Timken India Limited ($522113)

Ladies and gentlemen, good day, and welcome to Timken India Limited Q4 FY '26 Earnings Conference Call hosted by Avendus Spark. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mukesh Saraf from Avendus Spark. Thank you, and over to you, sir.

Thank you, Yusuf. Good evening, everyone. Mukesh Saraf from Avendus Spark. Appreciate everybody locking into this 4Q526 earnings conference call of Timken India. From the management team, I'm pleased to host Mr. Sanjay Koul, Chairman and Managing Director; Mr. Sujit Kumar Pattanaik, Business Controller, India, CFO and Whole Time Director. I'll now hand over the call to Mr. Koul for his opening remarks, post which we'll begin the Q&A. Over to you, sir.

Thank you very much. Thanks a lot. So hello all and good evening. Thanks for joining today. So obviously, it is always a pleasure and a privilege to welcome you all to the quarterly call so that we can discuss the results of the last quarter of the previous financial year and also the whole year a little bit as well. So I'm pleased to report that FY '26 has been another year of consistent and a little bit, if I can use the word broad-based performance for Timken India. We have delivered good healthy revenue growth, which was obviously driven by the strong demand in core Industrial segment, supported by good execution on our projects and also some momentum we see in both domestic and the exports. Our fourth quarter performance remained very resilient despite the issues of uncertainty in the microeconomics and cost pressures are pretty significant. And then obviously, we are doing investments. So that also hand-in-hand. So an update on Q4 FY '26, first time we crossed INR 1,000 crores in a quarter revenue. So that is a milestone, a first time for us. And then revenue from operations stood at INR 10,731 million, reflecting a 14.2% growth over the same period last year. PBT for the quarter stood at INR 2,074 million, INR 207 crore, PBT margin was at 19.3% compared to a little bit less in Q3 FY '26 and 21% in Q4 '25. So we had excluding a onetime BAPA adjustment impact in the previous year and a labor code related impact in the current year. So PBT margin improved by around 10 basis points over the same period last year. And the consolidated numbers. Consolidated revenue from operations stood at INR 10,898 million for the quarter ending March 31, '26 and INR 34,780 million for the whole year ended on March 31. Consolidated PBT stood at INR 2,120 million for the quarter and INR 5,826 million for the whole year. And the full financial numbers closed year with all-time highest stand-alone revenue of INR 31,478 million representing an 8.6% growth over last year, driven by growth -- a little bit of good growth in domestic and export markets. PBT stood at INR 5, 304 million, almost a 3% increase over last year, with PBT margin at 15.5%, EBITDA at 18.7%. Cash generated from operation at INR 4,374 million improved from last year. Capital advance for the year at INR 2,972 million, which was 8.7% of the revenue. And a very important operation and strategic date. The Board has approved the merger of Timken GGB with Timken India Limited. This will help drive operational synergies, improve effectively, it will reduce, obviously, overall cost. We have completed the investment or in the renewable energy initiatives, which we'll continue to do across all our plants that would obviously support long-term power security, energy security and cost optimization. All lines at our new Bharuch plant have now been capitalized and the plant continues to ramp up progressively, massive PPAP work being done. And obviously, we have started shipping and selling out of that plant. Investment towards rail expansion in Jamshedpur and frame bearing expansion in Bharuch continue to remain broadly on track. On the geopolitical fed, the Middle East conflict did not have any significant financial impact on that quarter, just finished quarter. However, as we enter the new financial year, we are beginning to see some inflation trends as you must be fully aware, Input costs are going up. So we are actually working on mitigation incentive, both in terms of cost reduction activities, efficiencies and customer engagement, which is why we will recover the increases. On the market, output global function continues to remain uncertain, as we all know, and slower growth trends, geopolitical developments are changing every day. Grade tensions are very much there. Supply chain realignments are happening. So that sentiment is very much there. Despite the backdrop, our demand account for most of the key segments continues to remain relatively stable. Focus remains on, obviously, execution and efficiency, but the demand is pretty stable. So that is the opening remarks, and I'm sure let us jump into the Q&A with me is Sujit Pattanaik, our CFO as well, so that between us, we can handle the questions, if you may, please.

