Ladies and gentlemen, good day and welcome to the Pitti Engineering's Q4 FY25 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 touch-tone phone. Please note that this conference is being recorded. Before we begin, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risk and uncertainties. For a list of such considerations, please refer to the earnings presentation. I would now like to hand the conference over to Mr. Akshay Pitti. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and a warm welcome to our Q4 and full-year FY25 earnings call. I'll begin with a brief overview of our performance and a few updates, followed by the Q&A session. FY25 was a landmark year for the company, with the successful completion of two acquisitions and a merger. We closed the year on a high note, delivering robust growth across all performance indicators. Consolidated revenue grew by 34.87% to INR 1,743.36 crores. Consolidated EBITDA grew by 49.77% to INR 271.12 crores. Consolidated PAT was INR 122.28 crores, higher by 36.32%. Consolidated sales volumes for lamination were up by 49.43% at 63,215 metric tons. For the quarter of Q4, consolidated basis revenue was INR 472.30 crores, a growth of 28%. EBITDA grew by 54% to INR 80.08 crores. PAT, however, declined by 21.43%, coming in at INR 36.14 crores.
This is mainly on account of the incentive being booked in Q4 of last year, which is not the case in the current year. Sales volumes in the quarter were 17,185 tons, a robust growth of 50.28%. On the operational updates, our major CapEx cycle is now complete. We have commissioned a new capacity in Aurangabad plant, taking the consolidated sheet metal capacity of 90,000 metric tons. Our machining capacity now stands at 648,000 machine hours, and the combined capacity of our casting facilities is now 18,600 metric tons. On the business outlook, looking ahead, we continue to see demand across key product segments, including railways and both domestic and international. In green energy, wind and hydro continue to remain strong. Pumps are showing a revival in its offtake, and power generation continues to show strong demand.
Our machine components business is on track to achieve a revenue of INR 750 crores in the next 18 to 24 months. As we integrate our recent acquisitions into our operations and consolidate our business, we are focused on reducing our cost and increasing our efficiency. This will help us in improving the overall margin performance. In the backdrop of ongoing geopolitical and international trade uncertainties, we remain cautiously optimistic and are targeting a revenue growth of 15% for FY26. With this, I would like to move to the Q&A session of the call.
Thank you, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. 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 comes from the line of Bala Subramanian from Arihant Capital. Please go ahead.
Good evening, sir. Congratulations for a good set of numbers. Sir, first question regarding this Bagadia Chaitra Industries and Dakshin Foundry. So, what are the sales and EBITDA numbers and volumes for these two Bagadia and Dakshin Foundries?
Sorry, FY25.
The sales volume is given in the investor PPT for Bagadia Chaitra. The sales volume for the full year is 14,075 tons. In Dakshin, the sales volume is 3,224 crores. Sorry, 3,224 tons. In terms of revenue, I believe Bagadia Chaitra did a revenue of INR 240 crores, and Dakshin did a revenue of INR 72 crores.
And EBITDA numbers, sir?
In EBITDA, what happens is that we make certain sales to these subsidiaries and vice versa. So, in elimination of profit, each individual subsidiary, you cannot look at it. You have to always look at it on a consolidated basis.
Okay, sir. Sir, any approximate margins are like 5%, 6%? Any approximate margins? Bagadia Chaitra Industries margin earlier is 5.6%. Is that in the same range or an improvement?
On a standalone basis, there might be an increase in its profitability. But again, like I said, you have to look at it consolidated because we sell some of our sized raw materials to that company. So, when we consolidate it, it gives you the right perspective on the overall operating performance of the business.
Got it, sir, and sir, I'm looking at India and exports. Exports is almost INR 500 crores for FY25. And out of 500 crores, which are the countries? If you could share some of the breakups, US, North America, Europe, if you could share some of the breakups and how the market dynamics are there.
Out of the total exports, about 30%-35% goes to USA, about 55%-60% goes to Mexico, and the remaining goes to various other countries.
Got it, sir.
Sorry, sir. I'll come back and queue for further questions. Thank you.
Thank you.
The next question comes from the line of Akshada Deo from Niveshaay. Please go ahead.
Yeah, hi. I'm new to the company. So sorry if I'm asking any rudimentary question. But I understand that the INR 450 crore estimate was slightly missed this quarter. Was it again regarding the RM cost variation that you mentioned in the last quarter as well? That's why we missed just a little.
I think that is par for the course. I mean, you can't really predict perfectly where you're going to land.
Okay, so that variation is not.
So you understand that 5% variation is always going to be there in the revenue.
No, that is fine. What I want to understand is the trend because that has been going on for a couple of quarters now. So, are you still seeing the volatility even in this quarter and going forward?
It depends on the product mix. As you see, in terms of volume, we've done exceedingly well. In terms of revenue, it might be slightly lower than what we have expected. But that will always be the case given the product mix. It also depends on how much job work we did, where the customer supplies the material to us, and we only do the conversion. At the end of the day, the EBITDA and the absolute sales volume is what matters. Revenue is notional in our company. For example, now the raw material prices are going to rise. We are already seeing a rising trend. So, you will see revenue growth even when volume and EBITDA remain flat.
Right. Okay. So, are you witnessing the electrical steel disruption as you anticipated that would happen in April onwards?
Yes, it's already happening. The raw material prices are up by about 7% in April vis-à-vis January. And the supply constraints are going to start, or I would say have already started as of this day. The BIS approvals for the Chinese will expire in this week. And after this week, there will be no more imports from the Chinese mills.
Right.
Additionally, the government has also put safeguard duty of 12.5% on the input of the CRNO producers in India, such as POSCO and China Steel.
Okay.
So, not only that, the imports of finished product will not be available. There will be also cost pressures on the local producers as their raw materials also have been impacted by this.
Okay, so are you expecting a little bit more supply constraint in the industry so that would be a little more beneficial for the company? Would there be more spot domestic sales that may happen in the next six to nine months?
That is the expectation. However, the current inventories at our competitors will take time to deplete, maybe around by middle of May. So, any improvements in sales volume, we should start seeing post-May. But that is the expectation if the current policies are maintained.
Okay. Okay. But you mentioned that at least six-to-nine months it would take for a new supply chain to be established domestically as well.
See, even if domestically a new supply chain is established, the input material for that supply chain is not there. And electrical steel cannot be bought in six to eight months. It'll take even longer than that. You have to start from a steel mill. The only viable option is JSW, and they have a finite capacity. They can't service the entire requirement of the country. They have two mills in their pipeline. One is expected to go online by middle of calendar year 2026, and the second one by middle of calendar year 2027.
Okay.
The cost pressure will be there, which the customers will have to bear.
Right. The JSW Steel will not go outside. It will be self-contained.
Yes. That is end-to-end manufacturing in India. POSCO and China Steel import their hot-rolled coils from their parent companies in their home territories and do the final processing here. And that has been subjected to these safeguard duties.
