Ladies and gentlemen, good day, and welcome to Q4 FY23 earnings conference call of Harsha Engineers International Limited. We have with us today Mr. Vishal Rangwala, CEO and Whole Time Director, Mr. Maulik Jasani, VP and Group CFO, and Mr. Sanjay Majmudar, Strategic Advisor. As a reminder, all participant lines will be in listen-only mode. 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 0 on the touchtone phone. I now hand the conference over to Mr. Vishal Rangwala, CEO and Whole Time Director. Thank you, and over to you, sir.
Thank you. This is Vishal Rangwala, and thank you for joining us on our quarter 4 financial year 2023 year-end investor call. While our CFO, Mr. Maulik Jasani, will give you more details about our financial numbers, I'm presuming that you would have had a chance to go through them already. With that, start with, in spite of, you know, very challenging times, right now, considering geopolitical tensions, severe inflationary conditions in our key markets like Europe and North America, we have posted a fairly decent performance for the quarter 4 and the year. Our top-line growth seems a little muted. However, that's a factor of, you know, commodity price adjustments, contracts we have with our customers. Accounting for that, we have recently grown at about 8% on a consolidated basis.
You know, I'm happy to inform that for us, the Indian market has performed very well, and it has reported a robust 20% around growth. However, you know, Europe and then by extension, our Romania facility has faced significant headwinds due to high energy cost and overall inflationary conditions, which has resulted into a lot of soft demands. Similarly, if you look at China, you know, during the year, we have seen a lot of lockdown imposition by the government and that led to reductions or challenges in demand side, as well as automotive slowdown there. Those areas, those countries, our market has remained muted. However, there is...
You know, I'm happy to report that there is a significant reduction in operating loss in Romania in financial year 2023. If I talk about our key growth drivers, I'm happy to inform that, from a medium-term to long-term perspective, those drivers remain very much intact. In case of bronze bushing, while, you know, our current market demand is little muted due to soft wind market in Europe and other places, we still have a robust order book and visibility. We are developing certain new products in this segment as well, and we remain confident that there should be a decent revival in second half of financial year, current financial year. We have witnessed a strong growth both in large bearing cages segment as well as from our Japan-based customers.
Further, you know, we believe that there's a significant CapEx announced by our customer base, who are global bearing manufacturers, they are setting up a lot of CapEx in India. We believe that we would be one of the major beneficiary of such, you know, cage requirements of these companies in the future. To that, you know, direction, we have ourselves developed about 333 new products in financial year 2023, which indicates a very strong pipeline buildup going on going forward. We're fairly confident that we can actually continue to grow in the market. While talking about financial year 2024, it's fairly difficult to give a precise guidance.
However, on a internal, you know, internally, we are trying to target about 8%-10% global growth for all markets combined. We are expecting that margins of Romania and China will be quite positive. Overall, we expect good margin growth for financial year 2024. Lastly, I want to kind of share that, you know, we have incorporated or registered a subsidiary, wholly owned subsidiary called Harsha Engineers Advantek Limited. This will be the vehicle for, you know, doing next green, greenfield project in India for Harsha. We are very close to identifying land and related formalities for execution of legal documents and so on. We'll be making some appropriate announcement in due course related to this.
With that, I will request Maulik Jasani to take you through key financial numbers from here on.
Hi, everyone, and good afternoon. Thank you, Vishal, for the business overview and updates. Let me quickly update on the major financial numbers. For the quarter ended March 2023, in our engineering business at the consolidated level, we have achieved revenue of INR 325 crore, against the INR 297 crore in the immediate previous quarter, and INR 330 crore in the same quarter last year. We have achieved consolidated EBITDA of INR 56.4 crore in the quarter four of FY 2023, against INR 55 crore EBITDA in quarter three and INR 54.4 crore EBITDA in last year's quarter four. For the whole year in financial year ended March 2023, the company has achieved consolidated revenue of almost INR 1,300 crore in engineering segment, against the INR 1,239 crore in the previous year.
