Tube Investments of India Limited (TIINDIA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 earnings conference call of Tube Investments of India Limited. This call is hosted by IIFL Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anupam Gupta from IIFL Capital Limited. Thank you. And over to you, Mr. Gupta.

Yes. Thanks, Margaret. Good morning, everyone, and welcome to the post results conference call for Tube Investments. From the management, we have the entire team joining us for the call, led by Mr. Vellayan Subbiah, who is the Managing Director. We also have Mr. Arun Murugappan, who has taken over as the Chairman of the company recently. We have the respective business heads: Mr. Mukesh Ahuja, heading the Tubes business; Mr. Srinivasan, who heads the Metal Forming business; Mr. Paul, heading the Cycles business; and we have the -- Mr. Mahendra Kumar, who is the CFO. We have the finance team also joining him, Mr. Ramanujam from there. So I'll hand over to Mr. Vellayan for further comments and then take over for the Q&A. Over to you, sir.

Thanks, Anupam, and good morning, everybody. Just quick highlights for the quarter. Our revenue for the quarter was at INR 1,309 crores compared with INR 976 crores in Q3 of last year. Our profit before tax before exceptional items was at INR 145 crores, and that's a growth of 53% over the same period last year. Now return on capital employed was at 26% compared to 20% for the same year -- for the previous year same period. Also, the good news is that we continued to kind of keep a very high free cash flow to PAT ratio. And this year -- this quarter, we generated free cash flow of INR 130 crores. The company also declared an interim dividend of INR 2 per share. At an aggregate level, for the first time this quarter, the company has actually gone to negative working capital. So the PAT for the quarter was 107 crores versus 78 crores for the corresponding period last year, because last year in this period, we actually had a lower tax regime because we amortized the move to 25% over 3 quarters. The individual businesses. Engineering had a very strong quarter. Revenue was at INR 733 crores compared to INR 502 crores. Part of this obviously is due to the steel price increase as well. And the PBIT was at INR 102 crores as against INR 60 crores. Cycles and Accessories also had a very strong quarter. Revenue of INR 234 crores as against INR 146 crores, and PBIT was INR 15 crores compared with INR 1 crore in the same quarter last year. Metal Formed, the one area that was not as strong was in railway. But overall, revenue of INR 393 crores versus INR 370 crores in the same quarter last year. And PBIT of INR 46 crores as against INR 33 crores in the same quarter last year. This year also -- this quarter, obviously, for consolidated results, we also have 1 month of CG Power results in there. So including that revenue, our consolidated revenue was at INR 1,700 crores as against INR 1,087 crores and profit at INR 159 crores as against INR 99 crores. As you all know, we took a controlling stake of 53.16% in CG Power and Industrial Solutions over this time period. It actually consummated on 26 November 2020. And the revenue for the company for December 2020 was at INR 276 crores and a PBT of INR 7 crores. This is for CG Power. Shanthi Gears, the other subsidiary, had revenue of INR 65 crores versus INR 58 crores in the corresponding quarter and PBT of INR 10 crores versus INR 8 crores in the corresponding quarter. So commenting on the financial results, Mr. M.A.M Arunachalam, Chairman of TII, also said, "TII has delivered strong results driven by the overall revival in the economy and easing of the lockdown restrictions for COVID-19. The company is witnessing improved performance in most of its segments and expects that this momentum is likely to continue, as the economy, which has started showing signs of revival, improves further." So that's a quick summary on the quarter, Anupam. And overall, I think kind of we -- the environment, like Mr. Arun Murugappan, mentioned, continues to be showing good signs of recovery, and we are quite bullish about things going forward. So I let me talk to that and then turn it over to the audience for questions.

Yes. Margaret, can you go ahead with the questions, please?

[Operator Instructions] The first question is from the line of Niket Shah from Motilal Oswal A.M.

Congratulations on yet a good set of quarter to the entire team. I have a few questions. First, if you can, is it possible for you to give us a brief sense of how much was the volume growth across segments, because this quarter would have seen substantial amount of realization growth as well?

Yes. So I think if you take kind of -- obviously, kind of -- we don't -- we've got some data, like -- but we don't kind of give data in too much kind of granular detail. But the -- if you take -- Mahendra, maybe you can give a gist for kind of at an overall aggregate level across kind of engineering and...

Yes. Of course, I think it is there in the segment results also in terms of the total revenue. But in terms of volume, if you see, cycles had a very good growth of close to about 70% year-over-year in terms of volumes. Engineering, also pretty strong growth, including large [ tire ] and also the normal [ tubes ]. The overall growth was anywhere between -- I mean depending upon the segment, anywhere between 28% to 30% to almost like 50%. And Metal Formed Products also, it ranges anywhere between, of course, leaving aside the railways, it is ranging anywhere between 10% to 30%.

