Ladies and gentlemen, good day and welcome to Pitti Engineering's Q4 FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. Please note that this conference will be recorded. Joining us today on this call is Mr. Akshay S. Pitti, Vice Chairman and Managing Director.
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 call over to Mr. Akshay Pitti. Over to you, sir.
Good evening, and a warm welcome to you all for the Q4 and full year FY 2024 earnings call. Before we open the floor for the Q&A session, I will briefly touch upon the highlights for the year gone by. Our ongoing CapEx in Aurangabad facility is on target. The enhanced capacity of 72,000 metric tons per annum there will be commissioned by September 2024. We have concluded the previously announced acquisition of Bagadia Chaitra Industries Private Limited on Ma y 6, 2024.
With this, we have now gained access to both the facility in the strategically important South Indian market and an end user industry which we previously did not serve. The scheme of amalgamation with Pitti Castings and Pitti Rail was duly approved by the NCLT convened meeting of equity shareholders and unsecured creditors of the respective companies.
A joint petition has been filed with NCLT, Hyderabad bench, and the same is reserved for hearing on June 7, 2024. The board has approved fundraising of funds not exceeding INR 360 crores through issuance of eligible securities in one or more tranches, subject to approval of members at the forthcoming EGM. I'm happy to inform you that we have received the addendum to our incentives for investments in the Aurangabad facility.
Consequently, we have accounted an incentive amount of INR 30.45 crores through quarter four FY 2024. On the sales volume for quarter four, we have achieved 11,435 metric tons, as compared to 9,591 metric tons in quarter four FY 2023, higher by 19.22% on a YoY basis.
Total revenue for Q4 FY 2024 was INR 359.32 crores, up by 36.5%. EBITDA for the quarter was INR 48.64 crores compared to INR 40.56 crores in the previous year, registering a growth of 19.9%. PAT for the quarter stood at INR 40.36 crores, higher by 62.5%. For the full year, the sales volume of 42,305 tons when compared to 36,297 metric tons in FY 2023, up by 16.9%. Revenue for the full year stood at INR 149.81 crores, as compared to INR 1,117 crores in FY 2023, up by 11.79%.
Net profit grew for the full year by 53.3% to INR 90.20 crore. The net debt for the year stood at INR 428 crore. The order book and schedule stands at about INR 800 crore. We have also provided an investor presentation along with a detailed performance report for your perusal. I would now like to open the floor for the Q&A session.
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 telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. The first question is from the line of Balas ubramanian from Arihant Capital. Please go ahead.
Good evening, sir. Congratulations for good set of numbers. My first question is regarding this Bagadia Chaitra Industries acquisitions. And, so, like, when we can expect around INR 300 crore top line in this acquisition company and we earlier mentioned around 10% kind of margins. Like, I just want to understand what's the rationale for this acquisitions and further, why those company promoters sold the companies, any specific reasons for that? These are my first questions.
I can't comment, I can't comment on why the promoters sold that company. That is something that they can answer. As far as the expectations in that company going forward, in terms of tonnage, that company has achieved about 14,000 tons of steel for FY 2024. For FY 2025, we are targeting about 16,000 tons of sales in the subsidiary company. In terms of margins, we expect the margins there to improve on better utilization of raw material between the two companies, the parent company and WOS.
I have explained this in detail in the previous conference call on the rationale of the merger, so I think then you know, refer to the notes from that call, which can answer the remaining queries on this particular point.
Okay, got it. Sir, we have seen our clients, like ABB, Siemens, they have posted good set of numbers in this quarters. So what kind of opportunities and what kind of order inflows we are missing in current point of time?
Broadly, we are seeing good growth across all the end user segments. Obviously, railways is continuing to outperform all the other segments, both domestically and internationally. But, I would say renewables also is performing very well. So all the other segments that we track are performing very well.
Okay, sir. So on the export side, our contributions are around 35%-40%, that range. So what kind of opportunities we have? One of our key client also expanding into metro side for a new plant to cater international market. I just want to understand how every player is talking about metro opportunities on the export side. So, like, what's your view on that on the export side? What kind of opportunities we have, especially on the railway side?
