Ramkrishna Forgings Limited (RKFORGE) Earnings Call Transcript & Summary

Good evening, everybody, and welcome to the Q2 FY '21 Ramkrishna Forgings Results Conference Call. We have with us from the management, Mr. Naresh Jalan, Managing Director; Mr. Chaitanya Jalan, Whole Time Director; Mr. Lalit Khetan, Chief Financial Officer; and Mr. Rajesh Mundhra, Company Secretary and Senior GM Finance. I would now like to hand over the call to Mr. Lalit Khetan for his opening comments. Thank you, and over to you, sir.

Thank you, Rushad, and good evening to everyone. We welcome you to the con call hosted by our company for the quarter ended and half year ended September 30, 2020. I have with me Mr. Naresh Jalan, Managing Director; Mr. Chaitanya Jalan, Whole Time Director of the company; and Mr. Rajesh Mundhra, Company Secretary on this con call today. The operational -- total operational revenues for this quarter has been INR 252.47 crore as compared to INR 260.66 crore in the corresponding quarter. The total operational revenues for the half year ended September 30, 2020, is INR 368.32 crore as compared to INR 639.91 crore in the corresponding period. The company has achieved an EBITDA net of other income of INR 45.58 crore for this quarter as against INR 47.28 crore for the corresponding quarter. The EBITDA, net of other income for the half year has been INR 44.08 crore against INR 119.45 crore in the corresponding period. The EBITDA margin stood at 18.05% in this quarter as compared to 18.14% in the corresponding quarter. We have achieved a domestic tonnage of 11,484 tons for this quarter as against 3,943 tons in sequential quarter, and we have achieved an export tonnage of 6,937 tons for this quarter as against 3,967 tons in the sequential quarter. The export sales for this quarter has been INR 113.91 crores as compared to INR 66.15 crore in the sequential quarter. We have achieved a total tonnage of 18,421 tons in this quarter compared to 7,900 tons in the sequential quarter. The company has uploaded an earning update, providing requisite details. We request the investors not to raise any customer-specific queries during the con call. Thank you. Over to Rushad.

[Operator Instructions] The first question is from the line of Abhishek Jain from Dolat Capital.

First of all, congrats for the strong set of numbers despite a challenging environment. Sir, we have seen a start recovery in domestic revenue in second quarter despite a 41% growth in the MHCV production. So is this outperformance because of addition of the new clients or introduction of the some value-added products or incremental revenue from the railway business?

Abhishek, this is incremental components per vehicle. Actually, like on earlier calls, we have added that we will grow better than the industry. That's because we have increased our content per vehicle. And because of the same, we have been able to increase our business in the OEMs and our [Technical Difficulty] increased per vehicle.

So this is because of the addition of the new products only?

Yes.

So just wanted to know that what was the domestic revenue mix for the LCVs, MHCVs and value segment?

I think MHCV is still in domestic market in commercial vehicle or automotive sale is close to -- commercial vehicle is close to around -- MHCV is close to around 80% and 20% is LCV.

20% and this LCV number is the incremental revenue for this quarter?

The incremental revenue plus in MHCV also there a lot of new addition in terms of components, so obviously because of that.

Okay. And how much revenue was from the railway segment, sir?

Railway, first quarter, was around INR 9 crore.

Okay. INR 9 crore. Sir, my next question is related with the export side, this quarter, we have seen a significant recovery. So just wanted to understand that what sort of the outlook for the next 6 months? And what sort of the order books right now do you have, especially for the North America and Europe?

Overall, in this quarter, we have opened new geographies such as South America. Our sales in September have started in South America. Overall, in terms of exports, we see traction in the market, and we are extremely confident to surpass FY '20 numbers in exports in this year.

So can you give some guidance in volume or value terms?

No, I would not like to put a number to it. But FY '20, we would better than the FY 2019 number.

Sir, what was the revenue mix for the North America, South America and Europe for this quarter?

This quarter, South America has been only 2.5% around. Europe has been close to around 25%. And the balance is North American market. And South America has grown significantly for us in this quarter and will continue to grow over the next couple of years.

And most probably that revenue -- South America revenue is the incremental revenue for you, and this is expected to grow significantly in the coming quarter?

Yes, coming quarters.

