Q2 25/26

Oct 31, 2025

Summary

Q2 revenue rose 8.63% and net profit 26.69% YoY, with exports and domestic tractor-wheel and air-suspension demand contributing. Management plans INR 250 crore of CapEx and expects growth from export expansion and ramping investments.

Ladies and gentlemen, good day and welcome to the Wheels India Limited Q2 FY26 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Srivats Ram, Managing Director. Thank you, and over to you, sir. Good afternoon, ladies and gentlemen. I am Srivats Ram, Managing Director of Wheels India. I have along with me Mr. P. Ramesh, the CFO of Wheels India. Good afternoon. We would first like to cover the performance, and then we have a small presentation, following which we would welcome any questions that you may have. Wheels India registered a 26.69% rise in our net profit for Q2 at INR 28 crore compared to INR 22 crore registered in Q2 of the previous year. Revenues for Q2 went up 8.63% to INR 1,179 crore, compared to INR 1,085 crore registered in Q2 of last year. Despite the uncertain global scenario, we registered export revenues of just under INR 300 crore, registering a 15.6% growth over the same quarter of the previous year. In terms of the domestic business, really strong demand for tractor wheels, as the tractor segment did well, and also for air suspension systems. These powered our growth in domestic sales and exports, as I mentioned, have also done well. So all told, I think, despite the global uncertainty on the international business, for the half year, we have done almost 20% growth in terms of exports. And we expect, whatever has happened in the first half, to probably at least be mirrored in the second half, unless things are even better, and then it will go beyond that. Couple of other statements I would like to make. One is, what is already in public domain, is that we entered into a strategic alliance with SHPAC, a South Korean hydraulic cylinder manufacturer. This alliance involves a strategic assistance agreement and also some joint business development for the hydraulic cylinder business. Essentially, this customer is based in Korea, has its customers in Europe and U.S. Some of them are asking him for a de-risking location as an alternate location for supply, and he has contacted us, and we are providing him that alternate location for de-risking his business. So that is essentially this agreement. The other point that I am sure that a lot of you have is that what will happen with CapEx? Typically, when uncertainty goes up, CapEx comes down. But based on what demand pipeline we are seeing, we are actually not reducing our CapEx. We had planned roughly about INR 250 crore as CapEx this year, same as the previous year, and we expect this INR 250 crore to go through as planned. Another update, if I can mention, is we started operations of our Mambattu plant, which is really focused on tractor wheel exports. And that plant has started supplies, and first exports are going to happen in the next month or so. So this is an update from our side. I have a small presentation I will take you through. I know that some of you might have seen it, but as there may be a few people who do not know about our group, I just thought I will cover a little bit. The group turnover, if you look at it in FY 2024, was about $2.2 billion. We started while we are essentially from the heritage of the TVS group, which started in 1911. This is Mr. T.S. Santhanam, the son of TVS's, his family's. He started his business in 1936. The manufacturing companies have 36 plants. They have 15 business entities, 1,200 branches and about 42,000 employees. We basically have had a successful long-term relationship with global companies. A strong customer connect and focus has been our value system, and we believe in long-term business growth, corporate governance and sustainability. If you look at the companies in our group, the TSF group, on the auto component side, there is Brakes India, Wheels India, Turbo Energy, Axles India, Sundaram Dynacast, and Sundaram Composites. On the auto distribution side, there is Sundaram Motors, India Motor Parts and Accessories Limited, Madras Auto Service. And on the finance side, we have the Sundaram Finance Group. So this, in a sense, makes up our TSF group. Wheels India is part of the TSF group. We were established in 1960. We are a listed entity where promoters have 58.31% of equity. Our value system is relationship, integrity, customer centricity and excellence. Small amount of brief on the types of business and our basic data. We have about 8,700 people. We have 11 manufacturing plants. Last year, our turnover was $520 million with $130 million of exports. We are largely a preferred OEM supplier. We supply tractor earth mover wheels, steel and aluminum car wheels and truck wheels, components for the wind turbine industry, air suspension systems for buses, fabrications for the construction industry, and hydraulic cylinders. We also have a joint venture company, WIL Car Wheels, which is a joint venture with Topy of Japan, focused on passenger car steel wheels. I need not really take you through the history of the company, but the timeline is here, and as you can see that pretty