Good day, ladies and gentlemen, and welcome to Bharat Forge Limited Q1 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Kalyani. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen, and thank you for joining our call today. As is usual, I'll take you through a quick explanation and a, you know, talk through our results, and then I'll be very happy to take your questions and answers. Ladies and gentlemen, once again, thank you for our Q1 analyst call. Overall, I think we've had a decent performance. We've had a quarter-on-quarter 5% growth. We've had a bottom EBITDA growth of about 7%. We've had one of our highest ever export numbers. This has largely been driven by a couple of factors. One is our export of passenger car components having grown very substantially to its highest ever number of almost INR 200 crore.
We are getting tremendous new traction in this area from existing customers and also from new customers, both for existing products and new products. I'm also very happy to report that we are getting business from geographies that we've never been supplying to. We also see other opportunities of non-automotive coming from those geographies as we begin to understand those markets and you know, build some presence there. Aerospace now accounts for more than 10% of our industrial export revenue. This same number for last year was 2%. This is the result of many years of hard work and the start of ramp-up of couple of our customer programs.
We now have, in addition to these programs that are active, two new programs that are under ramp-up and total two new customers in addition who have given us long-term orders. We will now have three distinct product segments which will allow us to create almost like product verticals within Bharat Forge for aerospace and become a large meaningful supplier in these areas. I believe that the best years in terms of growth for aerospace for us are now about to start and you will see year-over-year very strong growth. As I mentioned, we've also added two new customers during the quarter in aerospace. We have won over INR 350 crore for the India business in the quarter across automotive and industrial applications.
In fact, we see tremendous new opportunities in terms of customers looking at us for business in India for components and widgets, and we see quite a lot of growth opportunities. We have completed the acquisition of JS Auto Cast Foundry India Private Limited at an EV of INR 490 crores. This is a good company. It was purchased on July 1st, so it will be consolidated in Q2. This company will be accretive from the first quarter itself. Besides the products that it currently makes, it has tremendous headroom for growth. We can double this capacity with almost no CapEx and double the revenues.
Additionally, we get into a lot of new sectors, which we didn't have as much presence and become a bigger and stronger supplier in areas such as construction equipment, mining equipment, renewable energy, hydraulics and many other industrial products. Our balance sheet continues to remain robust. We have a net debt equity of 0.2 and a net debt divided by EBITDA of 0.75%. I believe that in the extremely volatile times that we are living in now, it's very important to have a strong financial base and the ability to take advantage of opportunities as they arise, and also the ability to withstand shocks when they arise. Because nobody knows what's on the horizon. One year ago, we couldn't have predicted what's happening in Ukraine either.
Not that any of us want something like that to happen, but I think it's best to be prepared. Our European operations have had stable performance in spite of extremely high input prices and slightly weaker end markets. The end markets are weak for multiple reasons, one of them being tremendous inflation that is there in Europe and the cost-of-living impact on families there. Something that is a once in a lifetime kind of scenario which many people in Europe have never faced. Energy prices in Europe have gone up by more than five times from something like EUR 0.075/kWh to now over EUR 0.40-EUR 0.41/kWh. Talk more about the impact of that going forward.
In spite of that, we've had over 8.5% EBITDA margin. Our new facility in the U.S. has just commenced manufacturing operation in the April to June period. As is, you know, let's say, expected for any new facility, it's gonna take time for us to prove out the parts, do our PPAP and ramp up and get product approval in place. Then we will move to a, you know, breakeven and profit situation. We are currently running at about a little over $1 million a month kind of EBITDA loss. We expect this to come down as time goes by, and we hope that by the end of the year, we should be, you know, above the red numbers.
I'd also like to add that this facility is gonna be producing specialty chassis components for largely EV and hybrid programs for European, U.S., Japanese and Korean high-end passenger car companies and pickup trucks and SUVs. The full capacity is booked out for the first phase, and we have got enough orders in hand for setting up the second p hase now, which we will now kick off. This will allow us to double our size of business in this aluminum forging facility in the U.S. over the next three years.
