Good evening, ladies and gentlemen. Thank you for standing by. This is Neera, 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. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to AIA Engineering management team. Thank you, and please go ahead, sir.
Yeah, thank you so much. Very warm welcome to everyone, and a good evening. Thank you for joining on this call, the second quarter result update for AIA. I'll dive into numbers and then we can get into, you know, Q&A. Also, Sanjaybhai is here with me. I think second quarter has largely been in line with the first quarter. We did 77,725 metric tons of sales, which converts to around 1,273 crores of revenue. Total EBITDA comes to INR 444 crores, which is 34.32%, and profit after tax at INR 323 crores. EBITDA and profit numbers are higher sequentially and also compared to second quarter last year.
Same numbers for the whole year, for the half year, if I were to compare to H2 last year, we did, you know, 151,771 tons, as compared to 146,000 tons, six months last year. Converting into sales of about INR 2,500 crore, INR 2,494 crore, and, which was INR 2,376 crore in the six months last year. EBITDA was INR 611 crore, which is INR 846 crore this six months, and tax was at INR 435 crore, which is at about INR 595 crore. So, there's an improvement in margin, and we'll go through unpacking some of those details.
Our other income, there was export benefit of INR 20.94 crore, which is in line with the, you know, the benefits under RCEP and duty drawback. Our other income, which is treasury, is at INR 63 crore. And both these numbers are largely comparable to the first quarter numbers. And a total other income of INR 62 crore, of which... Sorry, total other income of INR 62.32 crore and INR 20.94 crore of what we are considering operating other income. Our working capital is, you know, in sync with the first quarter. There's a slight improvement in inventory, and the total number of days now, working capital is about 95 days.
This is, this. You know, there is an improvement on this one metric, which was, which had gone up to 118-120 days, you know, right after COVID, when, you know, we had issues around freight and container availability. So there is a fair improvement, you know, on the working capital side. Segmental details, again, are largely, you know, comparable to the first quarter. It is 62,000 tons in mining and which was about 53,000 tons in the first quarter. 25,600 t ons in the other than mining. There's some improvement in cement or, you know, more than otherwise, compared to 20,790 in the first quarter.
So there's about 2,000-3,000 tons or 3,300 tons of higher sales in the second quarter compared to the first quarter. Our order books and other things are largely in line with, you know, what we reported in the previous quarter. With the caveat that order books are all. This does not include the value of contracts, which are longer term. You know, the supply happens under periodic, monthly, quarterly purchase order, and that's what we are reporting over here. Our net cash is now at INR 3,135 crores, you know, up from INR 2,757 crores end of June and INR 2,563 crores end of March. Our realization is also largely in line.
It's about INR 162 rupees a kilo, down from about INR 163-INR 164 in the previous quarter. Couple of factors, you know, that that I would, I would like to share. Just one second. Yeah. So a couple of things. If I compare first quarter to second quarter, there's been an improvement in raw material, you know, that just reflects the lower raw material consumed in this quarter compared to the first quarter. And raw material continues to be volatile. You know, ferrochrome has been between 120, you know, at its peak. It went down to about 100, it's back to 110-112 levels.
So it continues to be volatile and there will continue to be a pass-through going forward, you know, when we see these fluctuations coming on. So that's something that... So there's this quarter a reduction and we have a pass-through mechanism built on it. There's some improvement in power. That's a function of a higher captive renewable, you know, wind generation targets in this quarter. So there's some reduction in power costs on account of that. So there's a 2% sequential improvement in margin on account of these two factors, and both will normalize going forward.
Another thing, when we look at six months last year versus, you know, first half last year versus first half this year, there is also Forex, from what was about 79 or 83 +, you know, in this average is about 83+ in this first half. So there is, you see better numbers on account of rupee depreciation also. So all of that has flowed in. Our freight cost has also seen a reduction, and our pass-through mechanism. I think over the next two quarters, that will continue to, you know, you'll see, you know, margin adjustment on account of pass-through in freight costs. And one last thing is we still have one more quarter now where our product mix, you know, helps the realization as well as margin.