much every other year we have added new categories of business to our portfolio. All this holds us in good stead as a lot of these are of a low base and can grow faster than industry. This is a broad framework of the types of products that we have, our plans, our customers. Our customers have also recognized us with awards over the last 12 months, which are also covered in the presentation. If you look at our strategy, really, we have got four different businesses. One is the automotive wheel division, which is wheels for cars, trucks, and tractors. Construction equipment division, which is wheels, fabrications, and hydraulic cylinders. The energy product division, which is really components and machining for the wind turbine sector, and the air suspension division, which is focused largely on buses. We are one of the largest manufacturer of wheels for construction equipment and agriculture tractors globally. So globally, in terms of volume, we are probably one of the largest manufacturers. The company also has got a subsidiary that I mentioned about earlier. This gives a sense that while we are focused on the domestic market, our exports have been fairly strong with over 25% of our sales going to export. Even if you look at this year, for the half year, roughly about 26% of our sales has been exported. For the second quarter, if you look at it, we have had about 8.6% top-line growth. EBITDA growth has been 16.2% and PAT has been 26.7%. So reasonable performance in the circumstances. This is our half-yearly numbers. Segment-wise, if you look at it, roughly about 20% is industrial components, the rest of it is auto components. This will change as time goes ahead, as some of these segments have got faster paths to growth. Our CapEx, if you look at it, here again, I am just reinstating what I said earlier, INR 250 crore. So far, we have spent INR 108 crore. Large part of CapEx is really towards the industrial segment, with the windmill segment taking up almost 40% of the CapEx for the current year. We have managed this CapEx despite holding our debt at pretty much the same level. Our debt equity is 0.81. Debt to EBITDA has continuously declined, and we have been able to maintain this, and we manage our free cash flows, and that has actually enabled us to be able to make the investments. Strategy-wise, if you look at it, we are looking at growing our export of wheels for construction equipment and agriculture tractors to essentially Europe, U.S., and Brazil. We are looking at ramping up our machining facility for large castings for windmills, and this is a large part of the CapEx in the current year. Also, we are ramping up volumes of the fabricated and machined structural parts for windmill, which is really going into the offshore windmills in Europe. The hydraulic cylinder business, where I mentioned about the agreement with SHPAC, is another area where we believe that there's a lot of growth potential. And the domestic automotive market gives us the opportunity to ramp up our cast aluminum wheels. One more thing, if I can add, which is not in this presentation, is that the air suspension system business is also another area for growth, where in addition to traditional OEMs, we're also a major supplier to all the e-bus manufacturers. Company is focused on working capital optimization and cash flow management to manage its growth, and fundings have been largely through accruals holding the debt at the current level, and we still have further scope to improve. Our ROCE is currently slightly over 15.5%, and return on net worth is just short of 13%. So this is a brief presentation about the company. I will now open it to any questions that you may have. You can put it both in text form or orally. Thank you very much. We will now begin the question and answer session. To ask a question, ladies and gentlemen, please click on the Raise Hand icon tab available on your toolbar or on the QA tab available on your screen. Kindly turn on your mic when the operator announces your name. You may also post text questions. Our first question comes from the line of Zaki Nasser, an individual investor. Please go ahead. Sir, can you hear me? Yeah, we can hear you. Please go ahead, Zaki Nasser. Good afternoon, sir, and I think congratulations on a very steady set of numbers. Sir, you have already indicated that the H2, you could expect a growth of around 8% like the H1. But when would the current CapEx play out, sir? That is my question number one. Shall I ask both the questions together and then you answer? Yeah, please. Please go ahead. Finish all your questions and then we will answer. Sure. When would the current CapEx play out? What would the debt number be at the end of current year? And sir, in the next couple of years, what would you expect the automobile versus non-automobile mix to be in our company, sir? Thank you. Thank you, Zaki, for the question. Couple of points. One is the CapEx plan was INR 250 crore, out of which INR 108 crore has been done. We are pretty confident. As a matter of fact, I was asking the CFO whether the CapEx is only INR 108 crore, will we spend less than the budget? He said, no, they will definitely spend the budget. So INR 250 crore