Coming to defense, as I mentioned last time that the ATAGS gun has passed all its trials, and I'm extremely proud and happy to report that our artillery gun, which is co-developed with DRDO, will be showcased in the August 15th Amrit Mahotsav of Independence Day at Red Fort as a part of the 21-gun salute. This is a matter of great pride for us that it will be shown to the whole nation live over television and something we look forward to. On e-mobility, we are seeing good traction with domestic OEMs, both for components, subsystems and for their local requirements because our components are completely FAME compliant.
Tork Motors, which is a company we have invested in, has already started serial deliveries of their vehicles and also are now supplying three-wheeler powertrains in fairly large quantities. New plant for this company is under final installation, and from November, they will be starting production in a new plant, which will increase the capacity almost 10. We have many other initiatives in place, both at the organizational level, technology level, digitization and organization structure in order to manage and let's say, grow at a faster pace. We'd also like to showcase some new products that we are launching in the next month or two.
Post our Q2 results, we would like to organize an analyst day where we are able to show you a lot of these new products and talk through what is happening in the business and what we hope to do in much more granular detail. I hope that many of you will have the chance to join us. I think that's really all I wanted to say as an introduction. I have with me members of our finance, investor relations and our business team, and we'll be happy to answer your questions. Thank you very much.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kapil Singh from Nomura Group. Please go ahead.
Hi, sir. Good afternoon. Congratulations on a strong performance for the quarter. First question is on the outlook for each of the segments that you operate in. If you could share, you mentioned some risks also. What is the outlook for these segments? In particular, in each of these segments, if there is something to highlight what Bharat Forge is doing to gain additional business. Also, on the defense business outside the artillery guns, if you could share some update in terms of what is the progress there? What are the current revenues on this?
Okay. My colleague, Subodh Tandale, will answer the first part. Second part I will answer.
Sure. Thanks. The outlook of, you know, the various sectors that we are involved in, if I can go geographically. In the U.S., the commercial vehicle segment, Class eight, seven and eight that we operate. At this point, you know, the orders with OEMs are secured until end of next year almost. The rate of cancellations is not that high. The production of the OEMs is stable. There is a lot of talk about some recessionary conditions in the U.S. and so on and so forth. We have got to wait and watch. At this point, you know, at least as far as what we see on an operating ongoing business, it seems quite stable. We are not seeing any, you know, any difficult conditions as of now.
As far as the car segment is concerned, again, similar comments. You know, there are some disruptions because of supply chain and those aspects moving. That continues. Only thing is it's not just semiconductors, it's a lot of other things. Overall, the production is still stable. As far as the industrial verticals go in the U.S., I would say they are operating at a stable level. There is not so much of a growth in that, but there is not so much of a decline either. What would be the impact of if there are any recessionary conditions? It remains to be seen. There is of course high inflation in the U.S. like there is everywhere. The general impression is even if there is an inflation.
Even if there is a recession in the U.S., it may not be for a very long period. It'll be a quick one, is the expectation. We are of course watching this closely. We are doing everything we can to grow our share in these segments, not just in the U.S., but in all other segments in terms of, you know, trying to de-risk as much as possible. That activity is ongoing. The same checklist in Europe. Europe is of course, as we all know, a little more volatile than U.S., particularly because of the impact of the war. The only good thing in Europe is we still see a reasonably strong commercial vehicle industry. The segment in which we operate are premium vehicle segments in the passenger car side.
The demand there is also reasonably okay for now. At this point, you know, we see relatively stable activity for us in North America and Europe. As far as the other geographies are concerned, you know, we have growing presence. As Mr. Kalyani mentioned that we are also breaking into new geographies. We are trying to expand our business across all segments.
I think the answer, to put it in a maybe summary way, I think most of our customers are still showing a lot of confidence in the year going forward, especially in the U.S. In Europe, people are talking on a shorter time horizon. If you look at the advantages that we bring to the table, I think we are in a strong position, and that is why we continue to strengthen our position on our balance sheet, our technology, our customer traction and intimacy, and, you know, take advantage of whatever opportunities arise. Sometimes you have to create opportunities. That's the way I'd look at it. You asked me a question about defense. We have three verticals within defense.
