Ladies and gentlemen, good day and welcome to Ramkrishna Forgings Q1 FY 2027 Earnings Conference Call hosted by 360 ONE Capital Market Limited. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dineshk umar from 360 ONE Capital. Thank you. Over to you, sir.
Thank you. Welcome to all the participants on behalf of 360 ONE Capital Market for Ramkrishna Forgings Limited 1Q FY 2027 post results conference call. From the management we have with us today Mr. Naresh Jalan, Managing Director, Mr. Chaitanya Jalan, Whole-time Director, Mr. Lalit Khetan, Whole-time Director and CFO, Mr. Milesh Gandhi, Whole-time Director, and Mr. Rajesh Mundhra, Vice President, Finance and Company Secretary. I will now hand over the call to the management for the opening remarks to be followed by the question and answer session. Over to you, sir.
Thank you, Dinesh. Good evening, everyone. Thank you for joining us on this call to discuss the Q1 FY 2027 earnings. I trust all of you have a chance to review the earnings document that we have shared earlier today. The global macroeconomic environment remained mixed during the quarter, with geopolitical developments and evolving trade policies continuing to shape business sentiment across major markets. While the resurgence of the West Asia conflict remains an overhang, tariff negotiation can arise once again, operating conditions have become more stable compared with the heightened volatility which we witnessed over the past few quarters. While customer activity across key markets has remained resilient, demand across the commercial vehicle ecosystem has strengthened further, supported by healthy production schedules and greater policy clarity around regional supply chains. Robust GST collections and healthy consumption trends reflect the underlying strength of the domestic economy.
Reflecting these favorable market conditions, we are pleased to report another quarter of strong operational and financial performance. The momentum established in the latter half of FY 2026 has carried into the first quarter of FY 2027, driven by robust domestic demand, improving export volume, and disciplined execution across our increasingly diversified business portfolio. Our international business recorded further improvement during the quarter, led by stronger demand from North America alongside improving customer engagement and order execution across Europe. While tariff related developments remain an area of close attention, the operating environment has become considerably more stable, providing greater visibility and confidence across our export markets. At the same time, we are expanding our presence across passenger vehicles, electric vehicles and advanced materials including aluminum and specialty alloy forgings, broadening our addressable market and creating new avenues for long-term growth. Operationally, the quarter business continued progress across several strategic priorities.
The integration of our casting operations has now been substantially completed. We remain focused on scaling production while improving operating efficiencies. Production ramp up across the new forging and casting facilities continues as planned. With the majority of our strategic capital expenditure now behind us, our focus has specifically shifted towards putting these assets to higher utilization, improving asset turn, and generating stronger operating leverage. With cash flow set to strengthen, we remain committed to prudent capital allocation. We will seek to reduce leverage while ensuring that adequate capital is deployed towards growth investment and maintenance CapEx. Let me now briefly share the financial highlights for the quarter. Consolidated revenue for the quarter stood at INR 1,217 crores, which is flat quarter-on-quarter and it has registered a growth of 19.84% year-on-year. EBITDA excluding other income stood at INR 218.47 crores.
That is up by 47% year-on-year and 5% quarter-on-quarter. EBITDA margin improved to 17.96% from 17.11% in the previous quarter, reflecting better operating leverage and improved product mix. Profit before tax for the quarter stood at INR 65.34 crores versus INR 23.9 crores year-on-year. Profit after tax for the quarter stood at INR 46.88 crores versus INR 11.7 crores year-on-year, reflecting a growth of 172% and 297% respectively. With that, I would now like to hand over the proceedings to Mr. Milesh Gandhi, Whole-time Director who will take you through the order wins during the quarter. Over to you, Milesh.
Thank you, Lalit . It has been an exciting quarter in terms of order wins. The company continued to witness healthy order inflows during the quarter, reflecting sustained customer confidence in our manufacturing capabilities, engineering expertise and execution track record. During quarter one FY 2027, we have secured a business worth INR 278 crores with a program life of four years from automobile segment. The company also won new orders worth INR 15 crores from metro segment of Indian Railways. Out of INR 278 crores, approximately 82% of these orders are in passenger vehicle segment and 18% from two-wheeler segment. We continue to witness encouraging traction across both our existing customer base as well as our new customer engagements, supported by our expanding manufacturing footprint and broader product portfolio. Our diversification strategy continues to make steady progress.
Commercial vehicle remains our core business. We are seeing increasing opportunities across passenger vehicles, electrical vehicles, energy, mining, off-highway, and railway segments. The share of our non-automotive business in our order book has continued to improve, reflecting our strategic focus on building a more balanced business portfolio. Demand continues to be supported by healthy investment activities across infrastructure, industrial manufacturing, and commercial vehicles. Customer discussions across North America and Europe have become increasingly constructive compared to a year ago. We remain confident of sustaining healthy order momentum and building a strong foundation for long-term growth. Would like to mention we are looking to new ventures within the boundaries of forgings and casting business in non-ferrous products, manufacturing products from aluminum, titanium, Inconel, and nimonic grades for aerospace, robotics, and semiconductors.
