Ladies and gentlemen, good day and welcome to Rolex Rings Limited Q1 FY 2027 earnings conference call. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company which are based on beliefs, opinions, and expectations of the company as of the date of this call. These statements are not guarantees of future performance and may involve risks and uncertainties that are difficult to predict.
As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions at the end of the presentation. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch tone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Hiren Doshi, Chief Financial Officer from Rolex Rings Limited. Thank you, over to you, sir.
Thank you, team Chorus. Good morning, a warm welcome to everyone present on the call. Thank you very much for sparing your valuable time showing keen interest on our con call request. Along with me, I have Mr. Manesh Madeka, Chairman and Managing Director of the company, and team SGA, our investor relations advisors. I hope you have all received our investor deck by now. Those who have not, they may check it on the website of stock exchanges where we have already uploaded. We enter in fiscal 2027, having delivered a quarter that tells couple of stories at once.
Production that run below its full potential for part of the quarter, demand environment underneath it that stayed firm, in some market it got strengthened. Allow me to take you through both this story in a brief. Coming to quarter one of current fiscal, that is FY 2027, we'd like to inform that revenue from operations recorded came in at INR 304 crore, which is up by 4.3% precisely compared to quarter one of fiscal 2026.
Though this looks short of our guided growth, our order book through the quarter was healthy the constraint what we faced was not demand, it was in execution. A shortage of labor on the shop floor meant we could not convert that order book into output at the pace we wanted to. We have already informed the said factor in our last call also, it's a general phenomenon in the first quarter or maybe in the month of-- particularly in the month of April, May, till mid of June. We are glad to report that the situation improved from June onwards, June 2026 onwards.
By the quarter start from quarter two of FY 2027, our operations were back to running normally. I would like to inform or pleased to inform that in month July 2026, we recorded highest revenue since inception of our operations. In quarter one, revenue from auto components grew by 13.5% , 13.50%, compared to quarter one of FY 2026, amounting to INR 163 crore. While revenue from bearing rings, it got declined by 6% for comparing with the quarter one of fiscal 2026, amounting to INR 118 crore. The bearing rings softness was concentrated in industrial business or in industrial segment, particularly in the domestic and European market.
An area where we have flagged our broader industry-wide stagnancy in the past and it reflects same labor-driven output constraint that affected the quarter two. Auto components, on the other hand, continue to gain share within our overall mix and shift towards higher value-added processed products, is a trend we expect to continue over the coming quarters. Looking at the geographical mix within each segment, our bearing ring remains predominantly a domestic, with export accounting for about 27% of the segment.
Means 72%-73% of our bearing ring business is from the domestic realm. And it was the domestic-facing portion that saw the softness this quarter. Here also, I would like to mention that is mainly in the segment of industrial segment and high volume, bigger size of components. There we face a bit softness over there. Auto components by contrast, is now a predominantly export-oriented business, with exports accounting for close to 72% of that segment's revenue. Say 28% in the domestic front.
That is the part of our portfolio that delivered the strongest growth in this quarter. It is meaningful validation of the strategic shift we have been making, deliberately building out a higher value export-facing precision machine components business alongside our traditional bearing rings franchise. What stand out most in export is a change in customer behavior. Buyers who had been a bit cautious and holding back through in fiscal 2026 with a wait and watch mode as tariff uncertainty and certain adverse market factors played out, are now placing orders again with confidence.
That shift matters because it tells us that demand overseas is genuinely picking up, and that the relationship we have built with these customers, these multinationals, over the years remain intact and are now translating back to the order flow. As we had flagged and informed previously also, we have not lost single customer through the tariff disruption or even the war impact in European markets in the last year or even previous to last year.
What we are seeing now is those very relationships beginning to convert back into meaningful volumes and revenues. Coming to margin side, as you must have seen that gross margins for the quarter has came up compared to fiscal 2026 or on quarter one of fiscal 2026, reflecting both a favorable shift in product mix as well as disciplined raw material management and a scientific production measures cost control areas at our plant level. EBITDA for the quarter was INR 69 crore.
I'm not considering other income, which is up by 12% on comparing with the Q1 of FY 2026, with an EBITDA margin at 22.6%, which is up by 100 basis points, again, with comparing with the Q1 of FY 2026. Profit after tax grew by 22% year-on-year to INR 60 crore, with PAT margin at 19.8%, again, up by 290 basis points year-on-year basis. I want to emphasize that these margin expansion came through even in a quarter where our production was constrained because of labor and certain other matters.
