Ladies and gentlemen, good day, and welcome to the Q4 FY 2022 Earnings Conference Call of Alicon Castalloy 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 the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Vaswani from CDR India. Thank you, and over to you, sir.
Thank you, Rutuja. Good day, everyone, and thank you for joining us on the earnings call of Alicon Castalloy Limited for the fourth quarter and full year of FY 2022. We have with us on the call today Mr. Rajeev Sikand, Group CEO, Mr. Vimal Gupta, Group CFO, Mr. Shekhar Dravid, Chief Operating Officer of Alicon Castalloy Limited, Mr. Andreas Heim, Managing Director of Alicon Castalloy, and Rajiv Gupta, Head of Domestic Business of Alicon Castalloy Limited. As we always do, Mr. Vimal Gupta will cover the financial performance for the quarter, following which Mr. Shekhar Dravid will walk us through the operating highlights.
In order to share a more granular view of the initiatives towards both the global and domestic markets, we also have Mr. Andreas Heim and Mr. Rajiv Gupta to provide insights on these areas. Following this, our Group CEO, Mr. Rajeev Sikand will give us a brief summary of the quarter gone by. Thereafter, we shall open the forum for a Q&A session. Before we begin, I would like to point out that some of the statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with all of you earlier. I would now like to hand over the floor to Mr. Vimal Gupta for his opening remarks. Over to you, sir.
Good morning to all our investors. I hope that all of you and your near and dear ones are safe and well. Thank you for taking the time out to join our earnings call. We have closed the fiscal year 2022 on a positive note despite several macro challenges. As you would recollect last quarter, we had mentioned about how Alicon has faced and combated four key challenges during nine months of financial year 2022. In the fourth quarter, we saw two more of these challenges upending the demand environment globally. The six challenges that have emerged, which we have named as six C's, are. The first C is the COVID pandemic. Lockdowns and restrictions on account of the pandemic resulted in a slowdown across the domestic and international markets. In addition, job losses, pay cuts, and reduction in household income further affected consumer sentiments.
A combination of these factors have impacted sales in the auto industry, and we are assessing the long-term impact. The second C is the C hip, or we can say the semiconductor shortages, which have impacted production schedules of OEMs and resulted in loss in volumes for the auto industry. What we have seen in auto players rationalizing the available supply of chips into more high-value or premium models. Semiconductors are a multidimensional product catering to a number of industries, so overcoming these constraints are expected to take another nine to 12 months. The third C was a Cost-based inflation, wherein we saw higher costs of vehicle fuels, aluminum, elements, energy, logistics, and other costs. This resulted in increased cost of production and a sharp rise in vehicle selling prices by OEM, which again impacted demand. Furthermore, purchasing power was affected due to the unprecedented fuel prices in our country.
The fourth C was the Cost of new product development. As you know, the development costs for the products are amortized over the product life. However, with the EV evolution, this is an increase in the new product development cycle, and the product life cycles are shortened. We are seeing a rise in the field trials required for reaching to normalized efficiency levels. The two recent Cs are the Conflict between Russia and Ukraine and Crisis in supply chain and global auto industry. The ongoing geographical conflict has affected production volumes and has resulted in a complete sales stop in Russia and Ukraine. The conflict is also impacting and aggravating inflationary pressures in raw materials. Further, I think all of you have been hearing about the hit on power supply for European countries which rely on Russian oils and gases.
High power consuming industries like industrial, metals, foundries, et cetera, are facing unprecedented challenges in sourcing adequate power and at affordable rates. This has disrupted global supply chain networks. The shortages of raw materials and subcomponents are expected to impact auto production levels, especially in Europe. Overall, the year gone by was characterized by these significant macro challenges. Given this backdrop, Alicon has performed very well. While we did see some impact on our sales volumes given these challenges, but broadly, we are encouraged with how our Alicon family navigated through these roadblocks and delivered robust performance. Our focus on strengthening sales of value-added components resulted in favorable revenue mix during the year. In fact, in the last three years, we have seen a significant shift in the needle towards a value-added portfolio and revenue mix.
