Thank you, Raymond. Good day, everyone, and thank you for joining us on Alicon Castalloy Limited's Q1 FY 2021 earnings call. We have with us on the call today Mr. Rajeev Sikand, Group CEO, Mr. Shekhar Dravid, Group COO, and Mr. Vimal Gupta, Group CFO of the Alicon Group. Mr. Vimal Gupta will start and cover the financial performance, following which Mr. Shekhar Dravid will walk us through the operating highlights of the quarter. Mr. Sikand will then cover business developments, following which we will have the forum open 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 documents shared with all of you here. I would now like to hand the floor to Mr. Vimal Gupta for his opening remarks. Over to you, sir.
Thank you, Mayank. Good afternoon, everyone. On behalf of the entire management team of Alicon Castalloy, I would like to extend a warm welcome to all of you on the earnings conference call for the first quarter of financial year 2020/2021. I hope that you and your communities are safe and well. The quarter gone by was extremely challenging, with an unprecedented level of disruption due to the nationwide lockdown from March 24th. We began the quarter with the complete shutdown of all of our manufacturing units. This was accompanied by challenges in logistics, constricted movement of material and manpower, as well as high uncertainty of demand from the OEM customers. This has negatively impacted business operations as anticipated, leading to compression in volumes and revenues during the quarter.
As the first set of relaxations to the lockdown were announced at the beginning of May, we restarted our manufacturing units at Binola in Haryana and at Chinchwad in Pune on 11th of May, losing roughly 41 out of 91 days during this quarter. Since our Chinchwad plant was located in a containment zone, we were able to resume production at this facility only around the 8th of June, thereby losing 69 days out of 91 days during this quarter. On account of this, effectively in April and for a large part of May, we recorded negligible volumes and sales. Soon after, as our plants restarted production, we have been strictly adhering to the regulatory guidelines and are continuing operations with only 33% of the manpower as permitted.
Since we are implementing distancing norms at these facilities, the productivity level during the quarter was at 60% of the pre-COVID levels. Against this backdrop, we reported consolidated revenue of INR 53.66 crore in Q1 of FY 2021. For the quarter, exports including overseas revenues contributed to 40% of the total revenue, while domestic contribution was at 60%. Across verticals, the auto division contributed to 86% of the total revenues in Q1 of FY 2021, and non-auto division was at 14%. There has also been a concerted focus on cost management. We have instituted cost optimization initiatives and efforts towards improving process efficiency, which resulted in an improvement in gross margins at 51.4% in Q1 FY 2021, as compared to 48.1% in Q1 of FY 2020. This has also slightly improved in 56 basis points from the gross margins reported in Q4 on FY 2020, just a quarter ago.
However, due to the lower revenue base, operating deliverables resulted in negative EBITDA of INR 23.4 crore. Further, with largely stable depreciation and interest cost and negligible taxes, loss after tax during the quarter stood at INR 44 crore. On the whole, our business fundamentals remains intact and we are actively engaged with customers in order to be aligned to their requirements. The near-term outlook is uncertain, but we are confident that our offerings are highly relevant to BS6 and electric mobility requirements. On that note, I would like to hand it over to Mr. Shekhar Dravid, who will talk about operating highlights for the quarter.
Thank you, Vimal. Greetings for our investors. I trust all you are well and staying safe. Across the globe, economies and enterprises alike are facing disruption and volatility on account of the COVID pandemic and resultant actions. In India, even before COVID-19 hit, the domestic auto industry, as you all are aware, was facing a slowdown as a result of weakened customer sentiment, sluggish demand, liquidity issues in the market, and one-time transition impact to BS6 norms. This was further magnified due to the adverse impact of COVID-19 on manufacturing operations, supply chain, and transport. For the first time ever in April 2020, there were zero auto sales registered in an entire month in India. Although manufacturing operations and business activities for most auto companies partially resumed in May and June, the demand and sales only picked up from mid-June onwards.
These unprecedented circumstances in quarter one of financial year 2021 severely impacted our business performance and those of our customers too. As Vimalji discussed, we lost several operational days across all our plants, and even when production was restarted, it was at a reduced scale. In addition to this, supply chain issues also derailed performance in quarter one, financial year 2021. In such times of extreme ambiguity, as a company, we deployed a set of focus agendas to be able to effectively navigate through some of these operating constraints. Let me share a brief synopsis of what we have done in the course of this quarter. First and foremost, employee safety and wellness continues to be our utmost priority, and accordingly, we have deployed stringent safety norms and hygiene protocols across all our plants and offices.
