Ladies and gentlemen, good day and welcome to AIA Engineering Limited Q2 and H1 FY26 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 star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Kunal Shah from AIA Engineering Limited. Thank you, and over to you, sir.
Thank you so much. Yes, thank you so much. A very warm welcome to everyone. Good evening. This is Kunal, and I have Sanjay Bhai along with me here on the call today. As I get into top-line numbers, and we'll share a little update on the business, and then we can get on to Q&A. I think second quarter is largely in line with the first quarter of this year. No remarkable financial difference. Things look steady state, by and large, as far as operating numbers are concerned. I'll still run through a quick summary, and then we'll get on to the business bit of things. We sold about 63,000 tons for a total of about 123,000 tons for the half year. That compares to about 120,000 tons that we've done half year last fiscal year.
Up from the 60,000 tons that we've done second quarter last year, we've done about 63,000 tons this year, which translated to INR 1,029 crore of top line and EBITDA of INR 395 crore, and profit after tax of INR 277 crore for the quarter. Overall, from a financial number standpoint, the quarter looks largely okay and in line with the previous quarter. Further breaking up our other income, the total of which is about INR 98 crore. INR 33 crore of that belongs to foreign exchange, and in that sense, it's an operating other income. We also have INR 18 crore of export benefits and about INR 64 crore of treasury income.
The total other income is INR 98 crores is other income, and export benefits is about INR 18 crores, about INR 116 crores of other income for second quarter of this year, and almost similar to what we earned in the second quarter last year. Nothing remarkable from a working capital standpoint. All our debtors and stock, etc., are largely in line with what we've done historically. From a tonnage standpoint, we did 63,000 tons, of which about 38,000 tons came from mining and 24,000 from non-mining. Again, there's a small increase in the non-mining bit. Mining bit continues to be flat between second quarter of last year and slightly up from the first quarter of this year. We've had some, our average realization for the quarter is at INR 162-163, and that reflects product mix.
I think raw material costs are largely comparable to the first quarter, so no large difference between the two. There are some numbers around power and fuel and other operating metrics where some bit of renewable captive as it gets online, there is some implication, but largely comparable from an operational standpoint. Nothing that's a large delta change. From a business standpoint, also, things continue. All things that we've spoken about in the past around work that we're doing with the mines, I think all our efforts continue. There's a very important development that we've shared about our customer in Chile. We're not sharing the name because the customer would not prefer for us to speak about it on a public platform. Very interesting customer.
They've shared a contract that will last over 18 months, and their consumption is going to be variable because it goes up and down, but our sale per year will vary between 13,000-14,000 to 17,000-18,000 tons, depending on their throughput and other things. Let's say about 15,000 tons a year is volume that we expect out of that. More importantly, over and above the win, it is an important endorsement. It is a very important customer, and it is our first breakthrough or a first win in that important South American market and first-ever customer who is now using HyChrome for their grinding media. It is a big milestone for us from a directional standpoint and an endorsement of all that we are trying to say.
Our solution is designed to offer far more benefits than our typical grinding media offering has been historically doing, and that includes milliners and design changes within that and the whole solution engineering that we do. We continue to remain very excited. We are digging in our heels and putting in all the effort to make sure we have small wins and hopefully bigger milestones and good news to share. I'll have Sanjay Bhai share a little bit more on it, and then we can get to Q&A.
Thanks, Kunal, and a very warm welcome and a good evening to all of you. As Kunal indicated and as we had hinted even during our first quarter call, there is a very, very, I would say, a remarkably exciting shift in terms of our approach as a package, what we are now offering, where a very unique liner-driven solution, where as a package, the liner plus grinding media solution offers very exciting benefits to our end users. That would very quickly improve the throughput significantly, as well as reduce the power and other operating costs, which makes our solution unique. In a way, it takes us away from doing the risk of pricing and then anti-dumping and all other associated problems. More importantly, as Kunal just, we have also made the announcement.
We have taken successful trials based on this new approach with quite a few mines. As we speak now, two large mines are also under trial, very, very important mines, I would say. Plus this recent order that we have won, all of that makes us confident that going forward, we had also indicated that while this year we may expect some increase in the volume, maybe 5, 10, 15,000 tons. From next year, we are very confident that we should be able to demonstrate year over year a sustained growth in terms of increase in volume, which has so far been one of the, I would say, concern areas from the investor standpoint. I think with this, I think let 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 the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bala Subramania from Arihan Capital. Please go ahead.
Good evening, sir. Thank you so much for the opportunities. Sir, what is the tangible evidence for conversion pipeline, especially for forged to HyChrome side? And are you seeing any change in RFQ process from mining customers, especially requesting HyChrome or integrated liner media solutions? Can you cite the top three to five conversion opportunities in your pipeline?