So, I think we expect our margins to, you know, adjust by, you know, between 3% and 5% over the next few quarters, and normalize to our long-term guidance. But, this is just to unpack the numbers for this quarter. Other highlights, we are having, it's called a sunset review, when the five-year anti-dumping, you know, duty gets, you know, passes through that tenure. And in Brazil, that sunset review has started, and we are in that process to furnish all information and go defend that, the duty over there. So that is one development. Second is, we completed the 30% acquisition of, you know, a company in Australia where we are part of the mill liner capability.
So apart from that, business as usual, we are on track to spend INR 500 crore between now and end of March 2025, where about INR 200 crore goes towards the grinding media expansion, INR 200 crore towards overall debottlenecking, INR 50 crore towards captive power and another INR 50 crore for land and other requirements. So we continue with that. We spent INR 100 crore this first half, this quarter, and, you know, we'll continue to spend from that budget right up till March of 2025. The 80,000-ton grinding media expansion is on track for being commissioned by end, by December 2024. I think that sums up our commentary as far as numbers is concerned.
I'll ask Sanjaybhai to chip in on the business outlook and also some tonnage conversation, and then we'll go on to Q&A.
Well, good evening to everyone, and thanks for joining this call. While Kunal has taken you through all the relevant highlights, just quick one or two small clarifications. I think what Kunal meant was that we acquired a 30% stake in that Australian company and not, as announced in the stock, on the stock exchanges as well. That's pretty strategic in the sense that it's a high technology design capability company, and it will help us to significantly push our penetration and into the overall, liner, mill liner opportunity. That is point number one. Point number two, as you would have seen, we have done fairly decent in terms of margins, while the reported margins of 34- odd % in Q2.
At the operating level, it is about 29%, as Kunal explained, we have the benefit of a very good product mix and, therefore, a very strong, and of course, reduction in freight, which has helped in improving the percentages in terms of comparability. On the CapEx on, on all of our medium to long-term opportunities, we remain very intact. As you would have seen, we have done close to about 151,000 tons of sales in the first half, as against 291,000 sales in the last year. And we believe that we have given an indication that we are working on several fronts, several exciting opportunities. And as we have, also demonstrated in the past, that conversion from coke to high chrome is our complete area of focus.
Based on all the key conversion drivers that we have and the focus as a market opportunity, as well as the technological wherewithal that we have. We do expect the incremental tonnage to also come up more or less in the same indicative range. The only thing is, it may take a little more time. That is the indication that is available today. So we may not be able to do maybe 25,000-30,000 tons for this year. It might be slightly lower. We don't know exactly how much it could be lower. It could be maybe anywhere between 10,000 and 20,000. Having said that, the overall direction remains the same.
It could be a little bit of tonnage shift from this year to next year, but that does not in any way change the direction or the opportunity or the strategy with which we are going. I think with this, overall business remains very bullish. We remain continue to remain very bullish on all the prospects, and I will open the house open for, for, for the Q&A. Moderator, over to you.
Thank you very much. Ladies, and gentlemen, we will now begin the question- and- answer session. If you have a question, please press star and one on your touchtone telephone and await your turn to ask a question when guided by the facilitator. If your question has been answered before your turn and you wish to withdraw your request, you may do so by pressing star and two. You 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 Bhoomika Nair, from DAM Capital. Please go ahead.
Yeah. Good evening, sir, and thank you for the opportunity.
Yeah.
Sanjaybhai, this, you know, what you mentioned right now, that, from an incremental tonnage perspective, we are looking at a lower number. You know, if you can just give some more clarity around this and why are we seeing this kind of a slippage into the next year, and what is the reason for the delay in the acceleration of volumes or, you know, slower pace of conversion? If you can just talk about that.
What I wanted to convey that from a conversion process opportunity, as well as the number of mines on which we are working, it remains absolutely the same or rather more. We are little bit more aggressive. The only problem is that the time is exactly not under our control. So today, when we were evaluating first half, which is our earlier target of 320,000-325,000, the indications available that there could be for this year, maybe a shortfall of 10,000 or 15,000 tons, just because the conversion is taking more time. You just can't control the time. What we wanted to convey was that there could be a little bit of slippage, but that does not mean... So there is a very strong probability that next year, the target, the volumes could be actually more aggressive.