Currently, our units at Binola, Shikrapur, and Chinchwad in Pune are operating roughly at 50% utilization level, and we are gradually ramping up production across these plants. Secondly, from a supply chain standpoint, we have undertaken quite a few strategic initiatives to restore and maintain movement of goods through dealership networks and vendors in an otherwise tough environment. In July, the supply chain has marked a slight improvement, and we are currently at about 60%-65% of the normal level. Our inventory levels also continues to remain stable. On the international business front, we saw slight revival in the demand from May onwards, as soon as the international markets started reopening. We supplied components and parts from our Illichmann facility in Europe to many global clients during this period.
Further, as the ports reopened in India, we also reported resumption of export sales from the month of June onwards. Across domestic and international markets, our client engagement remains solid, and our customers are committed to continue with development programs once the broader and micro situation stabilizes. During the quarter, we have continued to engage with all our customers through frequent virtual interactions and have therefore been able to maintain continuity in deliveries to the existing customer and make progress against new leads, even in this challenging environment. Overall, we have made ourselves agile as an organization to efficiently adapt to any change in the operating environment and ordering patterns in these uncertain times. I am happy to share that in auto, we have bagged two prestigious orders in this quarter, mainly from Toyota globally, and other one is from PSA globally.
In Toyota, I would like to mention one thing. Since the inception of Toyota, this is the first time ever Toyota has decided to go for the outsourcing of a cylinder head like a business, and Alicon has got this opportunity in India to grab this opportunity. During this period of last quarter and pandemic situation, we have constantly worked with our customers, and I'm further glad to inform all that we could able to increase our share of business with the customer as compared to our share of business during BS4 regime. This will help us in coming quarters as well as for the years to come, as the increase of business in the auto sector due to increase of SOB.
On the e-mobility and non-auto business front, we are seeing a uptick coming in from international markets. We will continue to monitor these developments closely through the course of Q2 FY 2021. Here, I would like to mention that Alicon has added three new logos in e-mobility like Danfoss, Dana Group, Ashud, and Flexonics, which is a group company of Garrett, previously Honeywell. These are the three new logos that have been added along with the existing customers like Eaton and ZF, who have got their e-mobility wing. From there also, we have bagged the orders for e-mobility. In case of non-auto, we have bagged, already shared that further few components we added from ABB and with existing customers like Siemens and the GE Energy, we could able to bag further orders into our kitty.
Operationally as well, we optimized the cost across our business model and brought in higher efficiencies that enabled us to report improvement in the gross margin profile during the quarter. Looking ahead, we are hopeful that the demand scenario across the country will stabilize in the months ahead. In the month of July itself, we have seen a good amount of uptick in demand and consumption in the domestic market, with improved response emanating from rural and semi-urban regions. There is a positive sign that this momentum will also strengthen in the coming months, and we are hopeful of a solid revival in sales on quarter-to-quarter basis. In this quarter ahead. In addition, a gradual recovery in economy led by normal monsoons in India, a good Rabi season and kharif crops sowing should further aid growth in domestic market going forward.
As far as international business is concerned, we are now seeing some initial levels of activity returning, especially across the international divisions with U.S. and Europe economies, making efforts to reopen and restart the heightened precautions in place. Our discussions with several domestic and global customers are at advanced stages, and we believe that once the macro situation normalizes, we should be able to deliver healthy growth from the international divisions in the quarter and the years ahead. I would now request our Group CEO, Mr. Rajeev Sikand, to share with you in perspective on the way forward.
Thank you, Shekhar Dravid. I welcome all our investors. Thank you for joining this call. I hope you and your family members are well and safe. My colleagues have shared with you the details of our performance and covered a few pointers on the steps we have taken to counter the impact of COVID-19. I would just like to add here that we are very confident of our growth potential and opportunities across auto and non-auto and e-mobility space in the medium term. In the near term, against the challenging context, our business fundamentals remain intact, and we are engaging with the customers to ensure we revive economic activity as fast as possible. We have undertaken several measures to make our manufacturing and value chain more resilient in these times, and our teams have done a fantastic job in quickly adapting to the next normal.
We have also directed improved focus towards cost-effectiveness to boost our financial strength. Our financial position and cash flows remain robust. Three themes that are likely to engage as a result of this pandemic that would be of immense benefit are: we foresee a shift towards personal mobility. Even as interactions have shifted to virtual mode, we expect that movement of individual resumes, there will be a clear shift towards personal mobility. Cost cutting and focus on higher efficiency will be big agenda for global OEMs. They will need to protect margins due to increase in costs everywhere elsewhere throughout their operations, in order to announce value proposition in the post-COVID world, which is likely to witness down trading by customers.
Lastly, a focus on light weighting of the components, which will enable reduction in input costs as well as fuel efficiency, is a trend that we expect to accelerate. die casting as a process will stand out due to inherent strength and becoming increasingly viable and relevant solution, not just to automotive, but across the multiple sectors. I would like to reiterate that we are future ready as a organization, as the domestic and international operating environment gradually improves, we are positive that our product segments will record a strong recovery in months ahead. 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 questions 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Saurabh Jain from Sushil Finance. Please go ahead. Saurabh Jain from Sushil Finance, you may go ahead with the question.