Exports overall is continuing to remain strong despite headwinds in the end markets, such as Europe and U.S. Our exports remain strong. In addition to that, our indirect exports, the products that we supply to these entities in India, and then they export it to their different markets, also is remaining robust.
I've got it. And this underwriting of INR 360 crore, or like, for like, what, what kind of utilizations, they are going to use those funds? Like we already mentioned that, you know, peak debt, debt is expected around INR 450 crores. Whether, this fund will be utilized for, debt repayment or, further growth opportunities.
The funds are targeted to be raised for a multiple purposes, including further opportunities, organic and inorganic growth, as well as reduction of debt.
Got it.
I'm sorry, I can't understand what you're saying. There's disturbance in the background.
Sir, I'll come back in queue for the question.
The next question is from the line of Pratamesh Dahake from Motilal Oswal. Please go ahead.
Hi, sir. Am I audible?
Yes, you are audible.
Hi. So wanted to check upon two brief things. Firstly, you had said an order book of INR 800 crore. So adjusted for price, how much has it grown or reduced? What are the execution timelines? Can you also give us some color on split by sector, split by geography? How much of it is domestic and how much of it is exports?
The exact numbers, I think we can get you if you send the request in writing. Pending that, off the top of my head, I think about 25%-30% of the order book is export side, the remaining is only domestic. In terms of execution timelines, this would be about INR 200 crores, which is more than one year forward, and remaining is executable within the year.
Okay. And split by sectors, if you could give us a brief idea.
We track a lot of sectors, so to give that, off the top of my head, I don't think I can do that right now.
Okay. Okay, understood. My next question is around incentive, right? So, what I've generally seen is, we account the incentives for a year as incentive receivables in our balance sheet and realize it in the next quarter of the next financial year. But this time, it looks like we have accounted it in our P&L in the last quarter itself. Has something changed, or was it sanctioned earlier this time?
No, if you recall, we have already accounted one tranche of incentive in, if I remember correctly, quarter two.
Yeah.
Quarter. So, this time, we have got a second addendum. So if you go back to our original Aurangabad incentive, we are investing-
Okay.
INR 180 crores. The first eligibility certificate, which we have received, was for INR 103 crores. That amount-
Perfect.
- was eligible over seven years.
Okay.
Which works out to about the INR 14 crore per year that we normally book.
Okay.
Then there was an expansion in Aurangabad facility, which was to the tune of another INR 65 crore worth of incentives. For this, the addendum was pending to be received from the government of Maharashtra, last financial year itself. Due to certain other reasons in Maharashtra, that did not come in. Now we have received the addendum-
Okay.
- and therefore book the incentive amount for two years, FY 2023 and FY 2024, for the enhanced value of the incentive, which is basically-
Understood.
- INR 65 crore, which will be accounted within the next four years.
Okay.
Two years we have accounted in quarter four.
Understood. So, if I were to see, there is another INR 220 crore, which will be... Which is, you could say, will be expensed or amortized over the next seven years until FY 2023, FY 2023, as incentive?
Just one second. So, see, just to give you a breakup on this, for the next two years, we'll account roughly about INR 30 crore per year.
Okay.
With this, the original incentive claim would be finished.
Okay.
The current ongoing expansion-
Okay.
including what we are planning over the next two years also will be part eligible for the incentive scheme.
Okay.
This amount is expected to be somewhere between INR 300-INR 350 crores, based on actual spend in the facility.
Okay.
That amount would be realized over nine years, starting-
Starting from?
Uh,27 .
27.9 years. Till FY 35-36.
Yes. It will be on the actual investment made till FY 2027.
Mm-hmm.
Divided by nine years, starting FY 2027.
-roughly INR 27-30 crores, I mean, from FY 2025 till FY 2035, we can expect average 30 years, INR 30 crores of incentive per annum, right?
Yes, I think that would be correct.
Yeah. Okay, understood. My next question was, let's say, if we were to look at Pitti on a standalone basis, there is a plain machining revenue and there is a motor assembly revenue. Can you give us a broad split as to how much is just plain machine vanilla revenue and the motor assembly revenue, how much it is?