Because the conversion opportunity, supposing I'm working on, say, 10, 20 mines, and we are looking at an opportunity of converting, say, 100,000-200,000 tons in immediate future. Out of that, some will happen this year, some may slip to next year. That's all I wanted to say. What our team told us that we can't control the exact quarter by rate, but there is absolutely no dilution from an opportunity standpoint.
Understood. Understood. So basically, what you're saying is next year could then kind of look so this-
Yeah, but again, see, let's remain confined to this year. So, for example, earlier we were saying a 25,000-30,000-ton volume growth, that volume growth may go down a little bit from, say, 15,000-20,000 tons. Having said that, next year it could be a little more aggressive, but I don't want to give you any number about next year till I reach Q3 or maybe a little closer to Q4.
Okay.
It's just the nature of business. We can't help it.
Understood. The other question was related to the, you know, Australia entity. If you can just throw some light in terms of what is the addressable market for this stake?
No, no, no. So, okay, we are looking at an addressable market for mill liners at, say, around 300,000+ tons for the metal segment. Correct? Now, we have one design capability already. This is one more incremental. So this particular company, the Australia-based company, was very strong in designing a wide variety of mill liners. So we have enhanced our designing capability and technological prowess. We also have a very good access to certain markets. So this adds one more feather in our cap for aggressively converting the mill liner opportunity and improvement of our volumes in that segment. That's all.
Okay. And so,
You know, we work with a very complex set of parameters, where, you know, it's very difficult to explain to you from a layman's perspective that what exactly... So, you know, as you know, over the last 10 years, our journey is to we keep on strengthening our technological prowess and our solution-giving capability. This is one more acquisition, which is more on our technology and design side. And they already have a steady sort of a business which they are currently doing. Correct? And we are supplying to them a lot of liners, so that it's a very complementary kind of a situation.
Okay. So, so does that mean that our mix in terms of accelerating growth, you know, while the overall volumes might be muted, but, you know, mix might shift a little more favorably towards mill liners per se, given our capacity?
No, volume may not be muted. Bhumika, the point is that obviously, grinding media is a product of interest, right? And, mill linings complement that conversation because we are bringing in all these other, you know, benefits alongside. So even with what we are doing in Australia, like Sanjaybhai explained, it is deepening the engagement with our customer, what he's saying, we'll go out and sell some more mill liners. Right? Our objective is to get the whole, piece of that grinding, circuit, which is, mill linings and grinding media. You know, and to that extent, grinding media to non-grinding media ratio will vary quarter-over-quarter, and maybe for a period, because, you know, something comes before the other. But generally, you know, the product of interest remains to be grinding media.
So, you know, think of it that way.
Okay. Okay. Sir, lastly, in terms of the margin profile, I mean, obviously this quarter was very, very strong, and last two quarters we've seen that, you know, very strong improvement in the margin profile. So do we think that, you know, why it may take some time to pass on the benefits of the lower cost to kind of clients, so this might remain elevated for the next one or two quarters, and then kind of settle down towards our medium to long term trajectory of 21%-23%?
I think, a little more realistic trajectory could be a little slightly above 23%-24%.... While we continue to report much better margins. So, you know, as I said, now we believe that this 23%-24% seems to be a very consistently reasonable bottom that we can look at. It could be fluctuating quarter- over- quarter, but it should maintain at a decent level. And, and we live in a very volatile world, right? I mean, raw material, like, we cannot imagine everything else is, you know, corrected back to a certain level, our raw materials have not, and they're going down and coming back up. So in that situation, you know, there is quite a bit of uncertainty that is there. And so going out and saying, here's a margin, is also a, a tough question for us also Exactly.
So I mean, trade and product mix will correct over a few quarters, and what that number will be, I mean, at least for next one year, like Sanjaybhai was saying, it may be upwards of 20%-22%, and over a longer period, it'll get normalized to, you know, around 20%-22% there.
Okay. Sure. Sure. I'll come back in the question with you. Thank you.
Thanks, Bhoomika.
Thank you.
