Tega Industries Limited (TEGA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tega Industries Limited Q4 FY '25 or Earnings Conference Call hosted by MUFG. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavya Shah. Thank you, and over to you, sir.

Thank you. Good evening, and welcome to Q4 and FY '25 Earnings Conference Call of Tata Industries Limited. Today on the call, we have with us Mr. Mehul Mohanka, Managing Director and Group CEO; Mr. Sharad Kumar Khaitan, CFO; and Mr. Pratik Roy, Product Management, Global Sales and Marketing. Before we proceed with this call, I would like to give a small disclaimer that this call may contain certain forward-looking statements, which are based on beliefs, opinion and expectations of the company as of date. A detailed statement has been given on the company's investor presentation, which has been uploaded on the stock exchange. I hope everyone had a chance to go through these results. Now I would like to hand over the call to Mr. Mehul Mohanka for his opening remarks. Over to you, sir.

Thank you, Bhavya. Good evening, and a warm welcome to all the participants on the call. I'm joined this evening by Mr. Yaver Imam, who's our Director on the Board. Mr. Pratik Basu Roy, President, Product Group and Sales; and Mr. Sharad Kumar Khaitan, who is our CFO. The total revenues of the group for the year ended 31st March 2025, stood at INR 1681.8 crores with an EBITDA of INR 387.4 crores, that is an annual EBITDA margin of 23%. The group revenues has been higher by INR 166.9 crores or 11% in comparison to the same period last year that is financial year ended 31st March '24. I'm excited to inform you that during Q4 of FY '24, '25, we recorded the highest quarterly revenues of INR 542.8 crores, which is higher by 6% over the same quarter last year where we had total revenues of INR 511.2 crores. This, in turn, resulted in EBITDA margins of 29% during quarter 4 of 2024, '25. We have an order book of INR 1,029.2 crores as at 31st March 2025, out of which executable orders within 1 year is INR 591.2 crores. A significant portion of our products and solutions are customized for the gold and copper mines, and we believe there is a robust demand for both these metals. The world is witnessing heightened uncertainty driven by geopolitical tensions, whether it is Russia, Ukraine or the Israel Hamas war or the recent India, Pakistan issues along with the wave of tariffs and protectionist measures led by the U.S. leading to a disruption in the global trade flow. Investor interest is likely to strengthen as gold's appeal as a safe haven asset and portfolio diversifier heightens amid global economic uncertainties and financial market volatility. The demand for gold appears to be robust with an upward price trend as geopolitical tensions continue. There is strong central bank purchases that offer demand support, coupled with declining grades, which will in turn lead to an increased consumption of Tega's products. Copper's natural properties from its durability to high conductivity makes it the material of choice for the green transition contributing to solutions for modern climate challenges. Copper demand is expected to double by 2050, driven by clean energy requirements and critical decarbonization technologies such as wind turbines, photovoltaics, panels, heat pumps, electrical vehicles and others. Copper is also poised for growth driven by infrastructure expansion evolving technology, setting up data centers and increased demand of electronics coupled with supportive government policies. We had earlier mentioned that there has been a delay in our Chile project, mainly due to nonreceipt of statutory approvals on time. I'm pleased to inform all of you that all such approvals have now been received, and we have all the clearances to commence construction. And the commercial production of our new facility is expected to be operated by middle of next calendar year. I would like to assure you that no sales are impacted by such delays as we have put up alternate plans at Chile and also evaluated the options of shipping from our other plants as well, if required. I would like to express our sincere gratitude to all our investors for their unwavering faith in our company. Thank you for your continued support. And now I would like to hand over to Sharad to take you through the financial performance of the company for the period under review.