Mr. Bala, one is, of course, as you very rightly said, the proof of pudding is in eating. We have got one major order whose announcement we have made. One Chile, very important customer, where the order size is on an 18 month is about 22,000-23,000 tons and about $33 million order. That is one straight evidence of a conversion. Correct. More importantly, as I said, we have conducted successful trials in about 10-12 mines, including in India, very important mines, very important iron ore producing or zinc production mines, and overseas in Nigeria, in Ghana, in a few very other important locations where we have seen that the customers get the tangible benefits.
Based on that, now currently we are in trial, very, very advanced stage of trial, where in the months of December and in the months of January-February of this fiscal itself, we will start getting the final outcome of those trials. These are very large mines, much bigger than what we have been conducting. What is going to happen is that over the next three, four months, you may come across a couple of other such announcements where this is obviously plus. Please understand our current business is ongoing. As you see from a sales or an EBITDA standpoint or from overall, everything is steady. This approach, as you might have seen over the last five, six years, we have had several issues both in terms of anti-dumping investigations and a lot of other trade barrier-related problems.
We believe that this solution takes us away from all those issues, and we are working very hard on it. Beyond that, at this point in time, I'm sorry I'm unable to share.
Okay, sir. Sir, this new 75,000 ton milliner capacity, what is the current utilization rate, what is the timeline to reach breakeven, what kind of utilization we may expect in the next two to three years' time frame? How does the margin profile of the new rubber composite liners compare to your traditional grinding media? When can we expect these lines to be materialistic revenue contributors, maybe over the medium term?
Hi, this is Kunal. I think midliners are part while we've spent and done CAPEX and hence talked about that particular product line. You'll have to look at everything that we do as an offering because we are offering a solution. I think the tonnage of midliner per se is not always important. It's a beachhead for us because that brings in a lot of process improvement. The volume may come from grinding media, right? Because we are selling things as a package. We're trying to sell things as a solution. I think we'll give overall guidance, and the overall guidance that we give will include all mining parts that we are selling, which will be grinding media and midliners. And midliners, when we say that includes rubber liners also, I think it will be difficult for us to give a product-wise utilization or growth plan in that sense.
Like Sanjay Bhai said, we are making efforts. The first milestone is there. We'll share an overall guidance whenever we believe that we have enough visibility and confidence on that conversion number.
Okay, sir. Sir, I think overall 4.6 lakh ton per annum capacity, I think we did nearly 1.28 lakh. I think it comes annualized rent rate of around 2.6 lakh metric ton that range. It's almost 55-60% kind of utilization. What kind of post that, what kind of utilization we may expect, like 70-80% kind of rate, and what are the specific projects in terms of CapEx, whether we focused on debottlenecking or new product lines or geographic expansion side? If we get more clarity on that CapEx, that would be really helpful.
First and foremost, you're right that current capacity utilization level is around 55-60%. Please understand it's a mix of various products. We have grinding media, we have liners, we have castings. We have a mix of all the products that we give. We give as a combined blended capacity. Two main products, one is castings, which includes liners and everything, tube mill, and all other cement, mining liners, etc. The castings are what we call them as VSMS. That is vertical spindle mill spare parts, the bigger ones. Then there is the grinding media as a mix. We work on a very long-term customer acquisition and maintenance basis.
We have to always make sure that after all the efforts that we put in, and as you explained in the past, it takes me almost two years, more than that in some cases, a little less than that in some cases, to convince the customer that their solution is right. Now, when a customer comes for an audit, our audit, he should never get that feeling that we do not have adequate capacity to take care of his requirement. Therefore, we are always a little ahead in terms of capacity creation because that process, even if it is a brownfield project today, it takes one and a half years. If it is a greenfield, it might take two years, three years if I have to procure more land and start from the scratch. On an average, theoretically, I can go up to 70-75-80% utilization.
Therefore, we are constantly year over year consciously taking care that we always have some additional capacity available given the nature of our business and customer relationships.
Okay, sir. So what kind of CapEx numbers maybe in the next two years' time frame?
This year, we have already guided for a CAPEX of about INR 180 crore. We have incurred about INR 40-odd crore. This includes, of course, investment in my new, I mean, the subsidiary company, MPS, plus my hybrid and renewable solar investment that I am planning to make about INR 30 crore in this year, plus some maintenance CAPEX, some general CAPEX, etc., plus some investment that we'll be making in Ghana and China. That is the new facilities that we are in the process of creating. On an average, I think if you want to take an average annual CAPEX, currently you may take a number of around INR 150 crore.
