Mr. Shyam Agarwal will walk us through the operating highlights and give a granular view on G20's performance, while Mr. Rajiv Gupta will provide insights on the India business. Thereafter, we shall open the call for a Q&A session. Before we begin, I'd like to point out that certain statements made on today's call could be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I'd like to invite Mr. Vimal Gupta for opening remarks. And over to you, sir.
Good afternoon to all our investors. Thank you for taking the time out to join our earnings call. I trust that all of you have had a chance to review our earnings, which was shared yesterday. As we have indicated earlier, 2018-19 was a peak year for the global auto industry, and we continue to evaluate the performance of the auto industry against the performance set in 2018-19. As stated, the domestic industry performance in quarter two of financial year 2024 has reached a complete 84% of the base set in quarter two of 2018-19. For the international industry, the performance achieved in July to September of 2023 stands at a similar level of 87% of the production level recorded during the same period in 2018-19.
At Alicon, we continue to track ahead of our performance in 2018-2019, with our revenues in the second quarter of financial year 2024, reaching around 122% of the benchmark set during the corresponding period in financial year 2018-2019. This outperformance relative to the global and domestic auto industry has been achieved by a focus on new technologies, new geographies, addition of capacity, and value engineering. At Alicon, this is part of the strategic plan to take the company into a higher orbit. Our business transformation strategy is guided by focus on multiple avenues for growth, organized into five pillars. This approach reflects our commitment to adapt and thrive in the dynamic automotive landscape, ensuring sustained success for Alicon in the years to come.
These pillars are continued to scale strategic focus in the IT business, addressing opportunities from carbon neutral technology, including battery electric vehicles, hybrid electric vehicles, fuel cell, and hydrogen cell technologies. Opportunities from structural parts or technology agnostic parts, which remains consistent, no matter which fuel technology is used to power the vehicle. Non-auto business encompassing opportunities from sectors such as defense, energy, telecom, to name a few, where our competencies can be leveraged. Enhance customer wallet share, value add, and combining products to offer our customers a one-stop solution. Investors should closely monitor several key themes that underscore our business transformation at Alicon, providing valuable insight into our progress and the evolving nature of our business model. Firstly, the enhanced product mix is an important aspect that reflects our strategic focus.
We have completed and demonstrated a shift in our revenue mix to include a higher share from passenger vehicle and commercial vehicle. This is a, this is a result of our concentrated efforts to scale up business in this segment, along with, with a focus on carbon neutral technologies and technology agnostic parts. The growing contribution from the passenger vehicle and commercial vehicle segment is expected to outpace two-wheelers, thereby enriching the product mix further. Secondly, our customer profile is also undergoing a transformation, marked by the addition of prestigious global names to our portfolio. We have successfully expanded our reach to include leading global OEMs and tier ones, reflecting the growing status of Alicon in the industry. Thirdly, the composition of our business is increasingly influenced by our expertise in design, research and development, and value engineering.
In the past, business trends were primarily driven by reliability and cost competitiveness. Alicon distinguishes itself by winning businesses based on its capabilities in innovation, technology, and design. Thus, this shift underscores our evolution into a solution provider. This comes off making us as a more, let us say, source of low-cost components. As we continue to adapt and innovate, these themes serve as a key indicator for investors to assess our ongoing transformation and strategic directions we are pursuing. In that backdrop, I will now run through the financial performance for the quarter under review. In quarter two of financial year 2024, total income stood at INR 382 crores, as compared to 328 crores in quarter two of financial year 2023, higher by 1% on a year-on-year basis. On a sequential quarter basis, we have delivered a revenue growth of 8%.
This has been driven by addition of new parts and new logos. The volumes in our traditional business of two-wheeler have been demonstrating and moderating, and the revenues from the new products have offset the decline to post a growth of 1% on a net basis. We have observed a slight increase in the utilization level of plants in India and Europe. We operated at a utilization level of around 68.3% in quarter two. Our margin for the quarter, which was 50.1% in quarter two of FY 2024 compared to 48.6% in quarter two of FY 2023, is higher by 143 basis points on a year-on-year basis, largely due to more favorable product mix. There has been also a slight contribution from the stabilizing of alloy prices at lower level.
