Nelcast Limited ($NELCAST)

Ladies and gentlemen, good day, and welcome to the Nelcast Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Bhatt from EY. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and thank you for joining us. On behalf of Nelcast Limited, I extend a warm welcome to all the participants on the quarter 4 and FY '26 earnings conference call. The results and investor presentation have already been shared and are available on our website as well as through our filings with the stock exchanges. Joining us today to discuss the company's performance and outlook are Mr. P. Deepak, Managing Director and Chief Executive Officer; and Mr. S.K. Sivakumar, Chief Financial Officer. Before we begin, I would like to draw your attention to the standard disclaimer. Please note that any statements made during this call, including those in our presentation materials that reflect our outlook for future or may be construed as forward-looking statements should be considered in conjunction with the risks the company faces. These statements may not be updated from time to time. Further details are available at the end of the investor presentation and also in other filings on our website at www.nelcast.com. Should you have any queries or require additional information following this call, please feel free to reach out using the contact details provided in the investor materials. With that, I would now like to hand over the call to Mr. P. Deepak. Over to you, sir.

Thank you, Abhishek. Good morning, everyone, and thank you for joining us. FY '26 has been a year of steady progress for Nelcast as we continued our transition towards a more efficient and value-driven organization. While revenue growth remained stable during the year, we delivered meaningful improvement in our profitability, driven by better utilization, cost discipline and improving product mix. The domestic demand remained strong through the year, particularly in the M&HCV segment, supported by healthy freight movement and infrastructure activity. The Tractor segment also remained stable and with continued support from rural development, showed growth. This helped us maintain steady volumes and improved plant utilization across our facilities. On the exports front, while demand remained below last year's levels for most of the year, we saw a clear pickup towards the end of the fourth quarter. This was primarily led by the U.S. market, partly supported by prebuying ahead of the upcoming emission-related changes, along with the gradual normalization of customer schedules. Overall sentiment has improved, and we expect this momentum to continue into FY '27. Operationally, one of the highlights of the year has been the progress on our strategic initiatives. The ramp-up of the Pedapariya plant, along with continued progress in our new product development program, is now beginning to translate, and we will see tangible gains. We are seeing increasing contribution from higher value and more complex products, which is supporting margin improvement and enhancing our overall operating profile. While EBITDA per kg moderated in Q4 due to a lower export contribution and an increase in raw material prices, the overall trajectory through FY '26 reflects a structural improvement in our operating performance. Across the company, our priorities remain unchanged. We continue to focus on expanding our value-added product mix, strengthening our export relationships, improving utilization and maintaining tight cost discipline. These initiatives remain central to driving sustainable margin expansion and improving overall operating efficiency. Our investments in technology and processes continue to position us well for the future. We are also advancing our sustainability agenda, including our 1-megawatt solar plant at Pedapariya. Today, around 70% of our power requirements are met through renewable sources, reflecting our commitment to cost efficiency, sustainability and long-term competitiveness. During the year, we also took conscious steps to strengthen our balance sheet through disciplined debt reduction. This has helped improve our financial flexibility and created headroom for future growth. Combined with better asset utilization, this has resulted in steady improvement in our return metrics with both ROE and ROCE trending upwards. From a cost perspective, the structural initiatives we took in areas such as productivity, power optimization and overall operating efficiencies are now visible in our performance and are expected to support margins on a sustained basis. Looking ahead, the overall demand environment looks constructive. Domestic demand, particularly in the CV segment, is expected to remain strong, supported by macro tailwinds, while exports markets are also showing signs of recovery. New product development remains on track with the scale-up of the several new programs, along with improved utilization, we believe we are well positioned for the next phase of growth. While we remain mindful of near-term uncertainties, including geopolitical developments and broader industry-wide operational challenges such as labor availability impacting the start of FY '27, our strengthened operating foundation including improving export outlook and focused execution, positions us to deliver a stronger performance in FY '27. Coming to the financials. For the full year in FY '26, our total revenue stood at INR 1,342.4 crores, reflecting a growth of 5.8% year-on-year. EBITDA increased to INR 124.5 crores, which was a growth of 17.8% with EBITDA margin improving to 9.3% compared to 8.3% in FY '25. EBITDA per kg improved to INR 13.6 for the full year, up from INR 12.6 in FY '25, reflecting the benefits of improved product mix, better utilization and cost optimization. Profit after tax grew strongly by about 29.9% to INR 48.4 crores with the PAT margin improving to 3.6%. From a balance sheet perspective, we continued our focus on deleveraging with debt-to-equity improving to 0.4x as of March '26 compared to 0.5x last year. This, along with improved operating performance has translated into steady improvement in return ratios. ROE is now at 8.1% and ROCE at 11.4% compared to 6.7% and 9.5% in FY '25. Overall, the year reflects improved operating efficiency, better cost management and strengthened financial position, which provides a strong foundation for growth going forward. With that, I would like to conclude my remarks and open the floor for questions.

