Quality Power Electrical Equipments Limited (QPOWER) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Quality Power Electrical Equipments Limited Q1 FY '27 Earnings Conference Call, hosted by Asit C. Mehta Investment Intermediates. [Operator Instructions] I now hand the conference over to Mr. Siddarth Bhamre from Asit C. Mehta Investment Intermediates. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. It gives us great pleasure to host this Q1 FY '27 Earnings Call for Quality Power Electrical Equipments Limited. As we all know, quarter 1 saw a huge swing in commodity prices due to geopolitical uncertainties and one would have anticipated its negative impact on the supply chain. However, QP has delivered excellent set of numbers, especially on the margin front. We, at Asit C. Mehta, a Pantomath Group of Companies, would like to congratulate the management of Quality Power for this achievement. Today, on this call, we have Mr. Bharanidharan Pandyan, Joint Managing Director; Mr. Sanjog Mhatre, CEO; Mr. Rajesh Jayaraman, who's CFO; and Mrs. Sarika Jadhav, Senior Vice President Finance. Over to you, Bharani.

Thank you, Siddarth. Thank you, everyone, and good afternoon. Welcome to the meeting. This quarter has been operationally intense with customer qualification, capacity expansion and acquisition execution progressing in parallel. We completed several detailed audits by global OEMs and utilities, while customer visits to our facilities increased materially. Both reflect the larger programs we are qualifying for and require direct senior management involvement. At Sangli, machinery installation at the new facility is progressing as expected. In a new project of this scale, there are a few minor last mile issues around sequencing, utilities and statutory interfaces. These are being addressed effectively, and we do not see anything structural. Trial production is targeted during the current month, subject to remaining approvals. Machinery installation for high-voltage CTC magnet wire facility is also commencing. At Endoks in Turkey, civil construction of the power conversion system facility is complete with operations expected to begin during Q3 this year. In parallel, confirmatory due diligence on Winwin Specialty Insulators Limited has been completed without adverse findings, and we are progressing towards definitive agreements. One area I would specifically highlight is management bandwidth. As we acquire and integrate businesses, we are increasingly looking at management as a common group resource rather than individual company teams. Experienced leaders across from Mehru, Endoks and other businesses are taking responsibilities across the group, while Quality Power managers are similarly being deployed wherever their capabilities can add the most value. This creates a common pool of management talent across the group and allows us to scale without having to recreate management ability independently in every business. Winwin will add further experienced operating pool to this talent. We have also strengthened our technology leadership with the appointment of Mr. Shylendra Kumar as Group Chief Technology Officer, bringing in over 3 decades of experience from HVDC, FACTS, Power Quality and grid technologies from Hitachi, erstwhile ABB. We closed this quarter with an order book of INR 1,945 crores, approximately 1.9x last year's revenue. Demand remains strong across our businesses with particularly encouraging traction in energy storage at Endoks. The intensity we are seeing today is a result of several years of work coming together at the same time. New customer qualifications, new manufacturing capacities and new technology and acquisitions. Our responsibility as management now is very simple, execute each of these properly, preserve our operating discipline and convert this opportunity into sustainable growth. Thank you. Now I hand over to Mr. Sanjog Mhatre, our CEO.

