Tube Investments of India Limited ($TIINDIA)

Ladies and gentlemen, good day, and welcome to the Tube Investments Q4 FY '26 Earnings Call hosted by IIFL Capital Services Limited. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Mr. Joseph George from IIFL Capital. Thank you, and over to you.

Thank you, Indra. On behalf of IIFL Capital, I welcome you all to the 4Q FY '26 Results Conference Call of Tube Investments of India Limited. From the management, we have with us Mr. M.A.M Arunachalam, Executive Chairman; Mr. Mukesh Ahuja, Managing Director; Mr. A.N. Meyyappan, Chief Financial Officer; as well as all the divisional heads. I will now hand over the call to the management for opening remarks, post which we will take Q&A.

The Board of Directors of Tube Investments of India met today and approved the financial results of the quarter and year ended 31st March 2026. The Board has declared and paid an interim dividend of INR 2 per share in February 2026. The Board has now recommended a final dividend of INR 1.50 per share for the financial year 2025-'26. The stand-alone results for the quarter. Revenue in Q4 was INR 2,279 crores compared to INR 1,957 crores of same period previous year. Revenue for the full year was INR 8,556 crores against INR 7,893 crores of previous year. PBT before exceptional items and fair value gain on CCPS for the quarter was at INR 361 crores compared to INR 327 crores of the same period of the previous year. PBT before exceptional items and fair value gain on CCPS for the full year was INR 1,099 crores as against INR 975 crores of previous year. ROIC stood at 44% for the year ended 31st March 2026, compared to 44% reported in the previous year. Free cash flow for the quarter was INR 313 crores. Cumulative free cash flow for the year was INR 826 crores, that is 100% of PAT. The review of businesses. Engineering, the revenue for the quarter was INR 1,499 crores compared to INR 1,229 crores in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was INR 176 crores against INR 142 crores in the corresponding quarter of the previous year. The revenue for the full year was INR 5,612 crores compared with INR 5,029 crores in the previous year. Profit before interest and tax for the full year was INR 689 crores compared to INR 617 crores in the previous year. Metal Formed Products, revenue for the quarter was INR 421 crores compared to INR 403 crores in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was INR 35 crores against INR 39 crores in the corresponding quarter of the previous year. Revenue for the full year was INR 1,603 crores compared to INR 1,565 crores in the previous year. Profit before interest and tax for the full year was INR 162 crores as against INR 161 crores in the previous year. Mobility business, revenue for the quarter was INR 208 crores compared with INR 181 crores in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was INR 4 crores compared with INR 4 crores in the corresponding quarter of the previous year. Revenue for the full year was INR 783 crores compared with INR 671 crores in the previous year. Profit before interest and tax for the full year was INR 19 crores against INR 5 crores in the previous year. The others, revenue for the quarter was INR 246 crores compared with INR 244 crores in the corresponding quarter of the previous year. Profit before interest and tax for this quarter was INR 16 crores against INR 13 crores in the corresponding quarter of the previous year. Revenue for the full year was INR 923 crores compared with INR 987 crores in the previous year. PBIT was INR 70 crores against INR 48 crores in the previous year. Consolidated results, TII's consolidated revenue for the quarter was INR 6,215 crores against INR 5,150 crores in the corresponding quarter previous year. The PBT before share of profit of associate/joint ventures, exceptional items, loss on fair value of CCPs and tax for the quarter was INR 516 crores against INR 479 crores in the corresponding quarter of the previous year. For the year ended 31st March 2026, TII's consolidated revenue for the year was INR 22,847 crores against INR 19,465 crores in the previous year. The profit before share of profit of associate/joint ventures, exceptional items, loss on fair valuation of CCPs and tax was INR 1,937 crores against INR 1,801 crores in the previous year. CG Power and Industrial Solutions Limited, a subsidiary company in which the company holds 56% stake, registered a consolidated revenue of INR 3,442 crores during the quarter against INR 2,753 crores in the corresponding quarter of the previous year. Profit before exceptional items and tax for the quarter was INR 490 crores against INR 384 crores in the corresponding quarter of the previous year. For the year ended 31st March 2026, CG's consolidated revenue for the year was INR 12,418 crores against INR 9,909 crores in the previous year. The profit before exceptional items and tax was INR 1,662 crores as against INR 1,348 crores in the previous year. Shanthi Gears Limited, a subsidiary company in the Gears business, in which the company holds 70% stake, registered revenue of INR 135 crores during the quarter against INR 153 crores in the corresponding quarter of the previous year. Profit before exceptional items and tax for the quarter was INR 25 crores against INR 31 crores in the corresponding quarter of the previous year. For the year ended 31st March 2026, SGL's revenue was at INR 519 crores as against INR 605 crores in the previous year. The PBIT was INR 107 crores against INR 130 crores in the previous year. So with me, I have Mr. Mukesh Ahuja, Managing Director; Meyyappan, CFO of TII. Also have Mr. Jalaj Gupta, MD of TI Clean Mobility; and Gopal, the CFO of TI Clean Mobility, along with a few team members. So we are ready to take your questions.