If you take plain vanilla machining revenue, which are basically your components, which are not going into any other motor comp assembly, that should be-
Yeah.
In the vicinity of about INR 90 crore.
INR 90 crore. Agreed. And how do you see the split going forward? I mean, we from the investor presentation, we are aware how much metric tons has been sold, but then how do we see the-since we are adding machining capacity, how do you see the lamina machining component increasing in the next three, four years versus the motor comp motor business going ahead?
We are working internally to take out a proper metric through which all of you can track this, and I hope to have that by the end of this quarter.
Okay. How much gross margins do we enjoy there in just plain machining business?
Plain machining business, the gross margin should be somewhere around 45%-50%.
Okay. So our Pitti casting business is something which will aid the 45% gross margin business. Is it fair to assume that?
Yes, that's fair to assume that.
Okay. I'll join in queue for the set of questions.
Thank you. The next question is from the line of Naysar Parikk from Native Capital. Please go ahead.
Hello. Hi, am I audible?
Yes, you are.
Yes, please.
Thank you. So first question is on the order book. You know, if you look at last year, March 2023, I think you were around INR 825 crore. Now we are around INR 800 crore. So what is the reason we are not seeing growth there? And you know, how do you see FY 2025, if you just keep the merger and the acquisition aside, but just on a standalone, organic basis, how should we think of FY 2025?
The FY 2025 is, I would prefer to, you know, give you a volume projection, what we are looking at. In terms of steel, we did 42,000 tons in the last financial year. For the current financial year, on a standalone basis, we are looking at about 48,000 tons of steel. And at the WOS level, we are looking at about 16,000 tons of steel.
Okay. So, o kay, so it's 48 plus 16 is what you are looking at. And, you know, at the acquisitions you've done, the 16,000 tons, the EBITDA per ton over there, you know, after the material benefit that you will get and all the production that you do, what should we expect as the EBITDA per ton over there on the 16,000 tons?
See, benefits of the integration will accrue over the next 12-18 months. At the peak, at the end of that entire process, the EBITDA over there should be in the vicinity of INR 18,000 a ton.
Okay. So that will be 18. And for our 48,000, should we assume we'll maintain this 42,000 tons that we are showing this quarter? Is that, is that a fair assumption?
This will be going higher. It should be in the vicinity of INR 45,000 for the full year.
Okay. Understood.
Standalone basis.
Understood. Understood. And just to-
We have the merger of the Pitti Castings also happening, so that will also aid the EBITDA number.
Okay. So that 42-45 will partly be because of Pitti Castings also.
No, INR 45 thousand is on a standalone basis, without the benefit accruing from the merger.
Okay, okay. Understood. Understood. Got it. And the order book, just one thing, can you give what the volume in volume terms this year and last year? What is the growth in volume terms?
Just one second. I don't have the full firm number with me, but it should be in the vicinity of about 40,000 tons at the end of the last financial year.
And this year?
I'm thinking FY 2024 end.
Okay. Okay. Understood. And just last thing, the railways, like you said, is obviously, you know, grown significantly. Is it still all exports? Is there some domestic component? And how should we think of this railway thing? You know, how's the traction over here in that particular segment for you?
So, on the railway side, the Indian business is still maturing for us. If you see 40% of revenues on railway side, translates to roughly about INR 500 crores of top line coming from railway business for the full year. Out of this INR 500 crores of top line, roughly about INR 125 crores will be contribution to the domestic segment. The remaining is entirely export based. We see the export side remaining flattish over the next couple of years, while the domestic should grow more than 100% within the next one and a half years.
Okay. And do we have, like, confirmed orders or some... Or is that something that we think or we are still at the pure tendering stage on the domestic side?
So on the Indian side of the railway business, we are basically on two sides. One, which we supply to the OEM, such as, Wabtec, Alstom, Bomba rdier, Medha. So that business is more tender-based. We have to develop the products, and they have to, kind of, pull out those products in the field with the Indian Railways, and then they have the steady contracts. So that business is, I think, almost fully developed and will start, contributing to revenue from this financial year.