Thank you, Mr. Pandyan, and good afternoon to everyone on the call. I would like to focus my remarks on execution, operating priorities and the capabilities we are building for the next phase of growth. The most significant activity during the quarter has been the installation of machineries at our new Sangli manufacturing facility. Given the scale and complexity of the facility, this is a highly coordinated exercise involving equipment placement, foundations, alignment, utilities, interconnections and readiness of supporting infrastructure. As is normal in a project of this size, we are encountering a few minor last mile execution issues during installation. These are largely related to sequencing interfaces between equipment and infrastructure and closure of certain site-level dependencies. None of these are structural in nature, and the teams are addressing them effectively through detailed daily coordination and prioritization. In parallel, we are preparing the organization for the next stage. This includes process, documentation, operator training, quality systems, calibration, traceability and customer audit readiness. In high voltage equipment, the ability to move efficiently from machinery installation to qualified production depends as much on organizational readiness as it does on the physical assets. Our objective is, therefore, to ensure that once installation is completed, the transition into trials, customer qualification and commercial production is as efficient as possible. At Mehru, our focus continues to be on improving throughput from the existing asset base. We are working on line balancing, a reduction of changeover time, better material flow and removal of operational bottlenecks. The emphasis is on improving productivity and asset utilization before adding further capital. At the group level, we are progressively moving towards a more integrated operating model, engineering practices, manufacturing methods and testing protocols are being standardized across facilities and capabilities developed in one business are increasingly being shared across the group. Procurement is another important area of integration. We have appointed a Chief Procurement Officer with a mandate to consolidate group purchasing, aggregate volumes, rationalize supplies and standardized common specifications. As our scale increases, we expect this to improve both cost efficiency and supply chain resilience. On technology, HVDC remains a major strategic focus. We continue to strengthen engineering depth, simulation capability and specialist talent while progressing through technical qualifications and customer audits with global OEMs and utilities. These qualifications expand our addressable markets and improve our ability to participate in increasingly complex programs. At Endoks, the energy storage business is seeing strong market traction with inquiry levels ahead of our original expectations. This reflects the broader acceleration in utility-scale storage procurement across several markets. More broadly, the demand environment remains supportive across our portfolio, driven by transmission expansion, renewable integration, HVDC impact, deployment, grid modernization, energy storage and data center power infrastructure. Our priorities for the coming quarters are therefore clear. Complete machine installation at Sangli, address the remaining last mile dependencies, prepare the facility for customer qualification, improve throughput across existing plants, realized group-level procurement and operating synergies and continue strengthening our engineering capability. We are investing ahead of demand because we see a significant opportunity moving forward. Our focus now is disciplined execution and converting that investment into sustainable growth, stronger operating efficiency and improve returns on capital.

Thank you, Sanjog, and good afternoon to everyone on the call. Revenue for the quarter was INR 256.4 crores -- last year. Gross profit was INR 121 crores, with gross margin improving to 47.2% from 44.6%. Reported EBITDA was INR 64.7 crores at a margin of 25.2%. Profit before tax was INR 59.4 crores and profit after tax INR 46.7 crores. EPS increased to INR 4.66 from INR 3.12. I would first address the Ind AS 29 impacts on our Turkish operations. Other expenses include INR 7.82 crore net monetary loss arising from hyperinflation accounting. This is entirely noncash. Excluding this adjustment, EBITDA would have been INR 72.5 crores at 28.3%. PBT, INR 67.2 crores and PAT, INR 54.5 crores. The reported numbers are statutory, but the adjusted numbers provide a better view of the underlying operating performance. On margins, there are a few important points. First, our increasing group scale is beginning to translate into procurement efficiencies. Approximately INR 3 crores of volume discount benefited the quarter as we increasingly procured materials at a group level. Second, raw material movements affect our businesses differently. Mehru has a shorter manufacturing cycle so changes in input prices are reflected relatively quickly. Quality Power's coil products have a longer manufacturing cycle. Materials being consumed today largely related to orders booked several months earlier. Consequently, current raw material movements will flow through the standalone financials primarily during Q2 and Q3. Importantly, every executable order currently in our order book has been booked above the margin guidance communicated to the market. We have not compromised pricing discipline to build volumes. We also want investors to factor in the commissioning of our new Sangli capacity. Fixed costs such as depreciation, manpower, power and factory overhead will come into the P&L before utilization fully ramps up. We, therefore, expect some temporary moderation in standalone margins, particularly in Q3. As utilization increases over the next 15 months, we expect these costs to be progressively absorbed and margins to normalize. Our consolidated order book at the end of June was INR 1,945 crores, approximately 1.9x last year's revenue. And Endoks contributed INR 801 crores, Mehru INR 585 crores and Quality Power standalone INR 553 crores. This provides strong visibility as we bring additional manufacturing capacity online. Finance costs remained low at INR 1.4 crores. Depreciation increased to INR 3.9 crores and will rise as Sangli's CTC magnet wire facility and Endoks' power conversion systems facility are capitalized. Cash balances have reduced because we are facing -- funding this expansion largely through internal resources rather than debt. The Board has declared an interim dividend of INR 0.25 per share. Finally, confirmatory due diligence on Winwin Specialty Insulators has been completed with nothing adverse identified at an enterprise value of approximately INR 315 crores. The transaction remains comfortably within the group's balance sheet capacities. Overall, the strategy remains straightforward, maintaining pricing discipline, invest ahead of demand, use group scale to improve operating efficiency and continue building Quality Power as a global high-voltage and power quality technology platform. With that, I will hand the call back for questions. Thank you.

[Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital.

Congrats on a strong quarter. A couple of questions. Could you break up the quantum of your Y-o-Y growth between Endoks, Mehru and Quality? And I'm sorry, I didn't quite catch the CFO's comments on the margin pressure in Q3 '27. If I could request you to rehash that again, please?

Sir, I may not have the year-on-year of individual company, but I can give you some idea, roughly the estimates I know. Year-on-year, I think Quality Power went from INR 37 crores to INR 69 crores. Mehru went on from about INR 60-odd crores to about INR 83 crores. And I don't remember exactly Endoks, but Endoks contributed about INR 107 crores in this revenue. All the Indian entities increased their revenue. The Turkish companies had a slight dip in revenue, primarily it's the middle of the year and they had Eid holidays for 2 weeks in between. That was your first question, sir. The second question, can you just repeat it, if you don't mind?

Yes, yes. I was just trying to appreciate the CFO's comments on the margin pressure that he said would hit us in Q3 '27. If you could just rehash that again, please, the exact line items that will suffer and how exactly we should imagine your margin trajectory in H2?

So the margin profile for the reactor or the coil products business, as what we -- Mr. Rajesh indicated, for Mehru, whenever there's a copper or oil increase, the impact is immediate because the cycle time is about 8 weeks. So it comes and flows through the quarter. For somebody like Quality Power, when there's an increase in aluminum this quarter, it normally hits us about 6 months later because we buy aluminum today. And by the time it is going into winding, it is almost 4 or 5 months later. So the cautionary note was towards Q3, where any impact of anything in this quarter because aluminum did have a spike this quarter, would come in Q3. The stable guidance for the coil products business is about 20%. As he indicated, most of the orders that are booked are in excess of 25%. But this is more of a cautionary word rather than a real-word scenario at this moment.

Okay. No, that's helpful, Mr. Pandyan. And one last question for you, if I may squeeze in. For quality, what I understand is that our typical execution time line and order book is between 4 to 6 months, right? So given that we have our plants due for commissioning towards the later half of this fiscal, by when do you think our order book will reflect our enlarged capacities again? I understand we've been paid for a while given the capacity constraints, but by when do you think you'll be in a position to move that again?

So we are targeting 2 HVDCs. One is Olpad, which has already been awarded. I believe it's Q3, Q4. Barmer is close to, I think, tender completion this quarter. These are 2 HVDCs that we are planning. There are about half a dozen STATCOM projects across U.S., Europe, Australia that we are in talks with. We have got a couple of STATCOMS already in the U.S. Apart from it, the data center opportunities are typically the -- where we are seeing USD 100 million bids going on. That we are still struggling because our delivery periods are about 12 months' time. Once, I believe, in about 3 months' time in the next quarter, when we are slightly comfortable, once we have taken over the new facility and we have stabilized it, believe me, this facility, if you come over, it's quite large. It takes you about 600 meters from one corner to another corner walking around. So once we are able to stable, we will take in more orders. Getting orders is not a worry at this moment for us. So -- if like in Endoks, we could just open up the lid and we got in, we could get in more if we are able to deliver more, the factory is still not ready. Each of the factory is sitting on more than 2 years of order book almost at this moment, or close to 2 years of order book and at the last capacities.