Sure. That's very helpful, sir. The second question was on the Metal Formed part of the business. If you have to look at the Y-o-Y numbers, the growth appears to be lower compared to the other businesses. Is it largely on account of railways itself? Or -- because there are other categories like door panels, fine blanking, industrial chain, auto chains, I'm assuming all of them would have done far better in this quarter. So is it just on account of railways that the growth is lower? Or is there something else that we should be looking at?

Yes, that's accurate. Actually, railway is the biggest -- there is a lack of growth in that segment.

Yes. There are a few new business also which we will club under this, but that's not a big number. But, yes, it's mainly railways.

Okay. And the last question was on the [ PLI ] scheme which the government has kind of rolled out. How are you looking at that as an opportunity from Tube perspective? That's the final question.

Yes. We are evaluating that. I still don't think we have an answer on it. We're looking at both sides, which is like our existing businesses can -- as there are any adjacencies that we can get to or are there new things that we can get into. But we don't have a perspective on that yet. I think by next quarter, perhaps we can kind of have a better perspective on that.

Next question's from the line of... [Technical Difficulty] Ladies and gentlemen, thank you for patiently waiting. We have the lines for the management reconnected now. We move to the next question. The next question is from the line of Sujit Jain from ASK Investment Managers.

Congratulations on a good set of performance, some remarkable improvements, both in TII and as well as the turnaround in CG that you are on. I have a few quick questions. You can just note them down. In media, there are articles that TI could be looking to enter into auto manufacturing. CG Power, obviously, few steps at a time. But if I look at the competition, competition is already moving in the direction of operational data opportunities. So Siemens MindSphere and ABB Ability. These are the templates they are developing worldwide and make -- taking those use cases, putting sensors on equipments and have started selling those solutions are IoT-based. So directionally, eventually, how does the group look forward to? Retail HT motors, there will be a no-compete agreement between CG and Crompton Greaves. When does that get over? And if there is a thought that if you can launch them, that was a very strong segment for the [indiscernible] company. And in the CG Power call that you did post acquisition, you had spoken that you will update on the contingent liability of overseas business. I missed the opening remarks, but if you have some remarks here.

Yes, Sujit. So thanks so much for the question. What I would request is that here, we stay focused on TI questions. What we've said, and I think kind of is that after the April quarter, I mean next quarter, we'll basically start doing CG calls as well. But otherwise, it kind of gets confusing that we have like a lot of CG questions coming in here as well. So that would be our preference. So first, to address the TI question. Yes, we are entering the electric 3-wheeler business. So basically, we're going to start manufacturing and selling electric 3-wheelers in this year. And so that will be around -- I mean so in our sense, kind of perhaps the December to January time frame. Just a quick kind of response. Like I said, all the CG strategic stuff, I would just say kind of we move and kind of address more on our CG call. I think from a TI perspective, it's suffice it to say that we are more than satisfactory with kind of -- we are more than satisfied with the rate at which we are seeing kind of performance come back at CG, though it's early days there.

Sure. I appreciate that. In 3-wheelers, if you can just elaborate whose technology you're going to deploy. Is it in-house? And the battery sourcing, et cetera.

Yes. So obviously, we won't start discussing on a component level. The technology is a combination of in-house, plus we used a Korean firm. So we partnered with the Koreans on the design and the tech.

Okay. And one quick question is on the Cycles business. The opportunity that is there overseas in fitness bikes, which are high-end bikes. Anything that we are doing to tap into that?

Yes. This is Paul here, I head the bicycle business actually. What we are doing is we are upping our ante very much on exports. This year almost will be like 4x the volumes of last year in exports. And we are taking a very aggressive posture for the next 4 years on selective markets on medium to high-end bikes. And we believe that, that will form a very big cornerstone of our cycles in terms of driving the top line growth as well as the bottom line growth. And we actually, at the back end, putting up some facilities that will help us towards this.

The next question is from the line of Akshay Bhor from Premji Invest.

I just have a couple of questions. First one is, given that your role in some of the other group entities has expanded over the last few months, what does that mean for your tenure and engagement with Tube? What integrations does it have?

Sorry, I think we -- I don't know if it's us, Margaret, but we can't hear so clearly.

Sorry about that. Can hear me now?

Yes. This is better actually, Akshay.

Sure. My first question is if -- regarding your role in some of the other group entities, what does that mean for your engagement and tenure around or your involvement in Tube itself? And can you just give us some color on that?