Got it, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Raman Keerthi from Sequint Investments. Please go ahead.
Hello, sir. Can you hear me?
Yeah, yeah. Clear.
Sir, congratulations on a stable set of numbers as well as on winning a recent order from Chile. I just want to understand that we recently won a Chile order. Can we expect a volume uptake in the second half of the year because it's an 18-month order? If my understanding is right, you will be starting to execute those orders from this coming quarter.
Yes. We expect the uptake to start from Q4 of this year, and it should go on as per the requirement of the customer. As Kunal explained, on an average, on an annual grant rate, you can take around 12,000-15,000 tons. This quarter, we may ship around 3,000-4,000 tons. This quarter, Jane, the last one, fourth quarter. We already started production.
Okay. I just want to understand what will be the realization difference when it comes to our average realization, which are around INR 163 versus this Chile order. Is it a better realization?
It is not comparable for two reasons. We only share the blended average realization number, where if it is grinding media, it has to be on the lower side. If it is castings, if it is liners, it has to be on the higher side. It ranges from INR 100-110 a kilo all the way up to INR 300-350 a kilo in terms of my different products. This particular order is grinding media, so it will be always on the lower end of the spectrum. Hence, it is not comparable.
Okay, sir. And sir, with respect to volume growth, what is the volume growth are we expecting in FY 2027?
Sir, as I said in the beginning of the call, we believe that from next year onwards, at least 30,000 tons plus annual volume growth is what at the minimum level we are expecting or targeting, I would say, given the new initiatives that we have taken over the last 12 to 24 months.
Sir, 30,000 additional, right, from the?
Yeah, of course. Incremental. There too, I want to make a cautionary statement here. We are waiting for the outcome of these couple of more very large successful orders, and then we will really give you a proper volume guidance by the end of this year. This is the minimum I'm talking about, the minimum targeted. It has to happen. This is what we feel.
By when are you planning? When do you expect the trial orders to be, the trial products to be converted into orders?
One order will be reaching the final stage of trials around December end. Another one will be by January end or mid-February. Let me tell you, these are the way we are working, but these are really most important or extremely, I would say, game-changer kind of situations where it can open up a very, very big opportunity because many people are waiting and watching for the outcome of these trials.
Sir, my final question is with respect to.
At any given point in time, already working with 20-30 mining sites. There are different stages, some of them small, some of them medium. These are the ones which are relevant based on the new approach which we have adopted.
Understood, sir. Sir, my final question is with respect to the overseas operation. We have a unit in Ghana as well as China. What's the current operational capacity, and what's the utilization of those capacities?
That is, I think I do not know where you got that information from. We have only announced a plan and an intention to set up plants outside India. We want to be very careful. We will be doing smaller modular plants. As we stand right now in the process of acquiring land, applying for approvals, we will share a firm plan once we have things on the ground. We have never set up a plant outside India. It is a greenfield facility. We have only announced an intention to set up two plants, and we are working towards strategy to do that. Once we have clarity, we will be revisiting some of those decisions in terms of scale, size, capacity, and we will share that update once we have absolute firm idea when we start implementing the plant. Till that time, our capacity continues to be in India.
The entire 460,000 tons per annum capacity is in India?
Of course. Yes. Correct.
Okay. Understood. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Varun Jain from Dahlia Capital. Please go ahead.
Yeah. Hi, good evening, sir. I have a couple of questions. My first question is that if I look at your H1, FY26, and H1, FY25 volumes, in mining, there is a minus 2.5% degrowth, but the other segment is growing by almost 10%, 9.7%. Is this driven by cement or thermal or what?
Nothing to read. These are just timing things, my friend. There's no meaningful reason for that. It's just water and the sales that added up to this.
This 10%, will it continue for this entire year like it was in H1?
250,000 tons, I can't explain for 2,000 tons plus and minus. I mean, that will happen. I don't know. Between getting an order, producing it, dispatching it, delivering it, noising, there are timing differences. Companies have shutdowns, maintenance downtimes, issues. I mean, all that happens. This is just an operational plus adjustment between two quarters. Nothing more than that.
Okay. Okay. The other question is that you have guided on EBITDA margin close to 24-25% as sustainable. Q1, you said product mix was very good, so you got 29.5%. Even in this quarter, it is close to 28.3%. Will the margin remain at these elevated levels at 28% plus levels for the next two quarters also, or does this quarter also have a favorable product mix or something?
