Ladies and gentlemen, good day and welcome to the Aeroflex Industries Limited Q4 and FY 2025 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing the star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Asad Daud, Managing Director, Aeroflex Industries Limited. Thank you, and over to you, sir.
Thank you so much. Good morning to everyone. I welcome you all to the quarter four and financially ending 31st March 2025 earnings call of Aeroflex Industries Limited. Joining me today are members of our senior management team and the representatives from Strategic Growth Advisors, SGA, our investor relation partners. I trust you have had the opportunity to review our financial results and the investor presentation, which are available both on the stock exchanges website and also on our company website. Despite the global economic headwinds, including the tariff challenges and the macroeconomic uncertainties, I am pleased to report that Aeroflex Industries has delivered a strong performance in FY 2025 and has continued to generate immense value for its shareholders. Throughout the year, we have remained focused on strategic initiatives aimed at strengthening our core business and enhancing our growth trajectory.
We have considerably expanded our production capacity and have also made meaningful progress in transitioning towards value-added and high-margin products. This strategic decision is also reflected in our improved EBITDA margins and also in our profitability. We have also deepened our engagement across both the domestic and the international customer segment, aligning closely with the market realities to capture the growth opportunities across both high-potential as well as stable demand segments. Now, I will just give you a brief about the key milestones achieved during the quarter, which is Q4, and also for the year. The capacity expansion that we had planned for the last financial year, which is FY 2025, was completed seamlessly and fully integrated with our existing operation and executed ahead of the schedule and also below the originally budgeted CapEx.
Our high value-added assembly segment now contributes more than 50% of the total sales, which exceeds our internal full-year target well in advance. We delivered strong financial outcomes with both our EBITDA and our net profit growing by over 25% year-on-year. This is due to our increased focus on operational efficiency and also on the value-added product mix. The growth is driven by a transition from a single-location manufacturing base last year to a multi-location manufacturing facilities spread across three manufacturing units in Navi Mumbai and Pune. I am happy to share that we are collaborating with a multi-billion dollar global company, which is headquartered in the U.S.A., for providing flow solutions for liquid-based cooling for AI data centers. This project will be implemented at our bellows plant, and this marks a significant step in our growth journey to manufacture new age products.
We have also started to see the initial business coming in from the bellows segment. The miniature metal bellows expansion is progressing as planned. After the acquisition of Hyd-Air Engineering, FY 2025 was the year of transformation for Hyd-Air. We have installed the latest technology CNC machines, set up a world-class quality control lab, and have also upgraded our infrastructure to meet the needs of our customers. We expect robust growth in Hyd-Air in the upcoming years. From an end-user perspective, we are witnessing healthy and sustained demand across the key sectors, which includes energy, oil and gas, chemicals, metals, railways, and other new age sectors. Encouragingly, despite the global discourse regarding the tariffs and shifting trade dynamics, our operations and order pipeline have largely been unaffected.
In fact, we believe that the evolving global trade environment may prove beneficial to the Indian manufacturers over the medium to long term, despite some short-term uncertainties. Thereby, it will help to position us well to capture the additional market share in the global markets over the long term. Now talking about our Q4, sorry, Q4 and FY 2025 performance, which reflects strong operational stability and higher margins. Our total income stood at approximately INR 92 crores for the fourth quarter, reflecting a 16% growth on a year-on-year basis. Our EBITDA stood at around INR 19 crores with an EBITDA margin of 20.71%. Profit after tax stood at around INR 11 crores, which is a growth of 12% on a year-on-year basis, and the PAT margins was about 12.23%. Our total income stood at INR 379 crores, an 18% growth on a year-on-year basis.
Our EBITDA for the entire year stood at INR 82 crores, which is a growth of 24% on a year-on-year basis, and an EBITDA margin of 21.5%. Our profit after tax stood at INR 52 crores, which is a 26% increase on a year-on-year basis, and our PAT margins are at almost 14%. I am also happy to share that the board of directors have recommended a final dividend of 15%, that is INR 0.50 per equity share. Our capacity utilization for FY 2025 stood at around 75%. Our return on capital employed was about 24%, and the return on equity is about 16.5%. We continue to remain a debt-free company and we remain focused on effectively utilizing our working capital. Now, as we look ahead to the current financial year, which is FY 2026, we remain confident that our long-term strategy is bound to succeed over the next few years.
