Transformers and Rectifiers (India) Limited (532928) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Transformers and Rectifiers India Limited Q4 FY '24 Conference Call, hosted by Nuvama Wealth Management. [Operator Instructions] I now hand the conference over to Mr. Subhadip Mitra. Thank you, and over to you, sir.

Thank you. Good afternoon, friends. On behalf of Nuvama Institutional Equities, welcoming you all to the fourth quarter and full year earnings call of Transformers and Rectifiers India Limited. At the outset, we would like to thank the management for giving us this opportunity to host the call today. We have with us today the top management, represented by the Chairman, Mr. Jitendra Mamtora; Managing Director, Mr. Satyen Mamtora; and CFO and Adviser to the Board, Mr. Chanchal Rajora. I would now like to hand over the call to Mr. Satyen Mamtora for his opening comments, followed by the Q&A. Over to you, sir.

Thank you, and good evening, everyone. We welcome you all to the earnings conference call to discuss the company's performance during the quarter and the full year. We have concluded our Board meeting this afternoon and have uploaded our financial results as well as the investor presentation on stock exchange. Firstly, I'm happy to -- and proud that our team has endeavored to conclude the full year audited results within the first week of the financial year close, and I would like to thank their relentless efforts on making this possible, and we hope to continue this practice in forthcoming quarters. We are happy with our order book position and the various orders that we have received during the year across sectors, catering to solar power, private sector industries, metro projects, railways, power utilities. Other achievements that we have got this year successfully tested -- successfully short-circuit tested on multiple transformers on various voltage ratings. With this, the company has crossed commendable milestone of successfully dynamic short-circuit testing on record 150-plus transformers over the last 2 decades. Also the technology of 765 kV plus has also been fully absorbed during this year. The company received the highest order -- ever order inflow during the year for -- of about INR 2,050 crores, including the export orders of 11%. The unexecuted order book as of March 31, 2024, total debt INR 2,582 crores, 72% growth versus financial year, to be executed over the executive cycle of approximately 15 months. As of 31st March 2024, the company has quoted inquiries of INR 17,000 plus crores under negotiation at various stages, including overseas inquiries. This includes all segments of business such as renewable, green energy transformers, power transformers and furnace transformers. To summarize, during the financial year 2024, we navigated through phases of stabilization, turnaround and growth successes and growth successfully. And we are now taking steps for the next phase of consolidation, expansion and profitable growth. We have taken several conscious steps and started implementing our growth strategies. And the results of this country company-wide initiatives are starting to be visible in our performance from quarter 4 FY '24. We are entering financial year 2025 with a growth-oriented mindset to contribute to Indian government's vision for development of India by 2047. The major pillars are capacity expansion being more export-focused, becoming fully backward integrated, explore revenues from inorganic growth, achieve operational excellence and mobilize resources effectively as well as focus towards system-driven processes in positive direction. The strategy is being backed by our niche R&D, product development, design customization expertise and manufacturing facility expertise in manufacturing high precision transformers. With this, I conclude my remarks and would like to hand over the call to CFO, Mr. Chanchal.

I hope I'm audible to everybody?

Yes, sir, it's audible.

Okay. Thank you, MD sir, and good evening, everyone. We welcome you and also our quarter 4 and annualized post earning conference call. I shall discuss the standalone financial highlights now. First, I'll elaborate on Q4 results. During the Q4 FY '24, the revenue from operations was INR 500 crores, 18% growth from INR 425 crores of Q4 FY '23. EBITDA during the quarter was at INR 65 crores, 112% growth from INR 31 crores in the same period previous year. EBITDA margin was at 12.9%, a sharp 576 bps increase from 7.2% in corresponding quarter. PAT during the quarter was at INR 36 crores, a 306% growth from INR 9 crore in the same period previous year. PAT margin was 7.2%, a sharp 509 bps increase from 2.1% in Q4 FY '23. Now I'll come to the FY '24 results. During FY '24, the revenue from the operations was INR 1,273 crores, a 7% decline from INR 1,375 crores in FY '23. For FY '24, export revenue was INR 139 crores, 170% -- 117% increase from INR 64 crores from previous year. Export contributes 11% of our total revenue. EBITDA during the year was INR 129 crores, with a 9% increase from INR 118 crores of last year. EBITDA margin was 10% for the year, 155 bps increase from 8.5% of FY '23. PAT during the year was INR 42 crores, a 12% growth from INR 37 crores as compared to the FY '23. PAT margin was 3.2%, 55 bps increased from 2.7% in FY '23. EPS earnings per share during the year was at INR 3. In October '23, the company has successfully raised INR 120 crores by way of preferential issues, issuing INR 1 crore shares on a priority placement basis. This inclusion provides the medium-term capital support to ensure the smooth operations of organization. Average monthly collections from the customer during H2 FY '24 was INR 144 crores, which indicates the stringent internal control systems are in place. Despite muted FY '24, the company has been able to turnaround and close the financial year on a positive note. The improvement during H2 FY '24 was largely on account of the faster execution of the major orders, better production planning, improved receivables, internal control systems, et cetera. Declaring the audited financial results within the 8 days from the year closing clearly indicates that the company has started certainly towards being a system-driven organization with the detailed strategies in place. With the orders in hand and inquiries under negotiations, we expect the growth journey of the company has begun, and we expect tremendous improvements in the company's bottom line in the years to come. With this, I conclude my financial updates and I request the moderators to open the floor for the question-and-answer session. Thank you.