So is it because of the new client additions in South America?

Yes, Europe and South America, both are new client additions. Because of that business...

And this will be continue or is it onetime or...

It is going to continue over next couple of years.

Okay, sir. Sir, so what are the key changes are you observing right now, which gives an ace to the Indian forging company or other pillars like Chinese competition, and that's why you are winning the new business?

No, I don't think there is anything new. The facilities we have put up over last several years is one of the most capable facility to supply the right time and good product to the customer. And our converting over last several years is now paying off.

Okay. Okay, okay. And sir, this -- what was the average price of the buyback of shares?

This price, you mean to -- we have decided to -- the Board has passed on a resolution to buy at a price of INR 250 per share. And company has processed buyback, and we have deployed about INR 13 crore in total buyback, buying 6,74,000 shares.

Okay, sir. And so that has already been closed now?

Yes.

Yes. So sir, my last question is related with the total debt -- what is the total growth debt now? And what is your repayment plan going ahead?

Right now, the debt of the company as on September 30 is INR 1,040 crore approximately, and this will remain at this level or this will be the peak debt for this year. And from the next year onward, it will be going to be reduced, about INR 100 crore to INR 150 crore will go down next year.

It's a 140 -- total debt would be around 1.4 -- INR 10.4 billion.

No, INR 1,040 crore.

INR 1,040 crore, okay.

The next question is from the line of [ Sagar Parekh ] from [ One-up Finance ].

My first question was on the debt number only. So basically, if I look at your March...

Sorry to interrupt Mr. Parekh. Sir, can you speak a bit louder? We are not able to hear you.

Hello?

Hello?

Yes, is it better now?

Yes, sir.

Sir, my first question is on the debt number. You mentioned INR 1,040 crores. But if I -- the actual debt number comes to INR 1,095 crores, because in your presentation also, it's given 1.3x debt to equity. So if I do that, then the math comes to INR 1,095 crores.

Yes. No, that is due to the -- right, this year, we have gone into BNS facility with the Tata Motors. So that bill responder with Tata Motor, which is the obligation of Tata Motors has been added up in our debt. It is under bill responding perspective. But equivalent amount of debtor also has been added in the balance sheet. So net debt is INR 1,040 crores only.

Okay. Got it. And so this incremental debt has come because of CapEx funding from -- because still it was -- we have added about INR 100 crores additional from INR 950 crores last -- by March. And then in the...

Yes, it is a mix of CapEx funding and a little bit of the loss funding of the half year.

Correct. So CapEx is for this new LCV plant that has come up?

LCV on railway.

Okay. So our capacity now would be 2 lakh tons now or it's about 1,70,000 1,80,000?

1,70,000, 1,80,000 around -- by the year-end, it is going to be 2 lakh tons.

Okay. So how much would be the further CapEx that is required to fund this...

CapEx has already been done, equipments are under installation and trials. So it is going to get completed by December.

Okay. Okay. Fair enough. And you mentioned railways revenue was about INR 9 crores. So that has not moved much. We were expecting a significant traction in the railway. So any update on that?

We were expecting significant, and we are still expecting significant traction. But because of the COVID situation, the railways are not running right now. All the operations of railways have started just 1.5 months back. Because going into second quarter also, close down 145 days because of local lockdowns and other things, most of the plants in Chennai, Bareilly and Kapurthala were not operational fully.

So what do we expect now? Are we seeing traction now from railway side or...

We'll able to see traction in FY '22 on a big way. But from January, fourth quarter onwards, we will be able to see traction in our working.

And how much can we expect in terms of revenue from railways from -- for FY '22?

I cannot put a number, but we have done a CapEx, which can take us to a top line of close to around INR 200 crores from only railways.

Okay. Fair enough. And my last question would be on the realization front. So if I look at the domestic realization per ton, it has not moved much, honestly. But in spite of BS-VI, where you mentioned that BS-VI realization should improve significantly. So what am I missing here?

No, you're not missing anything. Basically, you are not -- steel prices have gone down in -- over last quarter. So that itself -- that's the reason realization is -- per ton is basically controlled by the steel price.

Okay. So now I think from September onwards, we are seeing uptick in steel prices. So going forward now you...

October onwards, the realization -- October 1 onwards, the realization is going to go up.

