Rolex Rings Limited (ROLEXRINGS) Earnings Call Transcript & Summary

Good morning, everyone. On behalf of Equirus Securities, I welcome you all to the Q4 FY '25 Post-Earnings Conference Call of Rolex Rings. From the management side, we have Mr. Manesh Madeka, Chairman and Managing Director; Mr. Mihir Madeka, Full-Time Director; and Mr. Hiren Doshi, Chief Financial Officer. So without further ado, I would like to now hand over the floor for opening remarks, post which we can open it for the Q&A session. Over to you, Hiren sir.

Thank you, Mihir. On behalf of Rolex Rings, a very good morning to all participants on this slightly sunny and slight windy morning of the day. As guided earlier also that Q4 of fiscal '25 would be better than the Q3 of fiscal '25. We had some more pressure in quarter 3 of FY '25, but that has partially released or rather that has partially taken care of in Q4 of FY '25. Further also, we expect the first quarter of this new fiscal, that is FY '26, more or less having 2% to 5% growth in this particular first quarter. But we are very much hopeful for the better numbers from Q2 onwards as we guided earlier also because of the new order win and the dispatch plan, the forecast what we had already received from our customers till now. That will be very much positive or hopeful for the Q2 of FY '26 onwards. Taking you through the numbers of quarter 4 as well as fiscal year '25. Mihir, my screen is visible?

Yes, sir, it is visible.