Thank you, Mehul. A very warm welcome to everyone, and thank you for joining the earnings call for the quarter 4 of FY '25 and for the full financial year FY '25. The group income for FY '25 stood at INR 16,818 million with an EBITDA of INR 3,874 million. That is an EBITDA margin of 23%. It may be noted that for financial year '24, group revenues was INR 15,149 million with an EBITDA of INR 3,426 million, that is an EBITDA margin of 23%. We have achieved a double-digit revenue growth of approximately 11% during FY '25 over FY '24 in spite of the heightened uncertainty driven by geopolitical tensions and supply chain issues. The consumable business segment contributed 87% to the group revenues and the equipment business share stood at 13% of the group revenue. The revenue from operations of the consumable business witnessed an increase of INR 1,396 million or 11% with FY '25 revenues at INR 14,301 million vis-a-vis INR 12,905 million last year. The revenue from operations of the equipment business witnessed an increase of INR 97 million with a 5% increase over revenue of FY '24. The growth in the revenue of the equipment business is impacted, mainly account commercial issues like nonreceipt of advance from customer, delayed customer site, a delay in receipt of manufacturing clearance from customers. We are in discussion with our customers to ensure that the goods are lifted and all approvals are released on time. We have been able to maintain healthy blended gross margins of approximately 57%, in line with last year in spite of raw material volatility and global uncertainties as witnessed during the year. As mentioned earlier, we have achieved steady EBITDA margins of 23% in for the year at the group level. We have achieved the highest quarterly revenues of INR 5,428 million in quarter 4 of FY '25 with EBITDA margins of 29%. The revenue from operations of the consumable business for the quarter ended March '25, stood at INR 4,605 million vis-a-vis INR 4,493 million during the same period last year. That is an increase of INR 112 million. The revenue from operations of the equipment business for the quarter ended March '25, is INR 793 million as against INR 586 million during the same period last year. That is an increase of INR 207 million, approximately 35%. If we compare the quarter ended March '25, vis-a-vis the immediately preceding quarter ending December '24, then we observed that the revenue from operations of the consumer business is INR 4,605 million, vis-a-vis INR 3,556 million during the immediately preceding quarter, resulting in an increase of INR 1,049 million or 29%. The revenue from operations of the equipment business for the quarter ended March '25 is INR 793 million as against INR 547 million during the December '24 quarter, resulting in an increase of [ 2% ] quarter-on-quarter. The order book for both the business segments, consumable business and the equipment business remains strong. As informed earlier, we have an order book of INR 10,292 million as of 31st March '25, out of which executable orders within 1 year is approximately INR 5,912 million. Thank you very much for your time. And now the forum is open for any questions you may have.

[Operator Instructions] The first question is from the line of from Riddhi Shah from SAS Capital.

Africa is a high-growth region for Tega, with PMML cost-effective equipment gaining traction. Can you quantify the revenue contribution from Africa in FY '25 and outlining the plan to expand DynaPrime and PMML footprint.

Africa contributes about 20% of the group revenue. but McNally is currently 100% focused on India, and we have not expanded yet globally. We had that vision to take Tega McNally global, but it will take a couple of years. Once we have the processor systems set out, which we have done to a large extent and have those equipments of larger sizes, et cetera, ready. We want to hit the global market with the Tega McNally portfolio, but it will take us about 1.5 to 2 years before we hit with the McNally products at a global stage.

Okay. I have a second question also. Like DynaPrime has been key driver as we know. So what is the current run rate for DynaPrime?

Ma'am, it's a very confidential information, and we don't give the specific details of DynaPrime. We'd like to refrain from giving any specific information bifurcating the product level details especially DynaPrime and the mill business.

Okay. But you won't be providing like how many additional top tier global miners are in the pipeline for adoption in FY '26 to maintain a 50% growth momentum also.

Ma'am, we have been -- if you see our past trends over a period of 5, 7 years, we have been growing at an average CAGR of about 15-odd percent. And we are hopeful to maintain a good track record in the near future also, we will definitely maintain that. But giving customer-wise detail, et cetera, being very little sensitive, we would prefer not to share this information at this stage. We work with almost all the top mining groups and companies in the world map.

The next question is from the line of Deepak from Sundaram Mutual Funds.