The next question is from the line of Rahul Maheshwary from Ambit Investment Advisors.

Excellent set of results. My 2 questions. First, when can we expect the Sangli coil facility and the HVDC magnet wire facility to commission? And what can be the peak asset turns, which can we expect from these 2 facilities?

So the machinery installation is already on. I believe we are also having the Vastu Shanti Pooja, I think, this week in the factory. We have to still get the building completion certificate from the authorities and I think the process is on. As soon as they give us, I think we will be able to start begin trial production in the facility. Obviously, the initial audits of ISO 9000, 14000 OHSAS has to be completed. It will take us about a month. And after that is when we start the customer audits in. We may have about, as I referenced, about 60 audits on the facility before this can take over the full volume of the existing factory. We have to schedule this one by one. These are global audits. And it will take us, I think, as we guided about 6 months from the day we open up the facility for audits. These are highly regulated products, and every customer has to come and review the facility. However, given -- saying that, I think some of the large HVDC orders, we have timelines for delivery. So I believe we will start opening up, as Mr. Sarkar had said, maybe at Q3 this year to get in more orders once we are comfortable. The asset turnover of this factory, I think we are still not fully capitalized -- put the full capital in. But I would say, INR 1,500 crores to INR 1,800 crores, I think this facility is good enough to deliver.

And for HVDC magnet wire facility?

The machines are already on. This is a new product for us. So we anticipate that it will take us another 3 months of trial run. We are anticipating by Q4 of this year is when we will be able to take a full production out of the facility. Bear in mind, the machineries have come in. It will be also installed. We've got the power. We've got everything in, including the licenses. All the ISOs and audits will be also on the facility. But being a new product in the facility for us as a company and as a team, I think we have to give it that 3 to 5 months to stabilization.

Sure. My second question is, how should we look at the order book in terms of execution means? It's a good order book size and plus the capacity ramp-up will happen. So when can we expect majority of order book execution to take place? If you can give some staged kind of lineup in terms of...

This order book, what we have -- Rahul, this order book is slated to completion in the next 15 months, give and take. So that gives you an idea how much we can eat. That gives you a rough idea.

Sure. And we can expect the book-to-bill ratio to be maintained near to these levels going forward for next 1, 2 years?

I think I wouldn't commit on that, but we would try our best. The order book demand is good enough. Some of the businesses like PCS can -- scaling up is much easier in our best business today. But these are -- as I said, we have a 4-gigawatt facility in Turkey, 1 gigawatt almost we have got an order. We will see ramping up as we start delivering products out of the facility. First, we need to deliver the products out of the factory before we start committing more.

The next question is from the line of Nemish Sundar from Elara Capital.

Congratulations on excellent set of numbers. Sir, just continuing on the BESS part, could you just explain in a little more detail as to like your capacity -- current capacity that you have for BESS, probably in volume or revenue terms as of now and the new facility that you are building at Endoks for BESS. So what could be the scalability for BESS that you are expecting from this facility, in terms in revenue or volume terms?

My current guess is that we have about $60 million give and take of BESS, that is PCS orders in our pipeline, and we are anticipating another $40 million more in the next 12 months, at least, which is in line with the guidance that we had given earlier that we see about at least $80 million of business coming in. So at this moment, our focus is to operationalize the facility and deliver more. Once we are able to deliver more, getting numbers out of BESS is not a very big problem. The demand for PCS in the world is very high. Most of the governments are still focusing on making basic batteries, cells and cell technologies. The power electronics, software and the hardware part is normally missed out, and there are very few players in this business. The bottlenecks continue to be the IGBTs across the world. As we are able to secure supplies, we should be able to also deliver faster. And we are also likely to by the end of next year get BESS to India as against what we guided 2 years. I think by end of next year, once we stabilize most of our businesses in India, we would like to start BESS in India, the PCS for the Indian and the Asian markets.

