Ladies and gentlemen, good day and welcome to the Diamond Power Q2 FY 2027 and H1 FY 2027 earnings conference call hosted by Monarch Networth Capital Limited. 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 this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Aalok Shah from Monarch Networth Capital. Thank you, and over to you, sir.
Yeah, thank you, Alrik. Good morning to everyone. We welcome you for Diamond Power's Q2 FY 2027 and H1 FY 2027 earnings concall. Today, we are joined by Amit Bhatnagar, Head Corporate Strategy, and Kundip Thakker, the Chief Financial Officer, to take us through the numbers and the performance hereon. Without taking much of your time, I would hand over the call to Bhatnagar sir. Over to you, sir.
Good morning, everyone, and thank you for joining the Diamond Power earnings call for the second quarter and the first half of financial year 2026/2027. I am Amit Bhatnagar, and with me on the call are Umesh Chhaya, Whole-Time Director, Kundip Thakker, CFO, Ashwani Saraf, the Chief Operating Officer, and the members of the senior management team.
We will keep the opening remarks little short so that we have ample time for your questions. Let me start with the headline. This was Diamond Power's first INR 1,000 crore quarter. Revenue from operations for Q2 was INR 1,032 crore, up 135% over the same quarter last year, and up 50% sequentially. EBITDA, including other income, was INR 133 crore, up 189% at a margin of 12.9%. Profit after tax was INR 108 crore against INR 28 crore a year ago. That is 3.9x . Earnings per share for the quarter was INR 1.87.
For the half year, revenue was INR 1,722 crore, EBITDA at INR 218 crore, and PAT at INR 166 crore. I would ask you to hold two numbers in mind. First is, in six months, we have delivered 90% of last year's full year revenue. Second, our H1 profit of INR 166 crore is already higher than the INR 158 crore we earned in the whole year in the financial year 2026. You will see eight consecutive quarters of growth. Two years ago, in the Q2 FY 2025, we reported a revenue of INR 307 crore and a PAT of INR 6 crore. This quarter, revenue is 3.4x that, and the PAT is 18x . The scale of the company has changed every single year, and it is still changing. Three things drove the quarter, and I want to be specific about each. First, the product mix.
Growth came from medium voltage cables at 11 kV and 33 kV, and from 66 kV EHV, and from AL59 conductors. The segments where qualification matters and pure manufacture is complete. Cables were 40% of the revenue, conductors was 31%, and the remaining was data center cable. Secondly, a new product line that did not exist in quarter one. Data center cables from our newly commissioned copper cable line contributed INR 242 crore, or 23% of the quarter revenue, supplied to EPC contractors building hyperscale campuses, including L&T, Orion Group, Sterling Wilson, and Blue Star. Three months ago, this line was zero. Copper capacity of 1,500 tons a month is live and is being scaled to 2,500. I want to dwell on September for a moment, because it shows what this platform can do once it is funded. The QIP funds came into the company in August.
In September, the very next month, we achieved record production of INR 575 crore plus GST. Of that, our team made and delivered INR 240 crore of data center cables in a single month. That is a historic month of production and sale for the company, and it was done with these lines, the same people, and the systems we already have in place. Third, operating leverage. Employee and other expenses came down to 5.7% of revenue from 8.2% a year ago. That is why EBITDA margin expanded on 240 basis points, even though the contribution margin as a percentage moved from 18.7% to 16.9%. The reason for that percentage move is simple. Higher LME and aluminum prices increase the revenue base. Our contracts carry price variation clauses, so the absolute contribution per ton is protected.
We manage the business on rupee per ton and per kilometer, and not on a percentage of metal. I want to be careful about one thing here, because this is a quarter in which every cable company in India has reported a big top-line number, and a good part of that is metal. On LME, aluminum is roughly 1/5 of a quarter. Only a year ago, the copper is up around 40%. Because our contracts pass through metal too, the revenue lines carry that inflation. So the honest question for any cable company this quarter is, how much of the growth is metal and how much is real? Remember, Diamond Power major input is aluminum. If you read the analyst updates from the listed peers, you will see the answer for the industry. Our revenue grew by 135%.
Metal and price variation pass-through account for perhaps 1/3 of that. The rest is real. On actual production, kilometers of cables and tons of conductors made and dispatched, our growth is well above 60%-70% year-on-year basis. Conductor dispatches were 6,850 km in the quarter. A data center line alone, which did not exist a year ago, there were INR 240 crore of product in a single month. That is the difference between a company riding a metal cycle and a company adding capacity, qualifications, and customers. We are the latter. I would like you to judge us on volumes, not on the rupee top lines. One more point on cost, since you will see it in the peer comparisons. Diamond Power does not spend 2% or 3% of sales on advertising and branding, as consumer-facing cable companies do.
