Ladies and gentlemen, good evening. Thank you for standing by. This is Sagar, the moderator for your call today. Welcome to the post-results conference call of AIA Engineering Limited. We have with us today the management team of AIA Engineering Limited. At this moment, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, please press star and one. I would now like to turn the conference over to the AIA Engineering management team. Please go ahead, sir.
... Thank you everyone for joining us on this, fourth quarter call and results for our full-year, fiscal year 2023-2024. As usual, I've got Sanjay and I am Kunal. Both of us will take you through the snapshot of this quarter and then get into Q&A. I'll quickly, you know, just update for numbers and highlights of this quarter. There are two updates that we would like to share, and then we'll get into Q&A. We've ended the full-year at 297,000 tons, up from 291,000 tons last year, about a 6,000-ton increase, you know, year-on-year. And for this quarter, we've done 71,400 tons, and it was largely comparable to the fourth quarter last year, which was at about 73,500.
It's been a flat quarter, year-on-year, as well as sequentially, where we've done 74,000 tons in the third quarter of this year. Our revenue for the full-year is at INR 1,130 crores, and that translates to a realization of about INR 158 per kilo. Our EBITDA for the quarter stands at INR 374.63 crores, which is at 32.57%. The EBITDA for the full-year is at INR 1,616 crores, which is the highest ever in our existence. It's been a record year for us and a EBITDA margin of 33.31%. Profit after tax of INR 260 crores, and the profit after tax for the full-year at INR 1,135 crores.
Year-on-year, again, profit after tax is largely flat. It was INR 268 crores, and EBITDA was INR 379 crores. You know, both figures are comparable this quarter compared to the fourth quarter last year, and lower down from INR 395 crores of EBITDA in the third quarter and INR 279 crores in the sequential third quarter of this year. So overall, it's a flat quarter compared sequentially and year-on-year. Highlights of some other line items are, our total other income is at INR 76 crores for the quarter, which includes INR 72 crores from our treasury income, and INR 19.26 crores, which is our other operating income, which is our export benefits, and a small exchange gain of INR 4.23 crores.
That sums up to INR 76 crore, overall, and that's again comparable to INR 83 crore in the third quarter, but which had a additional foreign exchange gain. If you knock that out, it's largely comparable between these two quarters. Working capital again continues to be flat. We are at, you know, 101 days, you know, consolidated, and that's comparable to the third quarter last year and also the fourth quarter last year. Most of our sales have come, have come from... The growth in sales have come from the mining side. So if I were to break up the 71,000 tons, mining is at 26,500, and, sorry, mining is at 44,900, and non-mining is 26,500.
So for the full-year, of the 297, we've done 203,000 tons in mining, which is up from 192,000 tons, you know, twelve months last year, FY 2022-2023. And non-mining is over 99,000 tons, is at 93,600 tons. So it's a little lower, about 5% lower, while mining is up by about 10,000-11,000 t ons. So 291,000 tons, that's how it adds up to 297 for the full-year. We've done our net cash is at INR 3,290 crores. I think that's broadly the number highlights for the quarter. We've got two more updates.
You would have seen our filing on the stock exchanges around anti-dumping and countervailing duty process that has been initiated by the U.S. authorities, you know, based on a petition that was filed by our competitor there, you know, which has a local plant in U.S., which is Magotteaux USA. So as you know, we've seen and experienced with Canada and Brazil, it's now almost a sub judice matter, where there's a department in the U.S., you know, a trade department now looking at our sales in that region, and they do, you know, whatever is required on their side.
We did 27,000 tons in U.S. in the calendar year 2023, because that is the period under review. And as always, we continue to not only defend, you know, our business in that region, but also actively cooperate and participate with the authorities there, you know, to make sure that a fair assessment is done. Beyond that, we may not be able to speak much. For now, we expect business to continue as usual, so nothing more to report on that account... our business in the duties in Brazil is also undergoing an investigation, a sunset review.
So five years, you know, the duty was applied for, and then there is a sunset review which is ongoing, and we hope to hear, you know, the outcomes of that next month in four to six weeks from now. So that is our update on the trade side. One more update is around our capacity. So we are very happy to report that our brownfield expansion for our non-grinding media business, you know, as we had reported, we are spending a total of INR 200 crore, of which we spent INR 110 crore already, and we'll do the balance in this year, FY 2025. Where we've done some brownfield, some capacity balancing equipment. We're buying land for storage facilities and doing some reorganization of our older plants in Odhav.
In addition to the efficiency that that will bring, you know, better organized supply chain and and operational debottlenecking, it has also given us additional capacity of 20,000 tons. So as we speak, our total capacity, which is at 440,000 tons, now remains enhanced to 460,000 tons, which includes this brownfield. On the ongoing brownfield for grinding media, we had originally reported 80,000 ton grinding media capacity addition. A lot of our equipment comes from Europe, which is, you know, facing delays and and interruptions. So what we've done over this quarter is we've we've chosen to implement one module of that capacity, which is 36,000 tons, and we hope to be ready and commission that in the next three to four months.