[Operator Instructions] First question is from the line of Ankur Sharma from HDFC Life.

Two questions. One, you did talk about RM inflation and obviously costs going up. So I'm just trying to understand in terms of price hikes, how much have you already tried to kind of take how much more needs to be taken. And in the context, which I would understand is that passing on price hikes would be relatively easier in the aftermarket channel and may be more difficult with your OEM customers. So just some color in terms of how much price hikes have you taken, need to be taken and could there be some margin impact maybe in the next 1 or 2 quarters until all of that gets passed on?

Yes. So the cost increases are happening on many fronts. So our steel has started showing the signs of cost changes. So the knocks on the doors are happening. So that is going to come and obviously that gets passed on. It has not come up yet in volume. And second, is it any input, which is generally our grinding, coolants, everything has gone up. So this quarter, we are trying to pass it on. And I should say that we have only begun passing it on, we are at 10% currently. So the massive work is underway. And then the currency also, there is an impact on currency as well. So currency deterioration is there though we import finished bearings for trading. So -- but otherwise, raw material also, there is intact, a little bit of impact because for making grinding side, something is coming from China or VCI packaging is coming from outside. So on our cost passing the exercise, both in terms of giving cost and taking the price, the job has started from middle of April in a very serious note, both of giving and collection. So we are at 10% as we talk. So 90% has to be achieved on realizing this price. So it will happen over 2 quarters, this quarter and next quarter. And in case still there is volatility, then it might continue a little bit. As I speak, our sales head was at Pune at one of the large countries who's preparing. And obviously, everybody has this given change, change of price. So we are in that super mode of passing it on. But to your question, both in terms of giving and taking we have obviously started giving. On taking, we have still not achieved more than 10%, but we are on an override on that. And we hope between this quarter and next quarter, we should be able to pass it on. So obviously, there is always this lag happen to negotiations and the automotive works, they will keep on dragging as much as began, but it was going to prospective hopefully. So from April 15 really the whole thing of giving and also passing it on has begun.

Okay. Fair. Second question, sir, on the domestic rail and the CV market. How are you seeing also an outlook of growth, growth out of very there? And also on the export front, especially in the U.S. geography, which is, I think, 50% of our exports. So are we seeing any pickup there? Of course, the trade deals are still pending, but as and when that happens, I'm assuming it will help us before that, in the idealo are you seeing exports overall.

Yes. So Ankur, on the export side, the last quarter -- last quarter of the last financial year, we did INR 220 crores, which was 21% of our pie, which was INR 222 crores compared to quarter 3. The previous quarter, it was INR 160 crores,INR 159.2 crores, exactly. So you can see there is definitely a quarter-over-quarter 40% Jan. And I think year-on-year, that jump is also if you take the whole year, the jump is almost 66%. So you -- despite the trade deal not happening, there is definitely a pull from the North American market. So there is -- we see that pull from the exports. So we had a good quarter on exports. I would say, if you see Q3 was INR 159 crores and Q4 FY '25 was INR 133 crores, we did INR 222 crores. So that is that is plus a good guide yet. On the rail, definitely, this market, as I always say, is going to be slow and steady. There are always ups and downs. Sometimes there are delays from the railway board and sometimes the wagon builders has a delay. So all that -- and then the cash in circulation between the wagon builders and the railways. So that would remain -- it would be slowly steady growth. So -- and that is why we are real for us in Q4 '26 was INR 278 crores. And if you compare it to Q3 of FY '26 was INR 128 crores. So that was obviously a jump on Q-over-Q, but Y-o-Y, if you see, overall, there was a degrowth -- slightly degrowth there.

On the CV front, sir?

On CV, robust. So CV is the markets we play in commercial vehicles, that is pretty good so far. I think the mobile others for us, which CV and tractors are both put together was INR 205 crores which was actually a jump of quarter-over-quarter 22%. So CV market is going to remain, I think robust there would be obviously, we have some cyclicity there. So there might be a little bit of dampening but then catching up again. So CV has remained in that condition in the last few years will be not robust. So CV is okay, and we see it, okay. Rail, we see steady, slow growth. So that also is very much there. And overall, the sentiment is domestic consumption is not bad despite the inflationary market situation, inflation and cost pressures are there. But the local demand is okay. The export demand is also okay, and then the cost pressures are there. So I think that all is on back.

