Ramkrishna Forgings Limited (RKFORGE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ramkrishna Forgings Limited Q2 FY '22 and Half Yearly Investor Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rushad Kapadia from ICICI Securities Limited. Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen, and welcome to the Q2 and H1 FY '22 Results Conference Call of Ramkrishna Forgings Limited. We have with us from the management, Mr. Naresh Jalan, Managing Director; Mr. Chaitanya Jalan, Whole-time Director; Mr. Lalit Khetan, Executive Director and Chief Financial Officer; and Mr. Rajesh Mundhra, Company Secretary. So without further delay, I would now like to hand over the floor to Mr. Lalit Khetan for his opening comments. Thank you, and over to you, sir.

Thank you, Rushad. Good evening, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Naresh Jalan, our Managing Director; Mr. Rajesh Mundhra, Company Secretary; and SGA, our investor relations advisors. Hope you all have received our investor presentation by now. For those who have not, you can view them on stock exchange and the company website. We trust and pray that you and your families are safe, healthy and secure. We hope you all are following the safety protocols and ensuring safety against COVID-19 pandemic. We at Ramkrishna Forgings, to ensure safety of all employees during the pandemic, have followed strict safety culture and COVID-19 protocols. We have conducted all the necessary vaccination drives in all facilities and ensure that its entire workforce was vaccinated. We also ran several vaccination drives for public at large. With recent signing of MOU for the development of EV powertrain components with U.S.-based technology partner, which follows our first order in EV segment from foreign multinational Tier 1 OEM in India. We are well placed to capitalize on the fast-growing EV market in Indian market. This [indiscernible] in EV market is also testimony of our strong R&D as well as product offering in terms of complexities and designs. The PLI scheme, which focuses on the EVs and hydrogen fuel cell vacuum manufacturing, will act as a strong catalyst and catapult the domestic industry into next growth orbit. The domestic auto industry is still on its way to recovery after the second wave. The silver lining is the commercial vehicle segment, which has performed relatively better and this augurs well for us. In the European markets, commercial vehicle registration for the period January to August showed high growth this year for the sector as the economy emerges from the pandemic situation. Nearly 1.3 million new commercial vehicles were registered in European Union during the 8-month period, making a growth of 24% compared with the same period of 2020. Demand is driven by central growth where sales continued to remain strong. U.S. new light vehicle sales in January to September reached 11.75 million units. Sales for 9 months of the year are up by 13% compared to same period of 2020. We have added customers in Europe and North America, and started supplying to South America. And we expect to add more customers going forward and expect improved contribution from exports. During the quarter, we managed to achieve contracts worth INR 620 crores from 8 contracts from various geography and business verticals. As mentioned earlier, we have also signed MOU for the development of EV powertrain components with U.S.-based technical partner. With the help of this contract, we have expanded our product offering in EV market. During second quarter, we commenced commercial production at 2,000 ton warm forging press line as well as our fabrication facility. With this, our capacity has been increased to 187,100 metric tons, and this also marks end to our current CapEx cycle. As part of our growth strategy, we continuously work on derisking our product portfolio by diversifying across different segments, customers and geographies. During the quarter, we added customers across various segments and geographies, and we are confident to get repeat orders from the customers and foresee a strong performance in upcoming quarters. That's it from my side. Thank you.

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

Congratulations on stellar numbers. And my first question was on the order contracts of INR 6.2 billion. Congratulations on winning these orders, which gives visibility for outperformance of the company versus the industry. Sir, here, just wanted to understand, of this orders, how much would be new orders? How much would be replacement orders? And this quantum of INR 6.2 billion, would it represent a single-year order or would it represent the lifetime order? And lastly, another clarification, would most of all of these orders commence by FY '23? I would understand that some of it would start in FY '22, but would it be fair to assume that everything would have started off by '23?