EBITDA is achieved at INR 218 crore, with 16.8% of revenue, against INR 189 crore last year at 15.3% of engineering segment revenue. Our profit after tax for engineering business for the financial year is reported at INR 123 crore, versus previous financial year of INR 96 crore, with a growth of 28.6%. In our solar segment, we have achieved revenue of INR 65 crore for the whole year, and profit of INR 0.19 crore for the financial year 2023. We have achieved sales of INR 30 crore in our bronze segment for the full year. While our business with the Japanese customers has grown by 34% year-over-year in last fiscal year, my precision stamping business has grown by 19% year-over-year.
Our LSE business has grown around 16% year-over-year. Our CapEx during the year has been INR 74.4 crore at consolidated level, which includes the work in progress also. Our engineering business, our working capital cycle is 128 days for the year ending, against the 129 days last year, at a consolidated level. Our net borrowing at standalone level is at INR 225 crore as investment negative, while at a consolidated level it is INR 150 crore. Our gross borrowings at standalone level is INR 88 crore and INR 177 crore at consolidated level. We have installed hybrid captive power and the project of 3.71 megawatt at Gujarat, which has been commissioned, and we will see the full impact of that project in the coming fiscal year, 2023-2024.
With this brief on the financial numbers, I hand it over to the operator for Q&A from the participants.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may press Star and one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press Star and two. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Nikhil Rungta from the Nippon India Mutual Fund . Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Am I clear?
Yes, yes.
Yeah. Just a couple of questions from my side. To start with, on this Japanese customer, where you mentioned, like, we have grown around 34% on a yearly basis. As a percentage of the revenue, or growing business, what percentage would be Japanese customer now?
Okay. Japanese customers roughly contribute around INR 60 crore in absolute value in our total turnover of INR 1,300 crore in engineering business.
This year, FY 2023.
For FY 2023.
Okay. Here we can easily see a similar kind of growth going forward, I think, right?
Right, Vijit.
The base is low, no? See, what is happening, currently we are still at 2% or 3% of the wallet share, so we are aiming at at least 10%-12% wallet share over the next 2 years.
Correct. Correct. Coming to this bronze bushing, you have clearly indicated in your presentation an outlook that you see improvement only in second half of FY 2024. If you can give some more detail and highlights on this particular business, because the bronze bushing was one of the key highlights during our IPO times as well. What exactly happened, and why is it that it's only H2 that you see recovery?
Yeah. We spent FY23 actually ramping up the production at our end, making those investments. All that was going on. There was already a demand in place, and we were replacing imports and that kind of situation.
However, while we were doing this, you know, we have talked about starting quarter 3 and early quarter 4. The wind market just started softening, and so we have the business remains intact, but demand has softened. We are continuing, we have now become the significant supplier in that segment to our customers. That overall, their demand has softened last, since last few quarters. We have received indication from our customer that in quarter 3 and quarter 4 is likely this revival will take place. Overall, the, you know, business remains intact. What we had projected that we will do, you know, in that maturity, full maturity of this bushing awarded business, we will do INR 125 crore plus business. That potential still remains intact.
Short term, we are seeing dip considering the wind markets. Based on some indication, we are seeing that this will revive in second half of financial year 2024.
This INR 125 billion annual target number at optimum level? Yeah. Correct.
Okay, okay. On this hybrid captive power project which we have mentioned, what type of benefit do we expect in FY 2024? You indicated the benefit would be visible in FY 2024. If I put that into numbers, what type of benefit we get?
As it is a hybrid project, mix of wind and solar, our estimate out of this project is to have an INR 4 crore after-tax benefit for the full financial year.
Okay, okay.
It will depend on the generations, but yes.
Okay. Sir, coming to our new investment or new subsidiary which we have formed, Harsha Engineers Advantek Limited. You have indicated that you will be investing approximately INR 350 odd crores or so there. Where will this funding come from? Because whatever IPO money was there, I think you used it to repay our debt. Where will this funding come from?
Nikhilji, as I mentioned in my speech, currently we are having a net borrowings of INR 225 crore at standalone level. If I see the gross investment is around INR 290 crore plus, that is the first. Second thing, this INR 350 crore is an enabling provision. We will do the investment in a partial manner, in a tranches, as and when required in next three to four years. This INR 350 is also the best estimate we have as of now, based on the need of the CapEx as well as working capital in that business. We believe that we will have sufficient cash accrual also by the time we will deploy this large fund of INR 350 crore, if we deploy fully INR 350 crore in that entity.
