Q1 21/22

Jul 26, 2021

Ladies and gentlemen, good day, and welcome to the Ramakrishna Fortings Q1 FY 'twenty two Results 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. Please note that this conference is being recorded. I now want to conference over to Mr. Nishant Waz from ICICI Securities. Thank you and over to you, sir. Thanks, Liz. Good day, everyone, and thanks for joining us today for the Ramakrishnan Purging's conference call. The management is represented by Mr. Naresh Jalan, the Managing Director Mr. Chetan Hilla, Whole Time Director Mr. Lalit Khatan, ED and CFO and Mr. Rajesh Mundra, Company Secretary. Now I'd like to hand over the call to Mr. Lalit Kedan for his initial opening remarks. Over to you, sir. Thank you, Nishal. Good evening and thank you, everyone, for joining our Q1 FY 2022 earnings call. We hope all of you and your loved ones are keeping well in these tough times. I have with me Mr. Mahesh Jalan, our Managing Director Mr. Chefanya Jalan, Executive Director and Mr. Rajesh Sundra, Company Secretary. I hope you have been able to go through the results update presentation we have uploaded on the stock exchanges. I will just give a brief update on the industry right now. The Indian government's realized scheme for automotive sector with an outlay of INR 5742 is expected to spur manufacturing and growth for the whole sector. The CMC relates approval from the cabinet, but as per reports, incentive rates may range from 2% to 12% of the incremental sales of this revenue depending on the product category and product scheme. RCN Serv stands to qualify under the automatic JMP and SCM, considering we meet all the suggested criteria set out for the component makers, that is more than INR 100 crores from the overseas operations, at least INR 5 100 crores for our revenue and global investment of minimum INR 150 crores. Once the final scheme is approved, we will evaluate the same and share our plan to capitalize on this opportunity. Demand and consumption in the domestic worker sector remained subdued during the quarter. However, from the latter part of June 2021, normalized some of economic restarted, and we expect a strong demand in domestic market in Q2 FY 'twenty 2. On export front, as per the latest data provided by the CN, total Viking exports during the appeal to June quarter of the current financial year stood at L14,19,430 units compared to L4,36,500 units in the same period in 20 21. Commercial export proved the 1st quarter stood at 16,006 units as compared to 3,870 units in the 3,870 unit in the 3rd June period of last year. Globally, markets are showing signs of resurgence. European pet market is continuing to recover with new risk system expected to expected rebound by 18% this year after a 27% plunge in 2020 27% plunge in 2020. Supplier side delays following the subsurface and shortages will slow the upward trend, but order book suggests the recovery will last to 2022 full year full calendar year 2022. Additionally, U. S. New light vehicle and U. S. Street sales grew by 30% and 5%, respectively, compared to the same period in 2020. In view, as of we are confident of achieving good sustainable growth in near future in terms of top line in domestic as well as export market and further improvement in overall operating margins on account of new order wins on existing as well as new customers and development of new products from existing customers. We have provided all the information on financial performance for Q1 FY 'twenty 2 in the investor presentation uploaded by the company. Before starting question and answer session, I would like to request participants to not meet any customer's specific queries during the call. And we will now open the floor for questions and answers. Thank you. Ladies and gentlemen, we will now begin for the question and answer session. The first question is from the line of Gupin from DS Investments. Please go ahead. Yes. Good afternoon, sir, and thanks for the opportunity. I had a slightly more macro question. Could you give us some further insights into how do you see the commercial vehicle market in India and also in the export market standing out over the next 2 to 3 quarters? And specifically, you made a comment that your order book suggests that calendar 'twenty two should be a good year. If you could throw some more color on what exactly do you mean by that? And if at all you can provide some numbers in terms of order book, that will be great. Thank you. Thank you. I think regarding domestic market, domestic market like Lalit explained in his opening comments that post opening from mid June onwards, we are seeing a lot of traction in the market. And we are extremely confident that commercial vehicle as a whole industry should do well in Q2. And going forward, in we are in Q3, there is a festive season. So we expect this whole year, rest of 9 months for commercial vehicle in India to do extremely well. In terms of export market, we are seeing lot of resurgence in terms of