Hello. Yeah. Am I audible now?
Yes.
Yes.
Yeah. Okay. Good afternoon, everyone. Hope all of you are doing well and safe. I have a couple of questions, sir. First is, things here in the domestic market seems to be somewhat improving, looking at the latest numbers. Would like to know how is the scenario in the international markets? Is the momentum resuming? Which are the top four, five countries to which we export?
Basically, yes, international market started opening in the month of May itself. Looking at the economies, taking in U.S., as you know, still the COVID cases are going up, but they are going with the stringent norms and productions are coming to the normal one now. We are looking for that. Also the schedules which have become now stable. I will not say that there is a hike, but there are stable schedules which have gone down, as far as the international market is concerned. In domestic market, the volumes what we are looking at right now, which are really increasing, and we are keeping our watch on that going forward.
Okay. Sir, if you can mention top few countries where we export.
We are exporting-
Austria.
We export to U.S., then in Brazil, then we are exporting it to Austria, we are exporting it to Germany.
Okay. That's okay. My second question is about the receivables. Of course, you have mentioned in the previous calls that with the rising share of exports, our working capital requirements will keep on rising because of a higher number of debt debtors in the exports orders. How do we plan to tackle that situation, and do you see any risk to receivables in that case?
Yes, Saurabh, we are mainly focused on that, because with the payment terms with the overseas customers, it is really a challenge for us also. We are in negotiations with the customers when we are making the settlements, how we can recover the money early. Hopefully we will be able. Maybe, I think in the coming time, you will see the improvement on that side also.
Okay. Sir, what would be the peak level of debt that we can expect over the next two to three years, considering the rising share of exports, which will stretch our working capital requirement as well? Although for the time being, we have kept the CapEx plan on back burners. I assume that over the next one or two years, we are not looking at expanding. Considering these two things, what would be the peak debt level that we can expect?
You're talking about the peak debt? Debt side you're talking about?
Yeah.
First, Saurabh, I think we should divide into the two parts. One is the working capital side, another is the CapEx side. When we go for the working capital side that I explained to you, we are more focused to bring it down. Maybe, you know that when we are going to increase the exports, that will be a challenge for us, and I explained earlier also. Now we are in negotiation with the customers as well as some other solutions we are trying to find out with the customers, how to reduce this credit period. Hopefully, my idea is that maybe as a number of days, you will find in the coming period that as a debtor number of days going down instead of increasing, in spite of when you will see that there is an increase in the share of exports.
That is one part. That I think I've answered your question for the debt side of the working capital. Second is the CapEx. CapEx, yes, when Mr. Dravid has explained to you that, okay, we are having the new projects, CapEx requirement will be there. This year is challenging that we will not be able to generate cash flows for funding the CapEx side. That maybe some little money, now we are in discussions how to fund that part. Maybe little increase you can find on the long-term debt for the short period to overcome this critical situation of this year.
Okay. Sir, what would be that amount, CapEx amount that you have budgeted for next one and a half year?
This year we are estimating approximately INR 40 crores-INR 45 crores.
Okay. Yeah. That has not changed. This is as you had mentioned in the last conference call.
These are for the new projects. New projects are on time. We need that.
That doesn't include the maintenance CapEx?
Yes, everything. Maintenance CapEx is including and the orders Mr. Dravid has explained about Toyota, PSA. Those are the very big orders. For that, we need to build up the capacity for those particular projects.
Okay, fine sir. Can you just quantify the order size of Toyota global, approximately?
This is roughly around INR 80 crores per annum.
Okay, fine sir. Thank you. My questions have been answered. I'll get back in the queue if I have more. Thank you, sir.
Thank you. The next question is from the line of Saurabh Shroff from QRC Investments. Please go ahead.
Hi. Good afternoon, everyone. Sir, just a couple of questions. First, on the cost front, what measures have we taken and what is the cost level that you will be comfortable at, or this current level of expense? Where are we? I'm just trying to get a sense for when the business breaks even and what measures that we are taking.
Mr. Saurabh, on the cost side, you know that this is a big challenge. When we go on the cost, either one is variable and another fixed cost. Major challenge comes for the fixed cost side. We are taking many measures to control, especially big challenge in the fixed cost always is, like in the foundries, manpower and the energy. Many measures to reduce the manpower cost, especially by improving the efficiencies, the outputs, that we are more focused how to increase that. That is the main criteria to reduce our cost of the manpower. As well as that, if we improve all these things, outputs from each machine and overall, then we can save manpower as well as on the energy side. Many other things, commercial side negotiations are with like some captive powers or some power trading.