We are seeking to leverage our advanced manufacturing capabilities with our participation as a strong engineering company in high technological sectors, which have been traditionally dominated by global players. We are confident to create a strong impression. That's from my side. Over to you, Lalit . Thank you.
Thank you, Milesh. Dinesh, you can open the house for Q&A.
Thank you very much. We will now begin with 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. The first question is from the line of Pranav Jain from Ageless Capital Finance. Please go ahead.
Hi, sir. Thank you for the opportunity, congratulations on the results. Sir, my first question is on the wheel JV. Just to understand the TAM, other than the 80,000 wheel offtake that we have with the Indian Railways, how do we plan on utilizing the remaining capacity? Just in addition to that, the 80,000 wheels that we are supplying, the wagons for that will be made by Titagarh or will be made by the Indian Railways production houses themselves?
In terms of the wheel sets, we have an 80,000 confirmed order from the Railways, and Railways are going to use these wheels for manufacturing of passenger trains, locomotives, and Vande Bharat. These are the three contracted for these 80,000. Wagon does not come into this. Additionally, to that, our JV partners have an obligation of close to 25,000 wheels, which takes us the utilization to close to 110,000. For the balance wheels, I think this 110,000 wheels manufacturing will take us till the end of FY 2028.
Beyond that, we are already working with our export customers and other amenities beyond Europe and North America, where we see a lot of traction in terms of wheel requirements, and we would not like to name the customer right now. Very soon, I think we will be able to tell our investors in terms of broader wins from the export market in the wheels plant.
Sir, just a follow back to that. Sir, 25,000 from, you're saying with the JV partner. Sir, considering the amount of wagon capacity they have, ideally, they require more wheels, right? What's stopping us from supplying more to them?
Basically, they can only buy wheels for the private sector wagons which they manufacture. For Indian Railways, supplies are FOC basis, which Indian Railways supplies to them in casting. The cast wheels, which are manufactured by Indian Railways by themselves in Bangalore, are basically used for manufacturing wagons and are supplied free of cost to the wagon builders for using to manufacturing wagons.
Sir, this segment, sir, what is the annual demand when it comes to India as a market?
I will not be able to comment on that. Basically, how much is the wagon wheel demand or casting wheel demand, I am not aware.
Got it, sir. Sir, just one last question, sir, on our other businesses of forgings and castings. Sir, going forward, we expect utilizations to improve throughout the next three quarters since you had guided for higher utilizations by this year end.
Yes, I think gradually you will see every quarter, Q on Q, there will be considerable utilization. I think the first quarter we have done extremely well in terms of our overall utilization and top-line growth. I think similarly, you'll see every quarter this is going to get reflected.
All right. Thank you so much, sir.
Thank you.
All the best.
Thank you. The next question is from the line of Sidhaant from Sanshi Fund. Please go ahead.
Yeah. Just wanted to get the timeline on the railway project because we said it will commence in first week of May, the trial. Also on the Mexico acquisition that we've done because in the last call we had discussed that this will also start somewhere in May. How's that panning out?
First, in terms of RKTR railway plant, already trial production has started and I think we are expecting to submit samples in the month of August, first 300 numbers of wheels to Indian Railways for their testing and trials and post the trials we will be able to comment on bulk production. With our working right now, we expect bulk production to start hoping to full-fledged supply to railways for their contractual demand by September or October latest, from month-on-month basis. In terms of our Mexico, we have already Mexico project productions have started and I think from third quarter you will see some significant revenues from Mexico. Already this quarter I think close to around INR 6 crore revenues have come from Mexico in terms of our top line. Significant revenue is going to start clocking in our books from third quarter of this year onwards.
Understood, sir. Thank you.
Thank you. The next question is from the line of [Kaushik Jawhar] from AK Investments. Please go ahead.
Yeah. Thanks for the opportunity. Firstly, great set of execution. We have been seeing Ramkrishna Forgings for last couple of years. We are going through some pain period. Looks like now we are heading for a good growth. I have two questions mainly, what are the target ROCs for this year and next year, sir?
Lalit, can you take this one?
Yes. See, ROC is just coming back to our old levels. This year what we are looking at, somewhere between 12%-15% ROC this we will earn. Next year in FY 2028, we will target my 20% ROC.
Great. Secondly, sir, how much of the revenue are we expecting from exports market because we are coming from a destocking year.