There has been a sharp rise in employee costs, which are higher by 13% year-on-year basis and 4% over the immediately preceding quarter. This is due to the increase in minimum wage, as well as the effect of the increments, which have kicked in from October onward. We have made investments in automation and process improvements for more efficient manufacturing, and this will enable us to mitigate the impact of rising power costs. While the absolute cost are going to increase, we will see a reduction as a portion of sales. Further, there is the impact on the ESOP cost of around INR 3.7 crore for the quarter and INR 7.05 crore for the half year. It is a non-cash charge. The most substantial part of the ESOP cost is being charged over the next eight years in largely equal installments over all four quarters.
From next financial year onwards, there will be a negligible cost on account of ESOP scheme that will be largely forwarded for. Other expenses were lower on a quarter-on-quarter basis, as we have focused on cost-reduction initiatives at all levels of the organization. Moving on to profitability front, EBITDA for the quarter stood at INR 47 crore against INR 43 crore in the corresponding quarter last year. Despite the sharp increase in employee cost, EBITDA margin for quarter two of financial 2024 has improved to 12.3% as compared to 11.5% in quarter two of FY 2023. I am pleased to share that we have reported an improvement in the EBITDA margin by 50 basis points on a year-on-year basis and nearly 104 basis points on quarter-on-quarter basis.
Importantly, if we adjust the non-cash charge of, for the ESOP cost, the adjusted EBITDA margin is 14.3% this quarter. This is an increase of over 103 basis points on year-on-year basis. Some of you would recall in our prior earnings calls, where we have indicated that we will increase the EBITDA margin by 100 basis points in FY 2024. We have done more than that in the first half itself and are poised to build on this growth through the year. We remain confident about the journey toward direction in margin given the improving product mix. Finance cost was higher by 39% on year-on-year basis, from INR 7 crore to INR 10 crore, in line with the higher interest rates. Some part of this rise is due to high interest rates, which are now expected to peak and gradually reduce through the next year.
In terms of quantum of debt, we have repaid some debt this year quarter from the operational cash flow, and the plan over will be to continue to repay debt each quarter to reduce the overall debt on a quarter-on-quarter basis, which will help us reduce the finance cost. We also witnessed increase in the depreciation, which was higher by 16% on year-on-year basis from INR 16 crore in quarter two last year to INR 18 crore in the quarter two of financial year 2024. The increase in depreciation has been driven by two factors. We have taken some machines on lease. As we are accounting based on accounting standards, we have to factor the machine useful life of five years, which results in a higher depreciation cost. Secondly, we re-evaluated the-
Ladies and gentlemen, please stay connected on the line for the management now. Participants, please stay connected on the line while the management answers the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected, so you may go ahead.
As a result of higher finance costs and depreciation, profit after tax for quarter two FY 2024 stood at INR 14.51 crore, as compared to INR 15.31 crore in the quarter two FY 2023, lower by 5% on a year-on-year basis. For the sequential quarter, profit after tax was higher by 53% from INR 9.5 crore to INR 14.5 crore. For the half year ending December 2023, revenue was INR 737 crore as against INR 722 crore in the corresponding period last year, growing by 2%.
... the first half of 2024 stood at 50.2% as compared to 48.1% in first half of 2023. EBITDA for the first half of 2024 stood at INR 87 crore, against INR 85 crore in the first half of 2023. That is higher by 7% year-on-year basis. Profit after tax for the first half of 2024 stood at INR 4 crore against INR 36 crore in the first quarter of last year. We have had strong performance from the perspective of cash flows. Operating cash flow increased to INR 80 crore for the half year ended September 2023, compared to INR 34 crore in the same period. Again, we realized towards the payment of borrowings, payment of dividend, and the MS product. We have deployed around INR 50 crore in the first half, which is in line with our target CapEx deployed for around INR 90 crore in 2024.
Looking to the outlook, we delivered a steady performance in the first half of the financial year, with revenues higher by 2% year-on-year basis. However, for the second half, we see improvement in the revenues, given the healthy pipeline of SOP of the new product and the new customers. As the second half of the prior year was muted, the growth rates are also set to improve early year, to end the year with revenue growth of 10%-12% for the full year. We are poised to take the business to new heights, and we aim to deliver a revenue of over INR 2,200 crore by 2025-2026, which equates to CAGR of over 15% for a period of three years.
Our confidence stems from the new orders which we have received and the discussions with the customers on new technologies and solutions. This will be accompanied by an improved margin profile, and we are aspire to take the EBITDA margin to around 14%, on which we have already reported the EBITDA margin of 12.8% in quarter two of FY 2024, and adjusting for one-time expense of ESOP cost, which is 13.3%. Lastly, we are looking to drive the efficiencies across the balance sheet and working capital, which will contribute towards enhanced results ratios too. On that note, I-
Participants, please stay connected. The line for the management comes again. Participants, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.
