Rishi Laser Limited (526861) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Rishi Laser Limited Q4 FY '25 Results Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded. Before we begin, I would like to point out that this conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company and it may involve risks and uncertainties that are difficult to predict. I would now like to hand over the floor to Mr. Rajneesh from Conferly Partners. Thank you and over to you, sir. Thank you.

Good day, ladies and gentlemen. Rajneesh Desai this side from Conferly Partners. We represent the Investor Relation for Rishi Laser Limited. On behalf of Ventura Securities and Conferly Partners, I warmly welcome you all to Rishi Laser Limited Q4 FY '25 Annual Conference Call. The company should be represented by Mr. Harshad Patel, Managing Director, and Mr. Ganesh Agrawal, Chief Financial Officer. I would now like to hand over the call to Mr. Harshad Patel for his opening remarks. Thank you and over to you, sir.

Thanks, Rajneesh. Good afternoon, everyone. I am Harshad Patel, the MD of the company. A very warm welcome to all of you all to this earnings call of the company for this quarter and year-ended March '25. Hope you all had the opportunity to go through the presentation uploaded on the stock exchange and company's website. I am pleased to share with you the company's performance for Q4 and the year-ended March 25. Coming to the quarter-on-quarter performance, the revenue for operations was INR 37.7 crores against INR 34.5 crores, which registered a modest growth of 9%. The Q4 EBITDA was 3.87 as against 3.18, which is -- represents a [ 27% ] growth and a EBITDA margin of 10.26%. EBITDA margin for the quarter saw an improvement of 100 basis points on a year-on-year basis. The Q4 sales were impacted more because of lower offsets from the earth-moving industry due to DS5 changeover norms. Coming to the full-year performance for '24-'25, the company achieved a modest 7.5% year-on-year growth in revenue to INR 150 crores against INR 140 crores in the previous year. EBITDA grew by 8% with a margin of 9.13%, which remains flat as compared to the previous year. The PAT stood at INR 8.25 crores as against INR 8.72 crores in the previous year due to higher interest and depreciation costs in the current year. Despite a lot of stock pressures, the company has maintained profitability. Our focus on robotics industry 4.0 and steel manufacturing practices improved our operational efficiency. Looking ahead to '26, we are confident in announcing the growth momentum through strategic investments, increased process automation, and continued deepening relationships with key OEM customers. We are also excited about our entry into the steel segment and expansion into retail cut steel parts, both of which present promising high growth opportunities. Our confidence in the business comes from being a supply chain partner to some of the best engineering companies in the world. Our new facility at Bangalore will be the largest and most modern for the company. We will be going in for the latest technologies in welding and painting to improve the offerings to our customers. The inauguration of this facility is planned from 31st May and commercial production soon thereafter. With that, I conclude my remarks and would like to pass it on to you all for questions, please.

The first question comes from Jaira Jain from Ashika Institution.

My first question is like, as you mentioned about your Bangalore plant, your new upcoming plant, and you are doing a 15 crore capex for the same plant, right?

Yes.

And you have mentioned that you will be doing a top line of INR 100 crore. So, what is the IRR you are targeting from this new plant?

[indiscernible] So, actually, the turnover is the expected -- what we hope to reach in 3 to 4 years' time. That is the capability or capacity of that plant. It's going to take us that much time to get to these revenues. So, it is going to be step by step after we start in this coming quarter. And it will take off from there. That number is basically over a period of 3 to 4 years. So, looking at IRR is -- I mean, we don't -- I don't have that number or we haven't calculated that. But obviously, it is very high because if you see the total investment involved here vis-a-vis the revenues which will get generated, the turnover to fixed asset ratio will be very high. So, this plant should contribute significantly to our future growth and profitability.

Okay. Okay. Any approximate range would you say for IRR? Can I know that?

I just -- Ganesh, is there anything, anything you can say on that?

No, no, nothing, sir. We will get back to you [indiscernible]

Yes, yes. Actually -- yes. So, no, we, we, we don't have that with us, yes. I mean, it depends also on the -- on the product mix and how, how, how fast it all happens over the next 3 years. That, that is, that is going to be critical. So, this year, I think the compounding impact will come, I would say, every passing year. That is, that is how I would -- I mean, we are looking at it.

Okay. I thought that you have, you have, you know, part, like, serving the 6 industries, like metros, earth moving machineries, electricity equipment. So, can you tell me, like, which industries you are getting more revenue for this year? And, any plan to [indiscernible] for the same?