We are looking at almost 35% revenue on a consolidated balance sheet coming from exports for a full year basis.
Little bit quantification. It will be highest revenues till now whatever we have seen.
It will be highest ever revenue for RKFL in this financial year for ever done in terms of exports.
Okay. That's it. Lastly, I have a question that two to three years back because of export shares were high, we were making 22% margin. Do you see that possibility happening in this year?
As an entrepreneur, we always see possibility of higher margins. Who does not want to earn higher margins?
Yes. Execution, sir.
Execution-wise, we are looking at higher exports. Environment is challenging in terms of the overall energy prices and other things, shipping cost and all these things. We would not like to guide the market in terms of profitability. What we are looking right now is continued growth in terms of balance sheet. As we have already shown in this quarter, we have improved our margin by almost 100 basis points, quarter-on-quarter. This growth in terms of margin and improvement is going to be a continued work and we are putting all our efforts in the right direction to ensure that we are back to our old profit levels.
Okay, great. Thanks. Lastly, you mentioned that you are venturing into aerospace and semiconductor. Can you also throw some light? What are the-
Sure. I think as Milesh has updated that we are already working very aggressive. We have already started working on aluminum forging and we have started bulk supplies in aluminum forging. Non-ferrous now becomes the next lever of growth for RKFL. It is a journey which we have just started so I think it is at least 12 to 18 months before we have a significant revenue or product lines from this section. We are very aggressively working on non-ferrous products of aluminum, stainless steel, Inconel and other things for aerospace, semiconductors and robotics. We have already started. We would not like come up with customer names and other things. We have already started quoting for lot of RFQs from this sector and accordingly we have already planned our equipment and other things in these directions.
Okay. All the best. Thank you, sir.
Thank you. The next question is from the line of Hardik Chheda from Lark . Please go ahead.
Sir, my question was little bit in terms of margin only. More than one quarter out for the rest of the three to four quarters, could you just guide a broad range for where the margins will be for the next full year?
I think I would not like to give a range in terms of the margin for the full year but I can only assure you that you will see continued improvement in terms of margin every quarter now. Like Lalit in his opening statement has already said that we are concentrating on setting the assets right now. This increase in utilization and plus with export product mix moving up, I think you will see much better margins. Our intention and our aspiration is to go back to the old margins which we were already achieving sooner or later we will touch that margin, but I cannot give how many quarters it may take to get to that margin.
No problem, sir. Got it. Sir, in terms of margin, what would be the factors which could aid the margins more than what you are targeting? What could be the risk factor? Like if what goes wrong, the margins can come down and vice versa.
No. Only risk which we are looking at is the geopolitical issues, which is leading to shipping delays. Because of the shipping delays, there is a lot of working capital pressure which may increase as well as the prices of the energy. Energy is one of the biggest ingredients in overall our forging setup, be it for steel making or whether it is for forging as such. Energy happens to be one of the biggest cost lever, and with the war, if it escalates and energy prices goes beyond control, I think that is one of the major risks which we are running in terms of our profitability.
Yeah. Thank you very much, sir. Thank you, sir. That's it from my end.
Thank you. The next question is from the line of Mitul Shah from Pantomath. Please go ahead.
Thank you for the opportunity. Sir, I have broader question on the overall bet on this last three, four months West Asia crisis. What is our experience in terms of the inquiry levels or consumer behavior on that side, particularly from the non-U.S. geographies in terms of the opportunities as well as challenges for auto as well as non-auto segment? Any inquiry level has gone up significantly or anything?
Mitul, I think we are quite optimistic for next seven quarters with next two years, FY 2027 and FY 2028. We are confident with the current order book which we have with the current. I think Milesh statement states very clearly we are flooded and we are very exciting times right now in terms of overall demand, in terms of existing products as well as new products, and in terms of new RFQ inflows which will cater to new order book going forward. We are in pretty exciting times. War is a cost. I think in terms of demand, we don't see any deflection in demand. I think we are seeing incremental demand coming in, and that's actually the biggest challenge which we are facing right now going forward.
Okay. Great, sir. Second question on this. As we all know that commodity cost as well as freight cost has gone up significantly in this quarter. Would you like to highlight anything in terms of the quantum or basis point where we are not able to pass on the full commodity impact to the customer? What is the industry-wide scenario in which that you are-
No, I think, Mitul, commodity is a pass on for us with one quarter lag. Commodity, whatever increases happen in steel. Steel is the commodity for us, which is the basic raw material. That is a pass on for us. Separate to that, gas and other things, I think that is a cost we will need to work with because this is so much fluctuating. I think customers are not prepared to go ahead and pay that shipping cost. It depends. Right now we are seeing some abnormal cost increases, but gradually we are hoping also that to stabilize. When we started this quarter, it had already come down. This is roller coaster. I think we are working with customer how to absorb this cost, but we do not have a definite answer for this.
