Ladies and gentlemen, good day. Welcome to the Ramkrishna Forgings Limited Q2 FY 2022 and half-yearly investor conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rushad Kapadia from ICICI Securities Limited. Thank you. Over to you, sir.
Thank you. Good evening, ladies and gentlemen, welcome to the Q2 and H1 FY 2022 results conference call of Ramkrishna Forgings Limited. We have with us from the management, Mr. Naresh Jalan, Managing Director, Mr. Chaitanya Jalan, Whole-time Director, Mr. Lalit Khetan, Executive Director and Chief Financial Officer, and Mr. Rajesh Mundhra, Company Secretary. Without further delay, I would now like to hand over the floor to Mr. Lalit Khetan for his opening comments. Thank you, over to you, sir.
Thank you, Rushad. Good evening, and a very warm welcome to everyone present on the call. Along with me, I have Mr. Naresh Jalan, our Managing Director, Mr. Rajesh Mundhra, Company Secretary, and SGA, our investor relations advisors. Hope you all have received our investor presentation by now. For those who have not, you can view them on stock exchanges and the company website. We trust and pray that you and your family are safe, healthy, and secure. We hope you all are following best safety protocols and ensuring safety against COVID-19 pandemic. We at Ramkrishna Forgings to ensure safety of all employees during the pandemic have followed strict safety culture and COVID-19 protocols. We have conducted all the necessary vaccination drives in all its facilities and ensured that its entire workforce was vaccinated. We also organized several vaccination drives for public at large.
With recent signing of MoU for the development of EV powertrain components with U.S.-based technology partner, which follows our first order in EV segment from foreign multinational tier one OEM in India, we are well-placed to capitalize on the fast-growing EV market in Indian market. This breakthrough in EV market is also testimony of our strong R&D as well as product offering in terms of complexities and designs. The PLI scheme, which focuses on the EVs and hydrogen fuel cell vehicle manufacturing, will act as a strong catalyst and catapult the domestic industry into next growth orbit. The domestic auto industry is still on its way to recovery after the second wave. The silver lining is the commercial vehicle segment which has performed relatively better, and this augurs well for us.
In the European markets, commercial vehicle registration for the period January to August showed high growth this year for the sector as the economy emerges from the pandemic hit. Nearly 1.3 million new commercial vehicles were registered in European Union during the eight-month period, making growth of 24% compared with the same period of 2020. Demand is driven by Central Europe where sales continue to remain strong. New light vehicle sales in January to September reached 11.75 million units. Sales for nine months of the year are up by 13% compared to the same period in 2020. We have added customers in Europe and North America and started supplying to South America, and we expect to add more customers going forward and expect improved contribution from exports. During the quarter, we managed to receive contracts worth INR 620 crores from eight contracts from various geography and business verticals.
As mentioned earlier, we have also signed MoU for the development of EV powertrain components with U.S.-based technical partner. With the help of this contract, we have expanded our product offering in EV market. During 2nd quarter, we commenced commercial production at 2,000-ton warm forging press line, as well as our fabrication facility. With this, our capacity has been increased to 187,100 metric ton and this also marks end to our current CapEx cycle. As part of our growth strategy, we continuously work on de-risking our product portfolio by diversifying across different segments, customers, and geographies. During the quarter, we added customers across various segments and geographies, and we are confident to get repeat orders from the customers and foresee a strong performance in upcoming quarters. That's it from my side. Thank you.
Should we start the floor for Q&A?
Yes.
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 remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Raghun andhan from Emkay Global. Please go ahead.
Thank you, sir, for the opportunity. Congratulations on stellar numbers. My first question was on the order contracts of INR 6.2 billion. Congratulations on winning these orders, which gives visibility for outperformance of the company versus the industry. Sir, here, just wanted to understand, of these orders, how much would be new orders, how much would be replacement orders? This quantum of INR 6.2 billion, would it represent a single year order or would it represent the lifetime order? Lastly, another clarification. Would most of all of these orders commence by FY 2023? I would understand that some of it would start in FY 2022, but would it be fair to assume that everything would have started off by 2023?