And sir, you mentioned margin increase that is anticipated from when Dakshin Foundry is up to capacity. So, on a consolidated level, what would be the margin increase that we can expect post once a year is completed?
I think today we are somewhere around 16.2% EBITDA margin in quarter four. For the full year, obviously, we are not at that level as the integrations were taking place, and we had one-time cost related to these acquisitions.
Right.
I would say that over the next 12 to 18 months, you can see another 75 basis points to a whole percentage point increase in EBITDA margins.
Okay.
That's not only from the enhanced utilization in the Dakshin's capacities, but also on the efficiency side. We'll be working on reducing cost, rationalizing our manpower and overhead costs. So, we expect that to give us a good boost to our EBITDA margins. And obviously, the volumes are going to go up. Like I said, we are targeting a 10%-15% revenue growth, maybe about a 10% volume growth. So, as the volume grows, our overheads will be spread over a larger base.
Okay. So, sir, once you're done with the CapEx and WIP and everything comes live, suppose FY27, when things are better utilized, what is the revenue potential that this would give? You can give me a range because I understand pricing is varied. But a ballpark figure.
On a constant raw material basis, for FY26, we are targeting 2,000 crores. And in terms of volume, our target would be somewhere around 68,000 tons on a consolidated basis. For FY27, we have a peak capacity of 72,000 tons in terms of a saleable capacity. And at that, we should be at about 21 to 22 hundred crores.
Okay. Okay.
Obviously, looking at the market scenario, how everything pans out, we shall be looking at doing CapEx in the second half of the current year or the first half of FY27.
Okay. So, if you don't want to.
Because we don't want to be restricted to 72,000 tons if the market will support us.
Okay. And sir, can you just tell me for the sales number that you mentioned in the opening statement? I was not able to pick that.
Sales number, I think.
170 crores of sales that you mentioned. I was not able to.
1743 is our consolidated revenue for the current year.
Yes, sir. Anticipated from one of your acquisitions, I think, is what you mentioned. Or I may have been mistaken.
No, I didn't mention anything from the acquisition. I said that as we look to integrate the two acquisitions and derive efficiency, we look at a margin growth.
Okay. Thank you so much, sir. I'll get back in line.
Yeah.
All the best.
Thank you.
The next question comes from the line of Sani Vishe from Axis Securities. Please go ahead.
Yeah. Hi, sir. Congrats on the set of good results. So, continuing on the question from the earlier participant, as you said, EBITDA and volumes are more relevant for us. So, if the sales increase in the coming period is due to increase in raw material prices, wouldn't that impact the margin? So, do you still think that we'll be able to improve the margin?
So, see, what we are looking at is about a 5% inflation due to the raw material increases. However, there'll be a 10% volume growth in lamination. Plus, in addition to that, there is significant growth in machine components, as well as the efficiency that we are deriving. So, what we estimate is that at an INR 2,000 crore level of sales, I'm taking the current quarter's raw material prices as my baseline. We should be looking at a 16.5%-17% EBITDA margin for the current fiscal. And that should improve again next year, provided the raw material prices are again at current quarter prices. Obviously, if this raw material hardens further, our sales numbers are going to go up and EBITDA will go down.
Understood. Very clear. And do we expect that this disruption will somehow impact our volumes? Because if there is a shortage, how do we plan to manage them?
See, it's not going to be a question about shortage. There will be a slight shortage. 100,000 tons used to come from China or 150,000. That will have to be bought from, again, POSCO, China Steel, or JSW within India. The point over here is on the cost. Not only has the material from China stopped, a safeguard duty has been applied on our two suppliers, POSCO and China Steel, namely, who bring their input materials from their home countries, Taiwan and Korea. So, the cost pressures will be there in the market. It all depends on how easily the motor manufacturers are able to pass this on to their clients.
Understood. Understood. Okay. The other point, you had mentioned the last quarter that there was some disruption due to the BS6 norms. So.
Yes.
Do we think those are settling down in this quarter, or do we think there will be some pain this quarter as well?
If you see last quarter, quarter four itself, the volumes in Pitti Engineering or subsidiary have picked up vis-à-vis quarter three. We see that trend continuing in quarter one of the current fiscal. Not only the BS6 norms, but also the pump industry, which was slightly depressed due to unseasonal rains in the south, is again back. We see strong volume growth in PIPM.
Okay. Finally, a bookkeeping question. So, what are our expectations of target on debt level? And would the current quarter's finance costs fare render to as you're doing this?
See, as we go through the year, obviously, we'll have accumulated profits, and those will go towards reducing our Net Debt. There are no major CapEx commitments. So, I think this is the peak finance cost that you can factor in. After this, you should be seeing gradual reduction.
Okay. Super. Thank you, sir. Thank you.
Thank you. The next question comes from the line of Harsh Vora from DRChoksey FinServ Private Limited. Please go ahead.
Yes, sir. Am I audible?
Yes.
Yeah. Hi, sir. Good afternoon. I would just like to know the current total capacity on castings and where does the components business stand today in terms of price?
So, if you look at the total capacity on castings, the name plate capacity is actually higher. The currently usable capacity is 18,600 tons. It is restricted by the amount of power that we connect to our factory. The molding side in foundry business, there are two capacities, right? One is on the melting of material and second on the molding. From a molding side, we have capacity roughly up to 28,200 tons. However, due to the electrical cost, we have restricted it to 18,600. In terms of revenue, I would say last year, our components business was about INR 250-275 crores. And if you add the components that we consume internally as part of our assemblies, it would be closer to about INR 375 crores.
Okay, sir, and where do you see it going in the next two years?
Like I said, INR 750 crores is our target, and we are on track to getting there.
Right, sir. And, sir, can you throw some light on the IC and EV business, as well as the consumer durable segment?
So, IC, I would say entirely automotive is a very small portion of our business. It's a portion of our business we are excited for over the next five to 10-year horizon as that market matures for us. And the sourcing of these products which go into automobile starts locally. So, currently, it's about 0.7% of revenue. It has tremendous potential, but it will take time. Consumer durables, I would say the same thing. It's a very low-margin business for us. So, we do it, I would say, selectively. We only do it with clients such as Atomberg today, where the margins are better because their product is a premium product. So, as again, the localization of these consumer goods, especially in the premium sector, starts in India, I would say that our business volumes in those two segments will rise.
Right, sir. And I hope the wind energy continues to grow. Well, any progress on the pumped hydro project?
Yeah. So, pump hydro is a product that we've been doing, if I remember correctly, for the last two and a half years. And yes, it's going on well, both for domestic as well as export requirements. It's doing quite well. On the wind energy side, the export market on wind is slightly slow over the last few quarters. However, it has been more than compensated by the buoyancy in the Indian market for wind products.
Right, sir. Thank you, sir. That's it from my side.
Thank you. The next question comes from the line of Sanjeev Zarbade from Antique Stock Broking. Please go ahead. Please go ahead, Sanjeev, with your question.