As far as the direct supply to Indian Railways is considered, we have to go through certain field trial, which should be completed by, October, and we should start bidding on tenders from October onwards for commercial supplies.
The EBITDA per ton, would it be similar or should we—I mean, there could be some, when we work with Indian Railways and the L1 and all that, should. Will there be some kind of a compression there?
See, on the lamination side, EBITDA per ton will be similar. On the machine components, what we supply directly to Indian Railways will be slightly lower in margins when compared to OEM.
Understood. Okay, got it. That's very helpful. Thank you so much.
Thank you. The next question is from the line of Sanchit Narang from Narang Family Office. Please go ahead.
Hi. I'm audible?
Yes, sir. Please go ahead.
Hello, am I audible?
Yes, you are, sir. Please go ahead.
Yes. Congrats on the good set of numbers, sir. Sir, my first question is regarding EBITDA per ton. If we see it from your presentation, the EBITDA per ton is flattish. Instead of we doing a more more percentage of machining, that is always margin accretive. So why is that?
You know, lamination tonnage also has gone up. So it's not just that we've done more machining, there's more tonnage as well.
Okay.
So you can't just, take a one-to-one correlation on that front.
Mm-hmm. Okay. And moreover, what I wanted to know that, we being in a converter business, then the electric steel raw material prices have gone down, but our EBITDA as a percentage should have gone up, but it has gone down to 14%. Why is that?
Is, you mean for the quarter four or for the full year?
For the quarter four.
Yeah, so in quarter four, we have certain raw materials transactions with Bagadia Chaitra. Because of that, we have higher sales, which will not be there going forward once it become a WOS. We are supplying raw material to the WOS.
Okay.
Which became a WOS with effect sixteenth. So for the last quarter, we had actually sold some raw material to them, which comes in revenue.
Okay.
And secondly, we have also accounted for other income, which is the incentive income, which is not added to EBITDA, but increases your top line by about 10%.
Okay. And, sir, what is the rationale behind raising funds as we have peaked our debt as well to the limit that you told in previous calls?
We are still planning more growth in some of our strategic sectors, and we feel that, you know, having that capital with us will help us going forward.
Okay, so we can expect a capacity expansion plan going forward as well, from here as well, what we have told, for the past two years?
Yes.
Thanks a lot, sir. That's it.
Thank you. The next question is from the line of Sanjeev Zarbade, from Dream Ladder. Please go ahead.
Hello? Hello, hello.
You are audible, sir. Please go ahead.
Yeah, sir. Thanks for taking the question. I wanted to get an idea about the size of the components business by FY 2027.
Firstly, if I just take the components business, we have certain components that we make, which go into the motor and generator side of the business. Then there are certain components that we make, which have nothing to do with the motor and generator side of the business. If I combine both of these, today this is about INR 270 crore business for us.
These standalone machine components, which are not going into any motor or generator assemblies, is about INR 90 crore, top line. This combined business, we see, at least about INR 500-INR 700 crore over the next four, three to four years, two to three years, three to four years.
Okay. Okay, sir. That's it from my side. Thank you.
Thank you. The next question is from the line of Khushbu Gandhi from Share India Securities. Please go ahead.
Hi, sir. Thank you for giving me the opportunity. So my first question is on Bagadia Chaitra. So we did the acquisition, and from this quarter onwards, their revenue will be merged with our financials, right?
Yes.
Yeah. So can you just give me an idea, what was their revenue in FY 2024, and what was their EBITDA per ton or what were the margins over there?
Their revenue was about INR 250 crores. Their EBITDA... EBITDA was about INR 14.5 crores, and EBITDA per ton was about INR 10,500.
So, so for the next year, for FY 2025, where do we see, how do we see the improvement in EBITDA per ton, in ex-Bagadia? I know you have given a guidance that overall on a consolidated basis will be improving to 15%, but, if I see on a, standalone as a Bagadia, how much improvement can we see in FY 2025?
Yeah, on Bagadia side, one, on the volume side, we should be going to the 16,000 tons in the current financial year. And on EBITDA, it's a 20-18 month journey, at the end of which we'll be having about 18,000 EBITDA per ton in that entity.