Okay. First of all, I'll give you our quarterly indicators. For the quarter 4 of fiscal '25, we have recorded net revenue, that is components and scrap revenue is somewhere about INR 284 crores, which was INR 260 crores in quarter 3 of FY '25. So here, we had almost a 9% growth in this compared to Q3 to Q4. In terms of EBITDA, this quarter -- last quarter, Q4 of FY '25, we recorded INR 62 crores, which was INR 55 crores in quarter 3 of FY '24 -- FY '25. Here, again, the volume has -- our operations have given me some kind of better cushion over here. If we compare the same with the Q4 of FY '24, where we had a revenue from this component and scrap was somewhere about INR 316 crores, which is somewhere about more than 10%, 11% of my Q4 of FY '25. And that is the reason why EBITDA has also increased in fiscal -- last quarter of fiscal '24. Coming to the PBT and PAT numbers. In Q4, we had recorded PAT of INR 55 crores vis-à-vis PBT of INR 49 crores. If we compare the same in quarter 3 of FY '25, we had a PAT of INR 20 crores and a PBT of INR 45 crores. Here, as you are very much aware, that in the Q3 of FY '25, we had some extraordinary special items where we have provided almost INR 18.6 crores, which has reduced my margin and -- or which has reduced my PAT number. So in this quarter, we have not provided any further item on that particular front. We will let you explain the updates in the due course. As far as the segmental revenue is concerned, component bearing rings, what it was leading till last year, this year, it is having quite sluggish compared to the previous numbers or rather the fiscal of '23 onwards. Bearing rings market is showing some kind of sluggish market and slowdown, particularly from the overseas market and where we are, we got a hit. So in bearing rings segment of my overall components sharing, I'm talking about the bifurcation of components only without scrap and any other income, bearing ring contributes somewhere about 45%; and auto components, which is 55%. Auto components is fastly or rapidly growing as far as our business is concerned for last 1 year. And again, in this fiscal also, we will be expecting good growth in auto component business compared to bearing rings. In terms of territory or the zone-wise revenue bifurcations, exports are 53% and domestic 47%. Here also, exports market are a bit decreasing compared to the previous numbers because of the -- mainly the sluggishness in the bearing ring segment from the overseas market, again from the European segment. As I explained you that we are expecting not a significant or a subdued demand in the bearing rings, especially from the overseas market in this quarter, that is current quarter or first quarter of FY '26. But definitely, we are expecting some kind of incremental additional from our existing customers as far as bearing ring is concerned and a couple of customers, new customers who have been added in this fiscal. We expect some kind of delay, deferment and reduction as far as the European customers are concerned for the existing supply as well as some new supply. But we expect the same to be regularized or rather the incremental and additionally -- additional numbers would be there in the second quarter onwards. As I explained earlier that EBITDA margin, particularly in the Q4 of FY '25, has a bit suppressed or rather down. That is because of certain inventory provision what we made that is of slow-moving and some kind of obsolete items that has impacted particularly in the quarter. But if we compare on an annual basis, my numbers are more or less same, that I'll let you know in the coming slides. We expect that U.S. tariffs in the coming quarters, it would be implementing, but may not be impacting on our business because we had partially kind of terms with the customers, and we are in dialogue with the customers, and they are still willing to resource the components from the Rolex only even after the incremental of tariff to some extent. Revenue mix for the fiscal '25 segment-wise in the end application industries, 46 percentage again goes to the passenger vehicle segment; 17% in industrial as it is down because of the overall industrial sluggishness in Europe and U.S. for the industrial bearing ring segment. The commercial applications and heavy commercial vehicles, the numbers are more or less same, 29 percentage. EV hybrid, again, having not significant growth in overall EV segment also. So that has led to 8% of our overall revenue bifurcation. If I tell you the annual numbers for the last 5 fiscals, FY '25, we ended with INR 1,154 crores of component and scrap revenue. I'm not considering other income over here. The bifurcation of that INR 1,155 crores is INR 553 crores from the exports market and INR 601 crores from the domestic market, that includes my scrap revenue also. Same numbers for the fiscal '24, it was INR 635 crores in overseas market; and domestic, it was INR 586 crores. Here, we are just able to see that the exports market has a bit decreased in this current fiscal compared to the domestic one. And again, it is mainly from the bearing ring segment and from the Europe side. If I tell you the EBITDA annualized numbers, FY '25, we have recorded INR 269 crores of EBITDA with a 23 percentage of margin, which was INR 277 crores in fiscal '24 considering 22.4% margin or so. So for last 3, 4 years, if you see, we have an average of consistent of 23% of EBITDA. And this number, we expect to be better. As the revenue or the operations are going to an increasing trend, these numbers will definitely give me a benefit of scale of economy. Annualized PBT versus PAT, fiscal '25, I had a PBT of INR 226 crores vis-à-vis a PAT of INR 174 crores in FY '24. The same numbers for fiscal '24, it was INR 242 crores PBT versus INR 156 crores of PAT. As you know that the company is having quite sound cash flow generating, and for last 3 fiscal averaging out to almost INR 200-odd crores is operating cash inflow what company is generating. Company did CapEx average INR 50-odd crores as indicated earlier also. This year, fiscal '25, we incurred somewhere about INR 52 crores for the CapEx and INR 55 crores in FY '24 for the CapEx in this year. INR 52 crores consisting mainly -- or rather the 60% of this portion is towards the new solar power plant, which would be operationalized in next month. Net debt, as you better know, for last 3 years, company is having a negative net debt. Company is carrying cash and bank balances somewhere about INR 54 crores as of now and are not considering any kind of short-term investments what the company has made over. Return on equity for the fiscal '25, it has gone down to 16%. It was 17% in last year. As you know that my overall revenue numbers are more or less on the same side. So the numerator, it has increased, but the denominator is on the same line. That is why the return on equity is a bit down. But as the operations are increasing, revenues would be increasing, definitely, the same would be having a better margin and better PAT, which will increase my return on equity in the coming years. These are the quarterly comparison numbers for fiscal quarter of FY '24 versus FY '25 and Q3 FY '25, which I have already discussed and I have already conveyed. The detailed numbers for the last 5 years of my operating numbers as well as balance sheet numbers are given herewith. Thank you very much for your patience hearing. And now I'll request team Equirus to take up the Q&A session, and we would be happy to answer the concerns, observations and query from the -- our investors and participants. Thank you very much.

Sure, sir. So thank you, sir, for opening remarks. [Operator Instructions] Here, I'll chip in for the first question. Sir, basically, in the quarter, what was our scrap and export incentives for the quarter?

For the quarter, my scrap revenue was precisely INR 18.73 crores and my export incentives is about INR 4 crores.