As volumes normalize and our order book converts fully into output, our margin trajectory should hold and, in fact, we expect it to strengthen further as value-added process products continue to grow as a share of our revenue mix. It reflects a structural improvement in our businesses. On a capital allocation front, we followed through this quarter on a commitment what we made back in April 2026. Would like to inform that our INR 180 crore buyback of 1 crore equity shares concluded during the quarter, with the promoter group choosing not to participate so that the full benefit flowed directly to non-promoter shareholders.
As of today, we are fully debt-free and clear of all legacy CDR obligations. Moreover, we are carrying cash surpluses. We see this buyback as the first of many steps in returning value to our esteemed shareholders. In a business that today carries a far cleaner capital structure than it has at any point in its history. Looking ahead to the fiscal 2027, for the remaining part, the trends we spoke about in May are playing out largely as we expected. With the labor situation now fully normalized, we expect Q2 FY 2027 to reflect better strength of our order book without the execution constraint that held back this quarter's output.
The U.S. market is coming back with our customers re-engaging after a prolonged period of caution. Europe continues to fire on the back of our expanding automotive components presence there. Our domestic business, while soft this quarter in the industrial bearing rings segments, retained strong underlying momentum. In the bearing rings with an end use of automotive application.
The bearing rings what we are supplying with an end use of automotive application, we have hold over positions and except one customer, other customers have increased their wallet share and continues to add incremental volumes and new components from our existing customer with a steady pace of existing program. Both these things taken together, we remain confident in the mid-teen revenue growth guidance what we have given for fiscal 2027.
This quarter's headline number does not fully reflect that trajectory for the reasons I have just walked through. The fundamentals underneath it, a healthy order book, improving product mix, expanding margins, re-engaging export customers, and a clean debt-free balance sheet gives us the confidence in the year ahead. We are also continuing to build for the medium term. The new customer programs onboarded over the past year are progressing well, and we expect these to ramp up further as the year progresses.
Fiscal 2026, we got a lesson, or rather it taught us that no business is immune to external disruption, but that a business built on strong fundamentals, deep customer relationship, and operational discipline can absorb the disruption and come out stronger. Q1 of FY 2027 has, in its own way, reinforced the same lesson from a different angle. Even an internal operational constraint like a temporary labor shortage did not dent the underlying strength of our order book, our margins, our capabilities, and our customer relationships.
We resolved it and we moved on. As I look ahead to the rest of fiscal 2027, I see Rolex Rings as a company that is well-capitalized, well-positioned, and well-prepared for the next phase of growth. Our ambition remains unchanged: to be the most trusted precision forging partner for the world's leading bearing and automotive Tier One, Tier Two, and OEMs too. We are well on our way. With these words, I would like to pause on my comment. Again, I would like to thank all the participants who have joined. I request team Chorus and team SGA that we can open the session for Q&A.
Thank you very much, sir. 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 questions queue up. We have our first question from the line of Jason Soans from IDBI Capital. Please go ahead.
Yeah, sir, thank you for taking my question, and congratulations on a healthy set of numbers. Sir, first question just pertains to in terms of the numbers, the split which you normally give the export bearings, export auto, domestic bearing. Just wanted that split for Q1 and YoY, Q1 FY 2026-2027 as well.
Kindly note down. Domestic bearing ring for the Q1 FY 2027, it is INR 86 crore. Domestic auto components, rounding up to INR 45 crore. Export bearing rings, it's INR 32 crore. Export auto components, INR 118 crore, with a scrap and export incentive of INR 23.2 crore. You need same for the Q1 of FY 2026, right?
That's right, yes, sir.
In domestic bearing ring, it was INR 90 crore in Q1 of FY 2026. Domestic auto component, it was INR 53 crore. Export bearing ring, it was INR 35 crore. Export auto component, it was INR 90 crore. INR 21 crore of scrap and export incentives.
Sure. Thank you so much for that, sir. Next question just pertains to, just wanted to understand, sir, any reason for the shortage of labor on the shop floor? Just wanted to know what would the exact reason be for this?
No, there is no specific reason because it's a general phenomenon and it's a hot summer in our region. We do have good amount of out-state labor force also. You better know, it's a vacation period as well as wedding season, and it's an agriculture crop season where these people used to visit their native and they took more than 15, 20 days, 30 days, or something like that. These are the quite common phenomena in our industries or rather overall in this thing. Why we are facing temporarily because of that, these all are our semi-skilled workers and spend a good amount of time with the company. That was the only reason.
Okay. Sure, sir. Sir, next question pertains to, we've been speaking about the slowdown in the bearings business. You spoke about some slowdown in the industrial and the large-sized business. Just wanted to know how do you see it going ahead? Do you see the slowdown continuing, or do you see any improvement going ahead for this business? For the bearings I'm talking about in particular.