Audible now, sir?
Yes. Now you are.
Yeah, sir. I just wanted to understand what are the new clients that we have onboarded over the last three months?
I don't think we have onboarded any clients in the last three months.
Okay, and if you could tell something about the European market as well, and any new segments that we have kind of seeded for our company in terms of revenue growth?
In terms of revenues, I would.
In terms of revenues, sir?
In revenue. So, see, the European market on a consolidated basis should be a INR 40-INR 50 crore worth of revenue business for us today. We see this rising over the next two years. If you see in our customer list, we have Siemens Energy, Siemens Gamesa, Indar. These are very marquee names, especially in clean energy as well as marine propulsions. So, we supply products to them across all those segments: locomotives, marine products, compact hydro, green hydrogen. And based on the outlook given by them, we are told that the business should go to about INR 150-INR 200 crores of top line in the next two years.
Okay. Okay, sir. That's it from my side. I'm logged out.
Thank you. The next question comes from the line of Deepesh Agarwal from UTI AMC. Please go ahead.
Yeah. Hi, Akshay. My question is more on the tariff side. What you're selling to Mexico is also indirect export to the U.S., or this is for the Mexico only?
Of what we sell to Mexico, I would estimate based on our discussion with customers, 70% would eventually land up in the US, and 30% would be for the rest of the world.
Okay. So, effectively, that is also exposed to the U.S. So, U.S. exposure would be more like a 60%-65% for us of the total export.
See, again, what lands into the U.S. eventually is not a U.S. consumption. So, Wabtec makes locomotives, which they export to the rest of the world from the U.S. facilities also. So, there's no way of actually pinpointing what is the eventual export and consumption of the U.S.
Okay. Okay. And the other thing is, I want to know your thoughts whenever the tariffs resume after this 90-day pause. Would you be in a position to completely pass on the tariff increase to the customer, or there is a possibility we may be asked to take some hit on the profitability?
See, there's a lot of noise around tariffs. We have, luckily, another, I think, 80 odd days to get to a trade agreement. If we do, then the scenario changes completely. However, if we don't, from a manufacturing standpoint, you see our margins, there's no way for us to absorb anything on tariffs. Tariff is always neutral, and the customer has to pay. That is our view, and we have communicated the same to our clients, whether it is in Mexico or the U.S. or any other country. See, today, if you are supplying directly to the U.S., you may say that you should partake in the tariffs. What about Mexico? Like you rightly noted, some of it goes to the U.S. So, the global economy is interconnected, and no one can expect the supplier to take the cost.
Eventually, the consumer will have to pay the cost of these tariffs.
All right. Currently, the tariff would be about 4%, correct?
I think currently the tariff is 10% based on the reset.
Okay. I mean, pre-tariff announcement, it was 4% or 5%?
I'm not quite sure, but I would think it was around 5% going into the US, and I'm not very clear as to what was the Mexico tariff.
Okay. Sure. Sure. The other thing is on the volume front. I think you have been highlighting that our focus is to increase the high-value-added assembly and machine components. While machine components for the year did very well, high-value-added assembly volume was up just 3%, whereas lamination volume was up almost like 26%-27% for the year. Anything to read into this?
So, I would say this is because of the acquisition of Pitti Engineering. If you see, most of their sales volume is in the low and low-value-added parts. And if you then go down, the high-value-added is one part. Further from the high-value-added, the integrated stator frame and rotor shaft assemblies are up by about 12%. So, if you see, there's a good amount of growth even in the higher value on the higher side.
Understood. Understood. Thank you. And all the best.
Yeah.
Thank you. The next question comes from the line of Het Choksey from DRChoksey FinServ. Please go ahead.
Yeah. Hi, Akshay. Congratulations for a very good Q4 and FY25 and incredible performance in this testing time. So, keep up the good work and best wishes for FY26.
Thank you.
Yeah. My first question was on the end-user industry. Looking at the last three years, how your end-user applications have shaped up in the segments in which you're operating. But with the new acquisitions which you have done, how would you see the end-user industry as a percentage of the total shape up in the next, maybe, two or three years?
With the acquisition, I would say pumps and power generation have kind of grown. Pumps have got added as a new segment. Automotive has grown, I would say, from 0.37% of revenue to almost a percentage, so like three X from where it was. Stand-alone legacy Pitti segments such as data centers and traction motor railway continue to perform well. Industrial and commercial motors are declining, which are our low-margin business as is due to the competitive intensity. However, we are looking at some revival in growth, or I would not say revival in growth, recovery of lost volumes there on account of the shortage of materials and the cost pressures on the materials side. Renewable energy will continue to outperform. We have a good line of sight on that green hydrogen business from European Union-based customers.
A lot of that depends on the subsidies that the state has to give them, this being a nascent industry. Other than that, wind continues to perform well. Special-purpose motors, I think, will be slightly depressed in the near term, but I think in the long term, they should be also doing quite well.
Okay. So, basically, traction motor and the railway components will see a contribution of close to between 30-35%, and the power generation will be around 14%. And industrial and commercial, which is a low-hanging or low-margin business, is probably something where you will see more of a volume growth rather than any margin expansion. But as a percentage of the total, this should remain close to around 11%-12%. Am I correct?
Yes. I would say overall, at percentage level, that would be a correct assumption. You should see automotive inch closer to 25%, or something like that, and data centers maybe 2% or 3%.
So, the entire profile of data center and automotive, can we assume that in the next three years, this should be around 5%-7% of your business?
I think yes. If you look at below the pump line, pump is about 3.15%, data center is 2.4%, automotive is rounded up to 1%, and appliances is 0.6%. So, this should go towards 10%-12% over the next two years.
And accordingly, these are higher-margin businesses. So, I'm assuming that the margin profile should also change with time, right?
No. In this, I would say data center is a relatively profitable business. Pump and automotive are traditionally low-margin business.
Okay. Okay.
So, you'll see volume and revenue growth coming from here. However, as the revenue grows, the component business also will grow, and that is where the margin growth will come from.
Correct. Okay. So, let's assume that today you supply a particular component in the automotive industry, and with the growing EV applications, you eventually go towards more of a kit-value-based approach from your perspective. So, probably that should bring better margins going forward in the automotive space?
See, in the automotive space, there are two parts to it. One is the IC, and one is the EV. The IC business is the one which is dominant today. EV business is something unexpected business. And unfortunately, off-grid, I think EVs are not doing so well globally. It remains to be seen how much EV will contribute to the growth in this segment. What we feel is that the IC business is going to be the one which will drive volume growth. As the ancillaries of these companies start localizing their procurements rather than doing subsystems and just doing some kind of a screwdriver assembly in India, they start buying the whole thing and making the assemblies in India. So, that part of the business should grow first, followed by the EV.
Looking at the other segment, now looking 23, it was around 13.7, and in two years, it's around 15.2. So, what is exactly the other component? What are the industry end-user applications in the other industry?