Thank you. Next question is from the line of P.A. Gravit from Invest Analytics. Please go ahead.
Hi, thanks for the opportunity and congrats for the set of numbers. My question is on the sales realization side. What is the range expected for second half?
The sales realization?
Right.
It, it will vary between INR 150-INR 165, you know, depending on, like I said, a variety of factors. Rupee is there. Rupee weakening was not part of this, you know, ex-estimation when we had done last year, right? The product mix changes. So yeah, closer to INR 155, INR 160 over the next four quarters is what we can estimate right now.
I think earlier it was INR 165-INR 170, right?
So it is the same, more or less. Earlier, I mean, exactly, because factors keep changing. So, you know, today it is this. I mean, I don't recall when it was INR 165, INR 170, but for now, where we stand, INR 150-INR 163 is a fair estimation of where it could be.
Understood. And means what is the exact reason? Means why these delays are happening in the conversion, like you are negotiating with the customers and mining.
No, no, no. So you must... Let me elaborate. So we are working on, say, X number of mines, say 20, 25, 30 new mining locations, where there is a lot of debate. It is not a question of debate, it's a question of process. So you do trial and error, you engage into discussions with their technical guys. They may come for a further evaluation, then they may want to negotiate on the terms. This process typically takes one to one and a half years, maybe a little longer, in case of certain more complicated situations. Now, to add to this, there are local factors, there are other local, you know, limitations that also we have to counter.
So it's a sum of all this, where we have evaluated after the second quarter results, where at the board, there was a presentation done that how things are panning out and how things are looking. We felt that it could be a little shift from maybe one or two quarters, that's all. We have not said that the opportunity is gone. And as I said, this is 100% beyond us. We are trying our level best. Our teams are engaging. They are very excited. There are a lot of locations where we are working. And as I said, because our, technically our year ends by March 2024, we are talking of now two more quarters.
It is possible that the volumes could come much better in Q4 than we anticipate, but there's something that we felt that we should, whatever we felt internally, that this is what the reality we should convey to you. That's all we have said.
So going by that, by April 2025, can we expect 35,000-40,000 kind of volumes in April 2025?
I, I told the previous participant that we will come with a more precise number, but broadly, yes, you can look at least 30,000-40,000 minimum. But again, we will come to you with some more specific number as we approach the fourth quarter.
Understood. Sir, on your margin side, so which are improving consistency over the quarters, is obviously a good thing, but the problem is the reason for the same is not clear to me. Like, it doesn't seem the operating leverage, because our volumes are not that high, if I compare with the past.
You must understand, our business is not running on operating leverage. Our business is primarily driven by an extremely wide product mix, where we have products ranging from INR 80-INR 100 a kilo, all the way to INR 250-INR 300 a kilo. It's a function of product mix, then it's a function of pass-through. So where every quarter or every six months, when there is a price adjustment due to pass-through on the raw materials, in some of, in a few quarters, we could be at an advantage that raw materials have actually come down a little bit, but the impact is not passed on, and therefore, there could be a quarterly trend that might reflect in our margin. Secondly, more importantly, it's also a function of the currency. As you know, last year, average currency rate was 79.
Now, this year we are looking at 80-83. So that currency also moves in my favor because my raw – my imports or my foreign currency outflows are minimalistic or they are practically zero, and my inflow is very, very strongly positive. So it's a function. Now, it's very difficult to do a math and say that X is the contribution of Y factor, et cetera. So it's a mix of all these three factors which keep on fluctuating, but overall. Overall, our sustainable margin at this point in time definitely looks to be upward of 22%-24% is the pure operating data. Again, you know, freight has come down drastically, so that also has an impact when you do a math as per percentage.
Freight is an actual cost pass-through, but when you know the numerator and denominator contains a lower amount as a percentage, you see an improved percentage.
Understood. But like you mentioned, the first factor, like passing on of the raw material cost and all these things, but this thing can improve our absolute sales, but the margin and the absolute EBITDA can't improve significantly because of it. But here in AIA, what we are discussing-
It's a function of. See, this quarter we had a very strong sales coming from non-grinding media. Grinding media and non-grinding. Now, non-grinding media comprises of tube mill liners, then mining liners, plus all my VSMs, those large castings, where definitely our margins and profitability overall is much better, while we don't share the segment, internal segment wise numbers for strategic and competitive reasons. So our product mix plays a, I would say, a very, very significant part, and that's what is driving our margins.
