Ladies and gentlemen, good day, and welcome to the Q2 FY 2022 earnings conference call of Alicon Castalloy Limited. As a reminder, all participant lines will be in 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. 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, Stephen. Good day, everyone, and thank you for joining us on Alicon Castalloy Limited's Q2 FY 2022 earnings call. We have with us on the call today Mr. Rajeev Sikand, Group CEO, Mr. Vimal Gupta, Group CFO, Mr. Shekhar Dravid, COO, Mr. Andreas Heim, Managing Director of Illichmann Castalloy, and Mr. Rajiv Gupta, Head of Domestic Business of Alicon Castalloy Limited. We will begin with Mr. Vimal Gupta, who will cover the financial performance for the quarter, following which Mr. Dravid will walk us through the operating highlights. We will then have Mr. Andreas Heim and Mr. Rajiv Gupta sharing a more granular view of initiatives towards the global and domestic markets respectively. This will be followed by Mr. Rajeev Sikand, who will share a brief summary of the quarter gone by and the outlook. That will be followed by the 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 and best wishes for the festive season. 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. Q2 began on a challenging note as India was emerging from the devastating effect of the second wave. However, we witnessed a partial recovery in demand as many of our customers had ramped up their production by the end of the prior quarter and thus commenced quarter two with much improved utilization levels after the disruption in quarter one. In addition, there was also an element of higher pricing of alloy during the period.
The combination of slight increase in volumes and the higher prices of alloy has enabled us to report a consolidated revenue of INR 268.7 crores during the quarter, higher by 31% year-on-year and 27% on quarter-on-quarter basis. However, I would like to highlight here that while our revenues are elevated by repricing, we operate with a pass-through model which minimizes our exposure to metal risk, albeit as an alloy. On a comparative basis, our revenues performance in quarter two is eventually driven by both volume growth as well as repricing growth. However, for ease of understanding, if I were to exclude the impact of repricing on a like-for-like basis, our revenues in the quarter have grown roughly around 23%.
We understand from our customers that demand, especially in the two-wheeler segment, has been impacted by higher fuel prices and increase in insurance as well as uncertainty given the emergence of new and viable options for electric mobility. The incentives being offered by the government have also improved the economics of electric two-wheelers. Hence, there is a significant element of deferred purchasing as customers are evaluating the EV versus ICE decision. In the passenger vehicle space, volume growth would have been even better but for the shortage of semiconductors which impacted the pace of manufacturing and vehicle dispatches of OEMs. The impact has been uneven, with some customers impacted more severely than others. Further, in the international business, there has also been some impact in Europe from the summer holiday season.
For the quarter, exports including overseas revenues contributed to 25% of the total revenue, while domestic contribution was 75%. Across verticals, the auto division contributed to 94% of the total revenue in Q2 FY 2022, and non-auto division was at 6%. Even as the human cost of the second wave abated by the end of the previous quarter, the impact on supply chain has continued to linger. As you are aware, industries worldwide, including the auto and auto ancillary space, are witnessing bottlenecks in the supply chain and interstate inflationary trends in input prices. As a result, during the quarter, we experienced a challenging and volatile input price environment and have witnessed prices of aluminum and related alloys reach its new heights. In addition, logistical problems such as unavailability of shipping containers and increased freight costs have compounded the impact of the price increase.
We have seen shipping costs increase from two to four times in the last few months itself, which further impacted overall expenses in quarter two. In order to efficiently mitigate these extraordinary cost pressures, we are working alongside our customers to undertake price hikes and pass through these costs. Our pricing with our customers enable a pass-through, and we are actively engaging with them to shorten the lag. This will enable more rapid transmission of input prices, thereby protecting our working capital and cash flow position to a considerable extent. As the input prices are significantly higher, there is a value increase in both top line and material costs. The gross margin was 47% in quarter two of FY 2022. As can be seen, the sharp increase in input prices has resulted in margin compression, which is largely optical due to the higher base effect.
The EBITDA for the quarter was INR 25.3 crore. Here, too, the denominator, which is revenue for the quarter, is higher on account of increased material prices, which are passed through. As a result, the EBITDA margin during the quarter is 9.4%, and the compression is largely optical due to the sharp rise in input prices. In a normalized raw material environment, we anticipated EBITDA margins to bounce back to stable range of 13%-15% going forward. Profit after tax during the quarter stood at INR 3 crore. On the balance sheet front, our net debt as on 30th September 2021 was at INR 235.5 crore, with a net debt-to-equity ratio of 0.55.