Yes. So, the, the, the highest revenue is coming from the construction equipment or earth-moving sector, what we, in the industry, call as yellow goods. So, these are used for infrastructure projects, road, road, dams, mining, et cetera. So, that is our biggest area of business. And that, I think, must be constituting about 60% of the turnover of the company. 60%, 65% of business comes from that sector. The balance comes from electrical, switch gear industry, metros, and railway, and other, wind energy, and so many other small, small sectors -- I mean, sectors are big, but our, our exposure is small. So, our largest, largest revenue comes from the earth moving yellow goods industry.

Okay. And as you mentioned about the construction and infrastructure, so, like, are your clients in the private sector, or do you get any contract from government sector also?

It's primarily private sector, and I think the only government sector or company we are working with currently is BEML, Bharat Earth Movers Limited in Bangalore, for their railways and metro work. But in that company, we are not doing any work for the yellow goods. They also make construction equipment, mining equipment, but those are -- we are not associated so far. We are only dealing with them in the, in the metro and railway space. But BEML has now become very aggressive in this area as compared to 2, 3 years ago. So, we expect substantially higher business from them in the, in the coming few years. We are dealing with them through our current Bangalore plant, and there were some capacity constraints also in working. So, now with additional capabilities coming, we'll be able to separate. The railways work that we do is mostly stainless steel, not carbon steel. So, the stainless steel capacities and facility will be able to offer a much better offering to them. And we have started bidding more since the last quarter of last year, and I'm hopeful that, that business should grow much more than that. Of course, the base is very small. So, when I say grow, high growth, it is on a very small base as of today, but the potential is very good. That's the only government company we work with. We, we used to work with the Indian Railways, but now there's not much work we are doing. Not Indian Railways -- sorry, the railway coach factories, the factories which build coaches for the, for the Vande Bharat and these other trains. Yes.

Okay. Great. And so, like my next question is, like I have seen like your this year, the revenue bifurcation was around 89% in domestic and around 11% in export. So, is there any plan to increase our share in export? But while considering the factors like right now that U.S. has been importing tariff on such duties and all. So, will it have any impact on export side, or it will be the same, or it will depend? What's your view and your point on it?

You will recollect in the past, I've been talking a lot about focus on export even a year ago. But unfortunately, we haven't done anything serious so far. We -- there is a -- there are a lot of inquiries, a lot of work in process, but none of these have really fructified to the extent that we were hoping for. So, going forward, it is looking better because some of the constraints that we had in taking up some of these orders now are getting removed, primarily with the, with the area of painting. So, exports, from here onwards, the share of exports to domestic -- I mean, to the total business, the percentage should definitely go higher. As far as tariffs are concerned, I think it will be to our benefit because -- not because of the tariffs, but India, we are not going to have higher tariffs than China, for example. So, I don't think tariffs will hurt us. That's not expected. So, tariff-wise, I don't see a risk. If at all, it may benefit us, but it should not work against us.

Okay, that's a good news.

But still, still it is a little unclear about this tariff and all that. So, we have to be a little cautious, but I don't think it's a negative factor.

Okay, great. And sir, like, what are your margins, like in domestic versus export? Are we growing or are we on the same path?

Export margins are typically better than, better than domestic because domestic, the competition -- not just the competition, but overall, the pricing is very, very tight. So, here, there's very little possibility to improve margins. Whatever little we've been able to do over the last year or 15 months is primarily because of improving material efficiency, by using better, better designing softwares, and also, as I mentioned at the beginning today about better, better practices, et cetera, is how we are able to maintain margins. And this is primarily because the earth-moving sector is -- our customers, their sector is very, very competitive. So, they -- I mean, it's very difficult for them to be very generous with the margins. We have to work very tight. And the, the only way is that you have to keep on improving your productivity, efficiency, and all that to get these timescale as far as margins are concerned. But with export, with the mix changing, with more export, the overall margin should improve going forward from here.

Okay. And sir, like, my last question is, like, how are you improving margins against your raw material inflation? Like, especially, steel, how will you balance it out or have an edge over others?

Yes. See, one thing is there that, benign -- I won't say benign, but stable steel prices are very essential for us to maintain margins. Even if the prices of steel remain a little higher, it doesn't matter, but they should not be very volatile. If the volatility very sharp increases in a short period is what sometimes hurts margins because we cannot pass them through very quickly. But if the prices remain stable, the steel is not -- should not be, should not be a problem. There, as I said earlier, there is a little bit more scope for improving productivity or rather improving the steel utilization by doing even more work on, on, on utilizing efficiency, et cetera, which is still a work in progress. We started all that last -- only about a year ago. We are investing in very modern softwares, which helps better utilization. But there is some more scope in that area for us to be more competitive as compared to the others.