Our strategic focus continues to be on high margin and value-added products, particularly in the assemblies and now the metal bellows division, which we expect to be the key growth drivers for the company for the next few years. We are also entering into new applications and exploring strategic partnerships globally, aligning with the evolving needs of the industry. Our teams are also diligently working to strengthen Aeroflex's presence both in the domestic and also in the international market. Our capacity expansion efforts are progressing as per plan and it is in line with our business plan. We have a compelling long-term growth story with our EBITDA and profit margin enhancement remains to be the core focus of the company. We are also actively exploring both organic and inorganic opportunities that come by, both in the India market as well as in the international market.
For FY 2026, our focus remains on delivering profitable growth for the company led by operational efficiencies and also a greater mix of higher value-added products, and also benefits from the highest capacities. We expect this combination to translate into higher EBITDA and profitability for the company and long-term value creation for our stakeholders. In terms of digitalization, I would also like to share that last month I did a course from Harvard Business School on how to implement digitalization and usage of AI tools in manufacturing businesses. Our aim in the future is to become a digitally dexterous organization. With this, I would like to conclude my speech and open the floor for Q&A. Thank you so much, everyone.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset 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 Raman KV from Sequent Investments. Please go ahead.
Hello, sir. Can you hear me?
Yes, I can hear you.
Sir, congratulations on such a good result. I have few questions. First is pertaining to the INR 400 crores of fundraise which you approved. Can you elaborate on what are the plans with respect to the fundraise?
Yes. We have obtained the approval from the shareholders in the last two quarter. The QIP documentation is still under process, and we expect that to come up with the same in the next few quarters. Obviously, we will not be able to give a specific timeline for the same, but we are working on it and we will inform to all our shareholders and investors as soon as the process is completed.
This is for the inorganic acquisition of some company. Because from what I understand is
Yes.
CapEx is internal approval.
Yes. Most of the proceeds of the QIP will be used for inorganic acquisitions and a small part of it would be used for working capital.
Okay, sir. Second part is, as of now with respect to the flexible hoses, the capacity is 16.5, and you said 75% is the utilization. My understanding is it will be soon, by FY 2026 end this will be 90% utilization, and then the additional 3.5 million meters of the capacity will come. By the end of 2027, the entire 20 million meters of capacity will be utilized. Right?
Yes. The 16 million capacity was commissioned at the end of Q3.
Obviously, that has not yet been utilized uniformly. You are right that our plan is to utilize the 16 million capacity in this financial year. Also with that, we are expanding from 16.5 million to about 20 million.
And my final question is with respect to the metal bellows and miniature metal bellows. We commenced 1.2 lakh pieces per annum in end of Q3. Can you give us the revenue from metal bellows in Q4?
Yeah. The metal bellows project started in Q4, in the sense the production started in Q4. The total capacity in phase one is 1.2 lakh pieces per annum, which is about 10,000 pieces a month. So far, obviously, the revenue that has come in is close to about INR 1.5 crores in the last financial year. We have started to receive a lot of inquiries from. We have started to generate sales from the domestic market already. We have also started to receive bulk inquiries from the domestic market. We are also seeing in terms of our international customers, the product is under testing at a lot of our customers' end. Also, as I mentioned earlier, this product requires a lot of certification. Our products are already under certifications. Some of the certifications we have received, some of the other certifications are still pending.
As compared to a whole, the sales cycle for a metal bellows is slightly longer. Hence we have started to see the traction coming in, and I think over the next few quarters, specifically, I would say Q2 and then the H2, I think you'll see the numbers of the metal bellows project, the numbers on the sales of metal bellows jump up.
I just wanted to know what will be the incremental revenue from the metal bellows and miniature metal bellows once it's fully integrated into the company.
At full capacity, the metal bellows project would be having a top line of about INR 85 crores-INR 90 crores at peak utilization. And the miniature metal bellows would have a top line of about INR 25 crores-INR 30 crores at peak utilization. That's the revenue potential.
Can we expect this in 2027 or the full utilization? Because I think by the end of 2026, all the lines will be completed.
Yeah. I think for the metal bellows, we can expect that by 2027 we will reach an optimum utilization. And I think miniature metal bellows are projects that would be commissioned by March of 2026. So the optimum utilization for that particular project would may happen in FY 2028 because FY 2027 would be the first year of operations of that particular project.
Okay, sir. Sir, one final question. What is the guidance for FY 2026 in terms of growth and EBITDA?