As I said, this is more of an enabling provision, and we will decide as the things will improve, and we will start investing in the new entity.
We don't necessarily mostly taking too much of the next.
Yeah.
It will all from cash accrual, mostly.
Okay, okay. Can we say that our intended CapEx plan would also be similar number or, in our standalone entity also there would be CapEx?
There will be CapEx in our standalone entity, and this INR 350 includes the working capital need also of the new entity.
Okay. The last question from my side. This itself, 2024, what type of CapEx are we planning?
For FY 2024, including the greenfield expansion, it will be INR 100-130 crore.
Okay. That's all from my side. Thank you so much.
Thank you.
Thank you. We have the next question from the line of Harshit Patel from Equirus Securities. Please go ahead.
Thank you very much for the opportunity. Sir, first question is that we have grown about 5% in FY 2023 in our engineering business. I assume here that the pricing of the products would have declined. Could you give a breakup between how would have been the volume growth both in India business as well as overseas business, and how much impact would have been there because of the decline in price?
Harshit, it is, you know, there were two things going on for the year. You know, the first half of the year, prices were increasing and then they were decreasing, it is a little complex thing. Having said that, as I mentioned, you know, we estimate that we have grown about 8% on volume basis for the year. That's our global estimate. On India basis, this number would be little higher. We grew on absolute terms about, you know, 9% plus on engineering business standalone. We estimate that about 12%-13% would be a rough volume growth on a standalone basis, approximately.
Just to add, Harshit, here, it is also a combination of product mix. As we speak, in our initial commentary, the growth in bronze business, LSE business contributes.
... in a different volume numbers. It is always a mix of multiple things, but yeah, this is the best what we can explain.
Very well, sir. My second question is on our Romania and China facility. What were the full year sales and margins posted by this 2 company? How do we see Romania margin panning out over the next 2 years or so? Can we reach the historical margin levels of around 7%-8%? Not like right now, next year, but let's say by FY 2025-2026, kind of a time frame.
Yes, at the EBITDA level, we have a very strong belief that Romania is able to reach that historical margin, 7%-8%. We will definitely have a significant improvement on the margins from, you know, last year to FY 2024. As you rightly said, in a year or two, we expect to reach that number, what you mentioned, 7%-8%.
Last year, that is FY 2023, currently Romania was pretty low, so was China, and we were talking of very insignificant margin. Over the next two years, I would believe that we can reach about 8% in Romania. I think by 2023, 2024, we will have to wait, but margin is about 5%-6%, which can go to 7%-8% in 2024, 2025. China can easily do about 12%-13% against current 6% or 7%. This is the way it will pan out, and that's why we made a statement that, you know, both this subsidiary should turn positive this year.
What was the quantum of sales that we have posted in financial year 2023 at both these two?
You mean by quantum means what was the revenue from both, right?
Yes, sir. Yes, sir. The revenue from Romania and China.
The revenue from both the entity put together is INR 360 crore, roughly.
What would be the split?
The profit PBT at both the entity put together is INR 4.5 crore.
Okay, understood. What would be the split in the 360 group that you mentioned? How much would be...
On the revenue, China has achieved around INR 124 CR and Romania around INR 238 CR.
Yes, sir. Perfect. Thank you very much for taking my questions.
Thank you.
Thank you.
We have our next question from the line of Amit Anwani from Prabhudas Lilladher. Please go ahead.
Hi, sir. Thanks for taking the question. My first question, again, on Romania. Obviously, as you highlighted, that we are expecting to turn around their FY 2024 and FY 2025. What is the... You know, rationally, what is going to change there, and, you know, right now, what is the contribution of semi-finished versus large cages, and what is the utilization volumes? Any more color if you could share on that?
Yeah. Romania, I think the biggest issue currently, apart from the energy crisis and related some cost, still left, you know, challenges. Bigger issue is the volume and the recessionary environment in Europe. Plus, combine that with, you know, wind market challenges overall globally. From a semi-finished to, you know, finished cage, I think we are still at about, I'll check, but I think
Semi-finished, 80 plus.