[Operator Instructions] First question is from the line of Praneeth from SJ Investments.

So first, I'd like to understand how the capacity utilization is at each of our plants for the full year and for the quarter itself.

So in terms of capacity utilization for the plants, I think Gudur was at about -- overall, our capacity utilization was at about 65%. Our Gudur plant was at about 55%. Ponneri plant realized nearly 100% capacity utilization. And our Pedapariya plant for the year was at 27% capacity utilization.

Understood. I think, and just not to ask the same question again. In the past commentary, you mentioned that we'll get to the 40% mark at least by the end of the year in terms of the Pedapariya at least. And as I see like right now, Gudur is also at lower utilization. So could you explain why is it, the fact that Gudur is also reduced utilization and Pedapariya is also still at the levels we had last year?

So Gudur also, I think the Gudur plant actually is largely an export-driven plant. I think if you look at it from a production perspective, I would say about 60% to 70% of the production of the Gudur plant is an export-driven product. And the impact of the tariffs, especially in the third quarter, had the biggest impact on the Gudur plant. So we did see the utilization on the Gudur plant lower than what we would have liked, primarily driven by that reason. Coming to the Pedapariya plant, I think towards the end of the year, I think our utilization in Q4 actually came up to 35% despite the year average being at 27%. So that's what pulled the average up. And we expect that Pedapariya now with the new product launches that are happening over the next -- in the current and the next quarter, the new product launch and ramp-up that will happen will bring this number up, that, too, beyond 40%.

In terms of, let's say, the fixed cost absorption, so I just wanted to understand about the Pedapariya plant. So you mentioned in the past, I think around 40%, 50% utilization will start breaking even for the plant. Could you explain how the fixed cost is for that plant? So for us to get a perspective because till now over the last few years, we want -- at least as an analyst, I want to understand that how much fixed cost is still getting absorbed in the PAT right now today. So how much more is left to go in terms of utilization or whatever it might be. Because that could be a huge turning point for the company's profitability, right? So I wonder what is fixed cost right now. And when do you think we'll absorb it at existing changes with whatever happening?

So I think from a fixed cost perspective, I'll break it up in 2 parts. I think from an EBITDA perspective, if you were to look at the Pedapariya, at 35%, we are able to achieve positive EBITDA, right? So that's definitely a positive sign, I would say, that we are there and able to achieve a positive EBITDA at this 35% number that we managed to achieve in Q4. Now of course, beyond the EBITDA level, there's also obviously interest and depreciation costs, which still are not yet -- don't get fully absorbed into it at this level. But I believe that at about 40% to 45%, we will be able to break even even at a PBT level.

And do you think we'll be able to get there in the end of the year, especially with the I think we have like half a tonne or 500 kgs, so we have the large orders I think 500 kgs and all of them. So I was just curious how management...

Those products are now just starting their early stages of ramp-up. It will be a fairly slow ramp-up that will happen over the next 2 to 3 quarters. But once that's done, we absolutely believe that we will be at that 45% kind of a thing by the end of the year.

In terms of the last customer guidance, like how has it been? Because there's been a lot of geopolitical uncertainty in terms of, for them also. And so I was just curious on, has there been any change of plans from customer side in terms of the guidance?

It's not really changed much with the geopolitics that's happening. We are seeing that domestically, the Tractor numbers do still seem to be fairly strong. We're also seeing that the commercial vehicle numbers, which typically taper off in April, May are a little stronger than usual because I think some of the pipelines of finished goods that the OEMs as well as dealers maintain seem to be a little lower because they were able to sell through quite well in Q4. So given that, we are seeing reasonably positive numbers. But I think we've been shielded in India a little bit from the impact of the fuel costs. So I don't know how that will -- as maybe that -- more and more of that comes through, we don't really know how that will impact the industry. When we look at the U.S. market, we are seeing a very strong pickup in the U.S. market. Primarily, I think that's driven by a little bit of a prebuy as well as some delayed purchases from last year. So that's something that we think will continue at least for the first 2 quarters or maybe up to the early part of the third quarter. So the demand still seems to be very, very strong.

But for the full year, so in the last con call, you mentioned that for the temporary next 2 quarters as the new product comes...

Praneeth, your voice is not audible, your voice is breaking.

Okay. Sorry for that. So I just was answering in terms of the last con call, the management has mentioned that for the next few quarters, the growth could show up. But on an annual basis, there's still some kind of uncertainty in terms of the size of customer and guidance and all of that. So could you elaborate on what has anything changed from that guidance from the last quarter? Is there anything more to it in terms of new RFQs or anything more updates?