Yes, Akshay. So thanks. I think that's a good question. And I think it's kind of come up in different ways in the past and past calls as well. And I think kind of our stand, kind of our perspective remains the same. I've always said even prior to kind of Mr. Murugappan's retirement last November, that there will be kind of a slightly expanded kind of role that I will play. And so I think you're referring to kind of the role in Chola as well. So basically, as you know, kind of both the teams are teams I have worked with, with extended periods of time -- over extended periods of time. And so yes, I will be providing kind of supervisory oversight there as well. I don't see that kind of taking away from the role at TI. And so basically, it's kind of -- and obviously, kind of with all 3 companies, over time, we will look at the succession planning. But my role in TI will continue, as I've always said, for the foreseeable future.

Sounds good. And just a clarification on the electric 3-wheeler opportunity side. Would you be like competing against some of your customers in the existing businesses? And does that like -- how does that like balance play out?

Honestly, kind of you see -- I mean it's an environment where we don't see kind of too much against kind of our existing customers, especially not in the businesses that they are in. We don't supply too much into the 3-wheeler space today.

The next question is from the line of Susmit Patodia from Motilal Oswal AMC.

Congratulations on a phenomenal quarter. It's quite commendable that you have negative working capital. I think it's quite a big achievement. First question, Vellayan, could give us some update on the lens venture?

So Susmit, thanks. The -- yes, I think the lens venture, like we told you, basically got slowed down because we're using all the Korean equipment. And the guys who have to install the equipment basically had a challenge because they've not been able to come here during COVID. So our sense is now that we will have somebody coming in this month. So we are basically producing in multiple operations, except for the coating of the lenses themselves. But we're hoping that by next month, we will have quoting in place as well, in which case that I think fairly shortly after that, we will get to the capacity of the existing facility, which is 0.5 million lenses a month. So my sense is that we should be able to get that in the equipment towards the end of the April, May, June quarter. And then basically, if we do that and are able to maintain quality, then we'll start thinking about an expansion plan there. But basically, the -- like I said, the only delay on that has been because the Korean equipment manufacturers were not able to kind of come during this COVID phase.

Okay. Got it. So Q2 FY '22 should be a quarter of full ramp-up, and if things go well, then the next steps in that?

Yes, yes. That's right.

Okay. And second thing, Vellayan, just to step back is you're now embarking on this 3-wheeler project, and you have the lens to ramp up and you have CG Power. So is there enough on the plate? Or there is more space on the plate to do something?

No. I mean I think we've always articulated kind of a path, right, Susmit? Kind of our path has been, like you know, it's in TI-1, TI-2, TI-3; lens, and 3-wheeler a part of TI-2. And the thing we've always said is that we, honestly, kind of -- none of this stuff is on my plate actually, right? It's kind of -- it's all distributed in multiple places: electric 3-wheelers on K.K. Paul's plate, the lens business is on KRS, or K.R. Srinivasan's, plate. And like you know, N.S. is running CG, who's kind of an old hand with the group as well. So a lot of it is more from a bandwidth perspective. I think if we don't enhance capacity, we also have to sure that we can grow. And it's constantly a question of how much capacity we can enhance as a company. And so a lot of what we are talking about, Susmit, internally from a talent perspective as well, is how we build organizational capacity. And I think kind of that is where a large portion of our effort is kind of focused. So honestly, I think that we've already articulated that both TI-2 and TI-3 have to be firing along with TI-1. And hopefully, kind of over the next couple of years, you can see that coming into reality, and we can deliver numbers from those 2 as well. So that's really our intent. Doesn't mean, obviously, kind of TI-3, we've told you it's kind of like a Danaher-like approach. So the one good thing is that once TI is kind of -- so both when we can kind of get leverage down in both companies, it's an approach that we're taking, right? So basically, it's kind of -- it's not kind of just a one-off acquisition. We've said that we have to keep on acquiring over time. But we won't do it and put too much stress on the balance sheet of the company, and that's something we're very particular about, right? So we don't want to stress on our balance sheet. The -- and so I think that this is a direction, is a direction that we'll continue, Susmit.

And just lastly, just to clarify if I heard it right, Vellayan, what would be the time line for the 3-wheeler business? When would be the first prototype?

3-wheeler? You mean electric 3-wheeler?

Yes, yes. Yes.

Yes. We already have working prototypes now. Like I said, we've been working with a Korean design firm on this. We plan to go to market in the January time frame.

Okay. Got it. And last question, what is the net debt now in the books of TI?

Yes. So end of -- Mahendra here. The end of December, it was about INR 60 crore.

INR 60 crores?

Yes.

The next question is from the line of Abhishek Ghosh from DSP.

Just a couple of questions. How should one look at the gross margin in the current quarter given sharp increase in commodity prices? Is there an impact of that in the numbers?

Mahendra, why don't you kind of respond? I mean the quick answer on this is kind of it does affect you a bit. But I mean, Mahendra, you can just...