Raghun andhan, first to answer your questions one- by- one. These are all new orders. They are not any replacement orders. Number 2, these are all orders which go into production in terms of sampling this year, and bulk production is in different quarters of FY 2023, and the entire full year production is going to be from FY 2024 onwards.
Thank you, sir. That was very helpful. Sir, the new orders seem to be flowing in, and thank you for the timely updates on the exchanges on the new orders. Here, Naresh sir, if I can take your opinion, where are you seeing the traction in terms of the geography and within industrial, which are the segments from where you are seeing the traction for new orders?
New orders in terms of auto sector is coming mostly from Europe, and in oil and gas is coming both from U.S. as well as Dubai, to be country-specific.
Got it, sir. Sir, on the industrial side, on a quarter-on-quarter basis, there has been a very strong improvement. Q1 was closer to INR 45 crore, whereas Q2 has come in at closer to INR 108 crores. This QoQ improvement has been led by which segments? Just wanted to understand, you expect the momentum to continue going forward as well?
In industrial segments, sales are being contributed from tractor and earthmoving equipments in domestic and exports both. We expect this to more expand in coming quarters. You will see new order wins also in coming quarters, making it more clear that how we are de-risking our entire model going forward.
Wonderful, sir. Sir, congratulations on the EV powertrain components where you have made progress. Can you elaborate on what are the products we are focusing upon and what is the size of opportunity? Also if you can talk a bit about the initial EV order which you have got, please.
Our initial EV order is basically in terms of manufacturing parts for motors and controllers. Our joint venture also, our first thrust is into manufacturing motors and controllers for two-wheelers, three-wheelers, and four-wheelers. Right now, I would not comment on the size of the business. We would still wait for another quarter before we have entire clarity, because right now we have only signed a definitive agreement, but we are in process of finalizing a joint venture agreement. We would wait for once the joint venture is concluded before we put anything to light in this.
Thank you. This is the operator. Mr. Raghun andhan, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Abhishek Jain from Dolat Capital. Please go ahead.
Thanks for the opportunity, and congratulations on a strong set of numbers. Sir, during this quarter, there's a big difference in standalone and console performance. Although on revenue basis, there's hardly any differences, but EBITDA and PAT is lower by INR 8 crore and INR 6 crore. Where all these losses incurred? Please throw some light on it.
Abhishek, this is basically a mix of the loss incurred by our travel subsidiary. That's around INR 1.5 crore- INR 2 crore is on account of that. Another INR five and half crore is on account of Ind AS accounting adjustment done on the sales to the U.S. subsidiary.
Will it continue in the coming quarter?
No. The process will continue. It depends upon the sale, how much the sale goes in the quarter, and certainly there will be some adjustment every quarter on account of this.
Okay. on console basis, that EBITDA margin would be around 21%-22%?
It may improve in the upcoming quarters if we have seen more sales there in the U.S. subsidiary. Subsequent adjustment is not going to be this kind of a, I will say this quarter, the gap is, I will say, one-off.
Okay, fine. The company was also looking to buy assets of the ACIL Amtek Auto. What is the progress right now?
Abhishek, it's still pending with the NCLT, and we are awaiting the next date of hearing on 26th of October.
Okay. Sir, can you throw some light what is the capacity there and how much revenue it may add if you want this business?
Abhishek, that is a machining, meaning machining of crankshaft basically. That's in terms of three-wheeler, four-wheeler crankshaft, two-wheeler crankshafts, they make hubs on boards, all the materials. We have also earlier given the guidance there is a revenue potential of INR 500 crore-INR 800 crore from that unit at an optimum capacity utilization.
Okay, fine, sir. Sir, other companies are also looking to raise fund of around INR 500 crores. Just wanted to understand what is the objective for you and how much you feel dilution will be possible in the coming quarter.