Yeah, 80+ on the semi-finished side and remaining on the finished cage side. What's going to improve definitely is volume, both on the semi-finished and the finished side. On the semi-finished side, it is a competitive market, and it is driven by volume. We are not at the optimal volume, considering, you know, very soft demand in the whole year for Romania. Volume improvement, even on the semi-finished side, will help on the, you know, margins. As well as the cage finished product has significant better margins, and that we are expecting to grow significantly. We had grown to a level, and then it has kind of, you know, crashed or almost reduced significantly because of this demand situation.
Combination of both is, you know, both is what we believe that, we will be able to achieve margins, and the directional growth, we are expecting.
What was the utilization this year?
Um, on the-
Yeah, on the inside, it is around 60% of our current usage.
Yeah, for, I think more like, for 50% on semi-finished side. On the finished side, product cage side, almost 50% around that. 50-50, somewhere in there. Very low utilization currently.
I'm talking about recent couple of quarters.
volume growth- Yeah, go ahead.
No, no, it's okay. Go ahead.
Yeah. Volume growth, which, you are mentioning, is it from the same customer or are we, you know, diversifying from where exactly we are thinking that the volumes will come back? Are we expecting scenario has completely started improving there, with respect to energy prices or volumes? What is the, you know, expectation coming from?
So, um,
I'm sorry, Kanchirak sir, you're getting an echo.
Yeah. Let's try again. Maybe it will go away. It looks better now. Yeah. From a volume growth point of view, we are expecting actually to grow with existing customer. We are expecting actually that some of the business which is off today will improve, which is already won, already developed. You know, we are a regular supplier for that business, but the demand is significantly muted. The second part of it is that we are actually adding new customers in specifically Romania or the European region. Third element is that we are also closely working with our customer to outsource some of their cage demand. Combination, the growth will come from a combination of all three for us, specifically on the finished cage side.
Sure, sir. My next question is on wind bushings, which we are expecting from H2, the demand will come back. Just similarly wanted to understand, are we really expecting that within 6 months, things will be normal? How much was the bushings contribution for FY 2023, and any expectations for 2024 or 2025?
The FY 2023 bushing contribution, as I mentioned in my speech, is INR 30 crore for the year. We are short by around INR 10 crore of our expectations. For the guidelines, let Vishal also give you inputs on the market estimates and the guidelines. See, right now, we are expecting we are gonna continue to grow in the bushing market. We are expecting to do a revenue of about, you know, roughly INR 45 crore for financial year 2024. This is our very early estimates, and we have received some indication from our customer for revival of wind business. We feel that we could potentially improve on this number, but it is very early right now.
Definitely, we have already accounted for some improvement in business in second half, based on the indication we have received. Then we are closely watching the market, and how it is behaving, and very hopeful that wind market will revive in second half and primarily calendar year 2024. It is, based on our customers' indication, looks very positive.
Sure, sir. My last question-
This is a very conservative estimate. Our earlier estimate was actually aggressive.
Yeah.
30 to 45 is again quite conservative, and it can change as we move ahead.
Got it, sir. last question on if you could share the business contribution from bearings and components, bushings, plastics for FY 2023.
We have disclosed what best we could disclose.
Sure, sir. Thank you.
I think you already have the bushings number. Yeah, we have given the best possible disclosures, Amit, yeah.
No worries. Yeah.
Thank you. A reminder to participants to press Star and one to ask a question. We have our next question from the line of Pradyumna Choudhary from JM Financial. Please go ahead.
Yeah. Hi, sir. Three questions. First is, my understanding is that currently, 38% of our engineering revenue comes from India, right? I wanted to understand, like, what is really stopping us from growing this pie, like, because ideally, India is a fast-growing market, and this pie should be. Is it possible to achieve it much more from here in terms of contribution to total revenue, or have we already captured most of the opportunities on the Indian side, considering our high market share here? Second would be, why is the wind market slow in Europe? Like, considering all the energy prices drops and everything, you would usually expect that all these alternative sources would have a good demand right now.
Third would be regarding the low margins in our foreign business, foreign location, China and Romania. I do understand the utilization part that we are operating at less than ideal utilization, but energy prices and all these things, usually my sense is, considering that our product is a very low % of the total bearing cost. I would expect a better pass-through of other issues, like the energy issues or raw material prices. Like, I would expect a higher pricing power with us, considering how critical our product is, and at the same how small its contribution to total bearing costs is. What is really happening on that side? These are my three questions.
