Rane (Madras) Limited ($RML)

Ladies and gentlemen, good day, and welcome to Rane Group Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from E&Y. Thank you, and over to you, sir.

Thank you so much. Good afternoon, everyone. Welcome to the Q4 and Full Year FY '26 Earnings Conference Call of Rane Group. To discuss and answer your questions today, we have the management team of Rane Group represented by Harish Lakshman, Chairman of Rane Group; P. Padmanabhan, President, Finance and Group CFO; Siva Chandrasekaran, Senior Executive Vice President, Secretary and Legal; J. Ananth, Executive Vice President, Finance and CFO, Rane Holdings; and S. Prasad, Associate Vice President, Corporate Planning, Rane Holdings. Please note that the results and presentations have been made to you, and you can also view it on the company's website. In case anyone does not have a copy of the presentation or e-mail, please write to us, and we'll be happy to send the same. Before we start, I'd like to say that everything that is said in this call that reflects any outlook for the future, which can be construed as a forward-looking statement, must be viewed in conjunction with risks and uncertainties that we face. These uncertainties and risks are included, but not limited to what we mentioned in the prospectus and subsequently in annual reports, which you can find on our website. With that said, now I'll now hand over the call to Harish Lakshman. Over to you, Harish.

Yes. Good afternoon, ladies and gentlemen. Thank you for dialing. I'd like to welcome you all for this teleconference. I'd like to start with a few comments on the industry. I think the entire industry delivered a very strong performance during Q4 FY '26 with all the major vehicle segments recording healthy year-on-year growth, supported by the continued positive customer sentiment, supportive policy measures, including the GST rate rationalization. The quarter marked the strongest performance of the year, reflecting a broad-based recovery across all the vehicle segments. The passenger car segment continued to witness healthy momentum during the quarter, driven by sustained demand for utility vehicles and improving affordability. The commercial vehicle segment registered robust growth aimed by the higher infrastructure activity, improving freight movement and healthy fleet utilization levels. The segment witnessed also witnessed a broad-based recovery with good fleet replacement cycle kicking in. The 2-wheeler segment witnessed a strong recovery during this quarter supported by the policy incentives as well as the growth in the EV category. I think the farm sector also had a very good quarter, driven by the favorable monsoon. Improved farm income will increase mechanization trend in the rural market and recorded the highest ever sales for the industry. Overall, the industry remains resilient during the year, supported by improving demand conditions and positive momentum across the key vehicle segments. However, the global geopolitical development has led to the significant commodity price volatility and supply chain uncertainty. Therefore, we need to continue to be closely monitored on how it can impact demand. Coming to the company performance. Rane Madras, the total revenue for the Q4 stood at INR 1051.7 crores compared to INR 905 crores in Q4, which is an increase of 16.2%. During the quarter, the company incurred a CapEx of INR 53 crores, taking the full year FY '26 CapEx to INR 191 crores. Investments were directed primarily towards capacity expansion across all the product lines, sharing engine components as well as [ break ] components. The net debt for Rane Madras stood at INR 705.8 crores at the end of the year compared to INR 779.2 crores, reflecting a reduction of about INR 73.4 crores during last year. The aftermarket product business continued to strengthen its integrated and market-focused approach during FY '26, improved retailer engagement, enhanced market visibility and portfolio expansion, an increased adoption of digital tools supported better execution and market penetration and growth. During the Q4, the company secured new businesses with an annualized sale of INR 33 crores taking the full year FY '26 order win to the highest ever that Rane Madras has done with a value of INR 712 crores of annualized sales across domestic OEM as well as international customers. So the entire new business booking has been a very good year for us. Apart from these, I'd like to mention that the JV companies as a group also secured new orders worth about INR 55 crores during this quarter from our domestic customers. As mentioned in some of the past calls, our key focus is for Rane Madras to improve the margins -- to continually improve the margins through operational efficiency and cost reduction initiatives, to further strengthen the balance sheet and reduce the debt-to-equity ratio, to continue to enhance our free cash flow generation and deliver on better return on capital employed. We remain focused on maintaining our financial discipline, at the same time, supporting long-term growth and competitiveness. When I look at the coming year, we remain optimistic, but we're cautioned on the overall demand environment with domestic trends expected to remain stable. So the demand continues to be there, even April and May to be trying to surprise us on the demand front despite the various challenges that are going on geopolitically. At the same time, we continue to closely monitor factors that could influence the broader operating environment and especially the volatility in crude oil and commodity prices as well as the exchange rate movement, which could impact our operations. So in this environment, our focus will remain on strengthening our operational efficiency, driving cost optimization initiatives and improving our overall competitiveness to mitigate external headwinds and support further margin improvement during this year. We also expect to benefit from new business ramp-up our diversified product portfolio and the continued focus on manufacturing excellence across the plants. Thank you. With these words, I'd like to now open the call for any questions. Thanks.

[Operator Instructions] First question is from the line of Lakshminarayanan from Tunga Investments.

A few questions. In that in one page, you are mentioning joint venture financial performance. Sir, You have mentioned it because the company split into two or the [indiscernible] entity or why -- I just want to understand that part.

Yes, what is [ next ] question?

Sir, next question is it the company has been split into two?