Okay. And sir, the execution cycle of BESS would be similar to the core business, like around 12 to 15 months?

No. BESS are very fast. I think they would be in 6 to 9 months, most of the orders.

Okay. Okay. So even the working capital cycle also around the same period of time? Like cash would be realized from that?

Correct. It's a fast-moving product.

Okay, sir. And just my second question on Winwin Insulators. So you highlighted that the acquisition cost and the asset breakup that you've given in the PPT. Sir, on the revenue front, could you just give an idea of like the current -- how much is the entity doing and like if margins and what's the plan for it, like would it be fully used for internal purposes? Or like do you foresee it having other applications as well on this?

So Nemish, we are quite conservative in which the way we sell internally. Each division internally buys from the cheapest source and not from the home source. And each division has to sell at the highest margin even to the internal factory. So I would not say this business is something like a backward integration. Yes, if I buy at the market prices, yes, we get allocations. The internal demand for the product is about INR 40 crores to INR 45 crores per year, which is what will these guys get if the margins are similar, give and take. Right now, for the insulators, we are at least targeting about INR 200 crores of orders in the next 9 months. That is what is our team, what we say, target that is given. We are right now focusing on qualifications and type tests. We have finished type tests in the last 1 month up to 220 kV, 400 kV and 765 kV, I think, is slated in the next few months. We have already got into our 800 kV, 765 kV DC insulator orders to them for HVDC projects in India. The customer audit, as we speak, is on at this moment at the facility. Our intention is that the facility first gets staffed by the right people, the right team. And then we start pushing on the revenues. I think the factory should be good enough at least for about INR 300 crores to INR 400 crores per year initially, but we are also starting CapEx very soon in the facility. They have two products. One is the composite insulators, which is very well covered. The second product -- sorry, the porcelain insulators. The second product they have is a composite insulator, what they use for normally bushings. They have a type test out of KEMA Netherlands of 400 kV composite insulators. We are also likely to scale up that business significantly. So right now, the strategy is on because we are still not acquired. There's not much of a fund in the factory. Right now, the focus is on strategy, qualification and type test initially there.

And margins would be similar to Mehru as it was initially and then you look to scale it up in the upcoming quarters? Would that be something that would be the view?

Yes, I think the margin profile would stabilize in about 4 quarters from the date of acquisition. You have to give us about 4 quarters. What we see at this moment is anywhere between 15% and 25% margin. The gap is very large because we still not have things under control. Once we have in control, we will narrow down the margin percentage.

Okay, sir. And any tentative date that you look for finalizing this acquisition, like consolidation and everything?

I think consolidation will have out of Q4, not before that, primarily because this being an SEZ property, which will require a lot of secretaries to sign off in Delhi. So it's a bureaucratic process in India, so we will have to bear with it.

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

Firstly, congratulations on a really great set of results in a challenging environment. So just wanted to know what is the revenue guidance that we can do in FY '27? Because based on the order book, I think we can have significant growth this year also, right? So could you just quantify that? Can we reach around INR 1,400 crores by this year-end?

Darshil, I think we have guided to 20%. At this moment, we'll stick our guns to it. Maybe at Q3, we can look at revising what we say the numbers. It's very early in the year, part of the year. I don't want to commit things I cannot honor. I would rather err in caution than be aggressive on this. We have the order book. We will build our order book more as we speak. But as I said, a lot of these factories are just yet to get commissioned fully. So we need to also bear with us that we are a factory where quality, people, systems, everything has to be established. And these are not very easy to come off suddenly overnight. So please bear with us. We will try to do our best.

Okay. Fair enough. And sir, overall margin guidance, what would that be, sir? Because even I think our Q1 has also been strong, like in an environment that's tough, right? So could you just help us with that, sir?

Please model us at 20% or high teens EBITDA. We will always try to deliver better.