In the auto division, we are seeing strong sales coming in new value-added components in the passenger vehicles and commercial vehicles segment. The year also witnessed improved volumes from higher margin products in the EV category. Our focus on value added- addition and our efforts towards driving better operational efficiencies have supported growth in the year. Our top line in the year stood at INR 1,081.37 crores, higher by 27% year-on-year basis. In the fourth quarter, revenue from operations stood at INR 320.56 crores as against INR 322.57 crores in the quarter four financial 2021. The decline was mainly on account of moderate demand due to the non-linearities that we witnessed on the macro front.
On the profitability front, the continuous increase in the input costs, along with inflated supply chain prices, resulted in higher expenses, especially in the second half of financial year 2022. While there has been a pass-through in the case of aluminum, for several other inputs too we have witnessed unprecedented pricing pressures. Recognizing this, we focus on further process improvement and yield enhancement in our production processes. Our teams deployed sustained cost optimization measures using the Kaizen principle to enable cost reduction. We have been constantly collaborating with our customers to undertake price revisions and have successfully passed on some part of increased costs. There has been significant inflation in almost all costs, including various overheads. We have also put in a lot of work to mitigate the impact of the rise in manpower costs too.
We undertook cost optimization across all levels of the pyramid to extract greater synergies and efficiencies across all aspects of business to counter the cost pressures. Along with the improved product mix, our cost-saving initiatives have enabled us to support margin performance during a difficult year in terms of inflationary pressures. Despite reporting gross margins for the year of 49.5%, lower by 499 bps year-on-year, we have reported an improved EBITDA margin, which at 10.7% was higher by 61 bps. In fact, for quarter four, for financial year 2022, the EBITDA margin stood steady at 12%, indicating that our exit rate margins performance remains strong. A key feature of our performance this quarter has been protecting margins from the multiple challenges arising from the volatile macro environment.
Due to the increase in alloy prices, there has been a dual impact on both EBITDA and sales, which has resulted in about 100 basis points impact on the margins. As the prices of alloy stabilize, the improved margins will be more evident. In a normalized environment, our medium-term target is to improve our EBITDA margins to a level of 14%-15% on the back of our cost efficiency measures. On absolute terms, our EBITDA during the year stood at INR 115.79 crores, up by 35%, and in the quarter came in at INR 38.72 crore, lower by 21% year-on-year basis. Interest costs have been re-reduced by INR 6 crores from INR 36 crore in financial year to INR 30 crores in the financial year 2022, as we reduced debt by deploying the fund raised through QIP and other initiatives.
Profit after tax during the year and quarter stood at INR 24.18 crore and INR 13.21 crore respectively. In view of the improved performance, the Board of Directors have recommended a dividend of INR 2.25 per equity share of INR 5 each. That is 45% for the financial year ended 31 March 2022, subject to approval of shareholders in the ensuing 32nd Annual General Meeting. On the operational front, during the year, our manufacturing plant in Europe operated at normalized utilization level to the tune of 65%-67%. We have created a safe, hygienic, and a multicultural work environment for our people. Despite the ongoing cost pressures and supply chain disruptions, we are focused on undertaking strategic enhancements where necessary in our operations.
During the year, we witnessed sharp increase in key input costs, which had a resultant impact on the cost of inventory and other data. However, we were able to drive greater efficiencies, which in turn have enabled us to actually improve the working capital days despite these pressures. We expect this to be stabilized going forward. Working capital days during the year improved by 18 days in the financial year 2022. During the quarter, we have reported steady cash flow from operations. On the balance sheet front, our net debt stands healthy at INR 261 crore, and the net debt to equity ratio remains comfortable at 0.48. On the CapEx, we plan to deploy around INR 90 crore in the financial 2023, which includes maintenance effects and new machinery, machining capacity.
While there has been some disruptions in recent quarters, our focus continues to be on improving return ratios. As the operating performance rebounds and we accrue the benefits of better product mix, healthy profitability, streamlined working capital cycle, and improved balance sheet metrics, we will aspire to take our return ratios to the pre-COVID levels of FY 2019. To summarize, we have reported a very encouraging performance in the financial year 2022 despite multidimensional disruptions in the automobile industry. We continue to operate a healthy financial profile and strong balance sheet. In a normalized environment, we look forward to delivering a strong and sustainable growth. On that note, I would like now to hand over to Mr. Shekhar Dravid, who will talk about operating highlights for the quarter.