So, what kind of product mix do you expect in the upcoming two quarters? Like, is it going to be the same, or, how it is going to shape up?
Sir, we have always guided that our long-term sustainable margin should be in the range of 23%-24%. We are not saying that Q3 or Q4. We don't do that. We don't share that quarterly margin number. We just give an indicative guidance. You have all my historical data with you, so I think, we should always strive to work and improve from what we are guiding. But this is what our guidance remains from a margin standpoint.
Okay, sir. Thank you. That's it from me.
Yeah.
Thank you. Next question is from the line of Ashish Shah from JM Financial. Please go ahead.
Yeah, good evening, and thank you for the opportunity. Sir, could you help me with what were the average raw material prices, like steel and Ferrochrome for the quarter, versus, maybe last year? So how has been the YoY movement?
Listen, it'll get little too granular to start sharing. You know, the idea of sharing raw material price was only to say that it continues to be at an elevated level and volatile. Otherwise, your raw material is there as an, from an accounting, reported number, you know, will be our, our average raw material price, you know, to a selling price. You know, we are, we will be unable to share exact, you know, price point.
Different grade.
Exactly. There is a different. You can just look at a ferrochrome and a scrap benchmark to see how things have moved.
Right. Right. Fair enough. Second point, sir, that while we have said that the freight rates, and we can see that the freight rates have also come down and historically from the, I mean, last, few, months, they have been coming down. But because of the whatever is happening around in terms of, the geopolitical issues, are you seeing that go up again? Have you seen any indications that in the coming months or quarters?
No, no, not yet. Freight rates?
Not yet. Right. And, just a last bit, so we obviously in our business model, we pass on the impact of raw material and freight, but, what happens to the currency depreciation? So is that a benefit that we, as a, as a structure, retain that or we also pass on some benefit of the currency depreciation?
We sell to a lot of countries, except U.S. and some countries, the end currency is not U.S. dollar, right? U.S. dollar is a transacting currency. There is always a importing currency on the other side, and a lot of our pricing is ultimately a cross-currency conversation. So, you know, yes, generally, a weakening rupee is better than an appreciating rupee, but it's not fair to say that all rupee weaken is, are, become, flows to the bottom line. Generally, you know, it gets adjusted in our pricing because other importing currency would also have moved in tandem with Indian rupee. So dollar price keeps getting adjusted, you know, as far as these cross currencies move.
Right. Right. Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Puneet Patani from CD Capital. Please go ahead.
Hi, good evening.
Yeah.
My, my first question is: How difficult it is to manufacture high-chrome grinding media, and what prevents any new player from manufacturing and scaling up the same?
My friend, of course, I'll try to do a little bit of justice, but for this, I think you need to understand our business in a little greater detail. I'll be happy to take it offline. But just to very quickly give you a heads up, we are 100% focused on providing customized solutions. So we understand a given application and design a part to suit that particular application. We would have retrofitted hundreds of thousands of mills and equipments across the world in more than 125 countries. We have more than 100 different alloy combinations, ranging from 3.5%- 32%. We have different heat treatment cycles for different types of solutions. It's very complex. So it's, it's, it's not easy for anybody to emulate the capability of providing a customized solution, though it's not a rocket science.
We are a foundry, and there would be hundreds and thousands of foundries across the world, but there are very steep entry barriers because once we provide a solution to a customer, there is almost 100% assured customer stickiness. We don't only reduce the cost, we reduce the overall cost of ownership and make their processes more efficient, we improve their profitability, and all this we do as a package, which is therefore very compelling. So this is all a culmination of several factors over the last 30 years that have given rise to all these entry barriers. So even today, on a very comprehensive basis, we're still an oligopoly between us and Magotteaux.
Okay. And, the second question is just the extension of the first. I understand that it is very difficult to persuade and convince a miner to switch to high-performance media.
Mm-hmm.