Yes. So I think in terms of the new products that we have developed that we are launching, we have a very robust pipeline this year. I think that pipeline still appears to be on track. We're watching it very closely because we are very close to the launch. We will be -- the major ramp-up of many of these products starts over the next month or 2. And as I said, it would likely be a gradual ramp-up happening over the next 6, 7 months. So we are working very closely on that.

So how many products are we -- so I think products do we have in the pipeline for this year? Because in the past also, I think we had like some projects with like the electric vehicle. And how have they ramped up so far? Could you give us some updates on those?

So we've got 3 large ramp-ups that are happening in this year, 3 large programs. So each program is a little different. One program might be, let's say, 5 part numbers and another one might be 7 or 8 part numbers, right? But 3 large programs that are going into the ramp-up stage in the next few months. And so that's -- I don't think it necessarily makes sense for me to talk about a number of part numbers because that will be some 20-something.

Yes, that's fine, program-wise, it's fine.

Yes, about 3 large programs that will gradually go into production, as I said, over the next 3 to 6 months.

Okay. And these are all are going to be one was in Tractor and the other two are Commercial Vehicles, is it? Or all of 3 are in Tractor?

Two would be in Tractor and one would be in Commercial Vehicle. Two are export programs and one is a domestic program. But the end market even for the domestic program is an export.

Okay. So let's say, even though these to be exported vehicles, do the margin are also similar to the export ones? Or is the margin similar to the domestic supply for us?

I think it's probably a little more similar to the domestic supply. But just given the complexity, the margin profile is a little higher than the typical domestic just because it is a more complex product.

Understood. And one last thing is last time you mentioned that with the new programs, we want to actually reduce our amount of receivable days or let's say, improve the working capital. So has there been any progress in terms of that with our existing customers and new programs? Like broadly, what is the update with that?

So some of the -- so like I said, the 2 export programs that we have here, we are working with customers with, typically on exports to match their like-to-like working capital cycle. It typically averages at about 150 days. In this case, we are working with customers between 75 to 90 days is the terms, right. So it should be better.

We will see maybe next year.

Yes.

So we are planning on...

Sorry to interrupt, Mr. Praneeth, may we please request you to rejoin the queue for the follow-up. We have several parties waiting. Next question is from the line of Dheeraj Kumar Reddy from Alpha Square.

I have 3 questions. First one being, how are we actually different from some of our competitors like Magna or any other competitors? Because I see the margin structures for them are very different to what we operate in. And how do you justify that?

Yes. So I mean, I think we're very different in the type of products that we make, I think the size, the process, the volumes. So since you mentioned Magna, one of the things that would differentiate us from Magna is, Magna is typically more of a low-volume, high-mix type of a product. I believe that we don't really ever compete with them. And they've got a couple of different things that they do. One is Furan sand and one is some lighter casting. So it's a very different profile of products that we have in comparison to them. I think what we look at is to be able to find more of a mix of parts that have probably a medium to high complexity but also have a reasonable amount of volume. And that's what we're looking to do.

You mean that the castings, which they do will have an 18% to 20% margin, whereas what we do will have 9% to 12% margin. Is my understanding right because of those -- whatever differentiating parameters which you mentioned?

Yes. So I mean, obviously, our goal will be to push our margins higher and higher. Again, that will depend on the product mix. And I think that's one of the areas where our Pedapariya plant really helps us in terms of unique capability of being able to produce large castings very efficiently. And as our utilizations go up as well, we expect that our margins will also continue to go up. So our goal would be to try to push that number from what is currently around INR 10 to about INR 15 or so. Currently, I think what we've stated is about INR 15 per kg is roughly where we look at our steady-state scenario without any raw material impact. We believe that we're going to move that towards INR 18 and then eventually, we'll push that once we get to INR 18, we'll work on pushing that towards INR 20 as well. So that's roughly what we see.

Is it at a consol level? Or is it more like at a product level, I mean, the new product level?

No, this is at a consolidated level, right? This is for the overall company as a whole.

Understood. And if we may understand here, like what will really drive this, Deepak? Because see, on one side, because we are working in the commoditized space, of course, like high volume and how will we push this INR 13, INR 14 per EBITDA to, say, INR 20, INR 22? Like what will be the key drivers in achieving this?

Yes. So the push from what is about, I guess, INR 13.6 for the year as a whole. That was despite a bad quarter because of -- a couple of quarters because of export market reaction. But to push that towards INR 20, I think there are a few things. The primary one is in terms of utilization, right, which is going to help us in terms of our operating leverage. The other one is going to be in terms of operating efficiencies that we are continuously working on and the product mix as well. Some of these new products that we're getting in are much better suited for our kind of products and will yield better margins.