Thank you, Vimal. Greetings to all. I trust all of you are well and staying safe. The auto sales in the fiscal year 2022 were a mixed bag. While passenger vehicle, commercial vehicle, and three-wheeler segment registered an improved performance on year-on-year basis, sales volume of two-wheelers saw a significant degrowth marked by the high ownership costs and the expensive fuel. While demand and offtake of the commercial vehicles and the passenger vehicle segments remained strong throughout financial year 2022, the upside was limited due to the supply constraints and the ongoing chip shortages. On the production front as well, we are seeing some impact on vehicle dispatches due to inventory adjustments and the continuing impact of chip shortages. The waiting period for best-selling passenger vehicles in the range of two to 12 months or more as per the FADA.
The average dealer inventory now stands at around 15-20 days versus the average level of four weeks. We are seeing some demand-supply gap in the domestic markets. On the international front, most of the key export geographies in U.S. and Europe are reporting improving auto sales. In terms of inflationary pressures, globally and domestically, the auto and auto ancillary space continues to witness supply chain bottlenecks. This has further intensified due to the ongoing geopolitical conflicts. We have seen aluminum and related alloy prices reach new heights. In addition, the spread of COVID in certain Asian countries is further fueling input prices. However, we are now seeing, in some cases, domestic auto OEMs sourcing inputs and chips from alternate source vendors. This is enabling them to mitigate cost pressures to some extent.
More so, we have also not seen any major OEMs, both domestic as well as global, suggesting for any sharp production losses or any production halts due to these issues, which is encouraging. Against the backdrop, we are quite encouraged to have reported a strong performance in the fiscal year 2022. In addition to our focus on value addition, as explained by Vimal, our growth was also supported by new customer wins, addition of new parts from the existing customers, increasing penetration of four-wheelers in our overall revenue mix, improved contribution from the EV segment, and strong exports. We have also undertaken several initiatives and directed efforts over the last few quarters and years to position ourselves well in the fast-growing industry, and our performance in this year reflects these measures. Let me take you through the highlights of our performance across each domain.
The first being our auto business. The domestic auto sector has seen sharp decline for two years in a row, adversely impacted due to the COVID and the input pressures. However, with a pickup in economic activity and the normalizing environment should improve the demand environment for all the segments. In addition, high rabi sowing, healthy agri inputs price supports, and forecast of a normal monsoon indicates that the rural demand in the upcoming months could witness similar positive traction. It is also encouraging that vehicle registration with regional transport offices rose by 37% to 1,627,975 units in April as per the data collected by the vehicle retailers body, FADA. Overall, the outlook remains healthy in the medium to longer terms.
Globally, the 2021 global auto production was higher by 1.8% year-on-year, driven by U.S. and China numbers. However, Europe was down by sharp 6% year-on-year. Despite this, I am happy to share that Alicon's global auto sales marked a strong increase of 63% year-on-year during this year. Alicon India export sales increased strongly by 100% year-on-year. In the IC segment, we are seeing strong inquiry level across domestic and export markets. In terms of new parts added via existing customers, we are seeing repeat orders coming in from customers such as Honda Motorcycle, MAN Truck, Tata AutoComp, Eaton to name a few. I'm happy to share that in the quarter, we have won orders for 21 new parts.
Overall, in the year, we have seen one new logo win, which is MAN Truck, which is a strong reflection of our growing brand value in the global markets. The passenger vehicle and the commercial vehicle segments are key focus area for us. Our sales in passenger vehicle division grew by 45% year-on-year in FY 2022, and the commercial vehicle sales grew by 61% year-on-year. Going ahead, our focus will be on improving contribution from higher value components in the passenger vehicle and commercial vehicle segments, thus driving augmented brand value and enhanced sales in this division. Coming now to the second of our growth pillars, which is the electric vehicle division. The division continues to see strong growth across the markets.
In India, the government's decision of raising the FAME II subsidy and increasing the deadline for EV transition to March 2024 is fueling growth in the sector, especially for two-wheeler EV. We have seen as many as 19 states across the country that have announced their respective EV policies with lucrative benefits to the consumers. This has translated to the strong uptake in EV. In financial year 2022, electric vehicle sales in the country gained momentum, with total sales increasing by more than 211%. The number of electric vehicles sold in the country based on the registrations at Vahan portal were 419,812 in FY 2022, against 134,853 in FY 2021.