[Operator Instructions] The first question comes from the line of Siddharth Shah from Emkay Ventures.

Congratulations on a great set of numbers. We are very pleased to see positive momentum across all parameters. Sir, I have a couple of strategic questions. First, if you can just help us understand the demand outlook across segments and especially for the exports market. And you have INR 17,000 crores of inquiries under negotiation. What kind of conversion can we expect this -- or in a way, what kind of order inflow can we expect in the next year?

See, generally, if you look at our past record, the conversion is in the line of 15% to 20%. So if INR 17,000 crores of orders are in the pipeline, then anywhere between INR 15,000 crores to INR 20,000 crores -- sorry, INR 1,500 crores to INR 2,000 crores should not be far-fetched. We should be able to get that kind of order. That's one thing. We are now more focusing on the things which are being ignored by everyone. Generally, we want to ensure that once the transformer reaches the site, we have the least thing to do. The exposure of the transformer reduces to a great extent so that our concentration on attending to the site complaints reduces. So this is what we are trying to address to ensure that nothing happens when the transformer reaches the site.

Sure, sir. And sir, from a demand perspective, which are the segments which are doing well and which of the geographies, sir?

See, it is everywhere. It's throughout India. It's not only a particular segment. But today, if you see, the main focus is the renewable everywhere. And renewable is the growth driver now as the power generated by the solar or by renewable, it is to be evacuated to the grid and that requires a huge number of consumers, whether on the smaller ratings or on the largest rating. So it's everywhere. And besides that, steel market is also picking up. So there also, we see a lot of movements. We have started receiving a lot of inquiries from the overseas OEMs for the supply of the large rating of industrial transformers. Besides that, there is -- there are certain inquiries or we are catering to some of the orders from a multinational company for supply of the transformers for the hydrogen -- green hydrogen. So these are the opportunities which we see in the near future, and it's going to be huge. It's not going to be small. So we are trying also to cater to this requirement. This may not be -- the transformers for the green hydrogen may not be very large, but we are going for automaton in those kind of transformers so that the production becomes faster because the customer requirement is going to be huge, whether it is for green hydrogen or for IDT that is for solar.

Sure, sir. That's very helpful. Sir, the last question from my side is on the fundraise, which you -- which the Board has approved through QIP or pref. Sir, how do we intend to use this proceeds of about INR 500 crores, which the Board has approved?

This would be basically inorganic growth and also some expansion that we are planning in the future.

And this will be, say, increase in capacity or some backward integration or...

Increase in inorganic growth and some increase in capacity, and part of it will be backward integration also.

The next question is from the line of Ashwani Sharma from Emkay Global.

Congratulations for a great set of numbers. So my first question is on the -- now we are at INR 17,000 crores. Out of this, how much would be exports, inquiry level?

Exports would not go beyond 15% this year. Because see, the local demand for our country is also so high. That since this is growing exponentially, exports may not grow beyond 15%. Will not be more than 15% of the total sales.

Okay. So I was referring to your guidance on achieving some 25% contribution. So that you're talking about FY '26, '27? Is that the right understanding?

Yes, yes.

Yes, Ashwani.

Okay. Secondly, on the collections from GETCO, what is the status over there, sir?