Yes. As I told you, in the month of July, it has bit improved. As I told you that because of certain this production floor constraints, we were not able to execute to some extent also. The guidance what we are getting from our customers in the particular industrial segment, for the next couple of quarters, it would be having a marginal growth. On the other side of the bearing rings, that is automotive bearing ring business, we are getting good amount of positive turnaround.
Okay. Sir, again, in terms of auto components, you've been doing very well. That's commendable performance. Just wanted to know, what are the clients saying, let's say Allison or Getrag, what is the feedback from their side for increasing sourcing from Rolex? How's the outlook for that?
See, as I tell you named couple of our customers.
Yes.
One of our customer, which was gone down by almost 35%-40% in the fiscal 2026 compared to fiscal 2025. That is again on the track or rather recovered by almost more than 30%. We are almost on the track of fiscal 2025 numbers with that U.S. customer. That is definitely recovering back. For the other customer where we got a new order for the new plants, incremental order for the existing programs also, certain programs what we have started gradually in the last quarter of last fiscal, that is also being ramped up in this quarter and further in next three quarters.
Maybe one or two plant, again, in the third quarter, we are going to start the supply. We are getting quite positive and very much confident on these particular customers. We are getting good response, they are offering additional volumes, new programs, so on.
That's good, sir.
Yes.
Okay. Sir, just in terms of the revenue mix in the presentation, there's a 8% others component. You have bearings and bearing rings, of course, auto components and 8% of others. What does that 8% pertain to?
That is my scrap revenue.
That's your scrap revenue. Okay.
Yeah. Which is the domestic part.
Sure. Sir, also in terms of you've been speaking about the tariffs, the duty drawback, some refunds going to come in from the U.S. with the HS codes and everything. Has something come in this quarter? What's the status of that?
Yes, it has already started. We successfully registered with the U.S. Customs Authority. Though it has not started in full swing, some marginal amount what we have received as a U.S. custom duty refund, which has already accounted in this number. The major chunk is yet to receive.
Okay. Just finally, sir, wanted to understand in terms of course, you spoke about a lot of improvements. Tariff thing is behind us, macro, et c, also is improving. Sir, any guidance for 2027, 2028 margins as well as revenue? You did speak about mid-teen, but I wanted 2027 and 2028 in margins as well. Margins when you speak about core margins, not including other income.
Yeah. As we have already mentioned that while telling operating numbers to you people, we are not considering this other income.
Right.
The EBITDA margin, what we have recorded is 21% and 21.5% In this particular quarter, June 2026. Let me tell you conservatively, we expect that would be in the range of 21%-22% in this fiscal FY 2027 conservatively. We will be having even a marginal growth subject to our increasing our operations, it will have a significant positive upward mark on our margins. On the revenue part, as I have indicated that mid-teen, we are bit confident till now for the fiscal 2027 and maybe more than mid-teen or coming near to the 20% number for the fiscal 2028.
Sure. Thank you so much for answering my questions. Thank you so much.
Thank you, Jason.
We have our next question from the line of Varun Jain from Dolat Capital. Please go ahead.
Yeah. Hi, sir. Good morning. Congrats on a strong set of margins. On the auto component export side, sir, our business was in decline in the past two, three years because of Allison. Right now, will Allison reach INR 250 crore level in FY 2027? Because I think it fell down from INR 290 crore-INR 300 crore in that range. How much recovery will happen? Secondly, we had this Allison acquiring Dana, so we expected that because we did not supply to Dana before, but now we wanted to supply. Has that started?
See, on the first part of your question, you asked me about this revival of Allison. Let me tell you the numbers, what you have told. Till in these four months of business, if I am going to annualize that thing, it has already crossed the number what you have mentioned. Right, we are almost touching to the number what we had in fiscal 2025. Right. On their acquisition, as far as Dana business is concerned, we had a-
Senior.
...senior level meeting with the Dana management, along with the Allison, and they are very much eager or rather they are very much inclining to explore the potentials for the higher size or a higher volume kind of product with Rolex. The development and all these things, it has gradually started or rather initial discussions, initial dialogues have been initiated. On the revenue front or rather coming the same on the paper, it will take maybe from now, maybe 12-18 months minimum.
In FY 2027, can we touch INR 500 crore in auto component exports? Is that on the cards?
FY 2027? Yeah.
Yes.
INR 500 crore. Even I had an auto component export in March 2026 only. It would be more than that.
Okay.
It would be touching for [crosstalk]
I'm asking the only export of auto components, not bearing rings, without bearing rings. Only auto component exports in FY 2026 was INR 350 crore.