We sell business to business and business to electrical consultants, to utilities, EPCs, data center builders, the industry, and end market for the long-term period. Only quality speaks. The industry is presently going through a cycle where quality is considerably compromised under the pressure of maintaining margins and volumes in B2C due to entry of newer players. For us, quality is our brand, and that is why our employee and other expenses are 5.7% of revenue, and that is why our saving goes completely to the bottom line. Our other income is INR 18 crore, is treasury income on QIP funds, largely fixed deposits, and the tax remains negligible because of carry-forward losses. The profit and loss tells half the story. The balance sheet tells the other half. In some ways, it is more important one in this quarter.
At 31st March this year, our net worth was negative by INR 604 crore. At 30th September, it is positive by INR 764 crore. Net debt of INR 527 crore has become net cash of INR 572 crore. Three events that made it happen. The QIP in July we completed and raised INR 1,614 crore, entirely due to the fact that we had to bring down our minimum shareholding. The promoters' loans, as we mentioned in the last call, have been completely repaid, and most importantly, the profit which we are generating.
The INR 12 crore of finance cost you see in this quarter is almost entirely bill discounting and bank charges on a much larger volume of business, a cost of trade, not an actual debt. The Resolution Plan in September was prepaid for full INR 501 crore cash consideration, a year ahead of September 2027 deadline, availing a prepayment discount of almost INR 9.5 crore.
The company has exited the NCLT mechanism completely. All plan payments are complete. Lender NOC release of charges are in process, and we are now eligible for a credit rating for fresh bank lines, which are being tied up. Let me take you to our orders, customers, and the demand. Our firm order book at 30th September stands at INR 3,735 crore at quoted value and around INR 4,300 crore at current market prices under the price escalation clause. More importantly, it keeps growing while we execute it. Order inflow in H1 was INR 2,217 crore against a revenue of INR 1,722 crore, a book-to-bill of 1.29x after 1.63x in financial 2026. The book is 46% conductor, including a INR 974 crore order of AL59 for 800 kV HVDC line. That is a landmark project which the company is doing.
With this quantum of almost close to INR 1,000 crore of HVDC, this will ensure that Diamond Power has all possible PQCs which are required to reach out the Indian TBCB players in the global market. 36% of medium voltage cables and the balance is LT and data center cables. The conductor strategy is unchanged from what I set out in the last quarter. The book is essentially of AL59, ECO conductor, and HTLS, through TS Conductor partnership building behind it. We are deliberately not chasing ACSR tonnage. Key wins in and around the quarter include additional MV and LT cable orders from Adani Electricity Mumbai, our third consecutive year of supply, 66 kV EHV cable for a GETCO project in Jamnagar, INR 1,370 crore of 11 kV cables for PGVCL coastal underground schemes, and AL59 conductors from TBCB suppliers.
We served around 670 customers in the first half of 2027 across utility, EPC players, data center, and industry. Adani Group entities are 43% of the order book, and we hold Adani's share of top line to a stated cap of 20%-20% over time, with every Adani order placed at market price on a reverse auction basis. We have built a national marketing organization. We have put our city teams in place. We have put a key accounts group. We have now put a separate conductor desk, and more importantly, a separate export team, which is drawn from most of the successful competitors who compete in the export market. I can assure you, FY 2027/2028 will contribute, a large contribution shall come from export.
We have already put a very large distributor in place in UAE and Middle East. And also, I can happily report to you that this quarter, Adani sales are less than 30% of our top line. So we are on track to build our customer profile as we had promised to you. We continue to be very bullish on the medium voltage cable segment. Last quarter, I said that Diamond Power is becoming a medium voltage and increasingly an extra high voltage cable company, with a premium conductor franchise besides it. Q2 bears that. 11 kV and 33 kV cables were 79% of our cable revenue outside data center, and 33 kV alone was our largest product line. I want to spend a few minutes on why we remain bullish on this industry as we were in August.
I will take you through the important demand driver which we have discussed in the past and are now building out. First, the grid build-out. India is in its largest ever transmission investment cycle, and for us, that is the conductor business. 46% of the order books, which is INR 1,718 crore, INR 1,718 crore. In the last year, we have supplied over 40,000 km of conductor to TBCB developers and to Power Grid. As I mentioned to you, the single largest order this year is HVDC 800 kV, and we have a long-term backup arrangement with TBCB suppliers so that their wins flow to us.
In the last quarter, the important thing we have done is because the number of TBCB players in the industry is growing substantially, we have now started a back-to-back arrangement which is pre-bid, which assures us that we get orders when the TBCB bid is awarded to a player. Second, I will talk about the renewable evacuation. The clearest example is Khavda in Kutch, the world's largest renewable park, where our AL59 conductor carries the evacuation and our cables run inside the Adani solar park. Beyond Khavda, solar is now a product line for our own. 3.3 kV solar cables were INR 39 crore in Q2 and are INR 221 crore on the firm order book position from key developers like Tata Power Solar, which we have now classified as a key account in October, considering the fact that we are expecting very large order inflows from Tata Power.