Yeah. We expect over the past, also in the last financial year, FY 2025, we had given guidance of growth in terms of profitability would be more than 25%, and we have already achieved that in terms of growth. For the financial year FY 2026 also, our focus remains on increasing the profitability, and we expect that the growth in our profitability, in terms of EBITDA, would be close to 25%, with at least a 100 basis point increase in the margin.
Revenue, sir? Revenue, will it grow by 25% or will it grow more?
As I said, our focus remains on increasing the bottom line. Obviously, increasing the bottom line would also be as a result of increasing the top line. Our top line depends on a lot of factors, which includes some geopolitical situation which is happening, plus these tariffs also. We will not be able to give a specific guidance on the top line, but our aim is on the bottom line. We expect at least 20%-25% minimum growth for the current financial year.
Okay. Thank you, sir.
Thank you. The next question is from the line of Aman Agrawal from Carnelian Capital. Please go ahead.
Sir, thank you for the opportunity, and congrats on a good set of numbers. My first question was on the U.S. tariff respite, the tariff which U.S. has implemented. What has been our discussions with customers, and what kind of potential impact we see from this tariff? If you can clarify a bit on that.
Yeah. Thank you, Aman. In terms of tariffs, obviously as we all are aware, there is a 90-day pause on the tariffs. But the tariffs on our products earlier was around 3.5%, which is now increased to 10%, not accounting for the additional tariffs on which there is a pause. Tariffs have increased in the U.S. In terms of some of the customers, some of the customers are taking it slow, some of the customers are just taking it as they go along. We have not seen a major shift in the orders. I am talking about specifically from the U.S. market. But I think in the long term, I think the government of India is also working on some policies and some trade agreements with the U.S. I feel, as I also mentioned in my speech, there might be short-term pain.
But I think over the course of the entire year, I think we'll see a much better opportunity for Indian manufacturers who are exporting to the U.S. because I think the demand for Indian products is going to increase. So there might be some short-term pain, but I think in the medium to long term, I think definitely there'll be much, much bigger business opportunities that we have.
Right. Thanks for that answer, sir. But if I see your America numbers for FY 2025, right? So there's a decline in the overall numbers for sales to America, like compared to almost INR 153 crore kind of sales last year. We have done INR 156 crore this year. So, are customers delaying orders? Are they waiting and are we seeing a longer lead time in conversion of orders? Is there something like that?
So one thing what happened last year, our order book is quite strong from America. The one thing that happened is because of the longer delays or the delays in the shipping, that's why the transit time has increased in terms of the flow from India because instead of the Suez Canal, the lines are using. So, all our shipments which are crossing the Atlantic, all of them are delayed and hence Also, I think, in the month of February and March, when this entire tariff situation was happening, right? So some of the customers requested to delay the shipments and hence, so that was the reason you could see. But all those shipments have already gone, in the month of April, and some are planned to go in the month of May also. So we don't see much of this getting affected.
And like I said, there might be a pain for a month or two. But I think overall, from the way we have spoken to our customers, and we have also started to get bigger inquiries of certain sizes of products which we were not getting earlier. So we expect that the demand from the U.S. is actually going to increase over the next couple of quarters.
Okay. Thank you, sir. That was very elaborate and helpful. Just one more clarification on exports versus domestic sales. Like for this year
Yeah
If I see that export sales have grown very minuscule, right? While in case of domestic, we have seen a massive growth during this year. How do you see, and because this for FY 2026, will domestic continue to lead growth for us or will exports revive, given the macros which are currently, how do you see exports basically panning out for FY 2026?
Yeah. So definitely our domestic sales has increased at a much, much faster pace as compared to our export sales. That doesn't mean that our export sales have not increased, but obviously our domestic sales has increased at a much bigger pace. We have got a lot of orders from projects or orders in the domestic market. We have also tapped into new segments in the domestic market where we are supplying our products at the ports and also for certain irrigation applications. There our products are being used. We are also seeing a higher demand in the domestic segment from the traditional industries, which includes the oil and gas, petrochemical, and steel. So definitely our domestic market has picked up much, much better in the last financial year or has shown a lot better growth in the last financial year as compared to the export market.
Great.
Also, just to add, there's one thing which also helps us in the domestic market is, although in terms of margins, I would say yes, export is slightly better. But what helps in the domestic market is our inventory cycle shortens, our credit period shortens. So overall working capital of the company becomes better when we're supplying in the domestic market. I would just want to add that.