While all classes of electric vehicles have shown a big jump, motorcycle sales have shown the biggest jump, growing 461%, followed by e-rickshaws and electric car sales. Several two-wheeler EV OEMs have announced aggressive expansion plans and to further support the EV value chain. We have seen the center undertaking policy initiatives such as the PLI scheme and the recently announced policy for the battery swapping. I am very pleased to share that Alicon Castalloy was one of the companies approved under the Component Champion Incentive Scheme. The Component Champion Incentive Scheme is a sales value linked scheme applicable on advanced automotive technology components of vehicles. This PLI scheme for automotive sector, along with the already launched PLI scheme for Advanced Chemistry Cell and Faster Adoption and Manufacturing of Electric Vehicles FAME, is aimed to fast-tracking India's transport system into an environmentally cleaner, sustainable and advanced system.
For this segment, we are working with the OEMs as well as the Tier 1 suppliers. We have been working extensively with Dana Incorporated, Scania, Tata AutoComp, Arrival, Mahle on both domestic and international orders. Overall, in the year, we have seen two new logos win. One is Scania and other is Arrival, which again reflects our growing brand value in the global markets. Another area where we are seeing strong response from the customers is the lightweighting of the products in the auto and EV space. We are getting increased inquiries from the OEMs both in domestic and export markets, and we are actively developing new parts to focus on this segment. We already built up a portfolio of over 101 parts catering to EV and other revenues from EV business thanks to 10% in 2022.
It is encouraging that in FY 2019, our overall EV share of revenues stood at just 2%. We have seen a very strong growth in this segment in just three years. Going forward, incremental sales of this company would be a function of this value-added EV segment along with other value-added components from ICV, structural and non-auto segments. Overall, our long-term target is to bring wallet share in EV business to 12% in financial year 2023 and to 36% of overall revenues by 2025-2026. Now on our third growth pillar, being a technology agnostic platform, we are steadily adding value-added products to our basket. Various aspects of the vehicles are cross-functional across both ICE as well as EV platforms and would remain relevant should there be emergence of any alternative technology too.
Our aim is to ensure that we gain relevance in interesting and accretive niches, around these products by leveraging our core competencies. In this regard, we are working on diversifying and expanding our product portfolio to include several niche and value-enhancing offerings. Overall, in the year, we have added parts from JLR, KTM and Piaggio, continuing the progress we have made in the global markets. Coming to our fourth segment, which is a non-auto business. In this, we are witnessing healthy growth in demand, especially from the different sectors. During the year, we have added complex parts from Textron and JCB. Both the parts will help to showcase existing and prospective customers about the capability of the group and will help to add further businesses. Our fifth growth lever is our focus on improving customer wallet share. This will be by leveraging our R&D, our competencies, and our relationships.
Our R&D facilities are core to our operations and enable us to keep pace with upcoming opportunities. Overall, we are well-placed to enhance contribution from the repeat customers and demonstrate customer stickiness. Our long-term approach is towards building wallet share and positioning ourselves as a trusted supplier for an existing customer base. On that note, I would like now to hand it over to Mr. Andreas Heim to throw light on our global business.
Thank you, Mr. Dravid. A warm welcome to all of you. I will briefly cover the developments on our international business. We have delivered a steady performance in Illichmann during the quarter and the full year on the back of improving demand environment in our key global markets of U.S., Europe and China. While we anticipate the inventory pressure to ease in quarter four, the geopolitical situation and shutting down of plants in some parts of Asia once again lead to the resurgence of chip shortages and supply chain issues. This resulted in slight impact on demand and sales values in the second half of the year. For the year, exports including overseas revenues contributed to 26% of the total revenue. For the quarter four financial year 2022, it's at 22%.
I'm happy to share Alicon global sales marked a notable increase of 63% year-on-year during the year. Alicon India export sales doubled during the year in review. As explained by Shekhar, we have added new business logos last year for the global market, Scania, MAN Truck, Arrival, and Textron. We are working in this quarter to break through with Ducati and Rimac. Rimac has an intense presence in EVs, and it's positioned to be the Tesla for the European market. Looking ahead, we are actively pursuing growth opportunities in the key targeted market in Europe, Middle East, and the U.S. In addition, there are significant and untapped opportunities even in the markets of China, South Korea, and South America. We are increasingly growing our presence in these regions through our Illichmann subsidiary.