Okay. And then you will also -- so how much is the BS-VI increase in realization, that would be about 10% to 15% increase for us?

For us, it's close to 7% increase.

7%. So 7% plus the steel price hike should be the realization growth per ton going forward?

Yes.

Okay. Fair enough. That's it for my side. So the CapEx number for H2 would be negligible, right, going forward for this period?

Going forward...

We have done the major CapEx already. And whatever is critical, that will be done, but most of the thing has already been -- most of the CapEx has been done for this year.

So FY '22, then can we expect only maintenance driven CapEx?

No FY '22, there will be some CapEx, but that we will be plan going forward. Maintenance driven apart from that, there has to be some addition as to be done on the plant CapEx also. But that will be not a big amount. It will be a smaller amount.

That will be more for the balancing equipments.

The next question is from the line of Jeetu Panjabi from EM Capital Advisors.

Good. I had 1 broad question. So how do you think of exports over the next 6 or 12 months? What are you seeing in your customer schedules and what the customers are thinking and saying in terms of what they would like you to be ready with in terms of production capacity? And which markets are you seeing looking better than the others as you look out over the next 12 months?

I think to frankly say in terms of market, which it looks better or which -- I think across the globe, wherever we are supplying, right now, we are seeing a lot of traction in terms of demand. And all the customers, while they are cautious with the surge in infection, but maintain their guidance in terms of growth, and we see that going forward, at least for 8 to 12 months, we do not see any market suddenly cracking in terms of demand. There is a stable demand and ongoing schedules are extremely good for next 6 months, the visibility we have from the customers.

So the schedules are upward, right? Next quarter is better than this quarter and the quarter after this better than the last quarter.

The upward trend is on schedules. And going forward, we feel extremely confident that for next 6 to 9 months, we do not -- unless something very bad happens across the globe, we don't see anything -- any cuts going to happen to these schedules.

And the question is that what is the end product demand that is driving these schedules? Is it traffic, trucks in the U.S. and Europe and whatever or what is the end product that is driving these numbers?

Class 8 trucks are doing well. Class 5 trucks are doing well. Passenger vehicles are doing well in Europe as well as truck market overall in Europe is also doing extremely well. Economy has started coming back in South America from where they were 1 year back. So there, the demand has started. So we are getting customer calls, and we have started supplies to South America also.

And what would export mix in your revenues look like a year from now?

It's going to be 60-40. 60, domestic.

60-40, okay. And then if the basic demand picks up after that point, do you have enough capacity still to supply?

I think we have just augmented a huge capacity from 1,50,000 to 2,00,000 tons. So I don't see -- till 2022, 2023, we will have enough capacity.

Okay. And the final question, are you -- how do you feel about margins? You think margin stays good as we go through the next 12, 18 months?

We feel that the margins are going to be stable. And with whatever we have done over -- last -- past 12 months, I think we will continue to grow on the upward trajectory of the margins.

And actually one last question. Is this growth that you're seeing a function of market share gains for Ramkrishna Forgings or is it more an industrial phenomena?

No, it is basically market share gain for RKF.

So -- and who is the loser in this case?

I would not like to comment or I would not have to know about it also.

The next question is from the line of Viral Shah from ENAM Holdings.

So firstly, just a clarification on the CapEx. The H1 number is roughly around INR 119 crores. Could you just throw some light as to what was that CapEx incurred on? Because that number seems to be slightly higher than what we had earlier projected.

No, my CapEx has been -- whatever we have done is in line with our plan, whatever committed payment we have to make and we have done according to that, and we are almost near to completion on our CapEx plan for this year.

Okay. So for this year, the total annual CapEx for the year would be how much, sir?

See, this is already INR 119 crores, another INR 20 crores, INR 30 crores max it will go.

Okay. Okay. Okay. And what should -- what kind of number should we expect for FY '22?

For CapEx?

Yes, sir.

CapEx still it needs to worked out. I cannot comment right now on the CapEx number, because it should be normally maintenance happened or a little bit of balancing equipment CapEx.

Okay. Okay. Okay. The second question was on gross margins per kg. We understand that the pass-through of steel price has not had happened because the prices rose from the October 1. But if I look at gross margins per kg, sir, that also has come down over the 3 quarters, whereas ideally we would have thought that under BS-VI scenario, the gross margins per kg would have improved. So could you throw some light as to why is that?