Is there a possibility that once a miner adopts high-chrome media from competitor, could employ undercutting strategy to cannibalize our customer base?
Do you mean to say they shift back to forge?
No, no. You have converted your customer to micro media.
Yeah.
Any other manufacturer, for example, Magotteaux, might undercut you and lose that customer or cannibalize-
Theoretically, it is always possible. Practically, it is very difficult because Magotteaux operates under different operating circumstances. We do operate under a very different set of circumstances. All our plants are in India. We have huge cost advantages as compared to Magotteaux. But yes, theoretically, it is very much possible. Practically, it is extremely improbable, if not impossible.
Okay, just one last question. On what attributes do you differentiate your products vis-à-vis your competition, and why we don't face a lot of competitions from China?
No, no. So first, China... I'll, I'll address the second part first. China, quality of grinding media and the approach of Chinese players, no way matches our quality standards between when I say our, it is AIA and Magotteaux both. So vis-à-vis China, we operate on a similar platform because we have the same or similar solution-giving capabilities. However, therefore, if you see overall, wherever we operate, there is, so there could be one or two odd instances of some Chinese also quoting alongside us, but when it comes to quality or when it comes to the addressing the customer requirements, I think there is no competition, no serious competition from China. This is point number one. Having said that, China itself is a large market for cement and also a little bit of mining. However, bulk of that market is currently addressed by some Chinese players.
We, as AIA, we are present in a very, very special range of products called larger castings or VSMs. We don't supply grinding media in China. Now, your second question as compared to Magotteaux, as I said, while we have significant advantages in terms of superior operating conditions, all plants in India, significant cost arbitrage, vis-à-vis the fact that Magotteaux operates with about 15, 16 small or mid-sized plants across various parts of the world. There is also another advantage that we are far more responsive and focused, and we are able to give much quicker and better solutions from a quality standpoint. Certain things, like, for example, mill liner technology, which is a patented technology that we have, some certain designs of mill liners, et cetera, we have access to, but I think Magotteaux does not have that.
So maybe from a capabilities standpoint, we score a little higher, but from an overall comparability, they are more or less the same, but it is just the equation of cost versus our capability.
Okay. That's it from my side, and thanks for the opportunity.
Thank you.
Thank you very much. Next question is on the line of Santosh Keshri from Keshri Financial Services. Please go ahead.
Hello, sir. Thank you so much for taking my question.
Yeah.
So I have two questions. One is about accounting. So, in the consolidated accounts, you can see that there is a withholding tax provision of INR 8.33 crore, that's there in the Note 4 to the financials, quarterly financials. So I was just wondering that, what it is about, if you can tell us? And secondly, if this is a withholding tax in the other country, then isn't it available as a foreign tax credit to you in India? Why should we make a provision?
See, this particular withholding tax was in one particular country where we were not—I mean, there was no withholding tax as such, but the government has withheld the tax. Our claim is for allowing us the refund, but that refund claim is pending. This is an African country where there are certain issues, and therefore this withholding tax has been kept as it is. Probably, I would... In our accounts, we would have written off this. I think we have written it off. Correct? Because it's not likely to be—We're looking for a refund, we are working towards that, but just to be conservative, we have shown that as a write-off, but we continue to, you know, work towards getting a refund.
It's a new jurisdiction that we are working with, and that is one tax issue that we are trying to... we'll figure out over here now.
Secondly, from a direct, I mean, this tax credit perspective, we do get tax credits everywhere as per the DTAA, there is no-
Yeah, yeah. Wherever it is available, wherever we get. There is no issue. This is the one specific subsidiary return.
Okay. So here we are not sure that FTC would come.
We have written it off. Yes.
Okay. Okay, fine. Now, my second question is about the demand situation and the order book. So I think we have spoken about the demand situation.
Yeah.
If you can tell us the present status of the order book, and give us some outlook for the future from the order book perspective?
Yeah. So the order book that we publish is the actual purchase orders on hand, which is close to about INR 700 crore generally, quarter-over-quarter. But most of our contracts are long-term. We don't make... We only produce on a made to order basis. We don't produce on stock and sell basis, except for the stock stock. So based on our long-term contract, which is typically three to five years or even longer, we have a very clear understanding and visibility of what is our run rate and how things are going ahead. Order book only reflects the quarterly situation.
