Ladies and gentlemen, welcome to the Q1 FY 2025 Results Conference Call of Action Construction Equipment Limited, hosted by Emkay Global Financial Services. As a reminder, all participants will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I would now like to hand over the conference to Mr. Chinmay Kabra, Emkay Global Financial Services. Thank you, and over to you, sir.
On behalf of Emkay Global Financial Services, I would like to welcome you all to discuss Q1 FY 2025 earnings of Action Construction Equipment. The company is represented by Mr. Saurabh Agarwal, Executive Director, Mr. Rajan Luthra, Chief Financial Officer, and Mr. Vyom Agarwal, President. I will now hand over the call to Mr. Saurabh Agarwal for his opening remarks, post which we will start with the Q&A session. Over to you, Mr. Agarwal.
Yeah, thank you. Good afternoon, everybody, and welcome to everyone to this earnings conference call for discussing the results for the quarter ended June 2024. Along with me in today's earnings con call, we have our CFO, Mr. Rajan Luthra, and our President, Mr. Vyom Agarwal. The company's financial statements and earnings presentation summarizing the performance of quarter one FY 2025 have been circulated and uploaded on the stock exchanges, and I will take you through some of the key highlights of our performance in the quarter gone by. The company has maintained its growth momentum in the first quarter of the current fiscal year. Despite the big event of general elections, we have been able to register our best-ever Q1, that is, April to June quarterly performance. It is the best ever in the company's history.
This has been a quarter of excellent performance by our company, and I'm delighted to share that the financial year has started positively for us, even in the wake of general elections. We continue to focus on improving product security while fortifying our execution, products, and distribution strength to reinforce our competitive position. We're able to sustain our growth in terms of revenues and profits on a yearly basis. In the last two years, we have delivered high growth across our business segments and have improved our key operating metrics. We are the best in the industry now. As a company, we have built long-term competitive advantage through our capabilities of doing complex operations in-house efficiently. We have a great level of fungibility in our backend operations, such as fabrication shops, machining centers, crane shops, etc.
These plants are equipped with state-of-the-art machines which are capable of doing operations that cater to different products that we manufacture. Hence, for better and efficient allocation of expenses, and as advised by our statutory auditors, M/s B S R & Co., that is KPMG, as popularly known, we have merged our Crane Construction Equipment and Material Handling segments into one segment for all our future accounting and communication activities. This has been done since all our segments were growing significantly with similar margins, and the exact allocation of backend expenses and accounting was getting complicated due to the fungible nature of our operations. Now, to brief you on the financial performance of quarter one FY 2025 on a yearly standalone basis. The operational revenues grew by 12.82% to INR 734 crores, with an expansion of 212 basis points in EBITDA margin to 17.11% from 15%.
The EBITDA during the quarter increased by more than 28% to INR 125.50 crores, as against INR 97.50 crores. The PBT grew by 24.87% to INR 111.42 crores, and PAT grew by 24.46% to INR 83.71 crores, as compared to INR 67.26 crores last year. The PBT and PAT margins now stand at 15.19% and 11.41%, expanding by 147 basis points and 107 basis points, respectively, for the quarter on standalone basis. Margin expansion continued, driven by operating leverage, better product mix, and improved price realizations, efficient cost control measures, and favorable commodity prices. This is one of our most promised performances, given the anecdotal evidence of our sales trend in the first quarter. On a sequential basis, that is, quarter-over-quarter, the revenues recorded a drop of 12% on account of tepid business momentum owing to general elections.
The EBITDA, PBT, and PAT have contracted minorly sequentially by 85 basis points, 70 basis points, and 33 basis points, respectively. Moving on to the segmental performance, the company has sustained its growth momentum across all operating segments. In the Cranes, Construction Equipment and Material Handling segments during the quarter gone by, we registered consolidated revenue of INR 690.67 crores, as compared to INR 575 crores in Q1 of FY2024. Both the revenue and volumes are up by 20% year-on-year. The margins also expanded to INR 103.76 crores, with a reach of INR 83.66 crores, thereby registering a growth of 24%. The Agri division clocked revenue of INR 42.96 crores, while registering a margin of 3%. Going forward, with further advancement of monsoon across the country, adequate water reservoir levels, better liquidity, and consumer credit availability, we expect the demand momentum to improve in the Agri space.
On the operational side, we wish to inform you that, in principle, agreement has been reached with Kato Works Co., Ltd., a Japanese global construction equipment manufacturer of mobile cranes and excavators, to establish a 50/50 joint venture in India. The joint venture intends to produce medium and large-sized cranes, mainly truck cranes, crawler cranes, and rough terrain cranes, for the growing Indian market, and in future, the JV also plans to utilize the technology which will be cultivated by the executive of ACE and Kato to introduce a wide range of value-added products for the export market. This joint venture will help us to establish a business foundation for the larger crane segment, which will steadily grow as a pillar of our medium to long-term growth strategy.
Our Union Finance Minister presented the first budget of Modi 3.0 government, largely an extension of the interim budget aimed at realizing the vision of Viksit Bharat by 2047. In line with this vision, the central government adopted fiscal discipline and invested strategically in capital expenditure, prioritizing long-term economic growth through investment in infrastructure, rural development, employment, and skilling. The central government moved to keep CapEX spending unchanged at 3.4% of GDP, amounting to INR 11.11 lakh crores, along with the provision of INR 1.5 lakh crores to the states as long-term interest-free loans, will aid infrastructure development, and the central assistance of INR 2.2 lakh crores under the PM Awas Yojana Urban 2.0 augurs well for our company, as we stand to benefit significantly from these allocations. Looking ahead, India remains as one of the fastest-growing economies, and prospects remain very strong for the period ahead.