The balance capacity for that, given the challenges that were there with the supply chain, we've decided now to put a halt on it because we are still with surplus capacity. As our markets, you know, as we start consuming more from our existing capacity, we will decide on, you know, further capacity addition. You know, customers need for us to have buffer capacity, and so we will be looking to add more capacity, you know, and this will be now the balance portion of this brownfield will be like a plug-and-play, where we start and finish it in six to nine months. So that module is now being put, you know, on hold. So for now, our current phase of expansion will end with 440,000 becoming 460,000 tons.
You know, current capacity plus 36,000 tons of grinding media that will come online in the next three, four months, which will take our total capacity to 496,000 tons. So these are the two updates, the action in U.S. and, you know, the capacity, you know, the updates on our capacity for grinding media and non-grinding media. Lastly, as far as market is concerned, I think we remain status quo with everything that we have said over the last few quarters. We continue to not...
While our endeavor is to add 30,000-40,000 tons of sales each year, and we are prospecting far more of, you know, opportunity to convert from forged to chrome, we will have to, we are not sharing, an update on, you know, exact numbers that we plan to sell for this year. So while our endeavor is, you know, and that's just a directional figure, we continue to not share, a guidance note on, on tonnages for this quarter. With that having said, I'll ask Sanjay Bhai share a small update from his side, and we can get into Q&A from there.
Yeah. Good evening, everyone, and thanks for attending this call. So just to add a couple of further updates. So as Kunal explained, yes, we remain absolutely committed and focused on working on all the opportunities which we believe remain absolutely the same. Either we talk of all the three basic cores on which we are focused on in terms of our mining opportunities, that is to say, iron, copper, and gold. We are working on several conversion opportunities as we speak, and therefore, although we appreciate and understand that this year was flat, as it was indicated on the Q3 call, that does not change the tone or the direction with which we are working. That is an incremental 30,000-40,000 tons, at least on which we are currently working, and we remain committed to that.
We believe that as we move forward, we should be able to guide you a little better, but there are... All I can say is there are several such opportunities on which we are very bullish and working. And directionally, this modular approach does not and should not be read as a deferment, but this is just more structural and strategic in nature. That's my first point. Second, we are also making significant investments on the renewables. So this year, we are participating in a hybrid solar and wind project, where we'll be adding almost under the group captive scheme, where we will be adding gross 60 MW, which would translate into effective about 40%-50% of the power factor, which should become operational in the current year.
Because it is under this group captive scheme, the investment is in the range of INR 30 crores-INR 40 crores, but that will make us, by the end of this year, we will be at least around more than 50%-60% effective captive. Yes. So this will become, this will be implemented in the current year, by end of the year, the impact will come next year.
So that will add another further significant renewable capacity. And, I think the other CapEx plans and everything, Kunal has discussed. So just to conclude, directionally, we are absolutely committed, and we remain very buoyant internally. But yes, we are facing challenges like this U.S. anti-dumping, and we will take it in our stride and do the needful. With this, I think, moderator, let's throw the house open for Q&A.
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 phone. 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 Amit Agicha from HG Hawa . Please go ahead.
Yeah. Am I audible?
Yes.
Yeah. Good evening, sir, and congratulations for the results. My question was with respect to the MPS acquisition. Like it is mentioned in the presentation, that 43% shares are acquired at the rate of AUD 64 in FY 2024. In the last con call, it was mentioned 30% stake is also acquired. Is it meaning that we are having 73% holding now?
No, no, no, no. It is +13, total of 43% now.
Okay, so in all, the total spending is INR 43 plus the balance of INR 64, right?
No, no. We bought 30 before and 13% now. Total is 43%. Yeah.
The total cost of acquisition, INR 64.
Yes. Yeah. Yes, we are both put together. Correct.
Okay, okay. And, fine. Thank you. Thank you.
All right.
Thank you. The next question is from the line of CA Garvit Goyal from Nvest Analytics. Please go ahead.
Hello. Am I audible?
Yes, please.
Sir, you mentioned about putting off brownfield expansion on hold. So, can you let us know what is the capacity that we are currently putting on hold?
No, no. So as against the first and foremost, 80,000 was the composite. Now we are implementing the first module through a modular approach of 36,000. So it is 440+ 20 brownfield already implemented at Odhav and a few other locations, as explained by Kunal, plus 36. So this will be 496,000, which should become operational by Q3 this year.
Earlier, the total capacity target was 520,000, right?
Correct, correct. INR 520 becomes INR 496.
Understood. And so what is the exact reason? Is it due to slower penetration happening across the industry, or anything else? Yes.
So that's what Sanjay Bhai explained, right? This is... We are already doing capacity ahead of time, and this, there was an opportunity to do it modular. It was taking time. If you remember, our current guidance for commissioning was December. It was end of this year, and it was moving to next quarter. We said, "Let's go ahead with what is available.