One part of the business is our capital items, which is things that, you know, are procured for the fight and are removed and that kind of part of the business, which is artillery guns, your vehicles and other specialty products. The second is all your spares and consumables. We currently have a well-balanced business between them. Currently, our business is, I would say, INR 300- INR 400 crores a year of spares and consumables. Our business on the capital side is currently largely [vehicular]. We have a business of roughly about INR 200-INR 250 crores a year currently on the vehicle side. This can go up, and we're looking at global opportunities in this, and we are also looking at global opportunities on the consumable side.
If you look at today, our total business, I would say it's somewhere in the region of INR 400-INR 500 crores a year. The two, three-year horizon, or let's say 2025-2026 horizon is how do we take this to INR 500-INR 1,500 crores a year plus, you know, INR 300-INR 400 crores of exports. You're looking at growing the business [ three times] and creating a suite of products that will keep giving us this kind of business going on. Also look at global opportunities, because some of the new products that are developed in India are really world-class, and we have the opportunity to supply them globally.
Okay, great. We'll look forward to that. Just a second question on financials. I see that gross margins or raw material sales will actually come down. If you could give some color because steel prices have actually gone up. How is there some inventory and how to think about, you know, gross margins over next couple of quarters?
[crosstalk] There is some inventory impact. If you look at the operating margin, which is raw material and variable cost, then it is more or less stable as compared to last quarter. In fact, it has gone up by 0.4 basis points as compared to last quarter. You should look at inventory plus, sorry, raw material plus variable cost.
Okay. Now that the steel price is coming down, I was just trying to understand how does this evolve as we head into the coming quarters?
In this quarter, we have not seen any of the softening of prices. It might, you know, we are looking at some reduction in prices, but for this quarter there was no reduction in prices.
Oh, this quarter you mean the quarter ending June, right?
Quarter which ended in June.
Okay. What I'm asking is July to September we should expect some decline, so will the RM to sales improve further or will it stay where? Just trying to understand that.
If the prices goes down, then you will see some improvement in margin, but it's optical. It's an optical decrease in EBITDA. What you should look at is EBITDA for a ton, which should also improve in this.
Okay. Thank you. I'll come back in a bit.
Thank you. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi, team. Thanks for the opportunity. The first question is on our European business. Is the full impact of the inflationary pressures that, you know, gas prices and all that we are seeing in Europe are visible in this quarter's earnings?
Yes, it is.
Okay. Secondly on the North Carolina sort of facility, our U.S. forging facility. Earlier we had talked about $80 billion-$85 billion revenues in phase I, so that should largely play out in FY 2024, right?
Yes.
To an extent, FY 2023 is the year of break even, whereas FY 2024 you will start to generate sort of mid-single digit or higher margin in that.
Yes.
And, uh [crosstalk].
We will have a, you know, positive margin for sure. As I mentioned earlier, we now need to very quickly start the set-up of the second phase because we have orders for almost four million pieces. Our first line will be a capacity of about two point two. We will be able to double our business in by about 2026.
Is it fair to assume that the margins therein, when the first phase is fully operational, will at least be similar to the levels that you have seen in Europe, which is high single digit or so?
No, I would say that slightly higher than I would say, you know, 10%, 11%, 12% should be doable. When very stabilized. You are about EBITDA margins, right?
Right. Right. Yes.
I would say 10%.
Then just looking at the aero business, you know, it seems like a pivot this quarter, right? Finally, we are seeing the revenues scale up. Earlier we had often talked about, you know, an aspirational target of $100 million coming from this vertical. Any timeline you would think that given the two customer orders, three product verticals that you are looking at.
I will not give you a timeline, but I will only say that we are definitely on track to achieve that.
Yeah. That is good to know. Lastly, just two housekeeping questions. One is.
I'll give you an example. If you follow our PV story, when we talked about it, you know, about five years ago, you know, people didn't know where we were going to get this and were a little skeptical. We achieved it. The same thing, I would say, will play out in this.
Yeah. This is actually very encouraging to see because this is where the PV business in terms of contribution used to be in FY 2016.