Okay. We have sustained the positive momentum from the first quarter, performing well in both new markets and with the introduction of new products. Despite a mixed industry backdrop, characterized by segments experiencing both positive momentum and challenges, we are pleased to report encouraging revenue growth, particularly on a sequential quarter basis. For Toyota, where we supply cylinder heads to their hybrid models, we have witnessed ramp-up in volume during the quarter, and our production is running in full swing to meet the increased demand. We also supply cylinder head to India, which is assembled and exported to Europe. During the quarter, the volume has picked up for India market, and it will further increase in quarter three, quarter four, as we commence supply for the European version. Supplies of cylinder head to Maruti Suzuki have also increased during the quarter.
The sales and production will increase further in quarter three, quarter four, with start of supplies to Gujarat plant of Suzuki. During the quarter, we added nine new parts from five customers, including one new logo. This includes three parts from EV or carbon neutral, four parts from ICE, and one part from non-auto, and one part from structural segment. Of the nine parts, eight parts are for international business and one part is for domestic business. In carbon neutral business, we added another part from Danfoss for the European market, and have also placed an order for proto business from JLR to support the Excel series business awarded last year. In the ICE segment, we further added new parts for the European markets through Tata Autocomp. We have also had a significant breakthrough in the European market with Hanon Systems, a tier one supplier to Ferrari.
In the non-auto business, we have added business in the existing portfolio and are in active discussion with the existing customer for further addition of parts. In technology agnostic business, we've added one more structural part for JLR, which will be supplied to their plant in U.K. During quarter two, FY 2024, Alicon has booked new orders aggregating INR 187 crores, which is our total order book, has reached to INR 8,687 crores, which is executable over a six-year period, from 2023-24 up to 2028-29. The other aspect to highlight is the improving product mix. 99% of our new business won is for the global market in four-wheeler, which is aligned to our long-term strategy.
With the prospects for global auto industry improving during the quarter, we are expecting better level of activity through the remainder of the financial year. The commencement of supply for these orders, along with the start of production across our aggregated order bookings, will contribute to enhanced revenue momentum. Our commitment to value creation extends to increase the value addition mix for our products in the four-wheeler and the commercial vehicle segments. In carbon neutral technology, we are actively exploring opportunities to expand the export and portfolio with existing customers. Our primary focus continues to be on passenger vehicles, commercial vehicles, and export opportunities, where we see significant potential for value addition. Further, we are actively engaged in strategic initiatives aimed at further enhancing our operational excellence. We have partnered with painting vendors at Delhi and Pune to provide more comprehensive solution and assured quality to our customers.
We have enhanced our machining capability at our Shikrapur facility, with installation of advanced equipment, enriching the competency will enable us to enhance customer wallet share and grow the proportion of value addition. To this end, we are also actively recruiting experts in casting, machining, strengthening our whole global team. On that note, I have completed the operating highlights, as Andreas Heim has got personal emergency, so I will now cover development on our international businesses. The international business has delivered an encouraging performance in the backdrop of continued inflationary pressure and deteriorating geopolitical scenario. Energy prices have stabilized at slightly lower level, and energy availability has also improved, along with minor improvement in alloy prices, which is encouraging to our customers. European operations are gradually emerging from the challenging situation faced last year.
There has been a mixed trend, with some of our customers ramping up production due to improving demand, while other customers are facing challenges to ramp up their activity levels due to constraint in supply chain with some other vendors. This is expected to ease in quarter three and quarter four, leading to improved volumes. As explained earlier, in the global business, we have added eight new parts from four customers this quarter, including one new logo. We have added a part of Hanon Systems, a prominent tier one supplier to Ferrari, which is trademark logo addition and enriches our customer profile. Further, which will carry significant weightage with prospective customers of the international business. The global business contributed to 20% of the total revenue during the quarter, and 21%-21% during the half year, which is higher than the contribution during the prior financial year.