The next question comes from [ Dhwanil Desai ] from Turtle Capital.

Sir, my question is that we have been talking about more potential on the export market. And I think with the new facility that we have put up, it is possible that we can utilize that for export market. So, if you can talk more about how we are seeing the scale-up with some of the larger customers like Caterpillar, Volvo, Emerson on the export market, that would be helpful. Yes.

Yes. So, I think I was a little bit, a little bit too, too early in, in talking about exports. Or rather, if not too early, at least, I expected that sector to start giving us much better results. But it's taken a little bit longer time than expected. But during the last 6 months, we had very close interaction with some of these big customers whose foreign teams have been visiting India and they visited our plants also, looked at -- in fact, the -- some of the specifications of our capacities have been decided looking at what kind of business we are likely to get. So, that also took a little bit more time in designing some of the facilities that are being put up now. So, that is the reason we have much more, much more confidence now, a little bit more credibility. And some of these people will again visit us in June once the plant is up and running. And then start the process of starting all these new, new parts which are being lined up. And it will take about 3 to 6 months for all these things to get into groove. After that, that should become regularized. So, this is the whole idea. And the primary biggest customer we are aiming for is, is Caterpillar only. Currently also they are our biggest customer. And for exports -- see, they have taken India much more seriously than most other people. They, they have, they have a separate India strategy. Their senior management people also come down to the country and they visit a lot of people. They look at the capabilities and then they decide what they want to do. So, they are the most serious about, about buying from India. The others are all [indiscernible] Sometimes if there is pressure, they look at India and then again they cool off. So, all these others are -- we cannot really -- we cannot bank on them for sure. But that also business will come as they are under -- as they will have more pressure from suppliers from elsewhere because of higher costs. But Cat is the, is the primary company for which we are -- we have, we have identified as a business. So, what type of business, where it will go, to which plants of that, lot of detailing is already done. But it's a long -- it's a little bit long drawn out process because they have -- it's a very purpose-driven company. And they go through a very little bit longer cycle of approval as far as quality and so many other things are concerned. It's a whole chain. Everything is done step by step. And so, all that is lined up. And we hope that, that should start now -- from the second quarter of this year, we should start seeing some more business. One more thing which happened recently is that we also -- Caterpillar is also looking at India for the after-market spares business. And that is a huge business opportunity because that -- the, the variety is very large and the volume is, the volume is big but over are a very large variety of parts. So, it is not suitable for China type of suppliers to be supplying. It's much more suitable for smaller, more agile companies like us. So, the after-market business last year, it has just started. And that also is looking to be a very, very big, very good potential for exports. And after-market is about 1/3 of the sales turnover of Caterpillar. It's one of the few companies in the world which has -- it has about $15 billion, $16 billion after-market -- the spares requirement. So, that is a -- I mean, it's bigger than turnover of most of the other big companies. It's such a big business, just the after-market. We also didn't realize this till last year when there they had a conference and they, they explained the potential of after-market and why, why we should take that market also very seriously. So, that is, that is another business which in the past we were not doing or looking at, where which we started this year. And that should grow many-fold. I mean, from a very [indiscernible] -- from a small base, but can grow 3, 4, 5 times from here.

Okay. So, sir, question is that, I think we have put up a new facility, while some of our facility in Pune, Baroda, the utilization level may be quite low. So, I understand you have put up this facility for a specific customer requirement [indiscernible]. But what is the plan in terms of utilizing more capacity between existing plants with either domestic clients or other clients? Any thoughts on that?