Got it. Correct. In terms of export, what kind of growth you might be expecting for next year, given the order book we have? Can we do double-digit kind of growth in exports or like high double digits? Any indication on that right now for FY 2026?
Yeah. So definitely, the internal targets that we have towards our team is an extreme high growth. We can expect that. We are also expecting to see how Europe reacts to it and the demand from the European market, because that is also an important market for us. Apart from the U.S., European market is the one which is our second-biggest market. We are also expecting that once this situation stabilizes in Europe, I think we can see sales in Europe also to increase over the next few years. Southeast Asia is one market where we probably have not done so well, obviously because of increased competition from the local players and from China and other neighboring countries. But that is one market which has not performed as per our expectation.
Like I said, the Middle East is a market where we have to do a lot of effort still to capture, and that is a market that we want to look at more aggressively in the current financial year.
Understood, sir. Thanks for that answer. A question on the base business. Assemblies, we are seeing material increase, in terms of mix, and that is in line with our past guidance also. Now from around 50%, 55% kind of mix during last quarter, and almost like if I see assemblies plus hoses, we started reporting it combinedly. So from 52% kind of number this year, how do we see this panning out for next year and years beyond? I understand our target is 75% and beyond, but how do we see that panning out for next year and beyond, sir?
Yeah. So just wanted to clarify. The numbers for the flexible hoses is obviously separate and the number for assemblies is separate. Overall, if you see it for the entire year, we have more than 50% of our sales coming in from assemblies. I think about 52%- 53%, to be exact, coming in from the assembly business. The assembly business obviously includes the assembly products and fittings. We expect that over the next, as I mentioned last year also, that our target is over the next three to four years, approximately 70% [inaudible] of our business should come from the assemblies. I think we are well on our target to achieve that, because our focus in this financial year will also be to increase our sales of the assembly products, wherein we definitely have better margins.
Although it leads to slightly higher inventory cycle, but definitely there are better margins in the assembly, in the business and a higher customer retention also. I would say over the next probably two years or three years, we aim that we need to reach at about 70% of the business coming in from the assemblies.
Right. So from here on, the increase in mix will be-
I am sorry to interrupt. Mr. Aman, can you please come back in the queue for further questions? Thank you. The next question is on the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi, sir. Thank you so much for the opportunity. Sir, we had a fairly good year last year. What kind of volume growth we are looking for this year?
Yeah. As I mentioned in my previous calls as well, our business is such that we don't work in terms of volumes. Because especially when we are selling the assemblies, right? It is more than 50% of our business. Assemblies is sold in terms of number of pieces. We can have an assembly of 1 m , we can have an assembly of 5 m length, we can have an assembly of 10 m length. Hence, volume does not give a true picture of our results and of our capabilities. Hence, we work on basically numbers. Sorry, in terms of value, I meant. If you've seen that over the last one year, we have grown at about 18% in terms of top line and about 25% in terms of bottom line.
Can we expect similar growth for this year and next year?
Yes, definitely.
Okay.
Definitely.
Sure. Sir, one question. We have been hearing a lot about the U.S. in terms of there being a manufacturing inside the U.S.
Yeah.
That will be beneficial for us in long-term?
Well, for our products, I would also like to add that in case of our products, there are already manufacturers in the U.S. So there are manufacturers who are quite big in the U.S. Because our product is a very critical product. It goes into critical applications and critical industries. Hence, a lot of the competition that we face in the U.S. is actually from U.S. made products. Because in our business, sometimes the pricing is not the most important factor. There are a lot of other factors which are more important than pricing. Hence, we already face competition from the manufacturers in the U.S. Now, in terms of our plan, yes, we have plans to expand in the U.S. through a more local presence. We are already in talks.
We are already identifying actually a couple of companies who we can possibly collaborate with for having a presence in the U.S. That's something which is still at an early stage. But that is something that is our plan, and we want to have our local presence in the U.S. at least in the next few years for sure.
I think we were planning some kind of acquisition in the U.S., sir.
Yeah, we are planning. Nothing is finalized as yet, so will not be able to comment on that.
But manufacturing will be done in India, right?
A part of the manufacturing will be done in India. The last mile assembly might be done in the U.S., but that is something for me right now is at a very early stage to say because it depends a lot on the kind of acquisition that we do, what kind of capabilities the potential company has. It depends a lot. It will be difficult to say anything right now at this stage.