The conclusion of equity raise through QIP and preferential issue has helped to enhance our liquidity and reduce our debt. During the quarter, we have reported steady cash flows from the operation. Given the uncertainty due to the further wave of pandemic, shortage of semiconductors and disruption in supply chains, we have undertaken a well-thought-out decision to alter our CapEx spend for the year. While we have anticipated around INR 90 crore at the start of the fiscal, we will be closing the fiscal year around INR 55 crore-INR 60 crore, and the balance will be deferred to the next year to invest for growth as we anticipate a stronger recovery in FY 2023. Overall, we will continue to follow a disciplined capital allocation framework.
Even as we have deferred our CapEx to align ourselves with our customer schedule, our stronger balance sheet and more robust cash position place us in a very strong position to ramp up production to service the new order wins. We have adequate liquidity to build up our working capital and also investment in machinery and tool production line. Our plants are now operating at 60%-65% utilization level. With the improved visibility due to recent win orders, we anticipate that the utilization will reach 70%-75% in the second half of the year. To summarize, we have reported a resilient performance during the quarter. With the pandemic impact largely behind us and large backlog of orders for the auto industry, we anticipate continued scale-up of production by entire auto and auto ancillary sector.
Add to that the rapid increase in traction of electric mobility as newer models are launched and there is a faster adoption. 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 domestic auto segment during the quarter saw mixed signals of recovery. While there was an improvement over quarter one, after the second wave, demand and bookings across the vehicle segment and especially two-wheelers have been sluggish. This is largely due to increase in fuel cost as well as the overall inflation pressure, which seems to be impacting buying power. This is also deferred decision-making in two-wheeler segment as customer evaluate the ICE versus electric decision more carefully. Further supply side issues due to chip shortage, container costs and the volatile input prices weighed down the overall volumes in the auto space. Sales for PVs in the quarter were hampered by supply chain constraints, leading to high waiting periods for some of the high-selling models.
However, new vehicle registrations in the PV space stood higher in September when compared to the pre-pandemic periods. The CV segment also saw a sequential improvement in demand with increased truck availability and the resumption of construction activity. Agriculture and commercial demand was also largely stable in an otherwise seasonally weak period. Overall, while consumption patterns were encouraging, weak retail owing to the supply side constraints in addition to the higher fuel prices restricted the pace of recovery in the quarter. On the international front, most of the key export geographies in the U.S. and Europe reported healthy auto sales led by steady demand and stable currency in the key markets. Against this backdrop, we have reported a solid performance during the quarter.
To reflect upon key order wins, we have added 17 parts from eight customers during the quarter, of which we have added four parts from the domestic customers like Honda Motorcycles, Piaggio and Dana Incorporated, and 13 parts from export customers like JLR, Mahle, Renault, Dana Incorporated and Tata AutoComp, and a new logo addition of Scania in the EV division. In the ICE segment, we have added 6 parts. We got a breakthrough order win from Renault in France. This opens more avenues for the growth for us in a new European market. Additionally, we also received an opportunity from a critical Tier 1 customer's resourcing projects for another European location. In our structural segment, we added new parts from JLR U.K. and entered into a new segment in two-wheelers with Piaggio. In other EV segment, we have added nine parts.
We got order wins from Dana for an existing location as well as for the new location, Mexico. With existing customers, Mahle, we received a promising order win for EV parts from Spain, another new market for us. We are happy to share that we added new logo, Scania, in the quarter with five parts for the European region. Let me now share the highlights of our performance across each of our five key strategic growth pillars. The first being our auto business. This segment, as just discussed, was impacted on account of supply issues. However, it is witnessing a good bounce back in the demand and recovery on the month-over-month basis. We expect the chip shortages issues to resolve in the coming quarter with the resumption of chip manufacturing factories in Malaysia. Inquiry levels across the domestic and export markets continue to remain healthy.
We are also seeing improving order wins from the OEMs that we work with, which in turn bodes well for us. On the industry front, the global automobile space is in the phase of transformation. Across the globe, there is a shift to quickly transition to cars with a premium high-tech feature and towards electric mobility. In India, the pandemic has accelerated the development in the automotive industry, with consumers preferring personal transportation modes. It has fueled the number of first-time auto buyers across the country. As per the latest industry trends, most consumers are preferring high-tech features for a car over a range level. This is also facilitated by the attractive financial schemes available in the domestic market today. Both urban and rural demand is seeing healthy recovery, and we are seeing stronger traction in vehicle registrations in the country.
Coming now to the second of our growth pillars, which is an electric vehicle division. Globally, volumes of electric vehicles have been exponential growth in recent times. A total of 2.65 million new EV registrations were reported in the first half of 2021, an increase of over 170% over 2020. In India, too, the segment is fast picking up speed. In September, EV sales for the first time ever crossed a 30,000 units mark in India. These registrations are mainly driven by electric two-wheelers and the passenger type electric three-wheelers, which together accounts for more than 90% of the total registrations. We have seen established and new players announcing exciting launches during the quarter.
