Ladies and gentlemen, good day and welcome to the Tube Investments Q2 FY 2027 earnings call hosted by IIFL Capital Services Limited. All participants are currently in the listen-only mode.
We are not able to hear anything.
There will be an opportunity to ask questions following the conclusion of the management's opening remarks. Please note this conference is being recorded. I now hand over the conference over to Mr. Joseph George from IIFL Capital. Thank you and over to-
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Thank you, Akshata. On behalf of IIFL Capital, I welcome you all to the Q2 FY 2027 results conference call of Tube Investments of India Limited. From the management team, we have with us M.A.M. Arunachalam, Executive Chairman, Mukesh Ahuja, Managing Director, A.N. Meyyappan, Chief Financial Officer, as well as all the divisional heads. I will now hand over the call to the management for opening remarks, post which we will have Q&A. Thank you.
Management team, you may go ahead.
[Non-English content]
Yes.
Hello? Ma'am, am I audible?
Yes, yes, you are audible. You can go ahead.
Yeah, good morning, everybody. I would like to share the Board of Directors of TI met yesterday and approved the financial results of the quarter ended 30th September 2026. Standalone results for the quarter, revenue for Q2 was at INR 2,710 crore against INR 2,119 crore in the same period previous year. PBT was at INR 253 crore against INR 250 crore in the same period previous year. ROIC stood at 44% for the quarter ended 30th September 2026, which is the same as the previous year.
Free cash flow for the quarter was INR 167 crore. I will give a view about the business-wise. Engineering division, the revenue for the quarter was INR 1,828 crore compared to INR 1,382 crore in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was INR 171 crore against INR 164 crore in the corresponding quarter of the previous year.
Metal Formed Products revenue for the quarter was INR 473 crore compared with INR 408 crore in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was INR 49 crore against INR 44 crore in the corresponding quarter of the previous year. Mobility revenue for the quarter was INR 247 crore compared with INR 194 crore in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was INR 8 crore against INR 4 crore in the corresponding quarter of the previous year. Others, revenue for the quarter was INR 260 crore compared with INR 227 crore in the corresponding quarter of the previous year. Profit before interest and tax for the quarter was INR 20 crore against INR 18 crore in the same period for the previous year.
At a console level, TI consolidated revenue for the quarter was INR 7,330 crore against INR 5,523 crore in the corresponding quarter of the previous year. The profit before associate and joint venture exception items and tax for the quarter was INR 643 crore against INR 459 crore in the corresponding quarter of the previous year. CG Power and Industrial Solutions Limited, a subsidiary in which the company holds 56.2% stake, registered a revenue of INR 3,802 crore during the quarter against INR 2,923 crore in the same period of the previous year. Profit before tax for the quarter was INR 559 crore against INR 388 crore in the same quarter of the previous year. Shanthi Gears Limited, a subsidiary company of the gear business in which company holds 73.16%, registered a revenue of INR 128 crore during the quarter against INR 132 crore in the same quarter previous year.
Profit before tax for the quarter was INR 20 crore against INR 29 crore in the correspondent. Thank you, and happy to take questions on this.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may click on the raise hand icon from the participant tab on your screen.
Which is it?
We will wait for a moment. We will take our first question from Gnanasundaram Saminathan from Avendus. Please go ahead.
Hello?
Hi.
Yes, you are on.
Thank you. Good morning, team. Sir, the first one is kind of a bookkeeping, largely on the standalone numbers. Can you clarify in terms of how much of this growth is coming on account of HRC price pass-through and how much of it was volume driven?
At a TI level, approximately you can consider about 15% there is a volume growth, and rest is coming on account of the raw material pricing hits.
Thank you, sir. Just a follow-up to that, any specific reason that we are seeing margins in both engineering and Metal Formed Products division being lower than what we had anticipated?
As all of us are aware, there is a continuous increase in the commodity prices, and in our businesses, whatever contracts we have with customers, it generally may be, let's say, it comes with retro effect, but it takes about one quarter to two quarters to settle prices with our customers and the OEMs. So that process is on, and maybe, let's say, as of now, we are confident we will be able to recover fully in the next one or two quarters.