To further enhance the contribution, we have strengthened our teams with involvement of personnel with rich experience in product engineering, tool making, and single components to add their know-how to our operations. Further, we have added a machine of larger size, which can manufacture parts up to 2 m in length, enhancing the capability of the European operations. The outlook has improved, as against the initial expectation of decline in quarter 2, FY 2023. There has been around 4% growth in volumes in the global auto industry. Further, against the growth forecast of 4%-4.5% in the global auto industry in calendar year 2023, the revised forecast now indicates growth of 4.5%-5%. On this note, I would like now to hand over to Mr. Rajiv Gupta, who will cover the development in the domestic business for the quarter.
Thank you, Mr. Shyam. Good afternoon, everyone. In quarter two, FY 2024, the domestic automobile market was stagnant. That was 1% growth year-on-year. On overall basis, we witnessed mixed trends categorized by 6% growth in the passenger vehicle segment, 9% growth in the commercial segment, and 2% degrowth in the two-wheeler segment. Within the passenger vehicle segment, we are witnessing heightened interest in UVs, with the market shares steadily rising. Other categories within PV segment continue to face sluggish demand. The two-wheeler industry was expected to benefit from higher volumes on account of festive season. FAME- II withdrawal in June 2023 has impacted the volumes of the electric two-wheelers, which have supported volumes of ICE. The entry-level motorcycles continue to see pressure, and there has been growth in the premium demand of the motorcycle segment. However, scooter segment has been flat.
The domestic, commercial vehicle industry volumes continue to do well, and there was an increase of 9% year-on-year in the segment on account of good momentum in the infrastructure and construction segment, as well as steady growth in the economic activity, as indicated by GST collections. In carbon neutral segment, we have witnessed ramp-up in volumes of the motor housing for TACO, given the increased sales of Tata Motors electric vehicles. We also supply motor housings component to Dana TM4 for Switch Mobility. Now, with Tata Motors, which also witnessed strong demand during quarter two. There has been start of production for HB1 controller housing, which is supplied to Danfoss for the EU market. As explained by Mr. Shyam, earlier, on new business, we have added one part from existing customer in the domestic business.
This is for the supply of cylinder heads for the heavy-duty defense truck, which commenced sales during the quarter. Further, the supply of wheels for the BharatBenz is ongoing. We also are working on tenders for the next year's sales, for these products. On this note, we can open the floor for questions.
Thank you very much. We'll 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 is from the line of Saurabh from Sunidhi Securities. Please go ahead.
Hello. Yeah, thanks for the opportunity, sir. My first question is, which are the major SOPs that are scheduled to start contributing during the second half, particularly in Q3 and Q4? And if you would be able to quantify that, that would really be helpful. Last quarter, you had mentioned that Maruti, we are expecting a good jump from Q3 onwards, and Toyota was also supposed to relook at some of the releases following the launch of Hyryder and Hycross. Similarly, PSA also, following the commencement of the new plant city at Bangalore. So everything looks on track?
Yeah, rightly highlighted by you. For the domestic market, we saw a lot of momentum in the last quarter. Like for the Maruti, which we highlighted, the cylinder what we developed. So in the last quarter, I mean, the end of last quarter, we got an entry to the Gujarat plant, which was planned. So this will now materialize in quarter three, and you will notice, Maruti cylinder volumes will increase. Second good thing happened was on the PSA, the cylinder got we back, 1.5 years ago. So initially, we started for the Indian market, and now we got an entry to the European French market. So this is also a good point. What we noticed, the sales are going to be bigger in quarter three and quarter four.
So these were two major aspects, and yes, Toyota, we know, the models are doing quite well. The long waiting period is there. And also thereafter, these platform going to Maruti with the Invicto and also the Grand Vitara, volumes are picking up. So yes, in quarter three and quarter four, we see good volumes for Toyota. And on the global front, yes, we see volumes are ramping up for Tata Autocomp, these are for the Europe market, that's what we added. And also, volumes are picking up for customers like Jaguar Land Rover, which we developed. And yes, now also we see the volumes are picking up as, the numbers are increasing, and they're also trying to add new OEMs for the existing pack. So here we see a good momentum.
So sir, mainly in this, like, Toyota. So Toyota, they increased the numbers, but definitely for the Maruti as well as, for the PSA, that was almost till quarter two. So that, will give a big jump in the number for, any quarter, quarter three and quarter four, the top line.
Sir, would you be able to quantify the contribution which is already scheduled for Q3, Q4 from SOP, new SOP?
One moment. So basically, the total new passport we added will contribute to roughly around 40%-45% of our total sales in quarter three.