So, the others, see, this has to tally with our overall revenue. So, this includes our other income from asset sale as well as scrap sales and certain other smaller user industries such as medical, aerospace. So, it is basically what is not categorized above everything else.
Okay. So, just out of my inquisitiveness, why is the others increasing at least a percentage every year? And why would it not be stable? That's what I would rather understand from you.
So, if you take FY23 to FY25, the other income on account of incentive in FY23 was mere 14 crores, and this year it's about 30 crores. So, that is one reason why it's jumped significantly. And the second is when we consolidate our revenues, Dakshin Foundry, which is a subsidiary, has a significant amount of interest income as it is sitting on a lot of cash. So, that also kind of goes in there.
Okay.
So, you and As exports are higher vis-à-vis 2023 to 2025, significantly higher. The export incentive that we get in terms of duty drawback and licenses, DBK, so that also is kind of put in here.
Okay. Okay. And my second question is mainly on the capex. We saw election year last year. So, I understand a lot of CapEx-oriented businesses face delays on account of contracts and renewals and allocation towards the appropriate allocation. So, we see a lot of industries like governments are not utilizing their budgetary allocation towards the CapEx infrastructure on account of elections and state elections. What's the picture for FY26? What is your sense of allocation this year?
See, luckily, we are not very dependent on government CapEx per se. A lot of this is basically private CapEx, what we do. The only place where we are kind of dependent on government is the Indian content of our railway business.
Okay. And that's.
That is very small, and that's continuing at the same rate as last year. We don't see huge growth there.
Okay. Okay, but as I understand, the Vande Bharat train sets getting manufactured in India and you being supplying to MEIL and BHEL, what is your sense on that? I mean, that should increase with time, right?
I think if you see the overall order book at those customers, it's not grown. I don't think there are new tendering that is taking place on Vande Bharat, and whatever order backlogs they have, they have to complete those, so if and when a new tender does come, it will mean again volume growth for us. As of now, we don't have any line of sight on any of those. Other than that, if you look at the locomotives that Indian Railways makes in Banaras or Chittaranjan, they are more or less flat, and the private companies which make locomotives in India such as Siemens, Alstom, or Wabtec, they have a fixed yearly contract over multiple years, so I actually am not able to see significant volume growth. Stable volumes, yes. Significant volume growth to be seen.
Okay. So, significant volume growth to be seen in the railway component business, but definitely seen in industries like power generation and renewable energy and data centers, correct?
Yeah. So, data center, power generation, renewables, we are seeing significant volume growth.
Okay. Okay. And just the last question, what would be the percentage of Indian business to have overall in the end-user industry? See, if your traction motor and railway component is 33.9%, what is the percentage of the Indian business out of that, if I can rightly understand?
So, total traction motor and railway components business was roughly about INR 600 crores. Out of that, about INR 200 crores was domestic and INR 400 crores was export.
Okay. Great. Great clarity, Akshay. Keep up the good work and best wishes for FY26.
Thank you.
The next question comes from the line of Abhijit Mitra from Aionios Alpha Investment Management. Please go ahead.
Yeah. Thanks for taking my question, Akshay. I hope I'm audible.
Yes, you're audible. Please go ahead.
Yeah. So, firstly, just to understand the margin guidance, the 16.5%-17% is ex of other income, right? You don't include other income into that 16.5%.
That's ex of other income.
Yeah. Understood. Second is on the volume growth guidance of 10%, just to understand a bit better. So, this 10% is essentially on the laminations volume that you're guiding, right?
Yes. That's correct.
This is like stand-alone plus PIPM or stand-alone as it is?
No, it's consolidated.
Consolidated.
For the most, I think we are looking at a target of between 68,000-70,000 tons in terms of volume.
Okay. Understood. Understood. Okay, and this year, it was around 64,000, right?
Yeah. About 63,200.
Understood. Got it. Got it. And on the casting side, I think initially you mentioned INR 750 crores or sorry, on the machine component side, you mentioned a revenue of INR 750 crores in 18 to 24 months. I missed the current year's revenue. What is the current year's revenue? Sorry.
The total machine components business yielded about 375 crores of revenue, of which about 250 was plain vanilla machine components and remaining were parts which are used in our assemblies of lamination, such as the child parts that we give as a separate line item.
Okay. Understood. So, this 375 crores will go to 750 crores?
Yeah. That would be correct.
Okay. Got it. Got it. And lastly, regarding your discussions with Wabtec, I mean, what are the themes that you are picking up in terms of their understanding of the continuity of the CapEx? There is a huge North American freight upgrade which is ongoing. So, there are two parts, right? One is, of course, the North American CapEx, plus there are CapEx happening worldwide, to which they're also suppliers. So, any sort of themes that you have picked up in your discussions or anything that you might want to share?
So, it's a very two-sided discussion, right? On one hand, you have a huge CapEx going on in North America in terms of freight upgradation. On the other hand, you have the tariffs. So, one day you have a conversation which talks of volume growth. Second day, you have a conversation which talks of tariffs, how China is having very high tariffs, and India is currently having low tariffs, and that will continue. China may not have a 250% tariff, but definitely the tariff in China eventually will be higher than India. So, how do you move supply chains to India? Those are among the discussions. So, there's a lot of flux there, I would say. It will take time that macro needs to clean up. There needs to be trade deals taking place. Tariffs need to stabilize to yield any fruitful discussion.
While the business is there, how long that business remains is very unclear. See, the point is, if this tariff war continues, are we looking at a recession in the U.S.? And if we are, then all of those freed upgradations go away. So, the biggest thing is the macro when it comes to U.S. recession or not U.S. recession.
Understood. Understood. Thanks. That's all from my side.
Thank you. The next question comes from the line of Shyam Maheshwari from Aditya Birla Mutual Fund. Please go ahead.
Yeah. Thanks. Hi, Akshay. Congrats on a good set of numbers. A couple of questions from my side. Firstly, on the machine component side, obviously, we have been continuously adding capacity here, as can be seen from your presentations over the last three or four quarters. Where do we want to eventually pick up this capacity to? I think it's about 630,000 machine hours. But is there a plan as to how much capacity you want to add over the next couple of years?
Yeah. This is a variable thing, Shyam. It honestly depends on the kind of machining that we'll have to do. We have the spare casting capacity. So, as we develop the component, we add complementary machining capacity. There's no one-to-one when it comes to machine hours to a casting tonnage. For example, a one-ton casting may require four hours of machining, and some other casting may require about 10 hours. So, this is something we do on a flexible basis. These machines, they don't have a long lead time. So, as we book the business and bring it to maturity, we invest in these capacities.
If you ask my gut feel, just a gut feel, I would say if we have to meet our target of INR 750 crores of a machine component business, the machining capacity will eventually end up somewhere around 7.5 to 8 lakh machine hours.
Interesting. And how much CapEx would that entail to increase it by another 1 lakh, 1.5 lakhs?