How can we try and get, you know, our module up and early?" That choice became available as we reconfigured our equipment, and then we decided, said, "Let's do something now, and then, then the next module can be easy to plug when we decide to go ahead and, you know, do it." So we are spending about INR 100, total INR 170, instead of INR 250, we are doing it at INR 175 crores, you know, and getting done with it soon.
Understood, sir. That, that's it from my side. Thank you.
Okay, thank you.
Thank you. The next question is from the line of Ravi Swaminathan from Avendus Spark. Please go ahead.
Sir, thanks for taking my question. Moderator, there seems to be an echo which is coming while you question.
We can hear you very clearly.
Okay. Okay. Yeah. It seems to be from the moderator side is what my sense is. Just wanted to highlight that. My first question is with respect to the overall mining demand environment. So with gold prices going up and copper also resurging back in terms of prices, how do you see the mining activity across your various geographies? Has there been any pickup that can lead to increase in grinding media demand? Are you seeing anything of that sort, sir?
As we have always, always maintained, we want to remain very agnostic to mining demand cycle. Correct?
Mm-hmm. Yeah.
So just because now there is an uptick, that doesn't mean that automatically next quarter I will start getting more inquiries. No. The whole approach is conversion. Correct? And, you know, it is a very painstakingly time-consuming approach.
Yeah, yeah.
Keeping aside the mining cycle, all I can say is that the demand opportunity of 1.5 million-2 million ton conversion on which we are focused is absolutely intact. We are very, very bullish on wherever-
... all those geographies where gold and copper are predominant, not to discount iron. Correct? So we are equally very, very bullish on all these three. As we speak, significant opportunities are under conversion process. You know, unfortunately, I can't give you details beyond this, but all I can say is that from an opportunity landscape, there is absolutely nil dilution. On the contrary, there are still more aggravated efforts that are being put. The only point is that it is beyond our control. The whole conversion takes its own sweet time. Having said that, our internal focus remains absolutely committed on all those conversion opportunities, and we are working on. There is no letdown in the pipeline. On the contrary, pipeline looks to be very, very buoyant.
Understood, sir. And with respect to the EBITDA margin, so, you-- earlier, you used to guide it to be in the range of 22%-23%, and then couple of quarters ago, you had mentioned 23%-24%. What kind of range that, it is likely to settle in, keeping in mind the cost savings, that initiatives that we are taking?
Ravi, I think we've had a consistent answer on this, and-
Yeah.
Our macro guidance continues at 20%-22%. We've done better, you know, beyond that, as you know, for many quarters. But as a business model, we will defend that margin going forward. There is always an opportunity that if we are able to reduce our cost, you know, there is a case for the customer benefiting out of that. You know, that becomes something that becomes an operational leverage at our side. It could become a margin thing. We will see whether it's possible on a sustainable basis. So that's an effort that continues. But from a guidance standpoint, I think we stand to what we've been historically maintaining.
And just to add to Kunal, there's a logic to that, because our whole focus is conversion, where we continue to believe that there could be challenges.
Yes, our endeavor will be to do better. In fact, we have been consistently doing better operating margins than what our guidance is. But at this point in time, we have not really relooked at it. So let's mention what we have spoken earlier.
Understood, sir. Thank you.
Thank you. The next question is from the line of Bhoomika Nair, from DAM Capital. Please go ahead.
Yeah. Hi, good evening. Kunal Bhai, Sanjay Bhai, you know, I understand that, you know, this year has been a little tough in terms of the conversion, and, you know, it's been a little slower in terms of what we had expected. But if I look at over the last five years, right? From 2019, in mining, we were about 170,000. In this year, we've closed around 204,000, roughly. This gives an average CAGR of 4%. Now, while annual conversions, et cetera, there could be, taking a longer conversion aspect, but the pace of conversion and the pace of volume growth has been relatively a bit slower. On an absolute basis, it's been about 30-odd thousand, kind of an incremental volumes over a span of five years.
So just trying to understand what has, what is driving this lower conversion. And as we move ahead, you know, at some point, I think we were looking at some 30,000 incremental volumes on an annual basis. You think that is something that is really doable? What are the challenges, you know, and what can really drive the conversion at a faster pace?
Thank you, Bhoomika, and I think, important question, I think for most people on the callers also. I think there is context to this five-year period because there was COVID in between, right? There was a challenge on developing markets. There was a serious increase in freight costs for almost two years. You know, that made the conversion virtually impossible just because of the extra cost, our customer, a potential customer, would have to pay compared to an incumbent, which is in the same region, right? So I think we lost almost three to four years, during which time that it was layered with this whole trade action, where we've lost volumes in Canada, Brazil, and South Africa, right? Collectively, closer to between 50,000 and 60,000 tons. So it's been a very challenging period.
The fact that despite all those headwinds, we've grown from 170 to 204, is something that excites us, that encourages us, that, that motivates us, that we are on the right track. We are not at 100,000 tons. I mean, all of these collectively are, black swan events that actually take a company down, right? No customer migrated back to an incumbent or to another competitor. 100% of our volumes remain. We've delivered, right? All of that, you know the journey. You've seen our price pass-throughs come along, including all of freight, right? So, so the point is that now, over the last 12 months or 18 months, markets have been cleared, the travel has started, freights have, you know, normalized over the last six to nine months. It's now, I think we are in a level playing field.