Exactly.
FY 2015 or so.
You will see the same.
Now it has. Yeah. In fact, I think the showcase of the guns at Independence Day, and in fact all the commentary that is coming from your side. It seems that on that side of business also we should see an order inflow this year finally, taking place.
Well, all the signs are pointing towards that direction. Let's hope.
Yeah. Just two housekeeping questions. One is, what is the USD INR realization for the quarter? Secondly, if you could just share the agriculture number within domestic industrial business, the agri-business.
Our realization was INR 78 crore. One second, I'll tell you the. What?
Agri.
Agri was about INR 55 crore. Any other question?
Okay, great.
Thank you.
Great. Thanks, team. Thanks.
Thank you. The next question is from the line of Ronak Sarda from Systematix Group. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. First question is on the export passenger vehicle business, you know. Like you just reviewed, it has seen a very secular growth. If you can help us understand, you know, what worked for us there? What kind of products have we added over the last few years? And what's the trajectory like for the next two to three years?
See, what worked for us is we have been working on this very consistently for the last five-seven years. In any passenger car business, particularly when it happens from offshore, you know, there is a very high degree of credibility involved because the volumes are high, the customers are very, you know, demanding and so on. Let's say over the last three, four, five years, we have been performing and doing our bit and now we are, you know, we have established a very strong track record of deliverability. Based on that, we are gaining traction to grow, especially because, you know, the same cannot be said about the supplier base in the outside world. We bring in a much more credibility and much more dependability as compared to them.
We are seeing that traction, and that is something that we continue to leverage on. You know, we are expanding our product offering as well as we speak. It's a combination of various things.
What we've also done is, you know, traditionally we used to only make engine components. One of the areas where we've gotten into is now transmission and driveline components. Highly complicated and highly differentiated products. Products that companies used to make in-house, we are now making and supplying in a fully machined condition.
Right. Got it. All right. You know, a question on the overall CapEx for FY 23. If you can help us understand standalone plus overseas, what will be the CapEx?
I mean, EFM will look at a CapEx of about INR 250 crores in India. Our EV business will be somewhere in the INR 125 crore or so region. In the U.S., our total CapEx only for the second phase if we do it, will be about $75 million over a period of two years. That'll be actually next year and year after next. It will not be incurred this year. In Europe it will be a small, I would say, EUR 10 million-EUR 15 million CapEx, which is basically for machining and some value adding, et cetera. Just to recap, the CapEx in India will be INR 250+ about INR 125 or so, 375. The other two CapExes will be a bit over two years.
Got it. Including the electric vehicle CapEx or the that is.
Electric vehicle will be built, building two new plants.
Right. On electric vehicle, I mean, on the top side, I mean, if you can help us understand, how, where do we see, I mean, the overall, let's say, revenue, you know, potential, break up between let's say the OEM part where we are selling motorcycles and then the component and sub [crosstalk].
We are selling motorcycles. Tork is selling motorcycles.
Okay. The component and the subsystems will be from Bharat Forge or everything will be.
All the components and subsystems will be from us. Motor, motor controller, BMS battery, all that will be made by us.
Right.
You know, allow me to fill in the Q2, because I really want you to see it. We'll give you a very good idea of what we are doing when we have our post Q2 analyst call, and this meeting rather.
Got it. We'll wait for that then. Thank you. That's it from my side.
Thank you. The next question is from the line of Pramod Amthe from InCred Capital. Please go ahead.
Yeah. Hi, Amit . This is with regard to your industrial division, where you have added the inorganic capacity and looks like the way the GDP forecasts are shaping up for the global markets that run up for exports on industrial can be cut short. How are you looking at the industrial division export opportunity in case there is a weakness or the recession type of environment builds up in the global market one? Or do you like to add up any more capabilities there as an opportunity going forward?