[indiscernible] obviously -- absolutely. Both these plants are -- have excess capacity, which we have not been able to, to fill up. And therefore, I mean, we have been struggling since last 2 years to grow the business. And both plants are having different, different challenges. So, as far as Gujarat is concerned, the Baroda plant, we are taking a little different approach, is that instead of doing a B2B OEM business, I want to start the retail kind of business from there. And that facility is also going on, I mean, in the same premises, but that is a separate vertical which will go on stream now in shortly this month of June. And that business is what, what we want to do, where to drive the Gujarat business. Because there, onboarding newer customers or even growing volume with existing customers has been proven to be very challenging. There -- some, some, some things have happened, but it's still moving very, very slowly. And there is a lot of talk, especially from the electric sector and that business can grow. But even, even last year, the growth that was projected from the customers has not fructified. So, -- and by doing this additional business, it is not going to hamper the -- our capability to supply to these OEM customers. That, of course, efforts will continue. But the visibility in that area is not very strong yet. And we, we, we have already taken a call in the past that we don't want to grow business by being aggressive on pricing and cutting prices to get more orders. That is, that's not a strategy that, that we want to follow. So, definitely, we are struggling there to get the right kind of customers who can give more volume. Some new customers have been onboarded last year, and they could grow, but it's, it's still not, not very clear. But there, the retail business that we want to do is -- will be much, much larger than, than the OEM business. And, of course, there is a smaller margin. The margins will be much lower than this, but the volume will be far higher. So, that's a whole different new, new approach that we want to take there. And we have to see how, how it all, how it stands out. And as far as the Pune facilities are concerned also, both in export and domestic customers, there is -- there are new businesses which are being targeted. And I think by, by the second quarter of this year -- last year, what was expected [indiscernible] some of these export customers has also not happened in full. Pune also, we are doing export to -- partly to Caterpillar, but also to other customers. So, the other customer exports are going on, but none of them have -- are -- have matured so far. But that should also, in this coming year, start getting some traction.

Okay. And last question, and I'll come back in the queue after that. So, we have target for 20% kind of a growth and better margins. So, wanted to understand more of the margin side. So, we do 45% gross margin, which is [indiscernible] raw material cost. And below that, the cost is kind of -- it's like most of that may be fixed [indiscernible]. But lot of operating leverage is available in the system. So, as we scale, how should we look at the margin? Because generally, with this kind of a gross margin, it's possible to get to 14% 15% kind of an EBITDA margin. So, is this is the right way to look at it? And, if I look at the [Technical Difficulty] raw material has grown like 10%, 11% while our revenue also has grown 7%, 8%. So, going forward, should we assume that the cost will grow at a lower rate than revenue? And hence, this margin expansion will continue to come as we progress and bring revenue?

I would say that -- see, gross margins for OEM business that we are doing, this is -- I do not see the possibility of improvement of this margin. These are already a quite, a quite good margins compared to many of the -- many of our peers that we look at. So, if we -- so, gross margin, I would say, would remain at this level. As I just mentioned, if the retail part of the business becomes significant, then the -- then the overall margin, gross margin could even come down. But that's the -- the current business model that what we are having, these margins may not expand much. The expansion could come a little bit more if the share of exports to turnover goes up. Otherwise, these margins, even if just to sustain itself, is a, is a continuous challenge. Because costs -- all, all kinds of costs which are increasing are, are not -- you cannot pass on to the customer. But the raw material cost is the only cost which customer is willing to accept for the cost to increase. Any other cost, whether they are consumables or whether they are, they are any other peripheral cost, the customer just will not -- you cannot pass on. The way out is -- was either to increase your volume or to improve productivity. Our productivity gains, there is, there is still some scope to improve because we just started with automation last year with robotics and all those things. Current year, we want to do much more. So, that should improve our productivity. And there, we are trying to negotiate with certain customers that if you give us higher volumes, we could look at some kind of price discounts and all that. Because one of the other challenges in India and the way we work here is that all the big companies are not comfortable having a single source. So, they always have 2 or 3 people supplying the same components. And therefore, everybody is working at inefficient productivity levels. And this is a, this is a big challenge. In fact, this is a challenge throughout the industry. And that is the reason why our costs in India are not competitive compared to probably the Chinese or the Vietnamese or whatever because they work with much higher volumes. And in India, we can't get the higher volumes unless the customers stop dividing the business between vendors. So, that is a challenge. So I think, net-net, these margins, we should not expect them to be higher than this. These -- even if we sustain, the bottom line should improve primarily because of operational. I mean, you can make your own calculations. But even if the turnover goes up by about 20%, 25%, you could see that most of the other costs are not likely to go up by that much, whether it is electricity or whether it is labor. Also our -- my target is that we see that it doesn't go up proportionately, obviously, because we want to automate more and more. And our ultimate target is whether we can keep that cost constant and improve sales by keeping that constant. It is a little bit challenging, but it is doable. So, the -- the bottom line will improve due to operational -- I mean, more turnover coming in rather than margins improving.