Raghunandhan, first to answer your questions one by one. These are all new orders. They are not any replacement orders. Number two, these are all orders which go into production in terms of sampling this year, and bulk production is in different quarters of FY '23. And the entire full year production is going to be from FY '24 onwards.

That was very helpful. And sir, like the new orders seem to be flowing, and thank you for the timely updates on the exchanges on the new orders. And here, Naresh, sir, if I can like take your opinion, where are you seeing the traction in terms of the geography? And within industrial, which are the segments from where you are seeing the traction for new orders?

New orders in terms of auto sector is coming mostly from Europe. And in oil and gas is coming both from U.S. as well as Dubai to be country specific.

Got it, sir. And sir, like on the industry side, on a quarter-on-quarter basis, there has been a very strong improvement. Q1 was closer to INR 45 crore, whereas Q2 has come in at closer to INR 108 crores. So this Q-o-Q improvement has been led by which segments? And just wanted to understand, you expect the momentum to continue going forward as well?

Industrial segments, we are majorly now contributing -- sales are being contributed from tractor and earthmoving equipments in domestic and exports, both. And we expect this to more expand in coming quarters. And new order wins, you will see new order wins also in coming quarters, making it more clear that how we are derisking our entire model going forward.

Wonderful, sir. Sir, on -- congratulations on the EV powertrain components where you have made progress. Can you elaborate on what are the products we are focusing upon? And what is the size of opportunity? And also, if you can talk a bit about the initial EV order which you have got, please?

Our initial EV order is basically in terms of manufacturing parts for motors and controllers. And our joint venture also -- our first thrust is into manufacturing motors and controllers for 2-wheelers, 3-wheelers and 4-wheelers. Right now, I would not comment on the size of the business. We would still wait for another quarter before we have entire clarity with -- because we are in process of -- right now, we have only signed a definitive agreement. But we are in the process of finalizing a joint venture agreement. So we would wait for once the joint venture is concluded before we put anything to light in this.

This is the operator. Mr. Raghunandhan, may we request that you return to the question queue for follow-up questions? The next question is from the line of Abhishek Jain from Dolat Capital.

Congratulations on a strong set of numbers. Sir, during this quarter, there's a big difference in stand-alone and consol performance. Although on revenue basis, there's hardly any differences, but EBITDA and PAT is lower by INR 8 crores and INR 6 crores. Where all these losses impact? Please throw some light on it.

Abhishek, this is basically a mix of the loss incurred by our travel subsidiary, that's around INR 1.5 crores to INR 2 crores is on account of that; another 5 -- INR 5.5 crore is on account of Ind AS accounting adjustments done on the sales to the U.S. subsidiary.

So will it be continued in the coming quarters?

No. So the process will continue. It depends upon the sale -- how much the sale goes in the quarter. And certainly, there will be some adjustment every quarter on account of this.

Okay. So on consol basis, that EBITDA margin would be around 21%, 22%?

But it may improve -- it may improve in the upcoming quarters. We have lately been seeing more sales there in the U.S. subsidiary. So subsequent adjustment is not going to be -- this kind of -- I would say this quarter, the gap is, I will say, one of them.

Okay. Fine. Sir, company was also looking to buy assets of the ACIL, Amtek Auto. What is the progress right now?

Abhishek, it is still pending with the NCLT, and we are awaiting the next date of hearing, 26th of October.

Okay. And sir, can you throw some light what is the capacity there and how much revenue it may add if you won this business?

Abhishek, that is the machining -- machining of crankshafts basically. And so that's -- in terms of a 3-wheeler, 4-wheeler crankshafts, 2-wheeler crankshafts, they make [indiscernible]. So all the material -- we have also earlier given the guidance, there is a revenue projection of INR 500 crore to INR 800 crore from that unit at an optimum capacity utilization.

Okay. Fine, sir. Sir, the company is also looking to raise fund of around INR 500 crores. So just wanted to understand what is the objective for you? And how much equity dilution will be possible in the coming quarter?