CapEx will happen before the end of the year. We expect all of this to be kind of in place probably by October. So in H2 of next year, the CapEx should be commissioned. We are pretty confident that this will happen. Yes, the mix between auto and non-auto is something that changes. It also depends on the relative growth of the different areas. Auto is more steady. The non-auto is dependent on global economies and things like that. At the moment, what we are seeing globally is that U.S. is still reasonably strong. As a matter of fact, in our overall export growth, the growth in U.S. was more than the overall export growth. So it remains strong, and the industrial segment remains reasonably strong going forward. So relative to auto, the percentage growth may be probably slightly more. But again, so many variables are there. We do not know exactly what will happen in the auto sector in India, leave alone what will happen in the industrial sector overseas. But we expect that pretty much the H1, at the very worst case, the H1 results will be duplicated in the second half of the year. I hope I have answered. No Oh, the loan. Yes, sir. The debt level, sir, I mean. Yeah. We have- Good afternoon. See, if you look at the debt, it is at around INR 710 crore, sir. So even for September 2025, it is around the same level. So our plan is to hold the debt around the same level. So even if you look at March 2026, we are around the same, INR 700 crore plus kind of debt. So the CapEx is largely funded through internal accruals. Sir. And sir, with the CapEx in place, could we expect this 8%-10% growth over the next two years, sir? Yeah, that is the plan. There are so many variables out there. Assuming that there are no new surprises. It is very difficult to forecast, but I would like to think that, yes, what you say is right, because CapEx is pretty much laid out, and it should result in revenues in the next few years. That is what we are looking at. Thank you, sir. Best wishes, sir. Thank you. Thank you. Our next question comes from Anukul Arora from InvIT. Please go ahead. Yeah. Hi, sir. Am I audible? Yes, Anukul. Go ahead. Yeah. Sir, I wanted to know on the export side, how it will be going forward. Currently, the mix is around 25% is the exports. Given the global uncertainty, how do you see exports going forward? If you actually look at our exports for the half year, we have done about INR 622 crore, and we do not expect anything dramatically different in the second half. We see reasonably strong demand, and I think even going into the next year. Unless the global situation becomes much worse, what we are seeing right now, the opportunity for growth is still there. We are still positive about export growth. Added to that, I think the export relative to overall sales depends on the domestic market. Domestic market is decent, but given the low base that we have in a lot of our businesses, the export growth can be quite substantial. We are quite confident that we will grow at this 8%-10%, partly driven by domestic, but also driven by increased export volumes that we will see. Okay, sir. Got it. How do you see the new hydraulic cylinders market? How do you see the opportunity over there? How big is the opportunity over there? Yeah. There are two parts of it. One is the domestic market, and the other is the export market. I will cover them separately. Domestic market, first half has been fairly muted because there were rains, and typically during the rainy season, construction equipment is not used, so sale of construction equipment tends to slow down. With the rains, monsoon over, we expect activity to pick up from this month onwards, and we are confident that second half will be better than the first half as the rains will be behind us. That is in domestic market. On the export market, we are looking at two or three opportunities. The SHPAC one was, of course, the one that we spoke about. That has already started but will be a probably slow starter and actually pick up steam more next year, as we have just signed up the agreement. We are actually going through the phase where our people have gone there for training. So next year onwards, we should start seeing probably more growth there. We are looking at other opportunities with other OEMs, but as those fructify, we will also keep you informed. All right, sir. Understood. That is it from me. Thank you so much. Thank you, Anukul. Thank you. We have our next question from the line of Rajkumar Vaidyanathan, an individual investor. Please go ahead. Good afternoon. Can you hear me? Yeah, we can hear you, Rajkumar. Please go ahead. Yeah. Thank you so much for the opportunity, sir, and congrats for the good set of numbers. Sir, I have about three to four questions, so if you permit me, I will ask one by one. Sure. The first question is on the segment. I just want your comment. We have been seeing this, particularly the first one is on the CV segment. I see many of the finance companies focusing on CVs have been reporting higher retail NPAs. I just want to know what is your view on this segment. Do you see any systemic issues in the commercial vehicle segment and what would be the impact on Wheels India from it? It has been