Yes, sir, my first question is regarding what is the demand outlook for consumable in FY '26. I mean are we seeing any kind of demand in -- because if you look at your consumable growth rate for the whole year, it's around 11%, right? Earlier, it was guided at 15%. So it means what is your estimation? Or was there any order deferral in the consumable in Q4, which will come through in Q1 or Q2 of next year? What is the demand outlook? Are there any headwinds for the consumable business?

Deepak, this is Pratik here. So our guidance. So our guidance remains firm. It's only a time difference that is coming between Q2. Some of the orders that in Q4, sorry, please for that, and which is coming -- which is expected to come out in Q1 and Q2 going forward. So there is no loss but more of a deferment that's come through. Our initial guidance remains the same.

Okay. And second, on your cash flow statement, so I observed that this year, we have spent around INR 170 crores in fixed assets. So could you just break up where have we spent this INR 170 crores in FY '25 and what is our CapEx for, let's say, FY '26 and '27?

Deepak our CapEx includes growth CapEx, sustenance CapEx and certain specialty designed assets which are deployed at all our manufacturing locations and at installation sites as well. As far as the CapEx guidance is concerned, we have our Chile project, which will have about $30 million, $35 million of CapEx expenditure, then we have our Dahej debottlenecking project, which is ongoing. And apart from that, we have about $5 million to $6 million of maintenance CapEx every year.

And sir, the Dahej CapEx will be how much?

About INR 30 crores is the Dahej CapEx.

Okay. And sir, 2 questions I have on equipment side. So this quarter, we have shown a very good EBITDA margin at 16.6%, right? I mean you have exceeded your own kind of guidance on margin front in equipment. So is there any one-off? Or is this 16% EBITDA margin in equipment is sustainable next year as well?

No, you should always see our numbers on a full year basis. So we have improved from our EBITDA margins of last year when we were a considerably improved the process systems, et cetera at [indiscernible] McNally and it's all about an operating leverage. And we intend to growth momentum. But yes, 16%, 17% on a full year basis for an equipment business looks a little challenging. But yes, we have a target to have decent EBITDA margins going forward.

Okay. And sir, on that NMDC order book, so have we executed any of the order which we won in, let's say, June, July of 2024. If I'm not wrong, it was around INR 120 crores, right? How much did we execute in FY '25? And how much we plan to execute in FY '26?

A significant portion of this order is going to get executed in the current financial year, which is FY '25, '26. A very small proportion has been done in the last financial year, but a significant chunk majority of that is coming in FY '26.

Okay. Sir, then just to summarize means, what is our growth guidance for equipment and consumable and EBITDA margin guidance for both for FY '26?

Deepak, we have navigated through the challenges in the past and have a clear pathway for growth and are well positioned to keep our strong momentum. So if you see the track record, we have had decent double-digit growth. So there have been years when we have been growing at about 23, 27-odd percentage, and we would like to focus on the trajectory and work towards enhancing the shareholder value.

Sir, anything which you can quantify?

You see, if you see our past trends, then we have that average growth rate of about 15-odd percent, and we intend to maintain that track record.

[Operator Instructions] The next question is from the line of Kirtan Mehta from Baroda BNP Paribas Mutual Fund. Please proceed.

Coming back to the Q4 mix, what I understood was that this is more related to the timing difference, and this will come through in Q1, Q2. So can we consider that FY '26 growth is 15% plus sort of 4% deferral or more closer to 20%?

See, there's always an overlap between 2 financial years. So we -- until we have a good order book and the orders are in intact, that is what we focus upon. So if you have the orders in hand and the order books are intact that flows into the revenue. Whether it's into a particular financial year gets spilled over to the next doesn't bother us because our manufacturing capacities are built around the order book and the delivery to the customers against the same.

Right. And in terms of the FY '26 equipment proportion, where do we expect it to grow from 13% to what level?

It should definitely be a higher proportion. We should be able to have at least 20%, 25% coming from the equipment business in the overall scheme of things.