When we talk about the contributions, it's like, we take example of Maruti. So in this, hopefully,
Please connect in the line for the management now. Thank you for your patience. We have the line for the management reconnected, so you may go ahead.
Yeah, so the major jump what we are noticing from quarter two through quarter three is, one is Maruti, from roughly around INR 3 to 4 crores to it's jumping now to, around INR 10 to 12 crore.
Overall, INR 20 crore, INR 40 crore as well?
Yes. Yes. So also we are noticing a good jump in Gujarat and PSA. So at this moment, yes, they have reached around 80%-90% of the numbers. So we are eventually waiting for the other suppliers to go up to the capacity, and thereafter, the volumes for the might increase.
So, majorly would be in Q4, is it? Would it be fair assumption?
Yes, yes. So because the bottom line basis, we see a good jump in Q3 as well as in Q4. So because when, for the full year, like in first half, it was almost around 2% growth against the quarter two of the last year. But we are expecting around 10%-12% growth on year-on-year basis for the fully, on full year basis. So in spite of taking the impact of this, because, you see that at this moment, the aluminum prices are also down. So that has also given an impact of around 4% on the overall growth. So in spite of taking that impact, so we are expecting to grow it 10%-12% for the full year.
Also in quarter three, we know there are planned shutdowns. Because of festival seasons, the major volumes will not be operating 10 to 7 days. There, yes, there's a dent to sales, but as we have added new parts, this will help us to cover up this gap.
Okay, that was helpful, sir. So what was the mix of two-wheelers and four-wheelers during the quarter? And if you could comment about the status of our CapEx plan. My other questions about top-line growth and margins for this year have been answered. So that's all from my side, sir. Thank you. All the best.
Thank you for the contribution. One moment. Two-wheeler contributed 43% of the total sales in quarter two. The passenger contributed 59%, commercial contributed 20%.
That was the momentum. We did well compared to our previous numbers. Eventually, we noticed we are increasing in a four-wheeler contribution. It's a club four-wheeler and commercial. And passenger commercial, we noted we touched near about 49%, which is a good sign.
Sir, would you comment about the status of the CapEx plan?
So CapEx side, for the full year, we had a plan of approximately INR 90 crore. So hopefully, already 50% is already done in the first half. And the second half, we have to complete this CapEx because it's related to the... We have to install the capacities for the new businesses. So for the full year, in the range of 80%, we will do the CapEx for them.
That's all from my side. Thank you. Wish you all the best.
Thank you.
Thank you. This question is from the line of Raghunandan NL from Nuvama. Please go ahead.
Thank you, sir, for the opportunity and best and greetings for the entire team. Firstly, taking a 10%-12% growth for FY 2024, the revenue number comes to INR 1,042-1,057 crores, roughly. How would the breach of each in regular business and SOP?
The business will contribute to around 45%, and 55% will be from the regular business.
Thank you, sir. And
Started going up. So year-on-year basis, you will see a
Got it, sir. That's very helpful. And, in terms of, export performance or overseas business from-
Sorry to interrupt you. Raghunandan, there's some background noise from your line.
Is it better now? Hello.
Can you connect to a different location, please?
Yeah, I'll do that. So in terms of the export performance in the first half, the performance is broadly in line with the overall revenue performance?
... Yes, it's in line. If you see, we just highlighted in the global numbers, the global numbers were around 21%. Yeah. But if you see, because at this moment, a lot of OEMs have started consolidation center, where they are taking material from India, and they are exporting outside to their other locations. So if I have those avenues also, I mean, those sales also, it will jump through around 21%. Like, for example, Daimler, which we are exporting to U.S., it's going directly, but which we are exporting to Europe, it's going through their logistics center in Chennai. So if I count those avenues also, my global is increasing, and this is increasing with the parts what we added, like, Daimler, JLR, TACO for the Sweden market, and so on.
So these are some of the push, which is helping us to increase our contribution in global, which is where we are aiming, because we know if you see the trend of the market also, we understood Indian automotive still is stagnant. We just notice a growth of 1%. But if we see the global numbers, it was up by 5%, especially if I talk about regions like Europe, regions like North America, volumes are picking up. So these regions we want to materialize. So these are some of the aspects where we are working in directions.
Got it, sir. This 21% this year, approximately, how would the same number be last year?
Last year, it was 27%.
Got it, sir. Thank you. And, in terms of share of EVs, how does it stand currently, in terms of revenue and also the sales book?
Participants, please take a note on the line with the management role. Thank you for your patience. We have the line for the management reconnected, so you may go ahead.