very muted, to be honest. The first half has been fairly muted. It is one segment which has kind of underperformed vis-à-vis what we thought it would be. Everything said and done, much as construction equipment activity is expected to pick up in the second half, when that happens, CV demand, at least on the haulage side of the construction, should come into play. There should be demand that is coming from that. The other segment that is working well for the CV business is the bus segment. I think these two parts should probably play in some growth of CV in the second half. The point is valid that the freight rates are fairly tight, so I am not sure how much of leeway there is for growth, but the area of growth for CV will probably be construction and bus. Okay. Got it, sir. Sir, I recently heard the Ministry for Renewable Energy, he kind of mentioned that there will be a lot of focus on the wind energy in the coming years. Wheels India has got a significant opportunity on this segment, right? I just want to know how much of that will be able to take advantage of it. Yeah. So far on the wind energy segment, we have been really focusing more on the international markets. You are asking about our wind energy business or renewable energy usage by Wheels India? Sorry, Rajkumar. Can you just clarify? Yeah. The question is, I think you mentioned that in the previous calls that you are focusing on the export segment of the wind energy. Correct. My question is, with the current focus more on the domestic side, are you willing to look at that opportunity as well? That is my question. No, very much so. You are right that earlier we either directly exported or sold to customers who are exporting their product overseas. But we have started working, we are working with various groups, including Indian groups such as the Adani Group, Senvion. A lot of domestic players we are kind of engaged with. And we are trying to refocus. Of course, there are also Chinese manufacturers in India. We are trying to engage with them as well. So we do believe that while export is a growth opportunity and everything that we've expressed in terms of our growth potential has been export, our team is also focused on the domestic industry. And we would also concur with the Ministry of New and Renewable Energy that 6 GW capacity addition is possible, as they've already crossed the halfway stage in the six months. So we are very much engaged with the industry domestically. Okay, sir. And sir, the next question is on the, in the last two quarters, we have seen significant depreciation of rupee against EUR and USD. So I just want to know why we are not seeing a big upswing in terms of margin for Wheels India. Is it because it gets passed on to the customer over a period of time? Or am I reading- Yeah. No, that is a valid question. There is some amount of pass on that does take place. It happens in a phased manner over a period of time. That also does happen, but our margins on the export business are reasonably strong even without the depreciation. We also have some imports. We also import materials sometimes for exports. So we gain on that side as well. Okay. It negates the gain to a certain extent. Okay, sir. The next question is, any color on the WIL Car Wheels subsidiary performance? No, they have done exceedingly well. As a matter of fact, if you look at the performance for the half year of WIL Car Wheels, they have shown growth both in terms of top line as well as profit. The profit for the half year this year is more than the full year profit of last year. Okay. Yeah. They are doing quite well. Of course, largest customer for them is Maruti Suzuki, so they are doing quite well servicing that market, and they have shown growth as well. Okay. So any color on the expected performance? Do you expect the performance to be much better in the upcoming quarters, or it will be steady state? No, as I said, the half-year performance on profit is more than the full year performance of last year. So I am basically saying that the profit will more than double for the subsidiary, WIL Car Wheels. Yeah. The reason I am asking is I see there is some small dip in profit between September and June quarter of WIL Car Wheels based on your consolidated numbers. That is the reason I am asking this question. No, as a matter of fact, if you look at our H1. Are you looking at H1 or Q2? I'm looking at Q2. Q2 numbers are pretty flat in terms of top line at INR 127.85 crore against INR 127.02 crore. But the profit is significantly higher. Okay. The profit is significantly higher than Q2 of last year. Okay. As I said I am asking Q1, Q2, sir. September 2025 versus June 2025. Yeah. See, if I can tell you the PBT number, H1 was INR 7.82 crore, and Q2 was INR 4 crore. It was INR 3.82 crore in Q1 and INR 4 crore on Q2. Q2 is better than Q1, marginally better. Quarter-on-quarter it is improving. Okay, sir. Got it, sir. The final question is, when do you think we can reach a return on equity of 15%? I remember you mentioning in some of, I think one of the previous calls, we will be targeting that kind of a return on equity. No, no. We went through the previous calls. I think the comment that I made is that on return on