We are thinking now looking back to growth. I think next three years will be a period to look at us, whether we've grown or not, right? Our efforts continue, and like Sanjay Bhai said before, we are very, very optimistic because we have a solution for a pain area that the customer suffers from. Yields from existing mines are falling, is a reality for any copper mine you can call and check with, right? Improvement in yield of recovery is an absolute interest, top three items for any mining company, right? You're helping them reduce their ESG footprint in terms of reagents or in terms of lower power consumption. You know, all of these are ESGs top priority for most mining companies, right?
So from a solution standpoint, we are only sharpening and deepening our engagement with the customer. We only remain optimistic and enthusiastic. The reality is that it's taken time, right? Even despite these things, we would be happier that we sold 30,000, 40,000, 50,000 tons more. But keeping reality in mind and look at us over the next three years. That, I mean, last five years may not be the best indicator of the potential that, you know, our solution has. We continue to remain excited about it, and adding, being able to add 30,000 tons a year, I think should be a fair goal for what we try and offer, right? For the opportunity that is there in front of us.
Got it, got it. And so in a sense, what you're trying to say that 30,000 incremental volume should be doable, all things being ceteris paribus, in the next couple of years?
If you ask me, for us, it's an open and shut case where someone should migrate, right? This is our—I mean, with all the benefits that we've spoken about and discussed plenty times before. But the reality is that there is a friction process, right? There is a challenge in terms of various things that, again, that we've spoken about, and it takes time, and we are happy to do that, right? That, it takes time. We are happy to be... We are here for the long haul, and everything we offer is of priority interest to the customer. I mean, if it does, if it takes six months more or a year more or even two more, that's okay in the time, relative to the time that we are looking at to keep this business.
I don't think we worry about, as much about losing the market as much as, you know, how do I find ways to grow faster? So-
A very simple math, Bhoomika, is that, as Kunal explained, what we lost was around 50,000 tons. If you just do an adjusted math, then your CAGR would look better. Having said that, that is a part of our business. We have realized it. This is always going to happen. So we have also climbed up our knowledge curve significantly. We have sharpened our tools. We have done excellent work on the IP side. Now, we have all sorts of mill liner solutions. So now even our confidence is much better. I absolutely agree with you. Just from a statistics point of view, it doesn't look so good, but there is a whole lot of changed, completely changed platform on which we are standing today vis-à-vis where we were five years ago. That's a very important point to take care. Let's not speak more, let time will tell.
Let's see how it goes.
Sure. Sure. So the other thing is on this whole U.S. litigation, while obviously as such, volumes have not yet gotten impacted, and we continue to sell into that geography, what is the risk that this can get impacted? Because, you know, that is a fairly large chunk of our overall volumes. You know, in your opinion, what is the likelihood of that kind of being impacted, if any?
This is like doing a crystal ball, you know, gaze into the future, and, I think we've been advised not to, speculate on what, what it means. I mean, you know that we've-- there is a reasonable amount of volume that we are doing over there.
It's a long process.
It's a long process. It will take nine to 10 months, you know, for us to engage with everyone, and we are also learning as we engage and go through the process. But, I mean, I would be restricted in you know, having a response that could be a little speculative in nature in terms of what can the outcomes be. But we remain confident that, you know, we've done. We've got a fair price, we've got everything in place, we've got great lawyers who are helping us defend. So the competition has to do what they have to do, and we have to do what we have to do. So, I mean, we are well-placed to defend it vigorously, basically.
Got it. Got it. And just lastly, if I may, on this, MPS acquisition in Australia, I mean, you know, how do you see that evolving over a period of time? We've kind of taken a decent stake now out here. How can it help us in terms of scaling up volumes, particularly in the mill liner space? That's it.
I think so MPS brings competency that we don't have, which is the whole, process and application side of mill liner, you know, in relation to grinding. So great fit, it complements us well. We've taken on a, you know, we've added to our repertoire when we go out and engage with the customer. So surely, we are seeing dividends in terms of our ability to do a better engagement to, you know, to include more customers now that we are going out. I think it's a no-brainer, because that was competency, that's a prerequisite to doing liner business. It would have taken us, you know, five, seven, eight years, you know, overall, to acquire that knowledge, which is available to us now. So it will show benefits.
May not be in a quarter or two, but surely it will, you will see an acceleration in our mill liner work.
It is a very profitable enterprise, so whatever was our target profits, we are achieving that. That way also, it is good.
Understood. Understood. Thank you so much, sir, and wish you all the best.
Thank you. Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.
Yeah, thank you for the opportunity. So first of all, just a clarification. Your mill, mill liner capacity is where you're adding this incremental 20,000 tons?
It is what we are calling non-grinding media, so that capacity is used for our vertical mill parts, other mill parts. Some of it can also go towards mill liners.