As I've mentioned before, I see the industrial vertical as one of our biggest growth drivers. Today, our industrial vertical is roughly INR 1,000 crores. When we add JS Autocast to it becomes about INR 1,400 crores. I think that we need to grow this at a, you know, double, strong double-digit rate CAGR over the next three to four years. I think that is what we should get from it. I think we have plenty of opportunity. We have good facility, good people, most importantly, and very good customers who are all growing their business with us. We are gonna grow this business quite substantially. I mean, I think you'll be quite happy to see the way it grows in the next two-three years.
You are not worried about the CapEx cycles getting shortened in those developed markets, and then you may have to delay your ramp up plan?
No, not at all.
Second one is with regard to the global CV cycle. Considering that you have a much longer experience in handling the cyclicality, do you see this time the up and downs or the down cycle will be as deep in the past? Or you should get from the customers the actions you didn't hit the peak itself properly because of supply constraint, the volatility will be much lesser going forward?
You know, it's a very difficult question to answer. I think you have to look at it from two different geographies. You know, in the U.S., the inflation is largely due to overall commodity price increases everywhere. In Europe, the inflation is due to everything that is happening globally, plus what is happening uniquely in Europe, which is energy.
Okay.
It is very difficult to be able to say that, you know, it'll be all the same everywhere. I don't want to hazard a guess on this and, you know, give you some answer. The point is, if you build a business model where you have strong customer relations, you understand your market well, you have strong financials, you have strong technology and you have capacity, you can take advantage of good times and bad times. In good times, you have growth. In bad times, you have suppliers who die. Okay? Not everybody can survive. You just have to be quick, nimble, good at what you do and strong. You can take advantage of both. I'm not saying that they're gonna buy anyone.
I'm just saying that there will be companies that will, you know, no longer be viable and, you know, somebody will have to produce what they used to produce.
Sure. Are there any new wins because now there are more EV trucks?
A lot. We've had a lot of new wins. We've had new wins in fast cars, in industrial, in CV, in defense, in aerospace, in everywhere.
Yeah. Specifically asking since there's some traction on the CV, EV drive, which is happening in some of the markets.
Yeah. There's been a lot of work in that area. Once again, as I mentioned, in the Q2 post-results analyst meet, you will see a lot of new things at play there.
Sure. Thanks a lot.
Thank you.
Thank you. The next question is from the line of Vineet Bajaj, an individual investor. Please go ahead.
What is the demand of Class 8 truck in Europe and North America?
What is the demand for Class 8?
Mr. Bajaj, my colleague, who looks after the sales and business development will answer this question. One second please.
Demand scenario I am asking. We are getting new orders?
Yeah, yeah.
Yes, yes, we are getting new orders.
Any numbers specific?
The market, you mean the market here?
Yeah. Numbers of market.
The market, the U.S. truck market is supposed to be in the region of 300,000 trucks and Europe is similar. Last year in the U.S . It was about 275-280. This year is expected to be close to 300, and Europe is more or less in the similar range.
Well, is it China is a major competition from export side, or is it any other country?
China is not a competitor on the export side to a large extent in these markets. Other countries, yes, they are.
Mainly, America.
Mainly U.S. and Europe.
Yeah. U.S. and Europe. China is not on the heavy truck markets?
They supply components to their own market, not globally.
Okay.
The global companies are buying less and less from China.
Any new products you are developing on EV side?
Yes, we are developing a lot of new products which will be shown in about three months.
Okay. Thank you.
Thank you.
Thank you. The next question is from the line of [Peter Agrawal] from Ksema Wealth Management. Please go ahead.
Hello, sir. I was just wondering, what is the geographical revenue breakup for this quarter? How much of the revenue loss because of the situation in Europe and America this quarter? What is the provision you have kept for the entire year if on a worst-case scenario basis?
It's there on page six, the full revenue breakup by geography.
Oh, okay. What percentage of the steel price rises have you been able to pass on to customers?
You know, look, I am not gonna share that level of detail with you. All I will say is that as a company, we have a policy of passing on price increases which are out of our control, okay? Whether it is raw material or other freight and things like that. This is a dialogue, you know, we want more, they want to give less. It's never easy. You know, you have to find a good relationship and make it happen. This will happen. Our team is working on it, and I think most of our customers have now agreed, and this will get corrected in the prices going forward.
Okay. Thank you, sir.