Perfect, sir. Clarified. Thank you. My second question with regards to the balance sheet is that there has been a INR 412 crore of incremental investments that has gone into subsidiaries. How much of this was into TICMPL and the other subsidiaries? Can you clarify, please?
Yeah, TICMPL is around INR 250 crore, and INR 78 crore we have invested in Shanthi Gears. That's the major investment. Yeah.
Got it. Just in terms of TICMPL, can the management throw an outlook in terms of where we are? Because the losses continue to seem to be there, INR 150 crore. I know the numbers are, the revenue numbers are very encouraging. Can you give us some outlook in terms of where should we look at TICMPL from a revenue as well as from an operating profit perspective, possibly, one or two year down the line perspective, not immediate quarters would be helpful.
Okay. Good morning, sir, Gnanas undaram. As you also pointed out, last quarter was a very good quarter for us. So INR 476 crore was our top line. In fact, the H1 top line has exceeded the last financial year top line. So that's on the top line part of it. From the future perspective, it will be difficult for me and may not be appropriate also to share the future projections in terms of the top line, et cetera. But definitely, our endeavor would be that every quarter should be better than the previous quarter, and that's what the endeavor would be. So that's on the top line part of it. On the profitability part, there are four businesses, and the four businesses will have their own trajectory for profitability.
We are definitely targeting at least one business, which is our truck business, to be an EBITDA breakeven in quarter four this year. Two businesses are to be EBITDA breakeven maybe in quarter four of next financial year. That is the roadmap. I mean, that is the roadmap. We are taking business by business, and hopefully, by then, at an organization level also, TICMPL will also be to start with the first object, the first target is to achieve an EBITDA breakeven, and then thereafter, go on to have a PAT profitability.
Very encouraging commentary. Thank you for that. One last one is that, can you just explain the cash position currently at TICMPL and how much of further infusion required from standalone over the next 18 months?
TICMPL currently, they are having a cash of around INR 350 crore in hand.
Okay. This would suffice for possibly FY 2027 also, going by the current run rate that we are having to-
Yes.
FY 2028-
Yes, sir.
Investments is, the understanding is right?
For current financial year, it is sufficient. There is no need for them to raise any funds. Next year, we have to just wait and see, and we will get back to you by Q4.
Okay. Now, I just want one clarification in terms of the strategic thought process that you have in terms of TICMPL is that, would you be open to having further investors come into it, or would it be further investments going on from TI only on TICMPL?
We can discuss these things offline. As of now, let's say TI is fully funded and committed to TICMPL, but anything that's there can be discussed offline.
Perfect, sir. Thank you, and all the best.
Thank you.
Thank you. We will take our next question from [Gopalakrishnan Subramanian] from [Utanshu] Investment. Please go ahead, sir. Mr. [Gopalakrishnan]?
Yeah, am I audible to you?
Yes, sir.
Yeah, great. That's great. First of all, thank you for the opportunity, and I wish the team all the best. Now, regarding my first question is, I have seen that the operating margin is almost stagnant at 9%-10%. Are there any plans in Tube Investments to restructure the business? Like, for example, what Mahindra did after Anish Shah took over, like, exiting some businesses like SsangYong and Meru and making some acquisitions and businesses which cannot achieve a profitability of 18%, I mean, ROI of 18% were removed and all that. Like that, whether any such restructuring plan is there for Tube Investments? That is one point. Second point is about moat building. I mean, whether you are planning to build moat for the company so that the growth can be more sustainable and profitable. That's all.
Let me take both the questions. Question number one, like you are already aware, we follow in company TI-1, TI-2, and TI-3 strategy. TI-1 basically is a continuous focus on the core business, and TI-2 are basically new initiatives like TICMPL invested in medical. We are pursuing CDMO, these kind of businesses which are getting incubated. TI-3 is a maybe continuous, I will look for if any acquisition possibilities are there, which can help at a console level TI growth. We are continuously working on that, and we are pretty confident, like we have given the guidance in the past also, we will be able to, let us say, at a console level, to do high double-digit growth, and on the revenue as well as bottom line both. That is on your first question. Coming to the second question, what was the- Can you just come again?
Could you build a moat around TI for profitability and growth?