Many areas we are finding out the solutions to reduce our cost. On the operational side, now, when we come to the variable cost. When we come to the variable cost side, then we have to reimagine all of our thinking. Like major cost when we talk about is the raw material, aluminum. What are the different options we have in the chemistry or some other combinations. How even you know that even we improve by 1%, it has a major impact. Those things we are doing on then process cost and the process efficiencies. In every area, we are focused to improve. Because now coming to the price, what we are talking about that, first is when the top line goes down.
That becomes a challenge and to maintain the all cost as a percentage to the sales. Our major focus is how to maintain our cost as a percentage to sales first for this year particularly. Even after having a reduction in the top line. This is the way we are working.
If I may probe a little bit more. This quarter you have an employee cost of about INR 30 crore, which is down from some INR 37 crore-INR 38 crore previous year and previous quarter. Is this a base that we should work with or is there room for this to go down further? Similarly, on other expenses side, I guess a lot of the variables are down. What I want to understand is that what is your per quarter, let us say, minimum fixed cost or what is your target to reduce fixed costs so that the business bounces back faster as and when the recovery comes from the external environment.
On the fixed cost, first is that when we are talking about the manpower. First of all, because you are talking about INR 30 crore for the consolidated basis. When you see because there was no lockdown in our European facilities, so that cost will remain for the Europe and for the India, then our fixed cost this for the employee is around INR 22.5 crore. Earlier we used to be approximately INR 28 crore-INR 29 crore for this on standalone basis. When we go for this manpower cost there are two challenges. One is that, you know that in India always minimum wages increase every year from the government side. Second is some increments or other things we have to take care. Maybe it is challenging in the current year, it's a challenging year, so maybe we will not go for this increment.
Going forward, we have to take care of all these things. When we improve on the operations and productivity improvements are there. Then we can see the effect on this and we are targeting at least to not to cross whatever manpower cost we are having in the previous quarters in spite of increase in the volumes. Like when we take March quarter when we had a sale of around INR 169 crore and we had a cost of INR 28 crore of the manpower. Maybe when we cross this top line, but cost we are targeting to remain up to INR 28 or below that. That is our target we are keeping. Right?
Okay. Fine. On the second, how much visibility do we have? Sorry, two questions actually, two parts to this question. One is, how much near-term visibility do you have, like you mentioned this Toyota order, if you could also quantify the PSA order and the regular business because I think in the presentation you've mentioned the Jaguar and the other orders which will sort of kick in in 2023. Between FY 2021, FY 2022, how much visibility do you have on the current order book and where things stand?
Yes, specifically on PSA, the start of a production will be in 2021, 2022, last quarter. For Toyota, the start of the production will be second quarter of 2022. These are the businesses what we are talking of which will be ramped up in 2022, 2023, where the value as I already said for PSA it will be around INR 120 crore per annum and for Toyota it is around INR 80 crore per annum with the peak volumes what has been shared by the customer with us. Definitely we are looking for this gradual growth next year for these businesses. Jaguar has already been acquired, and the sample submission and everything has been completed, and the ramp-up will start from the end of 2021. That is the fourth quarter.
It will give us this ramp-up business for the next year, as far as Jaguar is concerned, which is already initiated in 2018/2019. Have I answered your question?
Yes. For FY 2021, let's say if we were to assume an 80%, 75% utilization, let's say, for the entire industry, I'm just trying to understand that do we have any additional kicker that we could outperform the domestic auto industry growth or de-growth? Like if the industry was down 25%, could we be down maybe 15% or 18%? Do we have some visibility either from some orders which are starting or some export opportunity or whatever may be the case? I think linked to that is also, you mentioned that in BS6, we have a bigger role to play. I just wanted to understand how much does the content per car increase for us in the new BS6 environment and regime?
Yeah. This is Rajeev here. I think we are seeing a very good market in the two-wheeler and in the small car and small LCV, where we have also shared. There are two factors to this. I think that right now the supply side factors are working, let's say till September. The demand side incentives should hopefully kick in from October. Otherwise, you may actually see a downtrend after the festival season. Because a lot of the current purchase by the OEMs is also one is going towards their direct sales and slowly building for the festival season, which they normally build much earlier. These are two factors on one side. The other side is the story of the COVID itself. How does it play? How does the lockdown play? What happens on the other side?
We have made internally our projections, and we see that we are in that line with our projections for the year, for at least this quarter going forward. What we had projected in May and for this quarter, we are in line. I think a lot is going to evolve. This is going to be a very challenging and evolving year. Nobody projected a demand to come back so quickly. There is a shortage of associates in all companies, and every effort is being made, get them back. Also, you're right, we are taking all the opportunity which we can grab from the other sources who are not able to supply. Let's chip in. That's what we are doing at this moment.
Okay. On the BS6 part, how much is the increase per vehicle for us? The content per vehicle because of this?