Europe and as well as the market in U. S. Is extremely bullish going into FY 2022 also. Okay. And in giving an absolute number of my order book, I don't think that is possible because it keeps on fluctuating month on month. So I cannot give any number to the order book, but we are extremely confident of doing well with the current scenario, whatever we see that the whole year is going to be going whole year is going to plan up extremely well for us. Okay. And if I understand from the investor update which we had given that our overall capacity will be about approximately 180,000 tonnes. So if I have to just and in the first quarter so currently, what would be the capacity utilization? Is it around 70%, 70% or so? And by when do we expect to reach the full capacity? And can we go more than 100% utilization? I'm slightly new to the sector, so not very much aware about that. But what is the maximum capacity utilization level which we can achieve? And by when do you think we should be achieving that? I think in Q1, we did close we have had a utilization of close to around 70%. We never toned down our production levels. And we kept on producing. In spite the industry did not was not absorbing all things, we built up the inventory, looking into the pent up demand going into future. And in terms of utilization going forward, in terms of capacity, I think as you are aware that we have added capacity in this quarter. And going forward, we feel by Q4 of this year, we should be looking at close to 90% utilization of the installed capacity. Okay. So is it 90% or 1 lakh 80,000 tons approximately that much? 1 lakh 87,000 is a full year annual capacity. But for the quarter, I think it is divided by 4.90 percent of the utilization going into 4th quarter. Okay. And sir, any further impact which we expect out of the raw material increases? And if at all, we can give us some guidance about how should we look at the operating margins, the EBITDA margins going ahead? No. In terms of raw material increases, it is not in our control. It is absolutely steel. It is decided by the steel mill and the international steel pricing. So we cannot predict what is going to happen going forward. But in terms of policy, we have a pass on policy with our OEMs, the 7 month lag. So we are able to pass on most of our price increases of steel till now and we expect to do it in future also. Okay. So we are watching our highest EBITDA margins in the current quarter. So do we should we expect in the next year going ahead, we should be achieving somewhat similar margins, if that or not the exact number? We tend to remain at these levels going forward. We expect our margins to remain stable and our outlook is extremely bullish. Okay. That's great to hear, sir. Thank you very much and all the best, sir. Thank you. The next question is from the line of Abhishek Jain from Dolla Capital. Sir, there is a sharp improvement in the gross margin in this quarter. Is there any one off like related with past quarter under recovery as R and M impact was passed on in 1st quarter with 5% jump in domestic realization? No, no. See, Abhishek, there is no one off item in the our income statement, and it's a consistent revenue and consistent cost. It's only there is an improvement in supply chain realization and which is going to continue. I think this level is going to continue going forward. But in the last quarter, you have mentioned that export, there was under recovery in the export election and that will be passed on from this quarter only. So That has materialized. That's not a problem. It is materialized. So what would be the sustainable gross margin in the coming quarter? Because will it be sustainable at this number? There won't be any price fluctuations. See, on the price fluctuation, it depends because we can't comment on the price fluctuation. But whatever will be the price fluctuation, that's going to be passed to the customer. It's a matter of time left. So one month left, this is a general time left. And on the margin side, we are looking at right now what margins we have achieved, and we would like to achieve the margins in this range only going forward. Okay. And there is a tough jump in the employee expenses during this process. So is it because of the capacity addition? Or is it because of the hike in the Chinese? No. It's a combination of that. There is some hike in the Southeast, and certainly we have paid back to employees what we have deducted in earlier year that also we have paid in this quarter. So this is one on account of that, and we have paid some incentives to our supply also. So that's why this hike, next quarter, you will see the normalized selling. Okay. And in Q1 revenue from the year, ROC has shown a strong improvement. Can you throw some light on it? Have you run out a new business? Or what is the reason? I couldn't get your question, Abhishek. Can you repeat it? So revenue from the Europe region has gone up significantly in the Q1. Can we pour some light on