Just one last question, if I may, on the Bharuch factory where are we in terms of utilization, where do we target to read, say, over the next 1 year, say end of FY '27. Also to the pastand talk about your market strategy, how you're trying to gain market share here in the SRB CRB. Just get some color there would be very helpful.

Yes. So on SRB, CRB, so all our lines have been capitalized. So that is all done. And we are running these smaller lines, which we call up to below up to INR 250 crores. So that we are running pretty full, actually. And we have already done it how much revenue we have generated till date down.

So for the full year, it was almost INR 80 crores revenue coming off of the new plant.

INR 80 crores coming out of the new plant for the full year. And now April onwards, it would be as we generate. So we have a robust PPAP going on as we talk. We have almost more than 100 new part introduction underway in that plant. As you know, that -- we have to go through each part has to go through a property tap, and we have to have [indiscernible] Timken approvals and then it has to go to the customer approvals. So all our smaller lines of [indiscernible] are running full on large line PPPs are happening. I think we are running more than a shift. So we have to do more [indiscernible], which they are doing. And on CRBs, again, [indiscernible] are happening, and we are running more than I think 1 shift to be closer to 2 ships. As Sujit just said, whole year last year, we did INR 80 crore and then April onwards -- so on the Gen strategy, we are we are selling anyway to the metal industry aggregate, material handling our tapers and imported stuff now with this, in fact, today morning, only a cement customer is telling me that they see more life out of income bearing. So we sell value on engineering. So we are pitching to all the customers, which where we are anyway selling papers, whether it's dementia or the metal handling equipment or the chemist increments. So that is the target segment and then obviously, exports as well. I think out of that INR 80 crores income business.

[Operator Instructions] Next question is from the line of Varun Jain from Dolat Capital.

My first question is that I just wanted to know the segmental breakup for Q4 in FY '26.

Yes, sure. So Varun, Q4 FY '26 rail was INR 278 crore, which was 26% of the pi mobile, which is for CV and tractors was INR 205 crores. which was 19% of the pie distribution, which was both industrial and aftermarket, a more industrial is INR 162 crores was 15% of the pie process industry, which is the heavy industry stuff that was INR 200 crores, which was 19% of the pie and intercompany was 22.5%, which was 21% of the pie. So in total for the quarter was INR 1073 crores. And for the FY '26 in totality, rail, we did INR 781 crores Mobile others, we did INR 681 crores. So rail was 23% of the total pie and mobile others, which is CV tractors extra was 681, which is 20% of the pie distribution was crore, which is 17% of the pie process was INR 651 crores, a 19% of the Pi intercome exports is INR 707 crores, which is 21% of the pie. So in total, it was INR 3419 crores.

Okay. That's very helpful. And sir, for this Jamshedpur CapEx, are we online to go live with it in the December 26 quarters? And what is the revenue potential for it? Like what does the asset turn? I think you're investing 120 CR there? And what is the total overall CapEx guidance for '27?

So yes, we are roughly at INR 130-plus crores for CapEx. Last week, Jamshedpur. So we should be able to produce by what number this year. So by November this year. and then obviously new 9 PPAs and all that. So December, we should start producing. On terms of total asset terms, we are looking at to start with, and then we'll see because these are all state-of-art robotics imported assets and highly precise grade for super precision high-speed railways for future. As they come in, obviously, you can make a slower rail bearing system, but are capable to do the ultra-high speed for rail as well. So that we should be able to produce the first real bearing by hopefully, by November and December. That is the target. The machines are all getting shipped from Europe and the building is getting ready and all the assets regarding phosphating, et cetera. And we are in Jarkan in getting all these all these approvals, all those are in place. We have all the approvals now in place. And to your direct question, should be by December producing the bearings and then the global rail markets. So South Africa looks -- it's like Africa rail looks pretty strong in coming months. So that is good. And America is also okay. and India is slow and steady growth. So hopefully, it is time very right as we start producing.

Okay, sir. And sir, of the total FY '26 sales, we have what percentage of our sales have been produced locally in India as of now and what is the localization target, hence forth?