Mill liners.
But for us, capacity is grinding media and other than grinding media. We just clarified-
Mm-hmm, mm-hmm.
or talked about mill liners because we set up our plant for that. But now we have... And while it was getting commission and the opportunity and all of that, now we are going back to our old, older classification, which is grinding media and other than grinding media, and this 20 fits into that.
... Okay. Now, you have added 60,000 tons of mill liners, I think last year, and there was this whole idea of incremental addition of 10,000 tons per annum. But when I look at this year, your others, the volume has declined. So, you know, what is playing out there in terms of the declining volume, where mill liner itself incrementally was supposed to add 10,000 tons of volume?
Others does not reflect, mill liners. Others reflects non-mining segment. So mill liners are part of the mining volume, that has been reported, you know, because it's going towards the mining segment. We're not kind of product-wise, this thing, but you've not grown at 10,000 tons in mill liner. It's a little, I don't have it on top of my head right now, but it's a little lower. We don't want to, you know, really get into exact how many product, what product has done, what tonnage, just from a competitive standpoint. But it has grown. It has grown, but not at the 10,000 pace that we had hoped to. We are hoping next 12 months, you know, we'll, that pace will accelerate as well.
Okay. So mill liner is a non-grinding media, right?
Mill liner is non-grinding media. Correct, correct, correct.
Okay. Oh, perfect. Okay. Then, on the other question, your experience with the other trade action has been that the volumes that first being lost to a year later. That's why you mentioned we got-
Voice broke. Can you repeat your question?
I said, your experience in the past trade, trade actions in Canada, Brazil, or Africa, has been first loss of volumes to a year later.
Yes.
Right. Right. Can work, so is it that in the incremental 27,000 tons of anti-dumping duty imposed by U.S., or let's say, not be imposed, reviewed by U.S., the experience has to be similar?
Exactly. I'll tell you why. See, as Kunal explained, the matter is sub judice. We are completely restricted, but geographically, each geography's situation would not be the same, therefore, experience cannot be the same. Second point is, in the past, we have lost. In Brazil, we have gained quite a bit. So you know, we are quite okay with it. Don't worry about it. All I have to say that each geography is different, so parameters are not exactly comparable, so the similar analogy cannot and should not be drawn.
Okay. Okay. The recent review was in Canada. What happened in Canada, specifically, what were the volumes at that time before the trade...?
It was close to about 24,000 tons, and we are at about 7,000 tons now.
11,000 ?
7,000 tons.
7,000 .
Yeah.
The matter is still sub judice.
It's not sub judice. It's only part... We've got a administrative process in place where I will have to expand on. It's a little more complex in Canada than everywhere else, but I don't think that is an impediment for our sales in Canada. We are doing enough work, and we will start... You will see our, you know, numbers in Canada go up, you know, in, in next 12 months and, and sooner than that. So I don't think today the, what, what the Canada action has done is, is put in some administrative things in place so that there's a certain pricing mechanism that we have to adhere to, and which we are doing. I think, I don't think the action there is now a deterrent in our ability to get more sales.
Okay. Okay. So would you then be able to, in your revised format of selling, whatever trade changes have been brought in or implemented, will it be at a similar EBITDA per kg, or similar margin as earlier or a differential margin?
I don't think it's too much granular detail. I mean, for us to go into every region, and, I mean, you'll have to look at us, you know, margin as a company as a whole. I'm afraid we'll not be able to get into that granular conversation.
Okay, no problem. Just to iterate, Canada was 24 before the matter, and post that it went down to 6,000.
No, it went down to zero. Now, it is 7,000.
Same. Okay. Okay. Okay. Thank you very much.
Thank you.
Thank you. The next question is from the line of Mani, who is an individual investor. Please go ahead.
Yeah, hi. Am I audible?
Yes, sir, you're audible. Please go ahead.
Yeah. Yeah, hi. Good evening. I wanted to understand a little bit more about the mill liner segment. If you can explain what share of revenue does that contribute currently to AIA or anything. That's number one. Number two, I also want to understand, is the strategy of AIA in the mill liner segment very similar to what it is in the grinding media, where you believe that the solution which you offer in mill liners, I'm assuming the solution that you offer is ferrochrome-based mill liner, and that is a significantly better solution compared to the steel mill lining market that is there. Is that understanding correct? Or, if you can just talk a little more about the mill liner segment and your strategy over there, that'll be helpful.
So everyone, I'll just do a quick thing, and we can go offline, you know, if you want to understand a little more, but mill liner, there are four incumbent, three or four other incumbents, so we are not doing. It's not steel versus chrome. You know, the advantage we bring is not so much in metallurgy as much as in design. So the whole mill liner conversation is, you know, working through proprietary, some patented designs that we offer, that ultimately allow the customer for a higher throughput. It helps them save power cost and, of course, the cost of the mill lining. So that is the whole overall solution that we look at when we talk about mill liners.