Yes, sir. That is my question. I understand that around [ 3L ] 45% gross margin is a very good margin. If [Technical Difficulty] money that you remain in previous year will change in the next year. Right? That is my [Technical Difficulty].

No. Sir, please, please repeat it. I can't -- your voice couldn't come [indiscernible] yearly.

[Technical Difficulty] volumes...

Sorry to interrupt you. Your voice is not audible. Dhwanil?

Is it better?

Yes.

Yes, this is better. Yes.

Yes. Sir, my question is that as you said that, as the volumes go up, that cost below raw material, which is our employee benefit, labor, electricity, that cost will not go up proportionately. It will grow probably in line with inflation, let us say 5%, 6%, whatever may be the inflation. It will grow at 5%, 6% while our top line our volume will grow at 18%, 20%. So, all that benefit of incremental volume, whatever money that we earn will flow to the bottom line. Is that a right way to think?

[Technical Difficulty] All these are very big words, but I would say yes to a great extent, yes. Because we have seen in the last few years also, I think one of the quarters, I think where we had basically a bump in sales by about 10%, 15% or so, it had made a significant difference in the bottom line. So, yes, a lot of it will flow downward. The other costs are much more sticky and do not go up in the same proportion. And we don't have to -- for all those things, we don't have to make any investment, whether it is in the plant and machinery or as far as hardware capacity, the space, everything is already in place. So, that is why if the volume benefit goes up, it makes a lot of -- because this is true, of course, of most businesses. So, operationally, if you have capacity, either then if you sort of add to it. And because our business -- not that we are very labor-intensive business. In our, our case, because it's not a very high-volume business like a test shop for auto components or whatever. So, our personnel cost to sales is around 17%, 18%. This is not, this is not low, but it is not that high also. So, that is -- if we can maintain this or slightly bring that down as a percentage to sales, then it could improve profitability quite, quite well, I've known this stage.

The next question comes from [ Rahul Shah ] from Crown Capital.

Hello. Can you hear me, sir?

Yes, sir. Yes.

Yes, yes. So, just reconfirming that you're targeting a 20%, 25% top line growth, right? For FY '26?

Yes. Yes. Yes.

So, I just wanted to ask, so, like, what will be the driving factors for this? What will be driven by this, like, volume growth or -- and also, like, which particular segments will be key contributors for this growth?

Yes. So, the, the primary growth we, we expect it to come from, from the existing customer base only, but it will come through 2, 2 methods. One is the additional -- see, our customers are not growing at 20%, 25%. So, I obviously -- if we want to grow faster than what customers are growing, there are, there are 2, 2 ways. One is we have to unload more customers or we have to mine the existing customers to get more, more sort of orders from the existing customers. And third is to export the -- I mean to supply more parts to the existing customers' newer clients. So, our, our major focus or rather major visibility is from the existing customers only. It is more getting, more components from them, whether it is an import substitute or whether -- because we are more competitive as far as the quality and delivery is concerned compared to the others is, is where they could get more business. So, that is where the business growth will come from.

So, when you say you have this visibility, it's obviously based on some sort of, like, forward order booking or something? Or is it just, like, based on discussions you've had?