I can understand a question if things are worse than what I told, 2%. If we have done better margin, I mean, I will let it be at that, right? Our guidance is what we believe we should share with everyone, and what we can defend continues to be at not even 24%. It's 20-22% operating margin. We've done better. There are many factors that come to play. We'll not be guiding a different number. That is something our performance is up for there. As a policy, we'll not be guiding a profit figure beyond that.
No, sir, that is fine. If you are not guiding, but can you tell us the reason why in Q2 it was so high, 28.3%?
Exactly what you said. There is foreign exchange, there is raw material adjustment, there is transport cost, there is product mix, and it is impossible for us to strip out every single item and keep explaining where. It is a combination of those things. I will just clarify a few things. See, one, you are right. Our margins are good. What we are factoring is that when I go for a significantly higher volume, that volume, when I start getting the orders, that volume is predominantly going to come from grinding media. Correct. Today, my product mix is extremely compatible. I have very high value-added, high profit-making products also as a part of the mix, which play a dominant role. When grinding media plays a dominant role, when my volumes go up sizably, naturally, the average realization and the margins would change.
That is why we are saying that we feel that while our guidance was 2022, on a more optimistic or a more positive note, I feel we have said that around 24 can look sustainable. We are doing better because we have an extremely favorable product mix. That is the primary reason we are doing very good. As the product mix changes, this can change. Therefore, in all wisdom, we are saying, please do not factor anything beyond 24 or 25 on a long-term basis. When I reach 300,000 tons or 350,000 tons or 400,000 tons, this can definitely change.
Okay, sir.
I can do better, but it's always better to guide or give a picture on a conservative side and then do a little better. This is the reality of the situation.
No, I understand, sir. I just have a last bookkeeping question. In Q2, FY26, your year-on-year realization has fallen, yet gross margin is up by close to 418 basis points. Is this like some one-time low-cost inventory you had or something? Also, in Q2, FY26, this export incentive has risen very sharply. Just last two.
No, sir, there are two aspects. One, again, although I may sound boringly repetitive, the fact of the matter is that a quarter-over-a-quarter gross margin movement cannot and will never indicate a sustainable trend because, for example, in one particular quarter, say if I have shipped out of that 60,000, 63,000 tons, if I have shipped 15,000 or 18,000 tons of liners plus casting, the needle can move completely different. In the next quarter, if that number falls to 12,000 tons and my grinding media goes to 40,000-50,000 tons, again, the needle will change. My more clear suggestion would be, please look at us on a little longish, maybe over an annual basis or a half-yearly basis, and then do not try to work out the trend or do not read too much on a particular quarter. Having said that, we are very comfortable. We are profit-making.
We are generating good cash. Everything is comfortable. We are working very hard on now major breakthroughs, and that can and will definitely make a difference in the times to come. If particular quarter में अगर कहीं भी कुछ भी change हो गया, it should not be read as a trend setter.
Okay. Okay. Just one last question I want to squeeze in. This order which you got from Chile, is that your first-ever order from Chile for high-chrome grinding media?
I'll tell you. We all know that Chile, Peru, they are very important markets from the point of view of copper, gold, or the minerals where we are targeting. Correct. We've been working on Chile for more than two, three years. This is the first major order we got. The idea was to show that this is a breakthrough. Internally, we are treating this as a breakthrough because we got that entry into a very tough market on a substantial basis. You get my point? That becomes a trend setter according to us. It also becomes a very important reference point. It's not the first order, but it is one of the first major breakthrough orders. I would put it like that.
Okay. So anything above 20,000 metric ton you would classify as a major order. Am I reading it right?
At the board level on the materiality, we had a discussion today. We are working on it. We will probably look at a 15,000 tons plus as a materiality threshold, but we'll come back to you.
Okay, sir. Thank you and all the very best.
Thank you.
Thank you. The next question is from the line of Deepang Shankar from Trustline PMS. Please go ahead.
Good evening, everyone. Thanks a lot for the opportunity. Firstly, considering there is substantial potential for high-chrome grinding media for further conversions in the market, what are the key challenges faced by the company in this kind of conversion? Especially, what is the price gap between the forged grinding media and high-chrome, and how has the gap widened over the past three years?
My friend, the question that you have asked is an extremely pertinent question which goes to the very core of our activity. First and foremost, let me elaborate a few things. I understand that you perhaps have not been tracking us for a very long time. What our whole forte is that this particular market of grinding and crushing in mining, we are focused on platinum—sorry, gold, copper, and iron. As an opportunity, this is about 2-2.5 million tons. Predominantly, the penetration of high-chrome solution, which are these conventional forged or other material solutions, the penetration is 25-30%. We are talking about 60-70% opportunity, which is a million and a half or even more for these three specific goals. Challenges are many. We are in India. Our solution is not only based on cost savings.