Ashwani, we have got the majority of outstanding from the GETCO and the rest of the money is coming in the line. So GETCO is not the issue to us.

Okay. Now given the -- obviously, we have got very -- inquiry pipeline is robust and order book is also very strong. So what is the outlook that you see for FY '25 and '26 in terms of revenue and margins?

Ashwani, in that FY '25, '26, which you are talking about, we are looking for basically whatever our present order book is, first, we wanted to deliver that and we wanted to better that in the coming years. And as far as the EBITDA is concerned, we are looking to achieve the numbers what we achieved in Q4.

[Operator Instructions] The next question is from the line of Mahesh Bendre from LIC Mutual Funds.

Sir, you said INR 17,000 crores of bids are, I mean, under negotiation. So I mean...

Mahesh, can you speak a little louder? It's very feeble.

Yes. Am I audible, sir?

Yes, now it is audible.

So sir, we said that the INR 17,000 crores of bids are under negotiation. So these are transmission or distribution side? I mean...

These are power transformers. Most of them are power transformers.

There's [indiscernible] for power evacuation to the grid.

[indiscernible] transformer is not there.

So these will be about 220 kV right?

220 kV up to 765 kV. From 220 kV up to 765 kV.

765 kV. Okay, okay. So we are -- and on distribution side, no, we are not very active below 220 kV?

No. So whatever that is currently under negotiation from 220 kV to 765 kV. We are also in negotiations before, 132 kV 66 kV.

So what that quantum will be, sir, for distribution side?

Mahesh, we would not like to discuss what are the numbers and what are the levels of the inquiries are there. The INR 17,000 crores inquiries, what we are mentioning is altogether all kind of the products. The majority of them is the power transformer side, as MD sir has mentioned.

Okay. Okay. Okay. And sir, given such a strong demand, I mean, will our profitability will also go up significantly? I mean, given so much demand and the operating leverage that will play out moving forward?

I think Q4 number explains that.

No -- further, is there any possibility improvement in that?

No, this would be what would be around this much only will stay.

The next question is from the line of Khadija Mantri from Capri Global.

So my first question is, are we looking at some new industries such as data center for our transformers?

We are already supplying transformers to data centers. We are already supplying transformers to data centers.

And so how does that market look to you in terms of growth in the next 2 to 3 years?

The market is good and there is a potential for the data centers. And we are already pioneers in transformers for data centers.

Okay, sir. And one more question from my side. I observed that the contribution of revenue from state and central customers have gone down from 51% to 31% on Y-o-Y basis. So is it order specific or it is just the order book is in such a way that we have more contribution coming from industrial transformers?

We are -- sorry, we have deliberately taken a decision that we would be quoting less to State Electricity Board and more to EPC contractors who are in eventually servicing the State Electricity Board. That helps our cash flow better. So we have taken a conscious decision of quoting or quoting less to State Electricity Board.

Okay, sir. So you mean -- what you're saying is that the state and central customer, which you combine together, now that has come down from 51% to 31%, but it is largely because of your less exposure to the state customers? But the central side, central side, it has increased because the demand largely is for the power transformers?

Yes, that is true.

Okay. Okay, sir. Fine. And sir, sorry, I missed the comments on the reason for the QIP and how it will be utilized, if you can just restate?

When -- the company is going towards some backward and forward integration plan and towards the -- also the inorganic growth, so these funds are going to utilize for that focus. And part of this will also going to be utilized to reduce the working capital burden on the company and...

Yes. Okay. And also the INR 17,000 crores of inquiries, which is under negotiation, it is from the domestic market. You do not [indiscernible] export market?

Includes both. Includes both.

Okay. But you would not want to give the share in the export?

We want to do that, but we want to have a balancing between the domestic and export market as we have been given a guidance that by FY '26, we wanted to have 25% share of export. So we are slowly, slowly achieving on that target. If you see in this year also, we achieved almost 11% export turnovers. So we are increasing that slowly, slowly.

Okay, sir. And the execution cycle is same for the export orders, it is about 15 months?

It depends on the basically rating of the transformers.

Okay. But on an average, how would it be in export?

Yes, it is the same.

[Operator Instructions] The next question comes from the line of Mr. Subhadip Mitra from Nuvama.