Yes. So if you're referring to the commodity prices, mainly the steel price increase, it will start reflecting from Q4 onwards. And there will be some kind of a time lag in recovering it. But as of Q3, there is no significant impact because of the commodity price increase in the margins.

Okay. So 4Q will see impact of RM and we have to negotiate with your customers to kind of get that thing? Is that the way to look at it?

Correct. We have always been able to recover it. There could be some time line, but we should be able to manage.

Okay. Great. And in the Metal Formed division, is there also an impact of export being a little weaker or in the other segments because of container availability and other things?

KRS, do you want to answer that?

Yes. Yes. Yes. The exports have been slightly lower compared to last year in industrial chain, and of course, because of the overall global scenario due to COVID. And there are some challenges in getting the containers also. That is true. But the real issue in Metal Formed is the slowdown in railways due to the regulated coal factories have not ramped up their production. It is likely to get corrected in the coming quarters. Yes.

Okay. Great. And if we can also get clarity about the development in the truck body part of the business and the overall scrappage coming through. How should one look at that part of the business?

So I think obviously, kind of last year has not been great for kind of overall CV sales. And as a result, kind of truck body also kind of did not expand as much because [indiscernible]. So this coming year, I mean again, right, so I think we -- like we told you with some of these businesses, we'll take a little while to pick up. And so kind of we don't expect them to mainly contribute the numbers in the early days. But this coming year, we do see that we should be able to expand our business. And so we probably can give you some estimates on numbers at the end of the year.

Okay. Okay. And just one last question from my side. You were at just barely with any net debt now. Most part of the CG cash outflow has already gone. And you are generating close to INR 100 crores of cash every quarter. So how should one look at balance sheet more from a 2-year, 3-year perspective -- from that perspective. You can just give us a broad outlook, a little bit help.

How can one look from managing?

So where I'm coming from, the one part of the cash outflow to CG power has already happened. Despite that, you are at -- you barely have any net debt now, and you're also generating INR 100 crores kind of a cash flow every quarter now. So INR 200 crores goes into 3-wheelers, but that's just about 2 quarters of cash flow. So there'll be a significant amount of cash flow generation over the next. And CG Power will also start to throw cash flows. So how should one look at it? Are you already kind of evaluating? Or will you wait for some time to consummate the CG power thing and then probably look at it? How should one look at it? If you can just help me understand.

Like we said, right, I mean overall, the thing is in our consol books, we don't want too much leverage, right? Now the -- what you have to look at, again, kind of this is a process we're also learning. When we look at companies like Danaher and kind of a lot of time to just do this, how they do it well, right? Basically, you need to -- I mean it's like you guys do in the investing business side. We need to create a continuous pipeline. But our timing could kind of move out 1 quarter or 2 quarters, right? But so if your question is kind of are we evaluating, we're always evaluating, right? What I want to then is -- say explicitly is, and we said this before, which is we won't take too much debt because we don't want to have much debt on our consolidated balance sheet. And we won't do transactions that basically kind of levers us up too much. And honestly, we're not -- to answer your question directly, we're kind of nowhere close to looking at any acquisition right now in any level of detail. We said that first what we wanted was for CG to fully consummate. Until we get very comfortable with CG and we get the debt down there, we're not going to make another acquisition, if that was your question.

So that CG free cash flow will have to be used for prepaying CG debt anyway, because they have debt on their balance sheet.

So I think the relevant number to then look at is the consol debt and not the standalone net debt because you want group overall net debt to be at manageable levels, and then only look forward for future. That's the way to probably look at it. Is that correct?

Yes. That's a good way to look at it, right, which is as long as we have consol debt -- I mean a large amount of consol debt, and large varies, it depends, right? So South India, large is a smaller amount of debt in the South. Until we are comfortable with overall debt, we will not do another.

The next question is from the line of Ashutosh Tiwari from Equirus.

Congrats on a strong set of numbers. So I have a question on Engineering division. We have seen a very sharp increase in sales Y-o-Y. So is it driven by, I mean, the pickup in CVs and construction equipment that we saw in the last quarter? And even going ahead, I think these sectors are expected to go further then. Can we expect this top line that we did in this quarter on Engineering side, we can see some buildup from here as well?

KRS, do you want to answer that?

Yes, yes. Yes, your observation is right, especially in this quarter, all the 3 segments where Engineering business is based on, one is automobile industry, second is related to construction industry, which is off-road vehicles, as well as our exports. All the 3 segments have done pretty well this quarter, and we hope that going to -- go forward, we'll be doing well on year-on-year. The base is already corrected a lot in this year so there is only headroom for growth available going forward.

Okay. Sir, my question is that can we, like say, the revenue that we did in this quarter kind of reached up from there as well, because I think CVs will obviously be higher than what the industry volume was in the last quarter and probably construction equipment also can pick up from here. So can we assume that this base is probably now remain there and trying to build up on that?