That is how we had initially started. The fact of the matter is that compared to a forged grinding media or any other material of construction for liners, our solution works in three directions. One, it straightaway saves cost of this consumable ware part, which is 8%-10% of this entire mining process cost. Point number one. That does not change the needle because there are multifarious challenges. These mines are extremely powerful, completely decentralized, localized, large operations. Nobody is interested if you go and say that, "Hey, I am going to save you a few hundred thousand dollars," etc., etc.
Over the last seven, eight years, we have now made us a very, very formidable force by changing our solution to, one, not only on cost saving, but saving on sizably increasing the throughput of the mines for the same or similar cost they are incurring on the same products that they are buying conventionally. If, for example, it is a gold mine where input-output ratios are extremely adverse, if I say that on a $5 million purchase of my grinding media or a liner or as a package that I am offering, if I am improving or throughput whose value is $25 million, $30 million in a year or $50 million in two years, against a $5 million or $10 million that he pays me, he is not only saving on the cost of this material, but he is completely changing his equation of the balance sheet.
Third, my solution now saves a lot of power cost. These operations, mining operations, are extremely capital-intensive. Our area of focus is grinding and crushing from the stagnant stage up to primary, secondary, tertiary, and beneficiation. These are extremely capital-intensive operations where if I'm able to improve throughput, save power cost, my solution goes far beyond cost saving. This is what we have earned over a period of the last three, four, five, six, seven years of very hard work. That is where I'm getting a little more confident when I talk that now I'm approaching mines not simply saying that I will save you money, but saying that I will improve your entire efficiency, and it will be a game changer for you, and you pay me the same price you are anyway paying. This is the difference. It is a bit complicated.
Our mining customers are very difficult people. It takes a very long time for us to convert. Now the opportunity is massive, and we believe we are geared to take that opportunity. I think on this call, beyond this, to spend more time on that question would be unfair for the other participants.
Okay. Okay. Sure, sir. When we look at this Magotteaux's available financial information, for the last two calendar years, they were able to grow at 10-14%. Have they gained more market share in this, or most of that has only come from the grinding media and not from high-chrome?
No, no, no. Magotteaux first, now our competition, frankly, has moved away, and we are still very, very focused on the forged grinding media players who are, so Magotteaux in their own, they have multiple plants. Magotteaux is a very complicated scenario. They have some 14-15 plants in 12-13 locations, some of them good, some of them not so good. They also have licensee relationships. Beyond that, we cannot comment. Frankly, we are not really focused on Magotteaux as a competition.
Okay. Okay. Lastly, in the last couple of quarters, we have been saying that there is inventory ramped down by large customers, potentially could be 20,000-30,000 tons of volume. Are we expecting these volumes to come back at least by next year?
It is not a question of volumes coming back, but our entire focus is on gaining incremental market share and volumes in new set of customers that we are talking. Of course, some of these volumes are bound to come back because now things have settled down quite a bit. We offer our solutions to several mines across the geographies, and therefore, we are not really worried about one particular geography or other agnostic if some volumes do not come back the way we anticipate from, say, Brazil or Canada. It is not that needle changer. Yes, overall, we are very focused on the new customer acquisition.
Okay. Thank you on all the questions.
One point I forgot to mention on Magotteaux, they are also into non-high-chrome, which can be giving more volumes. We are not into that segment at all. Okay?
Understood, sir. Thank you.
Thank you. The next question is from the line of Priyankar Biswas from JM Financials. Please go ahead.
Good evening, sir. Everyone okay?
Yeah.
Yeah. I heard from the commentary that right now, trials are going on at 11 large mines. If I look at it like a prospect pipeline, if on average, it's something like a 15 KT types opportunity, each one of them, would it be right to assess that it's almost close to a 150 KT type opportunity of all the 11 mines to eventually convert to high-chrome? Would that be a fair assessment?
Sanjaybhai was just trying to answer one gentleman's question where we've been asked in 20 different ways to give some guidance, and we're trying to explain why we are not able to share a guidance, right? Short of a guidance, what work are you doing? We have 10 mines we are working at. I think we are doing work at more than 50 mines across the world in different stages. There are at least 8 or 10 where we are in advanced stage. There are maybe 10 or 15 where we are collective work that we may be doing, maybe prospecting work, maybe more than 200,000-250,000 tons. Correct? That is at various levels of work. Where does it convert? How long does it take? Whether it's a job, I mean, there are plenty of things linked to that. The question is not the opportunity.