Okay. Sir, last question from my end. I missed if you had something about the tariff. Will that have any influence on our business in near term?
Like I mentioned that there might be short-term pain with regards to maybe a month or so, but I think long term, I think we expect that the demand for Indian manufacturers and the demand for India-made products will actually increase in the U.S. Not only for our products, I am talking about generally. Obviously, there is a pause on the tariffs, which is good. But if you see, the tariffs have already increased on our particular products from about 3.5% or 4% to about 10%, which is almost close to 2.5 times. But we have not seen major changes in the demand in terms of a huge decline or a huge pause. We have not seen anything like that. And like I said, because of the uncertainties, a lot of our customers are also uncertain, but it will just delay their procurement.
I do not think it will change their procurement plan. So we do not expect much of a, I would say, threat or something from the tariffs.
Sure, sir. Thank you so much, sir.
Yeah.
Thank you. The next question is from the line of Prem Luniya from Astute Investment Management. Please go ahead.
Hello. Congratulations, sir, on the great set of numbers. I just wanted to understand about the competition which we are facing overall in India and also in other markets. Some of our competitors have also set up new plants in India. How do you see it panning out now?
Competition will remain and competition will be there, whether in India, whether globally, because the market is increasing and the demand for flexible flow solutions is increasing, right? Our aim is obviously to be ahead of the competition. We are the number one player in India, and we would want to continue to remain number one for the foreseeable future. Also, our plan is not only for India, but we ultimately aim to become the number one player in our business worldwide. Like I said, 75% of our business right now is from exports and 25% from India, which means we have actually strengthened our leadership position in India. Wherein in the last year, about 80% of our sales for the export and 20% was India. This year it is 75/25, which means that we have further strengthened our position in India.
Well, competition is good, so that competition keeps us on our toes. It keeps us to innovate. It forces us to be always thinking one step ahead, so that we are always ahead of the competition. From that angle, competition is always welcome.
Right. On the domestic growth, was it led mostly by some of the one-time projects, like some new industries setting up, and these are one-time projects which you also talked about in the last call. Do you see it sustaining going forward?
In the last quarter, yes, there were a few projects that we have received. In this quarter itself also, increased, we have also added the demand from new segments, which also includes some specific requirements of our products at the ports. Also in the irrigation, we have started to penetrate. Also, we have seen increased demand actually coming in over the last couple of quarters from oil and gas, from petrochemicals, from steel industry. Overall, we are seeing a significant demand coming in from the India market, which has obviously helped us in the sales growth in India.
Sure. Can you please elaborate? You mentioned that there is a working capital difference between Indian and international business.
Yes.
How much would it be? Can you quantify that?
Well, I can quantify in terms of, say, days.
Yeah.
For example, if an overall working capital days, say for example, for an export is, just assuming, say for example, 120 days overall working capital cycle. In India, that comes down to about, say, 75 days. So one is obviously because, I'll explain. So one is obviously for exports, you need to ensure that there is a certain quantity of a container that has to be filled in the container. So that increases the inventory cycle, plus also the time to travel from our-
Right
manufacturing plant to the customer end.
Right. Also on the high debt, I see that.
I am sorry to interrupt, Mr. Prem. I would request you to please come back in the queue for other questions.
Sure. Thank you.
Yeah. Thank you.
Thanks, Prem.
The next question is from the line of Varun Mohanraj. Please go ahead.
Good morning. Thank you for the opportunity. In the previous calls, we mentioned that our competitors are mainly from the U.S. and Europe. I think for the previous participant, you have given us your plans with U.S. competition. I just wanted to know about the plans and also your view on the European competition, because before the tariff was passed, we saw Europe having a lesser tariff compared to India, and obviously we would not know how it could be going forward. I just wanted to know your view about how we will be able to face the competition from Europe if it has a lesser tariff compared to us. Thank you.
Okay. Well, as of now, I think that the tariff from EU and from India is the same. From that angle, currently, we will not face competition from there. But in case, say, for example, hypothetically, if EU has a lower tariff, then obviously it depends on the amount or the differential in the tariff. If it is a minor difference, then there will not be any major impact on us. But if it is a major difference, then obviously there might be a few players in the EU who might be able to export in the U.S. But I do not see there will be a very big difference in tariffs between EU and India for the U.S.
Okay. Thank you. My second question would be on the metal bellows. Which industry would the metal bellows go into? Will it be going more towards the newer age industries which we are doing, or it will go into our traditional revenue by your oil and gas and the other split?