Okay. And for full year?

Full year, my scrap revenue is touching to INR 78 crores rounding, and my export incentive is INR 16 crores.

INR 16 crores, all right. Okay. Sir, my second question was on, if I see your quarter 4 performance, the export seems to have ramped up quite well, like it is roughly around 60%, 65% of your total turnover based on the number which I'm calculating. So what drove this? Was it bearings or the auto components segment, which drove the exports? And was there any lumpy order or we'll see this kind of run rate going ahead?

See, first of all, you are comparing with the Q3, which were already suppressed numbers and quite down numbers. So in Q4 of FY '25, we had a bit incremental numbers in bearing ring as well as in auto component both and particularly from the overseas market. Another factor is that a couple of new customers whom we have started supplying, they have already indicated that they would be starting in Q3, but they started in Q4 with the -- their 10% to 15% of their overall volume. So that has also given me some additional numbers in this Q4 of FY '25. But again, definitely, it is mainly driven through my auto -- incremental auto component business.

All right. And going ahead as well, like last quarter, you had published an order book kind of a number estimate for FY '26. So those also included a lot of auto component orders. So like going ahead in the longer term, do we see that previously, which we used to do around 50%, 60% of bearing rings moving to, say, auto component now being a larger part of your business going ahead?

At least we expect that fiscal '26 would be auto component is on a higher side. But we expect the downward or rather the decreasing portion of bearing rings also to come up. And as you rightly say, the new order book, what we won, there the major chunk is of auto components. So obviously, we expect auto component would be on a leading side, more than 50%, at least for next couple of years.

Right. And sir, in terms of margins, like if you see this quarter, so is it because auto components have now started picking up, the margins would be something which would be impacted or the margins are in a similar range compared to the bearing rings?

No, margins are there. In auto components, definitely the critical operations and value-added processes are there. So margins are there. But if you see my quarter 4 numbers of this FY '25 and quarter 4 of FY '24, my margins, even if you compare, it is having some kind of 1.5% or 1.5%-something-like-that reduction in spite of a revenue reduction of more than 10%. Here, as I told you that in March '25 quarter, we had some impact of this one inventory provision of this. In spite of that, we had these kind of margins. So margins would not be a question. We will be having the same kind of margin. And as and when it is a matter of utilizing the capacity, once we'll have some incremental revenue of 10% from the current level or so, definitely, we would be getting better margin.

All right, sir. Yes, so we have our next question from [ Abhir Katyan ].

So my first question would be on the breakup of bearing and auto component within domestic and export. Could you give that number for Q4?

Okay. Q4, domestic bearing ring market, it was INR 83 crores. Domestic auto components, it was INR 44 crores. Export bearing ring market, it was rounding to INR 39 crores. And export auto components, it was INR 95 crores.

Okay. This was helpful. My second question would be on the bearing demand that we're getting from Europe. And basically, the export bearing has been under pressure for quite a while. How do you see it going forward in the next 1 to 2 years? Do you see a full recovery in it? And how long will it take for us to get back to our previous numbers?

See, to get back to the previous number or full recovery, I think it is a bit early as of now to say. But the way we are getting feedback and responses from our customers, we expect that bearing number would be increasing maybe at the end of Q2 or from Q3 onwards of this current fiscal. But to get the full recovery, which is, I think it will take, as per our estimation, at least 4 to 6 quarters from now, minimum, what we are expecting.

Okay, sir. And the last question would be on your RoR issue. Has there been more clarity about it? You have been talking to the legal consultant and all, has there been more clarity on it?

Yes. As we stated in our -- auditors have also mentioned this thing in our published results that banker, we had some debate on the one particular issue of compounding of interest. Though we met a higher authority of our lead bank, and he suggested to get a legal opinion on the -- from the penalized or rather the empanelled advocate of the lead bank, and we got the same from the empanelled advocate. Bankers have -- lead bank has allocated or assigned this task to a particular legal counsel who is one of the renowned legal firm in the country. And we got that opinion from that legal firm just before -- 2 days back before our Board meeting. And it has held that compounding would not be applicable looking to the documents and looking to the agreements executed by the company with the borrowers. And on that basis, we have already requested our lead bank to revise or rather to withdraw their demand letter what they have already raised. And now this bank is in process of expediting the same.