The question is a larger context in which we operate where there's an end component. The end component has been around for a long time. The customers are conservative. It takes time for them to, so all our effort is to make sure that our value proposition becomes better and sharper and more value-added. That's what we are doing, right? Which is what finally, and these are things, only when we do hard things do we make the kind of margin that we make. You get it? The idea is that for us, these are hard things. These are things where there is no straightforward signaling to say, "I will do this amount of growth," which is where our business acts, right? More than 10 mines, I think our prospecting work is far more.
To answer your question, yes, there will be at least 200-250 thousand tons of prospecting work that we are doing.
Okay. That's extremely clear. Also, like in the, let's say, the copper belt of Latin America, can you give me a sense of what is the high-chrome penetration there? The reason I ask is if it is a very under-penetrated geography for high-chrome, for example, then we can potentially see a lot of growth, I mean, multi-year types of growth. So what sort of area? Yeah.
Except for Brazil, Chile, Peru, which are the large copper-producing regions, there is absolutely none. What we broke, the breakthrough that we did is the first high-chrome in that region for copper.
Kunalbhai, if this region were eventually to convert, I am not saying it will happen in one year, but let's say in a four, five-year view. What can be the potential levels from this geography?
I think the region consumes close to, I think, fourth-tier sale close to 700,000-800,000 tons there. I mean, that's the math.
Even if we, let's say, reach a 20% penetration, that will also be a huge market. That would be the understanding.
You're right. That's what our whole efforts are. Bang on.
Okay. Very clear. Also, just if I can squeeze in, were there any impact from the tariffs in the U.S. so far? Are the U.S. customers still taking the volumes? How are the volumes trending over there?
No. We are continuing selling, and the customers are paying the duty. Mind you, this is not the reciprocal tariff. This was the sectoral tariff, which was initially 25% imposed in the month of February against steel and aluminum. Somewhere in May, this was increased to 50%. Correct? Customers are paying. They are continuing to pay. There is, of course, some negotiation, some slowdown with some customers who are a little reluctant to pay. We are not bearing. We sell only to those customers who pay the tariff.
Okay. If I can squeeze just one last one. Recently, a competitor has bought Molycorp. Do you think that from your business strategy, it would make a significant level of difference, especially in the grinding media or the mill liners as a result, if Molycorp really gets revived in a way? What are your views on that?
I think we were competing with Molycorp for the last 7, 8, 10 years. Molycorp with a $300 million debt is better, or Molycorp with a $800 million debt is better, or $150 million is better. I mean, yes, there are some ownership changes. There was a previous owner that tried lots of things to make changes in that. Forge is not our terrain. That is not a product that we operate in. Forge is a product, right? Hence, Molycorp's offering is a product. AIA is a solution company. We are selling an alloy-based product. We are doing design engineering on it, and we are ultimately offering a solution that saves significantly more than the investment that they make in our parts. To that extent, if a product company has gone through ownership changes, I am not sure how else would we respond to.
There is financial leverage, and that itself does not make us feel nervous. Otherwise, we have to keep doing what we have to do, right? We are staying in our lane and working to make sure that we focus on what we do well and making our offering even more extraordinary as far as value addition to the customer is concerned.
You are not too worried about it? Maybe the AIA business will remain as usual? I mean, nothing about it.
Nothing for us. We are absolutely, we are just an observer like any other participant in the trade. That's something that has happened. Good. They'll go through their own journey, whatever that means for them, right?
Yes, yes. Absolutely clear. Thank you so much.
Thank you.
Thank you. The next question is from the line of Devangbhesh from BD Enterprises. Please go ahead.
Yeah. Hi. Am I audible, sir?
Yes. Yes.
Yeah. Sir, majority of the questions have been answered regarding the 4,000-5,000 crore cash we were holding out, and we are expecting some good news coming within the next three to four months maximum what we are expecting. Now, my only minor question is because I think so there is a subsidiary company, Wellcast, and you have closed down the plant.
Yes.
Any update further on that? Because I do not think so that I tried to call multiple times on both the numbers which were given on the announcement, but not a single number was reachable. Can you just guide me out with that? Because I am holding some shares on that one also, sir.
Devangbhai, Wellcast closure, we already made an announcement that it was not viable for Wellcast to continue given the fact that it was a very old plant. It was a very awkward location. For us too, as a major shareholder, as a holding company, to invest anything in Wellcast was not making sense, more so particularly when we have created excellent infrastructure here in Gujarat. It was more driven by the commercial consideration. Nothing else.
Any plan to the company is going to get it merged out or because?
No. As of now, we have not made any such plan. In fact, if you remember, a couple of times we had tried to delist Wellcast also, but we did not meet with any success because, I mean, we did not get the adequate number of shares, which is statutorily required. This is where the situation is. As of now, it's a standstill.