Just reiterating on a couple of points. I think I'm just summarizing what the management has already talked about, but I'm just trying to put it in context. So firstly, I think in terms of exports, my understanding is that you're looking at growing the export share to about 15% in the near term, let's say, FY '25, and going closer towards 20%, 25% by FY '27. Did I hear that correctly?

Yes, Subhadip.

Perfect. Secondly, sir, in terms of the current INR 17,000 crores of inquiries, of which, let's say, 15% to 20% is typically the conversion. So one can look at a range of somewhere between INR 2,500 crores to INR 3,500 crores of order inflow.

You are right. It can be a little more also.

Perfect. And lastly, with regard to your guidance, you mentioned that your current order book of closer to INR 2,600 crores is probably what you would be looking at as your revenue for '25, and then EBITDA margin of closer to 13%, which is what you've delivered in fourth quarter?

Subhadip, the current order book, what we have is going to be delivered in next 15 months' time. So we are trying to achieve that. And EBITDA margin will remain somewhere between 12.5% to 13% levels.

The next question is from the line of Mayank Chaturvedi from HSBC Mutual Funds.

Sir, in this capacity expansion after 8,000 MVA, can you tell me the total project cost plus what kind of -- what rating of transformers will we be producing from this capacity? And when will we start taking orders for this capacity now as the capacity will be operational by December '24?

See, this -- mainly we are looking at the transformers for green nitrogen and for solar parks. So there are not going to be very large transformer that will be in the tune of 20 MVA or so, but it is going to be produced in March with our number of requirement will be huge, something like 80 to 100 transformers per month. So we are going for making the plant automate by selecting the machines so that human intervention reduces and the failure rate also reduces.

Mayank, this plant expansion has already started, and we expect this plant to be ready by December.

Yes. And what could be the cost to CapEx for this plant?

That we would not like to disclose at this moment.

And have you started taking orders for this capacity or...

No, no.

The inquiries are already in place. So we are negotiating with the people.

Okay. And this QIP proceeds, will they go into the CapEx for this plant as well?

Sorry, I could not hear you.

I'm saying that QIP proceeds will -- can be utilized for expanding this plant as well?

Yes, yes, yes.

The next question is from the line of Kaushal Kedia from Wallfort PMS.

What is the current order book? I'm sorry, I missed that.

INR 2,582 crores.

The next question is from the line of [ Sampat Naik ] from Tiger Asset.

Congrats for the good set of numbers. So I just wanted to know...

Sampath, your line is not clear. [Operator Instructions]

So just wanted to know, sir, as we are doing backward integration, so how are we looking at margins going forward? Because without backward integration only, we are doing 13%, I think, kind of margin. So after this CapEx, how are we looking at margins?

Sampath, we are already around 40% to 50% of the backward integration. Now we are looking at to expand the backward integration further. And definitely, the margin is going to be improved once we are fully on the backward integration part.

Okay. Currently, we are quoting at 68 -- sorry, yes, 68% of raw material, right? I mean, like almost 32% gross margins?

No, no, basically, that's not the correct thing. Our present raw material is around 72% to 74%.

We do not disclose...

Yes. So that has not been better than that. So you can say that our gross margin, you can take it up from the books. Right now, it's going to remain same levels.

Okay, sir. Just wanted to understand like whatever the new orders are coming, at what gross margins they are quoted at?

Sorry, what?

Whatever the new orders are coming, at what gross margins they are being quoted?

We do not disclose it. They will be good profitable orders. Thank you.

The next question is from the line of Aashna Manaktala from HDFC Asset Management Company.

I wanted to understand how is the supply trend in the high-voltage transformers? So believing that the waiting time has gone up to 24 months as there is a tight supply. So how is that going to look for in the coming quarters for the industry?

See, we are -- first of all, it's very difficult to increase the capacity just like that. So what we are doing is we are just putting our efforts to reduce the cycle time, which we have done -- we have successfully done it, reducing the cycle time from 55 days to 40 days. So we are further trying to reduce it to 32 days, 35 days. If that happens, the capacity will increase and we'll be in a better position to offer transformer much in time.

And sir, this decline would happen over what time period to what...

It is a continuous process. We have started doing it.

Okay. And sir, how is the situation on the low-voltage side for the industry?