It will be around, at this moment, 18%-20% is per vehicle increase. If you see these increases, some of the components which were not there in BS4, we are adding to our KT for all this. This will have per vehicle increase also with the customer, as well as the share of business. Existing share of business has been increased with a very strategic and specific customers.
Okay, understood. Thank you very much. I'll get back in the queue for further questions. Thank you and all the best.
Thank you. The next question is from the line of Bharat Gianani from Sharekhan. Please go ahead.
Yes, sir. Thank you for the opportunity. Just continuing on the earlier question, in the quarter four call, you highlighted that in FY 2021, we might see a decline of about 20% in the overall revenues. What is the feedback that you're getting on ground from the customers, both in the domestic and the export market? Are you still maintaining that projection, or do you feel that the revenue potential drop could be higher than what you had guided for in the earlier call? That would be my first question.
If you see the performance from June onwards, as the ramp-up has started, we are seeing a very bullish sales in the rural and small towns. It's not only agriculture, it's the whole industry, rural industry, which seems to have picked up and is a grace for everybody in this business. On the other side, the COVID cases are going up, and you're seeing the whole story on that side. As we are seeing now in this quarter, going forward, we still stick to our original, what we had answered in the last meeting, and hopefully we can try to maintain that. Things are looking positive as of today. As I said, this quarter is also a lot of supply side incentives are working as we see it. Hopefully, demand side incentives should come in from October onwards.
That is something, because it is a festival season, of course. Hopefully, that can also see through to get us some additional sales.
Okay. Fair enough. Thanks for the answer, sir. One more thing is that, what is the order book, I mean, the export orders that you pointed out for INR 800 crore, that order book that we had, that would start execution from FY 2023, is it? Or what is the exact timelines when that orders will start getting reflected in our revenues?
INR 800 crore? Which one you are referring to?
Yeah, the INR 800 crore order book that we pointed out earlier that we had secured in the export order book that we had from the major automotive.
Yes. This will come into production from FY 2022, and ramp up will be in FY 2023. It is already as per the targets, and it is online. There was some disruption due to this pandemic, but we are catching up with that, and there will be no change in the final timelines for that.
If I may ask, this INR 800 crore is executable over what time frame, the order book?
Five years.
Five years. Okay. Fair enough. Thanks, sir. I'll join back in the queue. Thank you.
Thank you. The next question is from the line of Dhiral Shah from PhillipCapital. Please go ahead.
Yeah, good afternoon, sir. My question is, again, maybe repetitive in nature. This Toyota order, this is for how much years, sir? How many years?
This is for, again, five years, but it is given INR 80 crore. That is for the annum. Per year, it will be INR 80 crore.
Okay. Same for the PSA order, sir, for five years?
PSA order is also for five years, and that is amounting to INR 120 crore per year.
Okay. Sir, you just mentioned that in BS VI your content per vehicle will go up by 18%-20%. Don't you think this will drive the overall growth in FY 2021 itself?
No, it will come in FY 2022 because these are all new developments. Basically, these are the suspension parts where we were not into any domestic business initially. Now with BS VI, we have started entering into that. This increase will come in year 2022.
Okay. This will have any positive impact on margin, or margin will remain the same, sir?
Can you come again? I just missed your word.
Sir, this BS VI content which you supply, are these products are high margin in nature, or margin would remain same?
It will be slightly, but it will be average out to the other business in auto sectors.
Okay. sir, in FY 2022, we have a good visibility of Toyota plus, right?
Yes.
Okay. FY 2021, there could be a decline, but again, FY 2022, we have a good order book for that.
Yeah.
Okay. Sir, lastly, on a non-auto business, how is the current scenario, sir?
You must understand that Toyota order which Dravid had explained, this is one time in history it has been done.
Okay.
We have never outsourced this cylinder head.
Yes.
This is the first time a very small foundry in India got this order, and this is because Toyota, we have supplied one part for four years, very high quality. The Japanese, their entire technical team has been working with us from August last year. When I met them initially on sixth of August in Japan, they said the possibility was virtually zero, and then we convinced them over with samples and visits. More than 80 people from Toyota have visited us.
Oh, okay.
This is not an opportunity which happens every time. This is a leapfrogging. You can understand when you add a batch of Toyota. It's a lot of responsibility also on us, and our partners have supported us, Enkei. All this culminates into this kind of thing, and if we do well, it doesn't stop us to get more business from Toyota in future for their other localization programs. PSA is not that also, I'd like to explain that. PSA, normally they follow their global source. They have their global source in India, two of them. Because earlier of our work with Renault and our exports to Renault, Brazil, these guys have seen because buyers shift, as you know. In automotive industry, people shift from one company to the other.
Yes.