Understood. Understood. And can you please walk us through like how the new product -- because at this point of time in this INR 1,300 crores, how should we understand the mix between normal products and probably products which have some complexity? And how do you see this growth inside this new product division? And hence, how should one think about like building a model for the next 3 years, Deepak?

Yes. So what we are seeing is -- I mean, it's -- so we look at complexity as a spectrum, right. It's not high complex, low complex that we look at. So we look at it a little bit more as a spectrum, right. Let's say, if you take a scale of 1 to 10. I would say that probably 90% or 95% of -- maybe 95% of what we do would probably fall into that medium complexity or a medium to high complexity type of product. I think going forward, looking at some of the products that we are developing, I think there's maybe about 30% to 40% of our new product would fall into high complexity in the way that we define complexity. But then there is other ways to also define complexity. I would also look at, let's say, competition because some of these products are very unique that we can make them and we don't really have any competitors in the space. So those are -- so that -- if you look at what is in the pipeline, I think there, we've got a lot more of the new products that are in that pipeline. I would argue that of the 3 large programs that I mentioned, I'd say 60% or 70% of those products would fall into that category.

If you can talk about these products, Deepak, why do you think there is no competition? What kind of products are these, which we are working on, which are differentiated compared to the market? And what is the end use case of these products?

Yes. So some of these products are, as I mentioned, 2 of the programs go into the tractor industry. And these products are large, right, large in either weight or dimension. And one of the unique things that I would say that we have for the Indian market is that we have a productive line, from that can produce parts that are up to 1.8 meters or 1.9 meters long, whereas I think the closest that anybody else can do productively in India is about 1.1 meters. So these are larger products with -- and it's not just the length, but also the width and the height that we have in our line is very unique. I don't believe there's anything else like that in the country. And there's probably half a dozen like that in the world. So that gives us, I think, a good advantage in order to get these parts. So one of the parts I mentioned on previous calls is parts weighing 500 kilos, right. But not just that one part that's weighing 500 kilos, but we also have several parts weighing between 350 and 400 kilos that are part of this system. And then we also have several parts which are very tall, they may not necessarily have the weight, may be able to make more than one in the mold, but might not be heavy, but they're tall. So they can't fit into other people's molds whereas they can fit into our molds. So this gives us a couple of advantages, which are very unique and ensures that we are the single source for these products going forward.

This is across the globe, Deepak, or is this only in India? I mean.

Like I said, in India, I would say we are the only one. If I look across the globe, it's probably half a dozen.

Got it. And my last question, Deepak, is if I have to -- again, this could be a naive question. If I have to understand how is the value chain completely decoded today where like we are part of the [Audio Gap] how is machining and subassembly and integrated assembly. How are the margin structures different for these 4 or 5 areas? Because eventually, one day, you will keep migrating into towards like complexity areas, right? I don't know today, Bharat Forge is probably one player who is the only player probably who is doing integrated assembly. We just wanted to understand like how do you see these 4 categories and how are the margin structures different for these 4 categories?

Sure. So if I look at casting, I would say casting has in general, would have a lower margin percentage, but a higher asset turns, right. If I look at machining, it would be the exact opposite. I think you could expect to see much higher margins and a lower asset turn. I think in machining, if you get anywhere between 0.8 to 1 asset turns, typically, it is considered to be pretty good. But in terms of EBITDA margins, then you would expect -- I'd say you'd be disappointed at 20%, right. You would expect at least a 25% kind of a thing. Whereas when you get into assemblies, maybe there, the margins are better without having heavy investment in assets, especially in subassemblies. And then when it comes to final assembly, I think there's a lot more operating leverage of volume. Because I think, once the volume is there to absorb fixed cost, I think the margins could be the highest over there, right. So that's how I look at the hierarchy on these 4.

So the subassembly and integrated assembly, you mean to say they'll be more than 25% in margin structure?

Yes, you could get a higher margin structure, but -- and exactly. And subassembly, I think the investment might not be as heavy, right? Maybe final assembly, there might be a little heavier.

Understood. And Deepak, my final question, again, because Bharat Forge also has been there in the industry for the last 20, 25 years. We have been there, I mean, for more than 3 decades now. I see the next -- again, this is more a vision state vision question which I have. How do you see the next 10 years for Nelcast in terms of -- it's more about building a capability which is more unique for Nelcast and building those strong moats around.