Low voltage side, see, they are -- those are kind of off-shelf kind of a thing. So it's not long-term planning. As and when it comes, it comes. So solar, when it comes, it comes and then the projects last for about a year or so. So it goes on, the supply goes on until the project is completed. So there are no -- I mean, planned well in advance, like what they do in power transformers because the delivery time is very short.

Okay. But for the industry, the supply is very well, there's no tight supply in terms of low voltage, is it?

See, what happens is there are a number of suppliers, but it is the question of the quality of the transformers, which people are now focusing more. Because if any outage is there when the transformers are supplied, the whole project is not working. So it is always -- the customer always preferred to go for the more reliable transformer, maybe paying a little higher.

The next question is from the line of Shrinidhi from HSBC.

Congratulations on good set of numbers. Sir, would it be possible to compare and contrast profitability as well as payment terms between your industrial set of business as well as utility set of customers?

Shrinidhi, the -- if you were saying about the utilities, utilities has got a fixed number of payment terms, which is generally which ranges between 60 to 45 days to 60 days from the date of the transformer delivers. And when it comes to the industrial EPCs, basically, the payment terms are much better than the utility terms.

Right. And how are they on margins, sir?

The margin will remain the same, approximately the same.

Right. And would it be a compare similar business for export versus domestic, sir?

Export we have -- export, we have a slightly better payment terms as well as the margin also.

Right. And sir, the order backlog that you have about INR 2,600 crores, how is it split between fixed price contract and price variation contract?

Basically, the majority of the orders are on the price variable clause.

Right. Yes. And last, if I may, sir. So the order pipeline, which looks very strong at about INR 17,000 crores. Would it be possible to share what was this number a year ago?

Right now, we don't have that number in place.

[Operator Instructions] The next question is from the line of Nilesh Doshi from Green Lantern Capital.

Congratulations for moving in the right direction, both on the revenue and the margin front. Just one question I have is that -- what are we doing in terms of R&D and new product development, especially -- I'm sure there may be a lot of import substitution products in our country and we may be dependent largely on the imports, maybe some components for transformers or any new products which we can go into.

We are working on that. I cannot...

[Foreign Language]

Sorry for that.

Yes, so whatever the backward integration that we are doing, we are working on many projects that import substitute -- that will substitute the input that we do on those.

Yes. Satyen, any idea when we should be ready and getting -- I mean, we should be fully backward integrated?

We should be fully backward integrated by December of 2025.

Yes. Okay. And how much that can help us in terms of margin? Any kind of, I mean, calculation of work we have done on that?

Nilesh bhai, it will better our margins from the present levels. But the calculations and all, once we'll meet, I'll tell you.

The next question is from the line of Parthiv Dalal from Antique Stock Broking.

Sir, could you spend some time on your working capital scenario? I understand there is improvement, but could you spend some time on how you see it panning out going forward given higher scale of business?

Parthiv, if you see on my presentation and present balance sheet, my working capital cycle is a bit -- has improved drastically. And we are actually further strengthening that. If you see on my creditors side, my creditors have gone down drastically as well as my debtors are going down. And we are working on the directions where we can further strengthen this working capital cycle. Right, if you present -- when you see the numbers, you will find it a little high. But please understand that from our debtor side, the majority of the debtors which are right now under receivables, has been built very, very recently. So they are not even basically due. And if you heard my speech, that now every month, we are collecting more than INR 125 crores to INR 130 crores, that is itself is strengthening my working capital cycle. Even if you see the short-term borrowings, my short-term borrowings has gone down drastically as well as my long-term borrowings has all gone down drastically. So these are the indicators that my working capital is entering day by day.

The next question is from the line of [ Surbhi Saraogi ] from SMIFS Capital Markets.

No. My questions have been answered.

The next question is from the line of [ Mehul Mehta ] from Nuvama.

Audible?

Yes, yes.

My question is with respect to green energy power grid, what would be in our order book like green transformer order book share of the green transformer, green energy transformer?

It is -- when you say green energy, it's -- I don't know what would people mean by green energy. Any transformers, which are used to evacuate power from the solar park to the grid are called green. So most of this orders, which we have received from power grid are meant mostly for those things. So it is -- we can say that 60%, 70% of the transformers are for the green energy directly, indirectly.

Okay. So in terms of like whatever is our order book, say, about INR 2,600 crores approximately, out of which like in terms of transformers, can you bifurcate between the conventional energy and green energy, is that possible?

Say about 50-50.