Apologies for the network issue. So I was talking about the Indian context for the EV market, for the EV market. There we noted a good jump in Tata Motors. The volumes are picking up, Dana, which we highlighted, and also the new path is going into now sales. So but still, if you talk about contribution, we touched 7%, this quarter, which we compare with the last year, quarter two, it was around 3.5%. So we got a good jump in quarter two.
And, the important thing that I would just like to highlight on when we are talking about the EV side. So like, the last one year, we have announced that we have got the eAxle from the JLR. So this is the most complicated part in the EV. So for that, in this quarter, we have already started the development, and the prototype building already done. And so we are happy to inform you that in the first shot, we have developed a very good casting, and all team members of JLR team, they were surprised how this has happened. So we have used the best technologies from the European designers, the tool build, et cetera. So all, whatever the best possible resources were there at the global level.
So those were being used to develop those parts. So such kind of new technologies we are bringing into Alicon Group.
One is bringing, and second is now proving. So they were really amazed to see how the first initial start was quite came so impressive. So even on trials, JLR were there, and now they are getting more confidence, and also this development topic spread to other customers across global and domestic customers. So we know very well this developments will further attract a lot of customers. Like, we started in another round of discussions with some other customers, which may be in the coming quarters, we'd like to share with you. But yes, a promising development, which is now materialized and people are noticing. So that's a good sign for Alicon Group and for, other team members.
Congratulations, sir, this progress on the eAxle. Just continuing the point which you said, given that this eAxle housing actually reduces the weight, if, if you go for separate housing, the weight will be higher, and this eAxle was supposed to, eAxle housing would reduce weight by 7 kilos, if I remember correctly. So if you can talk about the opportunity for this server?
Actually, at this moment, we cannot disclose the names, but I just tell you that all big global players, they are in discussion with us, and some of them are approaching us with the business part. Maybe after having the final order or alloy in our hands, then only we can disclose the name.
Got it, sir. I'm wishing you all the best here. Sir, in terms of the full year margin, so first half, if I look at it, you know, adjusted EBITDA margin is about 12.8%. So, if I take that adjusted margin, which is at 12.8%, how do you see the outlook for the full year?
So for the, like first year, first half year so second half also, we see some improvement in term margins. So overall, I think because, you see that adjusted, there was a big cost is coming up, that is the non-cash item of the ESOP cost. So because that is going to on this year and after next year, it will not be there. If even we remove this impact, so in quarter two, we have seen approximately 13.3% EBITDA margin, if we remove the impact of the ESOP. So definitely for the second half, we are looking at the same level or better than this. And, like we have promised in earlier earnings call, so we are on with, from this.
But journey has already started for the improvement in the margin as well as, you know, changing the sales mix. So like the impact of the new businesses has started coming from the quarter two, and I believe that on bottom quarter cases, you will see the improvement in the margins as well as impact of the sales mix.
After making this INR 15 crore full year impact of ESOP, how much ESOP cost is expected for next year?
Very nominal margin, INR 2 crore or INR 3 crore, no more.
Got it, sir. My last question: what would be the total debt reduction for next year?
So you know that, we are also having some CapEx, and for the new businesses, we will require the CapEx. But we are expecting at least, like in first six months, there is a small reduction, but around INR 20 crore. But for the full year basis, at least we are expecting between INR 25 crore-INR 30 crore reduction on full year basis.
Got it, sir. Thank you so much for your thoughts and insights. Thank you.
Thank you. Next question is from line of Yash Dalal, from Sushil Financial. Please go ahead.
Yeah. Firstly, congratulations on a good set of numbers and improved margins, and, thank you for the opportunity. I have a couple of questions. First, to begin with, what is the fall in realization this quarter due to the raw material price fall? And correspondingly, the revenues have gone up, so there must be very strong volume growth. Could you just guide us on the same?
So, just like for the half year, so maybe overall, we don't see any improvement in the numbers. So there is definitely, you understand that the impact of the aluminum prices. So it's impacting approximately 4% overall impact. So when we take for the full year, converted into that, so around 10%-12%, we are talking about improvement in the numbers, means the revenue number, as well as we take around 4% impact of the aluminum prices. So approximately 15%-16% growth in the numbers, in the volume, we can say. So that I think, in our earlier call that when we discuss about the forecast for the year of 2023-2024, we have explained we are also expecting, the growth of around 15%. So these are in line, these numbers are in line with that.