[Operator Instructions] And we have our next question from Jason.

Sir, just wanted some bookkeeping questions. First, just in terms of the full year, just wanted to know your bearing rings export, automotive and domestic bearing rings and export bearing rings for '25 first quarter -- the whole year, I mean?

You need the numbers for the whole year, right?

Yes, that's right. That's right.

Okay. See, domestic bearing in whole year, it is somewhere about rounding to INR 330 crores; domestic auto component rounding to INR 178 crores; export bearing ring, INR 155 crores; and export auto components, INR 398 crores.

Okay. And sir, just I missed this. The domestic bearing rings number, can you just repeat that?

It's INR 330 crores.

And domestic auto components will be?

INR 178 crores.

INR 178 crores. Okay. And export bearing rings is INR 155 crores and export automotive is INR 398 crores. Okay.

INR 398 crores, yes.

Okay. And you mentioned scrap and export scrap was INR 78 crores and export incentive was INR 16 crores for FY '25, right?

Very true. Yes.

Sir, would it be possible to give the same comparable numbers for '24 as well?

Yes. You just put it down. Domestic bearing ring, INR 315 crores; domestic auto components, INR 176 crores; export bearing rings, INR 254 crores; export auto components, INR 382 crores rounding.

Okay. Sir, just one second. Okay. Could you just repeat those figures? I'm sorry, domestic bearing rings will be?

INR 315 crores.

INR 315 crores. Okay. Domestic auto components?

INR 176 crores.

INR 176 crores, okay.

Export bearing ring, INR 254 crores; export auto components, INR 381 crores.

INR 381 crores, that's for FY '24?

Yes.

Okay. And for scrap and export incentives, sir, for '24?

Again, almost same. Scrap was INR 78 crores, export incentives were INR 16.5 crores.

INR 16.5 crores. Okay. Sir, you mentioned, if I got it correctly, probably a full recovery for bearing rings will take around 6 to 8 months from now. That's what you mentioned.

I told 6 to 8 quarters.

6 to 8 quarters?

Yes.

6 to 8 quarters, so that...

Because you are asking full recovery. Full recovery, in the sense, I got a hit of almost 35%, 40% in my bearing ring business. That's why.

Right, right. So full recovery will take around 6 to 8 quarters?

Yes. Gradually, it would be difficult to get in a particular quarter, but we expect the same would be started from Q3 or -- Q3 of this particular fiscal.

Okay. So gradual recovery and a full recovery within 6 to 8 quarters?

Yes, yes.

And sir, how are you looking at the domestic bearings demand? I mean overseas is weak definitely. How is the domestic bearing demand looking at with the likes of -- I mean, right now, Schaeffler also has announced some CapEx and they've commissioned some CapEx. And other players like Timken, SKF also is looking at some CapEx with localization. How is that demand trending up?

Yes. I would like to request our Director, Mr. Mihir Madeka, to just take up this question.

Yes, sir. So the domestic market for the bearing rings is growing now. So we are seeing some light, and our customers have shown a positive sign. So maybe from the next quarter, it is going to increase.

Okay. And sir, in terms of the automotive components business, I mean, predominantly, it is an export-driven business. So could you shed some light on how is that demand looking export side as well? But you are increasing traction on the domestic side as well, right, increasing the domestic. So how is -- can you give some light on both overseas as well as the domestic?

Yes. See, you know that car manufacturer in Europe and America is much, much more than 10x compared to the Indian car industry. So all the agencies who are there in India, okay, they also do the exports. If they buy the product from us, they also do the exports and for the domestic market. And primarily, their requirement has always been for the European and American continent for the export. So that is the reason export for the auto component is always going to be on a higher side. We got a very good -- some businesses we have acquired, like nomination has been done and all the, say, project activities is going on and is going to start immediately from this fiscal year. So it is a very good sign and it's like very much a positive sign is there in case of the auto component for the exports.