Yes. CV industry is going -- expected to do well because government is also pumping a lot of money on the construction industry. And like you rightly said, base is corrected too much already, so there is only going to be growth going forward. And there should be a bullish growth going forward. That's what is our estimate.

Please don't take it as a forward-looking guidance.

Sure. Sir, secondly, on this -- so we are developing basically a product for export market on the Engineering side. Any update on that from what time you expect that to come inside?

So those product developments are already going as per our plan. We've already submitted the samples for a new project, what we are running it. And it is expected to get approved by quarter 1 or quarter 2. And beyond that, our growth in particularly new segment where we're investing it will start clocking from quarter 2 and quarter 3.

Okay. Sir. Around Q3, second half, maybe you see some benefit of that coming through?

Yes. Yes.

And sir, on this -- lastly, on this Engineering division, only the margin part. So we have, despite this very ramp-up, I think margins have come down a bit on a quarter-on-quarter basis. Is it because of the commodity pressure that we saw in this quarter or some -- maybe mix change is the reason?

Like Mahendra already explained, this quarter, there is not much of impact because commodity prices have started coping up from Q4, basically very high, Q3, whatever impact was there, which is already recovered. And we could see a time lag in the Q4, but ultimately, it'll get recovered fully. That's what is the arrangement we have with our customers.

Sir, my question was, let's say, Q2 to Q3, despite the revenue growth, we have seen margin compression in the Engineering division. So is that because of mix basically, a change in mix?

Yes. There are a couple of things. One is mix. The second one is, say, quarter-to-quarter, it is difficult to compare in this business because there will always be some lead or lag in terms of price recovery. So that may not be the right way to compare.

[Operator Instructions] The next question is from the line of Aditya Bagul from Axis Capital.

Congratulations on a great, great set of numbers. So sir, my question is more in terms of our long-term outlook, right? Over the last 2 years, you've sort of checkmarked our ROCE, checkmarked our cash conversions and PBT margin. Coming to the fourth point, which is revenue growth, how do you see that as a trajectory? You earlier highlighted that 8% to 10% would be a sustainable sort of a growth momentum. Have we seen a step-up there in this quarter? And is this a beginning of a higher growth trajectory?

So actually, I think -- Aditya, thanks for the question, right? See the -- again, revenue growth, it depends whether you're looking at standalone or consol, right? Now because the basic challenge, right, in India is -- because in India, it's kind of more driven by standalone. Another challenge, like you know, with the CG acquisition is that does not -- I mean it's basically -- it ends up being a separate entity. If you look at it, kind of the way we've articulated it is TI-1, TI-2 and TI-3, right? So TI-3, like CG, we're using free cash flow from the company to go and buy another entity, right? And so unless kind of that growth is also kind of seen as part of our overall entities' growth, it brings a different length to how we look at or evaluate the company's growth, right? So that's the first thing, right? And so you guys need to kind of think of how you're going to solve for that. You can basically take kind of our ownership interest in CG. I mean however you want to think about it, but I think from an analytic perspective, you need to think of how you're going to solve for that, right? Because clearly, if we're going to take cash flow from the main entity and use it for acquisitions, we need to think if those acquisitions end up being standalone entities, how that kind of drives into the growth, right? The growth drivers from -- so like we said, we have 3 engines of growth. The growth within TI-1 itself, which is the organic businesses. And I've said that, that can range from 6% to 8% over the cycle. Right now, obviously, we're seeing kind of more growth in that for a couple of reasons, right? You have base effect also there because -- up with really bad first quarter this year. So you're seeing some of that play in. This is that the growth will sustain into next quarter -- I mean into next year. And then you're basically -- like we said, over the cycle, we see TI-1 growth being 6% to 8%. Now TI-2 has not started kicking in yet, right? But our belief at least next year is that TI-3 will kick in with CG's numbers. Because there -- but how you choose to add that to your model, I think it's something that you have to drive, right? I mean it depends on how you would do it.

Right. No, sir, my question was more to do with TI-1. Just wanted to understand, you've seen a robust growth in cycles. Athleisure has been a key focus area, at least during the last 10 months, and even during -- even within the Engineering segment. So specifically for TI-1, are we seeing a step-up there?

TI-1, I mean it is a step-up, but we've also got to realize that TI-1 is a bit more cyclical, right? So I don't want to kind of move away from the thought that over the long term, putting so much more than 8% to 10% pressure on TI-1, I don't think it's the right way to look at it, right? TI-2 has to kick in. TI-2 will be part of TI standalone, but it has to kick in, which is where the electric 3-wheelers come in, which is where lens comes in. And those businesses have not kicked in yet.