We have now a dedicated servicing team for Waaree, ACME, CleanMax, Enrich. Demand from solar parks is strong enough that we are building a 1,000 km a month single core 3.3 kV cable plant, which will get on stream in the next 18 months. Third demand driver is underground cabling, and this is where our MV cables go. Medium voltage cables are INR 1,328 crore of our order book position, which is 36%. In Mumbai, Adani Electricity has placed a INR 152 crore LOA on us. Accordingly with that, we have PGVCL-related contractors who have ordered almost INR 195 crore of these cables in the last quarter itself. Our 66 kV underground program is also on track. We received INR 154.5 crore EHV order for Jamnagar, and further 66 kV tenders are in pipeline, and we are expecting a good inflow on 66 kV in the next 90 days.
More importantly, we have now started working in newer markets like the South and East. In Bengal, we have seen more than 5,000 km of 33 kV tenders which are now coming up. I'm sure with being a dominant player, we shall be focusing on that market in a big way. In short, Diamond Power is now more ahead of Adani in Western India and Northern India, and now the focus is pan-India. We desire to build a market which is equally segregated across the geographies in India. Coming to the fourth, which is the data center.
As I mentioned to you in the last quarter, we have made a dedicated data center team, and I can proudly tell you that most of the leading consultants in the data center space, now Diamond Power is approved, and we are now the preferred vendor, considering the fact that we delivered INR 240 crore of data center cable in one single month in September. The fifth is the industrial CapEx. The Yamuna Expressway, Mundra Port, Delhi International Airport, NTPC Vindhyachal, the Bio-CNG plant at Jagdishpur Reliance. These are some examples of the clients which we have worked on. Our recent 132 kV supplies to Siemens India, Tuticorin Port, and IndianOil Tanking is a validation of how we are now panning across the market and dealing with very sensitive industries like port and refineries. Our industrial names this quarter was AM/NS, JSW, SAIL, Bokaro Steel, and Serum Institute of India.
We are now across the spectrum, across the industry. Green hydrogen and offshore cables is something which we are now focusing upon, and I can assure you that we will be able to share with you some good news on these markets very shortly. We are also focusing on EHV cables in a very big way, and we are now focusing on exports, and especially exports in medium voltage and extra high voltage. We have already started building our Middle East market, and now we are working on pre-qualifications in Europe and U.S. market. It is worth remembering that nine of the world's top 10 cable manufacturers are manufacturers who make MV and EHV cables. Scale in this industry is one on medium and extra high voltage, where qualification and trust takes years to build, and that is precisely where we have spent the last three years building it.
Now, coming to our CapEx and what infrastructure we are building. This is what we call building the next Diamond. I will spend some more time on this section than usual because two things are new since the last call. We have ordered a sixth CCV line. We have frozen the design of a polymer compound backward integration, which will be the real differentiator between us and any other cable company in the country. Let me start with polymers, because this is the project investors have asked us most about. The insulation and sheathing compound is between 35% to 40% of the cost of a cable. More than that, the conductor material in most of the constructions. We already make our own PVC compound in-house. What we have never made and what no Indian cable manufacturer makes today is the cross-linked polyethylene polymer for cables above 66 kV.
Most of the peers make compounds up to 33 kV. We are setting up an integrated polymer complex, which is INR 170 crore of investment in a INR 1.5 lakh square foot building with no land cost because the land already we have. The combined capacity of the project will be 84,500 tons. The phase one is six compounding lines, which will cost us INR 78 crore, two PVC lines, two silane lines, one masterbatch line, and one peroxide-based line with a capacity of 66,500 tons a year. They will make PVC, FR, FRLS sheathing compound, bedding compounds, silane XLPE for 1.1 kV- 11 kV, and peroxide for 33 kV. All of phase one output is captive. It replaces the compound we buy today. The PVC and lateral line commission first, and the full phase is on stream to be commissioned between June and December 2027 progressively.
Phase two is the masterpiece in the entire investment of CapEx which Diamond is making. It is a Swiss-engineered reciprocating line, the same low-shear mixing platform that global compound makers use, making super-clean peroxide XLPE insulation for 66 kV, 132 kV, 220 kV, and 400 kV lines. This is going to be 18,000 tons capacity. The line is bought with its know-how package, its formulation, and its cleanliness acceptance. It commissions in early 2028 after the pilot trials on our own raw materials. Then the most important part here is super-clean. When we say super-clean, the compound has zero impurities, and there is nothing which is impure less than 100 microns.