Right? One question was about the receivables. When you look at the Tega stand-alone results result, there has been an increase in the renewables. The same, but the same is kind of not visible in the consolidated. Could you elaborate what it attributes to?

You see, when you have a stand-alone accounts, there are certain transactions which we have with our group entities, whereby we transport the goods and then you have the third-party billing coming from those entities. So higher receivable in a stand-alone is because of the outstanding from such parties. At a group level, all of those gets eliminated because we -- all intercompany transactions are eliminated when we have the consol financial statements.

And the standalone receivables, which we have seen in the increase, will this get sort of nullified over the next 1 or 2 quarters?

Yes, because all of these shipments, what we have done, they crystallize as revenue in the subsequent quarters and the money is flowing accordingly.

On DynaPrime, is there a possibility to give some color in terms of how we are developing into the market? And how far we have come on the journey in terms of taking the market share? Any color would be useful.

As far as DynaPrime is concerned, we are being able to establish the product and solution with our customers. And wherever we have done the installations, we have got very good results. And the savings what we have committed to our customers, we have been able to deliver that. But we would like to refrain from giving any specific data on DynaPrime because of sensitivities involved here.

The next question is from the line of Mayank Bhandari from Asian Market Securities.

Just on the stand-alone number of full year 21% growth. Is it possible to give what kind of contribution we had from the execution of the large order that we are executing in Europe?

Mayank, we see our business portfolio at a total level, and we have been able to have decent EBITDA, good EBITDA margins of 23% for the full year basis. customer-wise details we don't prefer to share specific to any specific customers.

So I think it was INR 600 crores total and...

Yes, revenue is there. Revenue details are there with you. It's there in the public domain. The margin et cetera, we cannot share customer-specific data.

Okay. Is it high margin, low margin than the usual business?

It's a part of the entire group, and it helps us maintain our EBITDA margins what we have been able to deliver.

And secondly, just understanding from a couple of competitors perspective in Metso and all have highlighted that March quarter has seen good preordering from U.S. And across the board, we have seen that because of the tariff uncertainty, there was increased procurement in the U.S. So is that the same thing that you have kind of observed? Or maybe if you could highlight the impact of the tariff changes on your business, in fact, on the consumables business.

Yes. So on the tariff, we don't see any impact on our business in the U.S. because all our competitors manufacture outside of the U.S. So if tariffs, whatever it may be in whichever shape and form, will be applicable to the industry at large and applicable to all our competitors and peers as well. So it's going to have a balancing out effect in time to come in terms of whichever way the tariffs go. So there is no material impact on that.

And in terms of the mining industry, are you seeing any increased activity from Chinese dumping perspective in other geographies other than U.S.

No, we haven't seen any of that.

Okay. Lastly, could you give any your finance cost forecast for '26 going forward?

It's going to be in the line with the current financial. If you see the finance cost at a group level has come down because we have repaid a certain portion of our debt, et cetera, and we have taken the benefit of lower interest rates as well. And that trend is going to continue.

The next question is from the line of Salil Desai from Marcellus Investment Managers.

Sharad, I had a question on this deferral of orders and revenue booking there. I know this has happened for a couple of times in the last 1 year or so. In such a situation, how do you kind of manage production planning? How do you manage working capital? What protection do you have if, let's say, the client places an order and then delays and does not pay in advance? What would that impact be on business operations and on profitability?

See, there's always a sufficient time cushion even the customers keep when they order -- place orders on us. And we have been trying -- as far as risk mitigation is concerned, we have those inventory raw material in place. We try to book the shipping lines in advance and try to ensure that customer deliveries are done on time. But because of these uncertainties, which we have witnessed over the last 1 year, because of geopolitical tensions or shipping lines, containers not available, et cetera. Just to give a perspective, even last week when this India Pakistan, thing had happened, there were a lot of concerns even about the port availability on the western part of the country. So these are part of the challenges of running a business, and we are equipped -- we have our colleagues and team, which takes care to ensure all of this risk mitigation is done so that the deliveries to the customers are done on time.