Thank you. Anyone who wishes to ask a question may press star and one now. The next question is from the line of Sonal Gupta from L&T Mutual Fund. Please go ahead.
Yeah. Hi, good afternoon, and thanks for taking my question. Sir, Amit, just, like if I look at the numbers the last couple of years, I mean, ex of the standalone, you've done a CapEx of INR 600 crore and INR 700 crore for the last two years. Just trying to understand like.
No, I think that [+INR 700 total].
Total, I think annually, right?
Yeah.
The last two years, six. Yeah.
No. Ex standalone, we have not done that much CapEx.
I think, I mean, he said this looking from the Q4 cash flow statement.
No, you are saying ex standalone means not including standalone, right?
Correct.
Yeah, that's correct. That's correct.
Yeah. Like you're mentioning again, like we [crosstalk].
Basically, look, we built only a plant. We built a plant for, aluminum forging in Germany, and we built a plant in the U.S.
Right. Like you're saying that you're gonna be making like a 10%-11%, 12% EBITDA margin, so potentially single-digit EBIT margins on these sort of investments. Your return on capital is fairly low.
No, no. I did not talk about margins for those facilities. I said on an overall European basis, we will do a double-digit EBITDA margin.
Oh, okay. You, I mean, these would be.
Aluminum business will be higher, steel business will be lower. On a blended basis, it will be a good number.
Okay.
We wouldn't make investments if we didn't generate adequate returns. Please be rest assured.
Got it. Okay. The aluminum business should make like we made in the [SATM], mid-teens sort of a margin to high-teens sort of a margin.
Yes. Yes. That is the goal.
Got it.
Mid- to high-teens is the goal.
Got it. I mean, like we're seeing wage cost pressure is also increasing, like even in European countries. What is the outlook there now? I mean, I know currently you maintained about 8.5% EBITDA margin, but how do you see that sort of getting absorbed?
You know, I would say that we are still targeting to generate, you know, 8.5% margin for the year. Hopefully, yes, there are wage inflation issues. It's about 7%-8% in Europe, and maybe 8%-9% in the U.S.
Right. Yeah. Do you think you'll be able to pass it on?
Reprice. You know, you have to reprice the products.
Right. You think that will be possible or it'll take a longer negotiation process with the customers?
Look, it's not easy, but it's something that we have to do, and our team is committed to it, so let us. We're working on it.
Got it. Just the last question, could you just talk about, I mean, on the oil and gas side, what is the traction you're seeing in the U.S.? Because we have a fair amount of exposure to shale. Earlier you were talking about, I mean, like some, a few years back of some new products and new customers being added in the space and now that this space is coming back, what's the expectation?
The shale gas, the fracking segment in the U.S. is doing reasonably well from a demand point of view. As compared to, say, five-seven years ago, the players are following a very fiscally prudent policy, they are controlling the amount of investments quite aggressively. As such, we have seen a fairly stable demand pattern there. We expect this demand pattern to be stable for the next, maybe at least one or two years, if not more. We are also working on adding new products. We continue working on adding new products. In the last two years, we have added a couple of new products, and we are actually working on gaining traction there.
All said and done, we have a stable situation when it comes to the U.S. fracking side of the business.
Got it. Great. Thank you so much for taking the questions.
Thank you. Ladies and gentlemen, I would request the participants to limit your questions to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Jay Shah from [ Capital PNS] Please go ahead.
Hello. Can you hear me?
Yes, please go ahead, Mr. Shah.
Yes. Congratulations for a great set of numbers. I just wanted to ask one question on the business side. When you say that, you know, we've got these particular order wins, what is our preparedness, you know, for these order wins? And how does the contract work, like from the day of signing to when does it go into production? And say, God forbid, if there are some, you know, uncertainties, do we have capacities that are fungible that we can, you know, use it?
Yeah.
For some other order?