It all again depends on the type of machining, Shyam. See, on a thumb rule basis, when we say we add a machine, it equals over 7,200 machine hours. So, technically, to add about a lakh and a half machine hours, we need to buy about 22 machines. A given machine costs maybe INR four crores, and a given machine also costs us INR 10 crores. So, it is again, like I said, variable on the kind of product that we develop.
Interesting. Got it. And secondly, from a more medium-term perspective, obviously, in the near term, there are these challenges on the geopolitical side, and probably we focus more on integrating some of the acquisitions that we have made in a more seamless manner. But from a more medium-term perspective, what are some of the key KPIs that you guys are kind of looking towards from a strategy point of view?
At our company level, so we would be looking at capacity utilization. We want to maintain it somewhere around 80%. Don't go in for bulk CapExes like we have done in the past. The time is now to be cautiously optimistic and add capacity on a reactionary basis rather than the expectation basis. So, you should look at net debt going down. That would be a key KPI for us. The second one will be how we optimize our ROCE. Third one would be how we optimize our overhead costs and how we integrate our multiple businesses into one seamless entity on a non-financial parameter side.
Got it. Got it. Thanks for answering. Best of luck.
Thank you. The next question comes from the line of Darshan Jhaveri from Crown Capital. Please go ahead.
Hello?
Please go ahead, Darshan.
Yeah. Hi. So, heartfelt congratulations on a great set of results, sir. I just wanted to ask a bit of a small clarification. We are saying around INR 2,000 crores of revenue that we can do maybe this year on a constant raw material basis. So, that would be for a stand-alone or consolidated business we are speaking about, sir?
Consolidated revenue on quarter one raw material cost.
Gotcha. Okay. Okay. Fair enough, sir. And so, then for FY27, because we are saying capacity will be near full utilization, so the growth will not be that much because we are seeing about INR 21,000-INR 22,000 crores. So, the CapEx plan, have we finalized anything, sir? Right now, we are yet to, if you want to do a CapEx and some plans, any plans, what expansion we want to get into or what are the areas that we are looking at, sir?
See, there won't be any major CapEx cycles anymore. We have enough facilities in terms of land and building infrastructure in Aurangabad and Hyderabad and Bangalore. What we will be doing is adding just equipment. So, this will have a very short lead time, four to six months to bring in machines and commission them. So, looking at how the current year is shaping up, maybe by quarter two or sorry, Q2, or looking at 2027, we shall do in Q1 of 2027 some CapExes. We'll be doing it tactically to meet our customer requirements rather than commit capital upfront today, given the overall uncertainties in the world.
Okay. That's a very fast approach, sir. That's helpful. And for the component business that we are speaking about, so we want to essentially kind of double it. So, what's the timeline for that, sir, that we are speaking about?
In two years from now.
Gotcha. Okay. Okay. Fair enough, sir. Yeah. And so, just the margin, sir. So, just from an understanding of someone who's not in the industry, so how much does the RM price increase impact our margins? In terms of percentage, I understand because a higher amount of the raw material price will increase anyway, sir, but what's the corresponding EBITDA increase that happens, or how will it impact the margins, sir?
So, our margins are unaffected in absolute terms. On a percentage term, it's just that inflation causes your margins to look lesser, or deflation causes your margin to look better. We work with a fixed conversion price with the customer, and we have a price variation formula for raw materials, scrap, and other metals such as copper, aluminum, etc.
Okay. Okay. Fair enough, guys. So, EBITDA is essentially just a function of our volume only, and raw materials just will inflate and deflate the revenue. Fair enough, sir. And just last question on my end. So, the Q4 depreciation is what will be the number that will go ahead, right, in the next full year, sir?
Yeah. I think the Q4 number is the number for the whole of next year.
Okay. Okay. Fair enough, sir.
Again, we do some CapEx in H2, obviously.
And so, sorry for that, sir. Just one last question. The CapEx would be around INR 50-100 crores. What kind of CapEx amount you would like to see, sir?
Again, on a very non-committal basis, I can tell you, if the machining capacity does go up, I think that will cost us another INR 50-60 crores in CapEx, too, maybe, potentially, if everything is working out. In terms of lamination capacity, I really don't see anything more than INR 15 crores in the current year and maybe another INR 15-20 crores in the next year. For next year, in terms of machining capacity, I think we'll be closer to about INR 60-70 crores, if again, everything is panning out as per plan.
Okay.
In the best-case business scenario, where you're talking of lamination volume growth beyond 72,000 and machining going to 8 lakh machine hours, cumulatively over 24 months, it'll be something like INR 130-140 crores.
Oh, yeah. Fair enough, sir. And what kind of an asset turn do we have on this, sir?
See, over here, asset turn in machining will be closer to 0.7, 0.8 because we are already doing the casting induction and utilizing the revenue. So, the incremental revenue will be not so much. It's just the value add that will come in. In terms of the lamination investment, your asset turn will be closer to 5 because this is, again, mostly towards the pump appliance, LV motor industry, where your margins are lower and your asset turns are higher.
Okay. Okay. Fair enough, sir. That's it from my side, sir. Thank you so much for all your answers. All the best, sir.
Thank you.
The next question comes from the line of Pratham Rawat from Mirae Asset. Please go ahead.
Yeah. Thank you, sir. So, just one question from my end. I wanted to understand our company's exposure to wind sector, and if we can have a breakup of the domestic and export segment?
In terms of wind, out of the 4.65% of the renewable energy which contributed to our total revenue, wind would take about 3% in total. Out of that, I would say 75%-80% for the whole year was domestic, and remaining was export. More pointedly, in quarter four, there was no export. It was entirely domestic.
Okay. Okay. So, do you see this trend increasing because there were, sir, talks of this new MNRE norms where they are implementing more domestic usage of the raw materials?
So, the wind power generators, that is where our components go in the wind power business of our customers. As far as I know, none of the wind turbine generators are currently imported to India unless there is a full wind turbine coming to India from China. So, whether that will spur some growth for us, it is a little early for us to estimate that. However, what we are waiting to see is how the European market in wind renewables bounces back. If that does, I think that should yield some growth in the export market towards EU.
Okay, sir. Thank you.
Thank you. The next question comes from the line of Pulkit Singal from Dalmus Capital Management. Please go ahead.
Thank you for the opportunity. The first question is largely around the whole macro scenario, geopolitical. I mean, you've had marquee customers for the last 10, 15 years, and these guys have huge manufacturing needs. Do you not see an opportunity in all this uncertainty to kind of further into their manufacturing chain, either for your current products or any new set of products? So, that's already happening. As I said, we are in one of the answers. One day, the discussion is on tariffs, and the discussion gets spun around saying, "What can you do from China to India?" So, definitely, those opportunities are there. Right now, our teams are handling RFQs at a rate that they can't even respond to for moving products from different geographies to India because, overall, the view is that India will be a net beneficiary of this tariff war.