Abhishek, we have not yet decided on that. Still that needs to be decided how much fund is to be raised and when. We will inform you as and when we will decide on that.
Sir, your debt is increasing continuously. There are some pressure on the working capital side as well. What is your effort to generate FCF and start to repayment debt? This quarter also, we have seen that net debt has gone up to INR 13.2 billion versus INR 11.3 billion of last.
Yeah, Abhishek, the net debt has gone up by about INR 140 crore if you look at the six-month performance. You can see the pressure on the working capital current asset has gone up by about INR 300 crore against that. That's due to the increase in exports, basically more increase in exports and a little bit increase in the VMI stock. That has created and the kind of growth trajectory we are in, there will be some pressure on the working capital for the time being. Once we reach the optimum level, then it will start moderating and certainly we will start generate free cash flow.
Okay, sir. My last question is related with the gross profit per ton, which it used to be the INR 65,000-INR 70,000 that has gone up to the INR 110,000 per ton in last couple of quarters. What are the key reason of this sort of the expansion in gross margin despite the higher RM cost?
Abhishek, I think it's a premix of job and better value addition on the jobs which we are trying to do as we move forward.
Is it because of the better mix or because of the increase in the content per vehicle because of the BS 6 and other things?
It is not basically BS 6. It is basically we are slowly but steadily graduating from only forging supplier to fully finished product, now fully finished product are getting converted into assemblies. As we ride up the value chain, our RM cost to sales are getting affected, by which gross margins are going up.
Okay. What is the current capacity of machining and how much change in the machining in last couple of quarters?
Almost, I think in last six months, we have moved from 45%-50% to almost 75% + in terms of machining and assemblies.
Thank you. Mr. Abhishek Jain , may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Mitul Shah from Reliance Securities. Please go ahead.
Thank you for giving me this opportunity, sir. Congratulations on a very strong performance. Sir, I have first question on your average selling price per kg, which shows roughly 7% improvement on a sequential basis QoQ. I would like to know how much is a price hike purely and how much would be whether product mix or value addition.
Mitul Shah, I think it is extremely difficult for us to say how much is for raw material price increase and how much is for product mix change.
No, sir, I'm asking how much price hike we have taken in this quarter?
We have taken INR 6 or INR 5.90 price hike for steel which has happened in this quarter.
Okay. Sir, on the second question on the RM side. RM by sales since last two, three quarters is a huge fluctuation. Like for example, Q4 was 51%, then it fell down to 39% in previous quarter, that is Q1 FY 2022, and now it has again come to 45%. What should be the stable range one should consider?
No, I think, Mitul, I think it is extremely difficult right now to predict that with the raw material prices changing every quarter. It is very difficult to say because how much inventory we are left with or how much inventory we go into next quarter with. When the price increase, actually, things which are difficult to predict is the retrospective effect of the raw material price increases which are happening. Because of that, we are unable to predict how things are moving.
A little bit to add, Mitul, what happens when you see the last quarter number on the current number, see, when you deduct the increase/decrease component in the cost of goods consumed, there are lot of cost other than the raw material also involved with that that is reduced for the purpose of presentation from the raw material, like processing cost, other manufacturing costs. That's why you find that anomaly. The 46%-50% is always a benchmark number to consider this.
At least on a near term, whatever visibility we have, that 46%-50% would be a probable range.
Yes.
Sir, my question on the, again, export and LCV side, can you give more detail on what is now situation of LCV segment in terms of utilization, margin improvement, and new orders?
I think gradually we are winning new orders. I think we have been keeping our investors posted with whatever new orders we are winning. In terms of LCV, we are doing exceptionally well in the North American market. We feel that in coming years, lot of new orders are going to come in, which is going to make a significant progress in LCV side.
For the quarter, LCV would be how much as an overall percentage of revenue?
In terms of export overall revenue, I think there are two parts to it. Lot of material is right now sitting in Ramkrishna Forgings LLC, in terms of North American sales in LCV. The sales which we have already taken into account, I think close to on 5% is LCV sales. Lot of material is in warehouse and in Ramkrishna Forgings LLC.