Yes, sir. Exactly same question I was asking about commodity. Because of the lag effect this quarter we were not able to pass on completely, right? Whenever this benefit will get reflected in coming quarter.
Yes. That is steel price, only steel price.
Lastly, sir, on this casting production in terms of metric ton has gone up significantly between the quarter. Can you highlight more details on this as well as any update on the cold forging side?
Casting production, Mitul, had started last quarter. I think you must have seen March press release, stock exchange releases we have sent. The casting plant was capitalized last quarter. That production has started coming in terms of and still the plant is work in progress in terms of overall capacity ramp-up. You will see gradual increase in production from casting plant, casting capacity over the next three quarters. In terms of cold forging and other things, I think we are working diligently in terms of improving the capacity utilization. I think by almost third quarter, we will be more than 70% capacity utilization in cold forging.
Thanks a lot, sir, and all the best.
Thank you. The next question is from the line of Vinil Shah from Dalal & Broacha. Please go ahead.
Hello. Hello. Am I audible?
Yes, your audible.
Good evening and congratulations on a good set of numbers. My first question was related to margins. Our gross margins have increased by 535 basis points quarter-over-quarter but our EBITDA margins have grew by 85 basis points quarter-over-quarter. If my understanding is correct, even with our volumes not growing significantly quarter-over-quarter, the entire improvement in EBITDA margins is purely because of increase in our prices and not any operational leverage. How do we think that this EBITDA margin improvement is going to play forward? Like we cannot be having price revisions every quarter, right?
No, I think it is wrong to say that this is only because of price revision I think because of the better product mix and other things, that is the reason there is an increase. I think gross margins have traditionally increased while the EBITDA has not increased, mostly because of the energy cost, shipping cost, all these costs we have not been able to pass on. That is one of the major reasons. Otherwise, if this cost, whenever it stabilizes, you will see significant improvement in EBITDA margins also. Hello? Hello? Hello? Hello? Hello? I think everybody should go. Can the moderator please check where is the noise coming from?
Yes, sir. The line from where the disturbance was coming has been muted.
Okay. We can go to the next call, I think.
Okay, sir. The next question is from the line of [Abhishek Jain] from CRISIL PMS. Please go ahead.
Thanks for the opportunity and congratulate for a strong set of numbers in a tough time. Sir, my first question on-
I think you are not audible. Please.
Are you able to hear me now?
Yes.
Sir, first of all, congratulations for the great set of numbers in a tough time. My first question on the export market, we have seen very strong numbers Y o Y and quarter-on-quarter. Just wanted to understand the outlook ahead. Basically, what is the guidance of export growth for the FY 2027, and how is the improvement in the Class VIII trucks orders in the U.S. and improvement in European business?
I think we are looking at one of the best years in terms of the overall export revenue in terms of RKFL is concerned, both from geographies of North America and Europe. We would not be able to comment on Class VIII trucks, how it is behaving, and what exactly it is resulting to, but in terms of RKFL order book and what traditionally we are seeing in terms of our existing customers and the new customers, we look at extremely healthy growth, and maybe it is not wrong to comment that we should have one of the best years in terms of our overall exports in this financial year.
As the base of the export is low, can we expect that 20%-25% growth in export in this year?
Yes, we are looking at almost 20% + growth in terms of exports.
Got it, sir. Sir, in the domestic markets aggregate, realization has seen a very sharp jump in quarter-over-quarter. Is it because of the change in the mix in the non-auto segment or higher revenue from the casting business?
Basically it is a mix of change of revenue from higher mix. Because of the demand, we have been able to improve our utilization, and we have been able to choose much better margin products and much better realization product. That is one of the reasons that we have been able to have a higher realization in the domestic market.
In the domestic market, what is your guidance for the volume growth in this year, sir?
I think domestic market continues to be robust and the demand looks to be extremely good. With the rainy season almost, I think by September, going to be in the next two months, going to be over, next half looks to be extremely exciting in terms of the domestic demand.
Great, sir. Sir, if I see the subsidiary numbers, we have seen a sharp improvement in the EBITDA margin. Now it has moved to the 21% versus 16% in the last quarter, depreciation cost has increased. Just wanted to understand what is the reason of the sharp margin expansion in the subsidiary companies and what is the reason of the increase in depreciation cost?
Milesh, can you take this question?
Yeah, sure, sir. See, there is a margin are, I will say, a little bit better, or I will say marginally better in the subsidies in this quarter than the previous quarter. There is no such sharp contraction. Because due to the higher elimination, you are seeing this 21% margin, but margins are 50 to 100 basis points higher than the previous quarter in the subsidies. Suddenly the depreciation is increased due to the capitalization in the Q4. In the subsidy also, whatever the projects we are doing, that has completed. That's why the depreciation has gone up, and it will continue at this level in the upcoming period.