Okay, so we are sure of whatever we are producing to sell?
I have a clear visibility of almost the entire year or even next year, but the order book only reflects the current POs on hand.
Got it, sir. So the demand situation is better than compared to the past two to three years, because I'll tell you the context where I'm coming from. The post-COVID, it was a consensus that the mining is the investors in mining is not so much, and then world needs lot of mining capabilities to come up in the near future. So if that situation continues or the mining capabilities, investments are done with, and now we are looking at the replacement demand or the, the normal demand.
See, from our standpoint, of course, while the mining industry may continue to grow at, say, 3%-4% or may not grow at all, let us assume a situation doesn't grow. What we are talking about is that our entire focus is on the conversion opportunity. 80%-85%, 70%-75% of the mining industry today does their grinding operations based on forged grinding media. Correct? Now, what we are doing is we have come up with a much superior solution. So between the ores, that is gold, copper, and iron ore, we are talking of a very recent opportunity of anywhere between 1.5 million-2 million tons, which have the penetration of 400,000-500 ,000 tons between us and a few other players like Magotteaux and a few players on the liner side. Correct?
So liners go separate, even then, we are talking of at least 1 million-1.5 million unconverted opportunity, which we are working on to convert. So this is a pure 100% conversion-based, replacement-based market opportunity, and therefore, we are agnostic to the mining sector growth. We believe our solution has a very, very significant benefit to offer vis-a-vis conventional forged media. The only difficulty is that the whole process is painstakingly slow because of a host of factors: local competition, local pulls and pressures, governmental roadblocks, like, you know, anti-dumping or some kind of a, so similar duty opposition, trade barriers. Then the mindset of the customer, the mining manager working with a limited budget, where he is not really jumping and clapping his hands when I show him the profit that he can earn. All those factors collectively make my journey very harder.
Having said that, we are extremely confident that this should happen over a period of time, and we see this as a long-term, five to 10 year growth opportunity rather than one or two years.
Oh, great to hear this, sir. And, at the same time, the customers who are convinced and who are buying your products, they are also, sort of, happy with the solution that they are getting?
Of course they are! When they keep on buying for life.
Okay.
They need me every 15 days, one month, one day, depending on how fast the consumption goes.
Okay, great to hear this, sir. Thank you so much for answering this in detail.
Thank you.
Thank you. Next question is from the line of PA Gravit from Invest Analytics. Please go ahead.
Hi, thanks for the follow-up. Sir, just want to know how economic activities are going on, like, what is the near to medium-term outlook in Australia as well as in Brazil in terms of mining?
Which country you say?
Australia and Brazil.
I think nothing is significant to report. I mean, the world continues as is. Copper and gold continue to be commodities of interest, given end use that they have, but nothing you know stand out to report in that sense.
Okay, okay. Okay, sir. Thank you. Thank you.
Thank you. Next question is from the line of Mayank Chaturvedi from HSBC Mutual Fund. Please go ahead.
Yeah, thank you, sir. Thank you for the opportunity. Sir, can you elaborate on this anti-dumping duty in Brazil? I missed some of your commentary on that part.
Can you for the-
You have the anti-dumping.
Right, so this is because we, the five-year period has just ended, and we are in the midst of, they are going to do a reassessment, you know, there's a whole prescribed method to go about it, and we are participating in that process right now.
We do it by March of...
Yeah, by March of next year, 2024, we should know the new-
... regime that will come in once, you know, they investigate and analyze data in last five years.
It is not disrupting my current supplies to Brazil.
Uh.
They continue.
But it could, if it goes against us, right? I mean, so what could be the volume profile that we're supplying to Brazil?
So, we went from last year, we did between 6,000 and 8,000 tons. This year, we should be doing a little more. We don't expect a very adverse outcome. In any case, the duty is there, right? So the worst can be duty continuous, which we are living with right now.
Okay. Okay. Thank you.
Thank you. Our next question is from the line of Raja Kumar, Individual Investor. Please go ahead.