Both. Metal bellows goes into the new age industry. Like I mentioned in my speech, we have collaborated with one multinational large company based in the U.S. for providing flow solutions, which includes metal bellows as part of that particular entire solution. That is being used for cooling systems for AI data centers. That's the new age opportunity that metal bellows provides. But also, bellows are used in power generation plant, in steel factories, in petrochemical factories, in oil and gas factories, in steam and turbine applications. A lot of the applications for metal bellows are there in the traditional, which is the hardcore industries and also for these new projects and new age sectors as well.
Oh, okay. My last question. On the previous call, we'd given a long-term guidance for four, five years down the line. At that point, how much percentage of revenues would come from the metal bellows in our overall revenue?
In which financial year?
Maybe four, five years down the line.
Oh, okay. Four, five years down the line, well, hard to give a number for four, five years down the line. But in terms of, I think, at least I would say 25%-30% of our business, if not more, would come from metal bellows four, five years from now.
Okay. Thank you.
It's just a ballpark figure, right? Which is difficult to say.
Sure.
because-
Yeah
The world is evolving. The world is evolving every month.
Oh, okay. For the metal bellows, it would be more of a bottom-line increase, right, since
Yeah.
Higher margin.
Yes, definitely. Yes. Yes, you are right.
Okay. Thank you. That is it.
Thank you. The next question is on the line of Pritesh Chheda from Lucky Investments. Please go ahead.
Yeah, hi. Sir, I have few clarifications. One, you have given that assembly is 50%, more than 50% of sales in FY 2025.
Yes.
I wanted to know how much of hose production is converted into assembly and sold. Maybe you could give that indicator as well.
Like I mentioned, in terms of the assemblies, the assemblies includes, like I mentioned, it could be a 1 m assembly, it could be a 5 m assembly, it could be a 10 m assembly, it could be a 1 in diameter assembly, it could be a 10 in diameter assembly. We don't track the assemblies in terms of how much of hose that is produced because for us, sometimes in some assemblies, the value of the hose is 70% the cost of the assembly. In some cases.
But I Sir, I'm not asking the value. I'm just saying that if you had produced whatever is out of 16.5 million meters, whatever meters that you would have produced in-house.
Yeah.
How much got sold as hose only and how much, so you would always know in your ERP, right? This many meters are produced, this many meters went build as hose, and whatever was not built as hose was built as assembly, right?
Yeah. So, obviously, it's a difference. The reason being, because when you convert the hose into an assembly, you're converting meter in terms of pieces. I don't have the data right on top of my.
No problem.
Head right now.
No problem.
But post the call, we'll probably share with you offline.
No problem.
Yeah.
My second question is, on the 16.5 million meter capacity that you have, or let's say on the 20 million capacity that you have.
Yeah.
At the current SS prices, how much of revenue potential this capacity would have based on your assumption of assembly being sold at whatever percentage of sales? What you are doing at INR 370 crores, INR 375 crores, what it should be at a max potential?
At a 20 million meter annual capacity, I just assume that, say if 70% of the business comes from the assemblies, right? We can see a revenue potential of about INR 650 crores.
Okay. These are based on the current steel prices?
Yeah, obviously, current prices.
Okay. And current steel prices, SS prices are how lower versus the peak SS prices which were experienced a couple of years back?
I think a couple of years back, steel prices right now, I think would be at least, I would say 20% to 25% lower as compared to the peak prices.
Okay.
The peak is about, I think about two years back. One and a half, two years back.
Yeah.
Those were the peak years.
Okay. No problem. On metal bellows, you mentioned that your current capacity of 10,000 pieces a month is about INR 100 crore revenue potential, right?
INR 85 crore.
This includes both, right? You mentioned types of metal bellow pieces, so this includes everything, right?
Sorry, I didn't catch the last. What did you say the last sentence? I didn't get the last sentence.
Okay. I'll read for you. The metal bellow capacity will be about 10,000 pieces a month. That translates into INR 100 crore revenue, right? Or INR 85 crore you said.
INR 85 crore, as I said. INR 85 crore, yeah.
Okay. And you have done about, in the six months of this year, once you certified steel operation, you have done INR 57 crore. That's what the number was.
No. This bellows project started as in, the first production started in the month of January. It's basically but three months, or even less than three months. And the bellows, like I said, the sales cycle for bellows is slightly longer than as a hose because of the criticality involved. We started to receive the orders from the domestic market. We're expecting more orders to come in from the international market from the next quarter.