Okay. Okay. That's fine, sir. That's all from my side because nothing else.
Done.
That's fine. Thank you, sir.
Yeah.
Thank you. The next question is from the line of Rajakumar from RK Investment. Please go ahead.
Hello. Yes.
Yeah. Thank you so much for the opportunity. Good evening, Sanjaybhai and Kunalbhai. Sir, just two questions. I see the standalone much better than your consolidated profit in June 2025 and September 2020.
Sanjaybhai, your voice is breaking.
Yeah. Can you hear me now?
I can hear you. No problem. Yeah. Let him continue. It's okay. Yeah.
Yeah. Yeah. The question is, your standalone profit performed better than your consolidated performance. Is it due to some of the subsidiaries not doing well, or is it more like you sold the material and the material is remaining unsold in the consolidated?
Mr. Raja, I want to make one thing very, very clear. My subsidiaries are, except for MPS, all of which is a small design-focused subsidiary company that we have recently acquired. All other subsidiaries are fully integral marketing-linked subsidiaries. Therefore, you should only look at our consolidated numbers and not my standalone or subsidiary standalone numbers.
Okay. Okay. Got it, sir. Yeah, I understand it now. Sir, the second question is, I see that note number 8 in your financial statements, you have mentioned that one of the subsidiary's factory has been shut down. I just want to know, given that you are expanding, we have not explored using that capacity for any alternate purpose. For any reason, you are shutting down?
I mean, one of the just the earlier previous question, I think that note pertains to the shutdown that we have recently announced of Wellcast Steel plant, where I explained it's a very old plant. The location in Bangalore, in the heart of the city, was not viable for us to make more investment into Wellcast so as to make it operationally viable. Therefore, in the interest of financial prudence, we decided to shut it down. Whereas you do not read anything because at the parent level, we have sizable capacities created here.
Okay. Okay. Okay, sir. Thank you so much.
Yeah.
Thank you. The next question is from the line of Lokesh Manik from Delma Capital. Please go ahead.
Yeah. Hi. Good evening, Kunal Shah and Sanjay Bhai. My question was for Siri on the new package solutions you spoke about earlier in the call and how it moves you away from the entire BD/DPI scope. So just clarification here is, is it now the technical description of the product that puts you out of the net, or is it the pricing of the combined solution as such that no domestic player can shout dumping?
I would put it like this that we are offering this as a complete package where individual items are, rather, they become insignificant. This package works as a complete total 360-degree solution where we move away from price discussion of a particular product. I mean, at this point in time, I can share only this much.
Fair enough. Fair enough, sir. Secondly, if you can just give us a sense of what would be the penetration of this solution in our existing business too as a percentage of total customers and volume, whatever you may want to share, just to get a sense of how we are progressing on that front, converting customers.
Most of our sales will come from solution sales. Most of our sales, going forward, large breakthroughs are linked to these solutions.
With the trial runs you spoke about that are scheduled to be completed in January, would it be a fair assessment, 30-40% of the business now would be these package solutions that we would be entering?
I think what Sanjay Bhai is saying is that important trials are in place. Those trials mean we will do more about it. This is efficacy of high-chrome grinding media. It's an efficacy for overall solution, right? It's a two-level approach that we have. The first breakthrough for high-chrome is done where there is some bit of solution. There is more of solution that we are working on, but these are all the minute we get into a rabbit hole where there's no answer, right? Just bear with us. All we are saying is there's interesting work going on. Once we have clarity, we will share numbers for people to build future guidance on. Just to clarify, when I say a package, it's a unique lining-based solution coupled with linked grinding media, which is offered as a package. My product remains the same.
It's not something new that I've invented, but it is the efficacy and the solution that I'm offering as a package, which is the game changer. You get my point? So liner मैं बनाता हूं, grinding media मैं बनाता हूं, वही मैं बेचता हूं. But it is linked and it is balanced.
Very good.
Which I think, honestly, no other competitor in the world is offering today. This is the uniqueness.
Great.
Which, through intense research, innovative design, there's a lot of hard work has gone into this.
Great. Great, sir. Last question was on just the substitute, if I may say, call it a substitute, which is a forged grinding media. Can, let's say, a competitor we spoke about previously, Molycorp, which has been acquired by one of the Indian players, and they have five years in that mill lining space. Can they also come up with a similar solution, or you think that high-chrome grinding media far outpaces that kind of a solution, even if they were to come out with it?