capital employed, we will be at 15%. We are currently at 15.5%. The question was, when will I reach 18%, as that is a stated goal. I said it will take two years. Our ROE per se is about 13% now, just short of 13%. So we are- Yeah, the question is on the ROE, sir. Yeah. I think that 15% is a reasonable target, probably in two years. See, we have done a lot of fresh CapEx, like on aluminum, a lot of the CapEx is done now, so it is a question of executing and getting the orders going, which we are starting to do. On the windmill sector, again, investment has happened. The execution needs to happen. The tractor for exports, again, we started a new plant just a few months back. So the CapEx is done. It is just execution. So we have made significant CapEx, which we will see play itself out in terms of increased revenue in the coming quarters and years, and that should also improve the profitability. It will not really require significant more CapEx. Okay. Okay, sir. Got it. Thank you, Rajkumar. Yeah. Thank you so much. Thank you. Our next question comes from the line of Samarth Singh from TPF Capital. Please go ahead. Good afternoon. Thank you for the opportunity. My first question was on our CA exports of tractor wheels. I think we were supposed to start that from the second half of this year. If you could just provide us an update on that, please, and the potential there. Yeah. See, we have been exporting tractor wheels for a number of years. But actually, the challenge has been that our entire product range has been pretty much what is used in India. Now, if you go globally, the variety is significantly higher. So we have had to actually tool up and add capacity so that we can meet the entire range of tractor customers. Tractor customers on the global side are not willing to increase the exposure to you unless you can service the entire requirement. So we made the CapEx so that we have the capacities and the toolings in place to meet these requirements. We have just kind of shipped the first samples for the export business in this month, and hopefully once those are accepted, then the bulk supply should start probably from November or December. We are quite positive on this. At least three of the large global tractor manufacturers have showed interest, visited us, audited us, sent us RFQs, we have quoted, everything has been positive. So hopefully that pans out. Although I must say that with the U.S. tariffs hanging over, most of it has come from Europe and not so much from U.S. Got you. How large do you think this can be conservatively over the next year? Okay. If I include construction, so we look at it together. So look at the construction wheel business and the tractor wheel business. I will say over a 3-4 year period, it can be maybe about INR 400 crore of additional revenue can come from this. Of exports? Yeah, of exports. INR 300 crore to INR 400 crore should come from this. Similarly, we have other areas also where we believe the export growth can happen. I would say that, while we have done reasonably well in exports, there is still a lot of headroom for us to grow this business as long as we focus on the customer, continue to build our relationship and execute on projects which have been handed over to us. Got you. On the cast aluminum wheels, what are our monthly exports as of now? Yeah. There is a bit of a seasonal flux. We were doing about 25,000 wheels a month, but with the promise of the 100% duty on China, suddenly customers went and bought as much as they could from China. So schedules are pretty much slashed for the next couple of months. But now that China is kind of normalized, I think the schedule should come back probably from December. But yeah, we were doing about 25,000 wheels a month. In addition to that, we also have domestic demand from the domestic OEMs, which is playing out and will continue to play out. As a matter of fact, we had a CapEx budget in the beginning of the year, and we have actually enhanced the CapEx budget for aluminum a little bit so that we can meet whatever business we have won, which is panning out in the next financial year. If I remember correctly, we need to get to about 60,000 wheels a month to get to double-digit EBITDA margins in this business. So you think we could- Yeah Assuming that you are adding more CapEx, I am assuming that means that you expect to get to that by next year? Yes, very much. Very much so. I think that we should probably be at, we probably will reach 60,000 plus hopefully by the second quarter of next year itself. What would be our total investment as of today in the cast aluminum wheels business? About INR 300 crore plus, including whatever is already planned. Not on the ground, but whatever we planned and are in the process of executing is about INR 300 crore. After we execute that, what will be our capacity? What we are doing right now is, currently our capacity is about 40,000 wheels a month, and we are increasing it first to 60,000, which should happen in Q4 of this year, and we are increasing it to 80,000, which should happen by end of Q2 next year. Got you. Next question is on the hydraulics business. What are our gross margins in that business today, and how significantly will they change post this Korea deal with the Korean OEM? Yeah. The hydraulics business has two sides of it. One is the company was merged into Wheels India, and we've had to do a certain amount of cleaning up of that business, move, take out all the non-moving stock and all that. You put that aside and look at the operating margins per se, it is just short of 10%. As the export increases in that business, it will become more of a double-digit margin business. SHPAC, I have mentioned that probably within 24 months, we should be looking at about $15 million worth of business. What is the hydraulics business annual revenue as of today? About 200 crore. 