The likes of Audi, Mercedes, Volkswagen, Mahindra & Mahindra, Tata Motors have announced launches of a range of e-passenger vehicles during the quarter, while Honda Electric, Ather Energy, TVS Motors, Ola Electric continues to announce new launches in the two-wheeler space. Recently, Ola Electric made history by registering the highest ever sales in a day of its e-scooter in the Indian e-commerce space. There has also been a strong build-up in activities toward EV infrastructure and ecosystem creation. Hero Electric is partnering with Maxim Mobility, has announced the plans to set up 10,000 EV charging stations by 2022. EVRE and Park+ has announced partnership for establishing another 10,000 EV charging stations across India over two years. Similarly, Tata Power is hoping to close this fiscal with 2,000 charging stations, with an overall ambition of reaching 10,000 mark in five years.
These are just some of the few developments to begin with. Government is also announcing supportive regulations and policies to increase the adoption of a green energy in the country. Last month, it is announced the PLI scheme for the automobile, auto components and drone industry, with an outlay of INR 26,058 crore in order to accelerate EV manufacturing and localize advanced automotive technologies in India. The detail of the PLI scheme has been recently notified, and we are studying them to ascertain the benefits available. Our preliminary understanding is that we are well positioned to qualify for the incentives based on our scale, our track record and the parts that we produce. We will inform all stakeholders of the progress in this regard at the appropriate time.
The scheme, in addition to the already launched PLI for advanced chemistry cells, which is of INR 181 billion, and Faster Adoption of the Manufacturing of Electric Vehicles, FAME scheme of INR 100 billion to boost manufacturing of electric vehicles in India. Cumulative incentives being offered across the three schemes, which will be amounting to INR 281 billion, targeting both the demand and the supply side. The various initiatives by the government provide a clear direction that the policymakers remain focused on promoting new energy vehicles. The EV segment is at the cusp of rapid adoption in India, and we believe this will bring in solid growth opportunities for us going forward.
We are working with the OEM as well as the Tier 1 supplier for scaling our EV business. We are excited to share that we are actively engaging with Tata Motors, who is fast emerging as a leading PV supplier, passenger vehicle supplier in the domestic market, with over 1,000 units sold each of the last three months. Alicon has got an opportunity to work with Tata Motors in EV sector through THACO, who are developing and supplying the battery packs and motors for EV platform to Tata Motors. THACO is currently sourcing components from China in a CKD mode, but due to FAME II regulations, they plan to transition to local suppliers before thirty-first of March 2022. Alicon has got the RFQ for more than 15 parts from THACO, and we are in advanced stage for getting nominated for these parts by December 2021.
We also been working extensively with Dana Incorporated on both domestic and international orders, and the portfolio with Dana stands expanded to 30 parts. We are also engaging with Arrival, a leading global EV company which plans to set up a plant in Bangalore in India. There is an RFQ of over 40 components for which we are actively engaged. We are also happy to share that we are an exclusive supplier for Ather Energy in India. We are also engaged with Tork Motors, which have seen the projects being revised after a pause due to pandemic. Our earlier order wins from Garrett, Mahle, Eaton, Sanden, Danfoss have all gone into the mass production mode now. We continue to work alongside with our customers in EV space and believe there are massive opportunities here.
With the industry dynamics constantly changing, Alicon is one of the front runners in the EV space to capitalize on this growth prospects. We have already built up a portfolio of over 65 parts catering to EV. Our earlier stated target to bring the wallet share of EV business to 25% of overall revenue by 2025, 2026. However, given the order booking on hand and we are already on the track for 18% of revenue share from EV and now raising our target for EV business to 36% of overall revenue by 2025, 2026. Now on to our third growth pillar, being technology-agnostic platforms, wherein we focus towards building niche around existing and new products by leveraging our core competencies. This includes light weighting of the products in an auto and EV space.
We are getting increased inquiries from the OEMs, both in the domestic and export markets, and for the development of frames and the control arms like components. Our successful conclusion of order with JLR has opened many opportunities in this domain. Our fourth growth pillar, being a non-auto sector segment, here we are witnessing healthy growth in demand across the sectors such as defense, aerospace, agriculture, and energy, and we expect this momentum to strengthen in the quarters ahead. Currently, our orders in defense sector to supply the wheels for the battle tanks is nearing completion, backed by Alicon's efficie.ncy and work quality.