Okay. You are talking only for the exports market, not overall auto components.
Yeah, auto components exports last year, 2026, INR 350 crore.
Yes.
Can it touch INR 500 crore in 2027?
Not INR 500 crore, I'm a bit confident to cross INR 425 crore or in between INR 425 crore-INR 450 crore.
Sir, you have already done close to INR 117 crore in this quarter. Even if I just annualize this, that only will take you above INR 450 crore.
Yes-
I mean.
...INR 450, I'm telling INR 450 as of now.
Okay. Got it. Sir, due to this labor impact, how much revenue was lost, and was this revenue lost or was it deferred?
No. It's a temporary hold or temporary discontinue, not even discontinue, but the lesser amount of production output is there. It's nothing what we lost. It might be deferred by month or something like that only. There is no loss of business. We try to manage much of the things with the extra labor by managing the situation. Because of environmental front and all these things, even the output capacity of human being, it was a bit less, particularly in the month of April, May, which is very hot in our region.
Yes. Sir, on the domestic auto components business has fallen close to 13% year-on-year. Why is this? Is this because Stellantis is going through a slowdown? How is our business with Mahindra? What is the outlook for this portion for this year and next year?
domestic auto component, what it was there with me in the last year, it was somewhere about INR 52 crore. Here it is INR 45 crore in this Q1 of FY 2027. That is mainly because of the differing of certain production plan of couple of OEMs of automotive. Stellantis, again, they started with these revenue, though it is not at that level what we had in last year. Gradually it is picking up, and it will be on track, what we had in 2025 or even better than that.
Got it. Sir, since this year I'm expecting that export auto, like auto component exports will be a higher share. The margins there are the highest, so can the margins be closer to 22% for this year and going forward next year they could increase by 50 basis points or so? Is that something that is possible?
Definitely. The second portion, 50 basis points up on the FY 2027 number would be there in FY 2028. As I indicated earlier also that I would like to be on a number in between 21%- 22%, because there are certain abnormal factors also affecting, which will, as you better know, because of this Hormuz and because of this Europe, Iran, U.S. thing. The ocean freight and the availability of ocean freight to U.S., et c, has gone up more than 2x or 2.5x- 3x . For the time being, it may impact to some extent also. That's why conservatively, I would like to be there in between 21%- 22%.
Got it. Sir, on the bearing rings export side, this quarter business fell by close to 10%. Is this that Timken's continued weakness is affecting us or is it something else?
Major factor is that.
When do we expect this to rebound? At least start growing or staying flat, because it has been falling for quite some time now.
Yeah. What we are doing, or rather our strategy is to develop new customers. We don't want to depend on a particular group or a particular plant as far as this business is concerned. No doubt, it was a huge business and, unfortunately, at the customer level, their business has also significantly reduced. Our strategy is to develop new customers for the bearing ring segment, whether it is in auto or in industrial segment in overseas market particularly.
In domestic, major players are already there in my customer basket. We are trying to expand our base in U.S. and Europe. Particularly in Europe, where we had a good strength on auto side, there we would like to develop further on the bearing ring business also. I don't want to be dependent on a one particular customer or a group of customers also like that.
Got it. Sir, just a last bookkeeping question. Can you for Q1 FY 2026, can you give us the scrap revenue, export incentive, and end user mix?
For which period you have asked for?
For this quarter.
I told you it is INR 23 crore something.
No, I was asking the breakup of the scrap and export.
Scrap is somewhere about INR 20 crore and export incentive is near to INR 3 crore. The split in terms of end application, 50- odd % is there towards passenger vehicle segment, 20- odd % is commercial vehicle and heavy duty vehicles. 14%-16% is there on the industrial segment, 7- odd % is there in EV and hybrid, and so on.
Okay, sir. Got it. Thank you, and all the best.
Thank you.
Thank you. We have our next question from the line of Disha from Sapphire Capital. Please go ahead.
Hello.
Yeah.
Am I audible, sir?
Yes.
Yes. Thank you so much, sir, for this opportunity. Couple of questions. Firstly, sir, obviously you mentioned conservatively because of the ocean freight and the geopolitical situation currently. Going ahead, sir, with our export mix increasing and our product mix shifting more towards auto components, what sort of steady-state margins are you targeting internally going ahead?
First of all, I would like to tell you, whether it is auto component or a new bearing ring business, wherever the more value-added processes are there, even in the bearing ring business also, certain bearing rings for the EV hybrid vehicles or our new critical bearing rings, we have a same kind or similar kind of margin. It is not the only auto components where we will be having this margin. Margin trajectory, as I indicated and replied in our earlier questions also, that considering all this inflationary trend in entire or rather in fuel market than the Strait portion and other things which having a cascading impact on our production cost structure.