What is the EBITDA loss on this capacity, if any?
I do not have the exact number on the EBITDA loss, but yes, obviously, right now the bellows project is not contributing EBITDA because it just started.
Is it a substantial number? Is it a substantial number to be shared?
I do not have the data as of top of mind, so it will be difficult for me to quantify it. But I can get back to you with the number on specifically that. But yes, obviously, there is no profit in the bellows business as yet because they have just started the business. So our actual EBITDA would have been much higher, obviously, if the bellows business had reached its potential. But obviously too early to say because it is just a few months in the business. So, yeah.
This peak revenue of INR 650 + INR 85, let's say INR 735, maybe INR 750-INR 800, based on few things here and there, prices here and there. You will be able to achieve the peak utilization on an exit basis in FY 2027 or in FY 2028? I am saying exit basis peak utilization.
Yeah. I think it will be closer to FY 2028 because we are talking about the peak utilization of both the hose and the bellows. Yeah.
Okay. Thank you very much, and all the best to you, sir.
Thank you so much. Thank you.
Yeah.
Thank you. The next question is from the line of Karan from Asit C. Mehta. Please go ahead.
Yeah. Hello, sir. Am I audible?
Yes.
First of all, congratulations on achieving great results. I just have one quick question. Historically, I've seen March quarter performing better than December quarter, but this time it has not performed well, like on revenue and EBITDA front, it has declined. Could you please throw some light on this?
Yeah. To reiterate what I also said in the last quarter, right? We actually don't look ourselves on a quarter specifically from last quarter to current quarter because every quarter is different. Because when we are in the international market, Q3 is the Q4 for a lot of companies in the international market, and Q4 for us is Q1 for them. We encourage that we are compared on a year-on-year basis or even in case of a quarter, it should be the same quarter of last year. Like I said, in some quarters, in my speech in the last quarter as well, I mentioned that some quarters might be very good in terms of the revenue, some quarters that might be not so good in terms of the top and the bottom line, because that depends on a lot of factors.
But if you see on a YoY basis, I think we have shown a significant growth both in terms of the top line and in terms of the bottom line. And the same on the annual basis. Yeah.
Okay. Just one more question. What are the competition you are facing in domestic market? Do we have any major competitors?
In the domestic market, we have competition from the international players who have their manufacturing in India as well, and with whom we compete. But as I was mentioning earlier that we have strengthened our position in the domestic market where we've increased our market share and we have grown at a much, much faster pace in the domestic market as compared to our competition. This is on account of a lot of new segments that we have entered, new projects that we have taken. We have increased the business from our existing customers as well. The efforts of all of that have resulted in this particular growth.
Sir, thank you so much, sir. Thank you.
Thank you.
The next question is from the line of Rajesh Jain from NB Investments. Please go ahead.
Sir, I have two questions. You had said that for our products, the U.S. has increased the tariff rate from 3.5%, 4% to almost 10%. But the new tariff that Trump government has passed for 90 days, if that were to be implemented or imposed, what would be the tariff rate for our products to be supplied to U.S.?
I think the tariff rate would have been approximately, I think, 27% or 30% approximately.
27%, okay. It is not sure the same amount would be imposed on EU also, right?
I think from the tariff list that was published, I think towards the end of March or around the first or the second of April, I think at that time, the tariff on EU and the tariff on India, there was a minor difference of, I think, about 4%-5%, from what I remember. I do not have-
They would be cheaper, or we would be cheaper, sir?
If in that case, if those tariffs would have been implemented, we would still be cheaper than EU, reason being that the cost of manufacturing in EU is much, much higher than the cost of manufacturing in India.
Okay.
Yes, we would still be cheaper, but obviously, when such high tariffs would be implemented, it actually does not matter from where it is going. The problem happens inside that country. Like for example, inside the U.S. where, with such high tariffs, demand would fall because the inflation in that country would increase, right? Yeah. But as of now, it is on pause mode.
Sir, my second question is, I know you had mentioned that our products are not decided based on the pricing as they are all used in a critical application. But see, we started supplying to U.S. and Europe market post-COVID. One of the USP for our products was the pricing. Having able to maintain the same quality as well as meeting the standards, whatever the U.S. and European customers wanted. Even a 10% tariff, wouldn't we be costlier than the U.S. manufacturers?