Cranes, construction equipment, and Material Handling business have done well and is poised well for future growth, with governments thirsting for attaining sustainable growth in manufacturing and focus on faster execution of infrastructure projects. We expect the demand for Cranes and CE segments to gain buoyancy and accelerate post-monsoons. Keeping in mind the continuous focus of government on infrastructure development and efforts to strengthen the manufacturing sector, we hereby reiterate our earlier guidance and expect a growth of 15%-20% on a consolidated basis with sustained margins. We hope that we are in a position to revise these projections by the end of the second quarter, which will predominantly depend on the overall macroeconomic scenario. Further, with our capabilities built up and process optimizations in place, we remain optimistic about the medium to long-term prospects of the company and remain focused to deliver on our sustained growth agenda.
With this, I would like to request the moderator to open the call for question and answer session. 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 touch-tone 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 CA Garvit Goyal from Nvest Analytics Advisory LLP. Please go ahead, sir.
Hello. Oh, am I audible?
Yeah, yes.
Good evening, sir, and congrats for a good set of numbers. My first question is on the EBITDA margins. So if I calculate your EBITDA margins, excluding other income, there is an impact of 300 basis points on a Q-on-Q basis. So I want to understand the reason for the same because, as I remember in the previous phone call, while answering to my question on EBITDA margins, you said we will sustain 16% EBITDA margin in the upcoming quarter. So what happened suddenly that there is a fall in our EBITDA margins, sir?
If you compare it to the last quarter, I think the margins have gone down by about 80 basis points.
So I think you are including other income for the purpose of calculations. If I exclude other income, then I calculate, then there is a dip. That's what I'm trying to understand.
How much is the EBITDA margin coming out to as per your calculation?
It is 13%, sir, if I exclude other income.
13%? Rajan, can you answer this one because I am a little confused?
See, in this quarter, there have been some additional material costs have slightly gone up, and beside that, some expenses related to admin expenses have slightly gone up, which I think will be taken care of in the coming year. And we have made some. Normally, we make provisions in the slow-moving and other inventories in the second half and the third quarters, but we are keeping in view that we have started making provisioning from the first quarter itself. So these are the reasons for the slight dip. But these are only, I should say, the template.
Is the gentleman referring to quarter-over-quarter or year-over-year?
Quarter-over-quarter.
I think quarter-on-quarter. I think another reason is that about INR 100 crore of revenue due to a separate quarter because of elections, which we had forecasted also. So a little operational deliberation has happened. But on the whole, what I see is that our PBT, the PAT margins, and the way we calculate are more or less similar. The INR 100 crore will definitely have some effect on the margins. So that would have also added it.
Sir, what is included in other income? Major portion of.
Yeah. Other income is basically more of income from the investments of what we do, and plus some rental incomes.
Are these going to be sustainable in the upcoming nine months, or what is the case?
As the market is growing, and I think most of the investments are in the debt funds and bonds and all. So I think the margins will be, the income is sustainable. Other income is sustainable.
Sir, you mentioned material costs increase. Are we able to pass on the same in the upcoming quarters?
All our material costs, we are able to pass on. There was a slight increase in the price of steel, but luckily, again, it has gone down in the last 1.5 months. So I don't think we will do an increase passing on of that increase in steel price, which happened in the last 15 months. So it has again cooled off in the current months.
Got it.
But going forward, we do annual price increase, which we will do in the coming month of January, from the first of January onwards, which will also be coupled with price increase on account of CEV-V, BS-V norms, where the costs are going up.
Got it, sir. Secondly, we are currently at 85% utilization in crane segment. Are we looking to add further capacity in FY 2025 for Cranes?
No. Currently, we are not at 85%. In the last quarter, we were at about 65% utilization in the crane segment.
See, if I take the run rate of the quarter to the annualized basis, that's how I was calculating it. You're saying it is 65%?
I'm telling you, we are at 65%. So you will have to believe me on that. We can make 13,400 cranes.
Got it. Got it.
Yeah. Yeah. So we are in the last quarter, we were at about 65% utilization. So we have enough legroom. But in any case, the CapEx, which is also currently happening, by quarter three, our crane capacity will increase to anywhere between 15,000-18,000 cranes. So we will have further additional capacity available to be used maybe quarter four onwards, and especially in the next year.
Got it, sir. Got it. And sir, lastly, on the Agri segment, our volumes are getting reduced. So are you witnessing any tough competition in this category, or it is only the demand-related issues? And in the upcoming, like we are expecting good monsoons here, so the demand will recover?
Yeah. Garvit, Vyom this side. See, the growth in our Agri segment has been somewhat subdued, and even the cattle industry is experiencing a flat trajectory. The industry, as per Crisil estimates, is also expecting a single-digit growth in the current financial year. Despite this, as a company, we are projecting around 15% growth in this segment, and we remain optimistic that with the increase in the MSP for crops, along with the good monsoons which we are witnessing across the country, and improved liquidity and consumer credit availability, along with the initiatives which the government has taken in the recent budget, all these factors will enhance demand momentum, particularly during the festive months of September and October. So going ahead, yes, we are very hopeful that this segment will perform well, and we'll be able to register a growth in tune of 15% going ahead.
Thank you, sir. That is from my.
Competition, there is no such competition because our numbers are very small. The industry size is huge. We have the complete industry to go ahead and play along.