We are also making steady and ground-up progress in pursuing new business wins with existing and new customers in the export markets. Overall, we expect demand and consumption trends to strengthen in the months ahead given normalizing macro conditions. We are also hopeful that the raw material situation eases in the coming quarters. On this note, I would like now to hand over to Mr. Rajiv Gupta, who will cover developments in the domestic business for the quarter.
Thank you, Andreas. Good day, everyone. The demand environment in the domestic market saw a slight uptick for the passenger vehicle segment during the quarter. Bookings and demand continued to remain strong in the passenger vehicle segment, but registrations were still impacted due to continued supply chain issues. While chip shortages have adversely impacted passenger vehicle production since mid-2021, production levels of major OEMs are now gradually improving. OEMs are sourcing chips from alternate vendors, which has led to a better output. The medium and heavy commercial segment category has seen a strong buildup in inquiries on the back of revival in construction activities and improved rural sentiment. On the two-wheeler front, price hikes on the back of inflationary pressures and high fuel costs partially affected offtake. Now coming to our performance, we have delivered a healthy performance during Q4 and last year.
Total contribution from our domestic segment stood at a strong 78% and 74% in quarter four and full year, respectively. During the quarter, we added 21 new cars from a leading domestic and global customer. On the whole, we have reported an encouraging growth in the domestic automotive segment during the year, led by a pent-up demand, festive push, higher preference towards personal mobility. We continue to witness good levels of inquiries and bookings in the market and are hopeful that improving macros will further support this momentum. The PLI-linked scheme and improved allocation towards road infrastructure augur well for our auto sector and will help boost consumption going forward. On this note, I would now request our Group CEO, Mr. Rajeev Sikand, to share with you his perspective on Alicon performance.
Thank you, Rajiv. Good day, everyone. The last few years have been quite challenging for the industry and economies worldwide on account of COVID pandemic and inflationary environment. Despite these challenges, I am pleased to report that Alicon has maintained a healthy performance during the year. Our growth has been in line with our internal target levels and reflects the momentum across all our business verticals. While focusing on our growth, we have also ensured a strong balance sheet positions. At the same time ensuring welfare for our team across various locations. Every year, we focus on strengthening our agile business processes to navigate the various operational challenges that may come our way.
This has held us in good stead in the last two years. Even now, when globally we are seeing strong inflationary pressures, our inventory management practices and our strategy to collaborate closely with customers has enabled us to mitigate cost pressures to some extent, thus protecting our profitability margins.
As explained by my colleagues, value addition is a key strategic vector for Alicon. Our focus is on improving offtake of value-added products across our verticals of auto, non-auto and EV. This, we believe, will drive the multiple growth synergies for Alicon going forward. In this year, we have undertaken strategically significant initiatives to solidify our trajectory of growth. We have announced significant order wins with multiple OEMs, which provide us with healthy growth visibility for years to come. Our total order booking now stands at around INR 3,000 crore over a period of five years, with nearly average sale around INR 660 crore till now. The inquiries and new business wins across our auto, EV and non-auto segments continue to remain healthy. From a macro perspective, while we do foresee some pricing pressures in the market, we expect them to be largely restricted in the near term.
On the business level as well, we are undertaking all necessary steps to mitigate these inflationary challenges. On the demand front, we anticipate the environment to improve going forward, improving rural segments, sentiments on the back of normal monsoon forecast and steady agri indicators. Healthy pent-up demand and buoyant CapEx cycle should further augment recovery in the Indian economy, boding well for our industry. From operating standpoint, Alicon is solid and stable, and we are confident that further stabilization of macroeconomic environment will lead to gradual and sustainable growth going forward. Overall, we remain very excited about our future growth prospects and opportunities in the medium to longer term. On that note, I will now request the moderator to open the forum for any questions or suggestions that you may have. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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 Raghunandan N.L. from Emkay Global. Please go ahead.