That happened in Q4 in February with the split we got the NCLT approval and the companies have been demerged, yes.

Okay. So now that the company demerged, will there be some kind of operating dealer rate because you have to have fixed costs in both the entities?

So that will be -- there will be a very marginal increase in cost as a result of this. As you are aware, [indiscernible] globally did the demerger, so we had to follow because historically, the two businesses have always been run separately. So there were very few people involved across both the businesses. So therefore, there's not going to be any significant material cost increase as a result of this.

Okay. And another request, if you can give the complete P&L of these joint ventures and the [indiscernible] because I would like to understand what is the gross margin and what is the debt that is actually carried in the businesses. And I just want to understand what is the debt in [indiscernible] Private Limited? And what is the debt gross debt or net debt of the joint venture [indiscernible] entity? And also, what is the debt carried in -- at the holding level?

[indiscernible], do you want to be the number?

The net debt...

Are you able to hear?

Yes.

Yes. See, the benefit at the -- on a holding consolidated level is around INR 950 crores.

And debt?

[indiscernible] is around INR 250 crores. [indiscernible] is around INR 700 crores.

Okay. And another question, I see that there is a preferential allotment, which has been proposed by the Board. I just want to understand how did you think about it if we have other capital raising options?

So I think the details are yet to come out, it has been -- it will be going in the coming weeks, and you will see the detail. It is not a substantial amount so therefore, the board deliberated all options and [indiscernible] that given the quantum, this was the best at this point in time.

Okay. Because anyway, you have debt at the company at a large level. So why would you take a INR 40 crores is like -- seems to be too small. But yes, why are you doing this at all. Just trying to understand that particular part.

No, that's what -- that is all was the requirement that is needed. As far as for the other debt, while as you know, there is already some transaction on real estate, et cetera, underway which will also get consummated during this financial year. So considering all of those, we took this decision.

Got it. And last quarter, you took a kind of a provision in the [indiscernible]. Just want to understand, is it that [indiscernible] final or anything more? Because is it that as per your prudent assessment of last quarter, is there any slippages from there? Or is it actually that some amount or there is reducing or increasing? And also, have you -- is there something insurance that would actually cover that particular provisioning?

Yes. I think as would have been communicated in the last quarter, there is no change after that. So neither is it going to increase nor is it going to decrease. However, whether this is the final number, I think there is still multiple discussions going on between the customer [indiscernible] and the JV. So it will take some more time to get the full picture. It could take another 6 months before we get full clarity, if at all. And insurance, yes. We have initiated, I think, the insurance process. As you know, that's long -- a little bit more long drawn out. And of course, but we don't have full cover. So even if the -- once the -- as and when the insurance process happens, it will not fully cover the provisions we have made.

Any quantum of the insurance coverage you have you like to mention here?

[ INR 75 crores ].

Next question is from the line of Aditya Makharia from HDFC Securities.

Yes. I would firstly like to congratulate the management for issuing warrants. I think while the quantum is small, it definitely sends a very positive signal out to the market. Having said that, sir, I had a question on Rane NSK, we did mention obviously NSK has lost its way somewhere in Japan. And now in India, while we are going alone right now, there are also talks of us wanting to enter into a JV with another foreign partner to ensure our technological progress in steering. So any thoughts on that, which you could share?

Yes. So I don't know if there is some lack of communication from our side. No, see, as far as the Rane steering is concerned, everything is done. As you know, we purchased the shares of NSK. The licensed technology for NSK continues for not only for current production, even for future production, it is possible. Over and above that, we have also signed a license agreement with ZF. And they have also given us access to the electric steering technology. So Rane steering for -- even for future businesses, we'll continue to have access to both NSK technology as well as ZF technology. So depending on what customers prefer, Rane steering systems, we'll be able to offer the solution. So in a way, we are very well positioned to cover a whole range of customers and the different types of technologies going forward.

Okay. So that's a great year that ZF is also cooperating on the technology part. Just one question here because Maruti is our largest customer, will this ZF technology also feed into Maruti products?

It is possible in the future. We don't know at this stage. But right now, through ZF, we have also already booked one order with another customer.

Next question is from the line of Pratik Kothari from Unique PMS.

Sir a couple of questions from Rane Madras specifically. One on growth. So I mean we have called out a good growth in exports and -- but at the same time, the OEM domestic OEM growth is much bigger in [indiscernible] highlight what is going well in exports and what is not in [ domestic ] compared to the industry.

Yes. I think we have put out the -- in the investor presentation, I think Slide #13 of the slides, we have kind of explained why in some segments, we have not grown in line with the industry. Actually, if you see commercial vehicle, we have grown faster than the industry. But in the case of passenger vehicle and farm tractors, we are slightly lower. And of course, 2-wheelers, they are much lower, but our presence in 2-wheeler is very limited. So we have explained the reasons on that particular slide. It could -- broadly because of the customer mix, what -- which models are Maruti or which models the Mahindra are doing well and which models are [indiscernible]. I think it's largely because of that. And in [indiscernible] on track is concerned, I think it's the power steering, is it, is that -- because, again, this is due to the lower growth in the [indiscernible] models if you -- there are different segments in the tractor below 25 [indiscernible], 25 to 45 [indiscernible]. So we are in some models, we're not in some. So it's largely a mix issue.