We are pleased to announce that we have been called for the tender for the refurbishing of 129 tanks, battle tanks, which corresponds to 3,870+ wheels, and the tender will be closed by end of December 2021. The fifth growth pillar in our focus on increasing customer wallet share. I'm happy to share that in the quarter we have got improved business wins from repeat customers. Our long-term approach is towards building wallet share and positioning ourselves as a trusted supplier for our existing customer base. On this note, I would like to now hand it over to Mr. Andreas Heim to throw some light on our global business.
Thank you, Mr. Rajiv. A warm welcome to all of you. I will briefly cover the development on our international business. This quarter, Illichmann Castalloy has enhanced its contribution to the group financial performance. In the quarter, we saw improvement momentum in the markets of Europe and U.S., led by higher demands in railways and grids. We had received new orders from KTM, Doppelmayr and Rothbach. The chip shortage issue across the globe saw a significant impact on our international business sales in the second quarter. The rise of the Delta variant and impact breakouts in key chip sourcing of markets of Malaysia and other South East Asia countries further amplified supply side constraints. We are hopeful now that the situation is easing, and we expect the inventory to improve in the second half of the fiscal.
This is also reflected in our customer orders from Samsung battery housing in quarter four, on which we recognize increase of the demand. Aluminum jumped to the highest in 2008 with the dipping power prices due to supply of the energy in China. These additional costs are covered from customers in order to keep our revenue. In addition, incremental pricing in terms of tooling preparation, mold services has further fueled revenue growth. Furthermore, we are performing well in our operations in terms of cost control and reduction, which is supporting us in our profitability growth as well. In quarter two, we have added 17 new parts out of which nine parts will be from global customers such as Mahle, Dana and Scania. Out of those customers, we could add Scania as a new logo in our book.
International business, including sales from Illichmann, contributed to about 26% of our total revenues in quarter two. Currently, we are working on partnering with CBS in U.S.-
Mr. Andreas?
entering untapped markets. Yeah.
Sir, sorry to interrupt.
Yes.
Your voice is sounding a bit muffled, sir.
Currently, we are working on partnering with CBS in the U.S. in entering untapped markets of South America. In addition, there are niche opportunities emerging in the Middle East, China and South Korea to significantly elevate the global footprint for the group. On this note, I would like to now hand it over to Mr. Rajiv Gupta, who will cover development in the domestic business for the quarter.
Thank you, Andreas. Good day, everyone. Demand across the domestic market has been on an uptrend driven by increase in spending and consumption, especially post-lockdowns. A shift towards new high-tech vehicles, personal mobility, preference, among other factors. There are initial signs of recovery in replacement demand as well, which we believe will be more prolonged in the coming quarters. A stringent implementation of fitness tests on the older vehicles will further support the replacement cycle. While there is a demand in the space, the severe supply constraint has moderated the auto volumes in the quarter. Domestic tractor and two-wheeler volumes were impacted due to muted customer sentiment in monsoon-deficit states. Domestic passenger vehicle witnessed a steep fall, mainly on account of chip shortages. However, domestic commercial vehicle volumes stood held, aided by better freight availability and rates. Now coming to our performance.
Given the macroeconomic backdrop, Alicon was able to report steady sales in quarter two of 2022. During the quarter, we added 17 new parts from leading two domestic customers and six export customer with 1 new logo addition. Overall, we are witnessing a good level of inquiries and bookings in the market. We have booked average yearly sale of around INR 30 crore with a project sale of around INR 130 crore over a period of five years in quarter two. This year, till about half yearly, we have added 30 parts with 12 in the EV segment, with average yearly sales around INR 50 crore, with project sale of around INR 240 crore over a period of five years.
Our total order booking now stands at around INR 3,150 crores over a period of five years, with yearly average sale of around INR 625 crores. While there are supply side constraints in the short term, from the longer run perspective, we are seeing a very exciting time in the domestic auto industry. On this note, I would now request our Group CEO, Mr. Rajeev Sikand, to share his further perspectives.
Thank you, Rajiv. I welcome all our investors. Thank you for joining the call. I hope you and your family members are well and safe. In last 18 months of the pandemic, a lot of changes and disruptions have taken place across society, economics, and the businesses. During this extraordinary time, Alicon has sharpened its ability to adapt to the changing business environment while creating new opportunities. We have continued on our journey to build a more resilient and a robust organization, undertaking strategic initiatives to augment our efficiency, build technical edge and improve product offering while also managing costs and infrastructure more effectively. Even in the quarter gone by, although the demand scenario was encouraging, supply-related issues and raw material pressures significantly impacted volumes. However, on an optimistic note, our ongoing interactions with our partners indicate that raw material issues are beginning to ease.