Yes. So, no, in our case, you don't get the, you don't get the order, order booking. I think whatever is the existing business that you are doing for -- it's like an OEM supply. So, that there is recommended orders and there are the schedules which will lift month on month. So, it all depends on how much your customer is producing in that month or that quarter or whatever based on that you get business. So, one visibility is what the customer is talking about his next year forecast and all that. But that is not -- that is not very exciting. I mean, it's there, but it's, it's not that, that great. The more things are getting newer parts and newer components which currently you are not supplying, which either because it's being import substituted or because they are having challenges in getting the supplies from existing people is where they are looking for switching to a more reliable and quality effective supplier. And I see the big challenge in our industry is the human resource side. It's not really capital or technology or factory or whatever. It is the -- it is your ability to absorb or to understand the high quality requirements of the customer and have a -- have the kind of capability and software to be able to do that. Because we are not a mass producing kind of thing where you set up a line, like an automotive component line or a shock absorber or whatever. So, you put up this line and then you just run it efficiently, mass produced. That is a less challenging kind of a business as far as people are concerned as compared to us. And so, I think what I am seeing is that the industry is really struggling as far as, as far as human capital is concerned. And it's a, it's a kind of a hidden thing. Nobody talks about it surprisingly. But the real challenge is the human capital. And whatever, when I say that we expect more business, why would, why would the customer give me more business? Either he would give because I give him a better price or I give him more, more better reliability, quality, et cetera. Price is not -- these, these companies don't give us business on price. They are -- they, they give business based on your reliability, quality, all these things. So, on that score, if you are better than your, your competitors, you can get more business. And that is where I think our, our company's maximum focus has been in that area. So, it's technology-wise, everybody has virtually the same technology. It's not that we have some special kind of machine which the others don't have. It is the human capital, that is where people are not sort of investing much. And we have -- after, from this current year, our training and man development budgets have been increased substantially. So, while at onetime we talked about costs not going up on personnel and other things, but there are 2 areas where we will be -- there could be a revenue cost, but I treat it as an investment. One is to improve your human capital. Another is to do R&D in processes and all that. So, like last year, we introduced some new welding process for the first time with our -- 2 of our customers, L&T and Volvo. We started doing laser welding for them. And we are the first supplier who, who actually did it and got the part approved. So, these all require some kind of investment in R&D. So, this R&D expense and human capital training expense, those are the areas where we will be spending more money to become more competitive. So, the hardware side, the space and machines and all that, that we already have, and anybody can have that. That is not really that critical. The criticality is this, and I think personally this is where we are already scoring over some of our competitors, and I hope that, that is what will over the long run set us apart from the other, the other companies, other -- our other core suppliers.

Have you completed this entire, like, process of improving human capital in R&D? Is it already ongoing? And when will you see the results?

It is an ongoing thing. R&D, a lot of work is going on parallelly in various areas, because earlier what we were doing was that for whatever automation or whatever, we used to go to outside companies and get it ready made, and that was very, very costly. I mean, it was -- all these European companies or whoever you go to, they, they just charge you -- I mean, it's an atom bomb, and that's the reason why most companies in India don't invest in all that. So, last year, we set up our own internal division to look at all this and do that. So, when I say R&D, it is more of process R&D. So the equipments are in place, but to do certain kinds of welding or to do some process improvements, to bring down your time and material cost into that, all those are -- it's an ongoing thing. I think it will carry on. I mean, this year, that is going to be the major focus area for us, and that is going to help us very -- in a very big way as far as exports are concerned, because these, these, these customers that you are talking about, they are not just interested in buying from you, but they also are looking at those kinds of best practices and all that to be done in your plant, and that is where I am hoping that we will be able to [indiscernible]. So, it is an ongoing thing, and those talks will be there, I would say, at least for another 1 year or 2 years. Our training facility is also starting. We'll have a separate dedicated training center in our Baroda facility, and people from all, all our different plants will go there for residential training as well. This will be right from workmen to mid-level and shop floor managers as well. So, it will be a proper training facility, and so we want to upskill our workforce to a different level. And, that is something -- again, I'm repeating that, that is an area which is very underinvested by everybody here, because nobody really looks at human capital. People just think that I can take anybody and just put him on the shop floor, and something, I mean, something will come out of it. It doesn't happen like that. And you have seen many of the even bigger companies talking about challenges on that side. So, it is a, it's a famine of good skill availability on the shop floor. It is very, very serious, and so this effort that we'll make will make -- will help us too. We also have had last year also some major hiccups because of lack of proper skilled manpower, but that's -- I think by, by, by the end of this year, that will be something behind us. So, it's an ongoing thing. It will be [indiscernible] -- this and also IT -- up to now, company was very weak on the IT side also, as far as manufacturing, engineering, design development of -- I mean, we don't make anything as per our design, but whatever the customer tells you, how best you can make it at the least cost and with the least amount of material wastage, et cetera, that's where the engineering comes in, and that's where the software part of it comes in. So, that we have invested quite a lot in those softwares over the last 12 months, and most of that investment is already done. Now, very, very little investment in software is pending, but now more and more utilization of all that has to be done. So, those things will give long-term benefits to the company and make us much [Audio Gap] much more stronger so that customers have more confidence in us and we can work at a different level along with them. And this has given results up to now, but it will start getting even better results. We were one of the few companies from India which was a special supplier award from Caterpillar US, and they have this big -- they have -- I think from India, 10 or 12 vendors have got that award, but on the fabrication side, we were the only one. And those things go a long way, I mean, with these kind of companies. So, that's -- what we are doing is building a big foundation to try and go to this level. These export businesses and all are not like -- not transactional. They are going to be long-term -- you are going to get into the supply chain of these big companies, and that will be a long-lasting impact.