Okay. Out of this revenue, it would be roughly 5% at present.
Yes.
On the export side, sir?
On export side.
Overall export view outlook in terms of-
I think we are going to remain strong. What we feel, only in our presentation we have clearly highlighted, we cannot predict the semiconductor issue, what is going to pan out for it. Putting semiconductor issue aside, I think we should continuously do well during the entire quarter.
Earlier we were expecting roughly INR 900 crore kind of annual revenue. Now it seems with this run rate, it could be definitely much higher than that.
I think we would not like to give any forward-looking numbers, but only thing what we can say that we are going to remain, are working in a consolidated manner, and we should look at doing much better than what we are doing right now.
Okay. Sir, last question on the margin side. This 24% EBITDA margin historically high. Any view, of course, I'm not talking about next one or two quarter based on the fluctuation of raw material as well as uncertainty on semiconductor side. Sustainability wise, 24%, is it sustainable or it could be one-off and stable margin would be 21%, 22%?
No, we are looking at sustainable margins at this level, and I think whatever the work we have done post-COVID is resulting in this kind of margins for us. I think we would like to, in last quarter, we had attained 23%+ of margin. That is a sacrosanct number for us, and I think we are doing all what is required to improve on those numbers. We are not surprised with what number, 24%+ numbers, what has come. We are working on improving the margin from what we had done in 1st quarter.
Thank you, Mr. Shah. We request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Yasuda from Daiwa Capital. Please go ahead.
Hi. Thank you for the opportunity. My questions have been answered. Thank you once again.
Thank you. The next question is from the line of Dhimant Shah from OneUp Finance. Please go ahead.
Yeah, thanks for the opportunity. One clarification on the ACIL Limited, you said the capacity is related to machining. If you can help me just kind of rewind that number that you mentioned, which it can add in terms of incremental sales on a full year basis.
Yeah. As we have said, on optimum capacity utilization, it can go from INR 500 crore -INR 800 crore.
Okay. You mentioned a very interesting thing, and it is partly reflected in your improving gross margins, and of course, the overall EBITDA margins that you are guiding for. As we move from smaller products to finished products to assemblies, where do you think, given the current capacity, plus give or take whatever, will this mix reside at? Will it be very crucially in favor of the assemblies or as we embark on this journey of more and more value addition as we move forward?
I think with our CapEx cycle almost over.
Right
It is time for us to fix our utilization and improve capacity versus what we had in terms of whatever better utilization we can do from the capacity. I think going forward, you will find more and more improvement in terms of machining assemblies, and this is the thing which we have to continuously do for next four quarters, at least a year, before we look at further adding in capacity. With the market growing, what we have said in our opening, Lalit also said, we are seeing green shoots in Indian economy and Indian auto sector now reviving. We are looking at doing such things to improve our utilization in terms of machining and assembly to ensure that we are at the upward trajectory of the capacity.
Right. Can you give us just some broad range that, okay, machined and assemblies put together would be at least upwards of 60%-70% of the total turnover?
No, I think we are looking at going up to 85%-90% of our forgings in machined condition or assembled condition in next two quarters itself.
Oh, wow. Okay. Given the kind of growth and geographical expansion that you are seeing, would it be one year before you will need to consider the next leg of capacity expansion, if any?
I think nothing before FY 2024.
Okay. That means that we would possibly overall be complete, as you rightly pointed out, towards the higher value-added products before which we.
Yes. Once we are at the optimum of our current capacities.
Right
We are debt light.
Correct
that is the time when we start getting free cash flows and we are able to repay most of our debts, then we are looking at to go ahead with doing any expansion or capacity addition.
The lead time would be, sir, at least even if you plan, let's say in FY 2023, by the time you order and it comes, it will be beyond FY 2024. How early do you need to plan for the next leg of expansion?
I think it is extremely difficult at this stage to give any.
No. Normally, what is the lead time in your-
It depends on the market condition. If the market is hot as it is today.