Abhishek, we have not yet decided on that. So still, that needs to be decided, how much fund is to be raised and when. So we will inform you as and when we will decide on that.

Sir, your debt is increasing continuously. There is some tension around the working capital side as well. So what is your effort to generate FCF and start to repayment debt because this quarter also, we have seen that debt has gone up to that 13 -- net debt has gone up to the INR 13.2 billion versus INR 11.3 billion of last...

Yes. Abhishek, the net debt has gone up by about INR 140 crore, if you look at the 6-month performance. But you can see the pressure on the working capital. Currently, Abhishek, it has gone up by about INR 300 crore against debt. So that's due to the increase in exports, basically more increase in exports and a little bit increase in the [indiscernible]. So that has created. And the kind of growth trajectory we are in, there will be some pressure on the working capital for the time being. But once we reach the optimum level, then it will start moderating. And certainly, we will start to generate free cash flow.

Okay, sir. And my last question is related with the gross profit per ton, which it used to be INR 65,000 to INR 70,000. That has gone up to the 1 lakh -- or INR 110,000 per ton in the last couple of quarters. What are the key reasons of this sort of the -- concerning gross margin despite the higher RM cost?

Basically, Abhishek, I think it's a premix of job and better value addition on the jobs which we are trying to do as we move forward.

So is it because of the better mix -- because of the BS-VI content -- increase in the content for recall because of the BS-VI and other things? And...

It is not basically BS-VI. It is basically, we are slowly, but steadily, graduating from only forging supplier to fully finished products. And now fully finished products are getting converted into assemblies. So as we ride up the value chain, our RM cost to sales are getting affected by which gross margins are coming -- going up.

Okay. Okay. And so what is the current capacity of machining? And how much change in the machining in the last couple of months?

Almost -- I think in last 6 months, we have moved from 45% to 50% to almost 75% plus in terms of machining and assemblies.

Mr. Abhishek Jain, may we request that you return to the question queue for follow-up questions? The next question is from the line of Mitul Shah from Reliance Securities.

Congratulations on a very strong performance. Sir, I have first question on your average selling price per kg, which shows roughly 7% improvement on a sequential basis quarter-on-quarter. So I would like to know how much is the price hike purely and how much would be whether product mix or value addition?

Mitul, I think it is extremely difficult for us to say how much is for raw material price increase and how much is for product mix change. It is extremely difficult one to...

No sir, I'm asking how much price hike we have taken in this quarter?

We have taken 6 -- or INR 5.90 price hike for steel, which has happened in this quarter.

Okay, sir. And then, sir, on the second question, on the RM side. RM by sales is -- since last 2, 3 quarters, is a huge fluctuation. Like, for example, Q4 was 51%; then it fell down to 39% in previous quarter, that is Q1 FY '22; and now it has again come to 45%. So what should be the stable range...

Mitul, I think it is extremely difficult right now to predict that with the raw material prices changing every quarter. It is -- every -- very difficult to say because how much inventory we are left with or how much inventory we will go into next quarter with. It is -- and when the price increase -- actually, basically things which are difficult to predict is the retrospective effect of the raw material price increases which are happening. Because of that, we are unable to predict how things are moving.

A little bit to add, Mitul. What happens when we see the last quarter number on the current numbers, see, when the -- just the increased, decreased component in the cost of goods consumed. There are a lot of costs other than the raw material also involved with that. That is reduced for the purpose of presentation from the raw material, like processing costs, other manufacturing costs. So that's why you find that anomaly. But the 46% to 50% is always a benchmark number to consider this.

Yes. So, at least, on the near term, whatever visibility we have, that 46% to 50% would be a probable range?

Yes.

And sir, my question on the, again, export and LCV side. Can you give more detail on what is the now situation of LCV segment in terms of utilization, margin improvement and orders -- new orders?

I think gradually we are winning new orders. I think we have been keeping our investors posted with whatever new orders we are winning. In terms of LCV, we have -- we are doing exceptionally well in the North American market. And we feel that in coming years, lot of new orders are going to come in, which is going to make a significant progress in LCV sales.