200 crores. And I missed your initial few comments. Did you make a statement on effect of the U.S. tariffs and how we are handling them? If we saw any sort of pre-buying that helped us in our export numbers in this quarter? Not really, because most of our supplies are to OEMs. We did not see any spike, although I must say U.S. has been stronger than the other geographies. We pretty much see steady demand in terms of exports. Somebody asked a question, half year has been decent in terms of export, how do you see the full year? I see it panning out pretty much as things stand. Was hoping that this oil tariff thing can be sorted out before end of November. Barring any adverse developments that happen, we do not expect any further uncertainty and we expect to execute as per our plan. What is the tariff on our export on our, I guess, our tractor and aluminum wheel exports today? Auto was kind of 25% tariff, and that is more of the PV type of PV and truck. If you take construction and ag, it is about 33%-35% is effective tariff rate that we are facing. The customer is bearing most of it, a little bit of it is shared by us, but by and large, just to give you some insight, we had a budget prior to Mr. Trump making his expansive remarks on tariffs. The board asked whether we want to reset the budget, and we said, "No, we will stick with the budget numbers. Gotcha. We had some shuffling. Not shuffling, we did some purchasing of shares of Axles India from our holding company. Could you just explain what that transaction was about, please? Sure. Axles India was a company promoted by Wheels India. It was promoted by Wheels India and Sundaram Finance in the early 1980s. The joint venture partner was initially Eaton, who was then bought by Dana. In the early part of the year, Dana actually sold its stake to Sundaram Finance Holdings. When that stake sale happened, Sundaram Finance Holding also said, "It's an opportunity for Wheels India." We looked at what we could afford, and we ended up buying about 3%. The stake in Axles India has gone up from 9.5% to 12.5%. This has happened actually in July. Right now, if you look at it's 12.5%. If the opportunity happens again where we can increase the stake, we'll look at increasing the stake. It's a business that is aligned with our business, pretty much similar customers that we deal with. It's a business we are interested in as a company. We are not on the operational side of it's just investment as of now. On the board. Both the Chairman and me are on the board of the company, of Axles India. I guess as directors in the board, we are kind of involved in the business to that extent. Gotcha. Last question from my side. You mentioned our ROCE goal of 18%. I think our gross margins have gone up last year and now I think for the half year, they are close to 32%, so they are steadily climbing up. Is there a gross margin goal that you need to reach to get to that 18% ROCE that we are aiming for? It is a very dicey question because we had a board meeting for the second quarter and people said, "Oh, your gross margins have improved." I had to tell them that it is really based on the mix, and we do not control which segment does better, which segment does worse. It is kind of a little bit of a roll of the dice. The only thing I can say is that we made investments in businesses which have higher margins, and as those pan out, as those investments pan out, we hope that we can maintain, if not enlarge the gross margins. Those would be the windmill business, the- Correct. cast aluminum business and the hydraulics business? Yes. Thank you for answering those questions. Thank you. Samarth, you had also posted a text question. We do hope that that has been answered as well. That has been answered. Thank you. Thank you. Our next question comes from the line of Ankur Agrawal from RC Business House Private Limited. Please go ahead. Hello. Yes, Ankur, go ahead. Yeah. As we are working on the margin side on 7%, 8%, is there any possibility to go, in next 2, 3 years, to 10% margin possible? Yes, we are very much looking at that. We are very much targeting that, and we do believe that, as we play out our strategy, as I just mentioned, we have 4, 5 areas of growth. As we pan out those strategies, we believe that we will get closer to a double-digit margin. Okay. And the next question, do we have any exposure toward defense side? We have. Let me put it this way. We do not directly deal with the Indian defense, but we are actually supplying through Tata, Mahindra, Ashok Leyland, Bharat