However, to say that this will mean immediate gains for us would be a little premature because, just like us, where we take about two to three years to develop a product and get it approved in the customer, the same's going to apply to us, right, when they want to move stuff here. So, I would say there's a lot of uncertainty as to whether the customer wants to move something. There's going to be no third term of Trump. So, what happens after Trump goes to tariffs? So, we are also cautious, Pulkit, in seeing to take only those businesses that, without the tariff being a factor, will be competitive eventually globally. We don't want to take on business today only on account of tariff arbitrage.
Right. I mean, there would be certain businesses just purely because of diversifying the supply chain as well, right? I mean, irrespective of tariffs, people realizing they cannot rely on one country either way to a large extent. So, I'm thinking, is that really because when you're saying that RFQs have increased, I'm presuming that means people are taking a decision in some ways, or is that a wrong interpretation?
Yeah. They are taking a decision, and we are excited only about those RFQs where we feel that fundamentally we have a better cost and quality supply than our nearest competitor in a different geography. Now, when it comes to diversification, yes, if someone wants to bring us as a second source where pre-tariff, we are slightly expensive, we are happy to get into that supply chain without great expectations going forward. So, we are trying to focus ourselves on where we are as well as more competitive and address those, and thereafter move to something where we'll be, say, L2 instead of L1 pre-tariff.
Yeah. So, in terms of any quantification, these RFQs, like earlier, let's say a year ago or six months ago, I mean, how many would there be per month or quarter, and where is it running now? And to get a sense of what is the level of intensity out there?
So, if you talk of customers, right, so normally, the RFQs would come mostly from existing clients. Once in a while, in a couple of months, you'll get an RFQ from a new customer, and then that process would take two to three years for maturity. Today, I would say we are getting more than 10 RFQs in a month from new customers and clients which we have never heard of. These are medium-sized enterprises in Europe and the US. They are not global names, but relatively good businesses. So, that gives you an idea as to the chain and profile of the buyers. In terms of absolute RFQs, I would say there's more than a 200% increase in RFQs. While that sounds exciting, I'll give you a word of caution: more than half of these will fail. It is just like a reaction to the uncertainty geopolitical globally.
No, sir. Fair enough. I mean, these may eventually go whichever direction they do. But typically, what is the size of orders for such RFQs? What is the range of outcomes?
Right from $500,000 annual business to a $50 million annual business.
50, 50.
Yeah. Right from 500,000 to 50 million.
Okay. So, it definitely opens doors for more conversation.
Yeah. It opens a door. It doesn't open. It's already opened a lot of doors for conversations. It's already yielding additional business to us. My concern is it has to be sustainable post-tariff world because I don't see these tariffs continuing the way they do.
Right. I mean, and you may have to probably shape a contract in such a way so that there's a—I mean, Pitti tends to—I mean, they do not go back on their commitments. I mean, otherwise, there's no point of taking a contract.
See, you may like to put it in a contract, but eventually, trying to enforce it is not going to yield you business. That is why I said that we are focusing on business, looking at the fundamentals. So, for example, I'll just give you a small illustration. So, like a shaft business, the nearest competitor was in China. Before the new rounds of tariffs were announced, we were, as it is, more competitive. So, we are more comfortable growing those businesses and developing new products in that segment. We will not be looking at doing something where we are not competitive. So, say, for example, someone wants us to supply a washing machine core lamination for a U.S.-based customer. That's something we'll never be competitive against China except tariffs.
Right.
So, that's something, even if it means a $50 million business, not interested in. We will entertain the customer. Let's keep that relationship going, but not excited about that.
How is your audit report?
I hope you get the intent of how we are addressing the RFQ.
Yeah. I mean, ultimately, you have to decide where you want to go, I mean, and what is sustainable.
Exactly.
But I'm also thinking that it probably opens door for new products for you to enter into newer areas that you may not have thought of earlier because you have such customers who would have needs in multiple areas, I would presume. So, I'm just wondering whether that also allows you to enter into some areas in some way.
So, see, there are discussions with clients where they want wound stator of course. So, that brings in an additional element of value add, gets an element of copper. But again, looking at the tariffs on copper or no tariffs on copper, how does that eventually play out? For us, it's a new industry, so it's a little confusing to us. So, we will not want to get into something we are not familiar with in such uncertain times.
Understood. Lastly, just order book, any sense of what it has been, how it has grown, Q1, QoQ, adjusted for the raw material price? I mean, just to get some sense of direction.
Adjusted for raw material price, I wouldn't have that, but you can probably subtract 5% adjustment for raw material. So, I would say about 8%-10% growth in the order book from Q3 to Q4, and Q4 to Q1, I would say for real deliveries, it's flat. In terms of expected delivery, we have grown about 10% again.
Q4 to Q1, as in you're talking about the current ongoing quarter?
Yeah. Yeah. Ongoing quarter.
Okay. Understood. But on a YoY basis also, I mean, so Qo Q, it's 10% growth. Q4 to Q3. But YoY.
Pulkit, we only track it on a Qo Q basis. On a YoY basis, it is not really relevant because your raw material price has inflated by about 10%.
Got it. Got it. No, this is great. Thank you for this and all the best.
Thanks, Pulkit.
The next question comes from the line of Mahesh Patil from ICICI Securities. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Sorry, I have joined in late, so if I answered this earlier. I wanted to understand the volume growth in terms of for FY26, FY27. Just wanted to understand the outlook. I think you mentioned stable business from railways and good growth expected in data centers and power.
In terms of lamination volume, we are targeting about 68,000-70,000 tons in the current year. For FY27, we are setting a target of 72,000, which we may upward revise going forward, looking at how the market is. Because to go beyond 72,000, we require CapEx. That's our peak utilizable capacity.
Okay, and just to get a sense on overall, not segment-wise or anything, just for India market, how do you see the volume growth, let's say, this year based on the inquiries that you would have received overall net net?
Net net, I would say a little bit of growth. There's a lot of cost pressure when it comes to material cost, which I explained in detail. Probably in the transcript, you can read that. Based on the material cost impact, there's a small amount of growth that the customers are projecting. Once everything settles down in India regarding the price of raw material, we are expecting, again, a 10% volume growth in the domestic market.
10% volume growth. Okay. Sure. Thank you. Thank you so much.
Thank you. The next question comes from the line of Parikshit Gupta from Fair Value Capital. Please go ahead.
Hi. Thank you very much for the opportunity. Most of my questions have been answered, and thank you for such detailed explanations. Just one thing from me. I understand the exposure to different industries as illustrated in the presentation. But if we look at competition, there are many players who are increasing their share of business to new sectors, I mean, growth sectors such as defense and aerospace. These sectors also enjoy very high margins along with good visibility for the next couple of years. I just wanted to ask if there are any plans for you to increase because you mentioned some aerospace in the other segment. Along with that, you mentioned that they are not so much dependent on government CapEx. So, I just wanted to understand your thought process behind it, if you can please spend a few minutes on this.