For the quarter, LCV would be how much as the overall percentage of revenue?

In terms of export, overall revenue, I think -- there are 2 parts to it. A lot of material is right now sitting in LLC in terms of North American sales in LCV. And the sales which we have already taken into account, I think close to around 5% is LCV sales. But a lot of material is in warehouse and in LLC.

Okay. So out of this revenue, it would be roughly 5% at present?

Yes. Yes.

And on the export side, sir -- overall export view outlook in terms of...

I think we are going to remain strong. What we feel -- only -- in our presentation, we have clearly highlighted we cannot predict the semiconductor issue, what is going to plan out for it. But looking -- putting a semiconductor issue aside, I think we should do -- continuously do well during the entire quarter.

Because earlier, we were expecting roughly INR 900 crore kind of annual revenue. Now it seems with this run rate, it could be definitely much higher than that. So what would be...

I think we would not like to give any forward-looking numbers. But only thing what we can say that we are going to remain -- or working in a consolidated manner and we should look at doing much better than what we are doing right now.

Sir, last question on the margin side. This 24% EBITDA margin historically high. So any view -- of course, I'm not talking about next 1 or 2 quarters based on the fluctuation of raw material as well as uncertainty on semiconductor side. But sustainability-wise, 24%, is it sustainable? Or it could be one-off and stable margin would be 21%, 22%?

No, we are looking at sustainable margins at this level. And I think whatever the work we have done post-COVID is resulting in this kind of margins for us. And I think we would like to -- in last quarter, we had attained 23-plus percentage of margin. That is a sacrosanct number for us. And I think we are doing all what is required to improve on those numbers. So we are not surprised with what number -- 24-plus numbers what has come. We are working on improving the margins from what we had done in first quarter.

Mr. Shah, may we request that you return to the question queue for follow-up questions? The next question is from the line of [indiscernible] from Daiwa Capital.

My questions have been answered.

The next question is from the line of [ Dhimant Shah from OneUp Finance ].

One clarification. On the Amtek, you said the capacity is related to machining. So if you can help me just kind of rewind that number that you mentioned, which it can add in terms of incremental sales on a full year basis?

Yes, we have said that on optimum capacity utilization, we can go from INR 500 crore to INR 800 crore.

Okay. Okay. Okay. You mentioned a very interesting thing and it is partly reflected in your improving gross margins and, of course, the overall EBITDA margin that you're guiding for. So as we move from smaller products to finished products to assemblies, where do you think, given the current capacity, will -- plus, give or take, whatever, will this mix reside? Will it be very crucially in favor of the assemblies? Or as we embark on this journey of -- more and more value addition as we move forward?

I think with our CapEx cycle almost over, now it is time for us to fix our utilization and improve capacity versus what we had in terms of whatever better utilization we can do from the capacity. So I think going forward, you will find more and more improvement in terms of machining, assemblies, and this is the thing which we have to continuously do for next 4 quarters, at least a year, before we look at further adding in capacity. With the market growing, what we have said in our opening -- Lalit also has said, we are seeing greenshoots in Indian economy and Indian auto sector now reviving. So we are looking at doing such things to improve our utilization in terms of machining and assemblies to ensure that we are at the upward trajectory of the capacity.

All right. So can you give us just some broad range that, okay, machine and assemblies put together would be at least upwards of 60%, 70% of the total turnover?

I think we are looking at going up to 85% to 90% of our forgings in machine condition or assembled condition in the next 2 quarters, I would say.

Okay. Okay. And given the kind of growth and geographical expansion that you are seeing, would it be 1 year before you will need to consider the next leg of capacity expansion, if any?

I think nothing before FY '24.

Okay. Okay. So that means that we would possibly, overall, be complete, as you rightly pointed out, towards the higher value-added products before, which we...