With the continual retail inquiries and upcoming festival season, we remain positive that the volumes will see a steady uptick in the quarters ahead. In this quarter, we have announced order wins with multiple OEMs, which further provide us a healthy growth visibility for years to come. We are further encouraged, excuse me, to share that just in span of five years, Alicon has captured a total order booking of over INR 3,150 crores. This is a commendable feat for our whole organization, and we look forward to registering a stronger and a sustained order wins going forward.
Health and safety of our employees is one of the key focus areas for us, and I'm happy to share that 100% of our entire employee base has been vaccinated with first dose and 78% of employee base has been fully inoculated for the second dose. The remaining second dose will be completed by December. We are slowly marking return to normalcy with our corporate office plant and facilities operating at a stabilized manning level. As Rajiv mentioned, these indeed are exciting times. We have seen a set of well-intended initiatives undertaken by the government towards boosting growth in the economy and towards developing India as a strong player in global auto value chain. The series of announcements made from scrappage policy, FAME scheme to recently announced PLI, all work in favor of the domestic auto and auto component sector in multiple ways.
We are currently studying the recently announced PLI scheme to understand how we can take benefit, and we'll be sharing updates with you regularly. The ecosystem for EV is shaping up pretty well and initiatives taken by the government are further driving EV adoption. Based on the strong momentum, my colleagues have already indicated that we have raised our own revenue share from EV to 36% by 2025-2026. Given the exciting developments, we have an aspirational target of 45% by 2025-26. On the whole, we look forward to a promising future and continue to stay focused on our objective of being future-ready and being consistent, trustworthy, and a reliable partner to our strong and growing customer base. On this note, we would be happy to take your questions now. 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 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 Raghunandhan N L from Emkay Global. Please go ahead.
Thank you, sir, for the opportunity. Congratulations for a good set of numbers. Sir, firstly, just in the overall order book, can you indicate the share of EV orders and also expectation in terms of annual revenues this year and next year? If you can also share the major EV customers for the company in domestic market, especially on the two-wheeler side?
Okay. I'll first answer on the EV. Having a European know-how in early stage and having a first mover advantage, Alicon is aiming to partnership with OEMs by providing lightweight solutions, HPDC to LPDC conversion by giving customer advantage of lower CapEx, thermal solutions for the components like battery housing, motor housing as a future technology and further add solutions for structural crash relevant EV parts. We have developed till now 80 parts from 13 customers till now. Last quarter also, we have added good progress, which already, my colleagues have explained in the call. Talking about domestic front, yes, we have added till now 53 parts in domestic in the EV front.
Thank you, sir. If you can also talk a little bit on the non-auto segment, the revenue share has come down to 6% this quarter. How do you see it, going forward?
Going forward, as my colleagues have just explained, the tender of 4,000 wheels has been submitted to RFx and expecting a finalization by January 2021. We are penetrating with existing customers like Siemens, GE, IR, Honeywell Automation. We are focusing to get global locations from the same platform. We are also focusing on high value add with critical and complex parts like cylinder head from a customer Trextol.
Thank you, sir. On the gross margin side, I understand the part about overall compression. But going forward, you know, how do you see the gross margin improvement triggers going ahead? I just wanted to understand that, within the current quarter, gross margin compression, there would be factors like under absorption of fixed cost due to inventory adjustment or lag in pass-through of cost increases, even on the freight side. Can you help us understand what would be the gross margin improvement triggers going ahead?
In this, if you see the gross margins, the EBITDA margins for this quarter, it is coming around 9.4%. As I explained that we have the impact of the aluminum pricing. If we remove that, the effect of those things. In the real terms we have a gross margin of, this EBITDA margin of 10.5% instead of 9.4. That is one for the quarter. You know that I explained the impact, the major impact has come from the cost, like energy as well as the logistics. That has impacted approximately INR 7 crore in this quarter. Now after this we have started, because after this increase, started the negotiations with our customers because we have the, settlements rising and it has to be also passed through.
We are expecting that we will get this benefit in the coming quarters, quarter three, quarter four and the future. For the full year, we are expecting maybe the margins will be in the range of 12.5%-13%. Going forward, as explained in my speech, that approximately we, you know, we will be normal in the range of 14%-15% in the coming year.
Thank you, sir. One last question from my side. On the PLI scheme, I understand that you are studying the scheme and you'll come back with more details. Just wanted to understand, would there be, you know, would we be benefiting directly or indirectly from the scheme? Just wanted to understand how does it apply to us, because we do qualify on the eligibility criteria.
Hello. The scheme is currently notified yesterday and we are further studying the components notified by the government. As per our understanding, some of our components from the EV will qualify for this scheme and we are discussing the same with our consultant and we'll give a detailed benefits in two weeks time.