[Operator Instructions] We'll take our first question from Joseph George of IIFL Capital.

I have 2, 3 points to touch upon. One is, can you help us with the underlying volume growth of the business because the revenue growth, obviously, includes the pass-through of the raw materials, et cetera?

Joseph, can you come again please?

Could you help us with the volume...

Mr. George, could you just hold the mic a little closer to you and speak and repeat your question, please?

Is it better now?

Yes, it's better.

Okay. So the first question was if you could share the underlying volume growth in the Engineering business?

So it is almost [ same ] because there are no major price movements in the quarter 4. So you can consider whatever the sales growth shown in the quarter 4, it is in line with the volume growth.

The second question was given the challenging macro environment, how are you seeing demand and volume growth, et cetera, in the early part of, say, 1Q FY '27 because a lot of OEMs and businesses are hinting at challenges on growth as well as on the cost side and pressure on margins, et cetera? So if you can give some indication of how things are on the ground, both in terms of volume growth as well as in terms of cost pressures.

So Joseph, as of now, we see volume growth are still on the stronger side. So we see the growth is still bullish. But like you said that there is a challenge on the commodity price increases, along with the macro environment. Fuel prices is a challenge in front of us. But like you are aware of, commodity price increase, we get it from our customers because we have contracts in place, which comes with sometimes a 1 or 2 quarters lag. There will be recovery. The immediate challenge is how to get the inflation on the fuel and this thing, which we have taken up with our customers. So we are hopeful through either driving some cost reduction inside and taking up with the customer, which may have a little bit lag, we'll be able to cover that.

The last question that I had was on -- if you can give an update on the scale up of the railway business, which is something you've talked about in the last, I think, previous quarters, but we are yet to see the scale up there. So some update on it.

So Joseph, on that side, maybe there is no major update as on now. As on now, still we are at a product development stage, which we have completed, but customers, where we are supplying, they have to get their product approved with the Government of India on the Vande Bharat coaches. So that process is on, and it is a work in progress. Hopefully, we'll be able to see some progress down the line 2 or 3 quarters from now.

[Operator Instructions] We'll take our next question from Rushabh Shah of RBSA Investment Managers.

Am I audible?

Yes, Rushabh, you are audible.

My first question was actually on the EV side. Now that I believe the current crude price volatility would have better -- given a better pitch for the TCO on the EV side. So how are we seeing the demand side on the --n especially on the HCV? Is financing still an issue? What is stopping us from scaling up in the HCV side?

Yes. So Rushabh, thanks. You're absolutely right. We are definitely seeing an upswing in the demand for the electric vehicles, especially in our heavy truck segment and also in the small commercial vehicle segment. In fact, we are sitting on a very good order book for the big trucks. Coming to the challenges, the challenges is primarily on account of deployment. And in deployment, there are 2 parts to it. One is financing, as you rightly said, because the average deployment is for about 50 to 100 trucks, which translates into about INR 100 crores plus kind of money, which is required to be put by the service provider. And second is the challenges to set up the charging infrastructure for a given route. So these 2 are the challenges which we are working towards, and we are hopeful we will untangle that because order book is good, and we are hopeful to deploy these trucks in quarter 1 and quarter 2.

And on the long-haul side, I think we are trying to do battery swap in that side. So what is the plan of action there? And can we see significant scale up in this coming 1 or 2 years?

So Rushabh, the situation has slightly changed with the introduction of higher capacity batteries and the fast charging, which is now available as a technology. So one of the positives of the swap is that it takes less than 7 to 10 minutes to do a swap. The not so positive for swap is the huge setup costs, which swapping infrastructure requires. So the judgment is still not out. When you look at China as a market, so there also, at some point of time, it was a swapping technology, which was more prevalent. But at this point of time, the trend seems to be tilting towards higher battery capacities and fast charging as a solution. So as far as we are concerned, we are not giving up on swap as a technology. There would be applications like ports, et cetera, where swapping only will work. So we are ready with our swap technology. In fact, we are working on a couple of orders in our hand for the same. But going forward, it looks like that higher battery capacity and fast charging could be the way forward for long haul.

Okay. And recently, there has been a news flow that the world's largest battery maker has commercialized sodium ion technology. So how does this -- does this anyway change anything for us like sodium ion really does become mainstream in the coming future? Does it anyway help us reduce TCO?

Not immediately because the technology getting translated into a cell and then coming on to the validation and the full-fledged implementation on the vehicle is a slightly long drawn process. So maybe in times to come, yes, but immediately, no.