Understood, sir. Sir, my second question is, again, trying to understand, you've talked extensively about Japanese influencers who have driven TQM and productivity management. Where are we in the journey there? And how do you see the next few years of [ TSM ]?

I'd say this is very, very early. I mean I think we've barely kind of -- not even gotten in the garden, I think. And so again, we've been trying to kind of work more with kind of more focus on Japan. Unfortunately, kind of everything has got shut down because they can't travel here right now. So I think we're just waiting and this kind of so -- but the more we kind of try understand that it's just like an ocean that we have to basically kind of drink from. And so there's a lot to learn in that space, right? And I think it's highly exciting in terms of the prospects of what that can do for TI, but I would just say that we are absolutely in our infancy in that.

The next question is from the line of Vimal Gohil from Union AMC.

Congratulations to Vellayan sir and team for putting up this splendid performance. Sir, my question is, firstly, on TII standalone. And just following up on Aditya's question, my question is on margins actually. The company is way past the 10% PBT that you had guided for. What would be the outlook there going forward? Clearly, despite the revenue growth not supporting in FY '20, you still have achieved and overachieved that number on PBT front. That is point -- question 1. The second question is on the lens business. I think what you mentioned on the volumes that you're targeting or the production that you're targeting is INR 0.5 million a month, right, if I have not got it wrong?

Correct.

Yes. And the third question, sir, would be the negative working capital. Is it sustainable? I mean the factors driving it, will it sustain on a negative trajectory going ahead as well? And lastly, if you could just comment on the Metal Formed business, excluding railways, how it has grown?

You asked me so many questions, my RAM is only so much. I have a very small RAM. PBT, we are using and expanding our target. We do believe that PBT will expand over the next few years. We don't want to particularly set a target right now, but we do believe that we will be able to expand PBT. Okay. Your second question was on negative working capital. Honestly, part of the challenge right now is that even if you want to buy steel, you can't buy steel, right, in the sense that there's not enough available to go around, right? And so that's also basically driving down our working capital levels. I think we still have to determine what will be kind of a stable level, whether it will settle at kind of close to 0 or a number slightly above that. I don't think we're going to go back the INR 300 crores, INR 400 crores level we used to be at. But it may settle at a number slightly above this. Just to kind of -- building something into a model or something. Last question was, MFPD has really been hurt by railways. And I think the answer to that, I've already answered the answer here.

Sir, excluding the railways, how has the metal forming business done?

Like what I mentioned, it will be in the range of 20% to 30% and varies from segment to segment.

The next question is from the line of Preethi RS from UTI Mutual Fund.

Congratulations to you and your team on such a good performance. Sorry, this is repetitive. My question is on the 3-wheeler electric business. If you could provide us a bit of background on how we're doing on this business? What is your assessment of the current market size and potential? At this point of time, we understand the segment is dominated by lead acid battery-driven electric vehicles. So -- and it's highly fragmented. So -- and also, if you can tie back to our strengths and what is our right to win in this segments?

I'll answer, Paul here. I head the bicycle business, again. I'll try to answer this question in 2 parts. The first part was, we are basically upbeat on how the EV space will play out in India. So a number of factors, what the government is doing in this new environment, post-COVID. So that optimism is with what we started this endeavor about 1 year, 2 year, 1.5 years back. I think we've looked at design. We've looked at the value proposition. We've looked at why somebody would buy it. We've looked at the total cost of ownership, and how does this compare with the current way, and how we will get him to adopt EV. We must also remember that there's a lot of environmental factors like dropping prices of battery, et cetera, that will happen, the softening that will happen. It's easier for somebody to switch to EV. That's how we zeroed in on this. And then we are in bicycle business, so we raised the vision to say, eco-friendly mobility. And therefore, the vision got enlarged from just cycling to mobility and eco-friendly, and therefore EV. So there's a fit of EV into our vision and that's what we are pursuing. Coming to specifics, broadly, at this stage, we've done a lot of reliability test. We've done design tests, we will, in consultation, with our design partners. And we are quite hopeful that we'll deliver something good for the market and for our customers and thereby when over a period of time. Does this answer?

Yes, sir. And if you could highlight any synergies with the cycle business in terms of manufacturing or distribution?

So again, right, I mean I think the synergy question has come up multiple point of times in the past, right? And one of the things we've said is kind of like there's a reason why TI is kind of taking this approach, right, which is we want to kind of move away. If we only want to save synergies, then we're going to be an auto component supplier our entire life, right? And honestly, kind of we do not want to be that. We want to kind of -- we want to reduce kind of our dependence on just auto because being an auto component supplier, we see 2 challenges with it. One is it's very capital intensive and the second is it's very cyclical. And the cyclicality kind of doesn't create an ability to generate consistent and constant cash flows. And we don't see that as kind of good for our company that has to be able to deliver consistent growth over time, right? So hence, I mean the same question was asked even with CG, what we see as common principles, there's common principles, right? So I think I forget it with -- I think this year, Susmit asked the question on the Japanese. Japanese lean principles, Japanese production systems like the Toyota production system and TQM, we see as applicable across businesses. And we believe that, that is what creates leading manufacturing businesses. Our interest and intent is to basically create leading manufacturing business in the country. We think those principles is a way to compete, right, using lean, using PPS, using TQM. And we believe that those principles are applicable across various industries.