Thank you very much. That's.
Thank you. The next question is from the line of Saurabh Jain from Sushil Finance. Please go ahead.
Hello. Yeah, thanks for taking my question. My first question is, it's about Ather. Ather recently posted a robust set of numbers. For the month of September, they posted a sales volume of around 3,500, which was, you know, multi-fold high, albeit on, you know, a low base. They have also showcased huge growth plans. My question is if you can, you know, throw some color on, how many components do we supply to Ather and how much business in this Ather contributes?
Yes, agree. We have noted the volumes are promising for Ather. The good thing is the content per vehicle with Ather is around 17 kg, which is very promising. If you see the content of aluminum is around 17 kg, which was somewhere around 2-3 kg when it was a ICE vehicle. With that approach definitely, we see a good growth along with Ather.
If you can, you know, if it is possible, can throw some light on the contribution from Ather. What's the size of business do we get from Ather?
This, which will be around 3% on a higher side.
Okay.
Approximately 3%-4%.
3% of the total turnover?
Right.
Sir, my second question is, our European unit, you know, the performance was relatively softer as compared to, you know, last three, four quarters. On the profitability front we have done quite well, better than last two quarters. If you can tell us how is the outlook looking for the second half. Last year we did a turnover of around INR 75 crore from Illichmann. Do we think we'll be, you know, exceeding that in the second half?
In this first of all that in the because in quarter two there was holidays in Europe. Due to that the sales were a little bit down against when we made a comparison with the quarter four or quarter one. You see that we are able to improve even further our margins if we compare with the previous quarters. In the EBITDA we have crossed the 20% against the 19% in the quarter one and approximately 19% in quarter four. Going forward, we are more feeling that we will be able to maintain our this growth in second half of the year in Illichmann with the same margin.
Right.
In spite of having the issue of the chip.
This was also, you know, on account of EBITDA margins which you just mentioned that for the full year you are looking at 12%-13% kind of EBITDA margins to close this year. In Q1 and Q2, we had 8% and 9% respectively. Second half, you know, looking at your estimates, it should be around 14%-15%. What kind of turnover are we expecting? Would we be able to, because of this, you know, pressure on gross margins and the other constraints which you mentioned, like chip supplies and all. You know, are we still, you know, very confident of closing the year by 13% kind of EBITDA margins?
Yes. In this, first, the main important thing, I think we should remember that, when we talk about the new orders. Now we have started the supplies against the new order wins. In this year, approximately INR 260 cores or INR 255 crores we will do. Major revenues we will get from these new orders in the quarter in the second half, and with the good margins. Secondly, I've explained that, now we are in settlement with the customers for the price increase against the increase in the cost of the commodities, especially in the energy as well as the logistics. Okay. That we have already in our build-up in our cautious. Yeah, we are sure that we will
14% is quite achievable for the second half, right?
Yes.
Okay. That's all from my side. All the best, sir.
Thank you.
A reminder to the participants, if anyone wants to ask a question, you may press star and one at this time. The next question is from the line of Pranati Trivedi from Electrum Capital. Please go ahead.
Hello? Hello?
Yes, ma'am. Please proceed with your question.
Okay. Hi, sir. Thank you for the opportunity. I just have one quick question. In your Q4 FY 2019 call, you had guided that non-auto contribution will reach around 12% by the end of FY 2022. Has this guidance changed, you know, seeing how the EV market is picking up in the domestic market? Like, you know, when can we achieve this target? And also, if you can give some color on what will contribute more to the EV contribution increasing, two-wheelers, three-wheelers or passenger vehicles. Can you also give us breakup for FY 2021 and H1 FY 2022?
Coming to the first point on non-auto, yes, we know our performance was good in the last year, quarter four, basically non-auto, just because the auto had a turmoil, and that is the reason we were able to get good sales, mostly related to non-auto. Yeah, this year, we noted the volumes were on a sluggish side for non-auto, but we are seeing a promising, which I've explained, good numbers going forward. If you see, we are aiming now to touch around 7%-8% next year, and we are aiming to take this non-auto to 14% in the period of 3 years going forward.
Coming to the good margins on the EV front, yes, if you see in terms of the component segment-wise, in a passenger and commercial, we get good margins because the weight of those parts are on a higher side compared to two-wheelers. We get the opportunity with a value-added service. We are doing extremely good in this area. We are actively in touch with the customers like Dana, who are pioneers into this area. We've already developed a lot of parts with for the commercial vehicle with them. We have explained in our script the way we are approaching new customers like Arrival and Tata AutoComp for the passenger vehicle of Tata Motors.