Forge, L&T. So we are major suppliers to all these customers, and through these customers, we actually supply the defense. But the products are specifically defense products, but it is supplied through these customers of ours. Okay. That is all from my side. Thank you. Thank you, Ankur. Thank you. Ankur, you had also asked a text question. Was that answered as well? Yeah. Thank you. Our next question is from the line of Lala Ram from LRS Capital. Please go ahead. Lala Ram, your line has been unmuted. You may proceed with your question. Am I audible? Yes, go ahead please. Yes. Thank you. My first question is, was there deferment of revenues in this quarter? Sorry, can you say it again, please? I see that our employee cost and operating expense quarter-on-quarter actually has grown while revenues have gone down. Was there any deferment of revenues or if not what was the reason? No, let me explain. See, when we are in some of the businesses that we are in, notably the windmill business and to some extent the hydraulic business, it kind of has a seasonal fluctuation. But there are a lot of skilled employees who are there. We actually need to hire people and train people in advance of the season kicking in. Now for the wind business, the season has kicked in in the third quarter. You will find that as a percentage of sales, as that revenue increases, we will find that the percentage reduces, A. B, there is also a lot of improvements that we are doing in terms of our productivity, which will also pan out, and you will see that the manpower cost is coming under better control. But you are absolutely right. The question is that if you look at the first quarter and the second quarter, the manpower cost has gone up substantially. The company is taking efforts to look at reducing this in Q3 itself, and some of it may spill over into Q4. Got it. Do we have a scope for automation in our business operations? Yeah, we have. I don't have a count of the total number of robots that we have, but we have over 200 robots operating in our plant, and we are increasingly looking at also inspection-related automation, some of it using AI. All that is actually on the cards, and we are aggressively looking at that. More than that, I think we are also finding that in some of the businesses like fabrication business, if the first-time quality is improved significantly, and we've made investments for that. As the first-time quality improves, the manpower also reduces significantly. Unfortunately, the reductions have happened only from September onwards, so it'll probably more reflect in Q3 than it has in Q2. Got it. My second question is, with respect to exports, what I see is that one of our competitors in Wheels actually has de-grown in the recent quarter while we have grown. That's an amazing achievement in the first place. Can you offer any possible reason for that? Yeah. See, we are not in export business, we are in business. Okay. And if you take some of our export customers, we have been servicing them for more than 30 years. Yeah. We have export customers who are older than who have had a longer relationship with Wheels India than domestic customers. Okay. So it's more a long-term business, and we are a major player in, as I said, the construction and agriculture sector, we're a major player globally. So to that extent, the business doesn't drop off that easily, but it also is a tougher business to get into. So we spend a lot of time and effort to build the business, and that business should improve because, to be honest, none of the businesses globally are actually rocking. So as they start coming into focus and as things improve, things will improve even further. Noted. Alternatively, can I say that in spite of the tariffs, we are competitive versus any alternate suppliers? So far, yes. Based on what I know of tariffs today, but who knows what will happen tomorrow. We are all hoping that by end of November, this oil tariff goes off. Afterwards, things should be much better. But let's keep fingers crossed. Sure. One more question linked to this is, you did mention that you also absorbed Wheels India's certain part of the tariff. Yes. Does it mean that if that was not the case, margins would have been even better? Yeah, definitely. Obviously, we have absorbed some part of the tariff, although after Q2 it has been not significant. It has been a fairly lower number, but probably in Q3 because the oil tariff will actually hit us more in Q3 than it has in Q2. Q3 onwards, there will be an impact. Of course, the oil tariff goes, then we also get the benefit that way. As I also mentioned, our budget number in terms of profit was going to remain the same. We found ways in which we can manage it and still maintain our budget profitability. Noted. One question is on acceptances/bill discounting. How do we expect that number to move in the next few quarters and even coming years? Yeah. You see, it should be around the existing level. Yeah. In terms of absolute number or in terms of percentage of sales? In terms of absolute number. Absolute number. Yeah, you see, it stands around INR 450 crore. Okay. Yeah. Okay. May I understand why this number will not move up with increase in the