it? No. Vijay, I think we have already expressed in last several calls that we have won large businesses from Europe. And it is now this has started coming into our income statement, and it is going to continue to grow. Europe is going to be significant contribution in top line going forward. This is only some highlights which has come into this quarter. But this is on a continued basis, it's going to Europe is going to continue to grow. So what is your revenue target from the year of any FY 2022? No, we don't have any guidance in terms of FY 2022. Basically, our intent is that in export side, Europe is going to be a substantial portion. Earlier, only we our substantial portion of contribution from exports was coming from North America. But now Europe is going to become a substantial part in our income statement. Okay, sir. Sir, within your total capacity, so this line has gone up to that 1,000,000 7,200 tonnes after adding the new fixed line of the 7,000 tonnes. So total capacity addition in Q1 is 2.24,650. Is it for the 6,300 tonne place line or 12,500 tonne place line? Now you see, we have added a hollow single line last year in December. So 10,200 tonne was for that account, but for the we had well before only 1 quarter. That's why in the result, we have seen it 2,550. But it was 10,200 added last year and 17,000 tonne on account of new 7,000 tonne, making a total 107,200. And is it for the it is for the heavy fixed line or the 600,000 fixed line? 700,000 fixed line. Segment in domestic markets. What is the revenue visibility you're looking from this business? In from mining segment, we do not expect a huge revenue, but we have just made a significant entry. This is going to show in coming quarter, we will going to become slowly become a significant going and a growing business going into FY 'twenty three. Okay. So you are not expecting any business in the significant business in the mining segment in FY 'twenty two? No. We are already doing in the mining segment, we are doing an annualized business of close to INR to INR45 crores. This is going to become this is going to increase by 10% to 15% in this year, but this is going to become a significant business in FY 'twenty three. Okay. And sir, in last quarter, you have also mentioned that you have owned a business of around $25,000,000 annualized business from the NCD business. So when it will start to reflect in the PL, it is only in the upper 20 3 or It is going to be in line by 23. Okay. If you are waiting for the last We have already mentioned in that call that this year, we are going to give samples and field trials. And next year, there is going to be business in the income statement. Okay. And my last question is related with this growth and the make data in your books at the end of the Q1 FY 'twenty two? Gross and net date. Okay. Total net debt is about 1104, I think. 1100 crores. Okay. And that is the lead date? No, that SG and A margin marginally increased due to higher utilization on account of working capital because there was very less domestic sales and there was much higher export sales. That's why we think this increase is due to working capital utilization, but it will again come down in upcoming quarter. And sir, your CapEx plan for FY 'twenty two considering this is taking the benefit of the PLI scheme? See, once the PLI scheme will be out, then certainly we will work on that and examine that in the final detail. Then we will decide on the action plan as per PLI scheme. Right now, for this year, we are going to complete our pending of the last year project. So that's INR64 on that account, another INR20, INR25 INR25 INR on the maintenance and another little bit on the machining side. So we'll be adding, we're putting around 100 core of capacity this year. Okay. Thanks. That's all from my side. Thank you. The next question is from the line of Aduthya Makaria from HSBC Securities. Please go ahead. Yes, sir. Just a couple of questions. Firstly, on the debt, what is our plan to deleverage? We are about INR10, INR11 INRRL as we said, what's the level we are comfortable with? And secondly, in the U. S. With regards to the Class 8 truck sales, is the semiconductor shortage out there over? And what is the CY21 or CY22 U. S. Class 8 sales number you think is realistic? Thanks. In terms of debt, I think we have already guided in the last call that we are looking at reduction of debt for on the annualized basis of close to around INR 75 crores to INR 100 crores in this year from internal accrures. And in terms of Class 8, we cannot predict whatever right now we get the sentiments that there should be 2,070, 2,290,000 for the full year in calendar year 2021. And calendar year 2022 also looks to be robust and at this levels only it may continue. Okay. But is the semiconductor shortage an issue out there because what we understand is the fleets are running full or the new truck deliveries is delayed for some reason? New truck deliveries are delayed because of semiconductors as well as