[Operator Instructions] The next question comes from Munjal Shah, an Individual Investor.

Sir, my first question is, sir, when we are mentioning that we are entering into tube processing business and cut steel parts of retail, so there we are mentioning that it will increase our margin. So, sir, this part of the business and the business where you were talking about from the Baroda plant where we are targeting the retail segment, sir, these are the same parts of the business or there are complete different segments which we are planning to cater?

Yes. So, it's the same. So, there are 2 different -- one is the tubes business and one is the cut bend -- the retail. So, the retail and cut bend is the same thing. So, that is a higher volume low margin business. And so that is -- that will -- that is margin per sale, the gross margins are lower, but the turnovers are much higher. It's a very fast moving business. And the whole business is conducted in a little different way, sir. The business model will be very software driven. And that software development has taken us a very long time. And that is what has held up the launch of that whole project. And this is going to be a very unique way. I mean, we don't have the time just now to discuss it [indiscernible] in detail. But this is a unique thing we want to introduce. And if that is successful in one location, then we could be even looking at growing that business [indiscernible] in that area. But that is a lower margin business. And so is the, so is the tube processing business. The tube processing also, is, by and large -- most of the business that we intend to do will be only on the first 2 stages of cutting and bending. There will be very little final fabricated tube assemblies and all that. If we get into that, as of today, we don't have much of, much of visibility in that area. Then though the tube assembly business [indiscernible] still in the similar margin range as our current OEM business. But in that business also, we are looking at doing a lower margin, high volume business. So that is why both these businesses, as of today, the turnover is 0, actually. And so once it comes on stream and it is, it is profitable, it will add to the overall profit of the company. But if you, if, if -- since it is going to be, at least for the first few months or maybe a year, a little bit insignificant as far as the overall turnover is concerned, it will not bring down the overall margins of the company. But if that business starts becoming bigger, then the whole margin structure could change. But it will be incremental to profit, ultimately, to the bottom line. That's, that's very important.

Okay, sir. So what I understand is the more number in the top line on this segment, it will give -- it will bring more operating leverage to the business. Am I correct in understanding this?

You are [Technical Difficulty] I mean, yes and no. No, in the sense that this is a different segment [indiscernible]. See, when I say operating leverage, I would more look at existing type of business. I mean, more of that business gives us more operating leverage. Yes, you should treat it as a different, a different segment and a kind of different P&L structure itself. So you will see like there are 2 types of businesses. One is this current type of margin kind of business. Another is a business where the, the turnover -- where the incremental value addition is less but the, the turnover is higher. I mean, the speed with which the goods move out of your factory are a little bit higher. So they are 2 totally different things basically.

Got it, sir. Got it. And, sir, one, one more question if I can squeeze in. Sir, currently the electrification theme and the mining theme are moving with a lot of potential in the future. Sir, how are we planning? So basically most of the -- like close to 60% of our revenues is coming from the construction equipment segment. So right now, how are we pacing with this mining and electrification theme? So if you can just give us some idea on it?

Yes, very good. Actually, mining, last year, again 1 year ago when we were discussing all this, Caterpillar -- Caterpillar is the biggest in India as far as mining is concerned. Off-road vehicles, the mining trucks, the 50 ton, 60 ton trucks and all that. [indiscernible] makes a little bit, [indiscernible] makes a little bit. But Caterpillar is the main player in that. An in that area, that division also gives us the highest business from Caterpillar. So last year it was expected that mining would pick up in the second half and that's the indication they've given us. But unfortunately, the business did not pick up by that time. And it's only now that we are seeing traction coming in, in this quarter in that business. So mining, yes, they are very, very bullish both in India and overseas. Worldwide, of course, because of more mining, because of copper, because of all these battery-related chemicals that have to be all taken out of the ground and all that, so mining is going to be definitely the growth area for our customer and therefore for us. Electrification has, again, not given -- I mean, the kind of potential that is there and what I felt growth could come. It is a -- it's a feeling that we have not been able to really make anything -- any significant inroads into that. Because in electrification, if you see, the biggest growth is coming from solar-related stocks. So the transformer business has picked up in a big way because the solar distribution is very different from currently how the power is distributed. And that should have also given good business to our big customers like Schneider and ABB. But they have been also, I think, struggling to increase their capacity and some inputs they are not able to get from abroad. And there have been some hiccups in that area. Current year also they have projected substantially higher business. But, the first quarter is, is not meeting up to their expectations. I think it's a bit, a bit lagging. But yes, you're right, electrical is the other area which is -- which the customers are quite optimistic. And we have a decent, decent sort of penetration there. So, if they have the growth what for what they are talking then that would also spill over. And this business is primarily being done from our Gujarat facility, because Gujarat is the biggest area for transformers, switchgears and all that. All the big ones are there. And ABB is also talking some different business. But as of today, it is not yet -- I mean, I don't see that kind of -- there is a lot of talk, but it is not yet fructified into business.