And just to add that a couple of customers who are into domestic territory who are sourcing auto components who were a bit, what you say -- they lifted quite lower demand in last couple of quarters. Now from this quarter, I'm talking about the current quarter of FY '26, first quarter, they came out and they already started sourcing back to the level or at least 80% of their peak level. So in that way, we expect some better turnaround in domestic couple of players as far as auto components is concerned.

Even in export also, a few of them, they stopped or they reduced drastically for a couple of months. Now again, they started. From this month, they started picking up the material. So we are very much positive now for auto components.

Okay. Sure, sir. And just wanted to know, sir, on this rings or automotive components, this -- your BEV and hybrid segment or the electric segment, that has shrunk in this year. So sir, how are you looking at the traction going ahead, especially for developed economies? Do you see some slowdown in the EV uptake? We have heard about that the conversion from ICE to EV is a little bit slow. How is the progress on that front? And are you getting any traction on that front?

Yes. See, if you see last 3 years, okay, before everybody was talking EV, EV, and everybody was having a threat that once EV will penetrate in 4 year, 5 year or maybe 10 year, EV is going to capture the entire market and what will happen to the engine component manufacturer or gearbox component manufacturer or something like that. But now people -- the charm of EV has gone. And the main reason behind that is the infrastructure, not only in India, but I can tell you in the developed countries like Germany and other European countries. I was discussing with my -- one of my customer, okay, one of my customer and he was from Germany, he told me that we do not have the infrastructure. If I want to go from my house to his in-law's house, he was telling me that it is an 11- to 12-hours drive. If I take an EV car, I will reach there within 25 hours. But if I will go with the ICE car, I will reach by 12 hours. So same thing what I have been heard from the American colleagues. They are also saying the same thing. So the infrastructure is a very, very big challenge in EV. And second thing is that Europeans, Americans, they need a feel in the car, okay? So in EV car, you will not get the feel. It is a very silent car. So due to this, their people, they say that if I want to keep third or fourth car, I will buy EV, but not first or second car.

Okay, okay, okay. Sure. So you are seeing some slowdown in that, clearly, for that?

So EV is not going to grab the market in another maybe 5, 10 years. It will take a long time. And after that also, they are going to have maybe 25%, 30% of the share of total. And see, you have ICE like diesel, petrol, then CNG, then EV, now hydrogen is coming. So over a period of time, after 5 years, I think you will have 7, 8 option, okay? So EV is not going to lead this market.

Just to add what Mr. Mihir has told that it's not that we are very well equipped for the EV and hybrid components, car components. Even if EV would be increasing, as you see it in India, a couple of car manufacturers are coming with quite attractive models of EVs and all these things. Here, the concern is cost of ownership also. But at the same time, if this demand will increase, we are very much equipped to cater that demand. And we already got a couple of orders. No doubt those orders got deferred because of the OEM deferment of launching of their product. But we also got an order from domestic OEM also through our one of the main customers for the components for EV or hybrid vehicles.

Not only domestic, not only domestic. We also got the order from American and European customers for the American EV, giant EV maker for the SUV as well as for the sedan car. So EV doesn't mean that -- see, in EV, there is no engine. There is no exhaust system, but there is going to be a gearbox. Of course, the gearbox will be smaller size, but the component which are there in the gearbox will be more precise. So our -- so there is a value addition for us. And we are supplying to them already, for the American market and for the European market. Already we have started, and we are growing in that direction. One of the very big customer is visiting our facility after 2 weeks. And 100% component is for the EV. And it is a huge business, and they are visiting us from U.S.A. to my company after 2 weeks. So we already got EV business for the domestic market India, for America and for Europe. That is already running. And more business from America is going -- we are going to get. We are very much hopeful.