So, if you take the defense industry, first and foremost, the core product of the company, which is lamination, which are required, the defense industry really doesn't require much lamination. Maybe a few things in airplanes. Apart from that, there's hardly anything. So, the only place where we can probably serve the defense industry is from our machine components. And more so machining, not even the castings that we make will be usable in the defense industry. We have the capability in our machine shop to address that market, but being long gestation and a non-focus area for us because eventually the revenue potential is very small from that business as far as we are concerned. So, we really don't focus on that. We rather stick to our core.
The other consideration is that we require certain advanced equipment which we require to do our processes, which will not be available to us as we give a declaration that we will not use this equipment for nuclear and defense industry.
Understood. But you've been working with really big clients, Wabtec, Siemens of the world. Before getting into finance, I spent a couple of years with GE across businesses. So, have you not also considered being a tier two supplier to any of their core vendors just in order to surpass the long gestation cycle? Because I think approval days and the stringent quality norms are different across tier one and tier two. Not saying that you won't be able to fulfill them, but just considering the time required.
See, if we have to put in that effort, we will do it sometime down the road. And that would not be for defense. I think civilian aviation would be far more profitable and in terms of revenue potential higher than the defense player.
Absolutely.
So, there's turbines, aviation turbines are being localized in India increasingly. So, there will be potential for getting into that side of the business.
Understood. Do you have any of such plan on the whiteboard, or is it something still?
It's a very rough plan, and our idea on that would be to get an entry through an acquisition. And as you guys know better than I do, the valuations for aerospace and defense are sky-high today. So, I would wait for those valuations to normalize before I look at that. Because honestly, to do it ground up is something you would not want to do. And to be a Tier 2, the profitability then goes away. And the Tier 1 is going to keep all that profitability, and you're going to do the hard work.
Sure. Understood. This was very helpful. Thank you again, and good luck for the current quarter.
Thank you. The next question comes from the line of Akash Singhania from Ray Global Investments. Please go ahead.
Yeah. Hi. Thanks for the opportunity. So, hi, actually, how much has the net debt increased in this quarter and what it is now?
Net debt is about INR 435 crores as of the year end. If I remember correctly, the quarter before, I think it was somewhere around 300 and something. One second. Just hold on for a second. It's 435 for the current quarter. I can't find the last quarter number. I think it's there in the previous PPT.
Right. So, I guess what I remember speaking with you last quarter was that we were intending to reduce it by around sub INR 300 crore. I think it could be INR 330-340 last time. Even I'm not sure. But the intention was to reduce it to below INR 300, eventually move towards INR 200-250 crore. But seeing this increase, just wanted to understand what has led to it.
If you look at last quarter, actually, I thought the number is about 435, and this time also is about 437, so it's more or less flattish. The reduction will come in the current year as we stop our CapEx cycle and take a pause, so whatever is the cash accruals, we should be looking to retain the company towards net debt reduction in the current year.
Okay, so by the end of the year, can we look forward to something like a 20% reduction, or is it too much?
See, if I...
If CapEx plan, which I just mentioned sometime earlier about INR 50-odd crore for machine shop and about INR 15-20 crore for lamination. Despite that, I think you should look at a INR 100-120 crore reduction in net debt at the barest minimum. Okay. Okay. I think that's nice. But that's all from my side. Thank you.
Thank you.
Yeah.
The next question comes from the line of Please go ahead.
Hi. Congratulations on the numbers. I would like to continue on one of the participants' line of questions on the traction motor segment. We looked at Wabtec's commentary in the last quarter. They were not. I mean, the guidance was quite low on the component business for locomotives. Is there any disconnect in, because the traction motor segment has been growing at 25%-30% for us for the last three years. Do you see this?
I'm not able to understand. You're saying Wabtec's guidance was lower, or you're saying my guidance was lower?
Wabtec's guidance was lower, and in general, locomotive delivery in the U.S. is expected to be lower than what it was in the last two to three years.
See, Wabtec is not a U.S.-only based company. They have business with the supply in Brazil. They supply in Kazakhstan. So, it's again going to their own press releases. They have one significant amount of business in Brazil and Kazakhstan. And those are more than offsetting those potential losses in terms of deliveries in the North American market.
Got it. So, you expect to see 25%-30% growth?
In addition to that, just one more further clarification. When Wabtec talks of locomotive delivery, that's a new locomotive delivery. They also have a program for doing modifications and upgradations, where they bring in the current locomotive and completely overhaul it, fitting new motors, components, etc. The mods business continues to be very strong at their end.
Okay. I'll check, but I think what I recollect is they mentioned lower single digit for both newer deliveries as well as the mod requirements.
Yeah, you can check that, but I'm quite clear on what I'm seeing.
Sure. And secondly, with these new BS6 norms, I mean, do you see any improvement in volumes? And secondly, with the new machines coming in, is there any change in motor design or motor content, or is it the same for us?
See, the alternator design has not changed. What has changed for the BS6 is the engine side and the engine outlet side where the gases and the polluting gases come out. So, that adoption at one of our customers was slow. The other customer was fast. So, the customer which was slow has now caught up, and we have seen those volumes return to normal.
Okay. So, volumes have come back to normal for this segment. Is this what you're saying?
Yeah.
Understood. Lastly, what would be the operating profits for Bagadia and Dakshin in their standalone businesses? Just wanted to check whether, I mean, there are synergy benefits playing out or not.
In terms of account, I'll give you the number. I think my team will just pull it out when that happens. Like I was saying to the other gentleman before in the call, the synergy benefit is also derived at the parent company level because we supply these off-cut materials to our wholly owned subsidiaries at a lower cost to them. So, for us, it is still a higher revenue than what we would sell in the market. So, the way to understand the synergy benefit is to look at the consolidated EBITDA and not standalone. However, in terms of standalone EBITDA in Bagadia Chaitra, it is about INR 17.34 crores for the full year. And in Dakshin, it is INR 12.50 crores.
Got it. And the components business you mentioned, INR 70-50 crores target in next two years. If you could break it up, how much of it would be for motor related and how much of non-motor? And within non-motor, what are the end industry applications?
See, I'm not going to go into that level of breaking up at this stage. Let things materialize. There are more discussions than the guidance I've given you. And as you know, there'll be a fallout in the overall business that we are developing. So, we factor that in when we give our guidance.
Got it. Yeah, that's it from my side, and yeah, thank you.
Thank you. The next question comes from the line of Nesar Parikh from Native Capital. Please go ahead.
Yeah. Hi. Thanks for the question. Most of my questions have been answered. I just wanted to understand that as the growth that we have seen, obviously till now, last two years, has obviously been very strong. Now, as we look to not do more CapEx and pay down debt and the guidance that you've given for 10% volume growth, so should we expect the next two years the growth to moderate and so even profits to grow maybe in that 10%-12% range only? How should we think about it?