Got it, sir. Got it, sir. That is from my side, sir. All the best for the future. I hope you will always, like you are always doing, you will outperform your numbers. Thank you.
I would just like to say here that I'm just looking at the segment also, and I'm a little surprised how you have calculated 300 basis points. But I think we will also work it out.
Sir, actually, I think my calculations are correct. We can do it offline also. That's not a problem.
Ladies and gentlemen, just a reminder, if you wish to ask a question, please press star and one on your touch-tone telephone. The next question is from the line of Jasdeep Walia from Clockvine Capital. Please go ahead, sir.
Hi, sir. Thanks for taking my question. Sir, the scale-up in the construction equipment segment has been a little bit lower versus the expectations you had from this business 2-3 years back. So what are the issues you faced in scaling up this business in line with your aspirations? Is there a problem in product performance, or do you find it difficult to build distribution and service network?
See, I would slightly differ here again because last year, if I'm not wrong, we did about a 45%-50% increase in this segment in construction equipment. And this year, with respect to especially construction equipment, backhoe loaders and [road machinery], again, we are looking at at least a 30% growth. So we are definitely growing from our base with respect to our numbers. The issue is not product performance at all. The product is performing well and very well accepted. It is just that there is a market leader and as much as it shows, it sells s imple logic is working. But I think we are very close to coming out of that barrier, and hopefully, soon we should become number two in this segment. We are very confident. We are on track. Last year, we grew 40%-50%. Exactly, I don't remember. Maybe 45%-50%, something like that.
This year, we will again be growing about 30%. That's our plan, if not more.
Got it, sir. Thank you. That's all.
The next question is from the line of M.B. Mahesh from Kotak Securities. Please go ahead, sir.
So, just a slightly different question. When you speak to your dealers and channel partners, is there been any indication of tightness in credit supply from lenders for both the construction equipment as well as for the agricultural products? And if yes, was there any geography which they seem to be worried about?
Not really. Not in the last quarter. I don't think on account of financing. I think the quarter before that, there was some indication, but there was no indication from our channel partners or our dealers. Because we also do some direct sales in some pockets like Bombay City as well as Delhi, NCR. So I don't think we experienced anything like that.
No tightness in underwriting or credit rejections and stuff?
No, not with respect to our line of business. But I can maybe relate to, let's say, the biggest complication in the construction equipment segment that we have. Because as I explained earlier, they might be facing some problems because their NP levels are much higher as compared to our portfolio. Our portfolio is obviously very small. The cost of the machine and the viability has been going down over the last 5, 6 years. So they have been increased NPs with our competition, the largest one. So maybe this news that you're hearing might be from their end.
Okay. Well, I'm just saying that is that causing some slowdown to business and stuff?
No, I don't think so.
Okay. Okay. Thank you.
The next question is from the line of Ashish Ajit Gullecha from Growth Sphere Ventures LLP. Please go ahead, sir.
Hi, sir. Congratulations for walking the talk. Sir, my first question was if you could give us some, what you should say, background. You had basically given that by Q2 or Q3, you would be basically in talks with respect to an acquisition, which you said that you were working. And the second thing we wanted to know with respect to the exports percentage, as a percent, what are our prospects going ahead with respect to the export market and the defense? I hope my questions are clear, sir. Can I have more details?
Yes. Yes. Yeah. See, with respect to the acquisitions that we had in mind, especially out of India. So work is already progressing on that. And if everything goes well, maybe I think we have mentioned quarter two, quarter three. So maybe over the next one or two quarters, we might have some news for you. But in the interim, we've already announced our finalization of joint venture, principal finalization with Kato Works, wherein within this year, the investment and everything will be finished, and the joint venture will be formed, and we'll start to function in the next year.
What is the second part of your question?
The second part of the question was with respect to exports and, on the defense side, what are the prospects going ahead?
Yeah. See, on the export side, last year, we had reached about 8% with respect to every contribution. And hopefully, this year, again, it should be close to 8%, if not slightly more. Obviously, on an increased base, it will grow again 15%-20%, whereas the company is expected to grow at least 15%-20%. With respect to defense, last year, our contribution from defense came at 2.5% of revenue. And this year, we are hopeful that it might be in excess of 3.5% at least. It could be much more than that. It totally depends on a slightly bigger order we are expecting from defense in the next maybe within quarter two or quarter three. It totally depends on the timing of the order. If we get it in quarter three, then the execution will be more certainly much more than 3.5%.
We can put 4%-4.5%. But if we get it in quarter three, it will be limited to maybe 3.5%.
Sir, I wanted to understand. You said that the exports you are basically targeting between 15%-20%. In how many years can we expect this target to get achieved?
I think this 15%-20% target, we can look at in the next three to four years.
3 to 4 years. Sir, one last question before I wrap up. Sir, before two or three con calls, you had mentioned that if anything with respect to the budget or infrastructure activity from the government, if anything gets slowed down, how are we basically taking that into consideration for our next 3-year plan? Because if anything happens on that front, that can be a significant, what you should say, hit for us. And how are we basically taking that risk into account?
That is why about actually recent years, we had started diversifying a little into defense, a little into exports. And today, infrastructure contributes about 35% to our revenue. 10% is real estate. So that's about 45%-50% comes from infrastructure and real estate, in which real estate is 10%. So yes, if there is a slowdown on account of government spending with respect to infra, I'm sure there will be some effect on us. But then everybody's looking at the revival of private sector. So I'm sure just in case if any such thing happens, which I don't foresee because the government in the last 4-5 years has only tripled its budget on infra, I think from INR 300,000-INR 400,000 crore, now it is nearly INR 1,100,000 crore this year.