Just a couple of points to clarify. One is that we were selling to Europe and U.S.A. even before COVID. We have been selling to Europe and U.S.A. since almost, I would say, 20 years, more than 20 years. All right? One is that. Obviously, in terms of the scale at that time was lower than what it is right now. One is that. Second is in terms of. See, a 10% tariff is not as much if you compare, because still the cost of manufacturing in the U.S. and in India, the U.S. manufacturing is still expensive. The differential amount is not 10%. It's much more than that. All right.
What happens is obviously when you are made in the U.S., you are approved in certain industries and certain critical applications where they will only take a make in the U.S. product and not take any imported products, specifically for some critical applications like your aerospace or defense, your certain communication devices and also over there, they have mandate to use only U.S. made products. Over there, obviously, we don't have much entry right now. But yeah, as long as the tariffs remain at 10%, we don't see any issues for us.
Okay. Even if it maintains at 10% or any more further increase, your plan of either collaborating or acquiring a manufacturing company in U.S. should have to be done at a faster pace. Is that understanding correct?
Yes. We are already working on that. Even before these tariffs were even a part of the discussion, we were still exploring and we are exploring opportunities for acquisition in the U.S. That has been a part of our business plan since last year. We are still actively working on it, and we are hoping that very soon we will be able to close something.
Okay. With this 10% tariff, our margins to U.S. sales would be down by a few percentage?
Minor. It will not have a major impact. Like I mentioned, before this the tariff was around 4%, so now it is 10%. The reduction in margin is there, but it is minor. Not much.
Thank you very much for the clarification, sir. And all the best.
Thank you.
Thank you. The next question is from the line of Raman KV from Sequent Investments. Please go ahead.
Hello, sir. Thank you for the follow-up question. In this quarter, how much did the company do from hoses, the flexible hoses business, and how much did the company do from the assembly and fitting?
In this particular quarter, it was approximately about 40% was from the hoses and about 60% was from the assemblies.
40% was from the hose?
Yeah. For Q4, I am talking about.
Yeah.
It was around 52% from assemblies and about 48% from flexible hoses.
My question is now, in the previous three quarters of the year, we have been approximately around INR 50 crores from the hoses business. But this quarter we did around INR 37 crores. There was a significant dip in the revenue from hoses. Can you explain why there was a significant dip in the revenue?
There is no actually dip in the revenue, reason being the assemblies that we make, hoses is part of that.
Okay.
When we make an assembly, a hose is one of the, I would say, one of the component of the assembly. Technically speaking, an assembly can only be made if it has the hose. Without the hose, you cannot make an assembly. Technically speaking, the revenue from hoses is not down. It is just that the revenue which was earlier being sold as flexible hose is now being sold as an assembly. There is value addition. I hope-
Okay
I was able to clarify your point there.
My last question is with respect to the realization of hoses. Last year in FY 2024, the realization for the entire year was INR 181. This year, I think when I am calculating, it is INR 122.
INR 181 per what?
Per meter.
No, I do not know how did you calculate that figure. Because when we sell, we sell it in the form of, like the hose obviously goes in the form of meter, but the assemblies goes in the number of pieces.
Okay.
Yeah, and then what happens, obviously, if you can share your calculation with me offline because this is something which I am not aware of. But what happens is when you sell a lower diameter hose, the value is lesser. When you compare a higher diameter hose of the same meters, the value is higher. Obviously, because there is more material has gone in.
There is a slower process and so on and so forth, yeah.
Sir, but my overall understanding is the main reason why the revenue from hose had a dip was, one, some percentage of the revenue was shifted to the assembly business as a value-added product, and as well as the overall revenue in Q4 had took an impact due to shipment delay, right?
Yeah. Like I mentioned, assemblies, whatever we sell as assembly, hose is a part of that. There is no drop in the business of specifically the hose. It is just that we have done a bifurcation in a way where we are showing hoses as a separate vertical and the assemblies as a separate vertical. So there is no drop in the sale.
Okay, sir. Thank you, sir.
Okay, thank you.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today's conference call. I would now like to hand the conference over to the management for closing comments.
Thank you so much everyone for joining the call. If I was not able to answer any questions, or if you require any further information or any further details, you can contact us or you can also contact SGA, who is our investor relation advisor. I would like to thank everyone for taking out your time for joining this call, and hope all of you have a great day and a great weekend ahead. Thank you.
Thank you. On behalf of Aeroflex Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you.