Yes. Once we are at the optimum of our current capacities and we are debt-light, that is the time when we start getting free cash flows and we are able to repay our -- most of our debt, then we are looking at -- to go ahead with doing any expansion or capacity addition.

But the lead time would be, sir, at least, even if you plan, let's say, in FY '23, by the time you order and it comes, it will always -- it will be beyond FY '24. So how early do you need to plan for the next leg of expansion?

I think it is extremely difficult at this stage to give...

No. Normally, what is the lead time in your...

It depends on the market condition. If the market is hot as it is today, it will take 12 to 16 months. But if market lightens from here, it may take -- happen in 6 months itself. It all depends on the market condition at that time when we start looking at capacity expansion.

Perfect. Perfect. And lastly, if you can comment on the working capital cycle. Will it improve for us? The thing observed in the quarter, was it one-off? Or can this working capital kind of improve? Was it that only because of sampling, because of certain export order?

I think if we continue to grow at the pace we are doing from first quarter of INR 400-plus crores to almost INR 580 crores, if that kind of expansion happens, and mostly from exports, and I think it will take some time before the working capital cycle eases out because shipments start reaching and then we get paid. It is a full 3-month cycle when things start looking at. So we should be, from fourth quarter onwards, start looking at things to normalize and debt coming down on the lower side.

Super. And one last question, sir, if I may. How do you think, on an overall basis, both domestic and exports, is the pass-through of the raw material happening overall?

I think we -- it is 100% passed on. Except the government contracts on domestic side, all raw material is 100% passed on for us.

[Operator Instructions] The next question is from the line of Dhiral Shah from PhillipCapital.

Sir, my question is pertaining to the passenger vehicle side. So any progress over there as we're looking to inroad into that segment?

Yes, we have started making progress in the domestic side in PV.

Okay. So is it contributing right now? Or this is going to contribute from next year?

It is going to contribute next year only.

Okay. And sir, on the railway side, how much it has contributed to the non-auto side?

I think Lalit can give you the exact number of railway in first half.

Railway, we have not done very well in the first half altogether. And I would say we have done a very nominal sales so far. But we are looking -- now the orders are getting [indiscernible] and market railway segment is also looking up. And in the next upcoming half, we are looking for much better number on the railway.

Okay. And sir, lastly, on the EV side, are we looking for any new CapEx in the EV segment? Or it will be entirely catering to the existing capacity which we have?

No. In case we put up a full assembly plant for motors and controllers, which we are talking through our joint venture partners, we will require a CapEx, but that may be an extremely small CapEx of $5 million to $6 million only.

Okay. So this INR 620 crore worth, which you're talking about, it will be from FY '24, right? And this will be for how many years of order, sir?

It is for 5 years.

Okay. So distributed equally, right, evenly?

Yes.

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

Sir, firstly, just a clarification. What would be your net debt number at the end of the quarter?

Debt number right now is at INR 1,210 crore right now.

Okay. So has it come up from the September quarter? Or this was the number at the end of September quarter?

The number at the end of September quarter [indiscernible].

Okay. No, because in the balance sheet, it is showing...

[indiscernible] of TATA Motors, that is notional. We have to add in [ data ] as well as in borrowings, that is INR 113 crore. Apart from that, INR 26 crore cash balance, we have reduced from arriving at this net debt balance.

Okay. Okay. Got it. Okay. Secondly, sir, on CapEx, if I get the number right, in H1, the CapEx outflow is INR 150 crores. So what should we consider for the full year?

This is the operator. Sorry to interrupt. Mr. Viral Shah, please self-mute your line, sir, while your question is being answered.

Sure.

Mr. Viral Shah, please self-mute your line, sir.

Hello? Lalit, can you answer the question?

Yes. Viral, are you there?

Yes, sir.

Yes, okay. So on the CapEx, I think we have already completed -- completed a major part of our CapEx. And there are some small CapEx are pending. I think another INR 25 crore to INR 30 crore will come in the remaining part of the year on the CapEx side.