The technology and the frugal engineering solution which we have given to PSA has made us breakthrough. We had appointed a French marketing office last year. These all factors put together has brought us to PSA. The other part of the story maybe was missed, the EV components, for especially these companies like Dana in various branches of their Danfoss. There is another huge development of more than 30 parts in the EV, which we have now going ahead. That is something which Dravid has not delved very deeply, but it's something which is also very exciting with the time as it may come.
Good to hear that, sir. Sorry, in your opening statement, you were talking about Honeywell. I missed that, sir. What was that?
Honeywell has got now taken over by Garrett Worldwide.
Okay.
Garrett has got their e-mobility for division separately. From them, we have just now got one component, and we are working on that to expand our business and basket with Garrett.
Okay. What would be that size, sir, if you won that order?
Basically, right now, it's under development, pipeline protocol, and SOP will start in FY 2022.
Okay. Got it, sir. Thank you, sir. All the best. That's it from my side.
Thank you. The next question is from the line of Sharan Sudarangani from Longview Finance. Please go ahead.
Hi. Am I audible?
Yes.
Yeah. Thanks for taking my question. If you could just talk a little bit about your raw material cost. How do you see that? Where do you procure the aluminum from? If you could just comment a little bit on that environment.
The raw material, aluminum, maximum part is the domestic, so many suppliers are there. They import the scrap and produce the ingots and supply to us. Very little amount of import is there, that is very specific type of alloy that is not available in India. The critical chemistry is there. Maximum is the local buying we are having. Mainly that it is because customers, they control the raw materials. Maximum customers, they finalize the suppliers, and we have to buy from them.
Okay, thanks. Secondly, in terms of this EV vertical, what percent of sales do you think in the future it could contribute going down?
Basically by twenty-
Hello?
Hello?
Yes.
Basically, by 2024, 2025, the Share of Business of our EV vertical will be around 6% of our total turnover.
Okay. Thank you. That's all from my side. Thank you.
Thank you. The next question is from the line of Divyesh Shah, who's an individual investor. Please go ahead.
Hello?
Hello.
Sir, my question is regarding our partner, Enkei Corporation, who is holding a roughly 15% stake in our company.
Yes.
They are aluminum giants of the world. Sir, can you explain what is the role of Enkei Japan to our company?
Yes. Enkei, you know that they are the worldwide leader in the aluminum alloy wheels, and they also work in the engine part, that foundry, other foundry products. They are very good in the technology and the technical support they are giving. Whenever we need, they send their Japanese people to support us for the development side. The owner of that Enkei, Mr. J. Suzuki, he always visits minimum two times a year to Alicon and spend at least two to three days in every visit. He audits our plant and give many ideas for the process improvements, cost reduction, because you know that Japanese people, they are more focused on the cost side.
Sure.
Mr. Suzuki is well known in the Japan for cost controls. We get lot of ideas For the technology side. They also give us the opportunity for Alicon team to visit their plants. Our team, our technical people, our other managers, many of them, they visit their plants in Japan, in Thailand, in Indonesia, many locations we go, U.S., and understand the processes. Whenever we have issues or some other operations we need from them on the technology side, so they provide. We have very good partnership and understanding with the Enkei.
The other critical element is that the relationship with the Japanese OEMs continuously gets enhanced with Enkei, with us. Lastly, we get to see their global plants, how they are benchmarking, what is happening in U.S., what is happening in China, how they're dealing besides Asia and Japan. Our people are continuously provided the knowledge and the wherewithal. It's an excellent relationship which we are harnessing all the while, and it has helped us in Toyota order also.
Sir, with due respect to your capacity, just to tell you that I am watching this company and I have invested in this company from last about minimum 14 years. I'm closely watching this company, and I'm a very long-term investor, and my only purpose to invest in your company was because of the technology provided by Japan, Enkei. Looking at last 14 years, looking at the potentiality, and the potentiality of your management and Japanese technology, and the potentiality of a Indian market and export market, I think somewhere we are missing that we have not performed as per the expectations of the shareholders. This is, I am hearing from last many years that Japanese have the world best, but still, I think we have yet to exploit the technology of the Enkei.
I don't know, just this is my only feeling that last from 14 years, I thought that by 2020, this company can be a INR 2,000 crore company, but we are missing this target by big margin. I just wanted to convey my concern that, as far as our capacity is concerned, we have no doubt about your management, but something, there is some missing link between the potentiality of a Japanese technology, Indian production facility, and the market. We are missing something, sir. This is only my concern. Sir, my second question to Mr. Rajeev Sikand, regarding our European manufacturing. Sir, this is a strategic question. Sir, is it economically viable to have a manufacturing facility in Europe? Does it make a profitable sense at the bottom line?