Okay. Okay. So also, actually you mentioned about EBITDA margins, the ESOP adjustment, INR 13.3 crore for the quarter. Can this be sustained, and what are the factors contributing to it? Are we on track for EBITDA of 15% by 2026?
So that is, I think, we are giving it, what you are asking me, to give you the, all this forecast, so that, I think you are the good people. As an investor, you can understand and you can work out. But definitely, we are focused on this and what we were talking about for the improvement in the margins. So that's I'm also explaining to Raghunandan. So this journey has started, more improvement in the margins as well as, improvement in the top line based on the, new orders and the seeing the case mix, so where we are focused. So we are, totally on the track of, on our strategy.
Okay. Okay, thank you. And so I just want to understand, recently you approved, you approved a new ESOP scheme. So what kind of cost would be involved going forward for the same?
So actually, I tell you that about the new ESOP scheme, which is a small scheme, around 300,000 shares we have taken up over. But it's not too big target. This we have kept for the future, because now, we are growing in new technologies, so we have to hire, some good technical people in the company or maybe some senior level people. So and the people-
... we are having one generation in the company, so who are going to perform in the coming years. So for them, we share, and still not granted, so grant will happen, maybe in like six months. It would not be for the full quantity, maybe 25%, 30% of this. And pricing is also, maximum usually in the discount of 25% in the market. So what I don't believe that there will be a cost on, of this, the PMS.
Okay. Okay, understood. Thank you. And just, last question, was regarding the traction with new products, any scale-ups or developments? Also, lastly, you mentioned the new friction stir welding technology. Is there any kind of traction are you seeing there?
Thanks for the question. So for the Friction Stir Welding, as we mentioned, it is very, very robust process for new EV. And as we all are seeing, that all the OEMs, Tier 1, they are investing heavily on the electrification. And we are also getting lots of inquiries from new Tier 1 on this process. So in the coming quarter, you will see lots of further order booking with the Friction Stir Welding, and even we have got the further volume increase with the existing customer. So we are seeing a good traction with this.
Yes, the main important thing to understanding this, I answer you. So this is a patented technology, and we have discussed, I will not disclose the name of some OEMs, but I had a personal discussion with the big global players, and they were shocked to see that, "Oh, such kind of technology you are having." And they are so much interested to start a partnership with us for the development of these two parts, with the FSW technology. And it only for Alicon that how we move, how fast we move in this technology, as well as the new opportunities. Because that, like for, it's, it is another vertical for Alicon, for high pressure die casting, HPDC. Earlier, we have discussed a lot of about this HPDC process.
That was obviously a challenge for us. But now we have started, actually, maybe in the coming years, we will go and install some facilities in-house for the production of high pressure. That is another avenue for growth, and a lot of demand is there. That's another opportunity we have opened up, and FSW is the main supporter for this.
Okay, sir, that's very encouraging to hear. Thank you so much for your time.
Thank you.
A reminder to all the participants, you may press star and one to ask a question. This question is from the line of Vijay Chadha from Kotak Asset Management. Please go ahead.
Hello, good afternoon, sir. Sir, my first question is on the revenue guidance for FY26. So my question is, what are the key macro assumptions that we are making when we are thinking about this revenue guidance, which you mentioned earlier in the call? That's my first question. And any key risks you would like to highlight in, you know, potentially under achieving this target? Thanks.
So here, basically, our drivers would be the shift, what we are talking, reducing our dependence in two-wheeler, because we also know, with the EV introduction and the other avenues available in the market, definitely the volume of ICE will come down into below mid the four-wheeler sec segment. So basically, here, what we are going to do is, we are going to enter, increase our portfolio in passenger and commercial, and also we are increasing our portfolio into critical A-class parts, like, for example, cylinder heads. I believe cylinder head is being manufactured at OEMs in-house, for example, Maruti, Toyota, Honda Cars, and so on. At this moment, now OEMs are speaking of loading this capacity, and they are coming to... And they are associated with some technical experts who are manufacturing this A-class part.
And you know, they came, like Toyota, they came to us. So, developments, and the major trend in or addition in cylinders is now supporting Alicon to communicate other existing or prospective customers of an avenue which Alicon can support. And so we have considered those avenue, like, for example, Maruti were doing cylinder heads in-house, and they are comfortable to offload. So you can imagine, market leader Maruti, 40%-45% of the share they are holding in India, and they are very comfortable offloading the capacity to Alicon. So this talks about the trust, faith, and the relationship what we have with these customers.