So I see no reason why the budget will be going down if the country, if the government wants the country to grow and to create assets. But just in case if anything like that happens, in any case, there is already revival in private capital, and going forward, it is expected to increase. So that will chip in because machines are required for all types of construction or development activity. And yes, if the government budget remains or keeps on increasing, there will have been 10%, 20% every year or even faster. And with private capital kicking in, I see that going forward, let's say, short term, 1-2 years, maybe some 2-3 years, it should ideally be a great run because then we will be firing on all the lenders.
Perfect, sir. Thank you so much, sir. Wishing you all the best. Bye.
Bye.
Just a reminder, ladies and gentlemen, if you wish to join the question- and- answer session, please press star and one on your touch-tone telephone. The next question is from the line of Krishna, Niveshaay. Please go ahead, sir.
Hello. I'm now on the line.
Yeah. Hi.
Yeah. So thanks for the opportunity. First of all, my first question is, like what is your view on the pick and carry market size? And on the same, I wanted to ask for pick and carry crane.
Your voice is a little garbled. I do not know. Maybe it was a speakerphone or something. If you can be a bit clearer.
Hello.
Hello.
Yes. He's got disconnected. I will be connecting the next line. It's from the line of Aman Soni from Nvest Analytics Advisory LLP. Please go ahead, sir.
Hello.
Hello. Yeah. Hi.
Am I audible?
Yeah. You're audible, yes.
Sir, what is the status of EV cranes?
EV cranes, I think last time, as you had mentioned, everything is ready. We have sold some units, but the government CMVR approvals are still awaited. We should be getting them anytime. That is the indication we have. Whether it happens this month or next month is anybody's guess. But we are ready, but there is a lot of interest. Very recently, we had a big team of L&T Construction visiting us at our plants. So they were also very keen on that. Even companies like Tata Projects and Reliance Industries, everybody is very keen. We're just waiting for the CMVR to go ahead. Hopefully, it should happen this month, next month.
What timeline will you give?
I mean, it's not in our hands. The gazette has to be approved regarding the registration guidelines for electric vehicles under the Central Motor Vehicles Rules. So we are expecting it to happen. The indication that we have, it should happen anytime. So whether it happens this month or next month, we really can't commit.
Understood, sir. And sir, you mentioned next 3-4 years, export target is to be 20% of the total revenue. I think last year we did 8.5%. So what is the target for this year?
This year, again, it's similar, 8.5%, obviously on an increased base. I think it will start to increase further in the next year. This year, I think it will remain at about 8.5% of the increased revenue base.
Got it, sir. That's it from my side, sir.
Hello. Thank you.
Thank you. The next question is from the line of Vinay Kumar Daggolu. He's an individual investor. Please go ahead, sir.
Good afternoon, sir. Can you elaborate a little bit on this electric crane thing? Is there a chance that the margin should be better for the company if it takes off and the business really takes off in that segment? That's number one. Number two is, can you also elaborate a bit on how your defense business is panning out? Thank you.
Which business is panning out? What did you say?
Defense. Defense.
I was saying EV crane margin and second was?
Defense. Defense.
Defense. Defense.
See, EV crane, I think with respect to revenue, it is going to be definitely better, 60%-70% more for crane because the cost of electric machines are better. And the customers are able to recover this cost with a lower cost of operation on account of use. So I think it will be a three-year payback period. And our margins would also be better as compared to our conventional diesel engine thing with respect to electric cranes. And we are very hopeful that they've seen a long wait last nearly one year. And then the elections came, and obviously that Aachar Sanhita was there and then a couple of times. So I think it should get through quickly because it just has to go through. The government has to gazette it. The ARAI has already proposed it to the government one year back, one and a half years back.
With respect to defense, we have been increasing our business. Our, let's say, medium to long-term target is 5%-10% revenue generation contribution from defense. This year, hopefully, from 2.5%, we should be able to be somewhere between 3.5%-4% in the current year.
Thank you. Can I ask a follow-up question, sir?
Yeah. Yeah. Why not?
Is there anything that has changed after the full budget last week for you as a company?
Nothing has changed. We would have loved things to have started moving faster. But I think it is raining very heavily in so many parts of the country that I'm sure 15th August onwards will start to look better with respect to our business in particular.
Okay. Thank you. Best of luck.
Yeah. Thank you.
Thank you. The next question is from the line of Kaushik Poddar from KB Capital Markets. Please go ahead, sir.
Thank you. Thanks for taking my question. My question is, Kato is in the similar line of business as you are. So what is the strategic significance of having a JV with Kato?
Can you just repeat your question? So the initial part of what you said, I think I missed out. Do you understand?
Yeah. The strategic significance of having a JV with Kato, though you are in the similar line of business.
Yeah. See, we are doing cranes, crawler cranes, and truck cranes, obviously technology evolved by us. And see, in the bigger cranes, there's a learning curve. And then the technology is upgrading. Machines are becoming more sophisticated. Kato is one of the prominent names all over the world. If you talk of strategic significance, joint venture with Kato to produce these high-end cranes and even increasing our range beyond 200 tons with respect to truck cranes and specific crawler cranes. We have bigger capacity cranes and proven technology, access to proven technology to make these cranes. Second is, these cranes for the Indian market, which is growing in tonnage as well as in numbers. And most importantly, these cranes, which are going to be evolved. So there are going to be export-specific models also, which will be sold globally through Kato Network.
Okay. Okay. Okay. You have given a guidance of tripling your turnover in five years. I mean, is that your?