In EHV cables, the electrical field concentration is very important, and because the life of the cable is 40 years, utilities approve the compound, and the compound itself is a brand and a prerequisite for making that cable from the end customer. This is where Diamond's investment in EHV compounding plant, the first of its kind and probably the sixth of its kind in the world, will make us the differentiator among everybody else. Presently, we have certain data which tells us that in this compound, the margin is more than INR 50 a kg. At our current volumes, this will yield an additional EBITDA of INR 120 crore when we use it on a captive consumption basis, and that is going to be a major impact on us. The project model shows a 30% post-tax IRR on a consolidated basis.
This project is being funded by INR 78 crore funding from the GCP account of the QIP and INR 100 crore from internal accruals and a small amount of debt if we feel we need to get it. The other projects we are already running is the balancing equipment project, the doubling of the copper cable capacity, the fifth and sixth CCV line, which is going to get commissioned. These are very important projects because all these projects are very long term, and we already have the equipment virtually in place. Our LV cable project, as promised, is going to be commissioned before April 2027, which will get us a very large inflow into LV cables.
Additionally, the single core cable project, which targets the solar infrastructure, is already on stream. On our last call, we indicated the financial year 2027, our revenue will be INR 4,300 crore-INR 4,500 crore. We are still standing by with that number. With INR 1,722 crore delivered in H1, we have to get you INR 2,580 crore in H2. The season itself is half as strong. As my new CFO, Mr. Kundip Thakker, told me yesterday, that most of the cable companies do 40% of revenue in quarter one and two, and 60% come in quarter three and four. I am sure his analysis and our capacity and understanding will stand good.
Diamond Power is constantly now focusing on increasing the manpower bench strength. We have a new Chief Operating Officer and a new CFO, both of whom have a fantastic industry experience. We have now started working on succession planning, and a Director's office has been made so that in the next five to seven years, we get our then next to come on board and start being part of the decision-making process in the company.
To sum up, a first INR 1000 crore quarter, a half year that has already out-earned all of last year, a balance sheet that has gone from negative net worth to a positive cash flow, a INR 3,735 crore order book position, and a capacity program that moves up step by step, voltage class by voltage class. I can only sum it up by saying Diamond Power is a five-decade-year-old company, and it is at the best of the next decade. I want to thank our team and about 2,000 people at Vadodara and Diamond Power employees across the country and our shareholders for their existing confidence and the future confidence on us. Thank you very much for listening me out. Now we are open to questions.
Thank you. 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 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 Nishant Bagrecha with InCred Capital. Please go ahead.
Yeah. Good morning, everyone. Thank you for the opportunity. Firstly, congratulations to the entire team on crossing the INR 1,000 crore quarterly revenue milestone. Sir, I have a couple of questions. Firstly, on the order book and the execution visibility. Your outstanding order book currently stands at around INR 3,735 crore. Could you please provide some color on the order inflows, momentum, and the inquiry pipeline across MV and EHV cables, conductors, and data center cables? I mean, also how much of your FY 2028 revenue target is already backed by the existing orders or a visible pipeline?
As we mentioned to you, the market value of our existing orders is around INR 4,300 crore, and we are targeting to do almost INR 2,500 crore till March. The remaining is obviously for the next financial year. On an average, our order intake is between INR 350 crore- NR 400 crore, and always the H3 and H4 is the period when the order inflow increases considerably because all the budgeted tenders of the Government of India get finalized in quarter two and in the beginning of quarter three, and that inflow comes to us through the EPC contractors. We are confident that by the time we end Q3, we will have 50% of next year's target in, and by the time we end Q4, we will have the next year's order book with us.
Sure. Just to follow up on this, as you mentioned, the data center cable contributed almost INR 240+ crore in Q2, which is accounting for a meaningful share of a quarterly revenue. Is this largely driven by the execution of a few large projects, or are you seeing this evolve into a sustained business opportunity? I mean, what kind of revenue potential do you see, particularly from this data center segment over the next two to three years? Are you increasingly engaging directly with hyperscalers and data center developers?
See, two things. One is, in the current year, I'm expecting to do INR 750 crore out of my top line from data center customers, for which I think I already have the orders from there. Number two, we've been tracking data center across the country. My director of marketing told me last week that there are 66 cities in India where data centers are coming up, starting from 20 MW and going up to now in terms of gigawatts.
We have instructed our teams across the country that now you have a great pre-qualification, you have approvals in place. We need to scan every data center across the country. Starting from 40 MW to gigawatt scale, you see, the entire market we are scanning. These 66 cities, as per the last data available with us, there are more than 230 developers who are developing these data centers. Let me assure you that we are at the back of every potential opportunity.
Sure, sir. Sir, secondly, my question is on the competition. With the several established cable players stepping up investments, particularly in the MV and EHV capacities, I think the competition is likely to intensify over the next three to five years, right? What sustainable competitive advantage do you believe you can build in this space, and particularly in the terms of technology, like customer approvals, your manufacturing capabilities, and also the cost competitiveness? What are your takes here on the competition?