Let me answer your second question first. First of all, our facilities are fungible. Okay? We only have to change some tooling. Secondly, how long does it take after an order to get into production really depends on what the product is. If it's a product that we make regularly, then the whole product knowledge, process knowledge, everything is ready. Then it's just a matter of, you know, developing dies, tools, fixtures and all that, and getting into production. That could be as much as three to six months. Then of course, trials and testing and stuff like that. If it's a complete new product or it's a product for a segment like, aerospace or, you know, something like that, defense, which is very, very critical, that requires longer testing. That could be as much as, you know, 12-18-24 months.
It really depends. There's no one-size-fits-all answer for this. It depends on the product, it depends on the industry, it depends on the customer and the segment.
Okay. Thank you so much. That's it. All the best.
Thank you. The next question is from the line of Ronak Sarda from Systematix Group. Please go ahead.
Yeah. Thank you for the opportunity again. Just want to understand on the Europe business, given the sharp variable cost increase in terms of energy prices, so how are the new orders, you know, or the new RFQs being priced? Are we getting the entire cost increase passed on?
Any new orders that we are quoting will take new pricing into account. Okay?
Mm-hmm.
Obviously, with existing clients, as I've mentioned a few times on this call, it's a process of working with your customers and, you know, getting reimbursed for whatever is the delta.
Got it. The new orders, there is a clear acceptance of the new prices, so there is no issue in getting those.
No, look, our team wouldn't quote, you know, a price which is not right. Right?
Copy. Got it. Thanks for that. Second, lastly, the acquisition for JS Autocast, has that amount been paid, and will that be part of as a subsidiary or will that be directly part of the standalone business?
It's 100%. It's under our industrial subsidiary. It's 100% owned and 100%. We paid all the money. It's first of July. Hello?
We paid on, sorry, first of July, you said.
That's the day we bought the company, yeah.
Okay. From accounting perspective, will this be part of standalone or, sorry, will this
It will be a part of consolidated accounts. It will be a subsidiary of Bharat Forge.
Okay. Got it. Thanks for that.
Thank you. The next question is from the line of Abhishek Jain from Dolat Capital. Please go ahead.
Thanks for taking my question. Sir, what sort of the benefit do you see for export due to the high manufacturing cost?
I don't hear you, Mr. Jain. Very unclear.
Mr. Jain, I would request you to use your handset to ask a question.
Hello?
Yes.
Sir, what sort of benefit do you see for export due to the high manufacturing cost in Europe?
See, there are multiple factors. One is, obviously there will be a difference in cost right now. Second is ability to continue manufacturing, sustainably on a longer term, and, availability of energy. There are many factors. Please remember, it may also affect some of our customers. There is right now a lot of shuffling taking place with large companies which are looking at, you know, where else they can produce things they produce in Europe in order to reduce their overall costs.
Sir, this quarter consolidated EBITDA is lower than the standalone on absolute basis because of the subsidy losses. What is the outlook for the consolidated EBITDA margin going ahead?
You know, we have talked about this also in the past, that any start-up that we have, a greenfield start-up, if you remove that, then we will continue to have a positive EBITDA. Once that also, you know, next nine months gets stabilized, it will all add positively to EBITDA.
But, uh [crosstalk].
If you are comparing on a consolidated basis, if you are comparing with the earlier quarter, please be aware that, since we have taken out [quarter] between our consolidation, the sequential quarter is actually six months for overseas entities.
Sure. This quarter, subsidies, manufacturing cost has gone up by around 1,000 basis points, I mean from 40%- 49%. If we deduct the standalone, then [audio distortion].
Hello?
Hello?
You can have a call with our team separately and discuss this because I don't have the granular information with me.
Okay, sir. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Amit Kalyani for closing comments.
Good afternoon, ladies and gentlemen, and I really thank you and on behalf of our company and our team for your interest and questions. If you have any further questions or require any more clarification, you know who to call in our company. Look forward to your continued support, and we will definitely keep you advised well in time for the Annual Day that we will have in post Q2. I promise you it'll be interesting and exciting, and you'll see a lot of new things that we have done, and it'll give you a glimpse into what Bharat Forge is transforming into in the next few years. Thank you very much. Have a happy Raksha Bandhan and wish you all good health. Thank you. Bye-bye.
Thank you. On behalf of Bharat Forge Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.