Thank you so much for both your questions, and I do understand your concern. You rightly said, you have to see the market as it evolves from a Japanese sense. Japanese are doing in-house foundry. Maruti Suzuki has in-house foundry. Honda car has in-house foundry. Except the two-wheeler, has a worldwide in-house foundry. They don't do overnight things. As first time we have told you that Toyota has given a order, so it must be a big change, right?
Right.
That is your question number one.
Mr. Rajeev, INR 80 crore order for a company like us and with Enkei support, it's too small after four years.
Yeah. You know this one order, multiplication happens in the automotive market. Traditionally, this is their secret foundry in Indian, is something which they do in-house. The Germans have outsourced over the years, the French have outsourcing, the Japanese do in-house. This is a key component for them. Really, in the real world, we can challenge all those components which they do in-house from the cost side and technology-wise. Hopefully, we will have some news on the other OEM, because with Toyota, we can now look at knocking the door of Maruti Suzuki also. This is another, it helps us there. Coming to the European plant. As far as European plant goes, we use it as a technology center. We have not pumped in anything from India to the European plant from a cash out.
It is completely like a technology center where we develop the parts for all the big OEMs, and then create that opportunity for us in India. Our Daimler order came because of that. JLR orders have come because they have seen that facility which we have and that type of casting. This would have never happened. That INR 800 crore order Dravid was, some of your colleagues were talking, was something which has happened because of this technology center which we have, and our pure play is technology center, because we want to bring the things to India as soon as they develop. Also, the technology is evolving. What comes to Europe today, I am not at a liberty, but one two-wheeler maker in India has got offices in Europe. He has gone straight to our plant there, and he has seen what we are doing.
In next two years, they want to come with that kind of a motorcycle, with those kind of parts. We are way ahead of the curve, so this helps us in the second way. I hope this answers your question.
Yes, Mr. Rajeev. Thanks for your answer. Is European plant self-sufficient to take care of its own?
Yes.
We are not burning. Yeah. My concern is that it may happen that sometimes, it happens to many auto ancillary company in India, that they burn money for their external plant outside the India. I just wanted to warn you that in future, we don't burn our hard-earned money after the European plant.
You're absolutely-
It should make economical sense.
You're absolutely correct. We have not pumped in anything. We made the plant earn, run, and get the orders for us. I understand where you're coming from. It happens in some cases. Earlier only we had made sure that when the plant was running in Austria, we moved from high cost to Slovakia, and we changed the strategy over a period of time to these EV components which Dravid has spoken about. This has purely happened because of Slovakian plant, of our office in Vienna and our Slovakian plant, where we have developed parts for Bosch and for Samsung, and another [impulse maker. It is not that suddenly you go to a OEM, because he wants to see what is behind you. That is helping our EV journey in India.
Of course, lot of these EV components which we are going to be producing here is for global exports.
Yes, sir. Mr. Rajeev, one simple suggestion is that, when Enkei took investment in our company up to 14%, at that time the rule was that you can buy only up to 14%, 15%, otherwise you have to give an open offer buyout. Now, that limit has gone to 25%. This is my simple suggestion. Can we make an effort for Enkei to increase their stake from 15%- 25%, to get commitment from Enkei? That can be a win-win position for you as a promoter or you as a company and we as a minority shareholder.
Absolutely right. Right now they've already invested around two years back, if you're aware.
Yeah, right.
If you're aware, they've already done that.
It is more than two years. I think it is four or five years back they have invested.
No. Two years.
Okay.
Two years they've done at a peak.
Yeah.
They have come in with a long-term intention.
Right.
It's step by step, and it moves to that direction.
No, only my intention is it gives a commitment to the management that Enkei is behind us. It gives more confidence to the investor as a whole.
Yeah. Again, they have invested two years ago, and they are very much part of us, so it is a step-by-step process.
Okay, Rajeev. Thank you very much, and wish you all the best, sir. Thanks.
Thank you.
Thank you. The next question is from the line of Ankit Jain, who's a shareholder. Please go ahead.
Hello.
Yes.
Am I audible?
Yes.
Good afternoon, gentlemen. I have two, three questions. One is, you have mentioned about those INR 800 odd crore order, which is there for the next five years, which is on track. During Q3 FY 2020 con call, it was mentioned that we have our own new orders. The order for the new projects were to the tune of INR 163 crore for FY 2021, and then it was supposed to be INR 207 for next year, and INR 285 crore for the third year.
No problem.
What I just wanted to know was, instead of pointing out particularly to that INR 800 crore, in totality, all these new orders which were won during last year, are they all on track?
You mean to say other than INR 800 crore?
Whatever the new orders you have won, is the product development or the approvals, whatever they are there in the different stages of development, approval, then supplying. Are they going as per the plan so that you would make approximately, this is what was given in indication during the Q3 FY 2020 con call. From the new projects, we will make INR 163 crore during the current year. The corona thing has developed subsequently. Are we on track to make at least INR 150 crore or something during this current year from the new projects?