So these are some parts which we are doing, yeah, which will support us as a sales driver for domestic market and also for global, as I explained, the avenues, what we have done in the EV market, particularly, like the eAxle. So I believe, you see, we know very well, I mean, our customers are keeping an eye on our developments. For example, Friction Stir Welding, they're keeping an eye. They calling up, they are visiting our facilities. They want- they are interested to understand where we are on this facility, so that once this is proven, they will immediately go back to their management, where they can revert back with their opportunities. So we know very well, these are some avenues, and that's the reason we have listed down very clearly the customers, the products, the region, the opportunities, and so on.
So if you see on marketing side, regular visits to customer, regular travels overseas is being done, explaining the know-how, explaining the advanced development, and explaining how we can support our customers. So it's, it, this, I mean, the actions will definitely fetch us to a incremental benefit going forward in the long term.
So, so overall, just to sum up, when we are talking about on what this is, what are the assumptions on this? So main assumption is that whatever the new businesses, we have introduced, we have got the orders. So that should happen. And, because the numbers, should have come there, and secondly, the LEV, the development of those parts. So those are the main things. But technically, on the other side, because generally we play very conservative in numbers. So on the other side, that we have not, these numbers are totally based on the orders we have received. So nothing is based on that, any business which is under discussion. So that is the, as a part of safety, we can say that will add up.
And second is, on the existing business, if we remove our, the new businesses, new parts from the existing business, so in our planning, we have taken another line. If this business will go down, especially on the two-wheeler side, if that will perform at even clear, so that will support us, plan B, we can say, so to deliver the numbers. So in this fashion, we have developed these plans, so hopefully, that we should be able to deliver these numbers that we are talking.
Got it. Fair inference would be how fast the EV is going to grow and how much of the portfolio these OEMs will be getting to outsource to players like us, right?
Correct.
Got it. Two quick questions. One, despite the marginal reduction, there is a spiking marginal interest cost, so has it increased for us?
What?
The interest cost, it has risen marginally despite the marginal reduction in debt. So is the interest cost been higher for us recently?
No, in the future, we are expecting to go down because when this debt reduction will happen. Because the improvement in the cash flow we have seen from the month of September, because earlier there was a little more utilization and effects are happening. So you know that the main one-time effects are happening, so we have to invest, so and we have to grow. But on the other side, we are taking a lot of action to control our interest cost, especially some of that. You see that because management is also there, so some increase in that data. So we are getting more opportunity to renegotiate some terms with the customers. So definitely, in the coming quarters, we will see the reduction in the debt cost.
So because we have identified the two major areas of the cost increase in this quarter, and all you can see in the sixth month. One was the net power cost as well as on the interest cost. So management is fully focused how to control and reduce these costs. So on the net power side, one part, so already explained about the interest cost, and second is about the minimum wage increase given by the Maharashtra government. So we are taking a lot of actions to control this and to reduce this, and the second is on the insight side. So that's how to renegotiate some terms with the customers and well as focus how to reduce our debts.
Got it. So the average cost of debt is 12% for us in line with what is it?
Maybe 10-10.5%, because all interest cost we are taking based on the test. So it will depend on the rate, on daily basis utilization.
Got it. Got it. My last question is on the, how much is the machining work in-house versus outsourced?
For this year, we expecting machine would be around 65%-67%, and this will jump to around 70%-75% by...
70/30.
70/30 .
In-house is approximately 70%, and outsource is 30%.
Got it. For the growth here, and we are saying, a fair inference is that we'll have to do more outsourcing over the next 2-3 years, right?
Yes, yes.
Got it. Thanks.
We are also adding some machines in our city as well, because 100%, we should not do in-house. So, we are doing the best we can do between in-house and outsource.
Got it, sir. Thank you.
Thank you. As there are no further questions, I will now hand the conference over to the management for closing comments.
Thank you. I hope we have been able to answer all your questions satisfactorily. Should you need any other clarifications or would like to know more about the company, please feel free to contact our team or CDR India . I want to take this opportunity to wish all of you a very happy Diwali and a prosperous new year. Thank you once again for taking the time to join us on this call, and we look forward to interacting next quarter. Thank you very much.
Thank you very much. On behalf of Alicon Castalloy Limited, thank you for this conference. Thank you for joining us. You may now disconnect your lines. Thank you.