Yes. So I -- I mean -- You can hear me, right? Okay. So I would say I'm incredibly excited about what the next 5 to 10 years holds. I think it's a really, really exciting time, certainly in the casting industry. Maybe I won't speak about other industries. But I think the opportunities that are there are quite staggering. What we are seeing happening in the overseas markets, especially in Europe, where there are a lot of financially stressed foundries that are there that we believe are already on the verge of closing down or some that have even started that process. That is something that's going to drive a lot of business to come to India. And we believe that given our position in the industry and our experience working with global OEMs, especially in North America, we have a very strong chance of converting that. The U.S. market, we've already established ourselves well. And one of the areas that we are now really, I think, looking to exploit over the next 2, 3 years is actually getting to parts that go into larger tractors that are sold in the U.S. and European markets. So we've got -- and that's driven by the uniqueness of the facility at Pedapariya. So I think we have a lot of things that we are very positive about. Of course, the domestic market also, we believe, will be strong over a period of time. It will have its ups and downs, but I think having a good diversified global business will help us be insulated from these vagaries of the market.

Is there an acquisition play you're thinking as well, Deepak? I mean, acquiring some of these stressed assets in Europe to enter into defense or any other categories? Is that something also in your mind, not probably in the next 1 year, but probably in the next 2 to 3 years?

See, we keep getting a lot of opportunities, and we keep evaluating them. I think we've not found anything compelling enough to get serious about. But we have, over the last several years, received a lot of opportunities, none that we have felt compelled to act on.

Got it. But that's there on your mind. That's all I wanted to understand.

I mean when the right opportunity is there, we will definitely take the time to evaluate, right? So we have been evaluating. But like I said, it's not a priority for us to say that we have to do it. It's also not -- so it's really purely on the merits of what benefit we would get out of it.

Got it. Is there any way investors can actually come...

Sorry to interrupt, Mr. Reddy, may we please request you to rejoin the queue for the follow-up questions. Next question is from the line of Murtaza from PinPoint X Capital.

Congratulations on a good set of numbers. I had a handful of questions. Starting with firstly, there was a certain commentary in the press release regarding the labor availability. So I just wanted to understand, is it the typical disruption because of the summer? Or is it something else? And how significant is it? Will it be impacting us in a major manner?

So the labor availability, I think it is, I would say, fairly typical now in the months of April and May. Is typically there during the month of April and May. I think that's typically due to the summer and post Holi. So that's something that is there this year as well. And I think this year, I would say maybe moderately a little bit higher, maybe driven by some of the elections that were happening across the country. We expect that the situation will normalize by June. I think it's a fairly normal annual cycle that happens. There are some impacts, but what we are working on is with more and more automation, the impact of this actually sort of gets minimized as we move forward.

Sure, sir. Understood. And secondly, regarding our raw material prices, I just wanted to understand what sort of hikes have been there? And like have we been able to pass through the cost increase in terms of domestic and export, like where exactly are we there?

Yes. So we do have formulas to pass on the price increases for all the material costs that are there as well as any fuel costs that are there. So there is a 1 quarter lag in passing it on. So whatever was there for the previous quarter and a big chunk of that was driven through the war in -- from mid-February and March. So a lot of that has already been passed on now for April. But of course, I think given the way that the system works, there is the lag that is there and you pass on the average, right? So the average of Jan, Feb, March is the pricing that's been passed on for April, May, June. So there will be probably a small impact of it that will still linger into Q1. But I think going forward, that it will be set right.

Understood. But the pass-on is for 100% of the contracts?

Yes. It is a 100% pass-through.

Okay. Okay, sir. And secondly, sir, as the earlier participants have asked regarding the Pedapariya ramp-up, as of now, it was roughly 30% broadly. So I just wanted to understand with the new program coming in, like how do we see the ramp-up now in FY '27 and '28 numbers?

No, I think with the product mix that we're seeing today, if the ramp-ups happen the way that we forecast, by Q4, I think we will be at about 45% utilization. Q4 was at about 35%. We pushed Q4 a little bit more, even a little bit beyond the demand that was there just to kind of get into that -- to start that ramp-up trajectory process because the ramp-ups this year on some of the products would be a little bit more severe. So we see that maybe by Q4, we should be at about that 45%-ish kind of a mark.

Okay. Perfect. And sir, regarding our exports, I just wanted to understand what sort of concentration does North America have in our export revenue? And what exactly, like if you could just.

So North America is roughly about 80% of our overall export mix is coming out of North America. And while we have been trying to work actively in Europe, we've won some business, and we are -- even if you look at North America and how we grew our export business, it was really -- you start with one product, you take a little bit of time to develop, validate it, then you prove yourself in it and then you get a much bigger order and an even bigger order for more products, right. So I would say we are sort of in that first stage now in Europe, where we are getting some orders. We've won some orders, and that gives us the opportunity to play in a much bigger field in the next couple of years. So Europe, while it might still be a little slow right now and the numbers might not show it over the next couple of years, there will be a steady ramp-up that will happen in Europe. And I do believe that within the next 5 years, when you look back, it will look like explosive growth. But, and talking about the U.S. market, even though, like I said, we've got fairly high concentration in the U.S., there's also a lot of new business that we have won in the U.S. And some of this new business is coming from other sectors, not just the truck, but also in terms of the agri sector. And a little bit more, we are working on some new programs for the light vehicle sector, which is pickup truck, SUV. So we're also not just looking at it from a geographic risk, but also within the geography, the sector risk and try to diversify within that.