Look, to start here, start with your, you know, comment about India. India is a 38% for us, as you rightly mentioned, and it has grown very significantly for us last financial year. Almost to the tune of 20%, India as a market. We are very, you know, bullish on India specifically. I talked about, you know, our customers are setting up lot of CapEx over next two years. This is a very positive effect of China plus one. We are quite bullish, and we will continue to grow at least a double digit in India. At the end of the day, it is still, you know, 38%, 40% of our market.
Obviously, our overall growth is driven by how the globe grows. That kind of creates opportunity as well as challenges. I've talked about, you know, beyond India, there are a lot of opportunities on insourcing to outsourcing, you know, building our portfolio with Japan-based customers or Japan origin companies. All those remain additional opportunity for us, which we are working and fairly confident that we will outpace the global growth in a significant way for bearing, specifically bearing side. Additional growth will come in from bushings and few other parts we are working on. Coming to your second question about the wind market, again, that's something I'm not in a position to actually qualify anything specific.
What, based on what I've heard, you know, wind market is driven and significantly supported by the government directives, subsidies and all that. Potentially during COVID time, a lot of funding went into, you know, other directions. That's the explanation I've heard out from our customer. You know, again, not, doesn't make me expert here, so difficult to actually say why. We also believe that directionally, what you mentioned, that this is something will grow, eventually turn around. Definitely, if you look at global projections from various consultants, you know, or the predictions from various government, considering the carbon neutral goals, you know, zero CO2 emission goals and all, et cetera.
Absolutely, we are very bullish on this market, in the mid to long term, we are very confident that it will grow, and we will win a lot of opportunity within that. On the third, aspect of low margin, I'll break this down into Romania and in China. Romania, we have talked about this is, we do a lot of 80% plus of the revenue is coming from semi-finished products, which are castings, relatively energy-intensive products. That's where the volume matters and the margins are low at the EBITDA level. On optimal stages, what we are expecting is about 6% margins, 6%-7% margins on the semi-finished side.
On the finished product side, we are expecting a good 14%-15% EBITDA level margins. That is also currently muted. As we mentioned, you know, almost it is down significantly from, you know, its normal cycle. Both those will come back, thereby Romania margins will significantly improve. Obviously, the reason for low number is semi-finished. On the China side, also a very up and down cycle, very challenging market. Specifically last year, we have talked about there was a significant one-time cost related to reprocessing slag and that equipment breaking down. During COVID, we didn't get an approval to restart that equipment and then ultimately resulting in, you know, selling that inventory at loss.
Those were the two, you know, very distinct reasons for us to have a relatively lower margins there. Again, reason gives us confidence that they will actually do much better. They've actually done much better. We have done a year-over-year improvement in FY 2023. We think that this improvement will continue in FY 2024 and beyond.
Just to add quickly on the India side, as you know, we have been, we have a very lion market share, frankly, with all the key major customers who that really matter, the global ones, where it is 80%-85%+. Lots of new investments are coming, and we believe we should be the major beneficiary in those investments, and a significant business that is expected to come. As Vishal explained, there is actually a little, relatively still a smaller market, and therefore, we grow with whatever capacities are growing, either for India or for outside India. On the margin side, just very quickly, there was a continuous process of pass-through, which we went, for most of the year with always a lag.
Therefore, you know what happens that when there is a lag, the impact is hit in your P&L, so the benefit moves a little low later. Therefore, the fixed overheads are on the higher side, therefore, margins appear to be very, very low. Having said that, if you look at Romania 2021, we did a decent margin in Romania. I think that is why we feel that now it seems that the pace of inflation as well as cost increase has slowed down a bit, and therefore, the indications are that Europe should start reviving, and we are hoping for the best. As we all very clearly said, we are closely watching. Let us go as we move ahead in the year, and probably we should have more clearer things to say.
Understood, sir. Just one follow-up here. In Romania, you said 80% is coming from semi-finished products. What is the plan over there? Like, can we move up the value chain? Like, how much can we, how much of this 80% can be reduced to maybe a much lower number, so that a lot of it is from finished products, where the margins are much higher? Second would be, considering the cost pass-through thing that you mentioned, so maybe one. I'm not asking for you for the exact quarter where you'll start seeing improvements, but maybe in the next couple of quarters, at least, if the situation remains similar, we should expect improvement, right? Because that's when most of the pass-through effect can.
