Timken India Limited (522113) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Timken India Limited Q1 FY '27 Post-Results Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from 361 Capital Markets Limited. Thank you, and over to you, sir.

Thanks, Huda. On behalf of 361 Capital, welcome all to Timken India Limited 1Q FY '21 Post Results Conference Call. From Timken management, we have with us today: 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. Sanjay Koul for the opening remarks to be followed by a question-and-answer session. Over to you, sir.

Thank you, Mr. Annamalai. Thanks a lot. Hello to everybody, and a very warm good afternoon, and thank you for joining. So I must say it is my privilege, and Sujit is with me, our privilege of both of us from the Timken India side for this investor call and to share with you a little bit more details on the first quarter, which ended 30 June '26. Before I turn to the current quarter, let me briefly reflect on how we closed FY '26. It was a strong finish to the year, as we spoke in May a little bit as well. The fourth quarter, always in India and traditionally for us, has been the best, and FY '26 was no exception. We closed the year with the highest stand-alone revenue of INR 3,147 crores, and robust Q4 was more than INR 1,000 crores. So against that backdrop, I'm pleased to report that we have started FY '27 on a steady note, carrying forward the consistent and broad-based performance that we have been doing the [indiscernible] Define Chemical India. We have delivered high double-digit revenue growth this quarter Y-o-Y, driven by resilient demand, especially in the core segments, and our execution both for export and domestic. As is typical of our business, the bearing business being cyclical in nature, the first quarter comes off from the last quarter, which is always very high. So against that backdrop, our revenue has been INR 929 crores, almost 15% growth for the same period last year. PBT for the quarter stood at INR 150 crores, and it was at INR 130 crores in the same quarter last year. So that gives us 15% top-line growth, 15% bottom-line growth, and you know the cost pressures we are at. Our PBT margin was at 16.2%, broadly in line with 16.1% in Q1 '26. It is worth noting that the same quarter last year did not carry depreciation of our new capacity investment, which has since been capitalized. So, adjusted for this higher depreciation, that is also in that. So you can see there is a margin improvement because depreciation has grown. Other income for the quarter was INR 10 crores. Net profit after tax stood at INR 115 crores. The EBITDA margin for the quarter was at 19.6%. We also have the consolidated numbers because of the other entity. Consolidated revenues were INR 943 crores for the quarter ended 30th of June, consolidated profit at INR 156 crores, and consolidated net profit at INR 119 crores. Also, I'm happy to share that during the quarter, we have secured the BIS certification for CRB and CRB rollers and TRB rollers, and we are on the journey to complete that process. That is obviously certifying our commitment to the quality and the standards for our domestic market. The scheme of amalgamation of Timken GGB Technology Private Limited with Timken India Limited has been approved by the Board earlier and is now with the NCLT, that is, the lot real Bangalore Bench. This merger will help drive further synergies and efficiencies and reduce overall cost. Our new Buch plant continues to ramp up progressively, and investment towards rail expansion at Jamshedpur and plain bearings continues to be on track. With that, I would open the question-and-answer session. So happy to answer any questions.

[Operator Instructions]. The first question is from the line of Mukesh Saraf from Avendus Spark.

First, just a bookkeeping question. If you could give the revenue breakup for this quarter for this INR 929 crores.

Yes. Thanks, Mukesh. So for this quarter, FY '27 first quarter, rail stood at INR 200 crores, and that is 22% of the total INR 929 crores. Mobile others was at INR 184 crores. Distribution was at INR 153.9 crores, which is INR 154 crores almost INR 186 crores, and exports were at almost INR 200 crores and 1% of the total.

So my question now is I'm just seeing that the parent has recently divested its business under its 80-20 philosophy and has been mentioning relooking at the portfolio to improve profitability and kind of getting out of some low-margin businesses. Just trying to understand how this reflects for the India business? Is there going to be some kind of a change in strategy here in India? I mean, you are obviously expanding into Bharuch, but is there something more strategic that the India business is also going to be doing?