Thank you, sir, for the comprehensive opening remarks and increasing the disclosures in investor presentation. Sir, firstly, a clarification. In third quarter earnings call, you had indicated INR 3,250 crore of pending order book. Did I hear correctly? You said INR 3,000 crore this time. Has there been a, you know, slight drop in the pending order book?
Yeah. Thank you. You are right. What we have done is we have done our internal leveling up certain products, certain things which we have seen in the market, though the customer may tell us. We have reduced that. There is no drop from any customer, but we have internally taken a cognizance of the market situation that some product lines will not do as well as they are being projected.
Understood, sir. Of this order book, how much would be the share of EV? I was trying to understand to reach the target of 36%, the order book could have a higher share of EV compared to the last year revenue share of 10%.
Sure. Yes, you're absolutely right. What we have done this year, you know, one of our internal vectors has been always look at value addition in our business rather than look at tonnage and sales purely, because value addition gives a very clear indicator where we are going. I will let Rajiv answer that to you. Thank you.
Yes, sir. Thank you, sir, for the clarity. Basically, as rightly highlighted by you, yes, our order bookings are increasing in the EV, structural and non-auto. Last year we have booked around 31% of my order with an EV, around 10% in auto, which is way ahead compared to last year, compared to say 2019, 2020, where the figures was around 9% of the EV and around 8% of the normal book.
Within this INR 3,000 crore order book, what percentage would be EV, sir?
Within this order booking, my EV contribution is 25%.
25%.
Around there. Yeah.
Yeah. The share keeps increasing because last quarter I remember the share was 17%.
Yes. This will be over, you know, next two years, this will grow, and maybe we need to revise our targets. Currently, our target is 36%, but this will continuously evolve as the market, you know, evolves in the EV and this figure will also evolve.
Yes, sir. I remember you had indicated the aspiration is 45%.
Yes, yes. That still remains.
Sir, which would be the major orders commencing this year, Toyota, PSA, if you can give some color on that? Would the execution of new orders add revenue of about 4.5% to 5%, that is INR 450 crores-INR 500 crores this year?
Yes. Talking about the growth drivers for this year, mostly will be from the new parts what we have added from existing customers such as Daimler, Toyota, Eaton and TACO, and also with the new customers what we have added, such as PSA Group, JLR, Scania and Magneti Marelli. We are concentrating on increasing the share of business in the domestic four-wheeler market. Talking about the new business wins, talking about sales from the new business, so we are aiming to get a sales revenue of roughly 40% from these new businesses this year.
FY 2023-2024, broadly, what will be the expectation of revenue based on the order book visibility?
We are anticipating a growth of around 18%-20% further this year.
A 20% growth in FY 2023.
Right.
In EV, if you can indicate the 10% of revenue which came from EV last year, what would be the share of domestic and export, and what would be the share of four-wheeler and two-wheeler?
If we see in terms of domestic and export, around 70% is currently from the global market and domestic around 30%, which we are planning to increase going forward. Yeah, I do understand talking about domestic at this moment, the major contributors are Ather and Dana Incorporated. Going forward with the new business, what we have get in last year, that is with TACO for the Tata Motors passenger vehicle segment, this will further increase my contribution in the domestic market.
Got it, sir. Two-wheeler versus four-wheeler.
Primarily four-wheeler. Yeah, we'll just give you, but it is primarily four-wheeler. We'll just give you that ratio.
Got it, sir. I'll come back in the queue for more questions. Thank you so much, sir.
Thank you. The next question is from the line of Saurabh Jain from Sushil Finance. Please go ahead.
Hello. Yeah, congratulations, sir, for a healthy set of numbers in an otherwise very challenging environment for this industry. Sir, I have a couple of questions. To start with, a bookkeeping question. What was the contribution of new products during FY 2022?
Last year, my orders and sales booking from the new business were roughly around 25%.
25%. This year we are expecting around INR 400 crores-INR 450 crores, right?
Right.
Sir, just wanted to clarify a couple of, you know, probably Q2 or Q3, you had given an estimated, you know, sales for FY 2023 of around INR 1,350 crores-INR 1,400 crores, if I am right, if I recollect it right. You said this year you are expecting top line growth of around 18%. Looking at the, you know, challenges being faced by the industry, are we scaling down our guidance for the current year?
