Ladies and gentlemen, good day and welcome to the KSH International Q1 FY 2027 Earnings Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the management's opening remarks. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Bhavani Kumawat from Axis Capital Limited. Thank you, and over to you.
Thank you. Good morning, everyone. On behalf of Axis Capital Limited, I welcome you all to KSH International Limited Q1 FY 2027 Earnings Conference Call. Today on the call we have with us management represented by Mr. Rajesh Hegde, Managing Director, Mr. Amod Joshi, Chief Financial Officer, Mr. Dhruv Chopra, Head of Investor Relations, and Mr. Nakul Patil, Company Secretary and Compliance Officer. We thank KSH International for giving us the opportunity to host the call. Now I would like to hand over the floor to the management for their opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, Rajesh.
Yeah. Good morning, everyone. This is Rajesh Hegde. Welcome to our first quarter fiscal 2027 results call. Fiscal 2026 was a pivotal year in our 45-year history, marked by the completion of phase I of our Supa expansion. In fiscal 2027, we are focused on utilizing the capacity while concurrently completing phase II of our expansion, and I am extremely pleased with the start we have made in the first quarter of 2027. Our first quarter financial results, along with supporting information, have been submitted to the exchanges and have been uploaded to our website. On today's call, I will start with a quick summary of KSH and then focus on some of the strategic developments and trends we see, as well as some of the key operating metrics of the company, including progress on Supa. Amod will then discuss the financial and operating metrics as well.
For those new to KSH International, we are a 45-year-old manufacturer of magnet winding wires, which is the most critical component of coils used in electric machines, from power transformers down to AC compressors and everything in between. We are the leading manufacturer of specialized winding wires in India and the largest exporter of winding wires from the country. Our installed capacity at June 30th, 2026, was 43,445 metric tons, and once phase II of our Supa expansion is complete by the end of this financial year, we would have an installed capacity of roughly 59,000 metric tons, making us the second largest winding wire manufacturer in India. We are a B2B company servicing over 120 leading domestic and global OEM customers and maintain long-term relationships with these customers with repeat revenue in excess of 95%.
Additionally, our business is made to order, which means we procure the copper and begin processing only after receiving a purchase order from the customer. Thus, LME copper price and exchange rate is a direct pass-through. Roughly 75% of our revenue comes from large power transformers used in T&D, renewables, railways, and data centers driven by our core continuously transposed conductors, or CTC product, in which we are the market leaders in India. CTC is a complex engineered wire product, and all of our exports are exclusively to T&D customers across five continents. The T&D sector, as you know it, is in a structural long-term cycle driven by renewable energy, grid modernization, urbanization, and growing power demand for AI data centers in India as well as globally. To address this demand, almost every transformer OEM is meaningfully expanding their own capacity.
To put it simply, more transformers require more winding wires. On our last call, we mentioned that some large transformer clients were exploring long-term multi-year agreements to ensure predictability of their supply as they ramp up capacity. We are very pleased to announce that we have entered into a five-year supply framework agreement with Hitachi Energy Global to supply winding wires to their Indian plants as well as some of their global plants. As yet, this framework agreement and the details are still being finalized. We will, of course, provide an update when we are in a position to do so. Long-term agreements such as this further improves visibility for us to ramp up utilization as we complete the phase II expansion at Supa. Looking at our export performance in Q1 of FY 2027, our export revenue increased 76% year-over-year and 12% higher than Q4 of FY 2026.
Export growth remained strong across all our key geographies and was driven by wallet share gains with existing customers, as well as new OEM customers added over the last two quarters. Specialized wire revenue overall grew at record 113% year-over-year compared to 62% growth in FY 2026. Growth was driven by higher CTC contribution and exports. In fact, in Q1, CTC's contribution to the total revenue reached record levels in the last several years. Apart from the end-user demand environment, this was also partially driven by the fact that we front-loaded some of our phase I capacity addition towards specialized wires. Over the next two to three quarters, we expect this to normalize to previous levels as we complete phase II of our expansion over the remainder of this year.
Domestically as well, we have added a number of standard wire clients, particularly as capacity has ramped up in Supa. As we have stated, our focus for standard wires is predominantly in the select end-user industries such as EVs, AC compressors, motors, alternatives for DG sets, et cetera, where precision technology plays a critical role. Standard wire revenue grew at a robust 83% year-over-year rate during Q1, similar to the 80% growth in Q4. Overall, sales volume was a little under 8,000 metric tons in Q1, up from roughly 7,600 metric tons in Q4 and 6,100 metric tons a year ago. This represents 30% year-over-year volume growth while being 5% higher than Q4 of FY 2026. Similar to revenue trends, specialized wire volume significantly outpaced standard wire volumes growth.