Same thing. I mean, it remains the same strategy, TI-1, TI-2, TI-3, what I maybe let us say just indicated. That is a continuous work we have been doing since last couple of years and continue to do it for future. We are looking for newer and newer businesses where we can continuously increase our growth as well as the bottom.
Okay. Actually, my concern came because from October 2024 till now, the share prices almost has come down by 50%, from 4,600 level to 2,300 level. So there must be something the market is expecting and the company is not able to deliver. That is why I thought whether these kind of things can really prop up the company. Coming to being an ex-employee of the company, I have this emotional attachment towards Tube Investments. That is why I asked this question.
First of all, thank you very much for your interest and concern for the company. We really appreciate it. But if you see the year-on-year, the company is able to grow even the profitability in the core business in the double digits. Like you mentioned, building a moat around the company, TICMPL is our one of the very, very big opportunity where we are continuously invested and keep on investing into business, and which is going to create a lot of upside coming for the TI. The moment maybe those things happen, share price is a question of maybe a confidence like investors like you will have in the company when bottom line and revenues are going to grow. So share price, we feel, is just a question of time.
Okay, sir. Thank you.
Thank you, sir. We will take our next question from [Sri] Naman Maheshwari of Shanghvi Family Office. Mr. Maheshwari, please go ahead.
Yeah. I hope you can hear me.
Yes, sir.
Yes, please.
First of all, great things that you are building. I' m slightly new to the company and wanted to gain some more understanding on the mobility business. I' m in basically e-mobility business, which is TICMPL, and wanted to understand how we are seeing the competitive intensity increasing in this space and what puts us ahead of the competition. You have seen some of the bigger groups also entering into this space and having a captive use case for these people. How do we plan to enter into this with some good bigger orders? That is part one of the question. Part two is more on the new businesses and the medical devices and this CDMO.
If you could just highlight what our strategy would be in and around this, what sort of things are we targeting, and where our focus lies in generally investment cycle for these businesses. These are my two questions.
I will go for second question, and then Mr. Jalaj can address the first question. Regarding TI Medical, as you are aware, maybe let's say around three years back, I guess, we acquired Lotus, which was basically a wound care invested into sutures business. Happy to share that maybe that company is growing 20% plus now. When you have seen the last quarter also, the growth was 20%. Also to grow this business further, we have invested into a plastic business, which is cannula and catheter, where maybe let's say it was a very, very small startup which we acquired it, and we are building the company in terms of manpower and the sales team extra. Those efforts are on. We are hopeful by end of current current quarter, which is Q3, the team will be in place.
It is a question of first bringing the capacity utilization for the current facility what we enjoyed, and based on the progress, we will be further investing in that facility because the opportunity is very large for that company. So we remain bullish about our medical business.
Okay. If you could just also talk about the CDMO space, which I think also would be-
CDMO business?
Yeah.
CDMO business, like you are aware, we have bifurcated into two parts. One is the regulatory lab business, which is doing pretty well, and we are able to bring good customer engagements in various customers. Coming to the manufacturing facility, which is getting ready, and now we are going to start the approvals for the regulatory process, which may take about a year from now. The moment will be until that time, we will be start doing commercial supplies another one quarter down the line. Once the regulatory approval comes, then fully can be scaled up. Down the line, maybe we can say about a year time from now, you will be able to see a good revenue growth coming in that business also.
Okay. What would be the focus area in this space? It would be like those small molecules?
As of now, we are working with all set of customers. Maybe we will not be able to give a guidance on which molecules and all those things, information. But we are having a good traction on all customer engagements in the lab business.
Okay. On the EV front, if you could
Yes. Mr. [Maheshwari], yes. So on to your question. A couple of just pointers as a response to your question. You are absolutely right. The competition intensity is increasing by the day. However, what we feel is that we entered into this segment at the right time. We entered into all the four segments simultaneously, which I think was a great and a very bold move by the group. That seems to be getting justified because the way the electric penetration is increasing across the segments. Just to give you some numbers and some figures, three-wheelers already, the penetration is upwards of 50% in quarter two. In case of the big trucks, H1, the volumes of the I am talking of industry. In H1, the industry was almost 170% of the last full financial year. Likewise, in case of small commercial vehicles, it was almost the same.