Yes, we are also anticipating the challenges, particularly in the existing market. That is the reason the new businesses, what we have got from 2018-2019, is helping us to outperform over the market growth, which was clearly noticed in the last year and which we'll continue to see in the coming years also.
Our estimates of this year remain really in line, barring the little offset we have done in the two-wheeler market, where we don't expect a big jump.
Okay, sir. Got it. If you can give me just, you know, break up between two-wheeler and four-wheeler for the last year? Last year, I believe, a two-wheeler was 42% of the total turnover in FY 2021.
Give me a minute.
Yeah, yeah, sure.
Well, this was sales as in VA.
In VA, last
The sales, sir.
If we see in terms of sales, last year, that is 2021-2022, we closed at 48% of the two-wheeler segment.
48%?
Yeah in terms of sales. This year we are planning to reduce our dependency in two-wheeler. From 48% we are reducing to 40%.
Actually it has gone up from 42% because in FY 2021, our two-wheeler share in the overall turnover was 42%.
No, that is with the VA numbers. Talking about VA, let me just clarify. Last year, the VA, we closed at 40%, which we are anticipating to bring down to 32% this year.
Okay.
Usually we are shifting our focus as the market is a little sluggish. We are shifting our focus from a passenger vehicle to a commercial vehicle.
Saurabh, let me explain this in a better way. Why we are looking at VA. VA gives us a better focus where we should be aiming at. This is where our long term aim is also to reduce our two-wheeler value addition. The tonnage and sale may look different. The value addition per kg is a critical thing for us. That is why we are moving out to more to different segments of the market.
Right, sir. Got it. My last question is.
We are hoping by this two-wheeler segment by 2025-2026 to be less than 20%. That's what we are aiming at.
Less than 20%.
Yes. On a value addition basis.
Okay.
That is the key for our business.
Right. Got it, sir. My last question is on the margins front. The margins of course saw some inflationary pressure, but still we were able to maintain a healthy 12%. Of course, in your opening remarks you had mentioned that in the midterm we aspire margins to go back to 14.5%-15%. Just wanted to know, can we see those levels in the current fiscal?
In the current fiscal, we are estimating approximately to improve by 0.7%-1% improvement. We will be able to deliver in this year.
On a last year full basis.
Yes.
Okay. Okay, sir. That's all from my side. All the best.
Thank you. The next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.
Hello. Am I audible?
Yeah.
Yeah. Hi. Congratulations, sir, on a good set of numbers. Sir, I just wanted to know if what is our vision for next two to three years in terms of revenue? Sir, margin, by midterm margins, I assume by 2025 we are assuming 14%-15%. Any color on revenue growth that we can expect would be very beneficial. Thank you, sir.
Just as I explained that we are expecting the revenue growth in the range of 18%-20% on a CAGR basis. That is the estimation we are having in the coming
Till 2025, 2026.
Till 2025, 2026.
Definitely then we will be like, as explained by Mr. Rajeev Sikand and Rajiv Gupta about the shift in the value addition from a two-wheeler to a four-wheeler and the EV. That is the main thing that will bring and improve our margins. Definitely, we will be able to improve our margins to 14%-15%. That I think after in nine months to 15 months is that we will be able to deliver that. The reason being, we should understand the impact of the aluminum prices the unprecedented increase in the last nine to 12 months. That if I remove it, in a very simple calculation, if I remove that impact to our margins for the year, like, we are talking about quarter four, 12%. It was around 13.5%.
It is not 12% when we make a year-on-year basis comparison. Definitely we are seeing now the prices are easing out in the international market of the aluminum. That impact we will see definitely in the coming quarters.
Okay, okay. Thank you, sir. That's very beneficial. Sorry, sir, one more just clarification. You right now said in FY 2023 we can do 0.7%-1% better margins. That would be overall full year basis or from quarter four, because there we've done 12%. Can I assume 12%-
For full year. We are talking about full year.
Oh, okay. Yeah. Thank you so much, sir. Thank you for answering my questions.
Thank you. The next question is from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead.
Yeah, thanks for the opportunity. Sir, in last call you mentioned that, you know, as the aluminum prices have gone up, the margin percentage on the revenue looks lower. When we say in the medium term we can reach 14%-15% margin, this is considering that if, you know, aluminum prices and other commodity prices will come down or even, let's say, it will remain at elevated level, we can still, with the value-added products can do 14%-15% margin.