Oh, okay, sir. Thank you. Sir, if I can ask one more question. Can you give me some clarity on the current order book, visibility and what would be your incremental yearly average sale? I think you've mentioned INR 625 crore. Is that correct?
Right.
That is, that's incremental, right?
This will be my average yearly sale of INR 625 crore. If you see incremental, next year, we are planning to book somewhere around INR 4 crore-INR 8 crore from these businesses, and this will touch to around INR 750 crore-INR 780 crore at the peak period, somewhere around 2025, 2026.
Okay, sir. Okay. Sir, order book visibility?
Sorry?
Order book visibility, sir.
Yeah. This was on the order book visibility. The sales what I mentioned, these are from the new orders what we have booked till now.
Till now, right?
Yeah.
Okay, sir. Thank you so much.
Thank you.
Good luck in the coming quarters, sir.
Thank you.
Thank you. The next question is from the line of Nakshita Mehta from Credent Asset Management. Please go ahead.
Thank you for the opportunity, sir. I have a couple of questions. My first question is on the cash at hand. I noticed that it has reduced to a great extent, so can I like know where have you making any CapEx capacity expansion? Is there any CapEx that
Yes, because we have the new orders, the growth plans are there. Only thing is that we are controlling all the CapExes. For this year, we made a plan around INR 90 crores at the beginning, but now we have deferred or reduced. For this year we are expecting to close in the range of INR 55 crores-INR 60 crores. Definitely we will require the CapExes to fulfill or to serve our customers against the new orders. That's what we have been.
Okay. We are making the CapEx an internal approval, is it?
Yes.
Completely.
Yes.
Okay. My next question is on the debtor side. What would you say would, you know, in how much time you will receive the payments, the receivables? Like, what will be that the credit period?
It totally different customer to customer because it's from 30 days, 45, 90 days. For the export side, on the longer side also approximately it takes 120 to 150 days. It totally depend on customer to customer. But overall we are working on this and this September also little bit, you know, that I explained that the aluminum prices increased and it is a complete pass-through. But it takes time because it is suddenly happened in the last three, four months. Up around INR 25 crores are stuck in this and that will be realized in October and November and in this quarter at least that we will be able to realize that money.
That maybe you will be able to see that in the coming quarters, the impact of that, as well as the, like we are explaining, the new developments are happening. A lot of new orders. For that some customers, because this, we have to develop the toolings, the dies-
Mm-hmm.
for the all new parts. Maybe some customers they pay and some customers they don't, means that we have to amortize. Amortize is one part, but when they pay. In this, some they pay initially some advances, but it takes time to realize the full money. That is the little reason for little bit now we see small increase in the debtor side.
Correct. Okay. Understood. My next question is on the capacity utilization. I understand that it's just 60%-65% in the, you know, as of now because of the chip shortage as well. Can you tell me what it was like pre-COVID? What was the pre-COVID level?
It was around 80%-85%.
Okay. There's a 25% hit. 20% hit that was taken on-
Yes. Yeah. 15%-20% we have to keep idle because there are fluctuations in the volumes of the customers. Because once suddenly in the festive season there is a jump like that.
Now, coming to the EV, it's first of all a very good opportunity for aluminum, you know, companies. In two-wheelers, as you mentioned that 90% is from two- and three-wheelers, correct? From our customers, how many customers are into EV? Our two-wheelers customers, how many are into EV and how many have plans for expansion?
If you talk about two-wheeler EVs, yes, we noted there are about 40+ startups now, and we are in touch with 20 such startups. They've already received RFQs, like Ola, Ultraviolette, Simple Energy and many more. We are hoping to get some breakthrough going forward. We already have Ather and the Tork motorcycle which have now arrived and with the SOP will start. Talking with the OEMs, yes, initially their plans were not very soon, but seeing the consumer behavior, now they are planning to start the developments, take those developments in early stage. We are actively involved with these OEMs on regular basis for early stage participation for those for the components.
Correct. Okay. On the PLI, now you will be, you know, getting the PLI benefits. Can we assume that in the next quarter their benefits would be realized and it'll be seen on the raw material pricing and on the margins?
Yeah. We will be studying this and we'll come back in the next quarter.
Okay. Just one last question. I just saw in the previous quarter, that is July, there was some preferential share issues. Was it a fresh issue or did the promoters reduce their holding?
Yes, it was a fresh issue.
It was a fresh issue. Okay.
Our Japanese collaborator.
Sorry?
It was a fresh issue to the promoters and our Japanese collaborator.
Also.
Also.
Okay. Perfect. Perfect. Thank you so much, and good luck for your business.
Thank you.