So out of that INR 3,413 crores, I think 60-odd percent would be domestic 65% would be domestic, 35% would be imported. As you know, that you can't produce everything in India. They are not 1,000 lakhs for different part numbers. So this 65%, 70% would be a good mix between -- and we are also exporting all the similar, so similar stuff. So it generally remains a very good very good balance. But we are looking at different things. If the market remains growing BIS gathers momentum, all that stuff is on our plate, but it was 65%, 35% if you take FY '26, a percent here or there.

So just last one for me. So any revenue growth and margin guidance for FY '27, if you'd like to share?

So margins and revenue, both we want to be more than the market growth. So on the top line, we want to be more than the market going on the bottom line, obviously, there are pressures on the cost. We are definitely going to pass them on. And then we are very good at continuous improvement in manufacturing. So that will be. So it should be healthy or we aspire for doing it better than before, but depending on what happens around us.

Sir, like would it be like a 10% revenue growth, that is the base case. Can I take that? Would that be a fair avunction?

I don't think we can give you a percentage guidance either on the bottom line or the top line. I can tell you, we will outgrow the market. So that is the math you'll have to see.

Sure, of course, No, problem. Thanks a lot, and all the best.

Next question is from the line of Rishi Vora from Kotak Securities.

Just on the CRB SRB plant, right? Now incrementally, going into FY '27, how should we think about the ramp-up of this plant? Like we ended at INR 80 crores. Our target was to exit at 40%, 45% utilization levels. So which would not have happened, but how should we look at going into FY '21? Are we seeing a good traction in that facility?

Yes. So I think with the PPAPs going on, we should be July, August, we should start seeing utilization of -- and then with every passing month, it will get better and better. It is a long cycle, especially when you are supplying to the OEs not only will they detect, they might even ask for testing and things like that. And some of the parts might also go to the rail application. There again, there is a huge process which we are already underway. But I think we would cross the 70% by July time frame.

And sir, the peak revenue would be INR 1,000 crores?

Revenue would be INR 1,000 crores, I wish it would be that much, but now it won't be that much. So as we do the next quarter, the picture will be more clear.

No, no, as in the peak revenue potential...

Yes. No, no, the mix is different. Obviously, the mix plays a big role. And as I said, it's in terms of wish. So that will be the math. But generally, with the whole year, depending on mix, we'll have to do the calculation that would be INR 1,000 crores.

Sir, you did a CapEx of INR 700 crores discussing 2x than the peak revenue potential, not I'm saying that you're reaching 20%, but then it is what north of INR 1,000 crores is how we should...

[indiscernible] Sujit, you want to say something if you have to take the building out of that.

I think in the last meeting we have explained that the fixed revenue would be very similar to in terms of the asset fund, right? So that's very close to do it. It's iodine past. But if you are specifically asking for finance from 37, it's very difficult to estimate at this stage because there are multiple things that's happening. And ramp-up and the manufacturing space ramp up, the customer approval, so on and so forth. It may not be exactly possible to estimate at business. But yes, the peak revenue will be very close to the asset since the Chairman explained.

So what should be the CapEx for this plant of buildings and land, like out of INR 700 crores, what would be the CapEx for just a machine in all that where on which we should then counteracts

Yes. So if you take out, I think it explained in 1 of the annual dollars. So total investment is roughly around INR 70-odd crores including the ForEx and stuff. So I think the building is almost -- I think it was very close to -- it's not on top of my hand and less and be corrected, but building were very close to I think 300 it was certainly 350. So you can take I think...

You can just for a rough calculation, the exits purely. Obviously, it is not only the building basis of the air continued stuff. So maybe 50%, so you can take INR 300 crores, INR 310 crores.

And in this facility, sir, is there a scope to further expand the capacity if required in the future years?

Yes. The building has been built for tomorrow.

Understood. And sir, second question, just a clarification on the CapEx number, which you guided for '27 INR 150-odd crores. Is that right? Or...

No. I think he explained about INR 120 crores...

INR 120 crores for rail which...

So what would be for '27?