50-50. Okay. And in this, like what sort of T&D system spend entirely like market like out of which transformers would be like what like is that possible to share?

Sorry?

Out of this entire T&D system, transmission and distribution system, what would we say transformers like a share kind of like if I want to understand the entire T&D system and that size and out of what would be share of power transformer sort of like power and distribution transformers because we basically categorize -- I mean, address like power transformer, if I understand correctly.

Mehul, Subhadip is the right person to give you the answer of that question. Very recently, he has done a detailed study on the steel and power industry. He has the question, so he has the right answers of your questions.

Okay, I'll question him. Just last question is that in terms of like, say, growth over the next 5 years in terms of like a transformer market, any numbers you would like to share, industry growth?

We want to take the baby steps to reach to the 5 years down the line. At present, we are focused for next 2 years. And after that...

So in annually like say, for next 2 years, what would you...

Annually, if you see that market research report is that the Indian transformer market is increasing by around 14% CAGR levels.

So that should be, we should take is about volume growth, right? Because realization always like to keep on changing. So 14% volume.

The next question is from the line of Rishi Kothari from Pi Square Investments.

Congratulations, sir, for a great set of numbers. And I would also like to congratulate the EY team for such a nice presentation here. Sir, I wanted to first ask, what will be your utilization level at the current 36,000, 37,000 MVA capacity, which we currently have?

Rishi, we are right now operating at around 60% to 65% levels.

Okay. And sir, by next year, by December '24, we are expecting another 12,000 MVA CapEx, and we will slowly ramp up that capacity. So do we expect that to reach the peak by FY '26, sir?

Yes.

The next question is from the line of Pratik Kothari from Unique PMS.

Sir, in one of the comments, you mentioned that it's tough putting up a new capacity -- you can talk about what are those bottlenecks or challenges?

Sorry, we didn't get your question.

Sir, in one of the replies, you mentioned that mix stuff putting up a new capacity and hence, you are working on operational efficiency. So just if you can highlight what are the bottlenecks that you are facing now in terms of -- when it comes to putting up new capacity?

We aren't facing any bottleneck about the new capacities.

It is just a continuous improvement in terms of production that we are looking at. So it is a continuous process. There are no bottlenecks, but how do we improve at whatever we are doing today, how do we improve that tomorrow, and how do we improve it on day after tomorrow. So it is a continuous improvement process that we are working on.

No, correct. Because -- so maybe in the last cycle, 10 years back, I mean, a lot of new capacity came up very quickly and that kind of disrupted the market. So if you can talk about are you seeing -- given the demand that all of us are seeing, do you see [indiscernible] very quickly?

The new capacity, which came up was in the transformer range of 220 kV and above -- below. There was no capacity which came up 220 kV and above. See, if you just see 400 kV and 765 kV transformers, there are not many players today. Even today, there are not many players. You can count them, 5, 6 players, that's all, not more than that. So putting up capacity for a higher rating of consumer, EHV, what we call this extra high voltage transformer, it's not that easy. It's complicated also. And then it requires a lot of presence to build those kind of transformers. It's not only the design which makes the difference. It's the total -- the art of production. So that makes a difference when you talk about large rating of consumers. Similarly is the case with the HVDC transformer. You see, there's a lot of transformer even in the world for 400 kV and 765 kV, but HVDC transformer, not many. And then you can count them on the fingertips. So these are the really state-of-the-art kind of production, which requires a lot of skill and trained manpower, which is difficult to get. You can get money, but where do you get the skilled manpower? That's the main thing.

[Operator Instructions] The next follow-up question is from the line of Ashwani Sharma from Emkay Global.

Sir, I wanted your views on opportunities in the railway, especially Scott transformers, I read in one of your transcript. If you can give us some sense opportunities over there?

See, with all this dedicated freight corridor that is coming up and the high-speed trains in Vande Bharat and the speed of trains constantly increasing, Scott-connected and V-connected transformers are going to be a huge requirement in the coming years. And we have started seeing the inquiries flow at a very fast pace to us also. So this is going to be one of the -- again, a big sector that is going to come in the near future.

So we have the product portfolio as far as the railway is concerned? Is there a gap?

We have a product portfolio for the Scott-connected. We are RDSO approved. The Scott-connected, V-connected transformers, we are getting short-circuit tested by end of May. So then our product will be considered regular then. We have got some orders for Scott-connected and V-connected transformers, and we have to give -- provide short-circuit test for them.