We have called out break as an issue, but break itself is not a very large share of [indiscernible] Rane Madras level. So any other thing which is lacking in 2-wheelers?

No. See 2-wheeler, we have only two product lines, [ engine gas ] and brakes and even break, we participate only in those vehicles in those 2-wheelers that have an EPS so if the vehicle doesn't have an EPS system, we don't participate. So it's a very small market for us.

Got it. And sir, on margins. So we did call out our aspiration or the efforts which is going on the last year or two since the merger. One, I mean, despite the large growth in our numbers, we still don't see double-digit margins. We had an aspiration of [indiscernible] 18 months when the model comes in. So one, on that journey of efficiency, can you [ prove where you'll be ] and then anything you can guide for double-digit and then the eventual [indiscernible] I mean -- are we still on [ time ] to still keep that happening?

Yes, I think definitely, we are definitely on track. As I said in my opening comments, the entire focus is to get to that double-digit level. And we are definitely on track and we hope that the market will continue to grow during this year, and we can deliver on those numbers.

Is it still double digit? Or is it still like 11%, 12% the margins?

No. We will gradually get to -- I mean double digits, we are at 9.5% right now. So I see double digit happening during next year and going to that 11%, 12%.

Fair enough. And lastly, on debt. So we have some money from the land sale which has come in. So now does our intention to sell more land parcels that we've taken some shareholder approval to [indiscernible]? And what -- I mean we're also now generating good cash flow. So what are plans in terms of that [indiscernible] over the next 12, 24 months?

Yes. So I think we will -- I think the good thing is our debt-to-equity ratio we are below 1% now. And we have -- as the real estate transactions happen, there is obviously the [indiscernible] one that is that will probably happen during the course of early part of this year, that will further improve the ratios and as far as the other land that we took shareholder approval for, obviously, when we get the right price and the right type of buyer, we do intend to sell. There is nothing over and above what we already got shareholder approval for. So you are right that the overall books are looking healthy and -- so I don't see [indiscernible] will only continue to come down.

Anything you want to quantify that what would the debt levels look like in a year or two [indiscernible] from INR 700-odd crores right now?

See, that's why I don't want to give an absolute number. I would rather give a debt-to-equity ratio because it also is a function of what we do in the business in case there are some new investment initiatives, new M&A, many things could happen. So very clearly, our intent is to ensure that our debt to equity ratio is at 0.5% level. That will be the goal.

So for now, our intention was to spend about INR 200 crores a year on CapEx, did that stay or have you materially changed that?

No, it's really -- if you hover around that, depending on supply and demand, it could be what are we looking at next year. Maybe another INR 20, INR 30 crores more.

Next question is from the line of Manish Goyal from Thinqwise Wealth Managers LLP.

I have a couple of questions. Sir, first on [indiscernible] like what has been the experience in last 3 to 4 months on the warranty claims like how many vehicles have been recalled and where have been -- I just want to get a sense because what we had 3, 4 months back that only 500 to 600 vehicles were probably faced the issue out of some [ 6 lakh 50,000 ] vehicles. So maybe if you can give us some more perspective on the warranty [ financials ].

Yes. No. To be frank, Manish, we are also still don't have all the information. While the -- in U.S., we have made this announcement in actual changes of this recall happening on the ground. We are also not aware how much because we are depending on the customer [indiscernible] in the U.S. So the information flow has not been great, and we are still discussing with the customer what is the amount of recall that they are going to do whether -- I mean I'm just saying one extreme is all the vehicles. Another extreme is they are going to do some sort of a test and then maybe only a smaller percentage of vehicles will be addressed. So all that is not decided. That is why it will take another, I think, 3, 4 months for us to get a clarity on what is the process the customer is going to adopt and maybe 6 months to know the impact.

Okay. And like on the business prospects and the exports growth from India, and probably sourcing by the parent. Hopefully, it has not affected much and we continue to get business on export front as well?

Yes, absolutely. There's no change in that. In fact, as I said, even in Q4, we got INR 55 crores of new order.

Okay. And sir, on Rane Madras and other businesses on -- particularly on the international business outlook. So in Rane Madras, now exports are nearly 27%, 28% and it has grown quite well. So if you can give us outlook in context with disturbance happening on the geopolitical front, how do you see the growth order pipeline for Rane Madras as well as for ZF Rane in particular.

Yes. To be frank with you, there is no impact because of the geopolitical situation. We had a record year, as I said, in terms of new order booking of INR 712 crores in Rane Madras last year and whatever programs that we started shipping in the last few quarters, there is no negative impact on volumes, both in U.S. and in Europe. So therefore, we continue to remain optimistic. I think the challenge is the cost escalation on both due to oil related and the commodity. So those are the things that we need to carefully manage and obviously try and recover that from customers, et cetera, which with the large OEMs is always a challenge, but so that has been the focus. So there are no major concerns from a volume standpoint as of today.

Sure. Sir, I probably jump back to ZF Rane one question on the margins which we are probably seeing quite strong margins of nearly 14% for this quarter. So how should we look at it going forward? Can we sustain this level of margins at ZF Rane? Because I think that most of our new plants would have started and contributed.