I think we had discussed this in the last conference call. It seems doable. Doing a 3x in the next five years.
Next five years. Okay. Thank you. Thank you. Okay.
Thank you. The next question is from the line of Murali Marpina. She's an individual investor.
Yeah. Hello, sir. Congratulations on good set of results.
Thank you.
Yeah. I have two questions, actually. How is the momentum going on now, and what is the size of the order book as of now?
Momentum and order book, right?
Yes. Yes.
See, the momentum since April, May has been a little tepid. And unfortunately, it has rained too much in the month of July. There's definitely some improvement, but it seems we expect better. So hopefully, by 15th August, when the rains have subsided substantially, things will start to look up. And it has been the same for us in the last 29 years of operation. So whenever it rains heavily, things are generally slow. And it starts to turn sometime around 10th to 15th of August. So I think it's maximum 10-15 more days. And order booking with respect to the current business scenario is okay. So I mean, obviously, yes, I won't say that the momentum is great as of now, but like I said, it is starting to move around 10th to 15th of August. That's how it happens every year.
Yeah. Okay. My second question is regarding this Kato Works. How is this 50/50 JV or like importing cranes or how it was actually JV?
50/50 joint venture. The cranes will be manufactured in India. So it is going to be made in India for the Indian markets. And also, it will go to be exported outside using Kato network. And just to answer a little more on the first part of your question, see, in any case, about 55%-60% of our business happens in the second half of the year.
Yeah. Yeah. Okay.
That is around 40%, 45%. So it generally starts to pick up around middle of August.
Yeah. When can you expect this four-figure revenue mark during Q3 or Q4?
I think earlier, we were thinking of Q3. I'm still hopeful that we are in position to achieve it in Q3. I think it should be possible because we expect the emission norms are changing from BS-IV to BS-V for construction equipment. They are called CEV-IV to CEV-V. We expect pre-buying to happen in quarter three, starting from September. I hope we are able to do it in quarter three only.
Yeah. That's great. That's great. Thank you, sir. Thank you. Thank you very much. All the best.
Ladies and gentlemen, just a reminder, if you wish to ask a question, please press star and one on your touchtone telephone. The next question is from the line of Krishna from Niveshaay. Please go ahead, sir. Mr. Krishna?
Hello.
Yeah. Hi.
Yeah. Hi, sir. Am I audible now?
Yes. Yes. You're audible, sir.
Yeah. Okay. Yeah, sir. So my first question is a bit on the pick and carry industry size and what products of yours are considered in pick and carry. So there is a Lorry Loader, crawler crane, truck crane. So are these all under pick and carry? And if we see in India right now, about 15,000 cranes would be selling, 12,000-15,000. And in China, this number would be about 150,000-200,000. So do we see that kind of growth in India? And in India, if we see, the most cranes are about 15-tonnage of crane. But in our developed or our Chinese market, it's more about more than 30-ton crane. So what's your view on this industry and similarly on the tower crane side?
Last year, first of all, the categorization, I think. The pick and carry crane is a crane which is on tires and is able to move with the load. It can pick and carry the load. So Lorry Loader cranes or Truck Cranes or Crawler Cranes do not fall in the pick and carry category. Pick and carry is very specific machine on tires which can move on the load, which is our biggest segment also. So within crane, again, I would say 90% of our cranes that we do are pick and carry, approximately 90%. So that's the category answer. Last year, the market size was a little over 14,000 with respect to pick and carry crane. And then we catered to that. Chinese market, you're right. But I think with respect to cranes, it should be the domestic market, yeah, a little over 100,000 crane.
Going forward, India is developing. India is developing fast. We have a good 5-7 years ahead of us. Maybe as the vision given by the government of 2047 being a developed country. Yes, the numbers can increase. The numbers can increase very fast because cranes are a very basic necessity for lifting, shifting, lifting, moving, loading, unloading, doing any activity when development is happening or even to make a factory run, you need lifting, shifting, loading, unloading. Definitely, crane numbers in our country are bound to increase first.
Does China sell about 100,000-150,000 cranes per year? If you could just give me clarity on that, if you have that information.
So obviously, the Indian market is going to increase. And that's what I said. It's going to be faster, hopefully, than what it is with growth coming. And see, again, something simple. $3 trillion, $3.5 trillion or $4 trillion economy, we are going to be adding this size every 4, 5, 6 years. So you will need more lifting, shifting, loading, unloading.
Yeah. Makes sense.
Of everything. So the crane market has to grow if the economy is bound to grow. There is no doubt in that aspect. Going to the tonnage, yes, in India, 15 tons is most popular. And I think in China, it's a 30-35 tons category. So we shipped in the, I think, last year, we evolved a 35-ton crane. We can carry. And also, a 45-ton crane is under planning with respect to pick and carry. And apart from that, we are doing truck cranes up to 60 tons. And this is where we are further with our new joint venture, forthcoming joint venture with Kato, where we will also be producing even bigger cranes, truck cranes and crawler cranes. So obviously, the market has been shifting. We have already seen that in the last one and a half years.
Already, there is a traction moving from 15 tons going to 20-25 tons cranes. That is happening. So the total sale of 20-25 tons has gradually started increasing. So going forward, it will go to 30-35 tons as the products become bigger, the loads become heavier. But that's the trend. That's how it happens. If you talk of the Indian market, when we started making cranes, the most popular was the 8-ton category. Then by 2000, it was a 10-ton category. By 2005, it was a 12-ton category. By 2010-2015, it was a 15-ton category, maximum selling. And now, there's a shift towards a bigger size. So hopefully, within 2-3 years, over 20-25 tons might become the most popular category.