The whole objective for us within that space is to not just sell out of the plant that we set up for 50,000 tons, to set up, let's say, to sell 30,000-40,000 tons next year. The idea is that, that allows us to have a conversation for the whole grinding suite with the customer, which includes mill liners and grinding media, because it's the whole, the whole solution together delivers a supernormal consequence for the customer. So our, our interest is to sell that whole combination. Of course, there'll be customers that buy just linings from us, and that's the journey and the conversion timeline that it takes. But that's the strategic reason why we are doing mill liners. The whole idea is to engage with the customer on that whole basket of products, right? I think that's, that's where it is.
And, and, uh-
It is high chrome.
It is not high chrome, it's a chrome solution.
Yes.
We'll continue to add... Our aim is to add 8,000-10,000 tons a year and fully utilize the plant in the next four-five years.
Okay, thank you. Thank you. Thank you, sir.
Thank you. The next question is from the line of Charanjit Singh from DSP Mutual Fund. Please go ahead.
Hello, Kunal Bhai. Thanks for the opportunity. So my first question is regarding, you know, our stance on whether we'll be, you know, keen to now put up any capacities in the other locations apart from India, looking at the kind of, you know, duty structure restrictions. Now, there's a fourth geography, which we have seen. So what are your thoughts on that in terms of, you know, doing some capital allocation in the international markets? That's my first question.
I don't think our view has changed. We continue to believe India is a great location. It's not a cost location for us, it's a competence issue, it's the availability of an ecosystem that allows us to produce. Nevertheless, we believe there's a large. I don't think that trade action in two or three countries, I don't think there are many more countries where we expect to see trade action. We see, you know, there are mining clusters in at least 15 countries, so there is enough, plus an additional, let's say, 10-15, where there is, you know, follow-on opportunity for us to grow. So I think there is a larger market outside of these territories that we continue to focus on, and we will see. For now, there is no plans.
I mean, we continue to stay put with our current structure and our current growth plan.
Got it, Kunal Bhai. The other question is, now, if you look at the overall, you know, mining production growth globally, now, there have been also, you know, discussion that maybe those numbers will go up as, you know, copper and other commodities are seeing increased demand. So what are your, you know, thoughts in terms of when you are looking at, you know, this production growth picking up? You know, while conversion from forged to high chrome is one of the most important factor, but overall underlying volumes itself, if it goes up, it benefits us. So, you know, just if you can touch upon on the overall production growth, what you are seeing in the markets.
You are absolutely right, that if the underlying growth happens at an existing mine site, we will be natural beneficiaries of that growth, but we are not counting on that. I mean, there are several factors where despite their, you know, desire to grow, they may not be able to grow. There's approvals in place, you know, there's the whole excavation part, post-process. So to that extent, while they want to produce more, they may have limitations, but if they can, obviously we'll be a natural beneficiary over there. But we are not counting on that as a strategy. For us, you know, converting and migrating our customer from using forged to chrome is where, you know, we spend most of our effort on.
Got it, sir. So lastly, now we have added, you know, this mill liner capability in our entire portfolio, and there was also discussions earlier. We used to, you know, talk about that as a complete solution provider. We'll be able to target this market. So if earlier, you know, when we are targeting only the grinding media, now with the liner, what percentage of the overall CapEx within this segment are we able to, you know, capture from a miner's perspective, sir, with mill liner and grinding media together?
You mean to say the consumable cost?
Correct. Yes, that's correct.
Not CapEx. So I think this covers almost everything. And because in the grinding side, their raw cost includes these parts, liner and grinding media-
In mine.
In mine. So of their grinding circuit, this would be most of... All of their consumable from a grinding standpoint. Of course, they use reagents and other things, but this is our largest. Sorry, this is the largest cost line item for them, or the top three at their operating site.
Okay, sir. Got it. And just lastly, if you can touch upon, you know, how is our, you know, progress in Chile as a market? We had, you know, got some initial traction, but, you know, if you can update on how is the journey there in Chile specifically? That's my last question, sir.
It's great. It's great. We are on track. We hope to report something good, you know, something, a conversion of, you know, in that market soon, but, you know, it will take the time it takes. So we are, we are as eager to hear news about it as you are. So we are, we are fully, you know, active and, putting effort in that region.
Great, sir. Thanks for taking my questions, and all the best for this future.
Thank you.
Thank you.
Thank you. The next question is from the line of Priyankar Biswas from BNP. Please go ahead.
Yeah, thanks for the opportunities, and, thanks to Kunal Bhai and Sanjay as well.
Yes.
So my first question is. We have seen this Red Sea crisis for some time, I mean, disruption on the freight, et cetera. So can you just tell me how much impact had it on your volume shipments? So what am I trying to say is, like, let's say, if this crisis was not there, hypothetically, so how much higher could you have possibly done?
So I think we were as you know, we had reported when that happened, we were on a wait and watch mode to see whether this is temporary or it's sticky. It appeared that it looks to be a little longer time, but over this last quarter, we've seen rates going down, you know, to start normalizing. We are not seeing of you know, carriers being interrupted or, you know, being hauled up, et cetera. And in line with that risk, overall risk perception going down, rates have started going down. So we've passed through some rates, and the rest is getting adjusted. So our view is that if the rates are getting normalized soon, and to that extent, and if they don't, we will be passing them.