The next question is from the line of Anupam Gupta from IIFL Capital.

Well, answer 2 questions. Firstly, on the cycle business. You said that there's a significant emphasis on export. So just to -- what sort of current revenue is coming from export and what has in terms of -- in between the normal in-house business, how fast is that growing, and can that sustain? And exports you mentioned will get twice in a -- will get doubled in this year. But just give you some picture on the domestic as well as the export maybe separately.

Yes. I think in the bicycle business, they way we look at that business currently, the revenues coming in from exports is about 5% of our turnover. Moving forward across the next 4 years, the way we have planned it out, that it will start contributing between 20% and 25% of our [indiscernible]. And again, we have to first -- to compete in this market, I think there are a lot of favorable headwinds that are happening in this business with [indiscernible].

Okay. And the domestic business, how fast is that growing? Is there pent-up demand? Or do you see that sustaining?

The domestic demand this year has been very good. I mean in terms of the market, if you take close to opening of the [ export rate ], the market has grown between 20% and 25%. But if you look at a historical perspective of the domestic market, it's gained between 1% and 2%. So we estimate -- we will have to look at to get the growth engine, export definitely is a big factor for us. But having said that, to earn the right to export, I think we have to build our cost competitiveness and velocity and compete on [ Q3 visually ]. And that's what Mr. Vellayan was explaining on the initiatives that we are taking up with the Japanese, et cetera, utilizing those principles that help us to be very competitive in the manufacturing space. And with that, then we have all the markets at our disposal to be able to compete. So as long as that are looking at this export scenario, we're looking because we mostly have predominant position in the domestic market, as we know. Whether it's the tube business or the cycle business, we're either #1 or #2.

Sure. The second question for -- just relating to CG Power is not necessarily about how it is doing. They have given a lot of reduction in the contingent liability. So the question for you is, do you see any further investment from TI going into CG Power or meeting any cash shortfalls for contingent liability? Do we see that happening at all?

We don't believe that there will be a need at this stage.

Okay. So CG Power should be able to handle all the cash flow needs internally, basically?

Yes, yes.

The next question is from the line of Kashyap Pujara, an individual investor.

Mr. Vellayan and team, congratulations for a great set of numbers.

Kashyap, actually, it's strange to see you at this end of the line. I think to all of this conference call, I just want to say a big thank you to Kashyap. Kashyap has been hosting our conference calls from Axis for the last 10 years, I believe. We're actually kind of seeing Kashyap from kind of the other side. So Kashyap, congratulations, and don't ask me anything hard.

I think this was one of the first companies we covered when I started covering. And I think it's been a great journey because over time, TI has gone up 10x. And apart from that, there has been Chola Financial Holdings and Chola that have kind of come out, so it's been a great journey over that time frame. But -- and sure to look forward to interacting with you more as I join in my new engagement next week. So look forward and congrats for a great set of numbers. Mr. Vellayan, I just had one question. I think most everything has been kind of spoken about. It's very encouraging to see Q3 PBT at INR 145 crores and NPAT of above INR 100 crores. So actually, we are annualized run rate is any which way now INR 600 crore and INR 400 crore plus. And we are at 11% margin. So I think I remember discussing in calls prior with you, and you said that over a mid term, maybe a 3- to 4-year horizon, aspirationally, you wanted to kind of get to that 15% mark. So I hope that is -- that continues, and there are no changes to that plan.

Yes. So I think broadly, like I said, right, I mean a lot of this is driven on operating discipline, right? And as I said, even that kind of slowed us down this year is the fact that we've not been able to get kind of -- some of the Japanese in here. And I think there's a lot for us to learn from them. I mean we still have to learn a lot more. So our belief is if we're able to kind of apply those principles and kind of maintain these high level of disciplines that are needed, we will be able to get to those numbers, right? I mean so that continues to be our belief.

The next question is from the line of Rohit Ohri from Progressive Shares.

A couple of questions for Shanthi. Just wanted an update. Last time when we spoke, you were talking about a CapEx plan, that is a growth CapEx of INR 15 crores, INR 20 crores for Shanthi, so any developments? Or how much of the intended amount has been spent for CapEx?