On the gross margin side, it may be whatever. Right now, I can't see that over the last 3 quarters, but margins are consistent. And whatever the difference we are looking, maybe due to the product mix change because quarter to quarter there may be some change in product mix that may have a little bit impact on the margins, but overall margins are consistent.

Okay. Okay. Okay. And just a clarification. I think in the last call, Naresh, you had mentioned that the incremental industry tonnage Ramkrishna will gain on content by 3x. Could you just clarify what exactly was that because there was some confusion?

No, there is no confusion. What we have said because of the content increase per vehicle.

Right.

On an industry average, whatever industry grows, we will grow by 3x of that growth. That does not mean that if the industry grows 10%, we will grow by 30%. Basically, it was on content basis and share of business, what we have right now. Based on that, what we said was that whatever content because of the content increase, whatever average industry growth is going to be there, we are going to grow 3x of that growth.

Okay. Okay. And just lastly, could you update us on the ACIL acquisition?

ACIL, we have already applied for modification of resolution plan, which -- for which we have filled application with NCLT and hearing is still awaited. NCLT -- once NCLT orders for calling of CoC, then we will go for CoC and modify the plan as for mutual agreement. And I think so it will take a little time in this environment because of due to COVID, the hearings are not taking place in NCLT. So I think it's at least 6 to 8 months away right now.

The next question from the line of Bharat Bhagnani from Tasha.

I would just follow-up on the previous question asked by the participant on the Amtek resolution. So what is the plan of the management? Do we plan to move ahead with that?

Yes, yes. So far, we want to move ahead with that. And certainly, it depends upon certainly how the modification goes, so and how much time it takes.

So what is the kind of modification that we are expecting? I mean, because the acquisition cost itself was favorable to us at that point. So I mean is it a substantial...

Due to COVID, certainly -- yes, but due to COVID, there is certainly -- certain price impact and we will try to have uncertainty, we would like to have. But again, it will be decided with the mutual agreement of lenders. And certainly, there must be a deferment of payment in the current environment.

Okay. Subject to these conditions, you are willing to go ahead with the...

Yes. Subject to overall, see, it has to -- again, there has to be a lot of other things need to be discussed and subject to an agreement with the CoC, we are going ahead with this.

Okay. Okay. And the second thing is with regard to the shares of the promoter which have been pledged for raising the amount. So during this quarter itself, you had unpledged shares. And then there was a re-plugging also which had happened.

I think if you go with the document, which we have filed with the SEBI, you can very well see that the company has taken a working capital loan from IFC against which security has not been created. So till the time security has been created, IFC has taken pledge of promoter shares. Once the security is created for IFC, this promoter pledge is going to get released.

Okay. And sir, the entire promoter pledge will get released once the -- so the entire promoter pledge to be understood is with IFC right now if being favored?

No, I think around INR 2 crores or INR 3 crores is with other, which is getting -- going to get released in this quarter. By this quarter end, almost everything is going to get released in terms of promoter pledge.

Apart from promoter shareholding with IFC, there is around INR 12 lakhs right now under pledged. And most of the shareholding will be released within this financial year.

The next question is from the line of Mitul Shah from Reliance Securities Limited.

Congratulations, sir, for strong performance. Sir, my first question is on your export outlook for next 6 months. In terms of these 2 geographies, America and Europe, what is your reading, sir?

I think we will continue to grow and we find traction in the customers. So I think like in earlier questions, I've already told that we are looking at doing better than what we did in FY '20 in our exports in overall segments.

So for Europe also, you are confident enough to regain the momentum because Europe is still seems to be slow compared to recovery of other countries?

No, we are very confident to do full year much better than what we did in FY '20.

And second question is on, sir, what is your understanding after discussing with domestic OEMs? This Q2 number was reasonably strong. Production for CV for Q3 and Q4, any indication by OEMs?

No, right now, we don't have any indications. But I think we are on a right path in terms of our plans to maximize our revenues, and we are working towards that from the domestic industry.

Sir, lastly on this lag effect of passing on the cost inflation of steel prices going up as you said that from October 1, we have also taken the increase or there would be some lag effect?