Okay, so in FY 2026, we'll be seeing an improvement immediately, right?
The improvement will start from quarter two onwards, and over the next 18 months, we should be going toward 18,000 EBITDA per ton in that entity.
Okay. And, so when you give us a guidance of up to sales of 48,000 plus 16,000 metric tons on a consolidated. So from the 16,000, if you can split that, majorly that would be coming from Bagadia. Any extra component which will be getting through Pitti Castings?
The Pitti Castings merger, as you know, is pending. We will not get any lamination business from Pitti Castings. Basically, we'll get casting business for which we can do machining going forward.
Okay. So, when do we expect, are we expecting this merger to be done at least in the first half from, from whatever date till now, which you have received?
We have received the requisite approval from shareholders and creditors, and the case is pending in front of NCLT, and the hearing is due seventh of June. On the timeline, I can't give you anything beyond that.
Okay. Okay. Yes, thank you, sir. That's it from my side.
Thank you. The next question is from the line of Bala Subramanian from Arihant Capital. Please go ahead.
Thank you so much, sir. Sir, in the automotive segments, earlier, we are, like, plan to enter into IC part of the business with generator-related products, and, we also like supplying to two-wheeler, on the EV side. And I just want to understand, right now, EV is picking up, so what kind of, like, order inflows or any, thought process on in future, in those, segment?
On the EV motor side, even today, most of the motors are still imported from China. Hardly any motors are being manufactured in India. So as and when the localization of that component takes place, definitely we'll be looking at that as an opportunity.
Okay, sir. In the non-automotive segments, earlier we guided around INR 500 crores of top line by FY 2027, and, like, still we are maintaining that or any further improvement expected?
Sorry, I didn't understand the question.
From the non-automotive segments, earlier, we guided around INR 500 crore of top line in this FY 2027. Any further improvement is expected, like what's the thought process on next 2-5 years time frame?
Do you mean the machine component side of the business?
Yes, sir.
So on the machine component side of the business, we still maintain that we should look at 500-700 growth of top line from that business.
Okay, sir. Sir, like right now, we have some extra land for this this new acquisition company. So any further, like, CapEx expected or any maintenance CapEx expected in next two to three years time frame?
In the acquired company, we don't have any extra land. The facility in Bangalore of Bagadia Chaitra is to be saturated. We will be looking at expansion there maybe in FY 2026.
Okay, sir. Okay. So, like, if you could share on the client mix side, like how much your revenue is coming from ABB, and coming to the top five clients mix or the top 10 clients mix? In this financial year. Q4 and in this financial year.
Top, top five clients will be about 60% of revenue. I can't give you the pecking order, but the top five clients would consist of Wabtec, Indian Railways, cement, among others.
Okay, sir. Got it, sir. Sir, in this, after this 72,000 tons per annum, any further plans which you have, or you have mentioned around more than 500,000 tons of capacity is available in the industry. And right now, the overall railways and the entire CapEx is going on in capital goods sector. So any further, like, growth plans we have?
This capacity that we are expanding will be commissioned by September and should be good for us over the next two years. We will be looking at expanding for business that we foresee in FY 2027.
Got it, sir. Sir, like on that, if I'm looking at the volume side, like, the value-added component side have seen good growth on the volume side. However, the loose laminations are in single-digit year-on-year basis. However, in assembled and value-added, 24% growth. So we can expect that same kind of double-digit growth in value-added component side?
With the acquisition of Bagadia Chaitra, we should be being actually on a consolidated basis, more in loss, going forward as well.
Got it, sir. Got it. It's all right, sir. Thank you.
Thank you. The next question is on the line of Pratamesh Dahake from Motilal Oswal. Please go ahead.
Hi, I'm audible?
Yes, you are audible, sir. Please proceed.
Yeah. So my first question is, I guess in Q4 of FY 2024, our volume contribution from value-added products moved to 79% when compared to 75% in Q4 of FY 2023, which I guess must have resulted into 3% improvement in gross margins. But on an annual basis, the contribution from value-added products has increased from 75%- 76% in FY 2024, but still, the gross margin improved by 4%.