Sure, sir. And sir, just one thing I want to ask you also about the provision, this right of recompense. I mean, clearly, what I can see on your release is basically there is a INR 228 crores order charge for that. What the banks are asking for, you have put in -- provided for around INR 506 million till date. So that is basically leaving probably more INR 150 crores, INR 160 crores still there is a contention over it. So sir, just wanted to understand what is the comfort level? Like I know you did say that you spoke to a very, very good legal team and you are looking at negotiating that. But how do we look at going ahead? Because that amount is quite a lot. So any -- yes, so just wanted to know what confidence does the management have that we can reduce it as much as possible.

See, that is what I already replied earlier of this session also. As the bankers have came out with the demand of INR 227 crores, and we already had in mind and it was rather compounding what they have applied. According to our calculation, our reading of the documents, execution and even the circulars of the CDR and RBI, we were expecting that compounding would not be applicable. And when we went to bank for -- represent the matter, at the same time, the very senior authority also told us, okay, forget about our debate, let us have a one legal opinion, a neutral opinion, which will guide for both of us. So that the bankers have appointed one -- their empanelled advocate, as I mentioned. And he gave an opinion, written opinion, to the bank that in this case, particularly in our case, looking to the documents and circular and all this -- after reading this plaintiff, RoR -- rather compounding would not be applicable and it would be at the sacrifice amount, what it has been stated in the CDR letter, which was issued in 2013. So definitely, as of now, we feel that the sufficient or rather the full provision to the extent we have already provided in the books. And now we are just in dialogues with the bank how to take up further and just withdraw the demand letter. Though we have a consortium banking, so obviously, banks are discussing internally and with their legal team, with their higher-ups, and we expect something to come up in this month.

Sure. And sir, just on the tax rate, I mean, of course, tax rate has been quite favorable this quarter. And when you look at the full year, it is around -- I mean, even if I consider the exceptional items, it's coming around to 16%, which is lower than the usual 25%. So just wanted to know going ahead, how do we look at the tax rate? Should we consider it as the base 25.6%, which comes -- I mean, how do we look at it?

See, the exceptional items, definitely, it will not carry any tax impact because it is a simple provision, it's not a cash item. So it will not have any change as far as my current tax is concerned. Particularly in this quarter, there is the excess provision, which was there in the books for the last 8 years or so, which we call back. And that is why for this particular quarter, net number is showing negative. But on an average, current tax would be at 25%, what it is there. And even it is there, if you just ignore this earlier tax period, my tax provision is somewhere about 25% only, and that will be there in the future.

Okay. So we should expect that to be just similar going forward?

Yes, yes.

Okay. And sir, just lastly, I wanted to ask, sir, I mean, we have customers like Allison, GM in the automotive components, Magna as well. Have you added any more customers? Because we are looking at expanding the auto components profile and the growth there, so have we added any more customers in that segment?

Yes. Yes, yes. Definitely, we added 1 or 2 customers in domestic as well as 3 to 4 customers in Europe and U.S. territory, a couple of new plants of my existing customer, which is a new customer for me ultimately. So those are there, but we have already indicated the territory of that. We don't want to disclose the name over here of our customer because of certain confidentiality. But we have added in both the way in bearing ring. Not -- on bearing ring, 1 or 2 customers; but in auto component, in domestic as well as overseas, more than 4 to 5 customers. In last 8 months, we got a new order or rather we have added it. No doubt the supply and the lifting would be started in this quarter or coming quarters.

So next question is from [ Rakesh Jain ].

So Hiren sir, just one question I had. While you mentioned that the 6 to 8 quarters is the recovery path for the industry of bearings, more specifically for the markets of Europe and U.S. Now while we can understand what is the situation. But within that also, are there any spots or are there any areas where you still see some resilience in demand? What are the applications where bearing demand is still holding up well? And what are you seeing from the customer point of view where, despite all of this, the resiliency is still there right now in terms of demand on both sectors?