H1 volumes of the industry were the same as the last full financial year industry volume. It is the tractor business which the electrification is taking place and will happen over a period of time. So first is that the vision which the group had to enter into the segment at the right time, well before the segment is starting blooming up. That's the first point. The second point is, we have already put a substantial number of vehicles onto the roads across all the four businesses, right? So including our small commercial vehicle and tractors, which were the newest businesses which we started operating, we have already put, let us say, for example, more than 1,000 small commercial vehicles onto the road. Likewise, in tractors also, there are more than about 300-odd tractors which are on the road.
So there's a huge learning curve that we have accumulated in electric business, which is one of the learnings that we have got that doing the electric business is slightly different from doing a conventional ICE business because of the dependency on the ecosystem of charging infrastructure, the concept of project management, 2.5x upfront higher cost of a product deployment as compared to ICE deployment, et cetera. So what will differentiate us is this learning curve, our products which are already out there in the market, our understanding of the market, which I think we feel is the accumulated wisdom over last five to six years, our relationship with the suppliers of continuous engagement, our dealer network, and the fact that we are focused only on electric. So for us, electric is not and electric, for us, it is only electric.
I think these are couple of things which we- T he last, but not the least, we being an indigenous Indian company and availing the benefits and the subsidies, et cetera, which Government of India is rolling out to promote the indigenous design and development of the product. I think these are couple of things which we feel could build the moat for us going into the future.
Okay. I'll just come back and like give follow-ups.
Thank you. We will take our next question from Rushabh Shah of RBSA Investment Managers. Rushabh Shah, please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Just coming on the EV business, on the HCV side, I believe earlier, I think last three years, we were targeting the fixed loop routes, such as cement transport, et cetera, and we have seen good traction there. Have you identified any new use cases for existing products? That is my first question, sir, which can help us significantly scale up.
Okay. Yes. Can you just ask the second question just so that we can then just respond to both of them together?
Yeah.
One is-
The second one is on the, I think, the significant market is the long route. I believe the charging infra is a major bottleneck there. We are working on some high-density batteries also, which will help us help the long-range area. What is the update on that? Any product development for HCV?
Okay, great. Mr. Shah, I will take the first question first. You are absolutely right. The endeavor is to build out the use cases except for cement. Happy to tell you that metals and steel movement is another use case that we have now entered into. We have seeded some 80- 90 vehicles into that application. Mining is another area which last quarter, I'm just talking of the quarter two. At a cumulative level, let us say mining, cement dependence is just about 60%. 40% of our total contribution of the trucks which are on the road is into the applications apart from cement. This cuts across steel, mining, chemicals, sugar, retail, tire movement, et cetera. The effort is, as you rightly said, is to open up new end use cases. That's the first part of your question.
The second is on the long haul and the new product development. Yes, we see the trend of the industry moving towards the higher battery capacity, because that is what will unlock the long haul for the e-trucking. Even we are in the process of doing that. Can't give you the exact timelines, but we are in the process of developing a high-battery truck on our existing products.
Just for clarification, I think we had earlier set a target for $1 billion revenues by 2030. Are we on track? Secondly, does this revenue target assume some revenue from long haul, or we are assuming that only from the fixed-route operation that we currently are in?
The aspiration of that target still remains. That is, we are not giving up on that particular target. That target is not only for the M&HCV business. That target is at a consolidated TICMPL level, in which all the businesses will contribute, including long haul, including existing businesses, including all the business will contribute towards reaching of that target.
Yeah, just on the breakeven side, I think, there has been some delay, I think, over the last two years due to external or internal factors. Currently, we have guided for HCV in Q4 and other two businesses next year. What gives us the confidence that we will be able to achieve the breakeven points this time around, and what initiatives have we done to achieve, ensure that we do this?
Mr. Shah, there are multiple factors work towards. A, the answer is not one standard answer for all the four businesses, because the four businesses and four segments are very, very different and different level of maturity. For example, tractor business is in a very, very nascent stage in the country itself. There, the strategy will be very different from the strategy we will deploy for, let's say, our truck business, or let's say for our small commercial vehicle business. It will vary from business to business. Two, three things which are common cutting across all the businesses is obviously scale. The first endeavor is to improve on the scale in each of the businesses. Scale again at a different level in each of the businesses. That is number one.