Thank you. A reminder to the participants, anyone who wishes to ask a question, may press star and one at this time. The next question is from the line of Kartik Ayan from Sharekhan. Please go ahead.
Good afternoon, gentlemen. Thanks for the opportunity. You know, one thing is in terms of the order book that you spoke about, INR 3,000-odd crore and the schedule of about INR 480-odd crore . How exactly have you factored in the volatility in raw material prices? How exactly will you be able to protect yourself? Some thoughts on that would be interesting.
Yeah, for the raw material, that make all settlements with pass-through set conditions. We don't take any exposure in the raw material applications.
Except within the quarter.
Except because there is a time difference, maybe there.
Mm-hmm.
Because most settlements are on quarterly basis, some on monthly basis. That may be one month up and down. That may be the impact. Otherwise, we don't have any impact.
You are basically saying that the embedded profitability on the INR 3,000-odd crore will be in the 15% range, ballpark range that you indicated, or it could be better also?
Yes.
Secondly, in terms of the shipment scheduling, is it contingent upon certain conditions being fulfilled, or do you believe that this is a reasonably done thing? You know, because I remember on three separate occasions, we had indicated three different numbers, and I'm not holding it against you, but just saying that these things happen because of various variables. Is the 480 number a more given thing or could this vary as well?
No, this will be somewhere at that rate, because if you see the orders, what we have booked, around 70, around 60% is from the new market existing, or with our existing market new product or a new market new product. This means we have captured a new entity, new customer or a new market. This will add on rather than this will be sluggish with the existing market.
Sorry. Just to clarify, my question was whether this is a confirmed schedule or is this contingent upon certain other, you know, aspects like, for example, the chip availability is a macro issue, but apart from that, is there any other variable in this schedule? That is what I was trying to understand.
Yeah. This is based upon the confirmed schedules received from our customers. Yeah, I do agree chip shortages have come up, but we have done a thorough research, studied with our OEMs also. What we understood, this will be there for another five to six months. Thereafter, things will be under control.
Understood. Thank you. One last thing, sir. When you spoke about supplying 17 kg of components to Ather Energy, is there further scope to increase this for Ather? Can you also share some, you know, color on how this has gone from two to 17 kg?
Okay. If you see, in an ICE vehicle, I have opportunity with a cylinder and a DFV. If you talk about Ather, they are in a premium segment, and they involved our designer at the start of a project. They wanted a unique product to launch, which will be durable and very innovative.
Lovely.
Lightweight, because this is very important in an EV vehicle, because a light vehicle will help to give you good performance. With that in mind, they have involved us in making those components in aluminum parts. That is the reason we got more opportunity with the content per vehicle in an EV space with Ather.
Interesting. One broader question, if you will permit me to. If you know, you have talked about several order wins, and I'm assuming that the competitive landscape is global rather than local. What exactly is helping you win these orders? Can you talk about some specific points that have helped you to win these orders?
Yeah. I think there are two of them. In the EV space, we started with our European entity in 2016.
Mm-hmm.
It gave us a much more headroom. Whatever we learned from our development there, we've been able to bring that to India, both for Indian OEMs and as well as global OEMs.
Right.
That is our strategy to move that part towards the EV. Of course, working right at the start of the design, it's not always easy for them to change for some of them where the design is fixed, but for others it's easier.
Mm-hmm.
Secondly, our philosophy to move into the tech-agnostic parts, which are either ICE or EV, is the focus area, and this focus area is helping us to break more international OEMs, which require these kind of components.
Mm-hmm. Sir, how do you assess the global demand supply scenario for aluminum castings? What I read is that there has been a fair amount of capacity added. Can you bear that out?
Everybody, you also see what is happening on the greenhouse gases and things like that.
Sure. Mm-hmm.
Eventually, India has an opportunity, I think with China also going more towards greener, the cost will be much more.
Mm-hmm.
India can offer a competitive logistics, other things. We have a much more scope on the aluminum parts, and this is for quite some time it will remain with us as the Indian subcontinent.
Sure. Do you perceive inorganic opportunities with some of these European possible capacities? You know, especially for the technology that they may bring to the table. Is that something that you consider as a possible option?
Actually, these have been coming to us, but our, it's been there for last three years very actively. Our thing is that, what are we looking at? Either we are looking at, we have our own entity there, which is leading edge in all these OEMs.
Mm-hmm.
Either we look at somebody who has a very big domain and we marry with the domain partner.
Mm-hmm.
Right now the opportunities are in a way we will sooner or later grab a foothold ourselves.
Interesting. Thank you so much and very best wishes.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their 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 very much.
Thank you. Ladies and gentlemen, on behalf of Alicon Castalloy, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.