Nothing significant because of the COVID impact on also a lot of deferrals has happened. So the CapEx, I think, will now happen between Q4 and maybe Q3 of next year, spread over the next 4 quarters.

All right. You were at an evaluation stage for some robotic processing for Shanthi, so any development in that case?

That's very, very early. I don't think we ever discussed it. If I had to surprise -- [indiscernible]. But I think that we will never -- are you talking about IoT, in about kind of robotic figure? I don't think we have it ever discussed publicly, and it's still very, very early.

Okay. And in terms of the pending order book which Shanthi is having, which gives us visibility of around 9 to 10 months from today, in next 2 years or so, do you think Shanthi will be able to do EBITDA margins of 20% or so?

Again, we don't give [ all-in ] guidance, especially on Shanthi. So I don't think...

Okay, okay. Last question. Shanthi has been accumulating quite a lot of cash, which is in the form of FD, I believe. So are you building the watches for Shanthi then?

Again, right, I mean Shanthi has accumulated cash before, we distributed cash [indiscernible] we were doing a buyback at that point. So we continue to kind of -- it's good to see what to do with the cash, whether it's best to invest in that company or pull back to parent? That's something that we will have to continue to be evaluate over that.

So it's not that you'll be going for incremental dividends and reward the shareholders then?

No. Please don't draw any conclusions, right?

No. Because Shanthi has accumulated quite a lot from around INR 13 crores to INR 45-odd crores in last 6 months. That is the reason why I'm asking what does Shanthi intend to do with this money that is lying?

I think like before also, we say this, we maintain the same stance, right, which is we'll continue to evaluate at a Shanthi level. See, these are all independent public companies. So we continue to evaluate at a Shanthi level. Whether the cash is to kind of use it like a watches or something else or to bring some of it back to the parent.

The next question is from the line of Susmit Patodia from Motilal Oswal AMC.

Yes. This is a question for Mr. Paul, actually. I didn't realize we have on the call. So Mr. Paul, if you could give us like a 3, 4-year vision, excluding the EV, can this business be like a INR 1,500 crore revenue business with nearly double-digit margins? Is that possible?

You're talking about EV or cycle? Vellayan here, we couldn't hear you.

Cycles, cycles, cycles.

Cycles, cycles.

It's difficult to give, again, as Mr. Vellayan said, forward-looking and prediction. But we are asked, but all I can say is that we are pretty upbeat in terms of the future, looking at India plus some countries in the globe with a favorable movement. So combined together, we believe that we'll be in a position to deliver and sustain our performance, is what I can say. I think -- and also with the introduction of our approach towards some of the Japanese philosophy should help us improve the velocity in which we do think and the way we manage the business, the sustainability that we can get out of it. And this combined formula actually coupled with also talent management, I think what Mr. Vellayan alluded to, would help us to see superior results over the future. That's what we are working towards, actually.

The next question is from the line of [ Ronak Vora ], an individual investor.

Sir, can you just explain the terms that you were using in the call earlier, TI-1, TI-2, TI-3? I'm just new to the company.

Yes. I think that this is there, if you kind go into our transcript, this has been an approach we've been using for a long time. TI-1 refers to kind of the 4 existing divisions in the company. TI-2 refers to what we call kind of a more venture capital-like approach to growth, like our expansion into lenses or the electric 3-wheeler business. And TI-3 refers to a more, what I would call an operational theme on the growth, which is through acquisition, and CG is an example of that.

The next question is from the line of Vipul Shah from Sumangal Investments.

Congratulations for a great set of numbers. My question relates to TI-2. So any progress on the TMT Bar business, which I think you discussed a few quarters back on our call?

Yes. Like I said, with TI-2, it's tough to kind of keep asking for progress every quarter and then, as you know, delivering on that. Like you know, with COVID, quite a few, like the construction business, the CV business, all of those businesses got hit quite badly. And so with some of the smaller businesses, we don't see kind of discussing progress on them. It's just like, I think, is normal. If we are planning to kind of get out of a business, we'll let you know. But otherwise, they have to kind of grow kind of organically to a certain scale before it becomes relevant to discuss them on this call.

And lastly, on lens business, what will be your CapEx, sir?

We have not determined a CapEx number. When we do, obviously, we do report it through the Board, and kind of we will discuss that publicly as soon as we have a number.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Mr. Vellayan, if you have any closing comments?

Anupam, I think like we said, I think we'll continue to kind of be, I mean, optimistic going forward. The biggest challenges continue to be on kind of supply on the raw material side. Demand still seems to be holding up. And so our outlook continues to [indiscernible]. So we just have to see how demand kind of plays out over the next [indiscernible] very optimistic now. Thanks, everybody, for joining us.

Yes. Thanks a lot, sir, for the opportunity. And Margaret, we can close the call now.

Thank you. On behalf of IIFL Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.