What is the reason behind the same? I mean, is it something like high, the products which are way higher in realization are not being captured in terms of volume terms? Or, is it due to economies of scale of RM? What is the reason behind the same?
Yeah, I think it's the volume itself, it's assembled and value added. So anything which is not in loose condition is typically included into assembled and value added.
Yeah.
Not all SKUs are alike in terms of percentage of value add onto the product.
Okay.
This may be because the percentage of, if I may use a word, lower value-added SKUs vis-à-vis higher value-added SKUs was higher in a ratio towards the lower value-added SKUs.
Okay. It answers the question. Then there could be levels in the value-added segment as well.
Yes. Yes, exactly.
Okay. Okay, and you also mentioned that machining component part would be INR 500 crore worth of business. So is it fair to assume that it will be achievable by FY 2027 end?
Yes.
Okay. If we were to look at the split of that INR 500 crore, how much of it would be motor-related and non-motor related?
Yeah, I think it would be about 2/3 non-motor and 3/3, sorry, 2/5 non-motor and 3/5 of would be motor-oriented.
So sorry, I was not able to hear. Could you please repeat?
INR 200 crore would be non-motor and INR 300 crore-
Okay.
-would be, motor-oriented. If you just look at today's, numbers, out of INR 270 crores, about, INR 90 crores is non-motor and about, INR 180 crores is motor-oriented. The INR 90 crore non-motor-oriented will grow to about INR 200 crores in the next two years.
Okay.
The INR 180 crores of revenue, which is coming from motor side and generator side of the business, will grow to about INR 300 crores.
By FY 2027 end, right?
Yes.
Okay. So, our plans around debt repayment, do they change post the fundraise or, how are your plans around it? I mean, currently, we have INR 500 odd crores of total debt. I'm talking of total debt. What are your plans about how do you want to see the debt position as of FY 2027 end?
Thank you. See, from now till FY 2027 end, there's a lot of time, and it all depends on what kind of inorganic and organic growth opportunities we see going forward. The net debt picture will be dependent on a lot to do with that. The fundraise is just one part of it.
Okay. Okay, but then, I guess in one of our previous concalls, you had mentioned going the ambition of net debt zero, by, let's say, next two years. So the, the plans around the, that execution still remain the same?
See, unless and until we see something dramatically changing, we are committed towards that plan.
Okay. Understood. I had a couple of small housekeeping-
A great opportunity on growth, whether organic or inorganic, we will obviously prioritize that over the previous target of being net debt free.
Mm. Okay, understood. I had one last housekeeping question. So, in our current balance sheet, what is INR 64 crore of other non-current asset and INR 116 crore of other current assets sitting on our books?
Those are the capital advances for the ongoing CapEx.
Okay, and INR 116 crores?
The INR 116 crore will be the capital advances.
Okay, and INR 64 crore, other non-current assets, that we have seen.
This could be tools, dies, and fixtures which are depreciated.
Okay. Okay, okay.
Incentives that we are supposed to receive from the government.
Oh, and okay, and how much, how much would those be in those INR 64 crore, receivables, incentive receivables?
Out of 116 crores of, I'm going back to the first question, answer of yours on this one. The other current asset is about INR 116 crores, of which-
Yeah.
INR 16 crore is industrial incentives yet to be received from the government.
Okay.
48 crore were accounted last financial year. Most of it is not received till now. It will be received by somewhere around November or December, as per the pattern.
Okay.
The remaining are basically our GST and other those kind of things, the other non-current assets.
Oh, 64 crore breakup, then, you have, what is, what would that be?
INR 116 crore.
Yeah, yeah.
INR 116 crore of breakout.
What about the INR 64 crore of other non-current assets?
One second.... That would be INR 62 crore be capital advances.
Ha, okay.
Meaning our deposits with government bodies and electricity, et cetera.
Okay, so maybe once the CapEx is done, that will also come down, right?
Yes, that will come down once the CapEx is done.
So whole of CapEx, 72,000 of metric tons of laminate, sheet metal and the machining hours will be done by September. Can I assume?