You will see two to three things. One is, we had day one conviction that the future lies in MV and EHV cables, and that is where we are putting our money in. When we did the QIP in August, we had five lines, CCV lines, and as you know that the standard delivery period of a line is almost two years. We have already ordered our sixth line, and you will see that we have managed that the delivery is within one year because we had an opportunity to buy it out from an existing order which was given by an international player. Similarly, we are now focused on two to three things. One is, we are doing a very major backward integration on polymers. That is going to 35%-40% of the cost of a medium and extra voltage cable is polymer.
If I am assuming that the polymer manufacturers, because I have data of almost five players, one which is the Indian player, he is making between 13%-14% net profit on his MV and EHV compounding business. The four other global players are making unbelievable profit, more than 20%. Even if I assume to get my scale, I am going to pass on 3%-5% of my polymer benefit to my customer, and I am left with 10% additional profit on the polymer part, I am looking at increasing my EBITDA by 3.5% once my polymer project is implemented. That is number one. Number two, with 11 medium voltage cable lines, I already have the scale and I already have the capacity to consume the polymer which I am making. In every product, there is a minimum break-even which is required for that industry.
If you want to really make XLPE compounds of the scale and type which we are now wanting to make, you should have minimum 10 operational lines, otherwise you will have to sell your compound to others. So that first mover advantage we have already put in place. I am sure there are competitors who are going to add the line. They will take two, three years to reach the number I already have, and by that time, I would have doubled my numbers. So Diamond Power from 2028 to 2032 is in pipeline. By the next, the fourth quarter of the year when we talk to you, we will share with you our roadmap of 2028 to 2032, and I can assure you, we will always be ahead of every other cable company in the country when it comes to medium voltage and extra voltage capacities and capabilities.
Sure. Sir, just on this MV capacity expansion, so you have indicated earlier that you have planned to add five new MV lines every year from 2028. So what is the incremental CapEx and revenue potential per line, and how do you ensure that the capacity additions are supported by adequate demand, particularly in the current environment?
Nishant, as I mentioned to you, we will come in detail on that at the end of quarter four, because presently we are negotiating with the global players, the quantum of lines we want, the numbers we want, obviously we want a really good price, and we want an assured delivery. Once we are out with a plan, we will share it with you.
Sure, no problem, sir. Thank you, and I will—
Nishant, one thing I'm sure I have seen a note which you released regarding our numbers for quarter two. I think we've done better than what you projected.
Yeah, definitely, sir. Yeah, that's our wish to you, to them, I think.
The next question comes from the line of Vidit Trivedi with Asian Markets Securities. Please go ahead.
Hi, sir. Thank you for the opportunity, and congratulations on great set of numbers. My first question is pertaining to the data center cables. Could you please elaborate on the nature of this business, particularly on the proportion of repeat orders versus the project-based orders? Second, can you call out the margin difference in the conventional cables and data center cables?
Okay. First and foremost, data center cables are not anything different than what normal cables are, but they are mostly single core cables. They are made with aluminum or copper depending on the intensity of the power which the data center will require. They are usually 33 kV cables, and in some cases, 1.1 kV cables, depending on the construction and nature of the data center where it is. In some cases, data centers are also transmitting power through HTLS cables, and some of them are using 400 kV and 220 kV class compounds also.
This is one on the nature of cable. Coming to the margin, well, the only extra margin you can get is because the prequalification terms and conditions are very stringent, and data center consultants and data center companies are very finicky and very choosy on whom to approve, whom not to approve. Obviously, t here is an entry barrier there. This entry barrier leaves at least 2% extra margin for you.
Got it, sir. Very helpful. Secondly, the tax part. Given that the company currently has significant carry-forward tax losses, resulting in a negligible tax outgo. Could you quantify the tax shield available and indicate us how long we expect this to continue benefiting from these accumulated losses, and in which financial year do you expect the company to start paying normal corporate taxes?
As on 31st March , our carry-forward loss was INR 1,432 crore, right? Going forward, the manner in which we are growing and the projections we have done, I think quarter one of 2029, we will have to start paying tax.
Thanks a lot, sir. That is helpful. All the best, and Diwali greetings to the team.
Thank you.
The next question comes from the line of Natasha Jain with PhillipCapital. Please go ahead.
Thank you so much, sir, and congratulations on a good set of numbers. My first question is, can you just quantify, so in terms of a INR 100 sales value, what INR 84 is your raw mat, and off that, could you just split the metal cost, PVC cost, and any others?
It depends on the nature of the cable, right? If it is a medium voltage and extra voltage cable, the metal is 40%, or in some cases even 35%, and the polymer is 35%. If it is an LV cable, then polymer is 20% and metal is 45%-50%. There is no single formula to say what the percentage is. It depends purely on the construction of the cable.