And just one last question on the 3-wheeler. Where are we on the 3-wheeler? I think we had some issues, and we had resolved those issues. So where are we on the scale up on the 3-wheeler auto side?

Yes. So 3-wheeler in quarter 3 of this year -- in quarter 2 of last financial year, we had introduced upgraded version of the Super Auto, which has started gaining a good margin. For us, one of the challenges in our scale up was on the supply side was the body-in-white supplier, which we took a bold call in quarter 4, despite it being in quarter 4 that we will solve this issue once and for all, which I'm glad that we have done. So we took a short-term hit. Our quarter 4 volume took a beating because we could only produce 50% of what we could have produced otherwise, which took a toll on our both billing as well as retails at the dealer end. But now that issue is resolved. And I'm very confident that as we end this particular quarter, quarter 1, we will be back to our normal production capacity on the supply side. Parallelly, on the demand side, the good news is that this new improved version has found a good market acceptance. And we are very confident that we'll be -- you will be able to see or you will be seeing a good scale up of volume as we move forward on 3-wheeler business.

Okay. And just the last question on the medical devices front. Last -- I think 1 year, we have been saying that we are expecting some certification in export. And I think that issue was also resolved, but we are not seeing a significant scale up in the business. So what is the reason? And what is the outlook for the business? If you could please share.

So exports, like you rightly said, the regulatory things are already over, but we had a little bit headwind on Middle East business, which was also a good market, which we feel is temporary, but we are able to scale up in Europe particularly and Southeast Asian countries, but a little got muted because of this war scenario.

So what is the outlook for the business for the next year? Is there anything that you can share? Or is the worst behyind us or it's subject to the macro things? Is there anything that we can do, identify new products or an acquisition? Anything that we can do to buy growth?

We have given a guidance, maybe even the last investor call, particularly, which we are in wound care, which is basically suture business. We are confident to grow the business between the range of 15% to 20%. And coming to further acquisition, we just now completed a small transaction, which was an asset purchase for the IV cannula business, and we are going to finish even the plant approvals, whatever assets we have purchased, which will be done during the quarter, and that will also start adding to the growth of the TI Medical. So overall, we are still bullish about this business, and we are hopeful we'll give 20% year-on-year growth in TI Medical going forward.

Can you just share the details of this acquisition or it is still under process?

No, it is already closed. It is a Medicura facility available at Ambala where we've done the business purchase -- asset purchase. And then we have to go through the approvals of -- getting the plant approval, which is a work in progress, and we are hiring our own team also, which all those activities will get completed by quarter 1. And quarter 2, we expecting it to start the commercial production for that.

And any tentative revenue can you share of that company? Or...

It is maybe -- let's say it was maybe we got at an attractive price, though the company was not in operation. We are going to put it in operation.

[Operator Instructions] We now move to our next question, that's from Joseph George from IIFL.

I had a couple of follow-up questions. One is if you can give an update on the CDMO business in the manufacturing plant approvals and when can we expect the revenue commencement? That was one. And second is, when we think about FY '27 as a whole, how much do you expect CapEx in the stand-alone business to be? And how much investment would go into the new ventures from stand-alone?

So like we shared, particularly CDMO business, our plant is under final commissioning, and we are going to do the commercial production from our Naidupet facility starting next quarter. That's the part number one. Part number two, CapEx in the core business will be around INR 300 crores to INR 350 crores range. And coming to the subsidiaries based on the requirement like we shared in the last investor meeting, some money will be required for -- depending on how operations are scaling up for the TICMPL, which is our EV business. And TI Medical also, we are going to invest money going forward. All put together, we have a rough estimate of around INR 300 crores going into the subsidiaries also.

Our next question is from Salil Desai of Marcellus Investment Managers.

The first question is if you could share the volumes for the quarter in the electric vehicle businesses for each of the product?

Yes. Quarter 4, the volumes were the big trucks -- big trucks was -- the M&HCV business was 6 -- 87 numbers.

687?

No, no, 87, 8-7. The small vehicle business was 241. The 3-wheeler business was 1,176. And tractor, there was no billing.

All right. Second is you mentioned this challenge on this body-in-white procurement. So if you can just elaborate what was it? And now we have resolved it in the sense that you've started manufacturing it in-house or your supply chain has stabilized.

So this was -- so there was this supplier, which was with us from the beginning of the business. And we were struggling with this particular supplier and is the reason we tried working out various solutions with him over a period of a couple of years. But finally, we could very clearly identify that as we want to scale up our volumes to immediately to 1,000 and then to 2,000 plus consistently, this definitely would be one of the bottlenecks. So -- and then we have taken over that particular facility of the supplier. It is very close to our existing unit of where we make our 3-wheeler and now we are running the facility. And it is the reason and whatever we have seen in the month of April and up till now in the month of May, we have been able to ramp up to the levels that we had targeted for. There are still some more teething issues to be resolved. So that's the reason we are very confident that by end of this quarter, we will be able to resolve by and large, this specific issue of body-in-white.