The second, obviously for improving the bottom line, the focus would be on working on the BOM cost, because whatever said and done today also, the electric commercial vehicle, the upfront cost of the product is one of the biggest hindrances. That is number two. Third, obviously in terms of the service or after-sales support in the field, which could be our more time, which is one of the big area that we are focusing on across all the entire product range. Fourth will be finding up new end-use cases which are both profitable and also can give us the scale. These are the three, four things which will cut across all the four businesses. Again, there will be some other initiative which will be very that business-specific, but these are the three, four which come to my mind.
Maybe the fifth one could be new products as per the requirement of the market, new segments. These are the four, five things which come to my mind will be our strategy going forward across all the four businesses.
Okay, just the last question on the EV side. Sir, I believe recently we have tied up for a 15-minute charging in the three-wheeler segment, and this could be a game changer for us. How are we scaling up nationally? I think currently it's only at select locations. How are we positioning to capture this as soon as possible, given it's a- My sense is this could be a game changer.
Yeah. I' m glad you are tracking it so closely. We have tied up with Exponent, who is the fast-charging provider. As you would then realize that our scale-up across the city is dependent on our partner's presence in the cities. At this point of time, our assessment and even Exponent assessment is that it is cities like Delhi, cities like Bangalore, and maybe in future cities like Bombay, whereby this facility would be needed, whereby the driver has a challenge in having a home installation done for a three-wheeler charger. This will work very well wherever there is a challenge to get a home installation for a three-wheeler charger done at home. In those cities, our dependence is there on our partner. They have plans to expand beyond the cities.
Our first endeavor is that the cities that we are going to launch it, which is Bangalore and followed by Delhi NCR and Ahmedabad. These are the three cities in which we have a plan to, A, test success, scale up volumes, and then expand it to the other parts of the country.
Okay, sir. Thank you. Just the last one question on the medical devices. We have been growing consistently a strong double digit, but on the margin side, it seems slightly subpar. How should one look at and what is the optimal margin that can be achieved?
Actually, you have to consider [four] of whatever this fair valuation, whatever we are doing on a quarterly basis, we are just doing apart from the whatever the business is doing. That thing you have to consider. Then if you consider it, then profitability will be much better.
Okay. Thank you.
Thank you. Our next question is from Vipul Kumar Shah of Sumangal Investments. Mr. Shah, please go ahead. Mr. Shah?
Yeah, am I audible?
Yes, sir.
Yes.
Yeah. Can you share the volume number for each of the four products for electrical vehicles? What was the same for last quarter?
Yes. I will read out. I'll first talk about this quarter, and then the second number would be for the last quarter. For the truck business, it was 311 and 86. For three-wheeler business, this was 2,242 and 1,924. For the small commercial vehicle business, it was 483 and 347. For electric tractors, it was 50 as against 22.
Any of these four products, do you feel that the results are not meeting our expectations and we should vet at this space? Are you confident of the success in all four products?
Sir, if you were to ask my personal opinion, I' m not happy with any of the four numbers. In my view, all the four numbers should be higher. From that aspiration side, it's [Non-English content] , right? We also have to see it vis-à-vis the competition intensity. The good news is that out of these four businesses, in two businesses, we are already as a close number one or a market leader. We have already notched up 25%-26% market share in a highly intense competition. In a market, let's say for a truck business, which is today competed by some 11, 12 players, we are already sitting at 26% market share. But we are targeting a market leadership or at least to be in the top three across all the four businesses.
Yes, different businesses are at different stages of our success, but our endeavor and we are extremely bullish on all four of them.
Sir, will it be possible to share market share of each product pan-India?
Sir, as I just said that for truck and SCV business, we are about 25% of market share. In the tractor business, again, tractor business is developing across all the segments in different ways. We have, just one sec. We have tractor in both the segments of 27 HP as well as 45 HP. Just give me a minute. Yeah. Yeah, I'll just tell you, sir. In tractor for H1, again, we are at about 25% market share of Vahan registration. In three-wheeler business, we have two products. One is the passenger business and is the cargo business. The passenger one is the one that we need to pull up our act. We are at about low single-digit numbers.