Got it. And sir, when you say these percentages, you mean it as a percentage of raw material, right? Or do you mean it as a percentage of sales? Got it.
No, no. Percentage of raw material.
Got it. And sir, my second question is on the EHV side. Could you tell us what the market size currently is, and what the market size that you are eyeing here is? Also give us some sense in terms of margins, how different the EHV margin is both domestically and if one had to export versus, say, an LV or MV or even HV, which is lower than your EHV?
To give you an example of the EHV market, last year, Gujarat Energy Transmission Corporation purchased INR 900 crore of EHV cables. This year, in the first seven months, they have floated tenders of INR 3,200 crore, and another INR 900 crore we closed this month. This is one utility, how the preference is changing from overhead to underground. If you want me to put a number to it is very difficult because I do not actually have the number. Our assessment is that we want our extra voltage cable to get into double digit in the quarter three and quarter four of our top line. That is our target.
Got it. Understood, sir. That is helpful. Could you just talk about slightly about the margin differential in EHV versus a normal cable portfolio, non-EHV?
So EHV cable is always a single core cable, and medium voltage 33 kV and below 1.1 kV are usually multi-core cables. When you are making multi-core cables, the expense of making those cables probably, if you consider per kilometer or per lakh, is more than single core cable, number one. Number two, the technology and the entry barriers and the type of people you require to make EHV cables, obviously, it is an expertise product. So, the differential is usually 5%-6% between a medium voltage and EHV cable, and almost 10% between LV and EHV cable.
Understood, sir. That is extremely helpful. My third question is on the polymer side. Could you also talk about the polymer import market size and what is the plan to capture eventually? Are we even planning to export or just use it for our own purpose?
As I mentioned to you that the capacity we are building is meant for 100% captive consumption.
Got it. Could you just give us a little of sizing in terms of this clean polymer market?
We have not looked at it because we are making it with our intention of doing a backward stream. We have not got into prediction of the market. What we have focused is what is the margin the players are getting and how much EBITDA we can add to our books. Based on that, we have taken this decision. When we are seeing completely a 10% difference, 10% additional margin we can make on the polymer side, it is a no-brainer for us.
Fair enough. Sir, one last question on exports. While you have touched that you have started an export team and already doing it in Middle East, could you talk about where are we in terms of U.S.? Which leg of the entire value chain are we there, and what are we going to export? A little bit on that.
We have already made our application for UL approval for medium voltage cables when it comes to the U.S. market. We have already sent our samples for type testing when it comes to the Europe market. We have created a dedicated team within the organization comprising of people who are coming from marketing, operations, production, quality assurance, so that we have actually quantified what is required to be qualified completely without any hurdles when it comes to the export market. I can tell you, before the end of March 2027, most of the pre-qualification would have been overcome.
Great, sir. That is great to know. Lastly, these export cables, would they be more copper cables?
It again depends on the market you are targeting. If you are targeting Africa, it is aluminum cables. If you are targeting Europe and U.S., it is copper cables.
Got it. Sir, this is extremely helpful. Thank you and all the very best, and wishing Happy Diwali to your team.
Thank you.
The next question comes from the line of Achal Lohade with Nuvama Holdings. Please go ahead.
Yeah, good morning. This is Achal Lohade from Nuvama Institutional Equities.
Good morning.
Sir, first question, with respect to the MV cable, if you could help us understand in terms of the market size and what has been the growth in the first half in your estimate for MV cable?
As we have already stated in earlier calls, there are basically five to six fundamental drivers which are growing demand in renewable. The first being renewable, the second being disaster management, third being vertical urbanization and underground cabling projects, fourth is data center, fifth is the railways. If you split my order book position, you will see that almost 90% orders are coming from these segments, and just 10% orders are coming from the traditional industry segment. Till 2022, we had demand from power plants and petrochemical and steel industry, which still continues.
But these five segments which I mentioned to you are now equally big and comparable to the market segment of INR 25,000 crore-INR 30,000 crore, which was there in the year 2022 with the traditional industries. As you will see the numbers for medium and extra high voltage cables in terms of growth, will get captured and will outshine every other segment of the cable industry. I can tell you with confidence that it will be even faster growth than optical fibers when it comes to the medium voltage and extra high voltage.
Got it. But in your estimate, first up, what would have been the growth for the industry, as per your estimate, sir?
I am not estimating anything because everybody's numbers are not out. I can tell you about the type of inquiries we are getting. We have presently INR 32,000 crore worth of inquiries which are live to be finalized in the next 90 days by various customers across the country.
You said INR 32,000 crore?
INR 32,000 crore worth of inquiries which needs to be finalized by various clients, which means orders under pipeline, which will go to some or the other cable player.
These are across cables, right? Across types of cables, right? Or it's just the MV—
Across medium voltage and extra high voltage.