The sheet metal side will be completed by September, the machine hours will still take a little bit of time to commission.
I mean, by H1, how many machining hours can we expect, total?
By H1 end, about 600,000 machine hours will be commissioned.
Okay. And the rest by next H1, H2?
Yeah, next by December itself.
Oh, December. Wonderful. That's all from my side. Thank you.
Thank you. The next question is from the line of Karan Kamdar from DRChoksey FinServ Private Limited. Please go ahead.
Hello, sir. Great, great, it's a great set of numbers. So from the previous question, I think I got a part of my answer. So what I was looking at is the change in working capital, which is a hit of INR 134 crore in the cash flow. So I think, bigger amount of it comes from the other current assets and the other non-current assets. Would that be correct?
No, it's not just that. The big change in working capital also comes from the fact that the sundry creditors, if you see year-over-year, have reduced dramatically.
Mm-hmm. Right.
This is because we are changing actually our procurement strategy. Earlier, the procurement used to happen-
Mm.
From vendors who the contract used to be on a calendar basis, not a financial year basis.
Okay.
So now we are trying to align our purchase contracts with the financial year. So as a result, in quarter one, we procured a lot of material out of contract period. And now we are going into the regular contract, wherein we'll have to sundry creditors financing the material, normal cash basis, basically.
Hello? Hello?
Mr. Kamdar, are you on the- Can you hear us? So the current participant seems to have dropped from the queue. We will proceed to the next question, which is from the line of Pratik from CCIL. Please go ahead.
Hi, sir. Good set of numbers, first of all, and congratulations to you. So my question is actually, you know, as we are expecting that, you know, the revenue will start coming from September, September onwards, for the CapEx, and we are raising INR 350 crore for the some growth purpose for organic, organic, inorganic growth. So by FY 2027 or mid FY 2028, what could be the max top line that we could expect?
In terms of tonnage, I can guide you better than the top line, because the revenue is subject to raw material price changes. We are targeting, including the WOS, about 80,000 tons of steel by FY 2027.
Okay. Okay. Okay. Thank you, sir. Thank you.
Thank you. We have the next question from the line of Naysar Parikh from Native Capital. Please go ahead.
Yeah, thanks for the follow-up. I just want to continue on-
[crosstalk]Sorry to interrupt, sir, but you are not audible.
Yeah, hello. Sorry, is this clear?
No, sir, you still sound distant to the next-
Yeah, sorry, is this better?
Yes, please go ahead.
Yeah. No, I was just continuing the question asked previously. So, on the working capital, can you please repeat that, what you were saying?
Yeah. So see, we have an annual contract, which was based on a calendar year with our vendors. This was their financial year. Basically, January to December instead of March to April. Sorry, April to March. So in the last quarter, we did a lot of purchases outside of contract to allow us to realign these contracts to our financial year basis. So a lot of these procurements were done on cash on a spot purchase basis.
Therefore, our sundry creditors have reduced when compared to the year-ago basis, while our inventories have increased to provide for this change in working capital structure, for procurement structure. Going forward, this will completely change once again. We'll go back to the old system, wherein we have, you know, creditor days payable, which is in the vicinity of about 100 creditor days.
Right. Correct. Okay, so this is just a one-off, right?
This is a one-off. This is actually realigning the structure so that we can get efficiency on the balance sheet going forward.
Got it. Got it. Okay, and just one more question was on the machine parts business that you know. What was the margin that we make on that business in this year? What was the margin we made? And as we scale up that to 500, is there scope where we can do high value add and kind of get better margins?
Yeah, on the machine components, our gross margins are in the vicinity of about 40%-45%. That margin is actually much higher than the overall company's average margin, if you see. Going forward, the components that we are targeting will be in the similar margin profile.
Okay. Got it. Thanks.
Thank you. The next question is from the line of Abhijit from Pi Asset Management. Please go ahead. Abhijit, the line for you has been unmuted. You may proceed with your question. As there's no response from the current participant, we will move on to the next question, which will be from the line of Akash Singhania from AART Ventures. Please go ahead.