Yes. So we don't give the guidance for CapEx. But if you look at it historically for last year, 25%, 26%, we spent roughly around 8.5% of our revenues. That's very good to the CapEx spend. And it will be almost in the vicinity of the 10 lens because the multiple expansion that's happening on store, then we are believing the sale bearings in our varieties and there's a little bit of equipment investment in the new plan. So put together, it will be very close to that number.

Similar lines. 8%, 9%, 10%.

Next question is from the line of Raghunandhan N. L. from Nuvama search.

Congratulations on the strong numbers. Sir, firstly, for FY '27, how is the traction and the inquiries on the industrial bearings business in domestic and overseas markets -- and which geographies are driving this in export?

So on the industrial side, so when you say industrial, so there is -- the one is the OE pool and the other is the MRO pool. So steel MRO is a little bit slow, and you must have seen that the overall melt of last quarter was also a little bit lower than the previous quarters. But cement -- cement is pretty much good. And overall, the sentiment in the OE side, which is because of the geopolitics is a little bit wait and watch. But general statement is okay. It is not showing any signs of despair if, I can use that word. And on export side, despite that the U.S. treaty is not fully signed, busted but the flow is pretty okay. North America, if we say our export North America is gaining momentum. Rest are also there, but it is the main driver is North America. And the order book is healthy. So both domestic and export commercial vehicle is pretty much bullish factor is, okay, rail is slow in studies, okay. MRO is also -- means the aftermarket is also okay. So overall, -- for me, the current top 3 worries, demand is not a worry. Cost escalation and passing it on, obviously, is our top priority ramping up Baru new plant, PPPs second -- and third is further projects of expansion. So demand is not currently an issue. Obviously, we want more and more, but it is not on the top 3.

Well noted, sir. That was helpful. Any change in the time line for Bharuch ramp

We are -- I think we are a little bit delayed. Obviously, we had a natural range last year in the Bharuch that inundated the whole city there. So there were some issues because of that. And then there was some metros. But overall, I said there was a slight delay, but we are on a path, a pretty good path. As I said earlier, we have capitalized all our lines, which means they are all functional. Now we have to complete all the people. So the demand is now to the capacity utilization. As we speak, we are hiring more operators for the plant, and we tell you that we need more people to run more ships. So -- and by July onwards, I think we should be 70% of the utilization, then every month, it will become better and better. PPAP, because for every PPA, you have to get all the toolings and then how the approval. So that is massive and way currently.

Noted, sir. Very clear. And do you anticipate any revision in CapEx guidance for the next 3 years with more products coming in.

There we are always looking at as earlier, I think, Rishi, from Porter asked that is this plant capable of handling more the 1 space is available. and we are only doing in the new plant as certain range of sizes, which are not erected for the whole market. So for the further range has to be brought in. So when we decide time is right, so that would happen. Similarly, if there is a chance to do any M&A, definitely, we always only look out. And then -- if there is a need to do anything more in our 0 to 8 inch, which is the traditional commercial vehicle sector, et cetera, -- so those things are also currently actually under discussion. So there might be a chance, but Sudeep just said that we would do -- 9% of our sales figure. And then if there is -- we are a debt-free company. We have the resources at hand. If there is a good project, we will not shy away from investing.

On the part revenue, in Q3, the revenue was about INR 12 crores to INR 15 crores. How much was the revenue and also ramp-up costs has impacted 170 bit in Q3. Was there any cost impact in.

No significant impact from a revenue perspective, of course, Q3 is the lowest 1 is that the ramping of 12 floors of Q4, we had a step up revenue. So the total revenue for Q4 was very close to INR 60 crores. So that is how it made INR 80 crores for the full ante. Yes, we are still very close to the breakeven. If you look at it the ramp-up cost impact what we had in the last quarter of 170 basis points that net has gone down a bit. We are still very close to the breakeven and the impact is not significantly higher specific to this quarter.

Just the last question on GCP. Can you indicate how is the profitability for this entity.

GGB.

Yes. So it if you look at it, the results that we have announced -- so for the quarter, the review was INR 16.6 crores, and the profit repertax was INR 4.6 crores. Very strong PBT at close to 13%, 22% that.

Next question is from the line of [indiscernible] Saha from Saha Securities.

Sanjay, actually, I'm not going to ask on the pilot because we dip expanded the business and where business. I only asked that your dividend last time paid dividend as an talented all this type of dividend. So you pay more very happy.