Right
it may take 12 - 16 months. If market lightens from here, it may happen in six months itself. It all depends on the market condition at that time when we start looking at CapEx expansion.
Perfect. Lastly, if you can comment on the working capital cycle, will it improve for us? The thing observed in the quarter, was it one-off, or can this working capital kind of improve? Was it that only because of sampling, because of certain export order?
I think if we continue to grow at the pace we are doing from 1st quarter of INR 400 + crores to almost INR 580 crore-.
Right
That kind of expansion happens and mostly from exports, and I think it will take some time before the working capital cycle eases out because shipment starts reaching and then we get paid. It is a full three-month cycle when things start looking at. We should be from fourth quarter onwards, start looking at things to normalize and debt coming down in the lower side.
Super. Thank you. One last question, sir, if I may. How do you think, on an overall basis, both domestic and exports, is the pass-through of the raw material happening for us?
I think it is 100% pass on. Except the government contracts on the domestic side, all raw material is 100% pass on for us.
Okay. Great. Thank you so much, and all the very best, sir. Thank you.
Thank you. Participants, to ask a question, you may press star one. The next question is from the line of Dhiral Shah from Phillip Capital. Please go ahead.
Yeah. Good evening, sir, and thanks for the opportunity. My question is pertaining to the passenger vehicle side. Any progress over there as we're looking to inroad into that segment?
Yes, we have started making progress in the domestic side in PV.
Okay. Is it contributing right now, or this is going to contribute from next year?
May be going to contribute next year only.
Okay. Sir, on the railway side, how much it has contributed to the non-auto side?
I think Lalit can give you the exact number of railway in 1st half.
Railway has not done very well in the 1st half altogether. I will say we have done a very nominal sales so far, but we are looking, now the orders are getting, railway started buying and market railway segment is also looking up, and in the next upcoming half, we are looking a much better number on the railway.
Okay. Sir, lastly, on the EV side, are we looking for any new CapEx in the EV segment, or it will be entirely catered through the existing capacity which we have?
No, in case we put up a full assembly plant for motors and controllers, which we are talking to our joint venture partners, we will require a CapEx, but that may be extremely small CapEx of $5 million-$6 million only.
Okay. This INR 620 crore worth which you are talking about, it will be from FY 2024, right? This will be for how many years of order, sir?
It is for five years.
Okay, sir. Distributed equally, right? Evenly.
Yes.
Okay. Thank you so much, sir. That's it from my side.
Thank you. The next question is from the line of Viral Shah from ENAM Holding. Please go ahead.
Yeah, hello. Thank you for the opportunity. Sir, firstly, just a clarification. What would be our net debt number at the end of the quarter?
This number right now will reach INR 1,210 crore, I think.
Okay. Has it come up from September quarter, or this was the number at the end of September quarter?
Number at the end of September quarter.
Okay. No, because in the balance sheet, it is showing.
I will just verify the balance sheet. What you said, that is a bit counting of Tata Motors, that is notional. We have to add in debtor as well as in borrowings. That is INR 113 crore. Apart from that, INR 26 crore cash balance, we have reduced from arriving at this net debt.
Okay, got it. Secondly, sir, on CapEx, if I get the number right, in H1 the CapEx outflow was ₹150 crores. What should we consider for the full year?
This is the operator. Sorry to interrupt. Mr. Viral Shah, please self-mute your line, sir, while your question is being answered.
Sure.
Mr. Viral Shah, please self-mute your line, sir.
Hello?
Yes, please go ahead.
Lalit, can you answer the question?
Yeah. Viral, are you there?
Yes, sir.
Yeah, okay. On the CapEx, I think we have already completed the major part of our CapEx, and there are some small CapEx that are pending. I think another INR 25 crore-INR 30 crore will come in the rest part of the year on the CapEx side.
It is fair to assume that our CapEx outflow for FY 2022 would be below INR 200 crores?
Yes.