First question that we are on track for this project, as I told you. Some projects, once we got it, the engineering, our engineers have worked during this COVID pandemic, working from home, making those facilities available to them. From our side, we have taken this opportunity and engineering work of these projects we have done it. As the customers for whom we were making this time period we utilized for this period, but it has been shifted as far as the customer is concerned. The total span is shifted by three months, as the total was down at their end. Basically, we are on track, and we will hasten this process as customer is also interested into, and we will try to cope up with whatever is needed as per the market.
So is it fair to assume that
Just to add that there is a lot of things to be done in their testing facilities.
Correct, sir.
From our side, we ensure as we were working throughout and our engineers worked throughout this lockdown. However, in their case, it is not so easy to assess their testing facilities. That has put in some cases 50 days, 60 days, some 70 days, to that kind of extent, delay. Overall, the direction is all same.
Okay. Is it fair to assume that whatever this INR 163 crore we had estimated, there may be some spillover to next year?
Yes. It is a one quarter. It's only a quarterly shift. As you know, the lockdown, and if this market continues. It's also back to the numbers. It's good. As of now, we can only say maybe maximum 50, 60 days in next financial year.
Okay. As on date, whatever the estimates for FY 2022 and FY 2023 will remain hold as on date.
Yes.
Okay. Sir, my second question is, who are our major competitors for aluminum castings in India?
In India, if you name it is firstly-
Firstly, the foundries in-house of Maruti Suzuki, Honda.
Okay.
Their in-house foundries are the ones which are. This is called group companies-
Okay.
...of OEMs. You will have Sunbeam, which was also referred to us, Rockman from Hero, and you will have companies like Endurance. TVS has their own company in-house. This would be the biggest competition. If you look at our, let's say for a low pressure, we would have around 100 machines, and our nearest competitor would have maximum of 25, 24 machines.
Okay. Sir, now this I was asking about the companies which are in aluminum casting, but if I have to compare with the casting companies in general, foundries and the casting companies, what is the difference the aluminum casting has with other castings of different metal?
Can I just elaborate on your question?
Yeah, please.
Can you just.
Sir, what I'm asking is, what is the difference between aluminum casting or casting of other metals like steel and other things?
If you see basic aluminum, the raw material cost is between around 60%-65%, as compared to ferrous. The value added in the total of a top line, if you see, the value added is to the tune of around 30%-35%, which is exactly different in the case of ferrous material. That is the biggest difference as far as the industry is concerned.
You mean to say in a ferrous, that is a steel casting, the cost of the material would be only 30%-35%, whereas in aluminum it is 60%-65%?
Yes, absolutely.
Also it is a application, where the world is moving. On this, we have very little to value add, because this is a global decision of the OEMs keeping the environmental norms. Because the weight of aluminum is much lower than, but certain application do require, like in tractors, in other industry, it may require iron castings, ferrous casting. Slowly the world is moved into aluminum. In India also, the movement is coming to a very large extent.
Okay. Sir, as for a non-technical person, I'm asking, is it possible for these steel or ferrous casting companies to convert into aluminum casting company?
No. Basically, the infrastructure requirement for steel and ferrous components is totally different than aluminum.
Yeah, anybody can convert. You are right. Conversion can be. In last 15 years, we have not seen anybody converting into that. We have seen very small incremental growth as the customer is growing, and they want to keep the share of business of their renowned companies. That kind of growth is coming.
Okay. Sir, we hear in the EV, electric vehicle segment, because of the increase in their weight of the vehicle due to battery, they are shifting to lot of aluminum components. In the existing vehicle types, is there any initiative or any companies have taken any methods to convert their existing components to aluminum components?
Yes, there are lot many. The suspension components which were traditionally in ferrous or forged parts, which has been converted to aluminum.
JLR.
Yes. As you know that, whatever the JLR component what we bagged it, which we call is a technology agnostic part. These parts are basically not goes into the powertrain, but other parts like the chassis or suspension or the building of a vehicle for other things. These are the components basically, which have traditionally been used in forged or the casting in steel, has been converted to aluminum now, for the reduction of the weight of the vehicle.
Okay. For example, in an existing vehicle, what is the composition of aluminum components, sir?
At present, if you see the IC vehicle, a normal vehicle weighs around 1,432 kg, is the weight of the vehicle. In this, if you see today's contribution is around 127 kg is the weight of aluminum, all parts together.
Okay. This, with the way you are saying, so many different parts getting converted into aluminum. Going ahead, maybe we don't know, five years or 10 years down the line, this quantity can go up. That is what your assessment?
Yes, absolutely.
Okay, sir. Thank you very much, and all the best.
Thank you very much. We'll have to take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Thank you. I hope we have all been able to answer all your questions satisfactorily. Should you need any further clarification 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. Thank you.
Thank you.