I think, on the first one, you know, in Romania specifically, our means of increasing the finished % is actually growing in the cage market. We are fairly confident that we will grow there. By virtue of that growth, we expect that, you know, semi-finished will become more like 70% and going forward, 60% when optimal volume comes in for finished products. We don't intend to reduce the semi-finished, per se, directly, we continue to work with our customer to go into semi-finished to finished portfolio. That journey will continue.
On the pass-through, I think we feel that most of the pass-through has happened, and in quarter four, most of the lag effect was addressed and removed. Unless prices now go further up or down, we expect that, you know, this quarter four is a good indication of a stable situation, unless, again, as I said, if it changes further.
Understood. Understood. The only concern is there's been a lot of headwinds we've been facing as a business, which is fine, like, because of the global situation and a lot of. Yet there are a lot of long-term tailwinds in our favor, as you explained, even during the IPO. It's just that one is not seeing the numbers right now, that's the only concern. All the very best for the future. Thank you.
Mr. Chaudhary, does that answer your question?
Yes, yes.
Thank you. We have our next question from the line of Shirom Kapur from Prabhudas Lilladher. Please go ahead.
Hi, thanks for the opportunity. Just first question, you mentioned you saw about 19% growth in your, stamp components business year-over-year. What is the value now, on an absolute number?
On the stamping business, our volume is INR 45 crore for the year ended.
Did you say INR 45 crore?
That's right.
Yeah, 45. Okay, great. So that's. Yeah, thanks. Second, is regarding your solar EPC business, you know, what's the outlook? We saw about INR 80, INR 82 crores in FY 2022, about INR 59 crores in FY 2023. What's the outlook here? We also saw about 1.5% margin. What is the margin and revenue outlook for this for the next two years?
It's difficult to exactly clearly define that. It's a little bit volatility and dependence on, you know regulatory requirement, I mean, guidance and all the subsidies which are coming in. In general, we expect it to be in the range of INR 60 crore-INR 80 crore top line. And the marginal improvement or marginal bottom line is what we are expecting right now. Obviously, we think that there will be some improvement from last year on the bottom line also. Beyond that, difficult to project.
Frankly, you know, as we have been maintaining in the past, frankly, not an area of growth, neither from a capital allocation standpoint. You know, it will just continue to be in a little bit in this range bound, a bit marginally positive or virtually, I mean, so it's not an area where we are focusing and therefore, you know, this is what it is, actually.
Are there any plans on, maybe eventually, divesting from this business to solely focus on the engineering side of things?
We are open to those options and looking at it. Right now we don't have a clearly defined, accurate, I mean, final plan in place.
Understood. My next question is on the Harsha, the advanced activity subsidy that you are incorporating. When do we expect, could you give us a potential timeline on when this will be set up and when it will start contributing to revenue? What the company has been-
The broad plan is, we will have our setup completed during this financial year.
Yeah.
We are working in that direction.
As we explained, the subsidiary has already been formed. The land acquisition process has started. Hopefully next one or two months, that should be over. We will, by that time, we'll frame and conceptualize the whole phase-wise capital expenditure program, capacity plan, et cetera. In next couple of quarters, things will become very clear to you. This project will take minimum couple of years, 1 to 3 years, in a phased manner.
Understood. Thanks a lot. Just one last question is on, you know, within China and Romania, if you could provide us with what the volume growth has been. I know you gave us the revenue numbers, maybe if you could provide us with the volume growth. Within Romania, if you could give us a split of volume growth between the semi-finished and finished housing.
I'll tell you, first and foremost, volume is a misnomer. It's very difficult, and we will rather be happy to go with the numbers for the very simple reason that it is a function of a vast multitude of products, some of them very high volume, some of them low volume. I think it's not possible for us to give you any specific breakup of volumes within the product groups.
Okay, sure. At least on an overall level between China, at least in China, there's one-.
No, there is. In fact, there is no volume growth either in China or in Romania, in 2023.
Okay, got it. The 20% of growth that you mentioned in India engineering, the revenue I see grew by about 10%. Is it 20% on a volume basis?
It's India market. Yeah.
The volume of the market overall has grown 20%, not necessarily, Harsha's revenue is in the market?