In the cargo, which is the Super Auto, that is where, again, although we are in low single digit, but we seem to be gaining traction in case of the cargo business and the volume increasing to reach about 200 numbers per month. This is the market share position across four businesses.
Sir, last year [audio distortion] this quarter. Our private equity partner has also contributed proportionately.
Come again, your voice is cracking, please.
Our private equity partner in TICMPL has also contributed proportionately since we have contributed 250-
No, this entire inclusion has gone from TI only.
Sorry, sir?
This entire INR 250 crore CCPS what you have put it is, it has gone from TI only.
My question is, the private equity partner in TICMPL, they have put their proportionate share also.
Proportionate share for what? Maybe we need to clarify.
Proportionate to their share in TICMPL.
I can explain. Earlier, they invested INR 250 crore of investments in TICMPL. Then post that, they have not invested any money. Only TI has invested after that. INR 250 crore whatever they have invested is only from TI. The external investors have not invested any money in TICMPL further after that.
I have more questions on EV business. Is it possible to connect offline?
We can connect offline.
Sure.
Thank you, sir. Thank you.
Thank you.
Thank you. We take our next question from Salil Desai of Marcellus Investment Managers. Mr. Desai, please unmute your connection.
Thank you. I have a long list of questions, so whoever is moderating, you can stop me if the queue is getting longer. The first question, if Jalaj could help, on the truck side, you had bump up in volumes in Q2. Now, I assume this is some one of large orders or is this some different strategy that you guys have adopted.
Okay. Yeah. Salil, you want to go through all the lists and then you want us to answer, or do you want to do it one by one?
I think one by one is better. I will lose track. Sorry about that, please.
Okay. Salil, the quarter two volume is not because of one particular order. There were multiple deals that we are into, and it is contributed by multiple orders, to answer your question. It is not due to a specific deal which has led to this increase in volume.
Right. Does this mean that you could see similar range of volumes going ahead also?
Salil, I think as I answered earlier also, our endeavor is to have a better quarter, every quarter better than the previous quarter.
Okay.
That is what our endeavor would be that going forward for each of the businesses.
Great. Second, Jalaj, how are you viewing, there is an emerging Chinese competitor in heavy trucks, and they also seem to be doing pretty decent volumes. I think battery capacity, larger battery capacity is something which they are selling their products on as a differentiator. Any thoughts on that? You mentioned that you also want to come up with a higher density battery, but how much of risk are you seeing with this emerging Chinese competitor?
It' s not a risk, it's a competition, which I think in a way is good for the end customer because it will, you know, t he way I see it is not more number of players. The way I see it is that if you look at the penetration of the trucks in the overall pie of the diesel truck, it is still in the low single digit, right? The way I see it is that with more and more players coming in, it will increase the pie itself, right? That' s how we see it. Competition sooner or later would be there. For example, in tractors, right now we just have two or three other players, but it is just a matter of time, maybe a couple of years now that down the line that we will have other competition also.
Competition is there, whether now it is in form of Chinese players or Indian players, et cetera, that honestly we do not have a control on. What we can control is to ensure that we are doing all our basic sites and improving the business.
Understood. Right. Next, Jalaj, is on the profitability in TICMPL. Right now, in trucks, the breakeven part is understood, but at least this quarter, for this, if I do revenues minus the segment EBIT, some INR 622 crore. So that assuming the costs that you have incurred in one quarter to earn these revenues. This number has almost 75% higher than what the run rate has been last three, four quarters. Any particular reason why you have seen Q2 as one big quarter in terms of costs?
Salil, as you would be tracking also, this quarter, and as also stated by Mukesh even for TI also, this quarter we have been all hit by high commodity costs. TI Clean Mobility is no different. We have been hit by very high cell price increase where we have a complete dependence. To make the matter worse, the adverse rupee in terms of the exchange rate, and third is, like TI, adverse commodity price increase. These three things have led to higher BOM cost increase across all the businesses, which is what has impacted the profitability for the four businesses.
Right. Any mitigation strategies you have in mind? Do you think the market is ready for you to take price hikes?