No, we will first but it will take some time before it comes into the balance sheet. But from October 1, we will get this.

So Q3 will have entire quarterly effect of the price increase or it will have some effect for this and then spill over to next quarter?

Right now, we have already launched our claims with the OEMs, so it is up to the OEMs to decide when they will do, but we will get it from October 1. But it may happen that some OEMs give it in the month January also. It will be a cash flow thing for us. But in terms of balance sheet issue, I think we'll get in October 1. So there is no balance sheet issue in terms of getting the increase.

Okay. Sir, my next question is related to your new capacity for LCV and PVs, particularly. So if we try to understand broader parameters, broader financials, for this business compared to MHCV in terms of margins, return ratios, how we can -- what would be the right comparison approximately, sir?

Put in an approx number is extremely difficult for this.

The margin profile is more or less similar to MHCV or it is slightly...

Margin profile is similar to what we are doing currently. We are getting into value-add products and margins whatever we get, will be same as what we get right now. Only thing we'll be able to derisk part of our business getting into new segment.

Sir, initial utilization would be low, so that's why margin may not be as high as it should be.

Like in all the calls, we have continuously said the full utilization is going to be only by second half of FY '22.

So by that time, you will reach to the MHCV type of margins, right?

Yes, yes.

So sir, despite this type of attractive margins, why haven't we looked at LCV in past? Or is there any other constraint which we faced earlier, now we are...

Opportunity comes with time and whenever company feels that's the right time, company has invested into it. So I cannot comment to why we have not looked, it's extremely difficult. Why we have looked right now, we feel that there is an opportunity and we can do it. So we have done it.

And the same is the case with the PV business also, sir?

Yes. PV and LCV is same. And I don't think we have 2 different manufacturing lines. PV and LCV are same manufacturing lines, which we are going to come into production.

Okay, sir. And lastly, on non-auto side, apart from railway, any further update or any segments where we can see sizable revenue traction maybe in next 2 years?

Nothing favorable currently in our plates.

So non-auto mainly railway will be the only segment.

Yes.

The next question is from the line of Sachin Kasera from Svan Investments.

Congrats on a good set of numbers. Can you point on the month-on-month trend that you saw during the quarter? Is it that July was better than June and then August and then September? And how is it currently looking?

Sachin, every month has changed for the positive. From June, obviously July was very good. July -- August was better than -- September was even much better. And a similar trend is being seen currently also. But what we feel that right now, we are at a stable regime, and I think this is going to continue for next 6 months. I don't think market is going to just run away from here. But it is going to stabilize at this level before again picking up from here on.

Sure. Sure. Second question, sir, on this net debt. So it was mentioned that the second half, we will have minimal CapEx. So can we also look at some debt reduction in the second half of the current financial year?

No. I think, Sachin, this year, we are not expecting any debt reduction. Debt reduction majorly is going to come in FY '22, wherein we are -- with the incremental top line, we are working on reduction of debt close to INR 100 crore to INR 150 crore. Like Lalit has already said, we are looking at close to INR 150 crores debt reduction in FY '22 from the current levels in spite of having -- projecting higher revenue in the next year.

Sure, sure. Is there any debt-to-EBITDA level that you would want to achieve over the next 2 years? Because currently, the debt-to-EBITDA, obviously, because of the lower revenue and lower opportunity is very high. But once things stabilize after, say, 2, 3 quarters down the line, beyond '22, '23, what is the type of debt-to-EBITDA that you think you are very comfortable with going at?

See, Sachin, this is a continuous process. And like we were in '18 to '19 -- '18, '19, we were less than 3 debt-to-EBITDA. So certainly, we will go back to the same level. It's a matter of time, it's -- or we may achieve that number in FY '22 also.

So my ultra question was that -- sir, is it that you would want to achieve a very strong debt-to-EBITDA before we now undertake any large CapEx? Is that the way we can look management's view at least for the next 2 to 3 years' perspective?

Yes, I think before we embark on any further new CapEx, large CapEx, we would like our debt-to-EBITDA less than 1.5.

That is very, very heartening.

The next question is from the line of Kush Joshi from Kitara Capital.

Sir, I just want to understand what kind of product will be manufactured for LCV?