One more question, sir, on the inventory. Sir, we've seen a fairly large rise on the inventory side. If you could clarify what was the reason why we've seen such a hike in inventories?
Yeah. Basically, it has been on account of increase in stock at warehouses due to at Europe and U.S. The vendor managed inventory has gone up and safety has also gone up because they're building up inventory for the improvement in domestic market, which we are doing, and that has not happened so far. That's why little bit built up on inventory.
Just one last question, sir, on the steel price. For the export contracts, are steel prices related to the domestic market or international market, and how do we pass through?
No, it is well related to international market, basically we rely on contractual indexes. We have different indexes in different contracts, based on the increase and decrease on those indexes, the steel price is passed on every quarter.
Any further pass-through which is remaining, sir, or we've largely kind of covered for all the steel price pass increase?
I think up to 30th September, we have got all the increases.
Okay. Thank you so much for answering all the questions.
Thank you. The next question is from the line of V. P. Rajesh from Banyan Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity, and congratulations on a good set of numbers. My 1st question is on the new order wins that you mentioned early on. Are we winning against other competitors, or are we getting incorporated in the new models of these customers' vehicles?
I think, Rajesh, we will not be able to answer to this question because we don't know whether we are replacing any other supplier or whether it is for new models. We don't know. We don't ask all these questions to When RFQ comes to us, we basically deal with the RFQ and basically close those RFQs with our customers. We don't ask them questions related to who are the current suppliers or whether it is a new component.
Okay. The other question, you said you are looking to reduce your debt. Is there a target to which you will bring it down to, and by when?
Purnima, can you repeat your question?
Yeah. You mentioned that you're looking to reduce your debt by Q4 as the working capital cycle eases.
Yeah.
The question was.
There is a pressure on working capital, and once working capital level starts to improve, debt will automatically go down.
Right. Any targets that you want to share with us for next year in terms of what it will be?
We have given the target that our debt level will remain at a certain level, I think INR 1,070 crore. I think that number we should achieve.
Okay. Thank you. That's all I had for now. Appreciate it.
Thank you. Reminder to the participants, anyone who wishes to ask a question, may press star and one at this time. The next question is from the line of Abhishek Jain from Dolat Capital. Please go ahead.
Sir, there is a Forex loss of INR 11 crore in 1st half FY 2022. Is it because of the foreign dominated debt? Second, do you count it on other expenditure or interest cost?
No. We have a Forex gain, Abhishek, in the 1st half. We don't have a Forex loss.
Okay. Do you have any hedging policies for this sort of fluctuation?
We forward sell some of our exports. We do part of our export forward sale. That we do, but we do not do 100% of the exports hedging. We do around 60%, depending upon the circumstances, we do hedge.
Okay. Sir, during this quarter, we have not seen any revenue performance from the subsidiary side. Only we have incurred losses. Can you throw some light on the business and operational performance of these subsidiaries?
See, we have the revenue, but due to Ind AS adjustment on the U.S. subsidiary, that revenue has been set off. That's why you are seeing a loss in this quarter, not revenue. From the next quarter, you can see both on the top line, on the bottom line, the reflect of the same. We have only one subsidiary in the travel segment where we are a little bit adding business or diversifying some business in that segment only. We have a foreign subsidiary where we are selling goods produced by Ramkrishna Forgings Limited to our customers.
Okay, sir. My last question related with this export side. Do you want to revisit your guidance for the 50% growth in exports for FY 2022?
No, we would not like to revisit right now.
What sort of the growth can we assume for the 2nd half? Because the growth was quite strong in the 1st half.
I think we would continue with that growth. Only the statement we would like to attach with it, that this is just the beginning of the journey.
Okay. Thank you, sir. Thank you so much.
Thank you. The next question is from the line of Arjun Khanna from Kotak. Please go ahead.
Thank you, sir, for this opportunity. Just a question in terms of working capital. If I look at numbers, you have actually given the production numbers also. Is my understanding right, we had roughly 28,729 tons of sales and our production was 36,863. Essentially, we built roughly 8,100 tons of inventory. Is that the correct understanding?