Okay. So how would the realization improve as per tonnage?
Yes. It will improve because the prices of cranes will increase by INR 1-1.5 lakhs per tonne.
Okay.
Let's say an average INR 1-1.5 lakhs per ton. So less than 20 tons, it is approximately INR 1 lakh per ton. And 20 tons or bigger, it is approximately INR 1.5 lakhs per ton. So the price realization on the higher tonnage is definitely better because the metallurgy and the components and the engines and the hydraulics, they become much heavier. And the costs are higher. So let's say a 15-ton crane, pick and carry hydra type, would cost about INR 15-16 lakhs. So that's about INR 1 lakh per ton. But a similar type of crane in a 20-ton is costing about INR 28-30 lakhs.
Sir, so like there are two types of crane now, the Hydra or the Farana that we talk about. And then there are some new safety cranes, new generation cranes, which have similar tonnage.
Hydra is a nickname for new generation crane.
Hydra. Okay. So there is how much price difference? Because I think Farana has more safety features. So that's why corporates are preferring that. So how much is the price difference? And if you could have some view on the rental difference as well.
The price difference approximately between an old generation and a new generation, or let's say a Hydra to a new generation crane, is for a similar tonnage, approximately 50%-60% more.
50%-60%. Okay.
The market in the last 8-10 years has been shifting. Earlier, the share of new generation crane was only 10%-35%. Now, today, it is close to about 35%. So in the last 7-8 years, the market for new generation crane within the pick and carry segment has become 35%, which is also slightly higher price, like I said, 50%-60% more expensive than similar tonnage because of the generally, they are 4x4 drives. So they are more efficient. And also, with respect to safety, the operator cab is in the front. So let's say the operator is definitely better for safety because visibility is better. And then they are equipped with sophisticated electronic overload systems, these things. As the market is also moving towards the new generation crane, the price realization there again will increase.
Within this segment, they are also moving towards, like I said, 20-ton plus categories. So there again, a price increase possibility is there. So going forward, I can tell you that in value terms, there will be more growth, price terms, rather than volume. Volume will grow, will grow fast also for some years.
Yeah. Yeah.
The value growth will be more.
Okay. Sir, on the rental, if you have some rental versus Hydra versus new crane.
Again, similar. See, when the price of the machine increases by about 50%-60%, that's how the rentals also. So rentals of new generation cranes are higher by about 50%-60%.
Okay. So that is similar. So the rentals would be higher for that as well.
That is similar.
Okay. Thank you. Thank you so much. And if you could speak something on the power crane market, that would be great. And that's.
Yeah. The tower crane market is again booming. Most popular is 5- to 6-ton crane because that is used standard. But within the last three years, five years, a lot of prefabricated construction and especially steel structure construction has started happening to shorten the delivery time of the project. So there are these 10-ton and 16-ton tower cranes have become very popular. So our numbers in tower cranes have been steadily increasing. And this year, again, I think if everything goes well, we should do a 20%-30% increase in our tower cranes, if not more, particularly tower crane numbers. Last year, we produced 500 something. And this year, we are very hopeful to be somewhere around 700-800 fast. The year before that was 300 something. The tower crane market is going fast.
In tower cranes, I would say primarily 90% of the cranes are used in the real estate segment or civil construction. That's about 90%. 10% are also used for other types of construction or different types of civil structures. And even, for example, any type of civil structure, I would say like a metro station or a bullet train station or anything else. But 90% is hardcore real estate. And I think real estate is also flying in our country as of now.
Yes. Okay. Sir, that would be all from my side. Thank you so much for answering.
And Krishna, beyond this side, I would like to just add a little bit to the new generation and the traditional Hydra that you had asked. Now, see, the market is also shifting towards new generation cranes. And we are pioneers in that crane. And we have also launched our NX series, which is our multi-activity cranes, which would mean that the owner can do two operations with one crane. So as ACE, we are changing the way craning is being done in India. And we hold patent to these technologies, which cannot be done by any other competition. So we have a clean runway and a great lead over all our competition outside. And tower crane, as Mr. Saurabh has already explained, it's a booming industry in India. And it's a very complicated equipment to engineer because of the aerodynamics involved in the operations of the machine.
We are pioneers in this as well. So I think.
Adding to your NX point, I'll miss that. See, the picture has gone ahead of old type of cranes or new generation cranes. And in the last 3-4 years, we have introduced even a crane series called NX, which is even further more advanced as compared to new generation. They're multi-activity cranes. So they do pick and carry as well as, let's say, a man basket, man lift operation, a pick and carry, or let's say a truck crane type through operations. So they're multi-activity cranes. So we're changing the way Indian cranes actually with those things.
If I could just have a last question, if you allow.
All these NX cranes and even the EV cranes, so obviously, we have exclusive patents. Nobody can think of trying to copy our designs.
Yeah. So can I just have a last question if possible?
Yeah. Yeah.
Hello?
Yeah, please.
Yeah. So mainly, my question is, how do you see the construction equipment business? So let's say backhoe loaders are sold in about 60,000 in India, but cranes are only about 16,000. So can that pick up to backhoe loaders? And why backhoe loader volumes have grown so fast rather than cranes? If you have some clarity on that.
Backhoe loader market is not 60,000. I would differ there. I think backhoe loader market in India is about 40,000-50,000. And definitely, crane numbers will increase further, like I said, with the economy growing. And if India is to add INR 3-5 trillion every 5-6 years to its economy, so you can very well imagine the number of cranes or Hydra they're going to increase. And further on, there is a 10-12-year life attached to either a construction equipment or even a crane. With the numbers increasing down the line, the replenishment market will also keep on increasing.