See, while we are in dialogues with our customers who are mainly into overseas and in the manufacturing of bearings, they simply told us that till today, we are working at 25% to 40% of our capacity of our peak level what we had before 1 and 2 years back. And still, the circumstances, the scenario is not that favorable, which will push up our things in a significant way or in a drastic upward trend. We expect gradual this thing. There is a big issue of unemployment. There is a big issue of power cost. There is a big issue of overall demand from their customer. So these are multiple issues. There is an issue of -- still they are facing some kind of geopolitical threats also. So that is why the companies or rather the plants, it has not operationally even more than 30% to 40%. So which indicates us that even if gradually something will come up, in totality, I clearly told in totality, what we lost of our bearing ring business, it may take 6 to 8 quarters from now to get that particular level. But with that, it's not like that we are not working on the bearing ring, as I told you that a couple of new customers we have added for the bearing ring businesses also. And in domestic market, we expect some kind of growth as far as the prominent players of our bearing industry. They are in expansion mode. They are on a growing stage. But particularly one customer who are mainly into nonautomotive bearing ring, there the expansion, there the growth is a bit less compared to the other players who are into versatile bearing manufacturing for the passenger vehicles, for the railways, for the industrial applications, for the windmills, for the EVs, like that. Obviously, those players are having a bit better growth, and we are working on that. And one of the main customers in India is gradually growing quarter-on-quarter in our books. What it was there in FY '24, today, it is more than 2.5x of the monthly numbers, what we had.

Got it. Got it. Are you seeing also any sort of shift in the preference of bearings for the applications of renewable or non-auto? I mean I'm not sure exactly if you can highlight that, but any change in preference given that what is customer prioritizing today?

I'm sorry, I'm not getting your question. Prioritization in terms of what?

Prioritization in the areas where the demand is seeing more prominent between the other sectors or other segments of bearings.

Definitely compared to industrial applications and the heavy commercial vehicles, there the demand is a bit low or slower. That is because of the expansion or rather the coming new projects got delayed, got hold. That is why that segment is having lesser growth or rather the very nominal growth compared to the automotive segments. Automotive segments, day by day, the new models are coming, demand is increasing, people are buying their second car. So obviously, these sectors are having -- even the railways are having a bit reasonable growth. But...

[Foreign Language].

Yes, so these are the things.

So next question is from [ Nishant Chauhan ].

Sir, firstly, I was just referring to your quarter 3 presentation, wherein you've spoken about some INR 175 crores worth of revenue that would be starting to flow in from FY '26. And this broadly forms around like 15% of our FY '25 revenue. So is it fair to assume that we would at least expect a 15% kind of a growth from FY '26? Or how do we see this number? Some clarity...

Yes, even we told last time also that we are expecting these numbers to come on the books would be there from the second quarter onwards of FY '26. And till today, we are on the same part and we are very much positive. And we expect the numbers would be there in this fiscal, this INR 175-odd crores would be added, subject to any kind of big change. And again, in this month or so, we are expecting -- next month, we are expecting some kind of a tariff change in U.S.A. and how it would be. But apart from that, our customers till date, they are on the same page and they are on the same level of their forecasting and the lifting plan accordingly, what we have planned our production also. So till date, we are expecting the numbers what we told.

Right. So if the organic business stays flat, we could at least expect like a 15% blended growth year-on-year in FY '26. Is the assumption or understanding correct?

Yes, sir.

Okay. Sir, secondly, on the industrial piece, I just wanted to broadly understand what is our split between the export and the domestic market for the industrial vertical?

Industrial vertical, you may see 65% of my -- this business of industrial segment, it is -- it goes to overseas and mainly into Europe and remaining into domestic market.

Okay. Sir, in the export industrial market, could you just highlight a few sectors where we have been seeing a very sharp fall in maybe the growth rates where...

See, the industrial applications, it consists or it comprises of various equipments, all kind of machineries, all kind of infrastructural this thing. Wherever the friction or wherever the movements are there, bearings are required. So one of our main customers, our leading customer, having 4 plants in Europe, they are into manufacturing of these kind of industrial or rather the nonautomotive bearings only. Only one plant is there in U.S., which is manufacturing auto bearings. So in industrial, it's a quite wide range equipment, you may say infrastructural equipments and different kind of machineries, hydraulic components, hydraulic equipments, all -- everywhere that they need these kind of bearings.

Okay. So it will be difficult to particularly pinpoint as what kind of...