No, no. Harsha's revenue from Indian market has grown 20%. The standalone company, which is actually exporting to multiple locations, beyond India, has grown engineering side of it, 9.5%-10%, as a standalone company. The Indian grown, almost 20%.
Okay, got it. That's all for me. Thank you so much, and yes.
Thank you. We have our next question from the line of Parth Patel from Unifi Capital. Please go ahead.
Hello. Thank you, sir, for the opportunity. I have 2, 3 questions on the side. I just wanted to understand that you are doing this INR 350 crore over the next 2-3 years. It is comparable to a blanket style. First, I want to understand the rationale behind this CapEx, right? I think we are at 60% capacity utilization in our existing capacity. Is there an option to expand using a debottlenecking or brownfield expansion in the current facility?
Parth, basically, one, this INR 350 crore, what we have mentioned, is a total, you know, potential, actually, investment, including working capital we are projecting. Again, this is, as Maulik Jasani mentioned, that this is enabling provision we have done. Now, This is the maximum, you know, we think that, this company will need in terms of CapEx as well as working capital over next 2-3 years. Now, our macro plan remains INR 100 crore plus investment CapEx over next 3 years. In general, that is the direction. Some of the CapEx will still go into our existing facility for de-bottlenecking, as you rightly mentioned. This, you know, that will continue.
We will try to utilize more and more capacity even within the existing facility. Now, if I look at, you know, various capacity within our existing facility, there are certain capacities which are highly utilized, and they need additional expansion, and we don't have a, you know, existing space, so we have to go with a complete greenfield project in that case. Some of the capacities where there are opportunities to, you know, continue to grow within this campuses, and which we will continue to do by investing in some de-bottlenecking CapEx equipment and all that. That's the thought process.
Karthik, just to add to what Vishal explained, you see, from my present plans that I have, I can go up to maybe INR 1,700-1,800 crores. The problem here is it takes 2 years for you to set up a new plant. We are working on several directions of growth. It's a long-term story, so by the time business is available, I have to have the capacities, and that is why this greenfield. Existing plant, I don't know whether you have seen, but if you have, many people have visited us, they're almost chock-a-block in many production areas. Some of them are so tight that we hardly have any scope or any room for expansion. Greenfield is more from a futuristic next 3-5 years, rather than one or two years.
Okay. Just want to follow up, what will be your asset turns on this new greenfield facility? There might be some technology improvements and some kind of automation, the assets will be better than the existing capacity. Second, what is the product mix in this greenfield capacity? Will it be a completely new kind of product, like, larger bearings? How will the product mix be?
Karthik, as a blended asset turn, we continue to maintain it at 1:2, and will not be able to specify on a product category level, and it will continue even in the new greenfield facilities. On the mix aspect end, it will continue to be a 1:2. While on the what we will grow over there is, as Vishal mentioned, wherever we have a business coming and there is no capacity here, that additional business will go to the new facilities, as well as diversification, where we are working on our core competency. We'll not be able to provide much insights beyond this as of now.
I mean, we are still at the planning stage. Maybe we'll get back to you within next couple of quarters on the exact plan.
Sure. Okay, sure, sir. I think that's it from my side.
Thank you. We have our next question from the line of Shailesh Khatri, an individual investor. Please go ahead.
We have installed capacity of 2.7 megawatt CG at Gujarat, correct? Hello.
Okay.
What is that, WTG?
I will not be able to provide one-on-one cost.
We'll have to do it offline. I'll have to check.
Yeah. Also, I don't have numbers here ready with me.
Okay. Is there any payback period, something like that?
For the new plant you are saying, I said, sir, every year we will be able to generate 4 crore INR, for the new hybrid power plant which we have said.
Shailesh, are you talking of hybrid or you're talking of my existing half megawatt windmill? We are getting a bit confused.
Yes, yes. I'm talking about only 2.7 megawatt CG at Jamnagar location, installed at 31st March, correct?
Under this hybrid policy, generally the payback would be around within five years because there is no wheeling. We have the benefit of a better generation and no wheeling.
Okay. Is there any subsidy available from Gujarat government for this WTG?
It is as per the Gujarat government policy.
No, there is no subsidy. No subsidy.