Okay. Got it. The second question, with respect to the polymer, what is the typical asset turn in this business? If somebody was to set up for third party, what would be the asset turn in this business, sir?
What did you say? EBITDA?
No, that is the revenue from the INR 170 crore investment. In total, I think you said INR 270 crore?
No, total INR 170 crore.
Total INR 170 crore. This INR 170 crore CapEx can give what kind of revenue if you were to sell it outside?
Around INR 800 crore.
INR 800 crore. Sir, if you could help us with respect to the second quarter number. If I see the revenue growth was 135%, but the margin improvement is only 70 basis points. Are there any one-off costs which kind of impacted the profit number? Because theoretically, you should have had even bigger operating margin improvement, right, sir?
No, it is because all the contracts are price escalation based, and the time lag of getting the escalation is 30 days prior to the date of dispatch. If I am dispatching something in September, I will get the price of August. If I am selling something in August, I will get the price of July. When your metal prices are falling, the lag impacts your contribution. It depends on the level at which it is falling, but always there is a plus-minus of 1% on your EBITDA on the basis of these aluminum prices, and that is the impact you see. But if you compare it with the original contribution which was envisaged when we took the order, the contribution remains constant.
That is basically cost-led kind of a contract.
One minute. Mr. Kundip Thakker would like to say.
Yeah, because sales price has gone up, so denominator is higher, and that is how in percentage terms it is seen as lower figure. But in absolute value, we are making the same value. Hope it clarifies.
So it is more like a conductor business, right? So where it is more of a flat turn kind of a margin and not like a cable where the margins tend to be percentage-wise similar. Is that right?
No, it is percentage-wise, but when you are talking about EBITDA, it is a differential number.
In the growing prices of commodity, the percentage may be seen lower because the absolute value of the revenue goes up. But when the prices go down, the reverse will be happening. The margin percentage will go up, but absolute value still remains more or less same.
Got it. Just one last question with respect to the conductor to cable mix, in terms of the tonnage. What would that be as of now, and how would that change, let's say, for FY 2028?
It is broadly around 30%, 31%, and it will not change. This is what we are envisaging for the current year, and for the next year, because the cable business will grow faster than the conductor business, we are expecting it to be 25%-75%.
Got it. Thank you and wish you all the best.
Participants, in the interest of time and fairness to others, please restrict yourselves to two questions. For any more questions, you may rejoin the queue. The next question comes from the line of Abhishek Basumallick with AlphaStreet Intelligence. Please go ahead.
Hi. First of all, congratulations on a great set of numbers. I had one quick question. You are talking about a big quantum jump in revenue over the next three to four years. So one is, what is the kind of CapEx that you think will be needed for the next three, four years? And secondly, what are the big risks that you can see that can actually create problems in terms of not able to reach the goal that you have for yourself of INR 10,000 crore of top line?
Two things. First is that to reach that top line, we already have our CapEx and infrastructure in place. Whatever additional amount of CapEx we are doing, which is broadly around INR 366 crore over six, seven projects, they are all projects aimed at increasing the margin. It is backward integration. It is getting additional value-added products. If you say plain vanilla to increase the top line, I do not think except the balancing equipment, INR 73, INR 75 crore, rest is not going to add to the volume. What we are focusing and investing on is where we can go and add our EBITDA margin. That is the first thing. Coming to the risk.
Well, every business has a risk, and especially when it comes to infrastructure business, which is the power, road, or businesses which at the end of the day are 60%, 70% dominated by government or controlled by government, there is always a geopolitical risk which is associated. But as you see things now, is there any alternative to power? Fortunately, we are in a space where there is no other alternative. As things are moving ahead and fossil fuels are getting costlier, more and more focus is getting into new energy, more and more focus is getting into methods by which the traditional source of energies, which can be fuels, which can be other ways, are now getting converted into greener energy. At the end of the day, everything is getting converted to electricity.
The most important thing is that we are the people who carry the power. If we do not carry it to the customers, all this investment which is happening across every segment of the electrical industry will not be there. To that extent, our segment of the industry, which is cables, is irreplaceable when it comes to the growth driver or growth engine of the entire country. We are not seeing any major risk which can turn the apple cart overnight.
Yes, I would like to add that the geopolitical risk is having a positive impact on our industry, just because as the fuel prices go up, more and more new energy is getting traction. Government of India or elsewhere, if you see, the focus is on new energy. When we talk of new energy, the solar, wind capacity comes up very fast compared to the thermal, and evacuation need to be planned very quickly. The demand for cable and all the equipments related to that are likely to continue, and the geopolitical risk is actually fueling it further.
Yes, we can take the next question.
The next question comes from the line of Kriti Tripathi with NVS Brokerage. Please go ahead.