Yes. So as you know, Manish, we have to look at the two businesses separately. The steering -- commercial steering business that has got a strong double-digit margin. And as long as the commercial vehicle market continues to remain strong, I see that kind of margin getting sustained. As far as the seatbelt and airbag business is concerned, that's a high single-digit margin. And that also will continue to remain at that level and the growth for that business continues to be strong.

Okay. And maybe if you can give us a revenue breakup between steering business and [indiscernible] and safety business and also the exports.

[indiscernible].

If for the quarter, Q4 total revenue is down INR 63 crores, steering is INR 300 and [indiscernible] is the broad breakup. In terms of domestic and export, export constitutes INR 150 crores and the remaining INR 610 crores from domestic.

And can you give us for the full year, please?

Okay. For full year FY '26, overall revenue is INR 2,680, steering is INR 1,000 crores and [indiscernible] and here, domestic is close to INR 2,072 crores and balance is exports, INR 609 crores.

Sorry, exports how much, sir?

Exports, INR 609. 6-0-9.

Next question is from the line of Viraj Mehta from [ Enigma ].

Sir, first question is on the margins for Rane Madras. In an environment where we are seeing steel prices hardening and where they are today in -- and not only steel but other commodities as well. Do you think your aspiration of doing double-digit margins this year, you said FY '27, by what quarter do you think we can reach there?

No, it will be very difficult for me to give the exact quarter, et cetera. It's a function of multiple things, especially as you said, all the commodity increases were unanticipated because -- but for the war, I don't think we would be dealing with that kind of a situation. So it's also going to be a function of how we can recover from the customer. But having said that, our confidence of getting to the double-digit margin continues to be strong.

And that is for this year, FY '27?

Yes.

And sir, if I -- and I'm just clarifying this. The answer to earlier participant question was that you said in ZF, in both the divisions, occupant safety and steering, both margins look strong. One is single digit, one is double digit, but both looks strong and can only improve from there with scale. Is that a fair understanding?

Yes.

And what kind of volume growth do you see in ZF?

Sorry, what kind of?

Volume growth, do you see in ZF both in occupant safety and steering business?

Yes. So we are looking at a strong 9%, 10% growth during this year.

But sir, that would be even lower than the market, right, like 9%, 10%. I don't understand, how is it done?

No. The commercial vehicle market forecast for next year is only about 7%.

Sir [indiscernible] Volume growth, 9%, 10%, but obviously, there will be pricing because all the commodities have gone up, so revenue growth could be higher.

Yes, possible. I mean I'm looking at volume growth, yes.

Got it. And sir, as far as -- thank you, you have been very generous with the dividend payout. Is it fair to assume that with the money that we'll keep forming at the holding company level that will be distributed in the same way going forward as we have done in the past?

Yes. That is the one. As we always do, historically, our dividend declaration in Rane Madras is in the 40% range, whereas the holding company has traditionally been 50%, 60%, 70%. So I expect that to continue for both the companies.

And sir, what will be this year's number for the trademark and technology transfer and subsidy that the Rane Holdings stand-alone gets from all the subsidiaries this year? Last year, it was in the range of some INR 45 crores, INR 50 crores. What will be the number for this year?

Yes, around the same, around INR 43 crores. For trademark, right? [indiscernible] Yes. Last year was INR 38 crores and this year is INR 43 crores.

So like is it like do we get 0.5% as a revenue -- of revenue, right?

Yes. By and large, yes. There could be some differences in certain parts of the business, but most of it is 0.5%.

Right. And sir, as far as volume growth for Rane Madras is concerned, is it fair to assume that we will grow our volumes in Madras in line with the EV market in general? So let's say, if EV -- and nobody knows how much it will grow, but let's say, if EV grows 12% volume this year, we grew 12% in volumes or we'll grow lower or higher?

No, I think we will grow in that range. In fact, if all anything, it can be slightly better because of the export market growth.

Next question is from the line of [indiscernible] from Unifi Capital.

I just want to get an update on the land deal. Like how is the landing shaping up? Any payment we have received other than the advance which we issued earlier. And when are we supposed to get the full payment of this?

So yes, we continue to get the advanced payments. I think as of today, INR 145 crores we have already received as the remaining will happen during '26, '27 financial year, it is again difficult to predict when exactly the transaction will happen because it is a function of government approvals for the -- both the residential projects that Prestige and Arihant are planning to do as well as for our corporate office that we are planning to build. So it's linked to the approvals we get from the government. As you know, recently, there's been an election, and therefore, there was a pause in government approvals for almost two months in Tamilnadu, but we hope that those approvals will start coming in, in the coming months.

Okay, got it. And another question, so in terms of growth in -- I'm talking about Rane madras, in terms of growth, which segment would like to focus or which segment could be a key growth driver for Rane Madras?

No. I mean -- across all segments, I mean, obviously, TV is the largest TV is the largest segment for Rane madras, and export also is a big contributor. So both of those are -- will be the focus area, but commercial vehicle is equally important. This is only Rane Madras? Yes. Okay.

Sorry, sir. I meant product-wise, like engine [indiscernible] or break of steering, which will be the growth driver?

Both steering and brake will see good growth this year. So I mean, [indiscernible] is not too far off.