I think for now, we are happy to see that rates are getting, you know, going down, they're getting normalized or in that direction.
Mm-hmm. So what I meant was not from the freight rate point of view. What I meant is because of the disruptions and the longer selling times, would you have lost some volumes? I mean, like, delayed shipments or something like that. So probably you could have done maybe better in the quarter.
It only means you to plan sharper and maybe a little longer lead time. But I don't think we have lost any volumes due to that. No.
Okay. One more question. So besides, Chile, so in LatAm, progress in other ... Because what I require is-
Sorry to interrupt, Mr. Biswas, your voice was getting muffled and eaten up in between. Can you please repeat the question once again?
Can you hear me now?
Much better, sir. Please go ahead.
Yes. Since you discussed about Chile, so I would just additionally ask about Peru, where you had actually opened up a new subsidiary as well, I mean, some months back. So what are the progress in the other LatAm geographies, and when can we start hearing news, so from there?
Soon. It continues to be status quo. I think it continues to be, you know, a lot of effort that we plan continue to put in, in those regions.
What are the minerals that we are targeting there? I mean-
Copper. Copper and gold, of course, but mostly copper.
Okay. That's all, good.
Thank you, Priyankar.
Thank you.
Thank you. The next question is from the line of Anupam Gupta from IIFL. Please go ahead.
Hi, Kunal Bhai and Sanjay B hai. So just a couple of questions. Firstly, on the volume side of it, so obviously the conversion has been slower than what everyone has been expecting. Do you, at any point of time, ascribe this to maybe slightly more intense competition from the incumbents in this case? So let's say when you say Peru and Chile, obviously the incumbent there is pretty large and in those regions. So is the volume conversion in a way also being slow because the incumbent is giving you intense competition for that shift to happen?
Not really, Anupam Bhai. I think incumbents will do what they have to do, and there's always, you know, friction point in terms of migrating from one solution to other, you know, wherever it is. I think the more important question is the efficacy of our solution, right? All these things that we are speaking about, that's how 15% of the market has gotten converted to chrome. There's no reason that this, you know, it's not going at least another 10%, 15% more, right? So, but every single place, every single country has its own set of challenges, its own set of existing customs in terms of where they have bought from, how they think about it, the time it takes, their risk appetite. And, and I, I think that's where it is. It's, it's a large market. We've done enough work.
We continue to put in work. In our mind, it's the breakthrough is around the corner, and we continue to believe in our solution, right? Now, that's where the real life world is, where what appears open and shut to us, you know, still takes. But that's like we keep saying, the inertia, right? That means that it, for the next guy, it's even more. That's why we keep this business. That is the whole joy and fun in this game is because that once the business comes to us, it stays, right?
Sure.
When we are looking at keeping this business for a few decades out, it's okay if it takes few years in that conversion journey, right? We are, as much as we are eager and anxious to make this happen yesterday, we also understand that we will have to do what it takes. As you know, we remain for a longer haul. We are not here to, you know, to have a flash and burn, right? So...
Sure, sure. So understand that. And a couple of bookkeeping, bookkeeping questions. Firstly, now that you have trimmed down the cap, the capacity addition part of it, what should be the CapEx one should build for FY 2025 and 2026, including what you are doing for power?
Sorry, so FY 2025, total CapEx is INR 200 crores, which is INR 90 crores for grinding media balance, you know, which we're commissioning now.
Mm-hmm.
INR 35 crores for power and INR 75 crores for that ongoing debottlenecking other things that we are doing. So total, INR 200 crores. We spent about INR 210 crores, FY 2024.
FY 2026 should be similar quantum at this point of time, right?
FY 2026 for now, if because we are not—unless we... That, that will depend on what new capacity that we are doing.... There is no announced capacity or CapEx plan for FY 2026 as we speak. We, we plan to complete all of this in this year. Through the year, we'll have, you know, we'll see where things go and then, then decide on what, what's happening on that front.
Okay. And one just lastly, what should be your tax rate for 2025, 2026?
I think it continues at 22%, blended 22%, between 22% and 23%.
Fine. Okay. That's all for me. Thank you.
All right. Thank you, Anupam Bhai .
Thank you. The next question is from the line of Lokesh Manik from Vallum Capital. Please go ahead.
Yeah. Hi, good evening, Kunal Bhai and Sanjay Bhai. My question was on, more on the macro front. So if we recap, let's say, seven, eight years, we've seen many countries, you know, become protectionist. And, one of the reasons why your competitors have, a competitor, for that matter, has been successful in their endeavors is they've taken advantage of this trend. You know, in this slide, do you think you need to rethink your strategy of, you know, manufacturing out of India for the reasons that you have stated in the past and then today as well again, you may be shifting a portion of manufacturing, in countries that are, you know, more on the exhibiting this protectionism trend, you know, to safeguard your volumes?