That's great, sir. And sir, just one final question regarding our casting revenue. So we were earlier trying to target to get to 10% of our revenue in the coming few years. So I just wanted to understand, are we still on track? And what exactly can we say is the bottleneck? Is it the approvals, customer approvals or the production ramp-up? Or is it logistics?

Sorry, which revenue are you talking about? I think I didn't hear you clearly.

The large casting revenue.

Large casting, large casting. Okay. So yes, I think that's the goal. I think we've got several large castings that will go into production in this year. I think, yes, overall, our goal would be to get that to about a 10%-ish kind of a number. It might be a couple of years before we can get there, but we believe we are moving in that direction.

Okay. And sir, just one final question. You said about 70% of our energy is coming through renewable energy. So just wanted to understand what is the relative comparable foundry which actually runs on a power grid, what sort of a cost differential is there between us and them?

So it can vary quite a bit. Again, depends on the contract, depends on the age of the contract that's there, the PPA that's there, the specific state that's there, all of that, right. So there's a wide range of numbers that will be there. But I think -- and the other flip side of it is there is a minimum agreement that of certain of what we have to -- what do you say, offtake, right? So 100% of the units that are generated at this group captive plant have to be taken by us. So there are some pluses and minuses. But if I look at it overall, I would say there's a minimum of a 10% in terms of savings in terms of energy.

Right. Just my objective was just to understand if you're planning to probably push this 70% number even higher? And are we planning to do some CapEx for some small CapEx for this? I just wanted to know that.

Yes. So I don't -- we might do something small. We might not do anything major, I would say, in this year. We just came online for our Gudur plant with a fairly large power plant that was there in -- which is a hybrid of wind and solar. And that just came online about 6 months ago or so. So I think this year, we might not do anything significant. We would like to let that stabilize for some time and get a better understanding of the picture. There's also other regulations. The governments are making it less and less attractive to put up renewable energy, especially because they're losing revenue for their discounts, right. So certain things like, for example, real-time metering and all of that do make it less attractive to do significantly more investments. So I think in the long term, we would say we're probably targeting to be at about 80%, but I don't believe that a number beyond that is realistic.

Next question is from the line of Debanjana Chatterjee from Spark Capital.

I'm sorry, I joined late. So I might have missed upon a lot of things, but that's okay. I just wanted to know on a couple of things, and that is you earlier mentioned the 7.7% of CAGR over FY '24 to '28. Do you maintain the same over '26 to '28 now?

CAGR of what, sorry?

Revenue, revenue and EBITDA.

Our revenue. Okay. No, I mean, I think -- so we believe that this year will be a year of growth. I mean we will see the ramp-ups happening this year over these next 2 to 3 quarters. I think we will see the start of the ramp-ups. I think we expect to be at a much higher level for the next financial year. So I think our goal will be to -- for at least a minimum of 10% CAGR. I think that's what we would expect over the next 3 years, minimum.

3 years from FY '26 to '29, is it 10% CAGR?

Yes.

And what kind of EBITDA per kg you are hoping to maintain?

We are targeting to get to about INR 18 per kg as an EBITDA in that period of time.

INR 18 per kg by this year?

In the same 3-year period, right, that we're talking about '29.

Okay. And since currently, I think it pushed up to some INR 16 EBITDA per kg last quarter, but that was another.

Yes. For the whole year, it was about INR 13.6. I think if you will look at it in the last quarter and third quarter, I think as I mentioned, we got a little bump from weaker, softer raw material prices, maybe by about INR 1. I think this time, we probably take a couple of rupee hit, because of raw material prices. So roughly about INR 15, I think, is what we believe our current steady state is, without raw material prices really having an impact. So a long-term steady state would be at the current level, will be at about INR 15. We're looking to bring that up to about INR 18 is what we believe we can get to.

Okay. So this INR 18 will be achievable over FY '28 to '29 period of time, right?

Yes. We believe that's true.

Okay. And what kind of CapEx are you planning? Are you planning for any heavy CapEx in future? I mean or do you want to like maintain the same thing?

So I think in the current year.

Also regarding your Europe diversification because U.S. still becomes kind of an uncertain market scenario in a lot of things. So in earlier con calls also, you mentioned you are hoping to go into Europe, any particular country? Or have you made any particular investments there?