Definitely that impact of the aluminum prices are approximately 1% that has been overall at this moment. 14%, 15% because when we take on both of it, we can take. Without increase means that the prices are not eased out. Definitely 14%- 14.5% we can say and then further 1% improvement if prices go down at the same level like one year back. Definitely there will be a further improvement of 1%.
Okay, in this FY 2022 sale or let's say Q4 FY 2022 sale, how much would be, you know, the growth due to only the price increase and how much would be volume or value addition driven?
The aluminum approximately we can say 7% approximately the impact of the aluminum.
7% growth due to the aluminum prices.
Yes.
Okay.
In the Q.
In Q4.
Yes. Yes.
Q4 YoY, right?
Yes. Yes.
Okay. Basically in terms of volume in Q4 we are down YoY, right?
Yes. Yes.
Okay. How much would be for full year, same thing?
For full year, approximately, 4%-5% in that range.
4%-5%. Okay. Okay, fine, sir. That's it from my side.
Thank you. The next question is from the line of Raghunandhan N.L. from Emkay Global. Please go ahead.
Thank you, sir, for the opportunity again. Sir, Alicon has been one of the first movers in the EV space and wanted to understand of late are you seeing a situation where the competition is increasing from other players?
Well, you know, we have been early movers and we are not looking at competition from a perception of parts. We are looking at from the technology point of view. Our play even in the EV will be technology and certain parts in the EV we have also redefined the EV segment, certain parts in that where we will be more focused, which is going to be our playbook. We are making that pitch with Suzuki Japan, with Daimler Germany. Certain things will evolve, you know. You can't say that there will be no competition in this line.
Got it, sir. On the PLI scheme.
Also, to be very openly speaking, some of our corporates go out and, you know, then they are easy to copy in that way. It is we are not doing rocket science really, but our core thrust area is our thermal engineering, and that remains our core business in the EV.
I got it, sir. In terms of, you know, PLI, some details if you can indicate on investments, expected revenue, incentives or the focus parts, some color, whatever you can share.
Raghu, Tarun this side. On PLI, we have filed the application with IFCI, and they have given us the approval as well. They have appointed a survey agency, which will be finalizing giving us the go-ahead in our product. Based on the revenue and the percentage scheme ranging from 8%- 15%, we will be looking forward for the incentive from the government. Which will be settling down in mid of June.
Got it, Tarun. Thank you.
We will be able to give more clarity on this.
Yes, sir, I will wait for that. Vimal sir, if you can indicate in terms of inflation, apart from the commodity side, for energy, logistics or any other area, where has been the negative impact? If you can quantify any of them that will be helpful to understand.
Sorry? Just repeat.
On the inflation, sir, you know, there has been cost increase in energy, logistics. How severe has been the cost increase and by when can company be able to pass on the impact?
For this, the impact is there. Approximately, in the quarter, we have absorbed around INR 3 crores-INR 4 crores cost in this quarter four. Now we have started the negotiations with the customers already. We have started with negotiations. Some customers, they have agreed. Hopefully next coming four to six months we will be able to settle down.
Understood, sir. The share of exports has been increasing for the company. Given this scenario, how much reduction is possible in the working capital days going forward? I mean, FY 2022, you've already achieved reduction in the cash conversion cycle. Appreciate that. Just wanted to understand the focus for future.
Yes. We are continuously monitoring this and taking all the efforts to reduce this cycle. Like in the last year we have reduced by 18 days. Now this year also we have targeted 18-20 days further reduction in the working capital cycle. That we are trying to take up with all, whatever with the customers or with the discounting side. Every, all the fronts we are taking it up.
Got it, sir. Just one clarification. You know, did I hear it correct that the goal is to reach 18%-20% CAGR till FY 2026 on the revenue side based on the order book visibility and medium-term target margin of 14%-15%? Would that be a fair way to understand?
Right.
Yeah. Thank you, sir. Thank you so much. That's all from my side, sir.
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to 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 further clarifications or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call, and we look forward to interacting next quarter.
Thank you.
Thank you. On behalf of Alicon Castalloy Limited, that concludes this conference. Thanks for joining us, and you may now disconnect your lines.