Yes. Thanks for the question, Mukesh. Obviously, Timken Global, more than 50% of their revenues are in America. And in the Americas, they have their portfolio, which is different from India. The markets are different. And 80/20 at the end of the day is largely an analysis of how and why you should serve. Obviously, the endeavor for every company is to grow their margins. And at the same time, I would say exit: how do you serve some businesses which are not conducive to the overall business? So, 80/20 is: who are your 80, which are the performance enhancers, or who are your 20, which are maybe a little bit of a drag down. So that strategy is being used, and it's a very prone 80/20. It has been effective in elevating many companies and necessarily is to focus on improving sales, improving service levels, say, for example, in our business, on-time delivery level: should it be 90% or should it be 100% for customer A versus customer B versus customer C. That due diligence is happening globally. And this is performance to elevate. That is the whole idea. The idea is to become better and better. And I think it would help the India piece as well because this is a performance enhancer, which means: how do you serve the customer? How do you bring in more speed to the customer? Then at the same time, how do you also decrease your cost? How do you consolidate? How do you do your MTF versus made to forecast versus made to order? How do you serve the customer out of inventory versus how do you serve the customer out of orders and things like that? Should I serve the small customer directly, or should you empower your distribution more, and how do you use digitization? So, all this is actually going to help the company. And it has a very good path record of enhancing the performance of the company. So we are looking forward to this strategic direction, which globally Mr. Lucien has started with Timken in Europe and America, and we can already feel the energy in that piece. So, we are looking forward to it. And we'll do what is best for Timken India Limited. And the idea is obviously to grow more in all these territories and for Timken India in India and the subcontinent.

Second question is a little more specific to the Bharuch plant. I think last time around, you had commented that around July or August, some of the PPAs, et cetera, will be done and the commercial supplies will start from many other SKUs. So, could you give us an update on the current utilization rates of the facility there? And how are we seeing the '27 kind of ramp-up for the facility?

Yes. So, every passing week, we are producing more and more PPA. The ramp-up, obviously, is bearing plants are to specific and customer-specific, and you have to get management approval and customer approvals. I am pleased to say that in my long span in the world of manufacturing, this is one of the fastest ramp-ups we have seen, and a pretty quality product being produced out of a very top-notch plant. So, the revenues are growing with every passing week, and I'll ask Sujit to add more color to the whole thing so that you get a little bit more specific answer. But overall, the sense is very good.

Yes, that's right, sir. And as the Chairman explained, the revenues are growing. And here, the objective is how quickly we are ramping up in terms of the deployment, the engagement, and customer approvals. That's something which the team is doing an extraordinary job over the last – we cannot [indiscernible] personal time between the way impact and with interaction for such its clearing [indiscernible]

So, just need to confirm that number, so is it 60 crores?

Yes, 50. 5-0.

Five. So what will be the utilization levels?

Yes, it can apply – you cannot at plant level; we cannot put it across. As you know, probably broadly have key numbers [indiscernible] ramp of the demand and [indiscernible] -- that utilization in the last quarter would have been close to 40%, 45%, and we expect that to ramp it up to 70% in tenfold last meeting – last in August, September time slightly lower in terms of its ramp [indiscernible]

The next question is from the line of Raghunandhan from Nuvama.

First, the key on process and export segments, we have seen a growth of 28%, and you can talk about which are the categories are helping the growth in the segment? And also, on the export side, directionally, if you can talk about outlook, whether you see that strong growth continuing.

Okay. So, on the process side, Y-o-Y it is, I think, almost 30% growth and largely coming from the metal customers as we see a little bit of projects coming in. There are some companies which are making mills in India and exporting out of India. And we are being pretty successful in that. So it is not necessarily only the MRO, it is the projects which is there. And then also, there is a nice RE sector in this. So the wind is playing a good part. As you know, wind is growing in India, both in terms of export of the gearboxes out of India and then putting more wind mills and wind farms in India. So that is the story in process. Some of it is metal, but largely it is wind. On the intercompany, as you know, that America market is resilient. It is showing nice signs, though Europe and other places, South Africa is okay. Australia is flattish. ASEAN is down. China is down, but the American market is up, and we are supplying tapers to America. So that is the intercompany push, which is almost 21% coming out of that. And we see that this will continue, though obviously geopolitics is playing its role and all that is happening on one side. So I believe the new normal, like the post-COVID, this is the new normal: geopolitical challenges and war will be there in bits and pieces. At the same time, life will go on. And you know the big pipeline they are putting up in Oman, 300, 400 kilometers. So $300-plus billion, despite the war happening on the other side, is happening. Similarly, the exports to America are looking up currently. And I think Europe is down, but the U.S. looks pretty okay. That is the story in the U.S. for exports for us.

Noted, sir. Just a clarification on the exports to the U.S.: what would be the applicable tariff?