There is one short-term industry dynamic we have observed, and I feel it is worth calling out, which is that we have seen a few of the transformer OEM customers who are in active capacity expansion mode delay picking up their orders by a few weeks. We do, however, believe that this will normalize as soon as they are able to resolve the bottlenecks and make their new facilities operational. Our Supa expansion continues to remain on track for FY 2027 completion, with the next wave of capacity expected to be added in Q2 of FY 2027. In Q1, annualized capacity was unchanged at 43,445 metric tons. With capacity unchanged, consolidated company utilization improved to about 73.5% in Q1, up from 70% in Q4 of FY 2026. Last week, we completed yet another one of our IPO objectives on time by commissioning our upcast backward integration facility in Chakan.
This facility will have a capacity of 5,000 metric tons and be used to recycle our own copper scrap, which in turn should provide some modest operating efficiency and further strengthen our sustainability efforts. I would now like to focus my remaining comments on two of the key metrics of our business, namely our capacity expansion through Supa and the EBITDA per ton. First, on our capacity expansion in Supa, through Q1, we have completed 14,400 metric tons of the scheduled 30,000 metric tons expansion. Let me highlight two points. Number one being we are on track to complete the remaining phase II capacity by March 2027, with the next wave of addition expected during Q2.
To secure our long-term capacity. The second being to secure our long-term capacity expansion requirements, our board last night authorized management to evaluate acquiring an additional 10 acres of land within Supa MIDC for its long-term expansion requirements. Purchasing land in Supa MIDC is the obvious choice for us, given the established infrastructure we are currently building out. Moving now to our EBITDA per ton performance. In Q1 of FY 2027, we reported EBITDA per ton of approximately INR 93,000 per metric ton, up from roughly INR 74,000 in Q4 and INR 66,000 a year ago. The key drivers for these improvements were, number one being within specialized wires, we had a record contribution of CTC during Q1.
While demand is undoubtedly strong, there is also a timing element of front-loading specialized winding wire capacity in phase I, and hence, we expect contributions from the standard wires to increase as we go into the second half of the year. Number two being higher export contribution and volumes during Q1, which are all for specialized wires. In addition, some of the new OEM customers have been more favorable and market-driven value addition rates compared to our established long-term customers on a like-for-like basis. Number three, an increase in the consolidated utilization rates to 73.5% in Q1 of FY 2027 versus 70% in Q4 of FY 2026 on a larger installed base. Lastly, a persistent weaker rupee is also helping the EBITDA per ton.
Lastly, I want to touch upon our working capital management efforts, given it is a key focus area of improvement for us and will take us closer to our goal of ultimately being cash flow positive despite the hypergrowth environment we face. After showing a five-day average working capital day improvement in Q4, we were able to improve it by another five days during Q1, resulting in an average working capital days of 60 days during the quarter compared to 71 days a year ago. There is more work to be done, and we are focused on doing just that. To conclude, I would like to highlight some of the financial trends we have observed over the trailing 12 months that we believe should be sustainable through FY 2027. First, for the trailing 12 months, volume growth was 26%.
The higher phase I capacity will be available for the full year FY 2027 as opposed to only for a part of FY 2026. Therefore, we feel that we should be able to sustain this rate of volume growth for the full year. Second, we reported an EBITDA per ton of approximately INR 74,000 for the trailing 12 months period. We therefore believe that we should be able to sustain approximately INR 75,000 per ton for FY 2027, though the actual performance will depend on the product mix, exports, and currency. We also want to highlight that we expect some fixed costs to increase as we ramp up capacity utilization going forward in the Supa plant. In summary, our key strategies to drive sustained growth is, number one being to grow volume in our ultra-precision, higher value-added products in segments like T&D, EV motors, and exports.
Number two, expand our international presence, including expansion with our global clients. Number three being increase wallet share with existing clients. Number four, drive operating efficiencies through scale and backward integration. Lastly, to improve our sustainability efforts. I would now like to ask Amod, our CFO, to go over some of the financial and operational details. Over to you, Amod.
Yeah, thanks, Rajesh. I will discuss our first quarter FY 2027 financial and operating performance. During Q1 FY 2027, our revenue from operations was INR 1,164 crores, which was 108% higher compared to the same period last year. Specialized winding wire revenue in Q1 increased 113% versus a year ago, driven by ongoing demand from our T&D clients domestically as well as from the export market. Standard winding wires also grew 83% year-over-year in Q1. Revenue from exports grew 76% compared to Q1 of FY 2026. Volume mix and material prices were key drivers of top-line performance. Q1 EBITDA of INR 74.4 crore improved from INR 40.3 crore last year and INR 56.3 crore last quarter. As we have stated, reported margins can fluctuate due to movement in copper prices, given that copper is a passthrough.
Therefore, to evaluate the underlying progress of the company's profitability, it is more important to look at the unit economics of the business. EBITDA per ton for Q1 was approximately INR 93,000 per metric ton on a consolidated basis, up from approximately INR 66,000 in the last year and INR 74,000 in Q4. During Q1 of FY 2027, we reported a quarterly record PAT of INR 42.2 crore, which increased 86% from Q1 of FY 2026 and 22% higher than INR 34.5 crore reported in Q4 of FY 2026.