Yeah, good evening, sir. Thanks for the opportunity. Sir, I want to know if you can give an update on the Peru subsidy and as well as the Canadian operations. The second question is, the volume guidance which you are revealing now, is it has it got anything to do with the impending global slowdown?
Not really. It's not linked to that, no. What was the first question?
Update on your Peru subsidiary and any update on the Canadian operations. And do you think the current standoff between India and Canada will impact us in any way?
Not really. Ours is strictly a trade matter, and, in any case, I mean, it's a matter that's under subsidies, because we are party to that, arrangement that is there as far as their last investigation was there. It continues. We're doing all we can to continue to sell in that market, and nothing to report on that front right now.
Nothing to do with the current standoff, whatever. Yeah.
Okay. An update on Peru, the subsidy?
The subsidiary, Peru, Peru.
Yeah. I think last quarter you mentioned that we have started a subsidiary in Peru.
Because a lot of these places, we have staff, you know, we have people on the ground. We need permanent establishment, and that requires us to be creating those companies. So it is more, structure thing rather than a market thing.
Of course, we continue to work very aggressively on the South American opportunity, including Peru, Chile, everywhere.
Okay. Okay. And also, this global slowdown is not going to impact us from a growth standpoint?
No, no. So, okay, let's just understand, this is Europe. There's hardly any impact of the overall European slowdown on our operation. South America, Australia, all those geographies continue to do pretty well in terms of mining. So no. Frankly, there is no impact of the global slowdown. That's right.
Okay. Okay, sir. Thank you.
Thank you.
Thank you very much. Next question is from the line of Suraj from Asian Markets Securities. Please go ahead.
Thank you for opportunity. Hello?
Yes, Suraj.
So, any update on our CapEx, and our CapEx, expansion plan?
Yeah, we are on track, as Kunal explained. We have a CapEx plan of INR 500 crore between this year, next year. This year, we should do upwards of INR 300+. That should increase our capacities. The grinding media Kerala GIDC Kerala plant of 80,000 capacity enhancement project should be over by December 2024. Then there are some other debottlenecking or reorganizing of plants which should add another 15,000-20,000 tons. So we are absolutely on track. So you should see about 440 going to close to 540 by end of next year.
Okay. Okay. Okay, thanks. Thank you, sir.
Thank you.
Thank you. Next question is from the line of Kamlesh Kotak from Asian Markets Securities. Please go ahead.
Good evening, gentlemen. Am I audible?
Yeah, yeah.
So just, I don't know whether you touched upon this. Can you help us understand how the mill market opportunity, how big it is? What are the key markets? Who are the key competitors? How we are positioned? That will be of great help. Thank you.
So mill liner market is about 300,000+ tons of annual consumption, and there are four... According to our information, there are three or four organized players, you know, operating in that industry. Our capacity, you know, for this, we've set up a new greenfield plant with a 50,000 ton capacity, and we've got about 25,000 ton capacity in our existing plant. So there's about a 75,000 ton market opportunity that we are looking in this segment. And the whole opportunity is not just to sell more than, to sell more liners, but it allows us to engage with these customers in offering them solutions around increasing throughput, lower power consumption, in sync with our grinding media offerings.
Mm-hmm. So is it more of a cross-selling opportunity for us, for existing clients, or we are tapping new clients?
Both, both, both.
Mm-hmm. Could you get names of who are the key players, as you mentioned? I mean, if you can help us.
Mill liner?
Uh, yeah.
Yeah. There is, there is a, a company called Elecmetal. You know, I can share that on an email. If you can send me an email, I'll share it with you. They've got these, you know, other names. I may not be able to spell each one, but if you can send me an email, I'll share, share all those details with you.
Sure. Sure. Thank you. Thank you very much. That's it from my side.
Thank you. As there are no further questions, I would like to hand the conference over to the AIA management-
All right.
AIA Engineering management team
We look forward to... You know, Sanjaybhai and I remain available offline for any questions, and we'll look forward to connecting end of third quarter. Take care and have a great. Enjoy happy Diwali to everyone in advance.
Yes, happy Diwali. Thank you.
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