Next question is from the line of Munjal Shah from [ NSFO ]. As there is no response from the current question, we'll move to the next question from the line of [indiscernible] from [ Table Tree Capital ].

A couple of quick questions. So around the guidance JV, what are the [ issues ] happening and [indiscernible] will take around 6 months for us remove the impact. So kind of -- provision crores. This INR 230 crores, does it consider all vehicles? Or does it consider only a portion of vehicles? I mean what percentage of vehicles? If you just give a broad story or a general guide that would be very helpful.

So it definitely does not cover all vehicles. It covers only some percentage of the vehicles. I don't know the exact working. It is -- based on some testing that will be done at the dealership end. So that is why the number has not been finally frozen it will all get decided based on the discussions between the customer, ZF [indiscernible]. So I expect we'll have a better picture in 3 months from now.

Got it. And sir, on Rane, Rane Steering and Rane Madras. Rane Madras, are we seeing from an export perspective? I mean the trend we're seeing with [indiscernible] in the less than 10 lakh kind of price point. So in terms of the business that we're winning in exports and as well as domestic, are we winning certain programs where the value is higher value the car is higher? Or are we still in the value in mid-segment business that is [ building ] business, more business?

Good question. No, I mean, it is slightly more than the domestic market for sure. But it is definitely the kind of businesses we are winning on the -- especially on the steering side, in Rane Madras export. They are also meant for some of the smaller cars in Europe. So while definitely the price of the product is more than what it is in India, it's not significantly more. It's not like BMW 5 Series, 7 Series type of vehicles. It's all the smaller European cars.

Got it. So sir, should we understand that at least [indiscernible] to get into higher priced SUV and much more on the higher brand. [indiscernible] general [indiscernible] as of now, the business segment as of now is small cars and [indiscernible] 15, 20 lakh or even in exports equaling or higher in value cost, is that...

No, I think it will be very difficult to generalize because it depends on the product because if you see within the steering world of Rane Madras, we export [indiscernible], we export ball joints and the export power castings. Now the statement that I made for small car is for the [indiscernible] opinion. Now whereas ball joint or steering housing, those could be even for a BMW or a more expensive vehicle. But then it is not the full steering. It's a subcomponent. So it will be very difficult to generalize. So we are winning across all 3. Last year, I mean, what we went into production happened to be for the [ right ] opinion for some of the small cars.

Got it, sir. Understood. Sir, last question on Rane Steering, we did about INR 2,000 crores of business, do you see this growing by in double digits? And in terms of the parts of EBITDA margins to double digit, how -- when do you see it because if you give a picture on the [ Rane business ] that will be helpful.

The growth will be very good. The business is closely linked to [indiscernible] growth as well as we are also breaking into some new customers. So the top line growth will be quite good. However, as far as the margin is concerned, I've explained in the past calls, we are at low single digits, and we expect to get to a mid- to high single digit in the next couple of years but double-digit is not going to be possible for some time in that business. But however, having said ROCE for that business, I expect within two years to start exceeding 20%.

Next question is from the line of [indiscernible] from [ RK Invest ].

Sir, you kind of mentioned that you are looking at double-digit EBITDA in FY '26 to refund, is that correct?

For Rane Madras, Yes.

Okay. Not the overall?

No.

Okay. Got it. Okay. Sorry, I heard it as overall. Sir, the reasoning for this question is, I think at the overall level, we have done only about 8%. So what would be your overall [indiscernible] and consolidated EBITDA? Can you expect that to move from [indiscernible] to what level?

Yes, Definitely, it will improve. For sure, it will obviously be [ 9-plus ] [indiscernible] exactly where we will end it.

Okay. And even the [indiscernible] stand-alone, I see there is a big spike in revenue. So what is contributing to that revenue in stand-alone?

Stand-alone?

Yes. Stand-alone revenues is INR 36 crores this quarter vis-a-vis INR 24 crores in the previous year and INR 28 crores in December quarter.

For the quarter is it?

Yes.

Okay, [indiscernible] just some additional initiatives that would have -- we would have done through Rane Holdings. You see, Rane Holding, the service income is only some of the group companies, right? So sometimes there are some special initiatives that we take there we [indiscernible] the operating companies, and there will be a corresponding expense.

So [indiscernible] overall?

Yes. And there could be some timing effect [indiscernible] something in Q4 will be recovered in Q1 of this year, et cetera.

Got it. Sir, and the second question is on the intangible assets on the development, I see INR 22 crores that has become INR 36 crores. So I don't see that in [indiscernible] consolation [indiscernible] stand-alone. So I think it should be sitting in your [indiscernible] is that correct?

Yes. Basically [indiscernible] systems [indiscernible] explained the new technology is [indiscernible] towards the technology that [indiscernible] as under process of developing. So this is quarter [indiscernible] which comes in [indiscernible] consolidated.

So what is the revenue opportunity [indiscernible]?

Okay. For the [indiscernible] I think -- I'm trying to recollect, this is about INR 150-plus crores per annum.

Okay. That is -- the entire [indiscernible] under development, that is a potential -- revenue potential for this?

Correct, right. Yes, annualize INR 150 crores to INR 200 crores annualized.