the supply chain issues being faced because of the sudden surge post COVID. Okay. Okay. Thanks. Thank you. The next question is from the line of Mittal Shah from Reliance Securities. Please go ahead. Thank you for taking my question and congratulations on a good performance. Sir, again, for a look on a gross margin side, in terms of growth materials per kg, sir, if I do that calculation based on your volumes, then it comes INR74 per kg compared to past many quarters because in the range of INR 81 to INR85. Can you show some light how from this instead of rising it because of the commodity inflation, it has come down significantly? See, this all depends upon the product mix. There is no reduction in raw material prices. So raw material prices are constant as per the last quarter only, and it was consistent. And I don't directly remember how you derive this number, the INR74 right now. But certainly, the issue is inconsistent with the prices what we have in the last quarter. And see, if you are comparing value or value per ton in terms of sales and cost, it may be not be the benchmark because product mix may differ quarter to quarter, and we'll talk to the early licenses are also different. So it may have a different value. But the other factors have not gone down, so it should remain consistent with the last quarter only. Sir, I am taking I'm not taking anything from the revenue side. I'm taking purely raw material cost given by you in the P and L and dividing it by volume given by you. So I think you have production value, correct? Right. But I think if you will look at last quarter also, last quarter my production was more the raw material driving there progression is wrong. Last quarter my production was 37,000 tonne and my cost was 272,000 tonne. This quarter I see 35,000 tonne and cost is 263,000 tonne. So almost it is in line. How you are deriving a 10% difference, I don't know. Okay, sir. I'll take it offline. Because you have been very consistent with the last quarter. So I think there is some error in your So my second question is, again, on a working capital loan, you indicated it has gone up marginally. Can you give both numbers roughly? How much was it in last quarter working capital then? How much it has increased? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] I said last quarter to this quarter, the working capital numbers have been increased by around 34. And whatever because long term debt, we have paid around 24, but that also has been drawn also same amount on account of continuing CapEx plan. And last question on the margin side, as you reported historically high margin, but this is again the quarter wherein your export volume is nearly half of the total volume. So can you indicate that export margins are surprisingly higher than the domestic and that is the reason these are the margins? I think, Abhijit, like we have expressed in earlier question also, and in the past also, we have said we are always working on improving the margins, and this is going to be consistent with the export has higher margins, it is basically the product mix which derives the profit. And we are driving in terms of product mix to earn better margins in going forward. Yes, sir. This is Mitul Shah. And lastly, again, just a reconfirmation. Earlier, we indicated non auto segment revenue would be somewhere in the range of INR 300 crores in next 2 years. Still, we believe that we can do in FY 2023? Yes. We still believe because I think post COVID things are working out well within domestic industry and things are coming up very fast. So we feel that going forward, whatever we have commented, we will be able to achieve by FY 2020. Thank you, sir. All the best. Thank you. Next question is from the line of Viral Shah from NAM Holdings. Please go ahead. Yes. Thank you for the opportunity, sir. So just a question on the debt. I think we said our debt is around INR 1100 crores and we plan to reduce it by around INR 75 crores this year. So is this number the peak debt that we will see despite of growing export where we have a large working capital cycle? So can you just throw some light on the debt side? I mean, have we seen the peak debt? And how confident are we of being able to reduce our debt numbers from here on? Biren, see, by and large, I think we are there at the peak level depending upon certainly this quarter performance, which may be 5, 4 here and there. But as domestic demand is going to improve from here on and so the cash flow certainly on domestic side is much better. And when domestic sales improves, cash flow improves and drawdown levels will suddenly go down. So we are very much confident of reducing debt from year on as we are hopeful that there is an uplift in the demanding domestic market. Sure. So second question, I think you did allude to the fact that your production volumes on a quarter on quarter basis were largely kind of constant despite a sharp drop in CV production volumes. So can you just throw some light why so? I