No. That's the forged production and that's the sale quantity. That's a mix of mixed machine and forged. There is some gap between the stock and the production here.
Okay. Basically, machining some parts, obviously the weight comes off because we right size it. That's the correct understanding?
Sorry, can you repeat?
Yeah, correct. Okay, sure. No, this is helpful. If we look at inventories by itself, would you characterize it as unnaturally large, maybe because of what we have seen with container issues, et cetera? Or you think this is largely a normalized inventory?
No, I think this is largely because of delays in, right now, shipments.
Right.
Material getting accumulated in the warehouse also because of semiconductor issue. Material has not been pulled to the extent we thought it will be pulled by the customers from the warehouse in RKFL LLC and our European operations. That's the reason you are seeing this kind of inventory.
Sure. No, that's helpful. Thank you.
Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Hi, sir. Congrats and good set of numbers. My question pertains to the capacity of 1, 87,000 tons. What kind of revenues we can do from that capacity considering the mix change which we are trying to attain?
I think it is extremely difficult for us to right now tell you what is the kind of revenue we can attain. What we are talking about right now is we are looking at almost 80%-85% utilization in the installed capacity by FY 2023. To get a top line to it is extremely difficult right now because the way dynamics are changing for us on day-to-day basis, we cannot predict what is the revenue number going to be with that.
Okay. This order book which you talked about, INR 620 crores. Effectively annualized revenue rate is about plus INR 130 odd crores from this. That's a correct understanding, right?
No, INR 680 is annualized, and it is a five-year contract.
Okay. Understood. Great, sir. Thanks and all the best.
Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Mitul Shah from Reliance Securities. Please go ahead.
Sir, thank you for giving me opportunity once again. Sir, I have question on non-auto side. Apart from railway, what is the status in terms of other segments where we were trying to enter and expanding?
Mitul, I think we have already started expanding in tractors, in earthmoving, and this has already started showing in our balance sheet also. I think our entire endeavor and thrust is that in next couple of quarters, non-auto segment, which is oil and gas, tractor, and as well as earthmoving, construction equipment and other things, becomes equally big as the auto sector for us.
For this quarter, sir, how much contribution was from this?
I think Lalit will be able to tell you the exact number, precise what is the index segment number.
Do you want number right now?
Yes, sir. Because, sir, in our presentation, other segment we have shown as almost 19%. How much, or can you give some breakup there?
That's the number we have actually derived from that sales customer wise. 90% fairly on the non-auto side, what we are looking at, it contains certainly oil and gas, railway, and the earth-moving equipment, basically. If you look at broader number, certainly it will be somewhere because the domestic side, even this contains scrap also. This is a mix of kind of thing. Number certainly from this 18%-19% is coming to around INR 100 crore. You got the number, I think, that way from the presentation.
Around INR 45 crore. If I may put an approximate number, it is around INR 45 crore from this non-auto segment of railways, tractors, and construction.
Okay. Yeah, that is very helpful, sir. Sir, second is on the margin side. New order wins are generally slightly high margin segments, right? Most of them are again from the overseas, which is again higher margin territory for us.
I think it is very difficult for me to comment on margins from new order wins. I think once we take up manufacturing for those components, then we will be able to understand what margins. Right now it is basically a calculated margins. As I said in my earlier statement, 23% is sacrosanct for us in terms of working at an EBITDA level. I think we are trying to improve more than that, and this effort for continuous improvement is already showing in our current results, and it will continuously show in the coming quarter results.
Sir, lastly, just to reconfirm on the CapEx side, for FY 2023, we are saying our major majority of the CapEx is done, only maintenance related CapEx. It should be roughly INR 40 crore-INR 50 crore kind of annual rate should be the range, right?
Yes.
Thank you, sir.
Thank you. The next question is from the line of Utkarsh Somaiya, individual investor. Please go ahead.
Hi. Thank you for the opportunity. Can you please tell me the replacement cost of your current capacity of 1,87,100 tons?