Okay. Got it. Sir, the last question is [indiscernible] you have done the consolidation at the [indiscernible] level. So last year, you said you will wait for the one more year before you look at rolling it up all the way up to [indiscernible]. So any thoughts on that?

Sorry, I did not hear.

No, this merger of all the Rane entities last year, we completed during Rane Madras?

Correct. No, we keep looking at what is the appropriate structure. So no decision has been taken, but we keep evaluating it. And of course, as and when we decide on something, we'll share with all the investors.

It's not something which will happen in the [indiscernible]?

I mean I'm not able to comment on it. So we haven't taken any decision as of yet.

So the reason for [ laboring ] these question, see how -- because we're not leveraging on this tax loss of [indiscernible] by keeping these entities separate. So that is the reason I'm asking why we are delaying this [indiscernible].

No, there is no tax to offset -- so which one, Rane Steering, you mean?

Yes.

So Rane Steering, as you [ recover ] or recollect last year, we had a one-off income from NSK as part of the settlement of INR 475 crores. All the tax losses that were available has been utilized fully.

Next question is from the line of [indiscernible] Mohan, an individual Investor.

Two questions. One is with regard to the land sale. You said INR 145 crores. What are the total [indiscernible]?

INR 360, I think.

Okay. INR 350 crores of balance according to your estimate, should flow in sometime during the course of next 12 months?

No. Bulk of it will -- a large portion will come next year. And some of it will come in the subsequent years. See, as I said earlier, the transaction is a combination of land sales, plus also a contract to build the corporate office for us of which is a 3-year process.

Okay. And the other land for which you have shareholder approval, roughly that will be, what, another INR 150 crores or it will be more than that?

We don't -- yes. Maybe in that region -- in that range. But obviously, we are still exploring the market.

Okay. Next question with regard to the export pattern from -- in U.S.A I hear there are several doubts about the export tariffs say 10%, but then for steel it is separate [indiscernible] separate. Are you having a clear idea of how much you're paying right now your customers are paying tariff for the export to U.S.A.?

No. So -- yes, you have a very good question. We are also very confused. Things keep changing all the time. But the only good thing is in more than 90% of our exports, or 95%, close to 95% of our exports. The customer is paying the tariff. So we are not paying. So the good thing is it's not impacting us directly. And -- but we also don't know how much they are paying.

Sir, the danger for that is the same tariff is going to be 50% because some [indiscernible] look at alternate [ resources ] of development. That is my worry.

Correct. No, that risk is definitely there. But as you know, while India and U.S. [indiscernible] on the FDA, the intent is that India will be one of the more favored countries to do business with. So even if there is going to be a negative impact on the tariff, I'm hoping that our government and the U.S. government will somehow be able to sort it out subsequently.

Next question is from the line of [ Asha Patel from Molecule Ventures PMS ].

My question is, sir, we are seeing this theme of European auto ancillary players, even bigger, larger size auto ancillary players going bankrupt because of their financial issues and because of the energy crisis, because of manpower prices, et cetera. So there is a clear demand shift speaking to other auto ancillary players, the business moving in away from Europe and in favor of countries like India. So do you see that happening in your case, given that you already have a European presence? And do you expect any big orders on line of this?

As I said, the overall export order booking continues to look positive and it is obviously driven by multiple factors that are happening globally, including the pressure on European suppliers. So I wouldn't say that is the only reason, and that is definitely one of the reasons. So -- and as I said, we had our record booking for orders last year, INR 700 crores plus in Rane Madras alone. And therefore, I expect our order booking for exports, especially in Europe to continue to be strong.

Next follow-up question is from the line of Manish Goyal from Thinqwise Wealth Managers LLP.

I have a couple of more questions on Rane Madras. Sir, if you can provide us perspective on your Mexico plant progress? How is it going on? And what is the current revenue base and outlook?

Yes. So as I said, the -- there has been -- there was some delay in the launch of production for the program in Mexico, but the trial productions have started, some invoicing has also started. And the revenue will start picking up during '26, '27 this financial year. But as we have mentioned in the past, the level of investment is fairly limited, and I don't see us investing significantly more amounts. But it is more like a satellite plant that will continue to support our local customers. But having said that, we are confident of the orders that we have booked and delivering it through the Mexico plant. Now of course, when I -- if you take a step back, see, we have to see how the whole trade agreement between U.S. and other countries, including Mexico plays out. The U.S. Mexico trade agreement is actually expiring next month in June. And between U.S., Mexico and Canada, they are going to renegotiate. So from a long-term perspective, how much we invest in Mexico and what would be the sales potential is a function of that trade agreement. But whatever investments we have invested so far are getting utilized in the next few years.

Okay. Okay. And sir, on the Rane Steering, probably mechanical saving column now probably based on last year's annual report it contributes now nearly [ 13% ] of the revenues. So like how do we see growth both on the traditional product and the mechanical steering [indiscernible] product.

So you're asking Rane Steering, [indiscernible]?

Yes.

No. So that will continue to see -- most of the mechanical steering column is for the commercial vehicle. So that will be in line with the commercial vehicle segment.

Okay. And sir, last question on the CapEx run for the group, if you can like outline what is the plan for FY '27 for each company, sir?