mean, why did we kind of keep our production levels at an elevated level? We actually felt that there is going to be a last time post COVID when the market suddenly because of pent up demand went ahead of production, we were caught off guard and we were not able to sufficiently utilize the opportunity for higher sales. So this is the thing when we thought that it is better proven to keep on producing. And in case there is a pent up demand, we will be able to make good the market and utilize that opportunity to be on the upper cycle of the market. Sure. Sir, can you provide an update on the Amtech acquisition? It is still in NCLT, and we are still getting dates. We are not able to get an update or any confirmation from the judiciary right now. So we don't have any time lines as of now by when we expect things to get materialized. Okay. And just last point on electrification, sir. Sir, do you foresee on the CV side, there could be kind of an upsurge in electrification or maybe hydrogen fuel cell technology in the next 2 to 3 years? And if so, how does that impact our company? I think our sales are not into majorly into any engine components. So I don't think we will be able to be affected majorly or any way by electrification or in terms of hydrogen vehicles. But to just keep you updated, we have already started on working on EVs also with lot of OEMs. And we have just very recently received a significant order book for EVs from existing OEMs to start producing and supplying them. So we are we as and when this sector starts developing into EVM, we will also significantly make improvements into it. Sure. Thank you so much. Thank you. The next question is from the line of Abhishek Shah from Valcoll Capital. Please go ahead. Hi, sir. Thank you for the opportunity. One is, so you mentioned that you are just confirming, you mentioned that by Q4, you're looking at 90% utilization on the 1.77 lakh metric ton capacity. Is that right? Yes. Right. And so that's so assuming, say, Q3, we did about 30,000 tonnes volume. And so where do you see that incremental growth coming from? And what will be the domestic and export split in that? I mean, just a ballpark, just trying to understand where do you see incremental demand coming from? It is extremely difficult to say what is going to be the pre mix of in terms of export and domestic. But as you know, we have already said that the current market scenario for CV was sluggish, and we expect the demand to come back in this coming quarters. So we expect with this capacity, we will be able to sufficiently utilize the current demand, which we feel that is going to come back to the industry in next coming quarters. Right, right. And sir, higher domestic volumes, do you expect the margins then to sustain at these levels at 23%? I think with the utilization improving, obviously the cost fixed costs are going to come down significantly. We are extremely bullish that our margins not only going to sustain, we are going to do better in terms of margins going forward if the capacity utilization improves. Understood. That's all from my side, sir. Thank you. Thank you. The next question is from the line of Dapin from DS Investments. Please go ahead. Yes. Sir, I had a follow-up question as far as the electric vehicles are concerned. Do we currently supply to any customers for their Thank you. I think I've just answered to a question previously. Thank you. I think I just answered to a question previously that we have just received significant order from 4 electric vehicles from an Indian OEM. These are partially into electric vehicle, which is concerned. While we are working with a lot of customers on offshore in terms of electrification and components for the utility, in terms of making any equipment or making any assembly, we are right now not there. But yes, we are going to be part of assemblies for EVs going forward. And you will be able to hear in this coming quarters for our carefully getting into significant businesses with offshore and domestic customers for EV. Okay. Sorry, sir, I missed it. And thank you so much. Thank you. All the best. Thank you. The next question is from the line of Faisal Hawa from H. J. Hawa and Co. Please go ahead. Hello. So my question is that how do you feel that in 4 to 5 years, what will be the kind of turnover of the revenue that we should expect? And what are the kind of investments that we need to make for the company to be really sustainable and in a high growth phase? I mean, in the high growth phase and I think with the capacity inflation improving, I don't know about what is going to happen after 5 years. But as far as company is concerned, we aim that in next 2 years, company should be looking at close to around at least in terms of achieving our top line at least 50% to 60% growth on annualized basis from year on. On. So in 2 years' end, the strategy or the D and L of the meal remain same only to grow faster? I think strategy is very simple. We continue to grow with the