Got it. My last question on the aerospace defense segment. Just wanted to understand how much the current contribution from this business and what kind of numbers you are looking from this business. You are also establishing a capacity for the titanium and other alloys. If you can throw some light over there, because that is a high margin business, and the ASP would be at a higher side. If you can throw some light over there.
Hello? Sir, can you hear us?
Hello. Yes, I can hear you. Hello.
Yeah.
Yes, sir. Go ahead.
Next, we are already in terms of quoting in RFQs and other things. We are looking at in next two years to build up our order book in terms of aerospace and semiconductors and robotics and other things. We are already putting and establishing capacities to manufacture Inconel and titanium products.
Got it. Thank you, sir. That's all.
It is a work in progress.
Got it. Thank you, sir.
Thank you. The next question is from the line of Aditya from Old Bridge Mutual Fund. Please go ahead.
Thank you for the opportunity, sir, and congratulations on a really good set of numbers. Sir, I am sorry I joined the call a bit late. When we are getting into products like titanium and Inconel, do you think there will be a good amount of period that will go into approval of these products and capability building? If that is the case, then what should be the timeline we should have in our mind that when these products will be operationalized and start contributing to the top line?
Any meaningful contribution, I think it's at least two years from now. I think I replied to the earlier question also. We have zero order book. We have started quoting in RFQs, and we have started building parallel capabilities, as in work in progress in terms of our manufacturing of Inconel and other steel. Already aluminum we already have in place and we have already started productionizing, going into bulk. We have already gone into bulk production in aluminum forgings. But in terms of stainless steel and other things, that is work in progress. I think significant portion of stainless steel forging will start happening because we have already got some order books from fourth quarter of this financial year. In terms of Inconel and other things, I think it is still a work in progress, and it will take at least eight to 10 quarters from now.
Okay. If we have to build capacities on these fronts for Inconel and titanium, what is the CapEx that we have in our mind that can go into building these capacities?
No, right now we already have capability and capacity. Only heating arrangements are being made for heating these steels. Other than that, I don't think there is any going to be major CapEx in terms of the current RFQs we are handling. There will be no major CapEx. It may be in the tune of INR 10 crore-INR 15 crore or at the most INR 20 crore to get away with the CapEx immediately. When we go into a significant portion of the business and significant ramping up capacity, we may need to do additional CapEx.
Okay. One last question, sir, on orders. We have got INR 278 crore of orders from the auto segment. Is this all domestic that we have got, or what geography we have got this from?
Milesh?
Out of INR 278 crore, this entire business is from domestic because the two-wheeler business, around 18% that I stated is also a domestic brand, and the 82% order for the passenger vehicle segment is also for the domestic.
Okay. Correct me if I'm wrong, is this two-wheeler business the crankshaft business that we are doing from the machining facility that we have in our Gurugram business?
Yes.
Okay. Thank you.
Thank you. The next question is from the line of Viral Shah from ENAM Holdings. Please go ahead.
Yes. Thank you for the opportunity, sir. Sir, my first question is, would it be possible to share the gross and the net debt numbers?
We have shared this gross and net debt number last time, and we have been able to improve upon the net debt by another INR 100 crore in this quarter. Last quarter, if you remember, INR 1,990 was the net debt and it is INR 1,890 or INR 1,900 crore of net debt this quarter. Okay?
Okay, this quarter is INR 1,900 crore. How are you looking at these numbers, sir, by the end of the year?
Lalit, you can answer it.
Yeah. We have already guided in our last call we will reduce at least INR 500 crore of leverage in this financial year. We are on track of that.
Okay. By the end of the year, we should be down to INR 1,500 crore of net debt.
Yeah.
Sir, secondly, just related, what would be the CapEx outflow this year? The CapEx outflow as well as the investment towards Rail JV.
Investment towards Rail JV is almost on the stage one, almost complete. Another INR 20 crore-INR 30 crore from our side will go. Total guidance for the CapEx in this year is somewhere around INR 350 crore.
INR 350 crore. Okay, perfect. Thank you. This is my question.
Thank you. The next question is from the line of Kumar Saurabh from Scientific Investing. Please go ahead.
Congratulations on a great set of numbers, sir. I think the rate at which we are growing, and I think you told in the last quarter also, we'll be hitting 80% utilization by FY 2027 end. My question is that the peak utilization? If that is so, then after this, sir, what is our next CapEx plan for further growth since we'll reach your peak in one and a half years?