I will not be able to tell you any product-specific names. We have defined that sector, basically, and I would not like to name a particular component...

Okay. Fair enough. Fair enough.

Hello?

And -- yes, that is fair enough. Hello?

Yes.

Yes. But -- so currently, we are doing 20% of our volumes from LCV, right?

In domestic market.

Domestic market, domestic market. Yes. So going forward, what kind of ratio we see in domestic market between MHCV and LCV?

Our aim is to get to 70-30, with the incremental revenues, which we feel that by FY '22, we will have. But it will -- we will be able to update you on quarterly basis. Right now, we are working towards getting 30-70 ratio in LCV and commercial vehicle market difference.

Okay. So -- because what I'm trying to understand is that is the gross margin reducing because of increased share of LCV in our portfolio? Because...

I can't understand your question, Kush.

Yes. See, my question is that as our LCV portfolio is increasing our total volume share, whether our gross margin also be reduced to that extent or proportionately because the margins are not as -- looks like as not high in if we compare...

Like in other -- earlier, my question, what I replied, we are working towards same margin. But I think gross margin is -- there has -- more of with raw material price increase and decrease, both. So it is extremely difficult to tell you because if tomorrow raw material prices continues to start falling, you will see gross margin increasing also. So right now, what has happened over last quarter, the price -- steel price has started hardening. While we have not been able to pass on still the price increase.

Understood.

However we are going to pass on the steel price increase.

Understood.

You will see gross margin changes in this quarter.

Okay. Because we do, I think, every 6 months, the reset of the price, right? If I...

In exports, every 6 months; and in domestic markets, as and when the raw material price is cleared by the OEMs, we'll pass on the same to the OEM.

Yes. And as far as debt, you mentioned that next year, the plan is to repay with increased turnover also, we propose to pay off INR 150 crores to INR 200 crores next year.

INR 100 crores to...

So INR 100 crores to INR 150 crores, sorry, yes. So whether the same run rate will continue for more couple of years or how it is -- what is your strategy with regard to that?

Just a question before that, I have answered any major CapEx we undertake, we are looking at a debt-to-EBITDA ratio of 1.5 before we embark on any large factors going forward.

So we have -- okay. Understood. Fair enough. And what was the share of revenue -- Europe revenue in the total exports?

Hello?

What was the share of Europe revenue in total exports?

Europe revenue, like I told, I think 2.5% is South America, close to around...

25% is Europe.

25% is Europe, Kush.

25%?

Yes, yes.

[Operator Instructions] The next question from the line of Sachin Kasera from Svan Investments.

Naresh Ji, one of our key issues have been the high dependence on the domestic CV cycle, which is a little cyclical. With this new capacity, how do you see the mix of CV, domestic CV versus exports and non-auto say, 3 years or 4 years down the line? Do you think we can significantly derisk ourselves?

Our right intention behinds this CapEx is basically derisking ourselves from the entire global MHCV. So railways, which is going to become one of the main pillars behind it. Going forward, the next 2 to 3 years railway will become a big business. In domestic industry in terms only MHCV, we are adding large portfolios of LCV. So LCV domestically will derisk -- LCV and railways will derisk majorly or its dependence on local domestic MHCV. In exports, we are adding new geographies. We have started our supplies to South America, which is going to become one of the big opportunities for us in going next 2 to 3 years as well as Europe is growing very fast. So with that, our exports are going to get derisked our dependence on North American market.

Sure. And secondly, once we commission this new capacity of 30,000, 40,000 tons, is there going to be a significant increase once again in the cost structure? Or is it because of the nature of brown field, the current cost will not see a major increase?

No, cost, I don't think vis-à-vis in terms of percentage to the top line achieved, it will be on the lower side because of the FX.

Okay. Okay. Because see, now we are achieving 18%, 19% EBITDA margin, even whenever utilization is hardly 30%, 35%, so going down, say, 6 or 8 quarters down the line to see 18%, 19%...

As the utilization improves, as the capacity utilization goes up and the new investment also sticks off, the percentage to cost is going to go down because of utilization, better utilization.

The next question is from the line of Karthi Keyan from Suyash Advisors.

A couple of questions. One, I logged in slightly late, so excuse me, I'm repeating. Can you explain the relatively high receivables number? I don't know if this was explained.