market. We are working both on content of the vehicle as well as getting into new geographies and new varieties in terms of automotive segment. Okay. Thank you very much. Thank you. The next question is from the line of Mittal Shah from Reliance Securities. Please go ahead. Yes. Thank you for taking the opportunity again. I have a question again on the LCD side, sir. What is the status currently and what is the outlook on that side? Are we relatively bullish the way we are projected on the Class 8 and domestic MHTV? We are extremely bullish into all the segments of the commercial vehicle, whether it is a light vehicle or whether it is heavy vehicle. We are working extremely efficiently on both the markets, and we are getting new businesses as well as increasing our content in existing business also in terms of share of business and new component. So we are extremely bullish. And if you see by our performance we have given in the Q1, while the industry most of the industries in India were on a shutdown basis and there were practically 0 sales, we have been able to block a significant sales in domestic industry also. That is basically only because that we have improved our content per vehicle as well as share of business per vehicle. Secondly, on the export side, can you indicate any major addition of client from North America or any apart from this Europe, any other country? No, as of now, we have nothing to inform. I think already we have given press release few weeks back regarding our order win for Europe, and we do not have any new information to share with the investors. Okay, sir. Thank you. Thank you. The next question is from the line of Sagar Parekh from Deep Financial. Please go ahead. Yes. Good afternoon, sir. My question is again on the gross margin. So I'm still not able to understand. You gave a clarification, but can you again help us understand? So if I look at your last quarter's raw material cost, that is raw material consumed and stock adjustment put together, that was about INR264 crores in March 2021. And if I look at June 2021, which is the current quarter, your raw material cost is about INR162 crores? Correct. Yes, carry on, Sadhguru. Yes. So basically, I'm looking at about 11% improvement in gross margins sequentially. So could you clarify how that happened? That's a pretty big jump. So on the realization front, I understand that your realization increased quarter on quarter by 7% 9% on domestic and export side. But on the absolute cost, how did it come down is what I'm trying to understand? Again, it certainly depends upon the product mix, Sadar. And certainly on the sports side, lot of heavier product has gone and that gives us a little better margin on the raw material side also. So that has yielded in this kind of market. So this could be the sustainable number. So if I just take on the percentage terms, if it's coming up Number R is going to remain nearby in terms of what Mahesh earlier said. See, we are expecting improvement in catastrophe utilization. So product, certainly the export and domestic mix may change in upcoming quarter a little bit, but export is going to remain strong. We are also looking to improve on the export numbers also quarter on quarter. So with that, we are extremely confident of achieving similar kind of margin or we may improve upon that. Okay. And just to clarify, this European OEM order that we won of €15,000,000 that will start from FY 'twenty three, right? Yes. Okay. So this quarter's European numbers does not include that. So that is from the earlier orders that we've asked. Earlier order wins, it is there in the current income statement. And gradually, this is going to grow over next couple of quarters. And new order book is going to this year samples and field trials are going to happen and this is going to completely come into the new order book next year. Okay. So how big do you think can Europe become? Like right now it's about 25%, 26% of export sales, but broadly As a company, we are estimating or we are working on basically fifty-fifty in terms of Europe and North America exports. Okay, perfect. That is the intent. Basically, that is the intent we are working with. Sure, sure. And just last question on from my side, we have guided for INR 75 crores to INR 100 crores of debt reduction for this year. But if I look at your and you have also said that next 9 months are looking very promising both on export and domestic. So your margins are also going to improve. So about even if we like do INR 450 crores, INR 500 crores of operating profit and then so you will have significant cash flows, right? So what am I missing? It's just the increase in working capital that will lead to lower debt reduction because your CapEx is also just INR 100 crores. I think basically, Lalit has already answered to this question. Basically, when domestic sales improve, the inventories are going to go down and that is going to create cash in the books to pay off the debt. So short term debts are going