Sometimes it is not feasible, possible, or practical to approach customer for each and every price hike or something like that, because our contract price or our programs, our commitments is generally not on the value add part. It is always on the raw material and forex what it is, fluctuation is passed through or to recover.
That is why conservatively, I would like to be there in between 21%- 22%, because the simple reason, in the month end of June or mid of June, the ocean freight has started shooting up. We have a good amount of export in U.S., that ocean freight has significantly increased. Even at this level, by paying that much amount, the availability of container for a particular vessel is a bit difficult. That is why our spend towards margin is maybe near to 21%.
Okay. Fair enough, sir. Just, sir, my next question is on what is your current utilization level?
We are at the same 63%-65% utilization, you can say.
What are we targeting by this year end?
We target to touch somewhere about 72%. 70%, 72%, yes.
Okay. Sir, given our mid-teen growth, even if I assume 15% sort of growth, it should be around INR 1,300 crore top line. What mix are you looking at and how much will be the contribution from the auto segment, from the bearing segment? Could you provide some insight on that?
Sorry, your voice was not proper. Can you come again?
Yeah. Can you hear me now?
Yes.
Yeah. For mid-teen growth, so assuming 15% sort of growth if we do for this year, it'll be around INR 1,300 crore. Out of that, could you help me with how much will that mix be between from the auto segment and from the bearing segment?
For this particular fiscal, 65%-70% would be from auto components.
Out of that, can you give me a percentage of how much will that be from exports?
Again, of that 70%, more than 75% it is from exports.
This mix, will this be the steady state level or what is the ideal steady state mix that we target between these two segments?
My target, we don't have specific target that whatever the new order where my facility suits to product, I do have available capacity. If I'll be getting a good quantum of the order, program size of five to seven years with a desired level of margin, I'll be happy to accept whether it is bearing ring or auto components. My capacity or rather the facilities, equipments are very much fungible, and we are able to produce auto components as well as rings both.
Mm-hmm. What is the CapEx, sir, that we target for this year to the next year?
In the range of INR 30 crore-INR 40 crore.
For both the-
On an annual basis. No. On the annual basis like.
Right.
Year-on-year.
Mm-hmm. Okay. That is it, sir, from myself. Thank you.
Thank you. 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 only two per participant. Should you have a follow-up question, we request you to rejoin the queue. We have our next question from the line of Salil Desai from Marcellus Investment Managers. Please go ahead.
Thank you. Hiren bhai, one question on this labor shortage. Now, given that this is seasonal factor happens every year, maybe this quarter it was a little worse than usual. Any permanent fixes that you are thinking of? What can we do to mitigate the risk that this does not surprise us in future?
As I mentioned earlier, the labor force what we have, what we developed or rather the age of these labor or service age with the company is quite at length. We don't want to lose such skilled or rather team or a labor which is very much acquainted with our this thing. We don't want to lose them. We are trying to manage or to mitigate this situation by adding some temporary extra labor at a reasonable cost or sometimes even on these part.
Let me tell you, this is a scenario for maybe two and a half months, where we try to manage by working three shift, by giving something extra or overtime or maybe hiring extra temporary labor. I don't want to lose my trained labor who are there with me for good amount of time.
Right.
Yeah.
Okay. This does not come at a cost is what also I've tried to understand, in the sense that if you're paying extra, is there a margin impact and-
For some time. Yeah, it is coming out with some additional cost. What I am looking on a long-term way, because the other people who went or rather who will be coming back, that they are able to give me more quality output and efficiency of them are quite better compared to this temporary labor.
I see. Okay. Thank you very much.
Yeah.
Thank you. We have our next question from the line of Anuj Shah from PhillipCapital. Please go ahead.
Thank you for the opportunity, sir, and congratulations for steady set of numbers. My first question is, sir, the company was facing a vessel and container shortage on the export side, which was triggered by geopolitical conflict in Middle East. Does that still persist or it has been resolved?
See, availability of container at proper cost is an issue. As we are committed to our customers, we are just trying to get as many as containers at a reasonable. As I told you earlier also that ocean freight is shooting up and it is more than double or 2.5x what generally it is. Still we are able to trying to manage the availability of container. Sometimes availability of container in a particular vessel is a big issue as of now, because what we got a remark or comment from shipping line that they are not getting vessel back to India because of certain other geopolitical reasons. I think it is moving.
Okay. That means the issue still persists, you mean, sir, then that can spill over to Q2. Is that correct?