As I said, Rane Madras will be in the [ 240, 250 ] range. Rane Steering will be in the [ 50 ] range. And the [indiscernible] number is still not decided as yet. There are still some discussions going on with the JV partner.

Next question is from the line of Viraj Mehta from [ Enigma ].

Yes. Sir, just a quick question on Rane Steering. You have mentioned that we will be looking at 5%, 6% [indiscernible] mentioned we should be looking at 5-odd percent margins in Rane Madras -- sorry, Rane Steering in FY '27. But now we are seeing that we will only see lower margins than that this year. Is that correct?

Yes. So I mean, as I said, we will get to about 5%, 6% in the next two years. That is what we had indicated. And I think I also explained it is because of some of the new models that will start going to production, which has a higher profitability. So we're still a couple of years away from getting it to that mid- to high single digit.

And sir, at 5%, 6%, how will we do 20% plus ROCE? I didn't understand that part because at 5% for us to do 20% ROCE and the working capital of the asset turnover should be like, 6, 6.5 points.

Yes. So just go back to the ROCE chart for one second. Yes. I think definitely by '27, '28, '29, we will get to 20% plus. Even with this margin level, EBIT margin level, ROCE.

Sir [indiscernible] EBIT or EBITDA?

EBITDA. one second.

No. But the EBITDA is not ROCE, right? EBIT is ROCE.

One second, go to key ratios of all the company's [indiscernible] and the 21% [indiscernible]. Just hold on one minute. We are pulling up the number.

Sure. No, I understand.

Yes. So the business will continue to have -- by '28, '29, yes, I repeat what I said. We will get to 20% ROCE even at an EBIT level of about 3.5%, 4% EBIT. So EBITDA could be 5% to 6%. So the ROCE will start hitting 20%.

So sir, we did INR 2,000 crores of revenue in RFSL in FY '26 to [ INR 2,018 ] crores. What kind of growth you are assuming? Because that -- that's a very large jump, I guess, when you're assuming in earnings because the margin is not improving and we're still going to that kind of number.

Yes. So I mean, the margin is improving. There is some improvement in margins. As I said, see, if you go from an EBITDA of, let's say, 3% to 6%, we are actually doubling our margins, right? And that is coming through the growth that we're having in top line as well as some higher profitable products entering into -- going into production. So this INR 2,000 crores has the potential to go over INR 2,700 crores to INR 2,800 crores. And yes, therefore, the asset productivity will go up 6, 7x.

Next Question is from the line of Lakshminarayanan from Tunga Investments.

Yes. My question is what is the gross margin we had in the joint venture company and the RFP steering with respect to last year and this year, what is the margin of these two [indiscernible]?

I don't know what gross margin, we only track EBITDA, so I don't want to say something. The EBITDA margins are about [ 12% to 14%, 13.9% ] last year for the quarter. Full year? About [ 12.5% ]. Yes.

Yes. And what is the return ratios, the joint ventures and [indiscernible]?

When you say return, what do you mean which return?

ROE and ROCE.

So ROCE for last year was about 15% for the full year. Maybe going to 20% in the coming year.

Okay. This is which? For the RFP Steering or for the [ power steering ] business or for the ZF [indiscernible].

Sorry, there was a mistake. We have already crossed 20%, we did 23% ROCE for this year, FY '26, the year [ that just got over ].

Sir, this is for which entity? [indiscernible]?

The joint venture steering [indiscernible] consolidated.

Okay. if I just look at there's another listed company in the Steering business. Their operating margins are in the range of around [ 8% ]. With respect to that, we are tracking a number and our aspiration is to even go up. Now can you just explain why they are around 8%, 9% and while our aspiration is to get to 5% [indiscernible] after 2 years, there a different way in which the different markets you operate in?

Yes. So I think as I said that in the past, it's a lot of it is because of some new contracts that we had booked based on certain NSK decisions that are going -- that have gone into production today. That's the...

But that would actually kind of roll off in the next two years or three years, right? The entire new contract -- let's say, 2 years out or 3 years out, let's say, '28 or so, what would be the new contracts you're getting [indiscernible]

So as I -- just to repeat, some of these decisions were taken in '21, '22 period, and those vehicles went into production in '23, '24, '25, and typically, in Maruti, our production goes on for 6 to 7 years. So that is the problem with the contracts that were booked based on certain NSK decisions in that period between '21 and '23. As far as the new businesses that we have booked in the last 24 months, they will go into production come next year, come the year after. Those will be higher margins.

Like that would be, what, 8%, 9% [indiscernible]?

Yes.

And what is the mix of the business from -- for this full year? What is the mix of business on the old contract? And what is the mix of business of the new contract? [indiscernible]

Yes. More than 80%, 90% of those contracts.

Okay. And that would continue even after two years. Even [indiscernible] this?

Correct.

Next question is from the line of Pratik Kothari from Unique PMS.

Sir, one on LMC, Light metal Castings. One, operationally, have we sold for it and how is the order book building out there and any -- I mean we had some ramp-up plans there too.