Hello, sir. Congratulations on the strong set of numbers. Sir, as you have mentioned that 60% of the projected FY 2027 revenue of INR 4,300 crore is expected in H2, with margins now already expanding, can we see EBITDA margins moving from 12.9% in Q2 to say 15% or higher in H2? Over the next two to three years, what kind of margin target have we set, 18%-20% or above? One guidance on that. Lastly, sir, what is our capacity utilization in H1 FY 2027, and what levels are we targeting for the next two to three years? Thank you, sir.
EBITDA margins will always remain between 11%-13%. Once our polymer gets on stream by December 2027, in the next year, we will like to give you a band of 14%-16%. Till then, I don't think there's going to be a major change in EBITDA percentage, but the growth will get you more numbers.
Absolute value.
Absolute value will get you more numbers.
Return on investment, return on capital employed, that will really improve further.
Okay. Next question was on the capacity utilization, sir.
Capacity utilization is approximately 45% of what it will be when the entire balancing equipment is operationalized.
Okay, sir.
The next question comes from the line of Ajit Sethi with Eiko Quantum Solutions. Please go ahead.
Yeah, thank you for the opportunity, and congratulations on a good set of numbers. I want to understand the total addressable market for the HTLS reconductoring in India in terms of circuit kilometer, and specifically the existing ACSR lines that can be replaced with HTLS. Also, what portion of this market is already covered by AL59 conductors?
First and foremost, we have not made a single kg of ACSR conductor for the last five years. We have a strong conviction that ACSR conductor has no future. Our focus is on AL59 ECO conductors. Coming to HTLS conductors, this is basically a very specific segment of the market which it addresses. If 100 V of 100 electrons of power is moving through a circuit and you want 120 to move, that is where HTLS can be replaced. Today, the scenario in India is that all the lines are already 20%-25% overloaded. HTLS, as per us and our internal understanding, does not have a very bullish future. It is probably going to be 2%-3% or 4% of the conductor market. The underground MV cable and EHV cable is the one which is competing with HTLS.
Being underground, it ensures that the power theft, et c, it is borne upon them. We are not very bullish on the future of the HTLS cable. As per our data and understanding, this year, around INR 5,000 crore worth of HTLS tenders have been floated there in the market. Around INR 2,800 or INR 3,000 have been awarded, and the others will be awarded. But at Diamond Power, we are very clear. We have a two-member team to focus on HTLS, but we've also targeted that it will not be more than it is a product where it is going to be less than 5% of our top line at its best.
Okay, understood. My last question is on the legacy receivable side of INR 1,000 crore. In the last call, we have said that we are in the process of recovering INR 300 crore in FY 2027. Any update on that? How much receivables have been recovered?
We did not say that in 2027. We said that INR 957 crore is the legacy receivable. We are positive on recovering INR 300 crore, out of which around INR 116 crore is now quantified, process of recovering that in terms of liaison, in terms of presenting it to the customer. To the extent of INR 116 crore, we have confirmation from customers that, yes, that is payable. The remaining is going through reconciliation, arbitration process, negotiation process, and we are confident that we will recover this money. If you want a timeline, I'll put a timeline of 24 months.
The next question comes from the line of Sanjaya Satapathy with Ampersand Capital. Please go ahead.
Yeah, thanks a lot, sir, and fantastic. In terms of turnaround and top-line growth, and you have already given a lot of things about your margin trajectory. Just wanted to kind of little bit more on that margin. Most of your peers have gross margin in excess of something like 20%-25%. Do you think you will be able to go closer to that?
Well, let me tell you that I have already given you what margin we will do. We will do between 11%- 13% EBITDA, and once the polymer comes in, between 14%- 16% EBITDA. Of late, we have seen that the market is facing serious quality issues, right? There is lot of undercutting which is being done in terms of consumption and quality of the product. We are medium voltage and extra voltage cable manufacturers. We are not spending any money on branding, right?
Our competitors are spending between 2%- 3% of their top line on branding. We are spending on quality. And I can tell you that the realization which we are getting is same realization everybody else is getting. We are ensuring that our quality will speak on a longer period of time. I can only tell you that the margin which we are having presently is the most reasonable margin which you should expect from us.
Understood. As far as the tax is concerned, till what time do you think you will have this shield of not paying taxes?
Quarter one of 2029.
Understood. Thank you, sir.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Aalok Shah for the closing remarks.
Thank you, participants, for joining in and for this healthy discussion. On behalf of Monarch Networth, we will conclude this call. Amit sir, you would have any concluding remarks, or we can conclude the call?
No, thank you very much. I think Mr. Kundip Thakker would like to say something.
Just to add to that, in case your questions are not answered or we have not been able to do that because of time constraint, you can write to us, and we will get back to you one-to-one. Thank you.
Thank you.
Thank you. Thank you.
Thank you, sir. Ladies and gentlemen, on behalf of Monarch Networth Capital India, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.