Okay. Okay. Thank you. Thank you so much for answering all the questions.
Yeah. Thank you.
Thank you. The next question is from the line of Ashwin Albert D'Souza, an individual investor. Please go ahead, sir.
Hello, sir. Are you able to hear me?
Yes. We are able to hear you.
Yeah. Sir, I don't know if I'm repeating this question, but this was related to the new land that was acquired in the beginning of the year. My questions on that is, what's the current status? And do we have any near-term or medium-term, long-term plans as to when we will be operationalizing the land and production will be commenced? Okay. That was the only question, sir. Thank you.
Yes. See, in quarter four last year, that was, we made agreements to acquire this land, 2 pieces of land amounting to about 82 acres approximately. And hopefully, within quarter two, these lands will come into our possession and will be capitalized in our books. Most probably in quarter two, there's a very rare chance that it might go to quarter three. And out of this, the smaller chunk, around 22 acres, we intend to start development there as early as maybe quarter four within this year to increase our capacity for a certain type of cranes further.
Okay, sir. Yeah. Thank you very much.
Okay.
Thank you. The next question is from the line of CA Garvit Goyal from Nvest Analytics Advisory LLP. Please go ahead, sir.
Hi. Thanks for the follow-up. Just one question. How is this quarter going on, sir, in terms of any slowdown due to monsoon? So do you see any major impact as compared to same period last year?
Definitely, we should be doing better than same period last year. Now, how much better that time only will tell. Things are looking okay. Definitely, the month of July has gone by, and it was definitely pretty okay and healthy as compared to last year. So things are on track.
Do we see any update Q1 Q-on-Q?
Do we see any?
Outperforming Q1Q because this quarter also was affected due to elections, right? So that's why I was asking.
Yes. See, as of now, if you ask me current scenario, let's say sitting on 1st of August, I think it should be somewhat similar with respect to growth. But like I said, 15th August onwards, things start to change. And there is a prebuy also, which will kick in in September, October. This year, Diwali is also earlier. It is in October. So it can definitely be faster. But I think for the whole year, and at the end of September is the best time to judge the whole year.
Understood. Thank you very much, sir. Thank you very much. All the best for the future.
Yeah. Thank you.
Thank you. The next question is from the line of Kamlesh Jain, Lotus Asset Managers. Please go ahead, sir.
Yeah. Thanks for the opportunity. So just one question on the part of, let's say, our proposed JV with Kato. So on that regard, what addressable market you are looking at? Currently, we are operating in. We are pioneers or the leaders in the crane part. But what additional markets we are looking at, or how much incremental revenues we can be targeting over the next couple of years, or three, four years?
See, we are leaders in pick and carry cranes, tower cranes in the country. But unfortunately, we are not leaders in truck cranes or tower cranes in the country, primarily because in the last five, seven, eight years, this market has been dominated by the Chinese players because of very sharp costing and bringing in the latest technologies. So basically, what we'll be looking to target here is three types of cranes: truck cranes, crawler cranes, and rough terrain cranes. In the tonnages of around, I would say, about 50 tons, going up to 200 tons, which has also become a growing market in India now. So that is an addressable market here with respect to the tonnages. With respect to revenue, the JV should become functional sometime next year.
I think achieving INR 300 crore-INR 400 crore turnover over a period of 2-3 years from inception should be possible easily. That is, the market is available. With exports also kicking in because the JV is also going to make cranes which are going to be exported. The eventual potential should be upwards of at least about INR 1,000 crores over the next 4-5 years, I think.
Yes. And lastly, sir, on the, so there is a lot of buzz about this automation in the warehousing. So a lot of, let's say, self-operated cranes or those equipment are getting a lot of traction in the warehousing. So are we looking to expand our footprint there as well?
The automations in the warehouse, we are talking more of AGVs, which are automatic guided vehicles, and racking systems, which are automatic loading and loading. So we are definitely not in that line of business. But we are into warehousing, so you never know what happens one or two years down the line.
Great. Thank you, sir.
Thank you. The next question is from the line of Rajiv Maheshwari from Raj Investments. Also, just a reminder, ladies and gentlemen, please restrict your questions to one question only. Thank you. Please go ahead, Mr. Rajiv.
Hi. Good afternoon. Thanks for taking my call.
Yeah. My question is more from the shareholders' perspective. We had a stock split, I think, sometime 15 or 16 years back. So with the prices rising over the last couple of years, do we have any plans or have you discussed anything in terms of the stock split going ahead? Yeah. Our stock is already at INR 1. So.
No, the stock is at INR 2.
Oh, sorry. INR 2. I'm so sorry. I'm sure patient shareholders will be rewarded over time. Our board keeps on discussing that time and again because there is nothing concrete that has been formulated or approved by the board, so I really can't talk about it. Yes, going forward, we can expect it.
If the discussion has been going on, so when would it come? It's again a question of once the decision takes place. But if it's done, it's beneficial for the long-term shareholders also, and it gives more liquidity to the counter itself because it's already closed INR 1,200-INR 1,300. But anyway, since it's in discussion, so I just wanted to know that. Second part is we had some promoters selling sometime back. So was it more in the account to ensure some marquee investors or FIIs getting into it, or it was just into a usual course? Or how was it like? What was the reason?