Yes. So let me address those questions. So first question, I think, was on CapEx. So roughly speaking, we'll spend maintenance CapEx which will include some automations that we will do and all of that. Roughly, I expect that we'll be spending about INR 30 crores a year or so on these kind of CapEx which are focused on, it's either a maintenance CapEx or it's an automation or it's some efficiency improvement CapEx, right. So these kind of things, we expect roughly about INR 30 crores a year is what we expect that we will spend going forward. At the moment, for the current year, we are not looking at any large CapEx in terms of putting up a new line or anything like that. So there will be some balancing CapExes that we will do in terms of capacities, that again, falling within that around that INR 30 crore number, right, plus or minus INR 5 crores. So in terms of Europe, we managed to get a couple of orders, again, relatively lower in volume, but the foot in the door, right? So we've got -- and some more opportunities to get our foot in the door. So we are now working on developing those products. And I think once we get into production, which will probably be in 2027, then I think, we prove ourselves, I think that the door opens for a much, much bigger opportunity.

Okay. And so you are hoping to maintain a INR 30 crores of CapEx for this full year as well, right?

Yes, about INR 30 crores to INR 35 crores a year for this year also.

Okay. And what are your like each plant's capacities right now? And how are they performing? Are they performing like close to 80% levels. I think, Pedapariya plant is 60%, 65% and during this uncertainty time, it went down to 50%. What is the scenario right now?

So overall, if you look at our capacities, the total capacity is 160,000 tonnes. The Gudur plant for the year as a whole performed at about 54%, 55%. I think for the Pedapariya plant for the year as a whole, it was at about 27%. Ponneri pretty close to full capacity utilization, 100%. And if we look at that in the Pedapariya plant, even though the average for the year was 27%, Q4 was at about 35%. I think that's where we expect a lot of the improvement in capacity utilization will happen in this year, is Pedapariya going towards the end of the year, right. We think it will be at about a 40%, 45% kind of a number. So there, we are expecting to see good growth happening.

So Pedapariya went down further to 45% utilization you are seeing it?

No, it was at 27% utilization, and it will go up. And if you look at Q4 specifically, it was about 35%.

Okay. And before this uncertainty period, it was somewhere around 60%, 65%, right?

No, no. No. Pedapariya, we started the plant only during the COVID period of time. So it's only been gradually coming up. So Pedapariya has always -- I think we've struggled to get Pedapariya beyond 25% in all quarters past. I think 35% is the highest that we have ever achieved in Pedapariya plant, which we achieved last quarter.

Right. Okay. And what about the borrowing scenarios...

Sorry to interrupt, Ms. Chatterjee, may we please request you to rejoin the queue for the follow-up question.

I'll just quickly answer that question anyway. The net debt. INR 68 crores. The net debt that we had at the end of the year was at INR 68 crores. No, total net debt, not just term loan. Sorry, the term loan was at INR 68 crores. Net debt was INR 172 crores.

[Operator Instructions] Next question is from the line of Saket Kapoor from Kapoor & Co.

For a very enriching discussion. Although I have been asked to ask one question, kindly permit me to just put forward the point and I join the queue since now the time is also getting to an end. Sir, firstly, if you could just give me how the tonnages have shaped for this quarter and for the year? And also going ahead, what kind of tonnages are we expecting for Q1? And then you have also seen -- sir, first answer this part, sir, then I'll just put forward the question.

Okay. So for the Yes. So for the quarter, we did fourth quarter a little over 25,000 tonnes in Q4, a little bit more than 25,000 was Q4. For the year as a whole, it was a little over 91,000 tonnes. And in comparison, the previous year was at about 83,000, from 83,600 to 91,300 was the annual movement. Q4 specifically was at 25,900.

25,900.

Yes.

And this was comparable to what number for the last year, sir?

So last year fourth quarter was about 23,100.

23,000. So sir, there is a significant impact. Is there any difference in the product mix that has resulted in the, if I may say that lower EBITDA number since the tonnage was significantly higher?

Lower for the quarter because of increase in raw material costs in February and March.

So there was a significant increase in February, March in raw material costs. That is one part of it. The other part of it is also, if you look at it, I think the export mix, if you look at from a product mix standpoint in Q4 last year versus Q4 this year, there is a drop in the exports as well.

Okay. And how will the tonnage shape up for the ensuing quarter, sir, taking into account the vagaries which you have mentioned about labor and other things, how we will be aligned for the Tractor for this quarter?

So the current quarter, I mean, typically, the first quarter is the more sluggish quarter. We see much better Tractor numbers in Q2 and then, of course, commercial vehicle numbers in Q4. We think this quarter will be 22,000 plus, we should be over 23,000 in this quarter. That's what we are forecasting.

And the EBITDA per kg, this number we will hold, sir, INR 13, INR 14 or how?