So it is fair to assume that our CapEx outflow for FY '22 would be below INR 200 crores?

Yes.

One more question, sir, on the inventory, sir, we've seen a fairly large rise on the inventory side. If you could clarify what was the reason why we've seen such a hike in inventories?

Yes. Basically, it has been on account of increase in stock at warehouses due to -- at Europe and U.S. The vendor-managed inventory, it has gone up. And [indiscernible] has also gone up because we're building inventory for the improvement in domestic market, which we are doing. And that has not happened so far. So that's why a little bit built up on inventory.

And just one last question, sir, on the steel price. For the export contracts, are steel prices related to the domestic market or international market? And how do we pass through?

No. See, Viral, related to international market, basically, we rely on contractual indexes. We'll have different indexes in different contracts. And based on the increase and decrease in those indexes, the steel price is passed on every quarter.

Further pass through, which is remaining, sir? Or we've largely kind of covered for all the steel price increase?

Up to 30th September, we have got all the increases.

The next question is from the line of V.P. Rajesh from Banyan Capital.

Congratulations on a good set of numbers. My first question is on the new order range that you mentioned earlier on. Are we winning against other competitors? Or are we getting incorporated in the new models of these customers' vehicles?

I think, Rajesh, we will not be able to answer to this question because we don't know whether we are pressing any other supplier or whether it is for new models. We don't know. We don't ask all these questions to -- when RFQ comes to us, we basically deal with the RFQ and basically close the RFQ with our customers. We don't ask them questions related to who are the current suppliers or whether it is a new component.

Okay. Okay. And then the other question, you said you are looking to reduce your debt. So is there a target you -- which you will bring it down to Lalit?

Could not caught you. Can you repeat your question?

Yes. You mentioned that you are looking to reduce your debt by Q4 as the working capital cycle eases.

So working capital -- yes, there is pressure on working capital and once the working capital level starts to improve, our debt will automatically go down.

Right. So any targets that you want to share with us for next year in terms of what it will be?

We have earlier given the target that our debt level will remain at certain level. I think that's INR 1,070 crore. I think that number, we should achieve.

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

Sir, there is a ForEx loss of INR 11 crores in first half FY '22. Is it because of the foreign-dominated debt? And second, do you count it on other expenditure or interest cost?

No, we have a ForEx gain, Abhishek, in the first half. We don't have ForEx loss.

Okay. Okay. And so do you have any hedging policies for the -- this part of...

We [indiscernible] part of our sport, forward sale. That we do, but we [indiscernible] depending upon the circumstances, we do it.

Okay. And sir, during this quarter, we have not seen any revenue performance on the -- from the subsidy side. Only we have incurred losses. So can you throw some light on the business and operational performance of these subsidiaries?

See, we have the revenue, but due to [indiscernible] adjustment on the U.S. subsidiary, that revenue has been set up. That's why you are seeing the losses in this quarter, not revenue. But from the -- next quarter, you can see both on the top line, on the bottom line, the reflect of the same. Certainly, we have only one subsidiary in the travel segment where we are a little bit adding business or diversifying some business in that segment only. And we have a foreign subsidiary where we are selling support goods produced by Ramkrishna Forgings Limited to our customers.

Okay, sir. My last question is related with this export side. You want to revisit your guidance for the 50% growth in exports for FY '22?

No, we would not like to revisit right now.

So what sort of the growth can we assume for the second half because the growth was quite strong in the first half?

So I think we would continue with that growth. Only statement we would like to attach with it that this is just the beginning of the journey.

The next question is from the line of Arjun Khanna from Kotak.

Just a question in terms of working capital. If I look at numbers, you have actually given the production numbers also. So is that understanding right? So we had roughly 28,729 tons of sales and our production was 36,863 tons. So essentially, we built roughly 8,100 tons of inventory. Is that the correct understanding?

No, no, no. That's the forge production and that's the sale quantity. That's a mix of machine and forge. So there is some gap between the stock and the production here.

Okay. So basically, machining some parts, obviously, the weight comes off because we rightsize it. That's the correct understanding?

Yes, yes. Correct.

Okay. Sure. Sure. No, this is helpful. And if we look at inventories by itself, would you characterize it as unnaturally large maybe because of what we have seen with container issues, et cetera? Or you think this is largely a normalized inventory?

No, I think this is largely because of delays in, right now, shipments and material getting accumulated in the warehouse also. Because of semiconductor issue, material has not been pulled to the extent we thought it would be pulled from the -- by the customers from the warehouse in RKFL, LLC, and our European operations. So that's the reason you are seeing this kind of inventory.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

Congrats on good set of numbers. My question pertains to the capacity of 187,000 tons. So what kind of revenues we can do from that capacity, considering the mix change which we are trying to attain?

I think it is extremely difficult for us to, right now, tell you what is the kind of revenue we can attain. What we are talking about is -- right now is we are looking at almost 85% -- 80% to 85% utilization in the installed capacity by FY '23. And to get a top line to it, it's extremely difficult right now because the way dynamics are changing for us on a day-to-day basis, we cannot predict what is the revenue number going to be with that.

Okay. Okay. And this order book, which you talked about, INR 620 crores. So effectively annualized run rate is about close to INR 130-odd crores from this. That's the correct understanding, right?

No. INR 680 crore is annualized and it is a 5-year contract.

[Operator Instructions] The next question is from the line of Mitul Shah from Reliance Securities.

Sir, I have a question on non-auto side. Apart from railway, what is our status in terms of other segments where we were trying to enter and expanding?

Mitul, I think we have already started expanding in tractors, in earthmoving, and this has already started showing in our balance sheet also. And I think our entire endeavor at first is that in next couple of quarters, non-auto segment, which is oil and gas, tractor, and as well as earthmoving construction equipment and other things becomes equally big as auto sector for us.

For this quarter, how much contribution was from this?

I think number -- I think Lalit will be able to tell you the exact number, precise, what is the industrial segment number.

Do you want a number right now?

Yes, sir. First, sir, in our presentation, other segment, we have shown as almost like 19%. So how much -- or can you give some breakup there?

See, that actual number we have actually left on the sales customer-wise. So 19% clearly on the non-auto side, but we are looking at the content. Certainly, oil and gas, railway and earthmoving equipment, basically. And so if you look at broader number, certainly, it will be somewhere -- the domestic side, even this contains scrap also. So this is a mix kind of thing. So number certainly from this 18%, 19%, which is coming to around INR 100 crore. We got the number, I think, that way from the presentation.

Around INR 45 crores -- if I may put an approximate number, it is around INR 45 crores from this non-auto segment of railways, tractors and construction.

Okay. Yes. That is very helpful, sir. And sir, second is on the margin side. So new order wins are generally slightly high margin segments, right? And most of them are again from the overseas, which is again a higher-margin territory for us?

I think it is very difficult for me to comment on new order wins -- margins from new order wins. I think once the -- we pick up manufacturing for those components, then we will be able to understand what margins. Right now, it is basically calculated margins. And as I said in my earlier statement, 23% is sacrosanct for us in terms of attaining any -- working at an EBITDA level. I think we are trying to improve more than that. And it is -- our effort for continuous improvement is already showing in our current results and it will continuously show in the coming quarter results.

And sir, lastly, just to reconfirm on the CapEx side. For FY '23, we are saying our major -- majority of the CapEx is done, so only maintenance-related CapEx. So it should be roughly like INR 40 crore, INR 50 crore kind of annual -- that should be the range, right?

Yes.

The next question is from the line of [ Utkarsh Somaiya ], an individual investor.

Can you please give me the replacement cost of your current capacity of 187,100 tons?

I am unable to understand exactly what do you mean by that?

Basically, how much does it cost for you to put up 1 ton of capacity?

We don't have any such figure of 1 ton of capacity, how much does it take to put up. But if anybody wants to replicate what RKFL is right now, he will need at least INR 2,500 crores to INR 3,000 crores in his pocket to replace RKFL as a whole in terms of only assets.

That's good. And another question. So assuming that your product mix is only going to improve from here, and if I take the current quarter as just a base, can I assume you can do 3,500 to -- sorry -- yes, INR 3,500 crores to INR 4,000 crores of revenue?

I would not like to comment on what revenue we can achieve. What we are talking about is close to around 85% to 90% utilization in FY '23 of our installed capacity of 187,000 tons. And as the capacity -- commodity prices move up and down or the premix changes because the market is so dynamic, we would not like to comment on what -- in terms of rupee or monetary terms what the revenue can be.

Is it fair to assume that the product mix will only improve from here?

Yes, it's fair to assume that the product mix is going to further improve from hereon.

Okay. And the INR 500 crores to INR 800 crores of revenue from Amtek Auto, when do you think that would come into the consolidated number, assuming...

When the courts hand over the plant to us. We are eagerly waiting for the Indian courts to decide. And the day they hand over it, in 12 months' time -- post 12 months' time from the handover, I think this revenue is going to get consolidated into the balance sheet.

The next question is from the line of [indiscernible] Advisors.

Can you talk a bit about your next set of growth plans in terms of what -- something about the color of new initiatives that you'll be looking at. Would it be more of the same? Can you talk a bit about your mindset -- some of the thoughts, please?

No, I think [indiscernible] it is premature to talk about anything, what is going to happen tomorrow. Right now, whatever we have done, we would like to consolidate on that. Like I said in my earlier statement that we are looking at -- to become in FY '23, to be a debt-light company. And once that is done, we would like to grow from there on. And in terms of what we would like to do, I think our growth path is very clear. I think we are looking at adding in terms of value-add and in terms of assemblies. And that is our endeavor that now we would like to be on per side of the value adds.

And would that mean it will be less capital intensive going ahead?

In terms of return ratio to sales to investment, yes, obviously, it is going to be on the lower side. But I think it is very, very premature right now to comment on what kind of investment or what we are going to do post FY '23. But I think our plates are full until FY '23. And I would like to comment only on -- when the D-day comes.

Right. And just to clarify, I didn't hear very clearly. Did you mention that the annualized run rate of new orders won is INR 620 crores? Or is that cumulative? I'm sorry, I couldn't hear that clearly.

Annualized run rate of INR 600 crores per year. For -- some contracts are there for 4 years and some are 5 years. I cannot -- I don't have the list of contracts in front of me. I think we have pretty -- announced it pretty clear, and I think we have mentioned details in every announcements to our investors.

[Operator Instructions] The next question is from the line of [ Utsav Srivastava ], individual investor.

I just wanted to know what is the dividend policy that we have in the company, one, because we've got a [indiscernible] what is the rationale and...

I think your voice is cracking. We are unable to hear you.

Can you hear me now?

Yes.

I wanted to know what is the dividend policy of the company because we've got a INR 0.50 dividend to distribute. So I just wanted to know the rationale behind this INR 0.50 dividend.

So we have uploaded our dividend ratio policy on the website. We can go through that. And this dividend distribution is always decided by the Board depending upon the quantum of profit and/or the cash flow available to the company, and considering a lot of other things. A lot of dynamics are involved. So that's already uploaded on the website, you can go through that.

And to correct you, it's not INR 0.50. Now we have -- for the half year, it is INR 1. INR 0.50, we have already given in first quarter. And INR 0.50 is the second quarter dividend.

And there are no further questions. I would now like to hand the conference over to the management for closing comments.

Thank you, operator. We have -- we've been very thankful for all the persons that participated in the con call today. We wish you all a very happy Durga Puja. And if there's any query further, we are there to reply to all the queries and the questions that we haven't discussed. Thank you all for attending the call.

Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.