to we are looking at reduction of short term debt going forward from INR 70 crores. No. So why only INR 75 crores to INR 100 crores? Why not more is what my question is because you would make much more cash flows then. See, Sangamo, it depends upon the certainly cash flow. And if there is a cash flow, that 75 or 100 crores is what's our target right now. That's on the conservative basis or I will say optimal basis. And if we have more cash, certainly it will go on only with the same working capital date only. Okay. So are we actually factoring in any Amtech acquisition during this year in our INR 75 crores to INR 100 crores? Or if so let's say if it happens then will our debt reduction target further go down or P. Vijay Kumar:] The debt reduction is altogether separate from all decisions because right now we don't have on that. Once the clarity will be there, then we will comment upon that improving the debt number. Right now we are not proceeding debt in our any of the statement. Understood. So this interest cost of INR 18 crores to INR 20 crores kind of quarterly run rate will continue for this year also then? Yes, yes. Okay, okay. Okay, sir. That's it from my side. Thanks and all the best. Thank you. The next question is from the line of Nishant Vas. Please go ahead. Yes. Hi. So thanks for the opportunity. So could you shed some light in terms of the progress in the domestic non auto business? How are you seeing that play out specifically like having business railways? Any shift and upgrade on that? I think, Nishant, in terms of railways, we have had a very high number. But because of COVID, we do not see any great improvement. But it is a pleasure for us to inform that we have received development orders for manufacturing of shells for locomotives. And we will be supplying and each shell is costing close to around INR 80 lakh. We have received an order for close to around 8 pieces. And this requirement from Indian Railways is close to around INR 250 crores. So we will be supplying this development order within next in Q3 of this year. And post that, we expect significant business next year for manufacturing of shelves for locomotives from in the U. S. And in terms of further other nonautomotive business, we have entered a segment which was missing in our portfolio that was tractor. We have made significant end roads in this quarter in the Indian tractor industry. And I think going forward in next two quarters, we should do significant business from sector. And next year, it is going to be again 8% to 10% annualized business for us from tractor segment. And sir, in the same concept on non auto exports, are you seeing some improvement in your category in terms of Offshore? Yes. We are seeing good traction in oil and gas and locomotives in our offshore business. And I think it is very nascent right now to comment on what we will be able to do. But whatever indications we are getting from the oil and gas industry, I think we should do a significant business in this year as well as next year in oil and gas. As you are aware, because of the high oil prices, CapEx has again started in the oil and gas sector. And we are going to we are extremely bullish going into next 2 quarters maybe second quarter may not result in a significant business, but the second half of the year, we are going to do a significant business in oil and gas. Okay. Thanks for that. Sir, the second question is more in terms of what would you think would be because obviously your capacity sometimes is tangible and obviously it's a function of product mix and sometimes standard is not the right reflection. And in some categories, utilizations have been higher than potential utilization, peak utilization on the space of your capacity? I think, Nishant, I think peak utilization can be somewhere between 88% to 90% of the capacity we have declared. That is going to be the peak, beyond which we will need to do further CapEx to augment further capacities. Okay. Fair enough. And my third question is more in terms of previous cycle to this cycle. So how would you put your say without naming any customer in terms of categories, how do you think your content per vehicle is likely to evolve through this cycle vis a vis the previous cycle? And in terms of also potentially, will that be positively impacting your gross value add? Just some directional sense on that. Nishant, we do not see anywhere the volumes to return back to what was there in 2018 near future. But whatever was the pre COVID level, if that also happens, we will be, I think, significant contributor to both in top line and in the bottom line from the domestic industry. I cannot put an absolute number to it, but in terms of content, whatever improvements we have done, if pre COVID level also comes, then also we will be able to do significant business in the domestic industry. Sir, in terms of content per vehicle for exports, presumably between previous cycle and the cycle there should be improvement, that is the right