Again, it's a little early given everything that's happening with the war and raw material prices. So at the moment, it's a little harder to project the EBITDA. But like I said, all these costs will be 100% passed on to customers, but perhaps there may be some lag in that. But that being said, the costs will be passed on. So there may be -- again, it depends on how the material costs move. There may be blips here and there. But by and large, we believe that INR 15 is the number that in a steady state, we are very comfortably at.

Okay. So INR 15 should be the exit number for the current financial year. That understanding is correct, sir? We should exit this year.

So I would say the understanding is more to say that in a steady state, INR 15 is the number that we are very positive about. In a steady state, right, assume that there is no crazy spike or crash in raw material prices, that's roughly the number over a cycle of ups and downs in raw material price INR 15 is the number that we believe we are at.

In the small point...

It's not necessarily an exit or an entry price. It's, I would say, a blended average over the cycle.

But sir, sir, I cannot understand the harping part of it. If you could just explain. Just a second. Sorry I could not understand, sir, then what is the significance you are trying to conclude by the INR 15 number. In what scenario will that play out.

So the INR 15 will play out in a scenario where, let's say, raw material prices stay stable. So there is neither a benefit nor a negative coming out of it, right. If there is no impact of raw material prices, either upwards or downwards, we expect INR 15. Some quarters, we may see an upward benefit and some quarters, we may see a downward drag. But we believe that over the cycle, INR 15 is the number.

Okay. And lastly, sir, in the diversified customer base, we find the mention of Automotive Axles awarding us for the year of '22 and '23. So what percentage of our sales are towards Automotive as a ballpark number? And also, sir, with the Pedapariya unit ramping up, are we doing any deemed export work for this unit also for this company in particular?

In the Pedapariya unit, okay. So I think specific customer you're referring to is Automotive Axles. So this we are exporting to them directly to their plant in U.S. This is the products that go on to the Chevy Colorado pickup truck that we are doing. And there is also some business that we supply to them to their plant in India, where they do some subassembly and then export the subassembly. So they buy the casting from us, they buy gears, side pins, a lot of other things. They do assembly of the diff case and they export that. So we are supplying to both of those units.

In that program...

Sorry to interrupt, Mr. Kapoor. Next question is from the line of Praneeth from SJ Investments.

One question is regarding land sale. Like we have a large surplus land that's in Tamil Nadu, I think, right? So what's the progress in terms of the sale of that land? Or has there been any change in strategy in terms of selling it? So what's the thought?

So the land is not held in the name of the company. The land is held in the name of subsidiary called NC Energy. I think there is a potential that we could look at -- we are interested in it. We are exploring opportunities. And I think there's a possibility that there might be some government acquisition that might happen there for an industrial park as well. But all of those activities were on hold because of the elections here in Tamil Nadu. We expect that in the next few months, once things settle down in the new government, that discussion will come up, and some action may take place on it.

So what is the realizable value potentially valuable at least at this point of time?

We, at the moment, we don't have any reference point that we can use to give a better estimation of value other than the cost price that was there, right, which is indicated.

Understood. Got it. So going back to the business side. So you mentioned -- so most of our -- right now, we're looking for export programs, right? In terms of domestic, is there any way that we can take more products on to improve capacity utilization at the end of the day? Because overall, our tonnage has remained quite similar with like I think this year is a little higher in the last 4 years. So can we explore more domestic programs to improve capacity utilization. So further we can again explore back exports. So what's the thought for this because we have -- the exports have been delaying a lot. So that's the reason. Yes.

So I mean, domestic programs, I think we are growing even in the domestic programs. I think if you look at what we have done in the last year, I think we had a significant amount of growth in both commercial vehicle as well as in Tractor. I think from a tonnage perspective, that's what you talked about. I think we had about a 14% growth in M&HCV and about a 7% growth in Tractor, right. So I think it was sort of rejigged in that direction. And we are working on some programs to try to gain some share of business, and we'll keep working on it. The challenge is to make sure, I think, also on -- to maintain competitive margins. And so I think that's one of the areas that we are working on. Domestic is also very important.

Sorry to interrupt, Mr. Praneeth. We will take that as the last question for the day. Ladies and gentlemen, due to time constraint, we'll take that as the last question for the day. I now hand the conference over to the management for the closing comments.

Yes. Thank you, everyone, for your time and your continued interest in Nelcast. FY '26 has been a year where we focus on strengthening our fundamentals, improving operational efficiency and advancing our strategic initiatives. We are encouraged by the progress made, particularly in terms of product mix, utilization and balance sheet strength. As we move to FY '27, with new product development on track, improving export traction and a stronger operating foundation, we believe the company is well positioned to deliver the next phase of growth. We appreciate your continued support and look forward to engaging with you in the coming quarters. Thank you all once again and have a good day.

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