I am unable to understand exactly what do you mean by that.
Basically, how much does it cost you to put up one ton of capacity?
We don't have any such figure of one ton of capacity, how much does it take to put up? In case anybody wants to replicate what RKFL is right now, he will need at least INR 2,500 crore-INR 3,000 crore in his pocket to replace RKFL as a whole in terms of only assets.
That's good. Another question. Assuming that your product mix is only going to improve from here, and if I take the current quarter as just a base, can I assume you can do INR 3,500 crore-INR 4,000 crore of revenue?
I would not like to comment on what revenue we can achieve. What we are talking about is close to around 85%-90% realization in FY 2023 of our installed capacity of 187,000 tons. As the commodity prices moves up and down, or the premix changes because the market is so dynamic, we would not like to comment on what, in terms of rupee or monetary terms, what the revenue can be.
Is it fair to assume that your product mix will only improve from here?
Yes, it is fair to assume that the product mix is going to further improve from here on.
Okay. The INR 500-800 crore of revenue from Amtek Auto, when do you think that would come into the consolidated number?
When the court handover that plant to us. We are eagerly waiting for the Indian courts to decide. The day they handover it in 12 months time, post 12 months time from the handover, I think the revenue is going to get consolidated into the balance sheet.
Okay. Thank you so much.
Thank you. The next question is from the line of Karthi Keyan from Suyash Advisors. Please go ahead.
Hi. Good afternoon. Can you talk a bit about your next set of growth plans in terms of something about the color of new initiatives that you would be looking at? Would it be more of the same, or can you talk a bit about your mindset? Share some of your thoughts, please.
No, I think, Suresh, it is premature to talk about anything what is going to happen tomorrow. Right now, whatever we have done, we would like to consolidate on that. Like I said in my earlier statement, that we are looking at to become in FY 2023 to be a debt light company. Once that is done, we would like to grow from there on. In terms of what we would like to do, I think our growth path is very clear. I think we are looking at adding in terms of value add, in terms of assemblies. That is our endeavor that now we would like to be on the upper side of the value adds.
Would that mean it will be less capital intensive going ahead?
In terms of return ratio to sales to investment, yes. It is going to be on the lower side. I think it is very premature right now to comment on what kind of investment or what we are going to do post FY 2023. I think our plates are full till FY 2023, and I would like to comment only on when the D-day comes.
Right. Just to clarify, I didn't hear very clearly. Did you mention that the annualized run rate of new orders won is INR 620 crores, or is that cumulative? I'm sorry, I couldn't hear that clearly.
Annualized run rate of INR 600 crores per year. Some contracts are there for four years or some are five years. I don't have the list of contracts in front of me. I think we have announced it pretty clear, and I think we have mentioned details in every announcement to our investors.
Correct. I wasn't very clear about that. Anyway, thank you so much and best wishes.
Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Utsav Shrivastava, individual investor. Please go ahead.
Yeah, hi. I just wanted to know what is the dividend policy that we have in the company. One, because we've got a INR 0.50 dividend this time. What is the rationale?
I think your voice is cracking. We are unable to hear you.
Can you hear me now?
Yes.
I wanted to know what is the dividend policy of the company, because we've got a INR 0.50 dividend this time. I just wanted to know the rationale behind this INR 0.50 dividend.
We have uploaded our dividend distribution policy on the website. We can go through that. This dividend distribution is always decided by the board depending upon the quantum of profit and/or the cash flow available to the company, and considering lot of other things because lot of dynamics are involved. That's already uploaded on the website. You can go through that.
To correct you, it's not INR 0.50. For the half year it is INR 1.50 we have already given in 1st quarter, and INR 0.50 is the 2nd quarter dividend.
Yeah, okay.
Thank you.
Thank you operator, we have been very thankful to all the persons who have participated in the conference today. We wish you all a very happy Durga Puja going ahead. If there's any query further, we are there to reply to all the queries and the questions that you have in this regard. Thank you all for attending the call.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.