I think we are looking at lot of activities right now. We have already explained in the opening statement, Milesh has already categorically explained that we are already working with customers in aerospace and other verticals. Our entire plan is to ramp up our Fresh manufacturing or new augmentation of any capacities which we think of is going to be into these verticals. We will only announce any major CapEx by end of FY 2028 when we have a clear visibility in terms of order book and approvals in place in these verticals. I think that till then we can do away with small CapEx. I think we are good to go for next two years of significant growth path with the current CapEx we have already done.
Got it, sir. The debt reduction should continue in FY 2028 also, should be less. I mean, FY 2027 you said INR 1,500. Maybe INR 1,000 crore of net debt should be expected by FY 2028.
I think debt reduction, leverage reduction, I think in the opening statement also, Lalit has very clearly said our company's endeavor is to continue to have the reduction in leverage in terms of our overall debt exposure while company continues to grow. I think we are not looking at a zero-debt company, we would like to keep debt into a significant check in terms of our overall leverage and continue to grow the company.
Great, sir. Last question, sir. Our gross margins were great. As you said, because of energy and transportation fuel cost, little bit of margin hit happened. How things are progressing in Q2 so far? Do you see any improvement there in the market conditions?
No, I think we have not seen any improvement in terms of market conditions. You are well aware of the current geopolitical issues. Unless this geopolitical issue has some conclusion, I don't think we are going to see moderate energy prices or shipping cost.
Okay, sir. Thanks a lot, sir, and best wishes.
Thank you. The next question is from the line of Jayesh Gandhi from Harshad H Gandhi Securities Private Limited. Please go ahead.
Most of my questions have been answered. Only one question is, with the net block that we have currently, what kind of sales can we generate if, say, we are working at 100% capacity?
Lalit, can you answer this question?
I could not get the question. Can you repeat the question?
I said with the net block that we have currently
Yeah
close to INR 3,700 crores.
Yeah.
What is the sales at 100% capacity that we can do generating this kind of net block?
The kind of net block right now we are having, a little bit of net block is under capitalization of casting. We can certainly looking at asset turn of two and a half on this. If you look at asset turn of two and a half, it will be somewhere around INR 9,000 crore of sales on this if we have 100% capacity utilization.
I think it is very difficult to have 100% capacity utilization. It is safe to say that we will have almost 75%-80% of capacity utilization before needing a next CapEx.
Got it, sir. That's all from my side, and good luck for future.
Thank you. The next question is from the line of Geetarth Tandon from Green Portfolio. Please go ahead.
Sir, my first question is, any plans to avoid the one quarter lag that you see in the steel prices? Basically, the purpose is if you plan to hedge the prices quickly, and if you avoid passing on to next quarter, that would be helpful in increasing margin for the continuous quarters basis.
No, steel price cannot be hedged. Steel price, I think there is no hedging system for steel price. Alloy steel price is bought on spot quarter on quarter. Every quarter there is a price which the steel makers declare, and based on that is bought. Means basically, there is no hedging policy in terms of steel price.
Okay, got it. Sir, ring rolling capacity is already at 127% utilization. Any plans to add that?
No, we have no plans to add any capacity. We are looking at almost peak utilization continuing at least for next two to three years because of the current order book.
Sure, got it. Sir, just wanted to understand, if you plan to add any further capacity, what are the factors based on which you add? You are adding a pressing line at 60% current utilization, and the pressing line is going to increase. Based on the current utilization, the current utilization would be reduced. Overall, just wanted to understand what are the factors based on which you decide.
Basically, we decide based on the order book and customer confirmation which we have. In terms of utilization, I think the press line which we evolved to put does not happen overnight or over one quarter. It takes at least four to five quarters from now for the capacity to be in place by when we will be at least around 80% utilization in terms of the press capacity.
The current participant seems to have been disconnected. We'll move on to the next question. The next question is from Bharat C. Shah from BCS Capital Ideas Private Limited. Please go ahead.
Naresh , [Non-English content] One of the most important things that I felt in this quarter or rather this year has been improvement in the working capital. Clearly, Lalit, what you were saying, that seems to be now finally falling in place. Operational cash flow after working capital is about INR 840 crore last year, probably is highest in the history of the company. Just wanted to understand how do you visualize things ahead?
Bharat, see, certainly the focus is on further improving the working capital days because this quarter. This quarter, there was a little bit elevation due to this waste classification, shipping cost, or transit time. With time, it will further improve, and certainly, this journey to improve the working capital days in overall working capital, it will continue, and our focus will be to further optimize the same. I will not give any target to that, but certainly, we will keep on working on that.
No. Improvement, Lalit , is a forever exercise.
Yeah.
Improvement, learning is a forever exercise. If there is a tangibility to that, then there is a purpose, and then there is a greater way to measure it and greater way to achieve it, actually. Some kind of a target in terms of how much improvement in working capital we are seeking to achieve would give a little bit more clarity.