Understood. Okay. My next question is on -- maybe Mukesh can answer this is on the MFP segment, right? Now we've seen that the Engineering business last 2 quarters, we have seen volume growth coming back very strongly. But MFP, given that there will be some overlap in the customer base, this still remains a little sluggish. So any reasons why? And what could be the outlook for next year?

So Salil, your observation is right. MFP is going a bit slow. The reasons for that is one is the railways where maybe we are not able to get the profitability in the tender business and new product development with the private players is taking a bit of time. From our side, it is over. That's first. And second, our one of the major customers in MFPD is Hyundai, which also had a muted growth. You might have observed Hyundai as the OEM maybe has not done so well in the last financial year. But now they started doing even the production in the western part of the country, where also we have put up a facility for them. So hopefully, those issues will be behind us, and we'll have a better year for the MFPD in coming time.

And this Western India capacity, are they -- is fully operational now, stabilized and running as normal? Or there is still kind of some phased expansion that is planned there?

So Hyundai has just started, maybe last quarter only, their Western plant, and we are already servicing requirements from our facility in the Pune. Obviously, it'll go through a ramp-up phase. But all those issues, we feel in quarter 1 ramp-up issues and some teething issues whenever you -- start-up problems will be getting settled in the current quarter.

I see. Right. And this, I'm assuming you're referring to the steel tubes' expansion in Pune, right?

Your question was on MFPD. So I'm talking [indiscernible] for Hyundai.

Right, right, right. Understood. And how about the capacity for steel tubes, is that now fully stable?

So whatever facility expansion we have done, maybe let's say, I think it was everything in our favor. CRSS plant in Nashik is ramping up. And hopefully, by end of this financial year or middle of next financial year, it will be 100% utilized. We are in the thought process what we should do for further expanding it, but we'll take a call out down the line 6 months. Our tube facility also in the western region has touched almost about 30% capacity utilization. Hopefully, but same commentary, maybe by middle of next financial year, we are hopeful it'll get 100% utilized.

We'll take our next question from [ Sishir Saha ] from Saha Securities. Sishir, could you please unmute your microphone and ask your question. Well, there is no response from this connection. We will move to our next participant. That's a follow-up question from Rushab Shah of RBSA Investment Managers.

I just had a follow-up on the EV business. I believe in one of the earlier con calls we had mentioned that we are planning a significant cost reduction across all the EV platforms. So I just want to understand where are we in that journey in terms of cost reduction and localization because I believe that is an important point for us to better enable us to scale up significantly.

Yes. So yes, Rushabh. So cost reduction across all our 4 platforms is a very important initiative. And it's a continuous and ongoing process, although some of the recent geopolitical situation has put -- are the headwinds that we are facing. But I can assure you this is one of the topmost priority across all the 4 businesses and various businesses have various levers to play in our journey to BOM cost reduction. When it comes to localization, happy to report that one of the parameter of localization is a PM e-Drive scheme, which was introduced by Government of India, which incentivizes on the purchase of electric truck only after our truck is certified to be containing some percentage of localization and component. Our Montra Electric Rhino was the first electric truck in the country to be certified under the PM e-Drive scheme, which happened in quarter 4, and we could deliver vehicles under this particular scheme. So that can -- that answers. But directionally, we are fully committed to increase the localization content across all our platforms.

And secondly, on the competitive intensity in HCV, I believe despite the market being so small, a lot of players have already entered. So how do we intend to stand out in HCV? I believe we are still the market leader there. So how do we ensure that we still grow on that market share?

Yes, you are absolutely right. Despite the market being very small, I will say across all the segments. So in truck segment, for example, there are already 11 players. And despite 11 players being there, we ended the year being a market leader with about 28% market share. Likewise, in small commercial vehicles also, there are already 7 players. Despite that, in quarter 4, we had a market share of 27%. So intensity will be there. We -- what we are or what is our USP is the end customer value proposition when he purchases the electric truck, which we feel the way we go about doing a solution selling in the market is what sets us apart from the rest of the competition, not to talk about -- I'm not undermining the product reliability, et cetera, which is definitely there. But if I was to pin out, I think I'll single that out as our approach or as our USP vis-a-vis the competition.

[Operator Instructions] That brings us to the end of the Q&A session. Ladies and gentlemen, on behalf of IIFL Capital Services Limited, that concludes today's call. Thank you for joining us, and you may now click on the Leave icon to exit the meeting. Thank you for your participation.

Thank you.

Thank you, everyone.