See, in all modesty and not to sound arrogant or anything, very honestly, theoretically, anybody can do research for 5, 10, 15 years and try to come out with something. Once Molycorp is a predominantly forged player, and we are replacing forged with our solution. Correct. Now, the other Indian player, competitor, you talked about, they are technically into liner. We are also into metal, foam, rubber, or composite liners. What we offer as a unique design and as a combination, and with a kind of a guaranteed throughput, etc., etc., I do not think they are anywhere near in terms of the capability. Having said that, yes, technically, theoretically, they can, but it is going to be very, very difficult. It will take a lot of time, if at all. I think at this point in time, nobody in the world is offering this. Globally, nobody.
Very heartening to know that, sir. Very heartening to know that.
Yeah.
All right. Thank you so much. That's it from my side.
Thanks.
Thank you. The next question is from the line of Mayank Bhandari from Asian Market. Please go ahead.
Thanks for the opportunity. Just one clarification on the gross margin. Are we baking in the lower steel prices here, and what would be the guidance? Will it improve sequentially from here on?
See, the gross margins are around 38%-39% generally. We always work with a complete pass-through kind of scenario. Currently, for quite some time, the prices are a little soft. Particularly, ferrochrome is quite a bit steady. If at all, if something and again, again, it's a function of product picks, as I said. It's not really something that causes us any concern. There's always a lag of one quarter or two quarters, and we normalize any changes in the cost structure.
Are we more dependent on steel or ferrochrome?
No, no. In terms of value, 50% of my raw material cost is ferrochrome, and 50% could be scrap. In terms of quantity, almost 70% is scrap and 25-30% is chrome. There is absolutely no problem in getting that.
Okay. Sir, on this high-chrome thing, I mean, as we might go back and touch that, we have a patent towards this product. We understand that. Is there any increased Chinese competition in this high-chrome market, or have we seen anything sort of that?
Chinese players are very much present globally also. I do not think anybody can come really nearer to us in terms of the solution or the advantages that we are offering.
High-chrome offering is there, but it does not match the exact quality that we offer.
Yeah. I mean, that high-chrome product that they offer is more like commodities. What we do is a part of a package solution, which is very unique.
Okay. Thank you very much.
Thank you.
Thank you. The next question is from the line of Vipin Goyal from Mareli Limited. Please go ahead.
Yeah. Hi, Kunal Shah. Sanjay Bhai. Vipin Goyal from Mirabeles.
Hi, Ji.
Heartening to know about the exclusivity of the bundle solution that you talked about for the two mines. Small question here is, are these two mines, two sites, completely new customers to us, or is it being done for existing customers where we are pitching them incremental solution?
It is for new customers.
Okay.
You can run through our last few transcripts. A lot of these questions will get answered. I do not want to take everyone's time on these questions. We are happy to take questions offline if you still have any. Yeah?
Great. And sir, just one more on the package solution that I mean, apart from the order, is it good to assume that as of now, today's visibility, 12-15 thousand incremental volumes are for sure for certain for next year?
Exactly. The new order that you got it, correct.
Got it. Thank you.
Thank you. Operator, just one last question. Yeah. Thanks.
Okay. The last question is from the line of Varun Jain from Dahlia Capital. Please go ahead.
Solution-oriented company because you have mill liner and grinding media. Now, even they have both of these things. They had a comment on Molycorp.
No, no.
They said that they are—let me say the question once.
Yeah.
Okay. Okay. So they basically had said that they have grown their high-chrome media from 0 to 62,000 MT in the past couple of years, and they target 200,000 MT. They have been growing in the past year. Can you tell us where this growth has come from and whether they have taken some market share from you or what?
We are not aware about their high-chrome business. We do not see any high-chrome from Molycorp or from Tega in markets that we operate in. There are lots of comments and things. It's not right for us to comment about it. Today, as we speak, they are taking my market. We don't compete with them in any other place. I'll leave it at that, right? They have a public commentary. I would rather that you go and clarify those with that. From our standpoint, we've clarified our guidance and the work that we are doing. I think we'll keep our questions to that. Yeah?
Okay. Okay, sir. Okay. Thank you and all the best.
Thank you.
Thank you.
Thank you so much, guys. Again, we are, like I said, largely our business continues as is. A great milestone for us in terms of our win in Chile. We hope to build on that in the next few years, create a very sustainable, meaningful presence in South America based on that. Hopefully, we'll have better news to share in coming quarters. With that, Sanjay Bhai and I will sign off and remain available for any offline questions you may have. Thank you very much, and have a good evening. Thank you.
Thank you, sir. On behalf of AIA Engineering Limited, that concludes this question. Thank you for joining us, and you may now disconnect your line.