So we paid last time we paid how much Sujit?

36%.

So did we announce this dividend of the sale 2.5. So obviously, it is slight less than before. But once in a while, we can win as well. is to do .

Your constant higher.

It is 2.5 years for the year of 10 and before that was 3.6%. But every 3, 4 years, we do 50 beta. So Sara, I thought the question will be for SP312517399 For -- don't give dividend invest and grow it more. So we want to make sure that we leverage our cash to invest more rather than paid to the banks as interest.

As you are not as we have not been invested in CapEx now made months. So I request you to consider what we did in return.

Yes, yes, sure. acutely, we -- if you see over the last 5 years, in that once we pay a mega dividend, but your consideration on your question and suggestion is well taken.

Yes, yes. there is no content. We have been paying a good amount, but we need a tie in a slew make a stable base definitely better.

Next question is from the line of Sabyasachi Mukerji from Bajaj [indiscernible] AMC.

Just one question. On this manufactured versus traded mix of 65, 35 on where do we see this number going in next 2 to 3 years, given the thought process behind setting up this Daricfacility was to replace the traded products that we used to import to make in India and manufacture here in India? This number should be in 2, 3 years?

Yes. So obviously, we are producing more and more, but then you see the overall price also increasing. So the pie is becoming bigger and bigger. If we were making selling only of INR 500 crores a quarter, then this would have been a different percentage. But as the Indian pie is also the bearing buy of India is increasing. And then also, there is a new application coming up, say, for example, on wind. It used to be sub megawatt and 2 megawatt, then 3 now a lot of 5-megawatt is coming up. So I think the 65, 35 or maybe some years, 60, 40, something 70-30, depending on the pie and depending on the market and depending on the mix -- but as I said earlier, each that we cannot produce everything in India, though our desire would be to do 100% India, but there are thousands and thousands and lakhs of different part numbers, applications keep on changing. So unless there is a critical volume, we do not want to invest unnecessarily. So currently, as I said, that all of a sudden, 5-megawatt is becoming very popular, which a lot of windy companies want to use. -- and putting up a cloud for 5-megawatt is matching, but then we have other sister clients from which we can buy at a competitive rate and sell in India. So I would say to you question though, the desire is always that we want to make more and more. But given the market mix business opportunities, diversion and new growth in India, -- and India is obviously changing very fast. So I would say that 65, 35 might be here for next 2, 3 years, easy, but the pie will keep on increasing.

Got you understood. Just another question on the segments that we cater to. Railways mobile in the process and automotive, industrial aftermarket and, of course, exports which are the segments that you think would grow faster in the next 1, 2 years? And really, you mentioned, I mean, it will be slow and steady, but how would the other segments where you see faster growth next.

I think definitely, given the fact that process industry would grow faster, India, just for the sake of it, general India is still $2 billion, $2.5 billion bearing market. So it is not a massive market like China, which is 20 billion. SP139495625 So billion market. And out of that, 65% is actually mobile, which means washing machine, refrigerators, 2 millers, 3-wheeler passenger cars and all that the CDs of the world and the explorators and better loads of the world. But 35% is on stationary equipment. Generally, in a major market, it will be 50-50 So pluses again definitely grow in India as people start investing more in steel, expansion of steel. And as they start putting up more cement in India, more power generation, whether it is being solar and then if there is a need of mass metal handling and things like that. And very soon, I am sure that West Bengal will see a big revision on industrialization. Heavy industries, it is East India. Heavy industries can easily come there, which are connected to the mining and out of stock. So process is one area which is going to grow when the process will grow distribution will also grow because as you still -- as you produce more steel, more mining, more meta will consume more bearings and rail would be slow and steady growth. Mobile truck is always and same thing is the attractive monsoon policy. So last 2, 4 years, commercial were closed down, all of some, we saw a nice uptick and that would have a cyclicity connected to different policies and the market condition. But to your decount sir, definitely process distribution. These are going to be strong growth followed by rail and followed by mobile lendering. I think the time is over. With that, I definitely want to say thanks. and we look forward to the next quarterly call and hope we are again meeting on a good note next quarter. Thank you very much. Thanks a lot.

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