Yeah, hi, Akshay. Congratulations on good numbers. My question is on EBITDA per ton, which is around, you know, for the last six quarters, if I see, it has remained constant at around INR 42,500. So, normally, you know, I was expecting some increase. So can you give us some color why it has remained stagnant for the last six quarters?
See, nothing much has changed in the business model in the last six quarters. What's going to change in the next couple of quarters will actually give you the increase, which is the machine component business increasing significantly, the acquisition of the entity in Bangalore, which will help us in better material utilization and better economies of scale going forward. So all those positives are yet to accrue, and as they accrue, the margins will improve.
Okay. And as you mentioned, around INR 45,000 per ton for FY 2025. So and if going forward for the next two, three years, should we see a steady increase from INR 45,000 to?
See, on a standalone basis, we should be at about INR 45,000 EBITDA per ton in this year. This is without considering the WOS and without considering the amalgamating company. The consolidation of the WOS will actually pull this number down.
Got it.
As we are at a much lower margin EBITDA per ton margin.
Mm-hmm.
On a standalone basis, again, going forward, if you see-
Yes.
For 45, we should be moving to the vicinity of 48 over the next two years after that, as further economies of scale and better operating leverage kicks in.
Okay. Okay, thank you, and best wishes. Congratulations once again.
Yeah. Thank you.
Thank you. The next question is from the line of Karan Kamdar from DRChoksey FinServ Private Limited. Please go ahead. Karan Kamdar, the line for you has been unmuted. You may proceed with your question.
Hello, can you hear me now?
Yes. Please go ahead.
Yeah. Hi, I got dropped earlier, so I just wanted a little more clarity on the working capital part, where you were saying that you are realigning the financial year and the calendar year. So I wanted to understand how that would benefit us and what, what kind of benefits would accrue to us by doing this change?
If you see, typically our purchase contracts are calendar year based, and now we are moving them to financial year. This will help us better align our procurement to our financials. To do this switch, we have to do a lot of purchases in quarter one on a cash and carry basis because of the contracted structure in which we have credit available.
Therefore, in quarter one, the sundry creditors have gone down dramatically when compared to the average history of average creditor days in the history of the company. This will not be going continuous going forward.
Now that we are into the financial year and the contracts with the suppliers have been aligned as such, we will go back to procuring on a credit basis rather than a cash and carry basis. Therefore, our sundry creditors will increase, and the overall working capital will become more, what do you say? More working capital will be released basically from the system.
We will go to a cash conversion cycle of FY 2023?
Yes, it will be better than FY 2023. This has been done to improve it further.
Okay. Okay, got it. Got it. Thank you so much, sir. Thank you.
Welcome.
Thank you. The next question is from the line of Abhijit from Pi Asset Management. Please go ahead.
Yeah. Hi, am I audible?
Yes, you're audible, sir. You may proceed.
Yeah. Thank you. So, sir, my question was regarding the expansion and its timeline, which has been answered. So, can you shed some light on how long will it take for optimum utilization?
The optimum utilization of 80% can be achieved by FY 2027.
FY 27. Okay. And, the other question was regarding the fundraise plan, since we are raising fund for, growth opportunity plus, debt reduction. So, can we expect a debt reduction in FY 25, by the end of FY 25?
It depends on the fundraise, right, whether the debt will reduce or not.
All right. That is it from my side. Thank you.
Thank you. The next question is from the line of Sanchit Narang from Narang Family Office. Please go ahead.
Hi, sir. Just a follow-up. What is our capacity utilization guidance in terms of tonnage in Pitti standalone going forward in FY 2026 and 2027?
For FY 2025, we are doing 48,000 as our target. For FY 2026, it will be about 54, and then the peak utilization of 58 in 2027.
Okay. Thanks a lot.
Thank you. Ladies and gentlemen, you may press star and one if you wish to ask questions. As there are no further questions, ladies and gentlemen, we have reached the end of the question and answer session, and on behalf of Pitti Engineering, that concludes this conference. Thank you for joining the call. For further queries or visiting the plant, please be in touch with Rama Naidu from Intellect PR on 9920209623. Thank you for joining us, and have a wonderful day.