Yes. So, it's a trade-off we need to do on intensity of competition, volume which we are facing, and of course, protecting our bottom line. We are monitoring the situation very, very closely, and we may be taking some better realization in form of price correction or improving our realization deal by deal in some of the businesses. We are looking at some price increase. That is number one. Number two, the second thing is, we have further intensified our efforts towards the BOM cost reduction across all the businesses. So these are the two things. And third thing, of course, is a slightly long-term arrangement with our suppliers when it comes to the supply part of it and entering those kind of contract. But these are very few in number. So these are the two, three things we are working on.
Great. Thanks. Mukesh, next question is for you. You mentioned that volume growth is approximately about 15% in TI in the standalone business. Now, the MFP has seen about a 16% revenue growth. So does that mean that the price increase there is only about 6%, whereas in case of engineering, there's 32% revenue growth, so the price and volume increase are both almost equal? So you can just break this down into the two segments.
So as of now, it will be difficult to break the segment-wise because price increase is in the midway path for engineering as well as MFPD as well as our IC businesses. I think it will take another one quarter down the line. It will be better to see the real mix between volume increase and this thing. But volume share is absolutely those are the numbers, but price increase is at various stages for various business. It will take another one quarter or two quarter to settle it down.
Great. Right. We wait for that. The next question is for maybe Meyyappan can help with this. There seems to be a change in the terms of the CCPS. Does that two parts to this, o ne is, does that make certain what this take- Each of the partners will have, or each of the investors will have in TICMPL. And secondly, is there is an an accounting impact of this?
No change in the accounting impact. Whatever we have considered in the March, the same thing continues here also. There will not be any change in the return, whatever the investors are going to get. There is no change. Most of it will be clarificatory in nature. That is what we have mentioned in the notes also, obviously.
Right. Your stakes are not frozen yet, right? There's still a contingency on what each partner will hold.
Depends upon, yes, you are absolutely right. It depends upon the fair valuation which you are going to get at the time of exit.
Okay, great. The last question is, last quarter we had given an indication that in the CDMO business, the semi-commercial quantities are already being shipped and some talks with clients on when they could be converted to commercial deliveries. The clean room was under construction that was supposed to get complete. If you can just update on the status of both of these.
Govindarajan, y ou can take this.
Sir, Mukesh , thank you. The semi-commercial plant has been already commissioned, and we have even supplied quantities to customer. In fact, one of the products which we had supplied from the semi-commercial plant, the customer has already given projection for the next calendar year, which is a financial year for the European customer. The clean room have also been commissioned, and right now the validation batches in the intermediate blocks are nearing completion. They will actually move into the clean room in the next three to four weeks.
Great. Thank you. Good to hear that. That's all. Thank you very much.
Thank you. We take our next question from Anupam Gupta of HDFC MF. Mr. Gupta, please go ahead.
Yeah. Morning, sir. Sir, just one question on the core standalone business. While there is this 16% volume growth, the EBITDA growth is EBITDA is actually flat and so is the PAT. I understand there is a pass-through element which you said, which is happening with a delay. But assuming it happens over the next two quarters, should one expect a much faster EBITDA growth in second half in FY 2028? Is that the right way to look at it?
Anupam, it is like that once the entire recovery happens, one or two quarters will be higher, ultimately back to whatever profitability level we were maintaining it earlier. That's how it will look like for a medium-term perspective.
Look, profitability I understand, but what I was basically concerned about is that the EBITDA is not growing. Ideally, with a 15% volume growth, EBITDA could have increased. I know that your costs have also increased. Just the question was that, would you catch up the miss that you had in first half in the second half and FY 2028? Is that the right way to look? Not in terms of margin, but absolute profit.
100% yes.
Okay, understood. That is useful. One question on the medical side of it. If I adjust for the INR 4 crore amortization, it is close to 8% margin which you are doing in the medical business. I understand there is some expense which you' re taking for the build-out and talent and all. Let's say, what is the medical business sustainable margin once all of this investment settles, and free of amortization? What is the margins one should look at in the business?
It will take some time to stabilize, but probably our perspective in the medical business will be higher double-digit teen numbers, that will be the profitability level for the business.
Okay. Understood. Any progress on which you might want to highlight on the possible electronics acquisitions which you were looking at? Anything that you find attractive there or we can expect anything there?
Anupam, like we shared earlier, maybe we are looking into that, but nothing on the table as of now.