So my question is, if the customer does not pick up, like you said, some people have not paid in advance those are not lifted material. In that case, what is the response or what is the option that you have to get paid on time?

Again, Salil, there can be delays, et cetera, even on the part of the customers not picking up or lifting the material. But all of this is a part of the business, and these are all assured things. There has been no defaults per se as such, and that is how it is. So one month -- a couple of months here and there doesn't make much of a difference to us.

In that case, given how much uncertain the world is, then do you think giving, say, a guidance of 15% revenue growth might be a little probabilistic rather than more realistic?

You see, Salil, on an average, if you see last 5, 6 years, so that is the guidance that we gave is an average growth over the past several years, actually. And certain years, we have even exceeded way past the 15% mark, actually. So on an average, if you see, we have been able to maintain that, and that's how we intend to move forward also.

Salil, Pratik here. So you see, we have a significant chunk of our business from repeat businesses, right, which is kind of an issue because and they will have to run those mills. And the entry and exit barriers are also very high for all of them. So that part is more or less assured and that gives us this confidence. What is at risk is the new business that comes in that might have -- but that's very, very small part of it.

I see. Because that's what I was surprised that given that it's such a repeat -- I mean, the nature of the business is such that the visibility should be high. But still in the last 3, 4 quarters, we have been missing -- it's been hit and miss on the growth target. So that was what we look.

It is just about a little change in the customers' order cycle. So if you see, there have been years, like I told earlier also, we have grown well past the 15% mark. So we should not see a year in escalation because of these uncertainties, it's not only our industry or we as an organization have got impacted. It's across the globe, people have got impacted, organizations have got impacted. And we're all learning to come up with the same and move forward. So if you see on an average, the growth momentum is there, and we have a strong belief that we will be able to deliver because we don't see any slowdown at any of our customers' end. Timing issue is well manageable, and that's the challenge we as professional managers run the business with actually.

Great. That's good to hear. And lastly, another question related to this is the orders on hand, which are executed in the next 12 months, it's come off a little from -- in the last 2 quarters from INR 600-odd crores to INR 760 crores in December quarter and then about INR 590 crores now. Does that impact -- I mean, how should one read this in terms of translation to revenues in the next 12 months?

I don't think there's much to read into it. It's just a question of the mix that comes in between the various customers we have globally. So it's just a mix effect. I don't think there's much to read into it.

The next question is from the line of Chirag Muchhala from Interim Broking.

Sir, firstly, on the Consumables segment, can you also speak about in FY '25, how various regions have performed and which regions are driving growth? In association with that, while in Chile, we are in the process of setting our new plant but for other manufacturing locations overseas, like South Africa, Australia, et cetera, what is our capacity utilization there? And do we foresee any need to expand capacities there over the next 1, 2 years?

See, Chirag, the average capacity utilization, which we have is about 60%, 65%, and we plan for our capacities well ahead in advance. So capacity is not a constraint for us at any point of time. And as far as the growth is coming, we are seeing growth across geographies and locations. So we are pretty confident Chile and South Africa, everything will contribute to the growth momentum of the company.

Okay. So South Africa or Asia Pacific, et cetera, in those manufacturing locations of ours is the brownfield expansion taking place or it is not required in the medium term?

Wherever required, we are doing the expansion plan. For example, we have taken the Dahej CapEx plan in India.

Correct.

Like I told earlier, it's about INR 30 crores what is committed to the Dahej expansion plan.

Correct. Okay. Sir, second question is actually within consumables, our non-mill liner portfolio. So since this portfolio is highly profitable, just wanted a sense on over the last 1 or 2 years, how this portfolio has evolved? And I mean, how the growth here is and within consumables, what is the percentage revenue share of this portfolio now non-mill liner?

No, I don't think we will -- we don't give a breakup, Sharad told earlier also within the consumables. Our business is divided in consumables and equipment. So in terms of -- but just to give you a sense, the non-mill businesses also has seen a robust growth. So I'll keep it at that.