See, it was more to do with marquee investors coming in because liquidity was left on the counter, like you mentioned. First of all, your idea about stock split is well taken, and let's take it to go. Yes, it was marquee investors who entered into the company, and the promoters sold close to a little over 1%. I think it was one or two months back.
Going ahead, do you have any such arrangement to get some more investors in, or it's done for the moment as of now?
I think it is done for the moment because as promoters, we are holding more than 65% stake in the company, and there is no intention of any reduction in the stakeholding of the company at the current level, even in the short-term or average to medium term.
Okay. Because that gives a lot of confidence to the investors. Yeah, that's all from my side. Thank you.
Yeah. Thank you.
Thank you. The next question is from the line of Krishna from Niveshaay.
Hello?
Yeah. Hello.
Yeah. Thank you for again letting me ask the question. So my question was how much higher tonnage cranes you are right now producing, and how do you see the higher tonnage market in India? And just a brief on that.
You're talking about the truck cranes, crawler cranes, or pick and carry cranes?
On the pick and carry and the truck and [crawler cranes] .
See, we are producing, I think, about 8%-10% of our production should be higher tonnage, 20 tons and above. I don't have the exact number as of now.
Okay.
But obviously, the biggest cranes, 60 ton, 100 ton, the total market size has gone to 7,800 cranes. I'm talking of the truck cranes and crawler cranes in the country. And there we are, like I said, we do about 40-50 cranes annually. We want to take to 300-400 cranes annually. And pick and carry cranes, like I said, market will move to higher tonnages. It is already moving. And new generation is already about 35%-40% of the market.
So right now, what's the highest tonnage of crane that you are making?
Currently, we're doing a 35. You're talking about pick and carry or?
In all segments.
In pick and carry, we are doing a 35-ton, which is the biggest crane. In tower cranes, we are about to launch a 20-ton, 25-ton crane. Currently, it is a 16-ton crane. In lorry loaders, we are doing a 50-ton-meter crane. In truck cranes, we are doing up to 60 tons. We want to take it to 110 tons. In roller cranes, we're doing up to 80 tons. We had introduced a 180-ton, but obviously, we'll come out with a new 100-ton, 150-ton, and a 250-ton. And truck cranes, like I said, is about 110 tons. So these are the tonnages we are looking at.
Okay. How do you see this market growing? Because a lot of Chinese cranes are coming in right now.
Yes. The market has grown pretty well in the last 5-7 years. And see, what was happening in India 7-8 years back, these bigger cranes were mainly used cranes being imported into the country. And the Chinese have converted this into a market of new cranes by offering very special prices. So the market has actually grown in the last 7-8 years. And Indian manufacturers were left waiting, especially TIL and all. And I think we have taken the charge on ourselves to start selling about 3,400 cranes over the next 3-4 years in this market, the bigger crane market, the truck crane, crawler crane, the heavy crane levels.
Okay. Yeah. I kept from my side. Thank you.
Yeah.
Thank you. The last question is from the line of Rashmika from Sai Enterprises. Please go ahead.
I have a couple of questions. My first question is, the joint venture with Kato in Japan, what is the joint venture for? The joint venture with the manufactured crane, what kind of crane could be manufactured by the joint venture? I thought we manufactured the entire range of crane from small crane to large crane. So why do we need the joint venture? What is going to be our percentage holding in it? Is it focused on exports or on the domestic market? And what is the projected revenue of the joint venture in 2027?
The joint venture is a 50%, 50/50 joint venture between both our companies. I actually answered most of your questions during the call, and I'll answer them again. It's a 50/50 joint venture. The joint venture will be producing bigger capacity cranes in truck cranes and crawler cranes and rough terrain segments, which we are not producing currently. So that means 150-ton crane and 200-ton cranes, which we are now doing 110-ton cranes and 80-ton cranes in truck crane categories. The joint venture is for both domestic as well as international markets. So with the joint venture, we intend to make cranes for the domestic industry as well as for exports through Kato, which I had earlier confirmed, conveyed in one of my answers. The revenue expectation is close to INR 300-400 crores. The joint venture will start to function next year, by 2026.
By 2028, we expect INR 300-400 crore, and maybe in five, six years, maybe crossing even INR 1,000 crore.
Yeah. My second question is, a couple of conference calls back, you said that there will be an announcement about the large crane business, which will be a game changer for both India and ACE. The announcement was due in one month, but it has still not been made. Is the announcement still on the anvil, and when is it likely to be made?
So this is about the Kato crane only, that we'll start producing bigger cranes of better technology in bigger numbers for India and outside India market. It is the same announcement you heard.
The joint venture will be focusing on what type of crane? What type of cranes will be manufactured by the joint venture?
It will focus on truck cranes, crawler cranes, and rough terrain cranes. And maybe down the line, even all terrain cranes. But that has not been planned so far. But yes, definitely 3-4 years down the line, even all terrain cranes.
Okay. That's all from me. Thank you very much. And congratulations.
As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Yeah. Thank you. Like I mentioned in the beginning, we were able to do pretty well, even beyond our expectations, looking at the Q4 quarter, especially due to elections. Going forward in the current year, we are hopeful of at least a 15%-20% growth, if not more. We should definitely be in a position to further advise with respect to or revise our projections by end of quarter two or early quarter three. We are hopeful that we have positive news for you. We look forward to growing in this year with a 15%-17% return margin, which looks easily sustainable. We are expecting good sales in quarter three on account of rebuy because of transition to BS5 norms. The short-term, medium-term, long-term fundamentals and potential of the company seem to be on track with respect to our growth agenda.
With this, I would just like to end the call. Thank you. Thank you, everybody.
Thanks. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.