Okay. Thank you for patiently answering my questions. Sir, just one, one, piece of thought. I really appreciate your idea of investing into human capital. And with all these years which you have been putting in, if we have a second level of defense in our company, it would be really great. Because the efforts which you are putting in probably will yield results in the future for sure. So, if, if, if in [indiscernible] future calls, if we can have some, some light on the second level of defense, if we are planning into it.

Absolutely. Absolutely. Yes, yes, yes, we can. [indiscernible] or you can even reach out to me at, at some time, and I'm going to discuss that as well if you want.

The next question comes from Venkata Subramanian Raman from Organic Capital.

I have 2 questions Harshad [Foreign Language]. One, you have shown a lot of interest in our robotics business. Can, can we have a separate discussion on this? Or in the next call, can we spend some more quality time discussing what your thoughts are and how it's working out? So that was one. And the second is, you are in a vantage position when it comes to judging private capital formation. And there's been a fair amount of discussion on this. It's almost there and still not there. What are the signs you are seeing? And, if you can paint a picture for the next meeting [indiscernible].

Yes, yes, yes. So, yes, I think this is a whole very big topic. We can go fairly deep into it. But robotics, we started working maybe more than 6 months -- 6, 8 months ago. We are doing a lot of it internally for our own requirements. And we are also marketing to outsiders. But very sadly, I'm finding -- I mean, I'm very surprised and quite badly surprised that there isn't that much of excitement and [indiscernible] from the industry as far as automation and robotics is concerned. One thing I'm surprised is that, this is -- I look at it as a life and death kind of thing. The industry will have to spend on all these areas because otherwise you just cannot remain competitive globally. So -- and why globally, even, even within the country. So I think there it is a little bit disappointing. But I think that maybe because I, I, I'm seeing things a, a little bit earlier than what others are seeing because I'm using more powerful glasses I'm wearing. But it will come. I think maybe 1 or 2 years down the line. Today, what I find is everybody is cribbing that they don't have people [Foreign Language] But when it comes to putting money into automation, then this starts -- and these are companies which have a lot of capital. They are not short of capital. But the hesitation in investment is still very surprising to me. I think Indian, Indian businessmen want a very fast return. So wherever you cannot show them that in 3 months this will pay back and you put this and magically [Foreign Language] unless you can show them that, I find that they are quite hesitant. So, yes, both these are tied up in one way or [indiscernible]. So, yes, it is a little -- I don't -- I can't say it's worrying, but I think the people need to wake up to the reality. But it will happen. I think it always happens in its own course. But why it is not happening up to now, I -- was a little bit surprising to me.

And on broad capital formation, private investment Harshad [Foreign Language]?

No, no, no. [indiscernible] There also, I, I still find a lot of hesitation. I think it's not, it's not happening that, that aggressively. I, I don't think so. I think still, still people are, are, are struggling. I think so. They are struggling, [Foreign Language] but maybe people don't have the confidence or what, I don't know. But something is holding people back on -- in that area. I don't know what it is yet. Capital is, capital is available. There is no, no shortage of money with companies. I mean, funding is available, capital is available. But there is a lot of hesitation in investment into things. There are of course companies, especially listed companies. You can see some of them quite aggressive. But quite a few -- there is a lot of hesitation. Some pockets are aggressive, but overall, it's not, it's not, that, that aggressive, according to me.

Now I hand over the floor to management for closing comments.

Yes. So I'm really grateful that you all have taken the time out to, to listen to my, my [indiscernible] and lectures. But I'm really grateful to you all. And I hope I could give some idea about our business and where we are today and where we are going. I'm looking forward to your support. And I'm very -- I mean I would like to sign off on an optimistic note as far as we are concerned. I'm quite optimistic about the future of the business and where we are going. So thanks once again.

Thank you. Those who are left to be entertained by the management, please feel free to reach out at [email protected]. We will reach out post the call. Thank you. Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation. You may disconnect your lines. Thank you and have a good day.