Bharat, Coming to specifics, certainly, we will take baby steps. We have internal targets, certainly. As we have set the target to improve debt to debt by at least 5-10 days, inventory days by another five days, and increase the creditors' days by another 10 days. Altogether, it will be certainly 15-20 days of improvement. If this has to happen, this cannot happen in one or two quarter. It may take one year and everything remaining steady, or it may take a little bit more. We have to keep on working towards that. You should take 10 days this year and 10 days next year.
Earlier, we were very confident in hoping for turnover of close to INR 8,000 crore by the FY 2028. In between, a lot of these tariff upheaval occurred, there were internal upheavals, and finally, I think, hopefully, all those things are behind us. When do you think we should be hitting that target of INR 8,000 crore?
I think, Bharat, with all what has happened in past, I think we are one year delayed. I think with last year's performance and now continuing improving on that performance, I think we have got delayed by one year, and I think we are on track right now with FY 2029 target as INR 8,000 crore.
Okay. Which means roughly 25% compounded growth from the next year turnover.
Yes. Yes. Around 22%-25% CAGR we will have for next three years.
This time, clearly, when we get beaten once, we become twice shy. I suppose there is a large opportunity. We have strength and capability. We have product portfolio. We have client relationships, and there is an improving market. Would you say that probably the best phase of Ramkrishna Forgings hopefully should begin now? Given also the fact that all the internal upheavals also would have taken some energy for us to get over. Therefore, if all of this is behind, mentally, we are more resilient, and overall opportunity has become better outside, and we are better prepared. Would you say probably this is the upcoming, the most interesting period for Ramkrishna?
Bharat, I think I can confidently tell you best period for RKFL has just started. I think in coming quarters, coming year, you will see much more traction in terms of growth, in terms of improvement in balance sheet. I would not like to comment on profitability or other things, I can tell you one thing very confidently that every quarter you will find significant improvement in the overall balance sheet of the company and overall parameters, which you measure each and every parameters of working capital or utilization or inventory days. Everything you will find significant improvement in coming days and quarters. I think for next three, four years, we are extremely confident the visibility what we have, that RKFL will be one of the best performers in terms of overall demand side absorption and creating a new brand for itself in these coming years.
Sure. If I have to be
Sorry to interrupt, Mr. Bharat Shah. May we request you to return to the question queue for any follow-up question?
No, I just need to complete this question. If I have to express any bit of skepticism about it, given the fact that we have gone through challenges, what are the factors, Naresh, now you believe gives us a far greater confidence about our destiny than, say, what was the case one year back, one and a half years back?
Right now, Bharat, working in terms of passenger vehicle, oil and gas, and non-automotive sector like earth-moving equipment are giving us extreme confidence, and we are looking at tangible growth, which really shows company in the non-auto sector growth or non-CV growth, and the order book, which we have been able to make over last couple of quarters in terms of our passenger vehicle. I think next two years are going to be exceptionally exciting in terms of our PV and growth and this is going to be the next lever wherein there is going to be transformation in overall RKFL.
Thank you. Mr. Bharat Shah, please come back in the queue for any follow-up question. The next question is from the line of Harsh Shah from Marcellus Advisors.
Yeah. Congratulations, sir, on the great set of numbers. I just have one confusion, sir. Everything railway related opportunity is catered through the JV, right?
No, I think you're wrong. JV is only for manufacturing of wheels. It is doing nothing else except manufacturing of wheels. Rest, railway, everything is isolated, standalone, RKFL. RKFL has its own significant order books for railways, which we are working and continuously growing. JV is only going to be part and parcel of manufacturing wheels, nothing else.
Okay. Sir, that's it from my side. Thank you so much.
Thank you. The next question is from the line of Vinil Shah from Dalal & Broacha. Please go ahead.
Hello. Am I audible?
Yes, you're audible.
Yes. Actually, I would like more insight into the export growth that you are anticipating. Could you just give us a color of what segment or what kind of customer wants we are getting there? You're not commenting on the Class VIII truck growth. Could you just give us a color of how the growth is selling on the export markets?
I think I would not be able to comment in terms of the customer name or brand of the customer. We can say in terms of Europe, you have already seen in I think you have a lot of background noise. Hello.
Hello.
Can you hear us?
Yes, sir.
Basically, you can very well see in our presentation also. In Europe and North America, both the places we are growing. New order wins from the existing customers, as well as new order wins from the new customers. Both are giving a very big jump into the next year or coming quarters in terms of our overall intake, in terms of the order book. We are very confident in terms of our export demand and deliverables.
Okay, sir. Sir, in the domestic product mix that you have said that it has improved, could you give us a color about that as well, like in what segment are we getting a higher margin that our product mix has been better?