Yes. No, -- we're still working through it, Pratik. I mean there is definitely some improvement, but we are still not fully where we need to be both in terms of the margins and the efficiencies in the factory as well as the order booking, both we are continuing to still have some challenges. The order book is looking slightly better for '26, '27 also because of the domestic market doing well. But we are still hopeful that during this year, we will see further improvements. As you are aware, we even took an impairment of -- during -- at the end of this year.

And sir, second, again on exports for Rane Madras, it's been going really well for a while now. So just in terms of -- are these [ clean ] customers, same customers, we are gaining [ volatility in geography ]? Anything that you would highlight what is driving this very strong growth?

So I think if you recollect 2, 3 years ago, Rane Madras did a similar growth and then we were flat for two years. And then now again, we are on the uptick. See, it's a combination of new businesses with existing customers as well as penetrating into new customers. And a lot of it is function of which program goes into production, which year, et cetera. So -- but last two years, the order booking has been very good, and that is going into production now. So it's a combination of both existing and new customers. And we continue to remain optimistic that this rate will continue in the future.

Next question is from the line of Munjal Shah from NSFO.

And sorry, I couldn't ask my questions earlier. Sir, if I go to the presentation of Rane Madras on slide 17 where the given [ rhythm ] of businesses of various division actually stayed in Light Metal Casting, Engine and brake division. The [ OEM ] growth, I think, is coming from steering, okay? From a quarterly run rate of, say, INR 420-odd crores, it's now at almost INR 500 crores, where the other 3 divisions is almost flat or single-digit growth actually?

Yes.

Yes. So Suppose we are targeting a good growth going ahead, Okay, well, how do you see these divisions giving growth going forward actually?

Yes. So I mean, I think just looking at only one quarter Q4 and it will not be correct because there were some new businesses that started kicking for Q4 in the steering business, which is why that showed the growth. But generally, if you see the order book for the steering continues to be the strongest. As I said, followed by brakes and then the engine components. So those also will continue to show good growth in this coming year. But for sure, the steering business has got the strongest growth portfolio.

Secondly, if I see like Q4 numbers, okay, the aftermarket is almost 19%, okay which is perhaps one of the highest if we look at other auto ancillary business. Other [indiscernible] companies actually, okay. And despite that, our EBITDA margins, excluding other income is only 8.8% actually in Q4. Okay. And excluding other income okay? So despite such a healthy aftermarket sales, and obviously, aftermarket would have a much healthier margins, okay? How do you explain sir, this 8.8% for our overall business, then if I exclude that 19%, then the rest of the business is it's very suboptimal EBITDA margins?

So the EBIT -- first of all, the aftermarket, the 19% growth that you are seeing business.

Not 19% growth, 19% of the overall business in Q4.

Yes. So it is -- one second. So yes, so it is 19% of the total revenue. So your question is -- you said 8.5%, 9.5% is the EBITDA, right?

That is including other income. I guess if I exclude other income, it's close to 9.1% or 8.8%, 9.1%. Okay. And if you look at other outlines sir, it concludes they are nowhere near 19% aftermarket. And aftermarket, we have this assumption that it's a very high margin business. So your balance, 20% of the business, which include [indiscernible], et cetera, okay, because aftermarket bulk of it is coming from brake business. If I draw some basic calculation when that 80% is very suboptimal margins actually.

Well, see definitely, the margins are lower when it comes to the OEE business. That is for sure. But I'm not able to respond if there is some one-off issue. Just hold on one second. So we'll do click on this point, we understand -- but -- we don't have the breakup of the numbers. I don't want to say something that's not correct.

No. Sure, sir. And lastly, our CapEx is INR 240 crores, INR 250 crores per annum, Madras. This includes the corporate office expense?

No, not yet. That has not even started. The government -- you [indiscernible] for the new corporate office, right?

Yes.

Yes. So that has not been started. We are waiting for the approvals and things like that. And just one second. So that CapEx is probably maybe even 12 months away.

Okay. And so is it fair to assume that '28 CapEx number would be much higher than INR 240 crores, INR 250 crores because that would have corporate office also?

Correct. Yes, exactly. We are talking only about the business-related CapEx, yes.

And this is from growth CapEx? Or there is some -- this INR 240 crores, INR 250 crores is growth CapEx? Or there is some maintenance or any other...

Definitely, generally about 15% of that amount is for maintenance and refurbishment and things like that, 15%, 20%. About 50% would be new CapEx and there'll be some in quality, some in R&D and things like that.

And sir, last one question is with regards to the real estate money that we are supposed to receive. Now if we just assume that this transaction does not go through for any reason, you will be able to retain the INR 145 crores that you are already received?

Yes. I mean, I don't think there's much risk in that. I mean there could be a delay of 1 or 2 months this way that way. But in fact, the transaction -- the contract is very well worded in our favor. So the transaction will go through. I don't see any challenge.

Thank you. Ladies and gentlemen, we will take this as a last question for the day. I now hand the conference over to the management for the closing comments.

So thank you, everyone, for your comments and as well as the questions. As I said, it's been a reasonably good quarter for us, but the more important thing is we have to continue to build on this performance in the coming quarters. The market looks to be favorable, although some of the global geopolitics is creating some concerns that mainly due to -- mainly on the cost front, so rather than demand. So hopefully, we'll be able to navigate it. So we'll continue to be in touch. Thank you. Thanks, everyone.

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