To some extent, yes.
Okay. Understood, sir. My second question is, in the domestic bearing market, the automotive industry as a percentage of revenue has gone up and the industrials has gone down. What is the growth that we have seen in the automotive side and in the industrial side?
In terms of bearing rings, you are asking for?
Yes, in terms of bearing rings.
As I already told that, particularly bearing rings in the industrial segment, we are getting some soften or rather some stressed or reduced demand. In automotive application where the bearings are being used, there we are getting good response and few of our domestic customers are facing good amount of incremental numbers. I don't foresee any downward or any kind. On the contrary, it would be on a positive side, upward trend in the bearing ring segment too, in automobile segment.
Sir. Understood. Thank you so much, sir.
Thank you. A reminder to all participants, please limit yourself to only two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. We have our next question from the line of Abhishek Jain from CRIS PMS. Please go ahead.
Thanks for the opportunity. Congrats for a strong set of numbers, sir. Sir, my first question on the domestic auto component side, where we have seen a decline in this quarter, despite that very strong industry growth. Just wanted to understand, is it because of the losing some business, or is there any production constraint?
None of these things are losing the business or any production constraint except that small portion of labor force, et c. Otherwise, there is no constraint. It is not that we lose the business. It is the OEM of automotive who are changing their design or maybe their production has gone down to some extent in this first quarter. That is why it is a bit under pressure. We expect that couple of Tier One, Tier Two customers to whom we are supplying, in turn, they are supplying to their principals at overseas, that will gaining up. In the second quarter onwards, we would be having better numbers as far as domestic auto component is concerned.
Got it. Just wanted to know how is the current business update with Timken. Are we started to recover some set of business from Timken or still we are in the same place?
No. There is not much change as far as the business with the particular customer is concerned. As indicated that we are trying to get the new customer, get the new this thing, which will be giving better numbers or which will giving better conversion on bearing limit part for the domestic as well as overseas. We are also approaching or rather the certain plants of our existing customer who are yet not in my customer basket. That also we are exploring and the things are moving on. We will be getting that response maybe down the line couple of quarters.
Thank you, sir. That's all from my side.
Thank you.
Thank you. We have our next question from the line of Manas Jain from Sanjay Jain Family Office. Please go ahead.
Hello, sir. Good set of numbers. Steady set. I had a question, actually. The point towards, I think it's mentioned due to the fact that there's ocean freight and transportation cost due to this current environment. I wanted to understand, is there a scope for us to move the exports to an ex works model where logistics are borne maybe by the customers. I understand we have a presence and warehousing in the U.S., but is there a scope to restructure this to reduce this cost and protect the margins?
No, it is difficult to change the current program terms from, say, DAP or DDP to ex works or something like that. What we will be doing or rather what we are confident that in certain kind of abnormal situations, our customers are helping us. In past it was also there when these kind of significant price increase on ocean freight was there, which is more than three times, four times. At that point of time, our customers have turned out and they helped us and they reimburse, or rather one customer has already changed the import delivery terms for the time being.
Same here also, we have already started approaching our customers, they are also showing their positive indication that they will be consider our request as far as this ocean freight hike is concerned. I'm bit confident to getting back certain reimbursement of these kind of high expenditure what we incurred in the first quarter or maybe June onwards. To some extent, I'll be able to pass it in the coming quarters. That kind of positive response, we have already got it from our customers, where majority of one customer group where we are paying this ocean freight in U.S., which is a major chunk. Europe, it is still under control, but we have already initiated these dialogues with the customers also.
Got it. Sir, second question was, our passenger exposure is great. I just wanted to understand the CV exposure. I am assuming there must be a very good opportunity there also. As a percentage of the sales, that's almost little, I mean, it's not that high. Is there scope are you working there to get some business opportunities in the CV area?
Yes. See, as I mentioned earlier also, one of our customer has acquired a division of one particular global multinational of this commercial vehicle, heavy vehicle segment, where we are expecting good turnaround, because with that particular customer, we have a very good repo or rather business association for last 12- 14 years. Year-on-year, we are getting some kind of incremental. Definitely commercial vehicle and off-highway heavy duty vehicles is the segment where we are approaching with that customer as well as couple of new customer. One customer is already almost on the verge of finalization in Europe and another one in U.S. also we are talking with. We expect there also some kind of growth. Yeah.
Okay. Thank you.
Thank you. We have our next question from the line of Jyoti Singh from Haitong . Please go ahead.
Thank you for the opportunity. Sir, just wanted to understand on the industrial side that our end market has shrunk around 26% of revenue in 2022 to 18% in 2026. Even as our PV has outgrown from 40%-52%, just wanted to understand, are we looking to increase more on the industrial side? Because compared to auto, we are having the better margin over there. Similarly, on the export side, what kind of opportunity we are getting on the industrial side as well as on the OEM side? What's your focus toward going forward? Like, will it be more on the OEM side or will it be shifting toward on industrial side because of better margin?
The loss or reduction of industrial segment of my overall business, it's mainly because of one customer group where at five or seven plants I'm supplying these kind of components. There, they got a huge reduction at their end and cancellation of order, mainly in the Europe. That is the reason why this number has gone down. We are in process, as I just replied in my earlier question also, that we are having dialogues with one of the very big auto customer in Europe for commercial vehicle and industrial segment products.
As far as bearing rings is concerned, in domestic, one of our customers have specifically diversified their activities into industrial segment and therein. There we got a good inquiry and certain samples have already been submitted. We are expecting turnaround over there also. Let me tell you, my concentration is to get the maximum or rather incremental utilization of my capacity, in terms of product range, in terms of segment and territory, volume of the business, overall revenue of the business, overall margin of the business.
On that base, I am very much concentrated. Definitely, we are concentrated on industrial products also, where the huge components are there. We are also exploring certain untapped area. We have initiated certain kind of government registration and approvals for certain areas where we are yet not. That is also another segment in industrial where we are approaching.
Great, sir. Understood. Sir, just wanted to inquire about the raw material for the bearing, from where we are taking it?
Majority, they're from Indian steel plants.
Okay. Some of our competitor, they are quoting in that way, that we are exporting steel from better countries, our quality of bearing is better than any other competitor's. We are getting higher price on the export front. Are we seeing any such kind of competition on the export front?
Competition is always there in all businesses. Here, my USP is my facility, my range of product, my precision level, the tooling department, what we do have, the yield of the product, and the customer association.
Okay, sir. Also last question from my side. Any plan to enter into the aero and defense side going forward?
We have initiated certain steps or rather certain registration, as I just indicated, for the defense era. In aerospace, we explore, there we got some kind of registration also, initial registration, initial approval certification also. Coming to the revenue, it will take some good time. I am bit hopeful for the defense, maybe down the line 12 months, we would be having something from defense. There we are working aggressively with some third party. Yes.
Great. Thank you so much.
Thank you. We have our next question from the line of [Krish Chheda] from Caprize. Please go ahead.
Hello? Am I audible?
Yes.
Sir, I just have one question. I want to understand that firstly, in the subsector, where do you see the highest bearing demand growth coming from? Secondly, is there a specific sort of shift in the types of products that they are demanding?
No, in the bearing ring, the segment is passenger vehicle LCV, where we are getting good demand or good incremental demand. The shifting, I am not getting your second part of your question.
I've recently noticed a lot of companies talking about that in the bearing space overall, there is a demand shift towards large size bearings. Is there some sort of truth behind it?
The way it was expected, it is not there. It has not played out. Definitely the big bearing manufacturers, global bearing manufacturers, are moving slightly towards production of bigger size of bearings. That will not hamper or reduce the existing, the automobile or the smaller size of bearing where we are. In this segment particularly, I am getting good amount of inquiry and trial and run process are going with my existing customer having global presence.
What are the applications of these larger size bearing rings? Where is the highest demand-
Those are-
...for these coming from?
Those are mainly into industrial, into mechanical applications, windmills and other critical equipment. Yes.
Are the margins on those rings higher than what the general auto industry caters to?
The margins on these kind of rings are better than the traditional bearing ring business. Because of having value-added and critical processes, and it is on the same line, maybe on the auto components, what we are able to generate.
Okay. That's it from my side. Thank you.
Thank you.
We have a follow-up question from the line of Khush Nahar from Electrum PMS. Please go ahead, Khush.
Thank you for the opportunity. My question was more on the strategy side. What we are expecting is, I think we will be generating a lot of cash flow over the next two to three years, and since our utilization is still at 60% in this year, going towards 72%, and CapEx figures around INR 30 crore-INR 40 crore only. What is the strategy? How are we planning to use this cash? Is it some inorganic acquisitions or maybe in the defense aerospace segment, since we are planning to enter that? Just wanted some clarity over there.
The first way what we are looking is to maybe certain distribution of profits to my shareholders, stakeholders. Maybe as we have recently completed buyback of INR 180 crore. Apart from that, we may look for the sweeten dividend or maybe another round of buyback or something, that is what we might be looking for. We are also looking for an inorganic growth or maybe a kind of some association or some JV with the overseas player to be based in India, wherein the base of the utilization of Rolex facilities will increase, and more value-added processes where the third party is having some kind of expertise and ready market available.