I think in terms of margins, I would not like to comment on individual sectors or individual places. I think overall company margins have been shown. We do not earmark any particular sector in terms of margins.
Okay, sir.
Thank you. The next question is from the line of Saket from Sagari Capital. Please go ahead.
Am I audible?
Yes, you're audible.
Sir, one quick question regarding the order book. I think we have got around INR 228 crore from PV. Within this, what percentage would be electric vehicle? Last time, I think almost the entire exports PV was towards electric vehicle, if I recall. Any color on this, sir? Any EV portion in this passenger vehicle?
Milesh, can you reply?
This order which we have announced, this is not from a PV. Sorry, this is completely from the EV. That is from the domestic side EV. This brand is within the Indian market, actually our requirement is for the domestic manufacturers.
Just to be clear, sir, now that you have clarified this. Our entire passenger vehicle order book, be it domestic or exports, everything is geared towards electric vehicle. Is that a fair statement?
No, that is not a fair statement. We have both the sides. We are also there serving customers who are into the ICE side, and we are also serving customers who are in the EV.
What would be the breakups, sir, ICE versus EV within the order book?
In our passenger vehicle segment, I would say around 50/50%, we are serving both the EVs.
within exports, almost 100% is EV. Is that a fair statement?
Currently, whatever you would have been seeing sales has been more to the EV, but our bulk supplies to the ICE side also starts. I think we have a fair requisition within the 50/50 range. Whatever I have stated, you will be finding similar numbers coming in the future.
Thank you, Saket. Please come back in the queue for the follow-up questions. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Karan Gupta from CAVI Capital. Please go ahead.
Yeah, thanks for the opportunity. Just one question, sir. If you could comment on the realizations in the casting division which have come off quarter-on-quarter. What is the reasoning behind that, and how do you see these going forward? That's it from my side.
No, this is one of, I think, because of the new capacity which has come up, that's the reason. Just to have some utilization improvement, we have done some components which did not give us the exact right realization. I think with the coming quarter, you will be able to see the realization back or more than what we had reported previously.
Thank you.
Thank you. The next follow-up question is from the line of Geetarth Tandon from Green Portfolio. Please go ahead.
Sir, just wanted to understand the last thing, that this 54% of gross margin, can we sustain it for further quarters, or are we seeing it going back to our old levels of 50-odd percent?
Can you repeat your question? I think voice is breaking actually.
Am I audible clearly now?
Yes.
I was asking if, can we sustain this 54% of gross margin we booked in this quarter for going forward, or are we looking to going back to the 50-odd percent we were doing before?
No, I think this margin is sustainable margin, and you will see improvement on it going forward.
Any further gas problem sorted?
I think already the energy prices is at peak when we have this balance sheet in place. Obviously, I think God forbid we don't see the energy prices crossing those levels again.
Got it. Any improvement in energy prices, we would be seeing increase in margins. A 13% will be kicking in.
Always.
Sure. Thanks.
Thank you. The next follow-up question is from the line of Bharat C. Shah from BCS Capital Ideas Private Limited. Please go ahead.
Lalit, while clearly in the first quarter margins have improved by about little less than 1% compared to last quarter. I would have thought that rupee depreciation should have helped us, plus gross margin having improved significantly. Really, the improvement in operating margin has come from internal working and operating leverage and productivity gains, or it is simply due to mathematics of the rupee depreciation and stuff like that, and gross margin improvement.
Bharat, rupee depreciation is entirely passed on. I think currency-
Achha
gain for us every quarter, we have to pass on. All our contracts are currency pass on basically. We don't get any significant benefit on the currency, either depreciation or appreciation, we are not affected. Both the sides, we don't run a risk of currency.
Oh, achha. This is true for all contracts?
Basically, yes, that is true for all contracts for RKFL. I don't know for other companies. For RKFL, currency is passed on every quarter.
Okay. This was not I was aware of. Thank you.
Just to add one more thing, Bharat. The currency depreciation for the quarter was only in the range of 1%-1.5% only.
Sorry, say that again.
Currency depreciation in the quarter was only 1%-1.5%.
Our margin also increases by only 1%.
Yes.
It's only on a part of the business, exports being just the part. Okay. No, I got it. Thank you.
Thank you. Ladies and gentlemen, due to time constraints, we take that as the last question. I now hand the conference over to the management for closing comments.
Thank you. We would like to thank all of you for taking the time and joining our earnings call. We hope we have answered all your queries to your satisfaction. We would like to further inform that you can get in touch with our CDR if you have further information which is required from us. We look forward to interacting with you next quarter. Thank you very much for joining the call. Thanks very much.
On behalf of 360 ONE Capital Market Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.