Yes, the receivable, we can see whatever we have sold to Tata Motors, what has happened this year, we have revert back to bill responding system with Tata Motors. Earlier, we were doing with a -- on other bank where it is not added to our balance sheet. So the Tata Motors bills are being added to our receivable numbers, which is actually not receivable and a similar number of bill discounting has been added in debt. Debtor is also higher by that amount. So that's why it is looking higher. Otherwise...

That's like INR 55 crores, right? So what I understood that's about INR 55 crores. Even otherwise, the number seems to be fairly large. So it's roughly equal to the entire 6 months sale. So even if I exclude that on the receivables number, it's slightly on the higher side. Virtually, the entire 6-month sales are sitting as receivable. So how to interpret that number? And is there a trend that you can guide for on this?

See, basically, due to the COVID, the exports process were not there or very less process were there in the first quarter. So that's why the receivables are aging almost more than 6 months. So that's why this number is looking higher in terms of total sales. But going forward, this number will not increase to sale, and you can see the traction in total receivables in terms of top line.

Right. Right. The other question is, can you talk about what percentage of your revenues would be from, say, engine components and transmission components and other components, just for a perspective.

From an engine -- we have close to around 10% revenue from transmission and close to around 10% from engine components.

Okay. Okay. Great. Great. Just one thing I explaining the question asked by an earlier participant. Would 24%, 25% EBITDA margin at full utilization be an aggressive assumption, given the operating leverage that seems to be available?

I think we will not have a number to the EBITDA right now. But as per whatever we have done over last several years in terms of cost-cutting and other things, we feel that we will be able to maintain a very healthy margins going forward as the utilization improves.

The next question is from the line of Kush Joshi from Kitara Capital.

Sir, can you just give us -- throw some light on the opportunity in the South American market and how we are -- what is the strategy for growth from that segment?

No, we have started supplies to axle components to South American market, and that's a big, huge market in South America. The economy is coming back. So it is one customer right now we have started our supplies to. And going forward, he alone -- they alone by the current customer close to around INR 300 million worth of forging every year. So if I am able to get even 5% or 10% of that, that's a big sum for me.

Is it -- so which country basically in South American region is pertaining to customer...

I don't -- I would not like to name any particular...

Okay. Okay. Okay. So will be supplying currently axles to that customer currently?

We make parts of the axle. We don't make...

Correct. Correct. Okay. And so axle parts you're sending. So it's an assembly form or is it just a...

It's a component.

[Operator Instructions] The next question is from the line of Paras Nagda from ENAM.

Sir, I had just 1 question. What is the kind of machining mix that we are seeing? And if you take a longer term view of the business say, 2, 3 years, how will the machining mix change from the current levels?

As of now and if you go by the last quarter, it is close to around 60-40. And our target quarter-on-quarter, I think, as the mix improves, as the market improves, in terms of our installed capacity or in terms of utilization, our target is by this year-end to reach close to around 75% in terms of machine components.

[Operator Instructions] The next question is from the line of Raghunandhan from Emkay Global.

Congratulations on a good set of numbers, especially when industry is going through a tough time. Sir, my question was to understand -- so if I look at the results, there is a marginal fall in volumes versus last year. And when we are looking at the underlying industry, be it MHCV in India or be it the North America Class 8 production, there has been a steep fall. So the gap between our performance and the industry performance. Number one is led by that contribution, which has come from LCVs. LCVs was 0% last year; and this year, within the domestic, it is 20%. Second is Europe, which was 20% last year, has come to 25% of exports this year. And third is, there is some contribution from South America. And also, fourthly, there is some contribution from the railway segment. Can you highlight whether these would be the main factors or whether there will be additional factors which are helping the performance for the current quarter? And like you have already given the flavor for the next year. So just wanted to understand for the quarter performance.

I think current quarter, it is extremely difficult to comment on what is going to happen in this quarter. Last quarter, we did well because of the mix we have changed, and we are very confident that going forward, the similar mix is going to give us better top line.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for concluding comments.

Thank you, participants, for attending the call in the evening time. We thank you on behalf of the management for attending our call. Thank you.

Thank you.

Thank you.

Thank you, ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference.