Ladies and gentlemen, good day and welcome to the Q3 FY 2021 earnings conference call of Tube Investments of India Limited. This call is hosted by IIFL Capital Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anupam Gupta from IIFL Capital Limited. Thank you. Over to you, Mr. Gupta.
Thanks, Margaret. Good morning, everyone, and welcome to the post-results conference call for Tube Investments. From the management, we have the entire team joining us for the call, led by Mr. Vellayan Subbiah, who is the Managing Director. We also have Mr. Arun Murugappan, who has taken over as the Chairman of the company recently. We have the respective business heads, Mr. Mukesh Ahuja, heading the Tubes business, Mr. Srinivasan, who heads the Metal Forming business, Mr. Paul heading the Cycles business, and we have Mr. Mahendra Kumar, who is the CFO. We have the finance team also joining in, Mr. Ramanujam from there. I'll hand over to Mr. Vellayan for the comments and then take over for the Q&A. Over to you, sir.
Thanks, Anupam. Good morning, everybody. Just quick highlights for the quarter. Our revenue for the quarter was at INR 1,309 crores, compared with INR 976 crores in Q3 of last year. Our profit before tax, before exceptional items, was at INR 145 crores. That's a growth of 53% over the same period last year. Return on capital employed was at 26% compared to 20% for the previous year same period. The good news is that we continue to kind of keep a very high free cash flow to PAT ratio. This quarter, we generated free cash flow of INR 130 crores. The company also declared an interim dividend of INR 2 per share. At an aggregate level for the first time this quarter, the company's actually gone to negative working capital. The PAT for the quarter was INR 107 crores versus INR 78 crores for the corresponding period last year.
Last year in this period, we actually had a lower tax regime, because we amortized the move to 25% over three quarters. The individual businesses, engineering had a very strong quarter. Revenue was at INR 733 crores compared to INR 502. Part of this, obviously, is due to the steel price increase as well. The PBIT was at INR 102 as against INR 60. Cycles and accessories also had a very strong quarter.
Revenue of INR 234 as against INR 146, and PBIT was INR 15 crores compared with INR 1 in the same quarter last year. Metal forms, the one area that was not as strong was in railways. Overall, revenue of INR 393 versus INR 317 in the same quarter last year, and PBT of INR 46 as against INR 33 in the same quarter last year. This quarter, obviously, for consolidated results, we also have one month of CG Power results in there.
Including that revenue, our consolidated revenue was at INR 1,700 as against INR 1,087, and profit at INR 159 as against INR 99. As you all know, we took a controlling stake of 53.16% in CG Power and Industrial Solutions over this time period. It actually consummated on 26th November 2020. The revenue for the company for December 2020 was INR 276 and a PBT of INR 7 crores. This is for CG Power. Shanthi Gears, the other subsidiary, had revenue of INR 65 versus INR 58 in the corresponding quarter, and PBT of INR 10 versus INR 8 in the corresponding quarter. Commenting on the financial results, Mr. M A M Arunachalam, Chairman of TII, also said TII has delivered strong results driven by the overall revival in the economy and easing of the lockdown restrictions of COVID-19.
The company is witnessing improved performance in most of its segments and expects this momentum is likely to continue as the economy, which has started showing signs of revival, improves further. That's a quick summary on the quarter, Anupam, and overall, I think the environment, like Mr. Arun Murugappan mentioned, continues to be showing good signs of recovery, and we're quite bullish about things going forward. Let me stop with that and then turn it over to Anupam for questions.
Yeah. Margaret, can you go ahead with the questions, please?
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch tone 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. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Niket Shah from Motilal Oswal AMC. Go ahead.
Yeah, thanks for the opportunity and congratulations on yet a good set of quarter to the entire team. I have a few questions. First, if we can, is it possible for you to give us a brief sense of how much was the volume growth across segments, because this quarter would have seen a substantial amount of realization growth as well?
Yeah. I think if you take kind of, obviously, we've got some data, but we don't give data in too much granular detail.
Okay.
If you take, Mahendra, maybe you can give it just for an overall aggregate level across engineering and-
Yeah, of course. I think it is there in the segment results also in terms of the total revenue. In terms of volume, if you see, cycles had a very good growth of close to about 70% year-over-year in terms of volumes. Engineering also pretty strong growth, including large dia and also the normal tubes. The overall growth was, depending upon the segment, anywhere between 28%- 30% to almost 50%. Metal formed products also, it ranges anywhere between, of course, leaving aside the railways, it is ranging anywhere between 10%- 30%.
Sure. That's very helpful, sir. The second question was on the metal form part of the business. If you have to look at the YOY numbers, the growth appears to be lower compared to the other businesses. Is it largely on account of railways itself? There are other categories like door panels, fine blanking, industrial chains, auto chains. I'm assuming all of them would have done far better in this quarter. Is it just on account of railways that the growth is low, or is there something else that we should be looking at?
Yes, that's accurate. Actually, railways is the biggest driver for lack of growth in that segment.
There are a few new business also which we'll club under this, but that's not a big number. It's mainly railways.
Okay. The last question was on the PLI scheme, which the government has kind of rolled out. How are you looking at that as an opportunity from Tube perspective? That's the final question. Thank you.
Yeah, we're evaluating that. I still don't think we have an answer on it. We're looking it at both sides, which is like our existing businesses, are there any assistances that we can get to or are there new things that we can get into? We don't have a perspective on that yet. I think by next quarter, perhaps we can have a better perspective on that.
Perfect, sir. I'll come back in queue for more questions. Thank you.
Okay.
Thank you. Next question's from the line of [audio distortion] the management. There's some disturbance from your line. Ladies and gentlemen [audio distortion]. Ladies and gentlemen, thank you for patiently waiting. We have the line for the management re-connected now. We'll move to the next question. The next question is from the line of Sudeep Jain from ASK Investment Managers. Please go ahead.
Hi, Vellayan and team, congratulations on a good set of performance. Some remarkable improvements both in TI as well as the turnaround in CG Power that you are on. I have few quick questions. You can just note them down. In media, there are articles that TI could be looking to enter into auto manufacturing. CG Power, obviously few steps at a time, if I look at the competition, competition is already moving in the direction of OpEx-led opportunities. Siemens' MindSphere and ABB Ability, these are the templates they are developing worldwide and taking those use cases, putting sensors on equipment and have started selling those solutions, IoT-based. Directionally, eventually, how does the group look forward to. Retail HT motors, there'll be a no-compete agreement between CG Power and Crompton Greaves. When does that get over?
If there is a thought that if you can launch them, that was a very strong segment for the erstwhile company. In the CG Power call that you did post-acquisition, you had spoken that you will update on the contingent liability of overseas business. I missed the opening remarks, but if you have some remarks here. Thank you.
Yeah. Hey, Sudeep. Thanks so much for the question. What I would request is that here we stay focused on TI questions. What we've said, I think, is that after the April quarter, we'll basically start doing CG Power calls as well. Otherwise it kind of gets confusing because we'll have a lot of CG Power questions coming in here as well. That would be our preference. First to address the TI question, yes, we are entering the electric three-wheeler business. Basically, we're going to start manufacturing and selling electric three-wheelers in India. That will be around perhaps the December to January timeframe. Just a quick kind of response. Like I said, all the CG Power strategic stuff, I would just say we move and address more on our CG Power call.
I think from a TI perspective, just suffice it to say that we are more than satisfied with rate at which we are seeing performance come back at CG Power towards early days.
Sure. Appreciate that. In three-wheelers, if you can just elaborate whose technology you want to deploy, is it in-house, and the battery sourcing, et cetera?
Yeah. Obviously we won't start discussing component level. The technology is a combination of in-house, plus we used a Korean firm. We partnered with the Koreans on the design and the tech.
Okay. One quick question is on the cycles business, the opportunity that is there overseas in fitness bikes, which are high-end bikes, anything that we are doing to tap into that?
Yeah, this is Paul here, I head the bicycle business actually. What we are doing is we are upping our ante very much on exports. This year, almost will be 2x the volumes of last year in exports. We are taking a very aggressive posture for the next four years on selective markets, on medium to high-end bikes. We believe that will form a very big cornerstone of cycles in terms of driving the top-line growth as well as the bottom-line growth. We are actually at the back end, putting up some facilities that will help us towards this endeavor.
Sure. Thank you. Good luck.
Thank you. Thanks so much.
Thank you. The next question is from the line of Akshay Bhor from Premji Invest. Please go ahead.
Hi, Vellayan and team, thank you for the opportunity. I just have a couple of questions. First one is, given that your role in some of the other group entities has expanded over the last few months, what does that mean for your tenure and engagement with Tube? What intentions does it have?
Sorry. I don't know if it's us, Margaret, but we can't hear so clearly.
Sorry about that. Can you hear me now? Or-
Yes, this is better actually, Akshay. May I request you to repeat your question, please?
Sure. Hi, Vellayan, my first question is regarding your role in some of the other group entities, what does that mean for your engagement and tenure and your involvement in Tube itself? If you can just give us some color on that.
Yeah. Okay. Thanks, Akshay. That's a good question, and I think it's come up in different ways in the past and past calls as well. I think our stance, our perspective remains the same. I've always said, even prior to Mr. Murugappan's retirement last November, that there will be a slightly expanded role that I will play. I think you're referring to the role in Chola as well. Basically, as you know, both the teams are teams I've worked with over extended periods of time. Yes, I will be providing supervisory oversight there as well. I don't see that taking away from the role at TI. Obviously at all three companies over time, we will look at succession planning, but my role in TI will continue, as I've always said, for the foreseeable future.
Sounds good. Just a clarification on the electric three-wheeler opportunity side, would you be competing against some of your customers in the existing businesses and how does that balance play out?
Honestly, you see, it's an environment where we don't see too much against our existing customers, especially not in the businesses that they are in. We don't supply too much into the three-wheeler space today.
Got it. Thank you.
Thank you.
Thank you. The next question from the line of Susmit Patodia from Motilal Oswal AMC. Please go ahead.
Hi. Good morning, everyone. Congratulations on a phenomenal quarter. It's quite commendable that you have negative working capital. I think it's quite a big achievement. First question, Vellayan, if you could give us some update on the lens venture.
Yeah. Susmit, thanks and trust we are doing well. I think the lens venture, like we told you, basically got slowed down because we're using all the Korean equipment and the guys who had to install the equipment basically had a challenge, because they've not been able to come here during COVID. Our sense is now that we will have somebody coming in this month. We're basically producing in multiple operations except for the coating of the lenses themselves. We're hoping that by next month, we will have coating in place as well. In which case, I think fairly shortly after that, we will get to the capacity of the existing facility, which is a half a million lenses a month. My sense is that we should be able to hit that towards the end of the April, May, June quarter.
Basically, if we do that and are able to maintain quality, then we'll start thinking about an expansion plan there. Basically, like I said, the only delay on that has been because the Korean equipment manufacturers were not able to come during this COVID phase.
Okay, got it. Q2 FY 2022 should be a quarter of full ramp-up and if things go well, then the next steps in that.
Yes, that's my sense.
Okay. Second thing, Vellayan, just to step back is, you're now embarking on this three-wheeler project, and you have the lens to ramp up, and you have CG Power. Is that enough on the plate, or there is more space on the plate to do something?
No, I think we've always articulated our path, Susmit. Our path has been, like you know, it's been TI-1, TI-2, TI-3.
Sure.
Lens and three-wheeler are part of TI-2. The thing we've always said is that, honestly, none of this stuff is on my plate actually. It's all distributed on multiple plates. Electric three-wheeler is on KK Paul's plate. The lens business is on KR Srinivasan's plate. Like you know, NS is running CG Power, who's an old hand with the group as well. A lot of it is more from a bandwidth perspective. I think if we don't enhance capacity, we also have to show that we can grow. It's constantly a question of how much capacity we can enhance as a company. A lot of what we are talking about, Susmit, internally from a talent perspective as well, is how we build organizational capacity. I think that is where a large portion of our effort is focused.
Honestly, I think that we've always articulated that both TI-2 and TI-3 have to be firing along with TI-1. Hopefully, over the next couple of years, you can see that coming into reality, and we can deliver numbers from those two as well. That's really our intent. Doesn't mean, obviously, TI-3, we've told you, is like a Danaher-like approach. Both when we can get leverage down in both companies, it's an approach that we're taking. Basically, it's not just a one-off acquisition. We said that we have to keep on acquiring over time. We won't do it and put too much stress on the balance sheet of the company. That's something we're very particular about. We don't want stress on our balance sheet. I think that this as a direction, is a direction that will continue, Susmit.
Got it. Just lastly, just to clarify if I heard it right, Vellayan, what would be the timelines of the two-wheeler business? When would be the first prototype?
Three-wheeler? You mean electric three-wheeler?
Yeah.
Yeah, no, we already have working prototypes now.
Okay.
Like I said, we've been working with a Korean design firm on this.
Correct.
We plan to go to market in the January timeframe.
Okay, got it. Last question, what is the net debt now at the books of TI?
Yeah. End of, Mahendra here. End of December, it was about INR 60 crores.
INR 60 crores?
Yeah.
Okay. Thank you. All the best. May you have a great year ahead. Thank you very much.
Thanks, Susmit.
Thank you. The next question is from the line of Abhishek Ghosh from DSP. Please go ahead.
Yeah. Hi, team. Thanks for the opportunity. Just a couple of questions. How should one look at the gross margin in the current quarter given the sharp increase in commodity prices? Is there an impact of that in the numbers?
Mahendra, why don't you respond? The quick answer, obviously, is it has affected a bit. Mahendra, you can respond.
If you're referring to the commodity prices, mainly the steel price increase, it will start reflecting from Q4 onwards, and there will be some kind of a time lag in recovering it. As of Q3, there is no significant impact because of the commodity price increase in the margins.
Okay. So 4 Q, we'll see impact of RM, and we'll have to negotiate with your customers to kind of get that thing. Is that the way to look at it?
Correct.
Okay.
We have always been able to recover it. Of course, there could be some time lag, but we should be able to manage it.
Okay, great. In the Metal Formed Products Division, is there also an impact of export being a little weaker or in the other segments because of container availability and other things?
KR, you want to answer that?
Yeah. The exports have been slightly lower compared to last year in the industrial chain, of course, because of the overall global scenario due to COVID. There are some challenges in getting the containers also. That is true. The real issue in metal form is the slowdown in railways due to the railway coach factories have not ramped up their production, which is likely to get corrected in the coming quarters. Yeah.
Okay, great. If we can also get clarity about the development in the truck body part of the business and the overall scrappage coming through. How should one look at that part of the business?
I think, obviously, last year has not been great for overall CV sales, and as a result, truck body also may have did not expand as much because it was a very slow year for overall CV sales. This coming year, again, I think like we told you with some of these businesses, they'll take a little while to pick up, and so we don't expect them to immediately contribute to the numbers in the early days. Coming year, we do see that we should be able to expand that business, and so we'll probably give you some estimates and numbers at the end of the year.
Okay. Just one last question from my side. You are at just barely with any net debt now. Most part of the CG Power cash outflow is already gone, and you are generating close to INR 100 crores of cash every quarter. How should one look at a balance sheet more from a two-year, three-year perspective? From that perspective, if you can just give us a broad outlook, it'll be helpful.
Sorry, how can one look from managing?
Where I'm coming from, the one part of the cash outflow to CG Power has already happened. Despite that, you barely have any net debt now, and you're also generating INR 100 crores kind of a cash flow every quarter now. INR 200 crores goes into three-wheeler, but that's just about two quarters of cash flow. There will be a significant amount of cash flow generation over the next- CG Power will also start to throw cash flows. How should one look at it? Are you already kind of evaluating, or will you wait for some time to consummate the CG Power thing and then probably look at it? How should one look at it? If you can just help with understanding.
Like we said, overall, the thing is, in our consolidated books, we don't want too much leverage. What you have to look at, this is a process we are also learning. When we look at companies like Danaher and a lot of guys who just do this, how they do it well. Basically, it's like you guys do in the investing business. We need to create a continuous pipeline. Timing could move out one quarter or two quarters. If your question is, are we evaluating? We're always evaluating. What I want to say explicitly is, we've said this before, which is we won't take too much debt because we don't want to have much debt on our consolidated balance sheet. We won't do transactions that basically levers us up too much.
Honestly, to answer your question directly, we're nowhere close to looking at any acquisition right now in any level of detail. We said that first what we wanted was for CG Power to basically fully consummate. Till we get very comfortable with CG Power and we get the debt down there, we're not going to make another acquisition. If that was your question.
Okay. That helps-
Basically, CG Power free cash flows will have to be used for prepaying CG Power debt anyway because they have debt on their balance sheet.
Yeah. I think the relevant number to then look at is the consolidated debt and not the standalone net debt because you want group overall net debt to be at manageable levels and then only look forward for future. That's the way to probably look at it. Is that correct?
That's a good way to look at it. As long as we have a large amount of consolidated debt, and large varies, it depends. What I've always told you, we're South Indian, large is a smaller amount of debt in the South. Till we are comfortable with overall debt, we will not do another.
Great. Okay. Thank you so much. Wish you all the best. Thank you so much.
Thanks.
Thank you. The next question is from the line of Ashutosh Tiwari from Equirus. Please go ahead.
Hi, sir. Congrats on the strong set of numbers. I have a question on engineering division. We have seen a very sharp increase in sales YOY. Is it driven by the pickup in CVs and construction equipment that we saw in the last quarter? Even going ahead, I think these sectors are expected to do further well. Can we expect this top line that we did in this quarter, on engineering side, we can see some buildup from here as well?
Mukesh, do you want to answer that?
Yeah. Well, yes, your observation is right. Especially in this quarter, all the three segments where engineering business is based on, one is automobile industry, second is related to construction industry, which is off-road vehicles, as well as exports. All the three segments has done pretty well this quarter, and we hope that is going to go forward, will be doing well only year-on-year. Base is already corrected a lot in this year, so there is only headroom for growth available going forward.
Okay. My question is that can we, let's say, the revenue that we did in this quarter, can it reach up from here as well? I think CVs will obviously be higher than what the industry volume was in the last quarter, and probably construction equipment also can pick up from here. Can we assume that this base will probably now remain there and probably build up on that?
Yes. CV industry is expected to do well because government is also pumping a lot of money on the construction industry. Like you rightly said, base is corrected too much already, so there is only going to be growth going forward. There should be a bullish growth going forward. That's what is our estimate.
Yeah. Please don't take it as a forward-looking guidance.
Sure. Sir, secondly, on this, we are developing basically a product for export market on the engineering side. Any update on that, from what time we expect that to commercialize?
Those product developments already is going as per our plan. We've already submitted the samples for new project what we are running it is expected to sample gets approved by quarter one or quarter two. Beyond that, our growth in the particular new segment where we're investing it will start clocking from quarter two and quarter three.
Okay. From Q3 second half, maybe we will see some benefit of that coming through.
Yes.
Sir, lastly on this engineering division, only the margin part. Despite this revenue ramp-up, I think margins have come down a bit on a quarter-on-quarter basis. Is it because of the commodity pressure that we saw in this quarter, or some mix change is the reason?
Like Mahendra already explained, this quarter there's not much of impact. Commodity prices have started coping up from Q4 basically very high. Q3, whatever impact was there, which is already recovered. We could see a time lag in the Q4, ultimately will get recovered fully. That's what is the arrangement we have with our customers.
My question was, let's say, Q2 to Q3, despite this revenue growth, we have seen margin compression in the engineering division. Is that because of mix, basically, a change in mix in engineering?
Yeah. There are a couple of things. One is mix. The second one is, see, quarter to quarter, it is difficult to compare in this business because there will always be some lead or lag in terms of price recovery. That may not be the right way to compare.
Okay, got it. Thanks a lot, sir. All the best.
Thank you.
Thank you. I would request participants to please limit your question to two at a time. The next question is from the line of Aditya Bagul from Axis Capital. Please go ahead.
Hi, Vellayan and team. Congratulations on a great set of numbers.
Thanks.
Sir, my question is more in terms of our long-term outlook, right? Over the last two years, we've sort of checkmarked our ROCEs, we've checkmarked our cash conversions and PBT margins. Coming to the fourth point, which is revenue growth, how do you see that as a trajectory? You earlier highlighted that 8%-10% could be a sustainable sort of a growth momentum. Have we seen a step-up there in this quarter? Is this a beginning of a higher growth trajectory?
Actually, I think, Aditya, thanks for the question. Again, revenue growth depends whether you're looking at standalone or consolidated. Because the basic challenge in India is because in India, it's kind of more driven by standalone. The challenge-
Right.
... like you know with the CG Power acquisition is that, basically it ends up being a separate entity. If you look at it, kind of the way we've articulated it is TI-1, TI-2, and TI-3, right? TI-3, like CG Power, we're using free cash flow from the company to go and buy another entity. Unless that growth is also kind of seen as part of our overall entity's growth, it brings a different lens to how we look at or evaluate the company's growth. That's the first thing. You guys need to kind of think of how are you going to solve for that. You can basically take kind of our ownership interest in CG Power. I mean, however you want to think about it. I think from an analytic perspective, you need to think of how you're going to solve for that, right?
Clearly, if we're going to take cash flow from the main entity and use it for acquisitions, we need to think if those acquisitions end up being standalone entities, how that kind of drives into the growth, right? Like you said, we have three engines of growth. The growth within TI-1 itself, which is the organic businesses.
Right.
I've said that that can range from 6%-8% over the cycle. Right now, obviously, we're seeing kind of more growth than that for a couple of reasons. You have base effect also there [audio distortion] u p with a really bad first quarter this year. You're seeing some of that play in. We think that the growth will sustain into next year. Like I said, over the cycle, we see TI-1 growing 6%- 8%. TI-2 has not started kicking in yet. Right?
Right.
Our belief, at least next year, is that TI-3 will kick in with serious numbers. How you choose to add that to your model, I think is something that you have to drive. It depends on how you will do it.
Right. No, sir. My question was more to do with TI-1. Just wanted to understand, you've seen a robust growth in cycles. Athleisure has been a key focus area, at least during the last 10 months. Even within the engineering segment. Specifically for TI-1, are we seeing a step up there?
TI-1, it is a step up, but we've also got to realize that TI-1 is a bit more cyclical, right? I don't want to move away from that thought that over the long term, putting too much more than 8%-10% pressure on TI-1, I don't think is the right way to look at it. TI-2 has to kick in. TI-2 will be part of TI standalone, but it has to kick in, which is where the electric three-wheelers come in, which is where lens comes in, and those businesses have not kicked in yet.
Understood, sir. Sir, my second question is again, trying to understand, you've talked extensively about Japanese influencers who've driven TQM and productivity management. Where are we in the journey there, and how do you see the next two years or three years playing out?
I'd say we are very early. I think we've barely, not even got to kindergarten, I think. Again, we've been trying to work more with more folks from Japan. Unfortunately, everything has got shut down because they can't travel here right now. I think we're just waiting. The more we try and understand that, it's just like an ocean that we have to basically drink from. There's a lot to learn in that space. I just think it's highly exciting in terms of the prospects of what that can do for TI. I would just say that we are absolutely in our infancy in that right now.
That's very encouraging to know. Thank you, sir, and best of luck for the quarter, sir.
Thanks, Aditya.
Thank you. The next question from the line of Vimal Gohil from Union AMC. Please go ahead.
Yes. Thank you for the opportunity, and congratulations to Vellayan sir and team for putting up this splendid performance. Sir, my question is firstly on TII standalone. Just following up on Aditya's question, my question is on margins, actually. The company is way past the 10% PBT that you had guided for. What would be the outlook there going forward? Clearly, despite revenue growth not supporting in FY 2020, you still achieved and overachieved that number on PBT front. That is question one. The second question is on the lens business. I think what you mentioned on the volumes that you're targeting or the production that you're targeting is 0.5 million a month, right? If I've not got it wrong.
Correct.
Yeah. The third question, sir, would be, the negative working capital, is it sustainable? The factors driving it, will it sustain on a negative trajectory going ahead as well? Lastly, if you could just comment on the metal forms business, excluding railways, how has that grown? Thank you.
You're asking so many questions. My RAM is only so much. I have a very small RAM, man. Can't remember. Okay.
I'll repeat.
My third was PBT. Are you saying I'm expanding our target? We do believe that PBT will expand over the next few years. We don't want to particularly set a target right now, but we do believe that we will be able to expand PBT. Okay. Your second question was on negative working capital. Honestly, part of the challenge right now is that even if you want to buy steel, you can't buy steel, right? In the sense, there's not enough available to go around. That's also basically driving down our working capital levels. I think we still have to determine what will be a stable level, whether it will settle at close to zero or a number slightly above that. I don't think we're going to go back to the INR 300 crore, INR 400 crore levels we used to be at.
It may settle at a number slightly above this, just to end up thinking of building something into a model or something. Your last question was, MFPD, has it really been hurt by railways? I think that I've already answered. The answer is yes.
Sir, excluding the railways, how has the metal forming business done?
And well-
Like what I mentioned, it's in the range of 20%-30%, and it varies from segment to segment.
Brilliant. Thank you so much, sir. We're looking forward to the separate CG Power call, maybe Q4 onwards. Thank you so much.
Thank you. The next question from the line of Preethi RS from UTI Mutual Fund. Please go ahead.
Hi. Good morning, sir. Congratulations to you and your team on this remarkable performance. Sorry, this is repetitive. My question is on the three-wheeler electric business. If you could provide us a bit of background on how we zeroed in on this business. What is your assessment of the current market size and potential? At this point of time, we understand the segment is dominated by lead-acid battery-driven electric vehicles, and it's highly fragmented. Also, if you can tie it back to our strengths and what is our ride to winning this segment.
I think I'll answer. Paul here. I head the bicycle business again.
Sure.
I'll try to answer this question in two parts. The first part was, we are basically update on how the EV space will play out in India for a number of factors. I mean, what the government is doing, clean environment, now post-COVID. That optimism, is with what we started this endeavor about a year, two years, year and a half back. I think we've looked at design, we've looked at the value proposition, we've looked at why somebody will buy us. We've looked at the total cost of ownership and how does it compare with the current ways and how we will get him to adopt EV. We must also remember that there's a lot of environmental factors like drop in prices of battery, et cetera, that will happen. The swapping that will happen. Easier for somebody to switch to EV.
That's how we zeroed in on this. We are in bicycle business, so we raised our vision to say eco-friendly mobility. The vision got enlarged from just cycling to mobility and eco-friendly, and therefore EV. There's a fit of EV into our vision and therefore what we are pursuing. Coming to specifics, broadly at this stage, we've done a lot of reliability test, we've done design tests, we're in consultation with our design partners. We are quite hopeful that we'll deliver something good for the market and for our customers and thereby win over a period of time. Does this answer?
Yes, sir. If you could highlight any synergies with the cycle business in terms of manufacturing or distribution?
Again, I think this synergy question has come up multiple times in the past. One of the things we've said is, there's a reason why TI is kind of taking this approach. Which is we want to kind of move away. If we only want to say synergy, then we're going to be an auto component supplier our entire lives. Honestly, we do not want to be that. We want to reduce our dependence on just auto because being an auto component supplier, we see two challenges with it. One is it's very capital intensive, and the second is it's very cyclical. The cyclicality doesn't create an ability to generate consistent and constant cash flows. We don't see that as good for our company. That has to be able to deliver consistent growth over time, right?
Hence, the same question was asked even with CG Power. What we see as common principles is common principles. I think that Aditya or Susmit that had asked the question on the Japanese lean principles, Japanese production systems like the Toyota Production System, and TQMs, we see as applicable across businesses. We believe that that is what creates leading manufacturing businesses. Our interest and intent is to basically create leading manufacturing business in the country using those principles as a way to compete. Using lean, using TPS, using TQM. We believe that those principles are applicable across various industries.
Sure, Paul. Great to hear and good luck to you.
Yeah, thank you. Thank you so much.
Thank you.
Thank you. The next question is from the line of Anupam Gupta from IIFL Capital. Please go ahead.
Yeah. Hi. Well, sir, two questions. Firstly, on the cycle business, you said that there's a significant emphasis on export. Just to clarify, what sort of current revenue is coming from export and what is in terms of between the normal Indian business, how fast is that growing and can that sustain? Exports you mentioned will get doubled in this year. Just give me some picture on the domestic as well as the export business separately.
I think in the bicycle business, the way we've looked at that is just currently the revenues coming in from exports is about 5% of our turnover. Moving forward across the next four years, the way we have planned it out, that it will start contributing between 20% and 25% of our turnover as a last mile.
Okay.
That's it. Again, we have to first, to compete in this market, I think there are a lot of favorable headwinds that are happening in this business with-
Okay. The domestic business, how fast is that growing? Is that pent-up demand, or do you see that sustaining?
The domestic demand this year has been very good. In terms of this market, if you take post opening of the COVID, the market has grown between 20% and 25%.
If you look at a historical perspective of the domestic market, it's been between 1% and 2%. Obviously, we will have to look at to get the growth engine export becomes a big factor for us. Having said that, to earn the right to export, I think, we have to build our cost competitiveness and our velocity and compete on QCD really. That's what Mr. Vellayan was explaining, the initiatives that we are taking up with the Japanese, et cetera.
Utilizing those principles that help us to be very competitive in the manufacturing space. With that, then we have all the markets at our disposal to be able to compete.
Right.
Most of us that are looking at this export scenario, we're looking because we mostly have predominant position in the domestic market, as you know.
Yeah.
Whether it's a tube business or a cycle business, we are either number one or number two.
Sure. The second question for, just relating to CG Power, this is not necessarily about how it is doing. They have given a lot of reduction in the contingent liability. The question for you is, do you see any further investment from TI going into CG Power for meeting any cash shortfalls for contingent liability? Do you see that happening at all?
We don't believe that there will be a need at this stage.
Okay, CG Power should be able to handle all the cash flow needs internally, basically.
Yeah.
Okay. Understand. That's all. Thank you.
Thank you. The next question from the line of Kashyap Pujara, an individual investor. Please go ahead.
Hi, Mr. Vellayan and team. Congratulations for a great set of numbers.
Thanks, Kashyap. Kashyap, it's strange to see you at this end of the line. Actually, I think to all on the conference call, I just want to say a big thank you to Kashyap. Kashyap has been hosting our conference calls from Axis for the last 10 years, I believe. We're actually kind of seeing Kashyap from the other side. Kashyap, congratulations, and don't ask me any hard-
No, thanks. I think this was one of the first companies we covered when I started covering. I think it's been a great journey because over time, TI has gone up 10x. Apart from that, there has been Cholamandalam Financial Holdings and Chola that has kind of come out. It's been a great journey over that timeframe. I'm sure to look forward to interacting with you more as I join in my new engagement next week. Look forward and congrats for a great set of numbers. Mr. Vellayan, I just had one question. I think most everything has been kind of spoken about. It's very encouraging to see Q3 PBT at INR 145 crore and in fact of above INR 100 crore. Actually we are annualized run rate is any which way now INR 600 crore and INR 400 crore plus, and we are at 11% margin.
I think I remember discussing in calls prior with you, and you said that over a mid-term, maybe a three to four-year horizon, aspirationally, you wanted to get to that 15% mark. I hope that continues and there are no changes to that plan.
Yeah. I think broadly, like I said, right, a lot of this is driven on operating disciplines, right? Like I said, the reason that kind of slowed us down this year is the fact that we've not been able to get some of the Japanese in here. I think there's a lot for us to learn from them, and we still have to learn a lot more. Our belief is if we're able to apply those principles and maintain these high levels of disciplines that are needed, we will be able to get to those numbers, right? That continues to be our belief here.
Great. Thank you, sir, and wish you guys all the best, and look forward to being in touch with you.
Yeah. Thanks, Kashyap.
Thank you. The next question is from the line of Rohit Ohri from Progressive Shares. Please go ahead.
Hi. A couple of questions for Shanthi. Just wanted an update. Last time when we spoke, you were talking about a CapEx plan that is a growth CapEx of INR 15 crores, INR 20 crores for Shanthi. Any developments or how much of the intended amount has been spent for CapEx?
Mahendra, you have the answer to that?
There's nothing significant because of this COVID impact and also a lot of deferral has happened. The CapEx I think will now happen between Q4 and maybe Q3 of next year. It will spread over the next four quarters.
All right. You were at an evaluation stage for some robotic processing for Shanthi. Any developments in that case?
That's very early. I don't think we ever discussed this. I'm actually surprised that you guys even know about it. Are you talking about IoT or are you talking about kind of robotics?
Okay.
... [audio distortion] publicly, and it's still very early.
Okay. In terms of the pending order book which Shanthi is having which gives a visibility of around 9- 10 months from today. In next two years or so, do you think Shanthi will be able to do EBITDA margins of 20% or so?
Again, we don't give forward-looking guidance, especially on Shanthi. I don't want to give you that.
Okay. Last question. Shanthi has been accumulating quite a lot of cash, which is in the form of FD, I believe. Are you building a war chest for Shanthi then?
Right, Shanthi had accumulated cash before. We distributed cash once back, and it was a big drove of buyback at that point.
We continue to kind of still to see what to do with the cash, whether it's best used in that company or pull back to parent. That's something that we'll have to continually evaluate over time.
It's not that you'll be going for incremental dividends and reward the shareholders then?
No. Please don't draw any inference, guys.
No, because Shanthi has accumulated quite a lot, from around INR 13 crores to INR 45 odd crores in last six months. That is the reason why I am asking that what does Shanthi intend to do with the money that is lying.
I think, like before also, no, we maintain the same stance, which is we continuously evaluate it at Shanthi level. See, these are all independent public companies, so we continue to evaluate at a Shanthi level.
Okay.
Whether the cash is to kind of use it, like a war chest or something else or to bring some of it back to the parent.
Okay. That's cool. Thank you. Thanks a lot.
Yeah. Thank you.
Yes.
Thank you. The next question is from the line of Susmit Patodia from Motilal Oswal AMC. Please go ahead.
Yeah. Hi. There's a question for Mr. Paul, actually. I didn't realize he was on the call. Mr. Paul, if you could give us a three, four-year vision, excluding the EV. Can this business be like an INR 1,500 crore revenue business with nearly double-digit margins? Is that possible?
You're talking about EV or cycles? We couldn't hear you.
Cycles.
Cycles. It's difficult to give, again, like Mr. Vellayan said, forward-looking and prediction. All I can say is that we are pretty upbeat in terms of the future. Looking at India plus some countries in the globe with the favorable movement. Combined together, we believe that we're in a position to deliver and sustain our performance is what I can say. I think, also with the introduction of our approach towards some of these Japanese philosophies should help us improve the velocity in which we do things and the way we manage the business, the sustainability that we can get out of it. This combined formula actually, coupled with also talent management, I think is what Mr. Vellayan alluded to. It will help us to see superior results over the future. That's what we are working towards, actually.
Okay. Thank you.
Thanks.
Thank you. The next question is from the line of Ronak Vora, an individual investor. Please go ahead.
Sir, can you just explain the terms that you were using in the call earlier, TI-1, TI-2, TI-3? I'm just new to the company.
I think that there, if you kind of go into our transcripts, this has been an approach we've been using for a long time. TI-1 refers to kind of the four existing divisions in the company. TI-2 refers to what we call a more venture capital-led approach to growth, like our expansion into lenses or the electric three-wheeler business. TI-3 refers to what I would call an operational PE model to growth, which is through acquisition, and CG Power is an example of that.
Any other questions, Mr. Vora?
No. Thank you.
Thank you. The next question is from the line of Vipul Shah from Sumangal Investments. Please go ahead.
Hi, sir. Congratulations for great set of numbers. My question relates to TI-2. Any progress on that TMT bar business, which I think you discussed a few quarters back on a call?
Yeah. Like I said with TI-2 , it's tough to kind of keep asking for progress every quarter and kind of delivering on that. Like with COVID, quite a few, like the construction business, the CV business, all of those businesses got hit quite badly. With some of the smaller businesses, we don't see kind of discussing progress on them. I think as long as, if we're planning to kind of get out of a business, we'll let you know. Otherwise, they have to kind of grow organically to a certain scale before it becomes relevant to discuss them on these calls.
Lastly, on lens business, what will be your CapEx, sir?
We've not determined a CapEx number. When we do, obviously, we do report it through the board and, we will discuss that publicly as soon as we have a number.
Okay, sir. Thank you very much, and all the best for the future.
Thank you. Thank you so much.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Mr. Vellayan, if you have any closing comments.
Hey, Anupam. Like we said, I think we continue to kind of be optimistic going forward. The biggest challenges continue to be on kind of supply on the raw material side. Demand still seems to be holding up. We just have to see how demand kind of plays out over the next- very optimistic note.
Sure.
Thanks, everybody, for joining.
Yeah. Thanks a lot, sir, for the opportunity. Margaret, we can close the call now.
Thank you. On behalf of IIFL Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.