Lastly, turning to cash flows and the steps we are taking to improve cash flow generation in a high growth environment. Working capital days, calculated on an average balance basis, improved to 60 days from 65 days in Q4 and 71 days in Q1 of FY 2026. In Q1, we made further progress on both payable as well as receivables compared to Q4. Payables showing a five-day improvement and receivables a two-day improvement. Inventory days remain flat given the nature of our business. We will, of course, keep looking for further efficiencies over the next several quarters with the goal of being operating cash flow positive even in a high growth environment. With that, I would like to hand the call back to the moderator to open up for questions, please.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Diksha Jain from InCred Research. Please go ahead.
Yes. Congratulations on very good numbers. My first question was regarding the EBITDA per ton. As we discussed that the EBITDA per ton number has been very healthy this quarter, how do we see this moving for the rest of the year? Also, has the margins improved for standard winding wires as well? How sustainable is this?
Hi, Diksha. I think Rajesh just addressed this particular point in his prepared remarks. But essentially what we feel is that there are some obviously strong structural trends supporting the EBITDA per ton, but there are also various factors in there. First of all, as our Supa phase II capacity comes in over the next three quarters, there will be additional higher costs, which is a counter, as well as ultimately what is the mix between the product, CTC versus others, as well as standard and special broadly. From our perspective, where we feel comfortable is INR 75,000 a ton for the remainder of FY 2027. Or for the full FY 2027.
Sir, has the EBITDA per ton improved for standard wires as well? I am not asking for a specific number, but I just want an idea regarding that. And how has the share of higher kV classes CTC moved in the specialized wire segment?
Yes. As the round wire or the standard winding wire capacity utilization has gone up, the EBITDA per metric ton of standard also has improved marginally from earlier quarters. And your second question is in terms of higher value-added product for 765 kV, yes, the quantity has been higher as compared to both the earlier quarters.
Similar. I think it is around-
Yeah. the 25% of the higher kV classes within the specialized.
765 kV.
Okay. Thank you for taking the question.
Thank you. We take the next question from the line of Gaurav Bhatia from Goldman Sachs. Please go ahead.
Sir, thank you for taking my question, and congratulations on great set of numbers. Again, asking this question again on EBITDA per ton. Is there any lumpiness in the CTC orders that we've executed in the current quarter?
As we mentioned in the call. Yeah. Okay, go ahead.
Let me explain the question, sir. The question is, when you are talking about non-specialized wire capacity also coming up, and that growth going forward being higher than, let us say, CTC growth, will absolute revenue that you have generated from CTC business, will that fall or will that also grow, but it will grow slower than the non-specialized wire? That is my first question.
Gaurav, to simply answer your question, no, there is no lumpiness. I think it is a question of proportion. As capacity on standard wires and others come in, those volumes will pick up. If CTC, as an example, was at an extremely high mix percentage of the total, that mix percentage will revert closer to normal. It does not mean that it would necessarily go down, on an absolute basis.
If I were to just look at EBITDA per ton or EBITDA separately for CTC business versus, let us say, non-specialized business, both will grow, but the mix could change, and therefore we could see a lower EBITDA per ton on an average for the company. Is that what you are trying to imply?
Yeah. I would not say explicitly that EBITDA per ton for both will grow, but EBITDA will grow on absolute basis for both. Yes.
Fair. Because the number that you just mentioned, INR 74,000 for the full year, and if you have done INR 93,000 in the first quarter, it essentially implies lower than INR 74,000 for the rest of the nine months, which is a bit surprising why it would keep below last year's Q4.
Gaurav, again, we have mentioned that this is not a guidance in that this is a number we are going to deliver. We have said that INR 75,000 is a level we are comfortable delivering.
Understood. That makes more sense. Second question, on this 10-acre land and the capacity. At the Supa facility, I remember you had mentioned that there is another 12,000 ton expansion that is possible without any need for extra land. Then this 10-acre land is on top of that. So two parts to the question. One, if I were to use this 10-acre land, how much incremental capacity is possible on a 10-acre land?
Right now, we don't have an answer to that question because the focus is on identifying the land. Ultimately, the tonnage that comes out of any plot of land will depend on the mix of the machines and products that you're putting in. We are a long way off from determining that. This is more to ensure that longer term, we have the ability to add more capacity as we need it.
Okay. Just the last bit on working capital. We've seen a steady improvement in the working capital number of days. Where do you think is the sweet spot? Where do you want to head to ultimately in whatever timeframe, but what is that number?
If you look at the industry standard overall, 30 to 35 net working capital days is what the industry is operating at, including some of our peers are even lower than that. But we feel that 30 to 35 days is something that is fairly achievable, and that is what our aim going forward will be, to do better than that also if possible.
Any timeframe you think is reasonable to assume that-
Sorry. On the timeframe, it's a multi-quarter process, not a-
Of course.
multi-years.
Of course. No, completely understand.
Gaurav, can I ask you to jump back in queue so we can give some others a chance as well?
Sure. I'll come back in the queue.
Thank you. We take the next question from the line of [Vyank Subramaniam] from [Zeva Capital]. Please go ahead.
Yeah. Hi. Thanks for taking my question. Just one on the long-term contract which you have signed with Hitachi. Could you talk a bit more about that? What kind of products does it cover, and what is the EBITDA per ton potential from it? That is one. Number two, related to that, you mentioned last quarter that a lot of OEMs were looking to sign similar such contracts. Do you think that over the next few quarters, you could see more OEMs locking in supply, primarily because of the scarcity in supply today?
With Hitachi, as we mentioned, this is a framework agreement where the broad construct is decided upon, but still there is no quantity or price defined as of right now. It is more of a framework that we agree on, but it is in due process. We will also frame the quantity as well, which we will, of course, communicate as we go along. The trend in the industry, what we had mentioned before also is, since most of the transformer manufacturers globally are sitting on an order book of, say, about three to four years. The general tendency is to at least lock in some amount of the capacity that would be required, and that is where we come in, because we have already been servicing most of these customers.
This discussion is ongoing, and we will report back whenever we are in a position to finalize any more agreements. That time, we will probably come back to all of you and mention it in the calls.
Understood. Just if you could throw some color on the EBITDA per ton, would you be able to say whether this is higher. A customer like Hitachi, given that they are very prevalent in high voltage, is the EBITDA per ton higher than the company average when you supply to them?
No, it will be similar, except when you look at it from a five-year agreement, then there will be obviously some clauses which, going forward, might move the EBITDA per ton. This is still work in progress, so I do not want to give any real guidance as such on the EBITDA per ton going forward. But definitely, we will be able to maintain it.
Understood.
The products you mentioned, I think one of your other questions was what products. Hitachi-
Yep.
Or transformer companies use specialized winding wires, which is your CTC, your paper insulated, or your enamel insulated rectangular conductors.
Understood. I think just on the EBITDA per ton, I think previously your guidance was INR 65-INR 75, but I think now you are confident of sustaining INR 75 at the very least. Is that the right way to look at it?
Yes. That's what we are saying, yeah.
Understood. Sure. Thank you. That's it from my side. I'll jump back in the queue.
Thank you.
Thank you. We take the next question from the line of Shubham Borade from ICICI Securities. Please go ahead.
Hi. Thank you for taking my question, and congratulations on excellent set of numbers. My first question is, in this quarter, exports contributed 24% to the revenue, which was 29% in last Q1 FY 2026. What is management's outlook on this, and what number can we expect for the full year FY 2027? Second would be, in this quarter of total exports, exactly how much were to U.S. and Middle East? That was my question. Thanks.
I am sorry, can you repeat the second question?
Out of total exports in this quarter, how much was U.S. and Middle East?
Okay. On the first question around export percentage, I think you are calculating. The way we typically calculate it is on operating revenue.
Excluding the other operating revenue.
Excluding other operating revenue. On that basis, I think it was 27-ish %.
Around 27%.
Yeah, this quarter. What we said is, over time, so not specifically in this period of this year, the target is to increase it back to its historical peak of around 40% of total revenue. On the second question was the mix-
Middle East and- Quarterly, we don't provide that information. But annually, Middle East, Europe, and U.S. are our key three export geographies, and each of them represented between 8% - 11% of total revenue.
Okay. Thank you. That's all my questions.
Thank you. We take the next question from the line of Jenish Karia from Union AMC. Please go ahead.
Yes. Thank you for the opportunity. I hope I am audible.
Yes, you are, Jenish.
Yes. Thank you for the opportunity, and congratulations on a very strong set of numbers on the operating front as well as on the balance sheet side. The question is more from industry demand outlook. How do you see the cycle panning out? Do you expect the cycle to remain strong over the next three to five years, growing incrementally each year? Or you expect the growth rates to slightly moderate in the next couple of years? What is your view on the cycle?
Let me just break it up into some parts. If you look at the T&D side of it, like we mentioned, a lot of the customers locally and globally, we find them, they are sitting on an order book of anything that could be from, say, three to five years, and depending on which customer you talk to. Most of these customers are also in expansion mode. Some of them have expanded. Some of the capacities are going to come in this financial year. Some of it is going to come by around 2029. Every year you are going to have some capacity that comes into the market. What we expect going forward on the T&D side, definitely the volumes are there as we go forward, and that is the reason why we decided to add capacity for the T&D segment.
Then the other drivers, if you really see, are the EV or the AC compressors, or even the alternators, which are used in DG sets. Finally, these alternators are being used for the data centers as well. So there also, we are finding, if you see alternators for DG sets or some of the motor segments and AC compressors, there is a strong demand pipeline that is coming up because of the sectors that they are going to be used in. There are some other factors also like BIS, which is being implemented. So there is a lot of localization of the winding wire that is happening, which was earlier being imported into the country. But now because of BIS, the standard wires are necessarily being. The supply base is shifting to Indian companies.
Lastly, the EV motor side, this is a more long, drawn-out process because the EV, the winding wires which are going to be required for EV, the two-wheeler side is very strong, three-wheeler side is also very strong. Passenger car and bus, in terms of volumes, I feel that still we would say around FY 2028, FY 2029 is where the incremental meaningful volumes would really play. But then you have to be a part of those programs right now, so that whenever those programs mature, that time you are in a position to supply to these companies. Have I answered your question? Yeah.
Yes, sir. That was really very helpful. Next is on the margin front. While you already guided that you will be able to maintain at least margin of INR 75,000 per ton, is it possible for you. So I will break my question in two parts. Is it possible for you to break down the INR 93,000 tons margin as to qualitatively or quantitatively, however you would like to answer, between inventory gains, value mix improvement from specialized wires and standard wires, and operating leverage? That is the first part of the question. Second part of the margin question is with the HVDC and other higher value items increasing going forward, maybe not immediately, but two, three years down the line, can we see an upward trend in the margin from the INR 75,000 guidance?
I think you lot answer that first one. No? I mean, from operating leverage. Yeah.
Yeah. So see the breakup of the EBITDA that you asked in terms of the improvement, what you mentioned, all three factors have contributed to the increase in EBITDA. However, we do not give a full breakup of the three on the call over here. Second question is on your higher specialized value-added products. Yes, expectation is that the quantities will go up, and it will help to sustain or improve the EBITDA going forward. But like it was mentioned on the call earlier, we are comfortable to say that INR 75,000 is a long-term sustainable EBITDA.
INR 75,000.
INR 75,000.
Jenish, if I can just add, this is Dhruv, one quick thing on that EBITDA question. Look, I think the key driver, which is what we called out on the call rather than the individual components, is the mix. We have always mentioned that specialized wires are more profitable than standard wires, and even within specialized wires, CTC being even more so. In this particular quarter, the contribution from CTC reached historically record levels, and that was a much bigger driver of the higher EBITDA per ton than any of the individual components.
Perfect. That was good to look. That was all from my end. Over.
Okay. Thank you.
Thank you.
Thank you. We take the next question from the line of Mayank Chaturvedi from HSBC. Please go ahead.
Yeah. Thank you, sir, for giving me this opportunity. Sir, just to one of the earlier participants, you were mentioning some percentage of revenues that has come in within the specialized wires from higher rated transformers. Can you just repeat that percentage for me, please?
You are talking about the 765 kV and HVDC?
Yeah. Yes.
Yeah. For the last two, three quarters or so, that has trended above 25% of overall CTC volume is coming from the large power transformers, and that continues to hold.
Okay. Within specialized, you have historic high CTC levels, and within CTC, you have 25% above coming in from 765 kV and HVDC.
Yeah. Correct.
Okay. And that historical high level of CTC mix within specialized, would it be fair to assume it would be more than 50%?
So again, we are conscious about what specific metrics are disclosed, but I think if you look at our overall specialized wires, CTC will represent anywhere between 50%-75% of that segment.
All right. Got it. And just, sir, on this new land parcel that you're trying to identify in Supa, I'm assuming, would it be a mix of specialized and standard wires, or would it be for one of those capacities? If you can just give me some color on it.
The land we are identifying, like it was mentioned earlier, is for future expansion, and it will be in our existing products. But currently that is under discussion within the company, and we'll give you more details as and when we finalize it.
All right. Okay. Sure. That will be all from my side. Thank you.
Thank you.
Thank you. We take the next question from the line of Priyanshu Jain from Growth X Infinity. Please go ahead.
Hi, sir. Congratulations on great set of results. The execution has been really phenomenal. I have few questions. First will be on the CapEx side. So by the year-end, we will be somewhere close to 59,000, 60,000 metric tons done. After that, as you mentioned, that we are acquiring land as well. So can you share some and earlier we can have around 12,000 tons additional capacity. So for that, can you tell me what is the CapEx required for the additional 12,000 tons, and any future plans, if you can share right now?
Priyanshu, it's again difficult to answer those questions that far in advance. We've said our focus right now is the phase II of the capacity expansion, which takes us to 59,000 tons. We have space available on the existing Supa plant, where we've said we can add potentially another 10,000 tons- 12,000 tons. This new plot would then be over and above that for future expansion requirements. I think you have to look at it sequentially for now. For FY 2027, the focus is exclusively on getting the phase II completed. The challenge and the objective along with that is, of course, to utilize that capacity. That is going to be a key focus area for us. As utilization is building in the overall 59,000 tons capacity, we will accordingly start working on additional capacity expansion.
At that point in time, we will be in a clearer position to let you know how many tons would come in, what would be the mix. Would it be only special, standard special, only T&D, or T&D and EV. All of those are still to be determined. For us right now, the focus is get the 59,000 tons in place, and then make sure we utilize that effectively.
Got it, sir. Sir, second question will be on the clientele addition side. As the data center boom is there, and transformer and distribution is also there. Can you throw some light on it? Are we in current talks with any future potential clients or the existing clients as well? What kind of a specific product?
For data centers.
For data centers, you mean?
Yeah.
No, we lost you there. You are saying any specific products for data centers, you are saying?
And clients.
And clients?
Yeah.
When we say data centers, it is basically any transformer that goes into a data center or maybe a UPS that goes into some data center. These are our potential markets where we can supply either specialized winding wires or standard winding wires. That is the way to look at it. Every data center requires X amount of transformers, and some of them could be the higher kV transformers, and they will also require some distribution transformers, as well as the UPS that goes into the data center. These are some of the markets that when we look at the data center market, this is what we really look at. The second one, sir, second question is? What was the second-
Can you repeat the second question?
Yeah, second question.
Sir, on the clientele part only.
Yeah, and then, sorry, one more thing. Also the DG sets, the diesel generating sets that go into these data centers, there are alternators that go into these DG sets. That's the other market we feel that is going to really grow as well, because a DG set is a critical component within the data center as a backup power requirement. If you were to really break up the data center market, this is how we look at it.
And sir, this last question is on the product mix side. Sir, the capacity which we are adding by the year-end, can we use the same facility for the, I know it's a kind of a question, but I still have to ask that can we use the same capacity for both standard and the specialized one, or they are different in terms of.
No. For CTC, if your question is, are they fungible? They are not. For standard wires some of the processes are fungible, but otherwise, the insulation lines that are there are very specific to CTC would have some specific lines. The EV products would have specific lines which cater to the EV products, and the PEEK products would have, again, SPM that would be there. So they're not fungible in terms of capacities, can't be used for each other.
Going forward, we can expect the standard wire, going to increase the share of standard wire products?
No. We mentioned in the call, see, when we did the 43,000 metric tons approximately capacity, we had front-loaded the CTC capacity. But now going forward, we would be having more of the standard wire and some of the special wire which goes into the EV, some of those capacities will come in. But the CTC capacity is available with us for the rest of the year already, and that's the focus for utilization and with the customers.
Okay, great, sir. Thank you, sir. That's all from my side. All the best for the future.
Thank you.
Thank you. We take the next question from the line of Surya Narayan Nayak from Sunidhi Securities. Please go ahead.
Yeah. Thank you for the opportunity and congrats for the great set of numbers. One question is that when we take the orders from the different clients during Q3 and Q4 of the year, the specialized, special and standard wires component is nearly fixed. Just to understand why the fluctuations in the EBITDA per ton because of the product mix during the year. Secondly, to add to the previous participant's question is that up to the wire drawing stage, it is nearly the same, and after that insulation, the operations are different. Just to understand that, because it is semi-fungible, we can say. Just to understand whether for in case of hyper demand situation from the specialized section, will you be more committed to your clients who are into the higher kV class customers or let's say maybe EV?
Those are the customers rather, let's say, taking less of the under-committing to the general industry segments and other segments.
Yeah. I'll answer the second question first. When we look at, like you mentioned, the drawing capacities are fungible, but otherwise the insulation capacities are not. We would really look at, let's say if there is more-- We are open to, if we have more orders on the T&D side, let's say if we pick up more HVDC orders or say 765 kV orders, then we would obviously pivot to adding capacity more on the speciality winding wire. Similarly, for the EV products, if we get some qualifications where we see a visibility in the next few years where a program is going to be certain, then we would look at adding capacities in those areas. That's how we decide about future capacity additions. The first question was?
Yeah. First question related to the intake of orders and the change in the product mix afterwards.
Yeah. I think we mentioned it in the previous calls also, but let me just repeat it for the benefit of everyone. How this works is that, we get into a year-long contract for the value addition with at least about, say, 80%-85% of the customers. This determines the overall. But then the mix that we will get during the year, let's say if I have a specialty, let's say CTC, we decide on the basic construct where the value addition is fixed. But then if we receive more orders during the year, say, in a particular month for, say, 765 kV or say more of exports of CTC, this would obviously, that mix is what we're talking about drives margins up or down. In this case, as we mentioned, INR 93,000, there were several driving factors. One of them was obviously the CTC mix was higher.
The export percentage was higher also. There was, again, within the CTC, you have your CTC as well as for the 765 kV and the HVDC also, there was some execution of that going on. But one thing that we pointed out also is that some of the new customers we had and which we were executing orders in the Q1, where we've onboarded, they are obviously at a higher value addition than the existing customers because we had an opportunity to link it to the market price as well. That's also pushed up the EBITDA for this quarter.
In that case when you just now sign the multi-year contract with Hitachi Energy, and likewise, maybe you will be getting more orders from similar kind of people like GE Vernova, and others. Your installation capacity will be falling short and you would be requiring quicker addition of capacities in that. Is my understanding right?
No, we have like 43,000 tons of capacity available right now, and we have another 16,000 odd tons of capacity that is going to come on stream by the end of this financial year, which will be available. Next year, we'll really start with the installed capacity base of around 59,000 metric tons. That would be the starting point for next year is what we are saying.
Okay. We don't have, let's say, if you keep on onboarding more of the higher kV class or let's say HVDC segment customers, then we don't have any issue so far as the insulation capacity is concerned. Those are equal taken care of.
Yeah. Right now we don't, but once it reaches an 85% utilization rate, then that's when we would really start thinking about future capacity expansion.
Because in Q2, Q3 2028, I see your utilization level reaching close to 75%. So--
Yeah.
Is it fair to understand that you will be planning maybe in the Q2, Q3 time, Q3 2028? This would sound fair?
Surya, this is getting very focused in terms of timing. I think when we see utilization rates on the fully installed base trending up, we will start looking at which machines we need under which products. At that point in time, we will be able to give you. Q2, Q3 2028 is four, six quarters away. I do not think on a quarterly basis we will be able to provide you any specific timelines. But like I said, to an earlier question also, get the 59,000 metric tons installed and then start pushing that utilization up. You will see once that on the larger base, the utilization is going, I think then this is a very direct and relevant question that you can ask us, which we will be in a position to answer.
Okay. Regarding, sir, upcast capacity, any kind of benefit that may accrue, if you can quantify, because that will flow obviously in the next year, perhaps. If you want to quantify, and whether this kind of scale will be also raised, because this is a smaller investment of around INR 7 crore.
Yeah. Regarding current year, considering that upcast is a sum up in the last month, and the remaining period that is remaining in this year, we see maybe it can just add maybe close to a few rupees to the bottom line, to the gross profit, but not more than that. Because it is a capacity as compared to the total capacity for the year. It is right now not that high. Having said that, going forward, obviously, if we see that the benefit is accruing, there is nothing that stops us from planning more capacity in that. But currently that is not on the cards immediately.
Surya, strategically, the way we have thought about this is essentially to be able to recycle the own scrap that we are generating from our production. For captive purposes. We have not thought about expanding it into a much broader effect. As a result of that, your overall recycling capacity is less than 10% of your overall capacity. While it will provide a benefit, there is only a limited amount of benefit that will come because of the-
Scale.
Scale that it would relative to the overall.
Dhruv, this 5,000 metric tons capacity is in sync with the overall 60,000 metric tons capacity scrap that we can get. Is the understanding right?
Yeah, I think that's correct. Slightly lower, but I think more or less you're right.
Okay. Thank you, sir.
Thank you. We take the next question from the line of Abhijay from AJ Capital. Please go ahead.
Hi, hope I am audible.
Yes, you are, Abhijay.
Congratulations on good set of numbers. I am new to the company, so I have some basic hygiene questions which I wanted to get clarity on. Hope that is okay. The first question is, I think I missed that quantification of the inventory gains number inside this INR 93,000 crore EBITDA per ton that we have achieved in Q1. Can you help us quantify what part of it was inventory?
No. So you are asking about inventory? Sorry, I didn't-
Have you quantified the inventory gain? Yeah. There is no-
No.
No, I think, Abhijay, we had mentioned that everything played a role. Nothing played an outsized role. The main impact on the EBITDA per ton came from the mix and the contribution, the higher contribution this quarter from CTC specifically than it has in previous quarters.
All right. That sounds more reassuring. This INR 93,000, okay, then the INR 75,000 feels conservative, which is fair. Thanks for that. My second question is, I just wanted to understand basically, what is, on a steady state basis, the lag between the copper pricing to the customer and the copper prices on actuals entering your cog. What would be that lag? Are you able to pass it on in this quarter or does it lag by a few quarters? Can you help us understand it better?
Yeah. Abhijay, let me answer the question. This is Rajesh.
Yeah.
See how this business works, we are in a make to order environment. We are not in a make to stock. Because we are basically supplying to OEMs, and typically what we do is we get into a value addition contract with every OEM. Then, let's say, for example, I get into a value addition contract for, say, 2,000 tons with customer X, or 2,400 tons, and customer X will release purchase orders for 200 tons a month, but not necessarily 200 tons on one day. But it will be staggered. Every purchase order is a unique purchase order. That's on an unknown LME basis. We will book the copper once we receive the order. We will book the copper with our supplier, and whatever is the known copper price, that becomes the invoice price for the copper proportion for that particular order.
That's the passthrough mechanism, and then we focus on the value addition. That's how this whole business is run, and this is not just us. This is generally run by everybody. We do this because we want to insulate ourselves from the copper price, as well as the exchange rate as well. There is no time. When you look at the time lag part of it, when I receive an order, then I'll take about 15 to 20 days to manufacture the copper, the finished good. But the copper price has already been finalized at the beginning of the order, so there is no real fluctuation as such for that order.
All right. Okay. This last question, coming to the borrowing cost. In FY 2026, I think your total interest cost was about INR 44 odd crores, and in this quarter, we have seen it ramp up a bit to about INR 17 crore this quarter. Can you help me understand for the company, your stature and your credit rating, it seems to be that your borrowing cost isn't double, is it? Is it a fair understanding, or am I missing something?
The borrowing cost as far as the working capital is required. This is a working capital we require when the turnover goes up significantly, and the increase is because the turnover has gone up over the last quarter. As compared to Q1, the turnover is significantly higher. For working capital, the borrowing cost is always going to be there, as the turnover goes up, borrowing cost on working capital is expected to go up.
No, but I think just to clarify your point, the cost of the capital has not gone up. The overall interest expense is higher because the working capital finance is higher.
Yeah, if you look at the effective, the borrowing cost, it has not really gone up significantly as compared to other years.
What would be that on a percentage basis? High single digits?
Look, we use a lot of borrowing. We use a lot of working capital products, and the interest cost ranges between as low as 6% to as low as 9.5%, and it depends on what mix we use when the borrowing cost gets determined on that basis.
Oh, yes. That helps answer the question because, yeah, I was looking at it. It seemed like a double-digit figure, but clearly that is not the case, and that's assuring. Yeah. Thank you for my time, and congratulations on a great set of numbers, and hope you keep delivering what you have promised. I'm sure you will overshoot your promises, so yeah, congratulations.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, we will take the final questions from the line of Rahul from Ambit Investment Advisors Private Limited. Please go ahead.
Yeah. Good afternoon. Excellent set of execution from the entire team. Hope I am audible.
Yes.
Yeah.
Yeah. You are.
Yeah. Couple of questions. First, on the PEEK insulated wires, which we were planned for the EV traction motors, what is the status currently on that part?
Yeah, it's still under installation, that whole. We've still not installed the capacity. We'll report it when we've installed that capacity and operationalize that capacity.
It is part of our phase II.
Yeah.
Okay. How much CapEx is being incurred for this phase II going for the entire year of FY 2027?
See, the overall project cost for phase II, like we had mentioned, was partly funded through the IPO funds, was around INR 150 crore -INR 160 crore. Till now, a large part of that has been incurred, but some of that is sitting in advances and so on and so forth. By the year-end, we are hoping that the entire phase II will get implemented.
Operationalized.
For this year, we can expect another INR 50 crore CapEx, which was sitting in our CWIP, I think.
Yeah, I think it will be more than that. If you see for this full year, if you look at it will be higher than INR 50 crore.
Yeah.
Okay.
Rahul, a lot of it is basically financed from the primary issue of the IPO. I think that the whole breakup between phase I, phase II was covered in the RHP.
Sure. Just a last question from my end. We have seen your value addition, EBITDA pattern has grown at a 23% CAGR on 2023 to 2026. Can we expect the same run rate if we exclude the copper and whatever the value addition which you do, how much growth run rate we can expect on that aspect? That will be very helpful.
The value addition, Rahul, just like the EBITDA per ton, is dependent on the mix between standard and special, and then within that, each of the products. The same trends we've talked about in the EBITDA per ton would also apply on the value addition side.
The realization is coming to INR 14 lakh per ton. This also would be maintained on a steady state basis or because the non-specialty is growing.
No, that is copper. A big chunk of that is the copper.
Yeah. I think the metal value is included in the INR 14 lakh.
No, I am talking about realization.
But INR 14 lakh is with copper.
Yeah. Realization is, if I understand correctly, you are dividing the revenue per metric ton, and revenue per metric ton, a large part of the revenue is the copper part, which fluctuates based on the LME and the exchange rate.
Yeah. Can you give how much can be the rough range of the copper?
No. Look, because the LME and exchange rate fluctuates, it's very difficult to put a number to. Right now it's been fluctuating between $10,000- $14,000 per metric ton. LME has been fluctuating. But what we're saying is that that's always a pass-through for us.
I think if you want to look at it, you look at it at the gross profit level.
Yeah.
Got it. Thank you so much, and best wishes to the entire team. Thank you.
Thank you.
Thank you.
Yeah.
Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now hand the conference over to the management for their closing comments.
Yeah. Thank you for having us on the call, and our focus going forward is to, one, utilize the capacity that we have in place and install the additional capacity that we are really looking at. I am quite hopeful that we will meet most of our objectives as we have said in the call as well.
Thank you. On behalf of Axis Capital Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your line.
Thank you.
Thanks.