Okay. Sir, is it at least possible to qualitatively say within non-mill what products are doing well and whether the growth is higher than the company average or in line with company average?

It's in line with company average. We have got [indiscernible] components, which has got the liners for mill shoots. We have got the conveyor components. We have got hydrocyclones and screens and trommels. So all of them are doing well in their respective.

Okay. And sir, lastly, on the equipment segment. So there, as we have been investing in people, processes, et cetera, so in the domestic market, for the domestic market, if you can speak about, I mean, the improvement that we have seen in our capability and as far as upcoming tenders, et cetera, are concerned, do we expect like NMDC to win much more tenders in equipment segment in the near-term.

Yes. So basically, now that in the domestic sector, there are 2 areas, which is the high-growth area. One is the power sector. Okay? And also on the steel, but the steel in the last couple of months, the speed has gone down. But power, we still consider that the power and aggregate will continue to grow. So like we've done with the NMDC project, we are -- some of the tenders which are expected in the next few months. We are collaborating with a number of parties the way we have done for NMDC to quote for this. Now some of these tenders, the time lines when it is going to be decided is a little hazy now, but we expect quite a few tenders to come in the next 5, 6 months, where we will be collaborating with a number of EPC contractor to quote as a consortium.

[Operator Instructions] The next questions is from Manish Ostwal from Nirmal Bang Securities Limited.

I joined the call a little late, so maybe repeat a few questions. So first on the operating cash flow generation during the year is weak compared to our EBITDA growth. So definitely, we have seen some increase in inventory as well as receivables. So is there any -- I mean, something is spillover effect, which is reflecting the working capital or which will correct in the coming quarter? Can you comment on that?

You see, we are a cash surplus company. And it's just a matter of time with the debtors realization coming in the subsequent quarters and the inventory getting -- the goods getting built, all of this will realize in the cash flows and strengthen the cash flows further. But we have got sufficient cash flows, and we are having no issues with respect to the sale.

And secondly, sir, did you quantify the amount of orders which spill over to the in coming quarters in the call?

No. It's very difficult to give a number like this because it depends on when -- upon the customer cycle, the timing of receipt of the order, et cetera. But yes, we are confident of the growth trajectory of the company, and that is what we have commented upon earlier.

Just taking your comment in the past, you said a few years where we have a lower growth in a few years we have reported higher growth even 22%, 23%. If I understand that trend, then the F '25 growth trajectory, then F '26 should be materially higher than the 15% which you are right now guiding, sir?

What we need to see is the company's growth rate at an average, say, a 5-, 6-year CAGR basis is that is what we should look for. There are years when we have got very high phenomenal growth, then maybe we have got a 13%, 14% growth next year. So as the numbers come in, we will keep you informed of that. What we can commit to you and see at this moment is that we -- the business is going -- moving in the right direction. The inflows are strong, and we expect the momentum to remain buoyant at this stage.

The next question is from the line of Mukul from Insight Investment Managers.

Could you provide the full year revenue and EBITDA number for McNally.

McNally, if you see, we had the revenue from the equipment business, that is McNally -- INR 213 crores is the number that we have for McNally.

And the expected the 15% CAGR for 3, 4 years, right, sir?

Sir, I couldn't hear the last term properly, can you please repeat?

So I said, I mean, growth rate would be about 15% for the next 3 years for McNally.

Yes, at the group level, we are seeing a decent growth rate, sir. So it will come both from the consumable and equipment business together. The share of McNally will definitely grow in the near future as we go forward. And that is how we see McNally contributing to the group revenues of about 20%, 25% having share in the group revenue in the near future.

Thank you. Ladies and gentlemen, due to interest of time. That was the last question for today. And I would now like to hand the conference over to the management for closing comments.

Thank you, everyone. Thanks once again for taking out your time and coming to our investor call. We will keep you posted of any subsequent developments. Happy to interact and take any subsequent questions, et cetera, you have. You can reach us at our Investor department, and we will be happy to answer all of that. Thank you once again.

On behalf of Tega Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.