That kind of association, that kind of JV, what we are exploring. It is in the primary stage. We have already appointed one global agency to explore this thing, maybe down the line six to nine months, we will be having something positive turnaround on that front. There also we need to have a good amount of investment. Our concentration or rather our intention to be based in India only as far as the production or rather the value-added processes are concerned because of all cost reduction or rather the cost benefit as far as production process is concerned.
Just some follow-up on that. This JV or some type that we're planning would be in some different segment, or what are we missing in our processes as of now, which we may activate or not?
It's not a missing. It's something more value-added on my existing product, where the new party or the other party is already there, and a ready market available with their OEMs, where I'm not as of now, where I'm not directly contact to those OEMs because I'm not producing the components in a finished way or with those kind of value-added processes. The coming party or the new JV party is having certain expertise, certain experience, and good amount of facilities for having these kind of value-added process, which will give me a benefit of its high precision level, as well as the main thing is that readily available customer.
As you know that in our segment, even in certain other value-added processes with our products, it would be difficult to get a new customer or to start a business within 15- 18 months time because of validation and all these audit activities. Our concentration is to add more value-added processes where third party is having better expertise and ready market available. In certain part of overseas, you better know that because of their conversion cost and inflationary trend, they are not able to produce components or not able to manage the situation. They are also inclined to going to in a country where the low cost production is possible as their customers are readily available.
Right, sir. Just one last question on the defense side. Could you elaborate more on the type of products that you're planning to look for?
It is very much primary or rather it's quite well in advance that product segment where we are. We are closely working with one of the very senior consultant, and it has just recently started maybe one and a half month back. Whatever the components which suits to our facility or what we are able to produce in our existing facility, where these agencies are going to approve, on that basis, any round job product or a hot forging product, we want to concentrate.
Okay. All right, sir. Thank you.
Thank you. We have our last question from the line of Jason Soans from IDBI Capital. Please go ahead.
Sir, thanks for taking my question again. Sir, in this quarter, we logged in a very strong growth in auto components, the export auto components, which is a 30% growth. Sir, you did allude to a good number for this whole annual year as well. Sir, just wanted to know what exactly are we doing differently here to log in such strong growth. One thing you mentioned that the Allison revenue has seen a strong recovery. I'm sure that has played a part. What else are we doing to basically sustain this strong growth?
The new programs what we won in previous year or rather in previous fiscal, it has started. The certain program which has started in last year, now it has ramped up further. Existing customers have increased their volume in a significant way. That is why the export business or export auto component has grown up. Further, it will be as I told that it is being ramped up further. Couple of new orders would be starting in third quarter of this fiscal. Further it would be added. You're seeing good traction for this segment.
Yes. Definitely. Sure.
Yes.
Sir, in terms of the INR 1.75 billion, we had placed a slide probably one year back or something for those orders coming in. Sir, any update on that? How is that flowing through? Or have all the orders been recovered or some have been pushed back? What's the status on that?
Except couple of orders from U.S., because of tariffs and all these things, that entire project is on hold, or rather OEM has hold their this thing. Rest of the projects are coming back, not with the full traction, but it has already started with gradual improvement, and others are in line. Even the new programs what we have won in fiscal 2026, that has also been started.
Okay. Sir, if this refund duty, if anything comes through, for the reduced tariff, et c, just a bookkeeping thing, will it be recorded in other income? Just give me some clarity on how it will be recorded, this refund, if any refund does come.
Are you asking for the refund of export duty?
Yes.
Yeah. That would be added to revenue.
That will be added to revenue, not other income, you're saying?
No, it is not part of other. It would be added to revenue.
It will be added to revenue. Okay.
Yes.
Sir, just lastly, one thing, you did speak about the JV. Okay? That JV you're looking at to do in an allied area, it could be a different area as well, defense, aerospace, it could be anything, but it's too premature or initial stages to talk about it right now. Is my understanding correct?
Very true. Yeah.
Okay. Sure. That's all from my side. Thank you so much, sir.
Thank you. Ladies and gentlemen, that was the last question for the day, and I now hand the conference over to the management for closing comments.
On behalf of Rolex Rings management, I again thank you everyone for joining this con call. I hope we have been able to answer all your queries, questions and concerns. We look forward to such interactions in the future, and we hope to meet your expectations in the future, too. In case you require any further details, you may contact us directly or to our investor advisors, SGA. We will be delighted to revert. Once again, thank you very much to all of you.
Thank you. On behalf of Rolex Rings Limited, that concludes the conference. Thank you for joining us, and you may now disconnect your lines.