Okay. That's very clear. And sir, we are sticking to the 50% growth in FY '28, right?

I think you can start looking at our order book and the delivery time line, I think you can start mixing the data on it.

The next question is from the line of Naman Parmar from Niveshaay Investments (sic) [ NIVESHAAY HEDGEHOGS LLP ].

Congratulations on a great set of numbers. Sir, firstly, I wanted to understand on the new products that the GIS and the grading capacitor used in the circuit. What's the update on that, if you can help us on that?

So the plant is being installed as we speak. I think this quarter, the new plant for the GIS manufacturing should be ready with all the clean rooms that is required. Substantial investments are going into that. The grading capacitors also, the trials are on. We are yet to get the slots for the type test dates from the laboratories. We are waiting for that. The product per se is ready. Maybe in the next quarter, we will try to put some photographs of it. So yes, I think it is on track. We should start getting some results soon about it. I think the first product that we'll be testing is a 220 kV GIS components, switching on to 400 kV, 765 kV in the next, say, 1 year's time.

Okay. Got it. Secondly, on the bookkeeping side, like how much would be the ForEx currency gain in the other income, if you can elaborate?

I think we had a loss of INR 8 crores -- INR 7.5 crores, not gain.

No, that's the hyperinflation accounting entry, right, non-monetary. But I'm asking about ForEx currency gain or loss.

Nothing, nothing, nothing, 0.

And lastly, it was -- on the margin side, if you can help me understand what was the [indiscernible] for the Endoks and Mehru in the current quarter, EBITDA?

Mehru this quarter delivered about 18%. Our target was to get about 22%, 23% internally. However, with the kind of copper and oil prices that came in just in April, they had a direct impact. I believe we should be increasing the guidance of Mehru about 15% what we were earlier. I think our revised guidance for Mehru would be around 18%.

Okay. And for Endoks?

Around 18% going forward, Mehru.

No, that's for Mehru. Endoks?

Endoks, you will have to give us some time. The current product lines where they are already present like STATCOM, SVC, automation. I think they are normally around 25%. With the BESS coming in, we will have to just have a look at it. The products are yet to be shipped out of the factory. I can better answer that in Q3, how the blended margins look like.

Okay. Got it. And lastly, like you mentioned, you are raising the capital. So if you can help us understand the raising of the fund will be for what, and current debt structure is what?

I don't think we have much of a debt. One second. The total debt as of last quarter is, I think, about INR 23 crores, overall at a group level. That is also working capital at some subsidiary thing. Most of the companies are sitting on cash. However, these are at subsidiary cash. We are raising capital to close the WS acquisition. We are also proposing a INR 50 crore CapEx at that location for enhancing capacity. We have about 40 acres of land free to do what we want in SEZ, beautiful campus. I had put across a videograph -- video on it. So there, we are putting INR 50 crores. And we have started working on a lot of projects in America. We want to set up a U.S. sales team and a sales office. So we would be deploying. We are also working on some next-generation technologies in those markets. So we are also raising money for the U.S. entry because U.S. needs to be funded quite well. Otherwise, with just 1 or 2 people, you will not be able to get the results, what you want to. So that's the primary requirement, of course.

Yes. So total raise would be how much?

We have not put numbers to it, but less than INR500 crores.

The next question is from the line of [ Ankit Jain ] from Anand Rathi.

Congratulations for delivering very solid set of numbers. So I have 2 questions. Number one is, I believe that you have started marketing your Mehru's products globally. So how is the reception of the products? Are you seeing more traction from Europe or U.S.? And if the traction is good, would we need any further capacity expansion in India itself to cater to those markets? That's number one.