Understood. Sure, that's all from my side, sir. Thank you.
Thanks. Thank you. A quick reminder, anyone who wishes to ask a question may click on the raise hand icon from the participant tab on your screen. We will take our next question, a follow-up question from Gnanas undaram of Avendus Spark.
Hello.
Mr. Gnanas undaram?
Yes, ma'am. Am I audible?
Yes, you are audible.
Thank you. Sir, just a quick one in terms of, I just wanted to understand the cash flow here. Could you just help us in terms of what is the CapEx that is outlined over the next two years on the standalone business, and a dividend policy in terms of CG and how much of that flow through is expected to happen in terms of cash flow?
Our cash flow guidelines remains that internally we are targeting about 85% to PAT. This is what is internally we are driving it, and we are on the course of that. There can be a little bit plus or minus happening in some quarters, but overall, we are bullish about that.
This, I would presume, is FCF to PAT, right?
FCF to PAT.
Okay, perfect. This is considering it for the CapEx, but not considering for the investment that would go into subsidiaries?
Yes. Yes, you're right.
Right, sir. In terms of, what is going to be then the usage of excess cash? Because even if I were to take about INR 500 crore or INR 300 crore in terms of CapEx and INR 500 crore in terms of subsidiaries, Tube over the last five, six years has very clearly stated the policy of not to hold excess cash on books. We give further investments, I know the team is pursuing. So how should we really look at capital allocation here in terms of new businesses or what is exactly in mind? Because then it would seem like we are accumulating significant portion of cash, one, from internal accruals, two, from dividends from our subsidiaries. What is exactly the thought process here?
Here the capital allocation principles, like you are saying, TICMPL is one of the big investments we made in the past. Medical and CDMO business, which is also getting integrated with these kind of investments only internally. We have an interest, maybe we just maybe acquired a small startup, which is MIM, metal injection molding. That is an area also, after we start understanding the business, it will call for investments. Like we discussed earlier, maybe we are also venturing into another one or two new businesses, which we will invest after seeing a right opportunity and future growth perspective. Based on that, we'll take a call. From a long-term perspective, we feel whatever cash we are generating in TI as well as CG Power, we will be able to invest into newer businesses or use for the core business to drive the extra growth.
But core business, as per our understanding, you've got limited opportunities for CapEx, right? Core business also, could we expect some inorganic pursuits out there? I'm not pushing you anything. I am just thinking what is the thought process of the management is what I am really wanting to understand here.
There can be an investment in adjacencies in the core business. It is not necessary that when we hold the high market share in the core business, but there is always a possibility of adjacencies in the core business. Also, maybe let us say we are planning internally, can we launch some new products and categories in the core business, which is nothing finalized as of now, but it' s a work in progress. If those materialize, core business may also call for a little higher CapEx, which will not be counting, maybe let us say, when we say 85% to PAT. That area there will be a division.
Got it, sir. One last question is in terms of our core businesses, in terms of international operations. Where are we? Because we had set an ambitious target of that to be about 25% of our revenues even a couple of years ago, and then we had a few headwinds coming in from there. So where are we on that to now, and then what is the outlook on international business?
As of now, we are able to maintain around 15% of our revenues are coming from exports at a TI level. In spite of various issues in the geopolitical issues, we are able to maintain that number. Obviously, like you rightly said that our initial endeavor was to grow this towards 20%, but which didn't happen. While the growth is happening, export pie is maintained. We are looking for, maybe let's say, if some stabilization in the geopolitical situation happens, we see customer engagements and contracts all are running in good. We are not seeing, maybe irrespective of the situation, the customers working it out. So it is a right timing issue. If it works, surely there is a headroom available. A lot of headroom is available on the exports market.
And would we be right in presuming that we just stuck to about three to four products in terms of our export business?
Basically, our exports are happening from engineering division and our other businesses.
Got it, sir. Perfect. Thank you very much, sir.
Thank you.
Thank you. That brings us to the end of the question and answer session. Ladies and gentlemen, on behalf of IIFL Capital Services Limited, that concludes today's call. Thank you for joining us, and you may now click on the leave icon to exit the meeting. Thank you for your participation.
Thank you.
Thank you.