Nothing much. Yeah, just, what Sanjay has said about wheeling policies as per Gujarat government policy.
See, what happens, the hybrid has the advantage. Solar generally generates for eight to 10 hours, wind generates for 24 hours. That mix creates an overall improved power factor. That is better.
Okay. Okay. Thank you. Thank you, sir.
Thank you. We have our next question from the line of Jinesh Shah from IDBI Capital. Please go ahead.
Yeah, sir, thanks for taking my question. I just wanted to ask you... Yeah, can you hear me? Yeah.
Yeah, yeah. Loud and clear. No problem.
Yeah. Sir, I just wanted to ask you know, in terms of a global market share, in terms of brass, steel, and polyamide cages , we are at 6.5%. I see, you know, of course, there are three main players, and it's a very niche market. You have opportunity to, you know, garner a lot of market share, you know? There is a 79% pie, which still is done by others or, you know, probably it might be an unorganized segment or done by bearing manufacturers in-house. I just wanted to know your sense and understanding that how fast, you know, we can grow this market, you know, because as we're in a niche space and very niche competition is there. You know, just wanted to know.
In terms of the long-term growth perspective, how fast we can grow this market? What percentage is an unorganized market, you know, probably we can take market share away from them because we being an organized player on that perspective.
Jason, thank you for your question. Now, let's first put this math a little clearer.
Yeah.
When we talk of a 6.5% market share, it is a function of two, three subsets. First, the market purchase about somewhere at 5%, we are talking of $5 billion market.
Mm-hmm.
About 60% based on today is about organized. Organized means those top-ranking six, seven, eight major players with whom we are working.
Mm.
Within that, about 75% is brass, steel and polyamide. After that, the next subset is about 40% is still in-sourced.
Right.
Ideally speaking, different market, different companies, we have different strategies.
Mm-hmm.
If I look at India, we have a very large market share, and we continue to maintain that market share. Outside India, my wallet share would be anywhere between 10%-20%. If I look at Japanese-based customers, that is 2%-3%. Within even my existing very well-established players, if I look at large-size bearing cages, it is about 2%-3%. Multiple opportunities exist and multiple strategies, of course, very clearly keep on increasing your wallet share, from that continuous process of outsourcing to insource, I mean insourcing to outsourcing. Within that, lot of focus on large-size bearing cages, lot of focus on Japan-based customers, plus to add India opportunity, China plus one, new plants coming in. As and when we are ready, we are ready.
It's a multiple host of factors that keeps me growing or makes me confident that over a medium to long term, I should be able to do at a 15% CAGR, which have a 6%, 7%, 8%, which the industry is growing.
Sure, sir. Thanks for that. I just wanted to understand, you know, in terms of large cages, can we service them only through Romania or through the India business as well?
No, we are doing it from India as well. Very well from India.
From India as well as Romania?
India as well.
Yes, yes. I just wanted to confirm the volume. You said volume growth was 8% on consolidated basis and 12%-13% on an India basis. Is that right?
Approximately, that's correct. Again, you know, these are not the, I want to qualify that these are not, like, absolute numbers, because-
Mm-hmm.
you know, we have a lot of product mix, and we are just creating a blended, kind of a volume growth.
Yes, sir. Actually there was a previous question, because 5% is your revenue growth and 8% is your volume growth, I understand that the semi-finished castings will have, you know, a lesser realization. The blended cost becomes a 5% revenue growth. Is that right? I mean, my understanding would be right. Of course, cages will be a high-margin product for you. A high-margin product for semi-finished castings.
Semi-finished, like, on a global consol basis, you are right.
Yes, yes. Okay, okay. Sure. Sure, sir. Yes, sir, that is the questions from my end. Thank you so much.
Thank you so much. Thank you.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. As there are no further questions.
Other questions, yeah.
Yes, any closing comments, sir?
Yeah, thank you very much for attending this call. Just to summarize, you know, we are very happy considering overall market conditions, where we are today, and very bullish on a mid to long-term growth trajectory for Harsha Engineers. With that, I appreciate everyone attending the call, and thank you very much.
Have a good evening.
Have a good evening.
Thank you.
Thank you.
Thank you.
Thank you. On behalf of Harsha Engineers International Limited, that concludes this conference. Thank you for joining us, and you may disconnect your lines.