So for Mehru, we have got a lot of orders, but they are already full with a lot of orders. They have, I think, at this moment supplying 1 in 2 high-voltage instrument transformers that is required in this country. They have been a very vital part of the entire Indian grid system. So the customers are writing more of framework orders now rather than small order packages. So we do not have much of a capacity coming in from Mehru, the current facilities. I think they will reach 100% very soon. We are overlooking at a facility in Turkey. I was there in Turkey a couple of weeks back, looked at the site, the space we had, we had put in some photographs also of the facility to be able to either build a facility in Turkey for the European market and deliver in U.S. from India, and keep the rest of the world from Europe. That is one option. Another option is to also look at the piece of land, what we have in Vizag to make it especially all the exports through one separate business. Advantage of WS is that we have 40 acres of land in the campus apart from the insulator factory. We're doing whatever we want to do and build a large campus out of this facility. So these are decisions that we are looking at. We have about 6, 7 months' time before we bite the bullet.

Understood, sir. And sir, second would be, in order to cater to more European markets, would we need to set up any manufacturing facility there in the US or can we fully cater to the market from India or Turkey? So is there any localization requirement that we might need to consider?

Most of the markets are inward-looking, by the way they write the policies and tender documents. So Europeans normally prefer a European origin company rather than any other origin in the world. Americans are that way kind of open to whoever the vendor in the world, as long as the quality and the systems are in process. So I believe US can be catered out of India, but for the European market, which is at a different level of a boom right now because of the renewable energies, we would definitely need a facility somewhere in the European peninsula. That is one of the reasons why we are also interviewing candidates, because this is putting all together a totally large green facility. So we are taking our time -- taking the decision rather than rushing into it. But in Europe, we are already supplying inside the Denmark grid from Mehru this quarter. And we will get more from the Swedish grid very soon.

Got it. Got it. And if I can squeeze in a very quick one. Sir, you also mentioned that you are hiring for a procurement across the group. So how does that help us? Will that lead to better negotiations? Can we see some margin accretion when you consolidate all the procurements? So how to see this?

As the scale increases, we are seeing the reason why we need to start negotiating together. So to give you an idea about castings, say aluminum castings, we buy about INR 15 crores or INR 20 crores in Mehru. We buy maybe at about INR 250 crores of revenue in WS. We would end up buying almost INR 50 crores of castings. Same way in Sukrut, they buy about INR 10 crores of casting. Quality Power buys casting. So if all of them are talking to 4 different vendors, why not have a framework agreement with 1 vendor to get the scale and cost? So this is us going through a natural progression of being a larger company where we are finding at some points, we need to, what we say, start consolidating, at some points, retain freedom at factory level. I think we will find an equilibrium in the next few years.

Understood, sir. Glad to hear that you are moving towards that direction.

The next question is from the line of Lovish from Burman Capital Management.

Sir, my question is related to the Sangli facility. I did not fully understand what led to this, what is leading to the delay in starting the production. So can you help me understand what is the current status? And when -- by when do we plan to start the commercial production?

Technically, the commercial production can start the day we get the clearance from the utility -- from the authorities. That is your pollution completion board, your factory inspector, your building completion certificate, the MIDC, all the local authorities. So the last-minute checks and balances are being done as we speak. I think we have guided this month. We are trying our level best to start commercial production this month. Maybe in small volumes, not in very big batches. The reason why we are calling it trial is primarily because this being a regulated product, I cannot start producing everything overnight in this new facility because the customers want it only from an approved facility. And approval of this facility is what takes time.

Got it. And sir, when -- what is the time line for getting these approvals, the required approvals?

We have guided about 6 months because we have -- at least in our initial scope of things, we have about 60 audits lined up. Global audits.

And would we need all of these audits in one place? Or can we -- as and when we start receiving approvals, we can start ramping up production?

So our first focus is the orders which we are executing. Let's assume that we are executing the Adani and the POWERGRID HVDC. Our first focus after getting the ISOs is to get the Adani and POWERGRID HVDC approvals. For that, I need to first get the Hitachi Global approval from the facility, which is about 5 or 6 audits. Then we have an Adani audit and the POWERGRID audit. So that itself is about 8 audits before we shift into the next project. So we are prioritizing the audits based on which project is coming into manufacturing first.