Because, you know, the cost of losing the business, as I understand, is significantly high, given that, you know, you took three years just to get a foot into the customer's business, and then you develop, and you slowly build the volumes in these businesses. So the cost seems to be significantly higher, you know, when such actions are taken to us. So, either, you know, moving a portion of the manufacturing in those countries or, you know, reorganizing the supply chain, if you discuss this at the board level, if you can share some insights on that, it would be really-
So I think, first of all, I want to remove this myth that a trade action stops our business, okay? It has stopped only in South Africa, and South Africa is a very unique case because their currency weakens against the Indian rupee. Yeah. So we've been consistently hit by a 3%-4% hit on the currency weakening every year. On top of that, they applied a ban on scrap export of scrap, which means local scrap is 30% cheaper than what I buy in India, which is international price, correct? Without the custom duty, it's not a dumping action, it's a custom duty that they applied for the whole iron and steel, you know, iron and steel industry, and we were part of that, right? To protect the local industry.
It had, even had they not applied our product, if just by the ban on export of scrap and the weakening of the currency, there's a challenge with that. So if you leave aside that region, which is its own story there, that's South Africa for you. I think Brazil, we are—I think we are doing okay in volumes. We continue to make efforts to take more volume. Same thing for Canada. I mean, we have, yes, it has reduced, but it has not changed our fundamental viability or presence in that market. Every customer wants two suppliers. When there is a supplier that has, that is hungry to provide more value to you, that is ready to invest in stock for the just in time, right? Why would any customer depend on one single location plant?
I'm not a rubber or a plastic or a steel industry, where you've got 10, 10 producers, you know, in your local industry. The consumers in Brazil and Canada may not want to depend on one supplier. What happens if there is an interruption at that plant? So I don't want to insult the customer by telling them that they'll only buy, because there's a trade action, they'll stop buying, right? It was already a challenge for them to buy all them, all the way from India back in the day, whenever they converted, when they had a choice of a local consumer, because they want to diversify and risk mitigate their supply chains.
Well-
Action only is a cost implication for them, if at all there is a trade action. I don't think that fundamentally changes our value proposition or our opportunity. Now, in the short term, there could be some, you know, where volumes get affected. Now, that depends on every country. So Canada started with an interim duty, and so volume got impacted, you know, immediately as those duties came in. In the U.S., when the process started, it was they, they have a different process than they follow, right? And so, Brazil had likewise, Brazil had a different process. So all we are saying is, in a year or two, there could be some interruption. In the U.S., the situation is different, so I don't want to compare it to Brazil and Canada.
It's an independent situation where I think our proposition and our standing is a little different, but I cannot talk and speculate about what it means. We're going to go through the process.
I'm not, I'm not, speculating on that. What I'm going to say is that, have you thought that a portion of manufacturing would be moved there to satisfy these authorities? Is that possible on the cards?
See, moving manufacturing there is first of all for us to say that India is not our current situation as an issue. We don't think our current situation as an issue. That's what I'm trying to make a point.
Understood. Understood.
Trade action is part of the deal. If my benefits to the customers, I'm saying, are plenty, I'm saying the customer wants an alternate choice, right there I've got an opportunity, right? I may have a little lower volume. In the scheme of things, this does not move the needle for us. I'm just saying that producing outside the country, we may set up a plant somewhere outside the country, we may not do that. All of that is conjecture for us, you know, for our business to continue to take. But for now, our current structure is robust.
It has allowed us to supply and work with many, many countries. A country which has some duties, we are talking about a trade action, but we supply to at least 50 countries where there are double-digit import duties.... We are not talking about those duties where my competition has preferential access.
So we are not going into those granular details, where we still have a market share in that market, maybe as half, about the market. So all I'm trying to tell you is just because this gets announced, it gets talked about, and it appears, of course, 27,000 tons, I understand optically it appears that there's a large action. All we are trying to say is that India remains a great destination for our type of product, which requires shop floor competence. It requires hands to do some of the work. You know, over the last 10 years, India and China have been two countries where a large majority of these investments have come. So while I'm not saying we will never set up manufacturing outside of India, for now, we may do it for different reasons, because all that becomes a conversation.
But for now, our view and our thinking of our positioning has not changed because of one more action around trade. I think the competition is doing what they think is right for their interest. For us, we continue to doing more of the same. I just believe that of the hundred things that we face as a challenge every year, this is just one more that we have to overcome, you know, understand, deal with it, and overcome.
Understood. Understood. That's it for me. Thank you so much.
Thank you.
Thank you. Thank you. The next question is from the line of CA Garvit Goyal from Nvest Analytics. Please go ahead.
Sir, my question is already answered.
Thank you.
All right. So, I think I'll do the closing. Sanjay, you want to add?
Yeah. No, no. As you know, as always, myself and Kunal remain available. We are definitely looking forward to much better things to talk about going forward. We will just inform as and when things happen. So I think with this, Kunal, you can give the concluding.
Exactly. Thank you so much. Sanjay and I remain available.