assumption to say? That is already showing in the balance sheet, Nishant. I think if you see our historical numbers, I think we in terms of quarterly exports, we have done the highest ever exports in this quarter. So obviously, in terms of geography, in terms of making inroads into new arenas, we have done considerably well. Fair enough. Thank you, Asaf. Thank you. The next question is from the line of Kush Joshi from Kitara Capital. Please go ahead. Yes. Thank you for the opportunity. So can you just explain some the endures which you made to the South American markets, some failure to that? I think in South America market, it is not a new end road. I think 3 years back, we were doing significant during 2017, we were doing significant business for Brazil. And because of the currency impact, that business had gone and we had no businesses for last 3 years from then. And now post COVID, because of the surge in the market, that business has come back again. And we have confirmed the business plan for them for next 3 years. So what was the business we're doing in 'seventeen in Brazil? I think it was close to $5,000,000 and this is going to be $5,000,000 for next 3 years for us. Annual? Annually. Okay. And my second question is with respect to passenger vehicles. So whether any traction will be made there? No, we have already entered into passenger vehicle segment. But right now, our components are on field trial. And right now, we have not made any significant entry. I think going forward, it will take at least 2 quarters to make significant in 2000 year vehicles. Thank you so much. Thank you. The next question is from the line of Hitesh from AXA Capital Advisors. Please go ahead. Hi. Thanks for the opportunity. Sir, it's quite heartening to learn learn that you have been winning new business and this is I think the wins that you're talking about is not the organic growth that you're targeting, but I think it's also the content for retail. Just trying to understand what is driving this order flows towards in the sense how are I'm sure you're discerning some of the leaders who are already catering to that market. So what is driving that team to help us understand that? I think I'll not be able to comment that we are taking somebody else's business or not. For us, it's a new business and it is a new component and new area which we are entering and as well as new geographies. So we are bidding for each and every business and our opportunities which we are getting and that's the way we are getting into new businesses. But whom we are disclosing or why we are disclosing, it's up to the buyers to comment. We cannot comment on that. But are these new wins for the newer models? Or are they new ones for the existing model of vehicles? That is coming to? It is for existing requirements and as well as new requirements. And because of the difference in the steel price both in India and the overseas market, is it because of that that we are getting an edge low in terms of pricing that we are quoting with our customers? I cannot comment on that. We are not looking at international pricing. We are working with domestic steel industry. So we are working clearly on that. And we are quoting as per our norms and our overheads. So I don't know or I cannot comment right now why it is up to the buyer to make his decision on what savings he is having. So I would basically only be happy that I get the business and I continue to supply and get more and more entries into new geographies and new arenas. Sure. And what would be the typical tenure of these wins that you when we have from overseas customers? It is 3 to 4 years. Okay. Great. And just one last Some contracts are 4 years. Sure, sure. And just the last thing, the major order that you were mentioning about 8 shells for the locomotives, is that for the flight locomotives or is it for the passenger locomotives? It is for electric locomotives, both used for freight as well as passenger trains. These are being manufactured by DLW and CLW in India, but there are 2 basically locomotive manufacturing companies in India and they manufacture and India is converting the entire requirement to electric locomotive and we have started manufacturing shells for these locomotives. Got it. Sure. Thank you. Thank you. As there are no further questions, I now hand the conference over to the management for the closing comments. Thank you, Lisa. We would like to thank everyone joining on the call today. We are confident of increasing our new growth momentum by capitalizing on the upfront and domestic and international automotive sector. Increasing content per vehicle along with new customer addition would enable us to maintain optimum capacity utilization of our enhanced manufacturing facilities. For any further queries, we request you to get in touch with HEI Investor Relations Advisors or you're also free to get in touch with us. Wish you a very pleasant evening. Thank you. Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.