Yes, yes, it would be difficult because we don't have those numbers where what my customer is selling to what particular industry or individual, drill down to a particular case of industry.

Fair enough, sir. Sir, lastly, just referring to your presentation, I think industrial piece has seen some bit of a reduction in overall share for us. So is it that we are, I mean, voluntarily trying to let go some business? Or it's just the general economic slowdown that has...

No, not at all we are voluntarily moving all these things. But if you see earlier, we had somewhere more than 25%, 27 percentage of our share into this segment. And as I mentioned repeatedly that our -- one of -- a couple of main customers who are into industrial applications, they are facing quite -- or rather they've gotten quite reduced production plan. They are working at 25%, 40% of their capacity. That led me to down. It's not that they are sourcing from somewhere else and I'm just moving it out. But definitely, the company would be preferring a segment where they are getting quite value-added processes or maybe with a better margin compared to industrial bearing. If I'll have a choice of auto components giving me a better margin and utilizing best capacity of my resources, definitely, we would be preferring that. But at the same time, if my existing customer, my customers who are with us for more than 2 decades, we never say no to them, and we are obviously honoring their requirements.

We have our next follow-up question from [ Abhir Katyan ].

So I just wanted to ask what is the CapEx guidance going forward for FY '26 and '27?

Broadly, for fiscal '26, we would be having INR 30 crores to INR 40 crores in the -- mainly into equipment; and again, INR 40 crores to INR 50 crores in FY '27.

Okay. And this is all just maintenance? Or how much of it is...

No, no, no. Hardly 20% of this is towards maintenance. The rest is for the -- all the new equipments, new additional facilities, new value-added process equipments and certain quality measuring instruments and all these things.

Okay. And the second question would be, from what I've gathered from the discussion, mainly on export side of our bearings, industrial is the segment that has been struggling in Europe so far. So how long before we see it...

See, as far as European market is concerned, it's not only industrial. Even the auto is on this thing, particularly auto bearings. But now that has come out with some kind of positive sign, and we expect that auto bearing would be increasing. As auto component business is also growing, so obviously, it will lead to incremental in auto bearing business.

Okay. And as our export of auto component is growing, what will be your expectation of EBITDA margin going forward for FY '26 and '27, overall basis?

Overall basis, definitely my EBITDA, what we are expecting for FY '26, conservatively, I'll say 23.5% to 24%, and then maybe more than 24% in FY '27. It will lead to my increasing or incremental operating leverage.

So sir, just one clarification on the EBITDA margin point. So that is including the other income, right?

Yes, what the way you see. When I say 24%, definitely that includes other income.

Right. And -- okay, so we have one question from Jason.

Sir, I just wanted to know, previously, you did use to give a guidance as such. I understand that there are a lot of -- the tariffs and et cetera are there on the horizon. So it's -- but still an earlier participant also alluded, you are getting -- you have a visibility for orders, which is around 15% of your annual revenue as well. So can we expect that Rolex will grow at least 15% to 20% for the next 2 years? Margins you said around 23%. So would that be a fair assumption? Or I just wanted some color on that, probably a CAGR of 15% to 20% for the next 1 to 2 years, next 2 years, I mean?

For FY '26, I would be -- rather tell you that it would be in the range of 15% growth what we are expecting. Any additional, that would be icing on the toppings of the cake. But for '27, again, on the numbers of FY '26, we are expecting maybe 15% or high-teen growth over there. But I don't want to say a 20% CAGR or something like that. But it would be in the range of, you can say, 10% growth for the next 2 years, definitely.

So we'll take that as the last question. And over to you, Hiren sir, for closing remarks.

Yes. Thank you very much, team Equirus, for arranging this investor call and updates to our investors, stakeholders and the participants. Again, very much thankful to all the participants for sparing their time. And we hope we tried to clarify, justify their questions and their concerns. We will be there for any kind of queries or concerns. I request any participants, they can directly send a mail to me or to the management. It would be our pleasure to reply. Thank you very much again for attending this call. Thank you very much.

Yes. Thank you, sir.