The thing that we are looking at internally is not to chase just volume growth, but to bring in efficiency and pivot our product mix to a more profitable eventual product mix between machining, casting, lamination, assemblies. So, the volume growth will be slow, but your margin growth will be higher.
Like I've said before, we should be looking at a percentage point increase in EBITDA margin over the next 18 months. For the FY26, we are looking between 16.5%-17% EBITDA margin. And as we don't do CapEx and conserve cash on net debt go down, so your flow-through to your PAT should be much higher going forward. While the revenue may grow 10%-12%, maybe around that level, your net margin should grow at maybe 15%-20%. Right. It's not slightly higher.
EBITDA per ton this year?
So, see, again, I'll give you the number, but again, it will have no relevance because as you understand, there's Dakshin, there's Bagadia Chaitra, there's a significant amount of machine components. You can quite easily arrive at the EBITDA per ton, INR 271 crores divided by 63,200 tons.
It's about 42,800 tons, INR 42,800 per ton on a consolidated basis.
Right. No, no. That I computed. What I meant was if you look at your earlier just standalone lamination business, excluding your subsidiary machining, what we—
Earlier also in the standalone business, we bought the castings from Pitti Castings, and we machined and sold it. Not all of it, but a significant portion of it, roughly half of those.
Right. Okay. Understood. And I needed one—sorry, but just one housekeeping kind of a question on page 15 of your presentation where you give the sales, they come by volume, right? And you mentioned you've done some 62,000 tons of volume this year. So, what elements of those do you actually consider when you are giving us that number of 62?
So, you take the first five line items, those laminations all the way through child parts.
So, this is all the lamination and the assembly breakup. And then you just add the PIPLCS volume. Okay. So, that will give you the overall lamination breakup. As for the casting breakup, you add the machine components, raw castings, and stator frames, as well as the DFPL volume. So, that is a total machining or casting sales.
Right. And do you, in your revenue, is it possible for you to kind of break up what percentage is lamination versus machined and casting?
It is slightly complicated. As you can see, you know the stator frame core drops. These are machine components which are going into a lamination assembly and so are shafts. So, it gets very tricky when you try to do that. We have to then do it at some internal cost movement from one location to the other.
So, we actually don't look at it in that way yet.
Okay.
Because if you do, that will help because it will, one, it helps to compare versus earlier also. And secondly, it just gives a better understanding because your capacities and volumes, etc., are obviously different for, so that is.
So, if you take the revenue for machine components, it's about 375, like I mentioned.
including the assemblies that go into the laminations. But we don't split it and then look at it differently in our financials. For us, it's an integrated reporting.
Okay. Okay. Got it.
And this is. It is just by end use. One product is going into, say, motors and generators, and one is not.
Right. Understood. When it comes to machining. Last question.
I think you answered to some earlier participants, but your idea was that you wanted to do more of high-value add assemblies and things like that. The growth for that, we've not really grown that if you look at versus FY26, it's actually down. And earlier, the target was that we wanted to actually grow high-value add assemblies because that is high margin. So, what is the reason why we're not able to grow there? And is there something that we can do to kind of, because that will also help improve margins?
We've grown across the board, if you see. We've grown in every one of them. Maybe the growth in the specific high-value-added assemblies is only looking at 2.94%. But if you look at the stator frame, rotor shaft, if you look at child parts, shafts, etc., the volume growth is significant there.
Okay. Thank you so much.
All the very best.
Yeah. Thanks.
Thank you. The next question comes from the line of Bala Subramaniam from Arihant Capital. Please go ahead.
Thank you so much for the opportunity, sir. So, my first question regarding, like you mentioned, about Pitti's license expiry in this April only. And it's basically increasing the raw material over the next six to nine months. And you are mentioning about 75 basis point margin improvement. So, how do we understand whether, how much impact is from integration of acquisitions and increase in machining capacities? How do you tackle these raw material price increases? Because we cannot always, cannot pass 100% to the customers. There is always some.
Bala Subramaniam: Firstly, in our industry, it's 100% pass-through or we don't do business. It's as simple as that. And that is something which doesn't change. It's a core tenet of the business. So, there's no question of the RM price not being passed through.
Sir, I think the quarterly mechanism is there, right, sir? Like it's a...
Yes. So, it's a quarterly mechanism. And our procurement is also on a quarterly basis. Therefore, there's no question of it not getting passed on.
And sir, out of 75 basis points margin improvement, how do you understand how much it's from integration of acquisitions and how much it is from increasing machining hours?
See, I think that is something you better leave to management to figure out. Obviously, if you're saying 75 basis points will be our target to achieve, we will not target 75 basis points. That will be something we target more. Some things will work, some things will not. So, you better leave that to us to deliver on.
Got it, sir. So, what is the status of supplying directly to the Indian Railways?
It's ongoing. We have already become Tier 1 suppliers to the OEMs doing many products, and it's ongoing.
So, what are the products we are supplying, sir, right now?
It's a wide variety of products that go into the locomotive from casting, machining, laminations, shafts.
Okay. Sir, okay. Thank you.
Thank you. Ladies and gentlemen, the last question comes from the line of Akshada Deo from Niveshaay. Please go ahead.
Hello, sir, the non-committal expansion that you mentioned, the INR 50-60 crores in machining and INR 15 crores in lamination tentatively, what would the capacity increase look like, and a tentative number on that would be great?
On the lamination side, the tonnage capacity probably will increase by about 3,000 to 4,000 tons. The assembly capacity will increase significantly in that, which we obviously don't give a separate line item. In terms of machining capacity, again, on a non-committal basis, I'm just giving you a midpoint. That should increase by about 70,000 tons. 70,000 hours. 72,000 hours.
Okay. Okay, sir. And this will again have the same...
And then add more machine hours like I had mentioned.
Right. So, this should add incrementally roughly INR 250 odd crores to the business?
Not really. The INR 15 crores of lamination revenue capacity addition will add about INR 200 crores of top line. However, in terms of, not 200, sorry, what am I saying? It will add about INR 50-60 crores of top line. And the machining capacity will add only about INR 40 crores. There the expectation is 0.7-0.8 as it turns.
Okay. It's not 5X.
See, what we are doing as raw castings in PEL and the Dakshin foundries, which is roughly about 5,000-5,700 tons, that will move into machine components.
Okay. Got it.
So the revenue for the base is already there. It's only the incremental value add that will move to revenue.
Okay. So, we can expect just another INR 100 crores or so of incremental revenue, probably if non-committal.
Incremental revenue potential for the INR 60 crore or INR 65 crore of CapEx, yes.
Yeah. Okay. Thank you so much.
Thank you. As there are no further questions on behalf of Pitti Engineering, that concludes this conference. For further queries or visiting the plant, please be in touch with Mr. Raman Naidu from Intellect PR on 9920209623. Thank you for joining us, ladies and gentlemen, and have a wonderful day ahead.