Okay. So in our order book, how much would be that? Any sense?

Very small, about 7 to 8 transformers, not beyond that right now.

About 2% to 3%.

Okay. Sir, secondly, if I look at the contribution -- product-based contribution in our order book, the contribution of reactors are increasing year-on-year. What explains that, sir?

This is power gate supply.

It's mainly power gate supply?

Yes.

The next question is from the line of [ Dhruv Agarwal ] from [ Nivesha ].

Yes. I'm audible?

Yes, you are audible.

Congratulations on a very good set of numbers, sir. Sir, in the last con call, you said that you are expecting and you are executing orders, which are having low gross margins of around 24% to 25%. Because the new orders, the company has already quoted the prices considering the gross margin of 32% to 33%, which was reflected in the quarter 4 itself. So is it fair to assume that the low-margin order is fully executed sir, right now?

No, it's not that, Dhruv. It's not that. It is the mix of those things we are right that we are going to deliver.

So sir, can you please quantify what will be the low-margin order book stands at as of now from the total order book?

I cannot disclose that at the moment.

Okay. Okay, sir. And like, sir, you said that there is INR 2,600 crores of unexecuted order book which will be executed in 15 months' time period. So sir, for the financial year '25, revenue looks like around INR 2,000 crores to INR 2,100 crores. Is my understanding correct, sir?

We will try to achieve, if possible.

Okay. Okay. And sir, like currently, you asked a capitalization of 60%. So going ahead, seeing the demand that we currently have in the moment, so what would be the capital utilization going forward in the financial year '25, '26, sir?

Dhruv, for any manufacturing industry, the peak capacity utilization is 85%.

Right, sir. So are we like going to increase the capital utilization, sir, in the coming years?

Definitely, if we have to deliver, we have to increase that.

Okay. Just one last question, sir, like in the next financial year, what would be the borrowing levels could be, sir? Is there any plan to reduce further sir? Or it would be in the same level, sir?

We are trying to reduce the borrowings.

Okay. And just one more question related to that only, sir. Like in terms of working capital cycle, you said that your target is to have 120 days working capital cycle. So what is the -- what is -- like how are we going forward in that, sir?

There is a retail strategy in place for that, and we are working on that direction piece.

So what would be the current working capital cycle, sir?

You can please go through on our financial numbers, which we uploaded on the market, to get the detail about this.

The next question is from the line of Pinkesh Thakrani from Profit Gate.

Yes. I hope I am audible. The Board has like [indiscernible]. Sir, I just want to say...

You are not audible. Please, can you repeat yourself?

I'm sorry to interrupt. Your voice is sounding very much muffled. [Operator Instructions]

Yes. I think I am audible right now. I just wanted to just -- I missed the point of QIP round. The QIP round is for INR 500 crores, am I right?

Yes.

Okay. So by what time it would get completed, like any deadline, any time line from the Board?

Pretty soon.

Can you give some specific number, specific period?

Pinkesh, by end of first quarter, it should be completed.

The next question is from the line of Khush Nahar from Electrum EMS.

So I just wanted to know what would be your R&D expenses for FY '24 and FY '23?

Khush, this is the one thing which we don't want to disclose in this quarter.

The next question is from the line of Sampat Naik from Tiger Asset.

Sir, you just said that we are RDSO approved for Indian railways. Just wanted to understand how difficult is it for anyone to get RDSO approved? And are there any other players who are already RDSO approved?

Yes, there are so many companies. [ Homten ] is one of them. BBL is one of them. We are. And it took us almost about 1.5 years to get the first order from RDSO. So this goes way back into 2011, '12. So it is difficult to get RDSO approved. You need to meet certain requisites first to become a certified RDSO supplier.

So what other companies you said, sir? I just missed that.

[indiscernible], CG, BHEL, ABB.

Ladies and gentlemen, we would take that as a last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you all for being part of our earnings conference call and for actively participating in the call. We appreciate your support and interest in us, and we hope we have been able to address most of your queries. In case any further queries, you may reach out to our Investor Relation adviser, Ernst & Young, and they will connect you with offline. Thank you, Vijay Bhasin from Nuvama for hosting our call. Have a good day. Thank you.

Thank you. On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us. You may now disconnect your lines.