business? See, that is our planned effort. Internally, when we look at the debt, we add this discounting as a part of the debt. Put together now, I have a debt of on book, it is about INR 700 crore, this plus INR 450 crore, it is about INR 1,150, around that number is what our internal plan is. Our idea is to hold on to this level and with improving performance and better cash flows, even if the CapEx is going to be slightly higher than what it is today, we should still be around this number. Okay. Is it a function of purely better working capital management, which is why we do not need to do this? Yes. Is there also an element of product mix? Are certain products, do they rely heavily on acceptances bill discounting versus some other products? Is that the case? Mix is there to an extent because when we import steel, then you have the credit available for 180 days. Unlike if you do a local purchase of steel, let us say it is for 30 days. The mix has an impact that the more you import, your discounting limits can be equalized less. Again, the commercial for making a viable import depends on so many factors. Okay. Largely, it is working capital management because we still internally, we are kind of working for optimizing the inventory levels. When we optimize the inventory levels, even when the business is growing, we should still be hovering around this INR 450 crore plus numbers in terms of discount. Okay. We have done an improvement in debtor management. Inventory management is still work in progress. I think we are confident that by end of the year, if not early next year, we should be in better control of it. Yes. Yeah. We can see it in the numbers. Great job there, and hoping it continues to improve. One more question is on Axles India. Here, do we have a plan to take over ownership to a certain level? Yeah. We have about 12.1% is the current ownership of Axles India. If the opportunity presents itself and Wheels India has the capability, we will look at it. But right now, no real concerted plan as such. Okay. I have one final question. While in terms of margins, we have discussed in the past on call segment-wise, if I look in terms of, say, return on invested capital, how would the different segments stack up? Yeah. We have some businesses which are actually what I would call as conversion businesses where there's no RM, notably the windmill machining business. Which is not insignificant. There, I would say the returns will be clean double digit, or even higher than that. Probably the one where the return on investment is lowest is cast aluminum because we haven't reached the scale yet. Once we start doing, say, something like 80,000 wheels a month, then we'll probably start seeing a return on investment there. But that's one area which has relatively underperformed. Hydraulic cylinders, again, because the scale is only now getting to the stage that we want, has underperformed in the past. There are a lot of other The fabrication business, construction, used to underperform, but now it's performing much better than a lot of the other segments. We keep working on, we always have some work in progress that we are reviewing on a bi-weekly basis or a monthly basis internally. And we keep working on that, and we found that as long as we keep on it, like within a year, we're able to turn around stuff. Thank you so much. I join the queue now. Thank you. Our next question comes from the line of Pawan Kothari from Calcutta Metal Depot. Please go ahead. Pawan Kothari, your line has been unmuted. You may proceed with your question. Okay. Am I audible now? Yes, you are, Pawan. Go ahead. Okay. Congratulations on a good set of numbers. Some of my questions were already answered, but could you just elaborate that why the inventories are so high, like around INR 800 crore, compared to the turnover? Does it give us any advantage by keeping high inventories, or is it the nature of the business? My second question was, this INR 250 crore CapEx that we have planned. As far as I understood, it would be completed by March 2026. So how much increase in the turnover we are expecting from this INR 250 crore CapEx which we are doing in the current year? If you could just tell a little bit more on these oil tariffs. Sure. I will try to answer the question. Okay. Yeah. On the inventory, we have got, A, the exports have grown. So the exports grow, there is some of the export where we are delivering just in time to customers. So it stays on our books till we inward it. So that is one reason as the exports grow, the inventory is also growing. Secondly, there are some segments, notably the windmill segment, where unfortunately, you are in a seasonality. Because of the seasonality, we found that we are sitting on stock. But as it so happens, the segment is now seeing demand, so the stock will also get extinguished. So we have been working on reducing inventory and I do a review every two weeks on the inventory. We have an aging analysis and we take action on it, so it will definitely reduce. You are right in pointing out that it has increased, but partly due to seasonality and partly due to exports. This is the first question. What was the second? The second question was on tariff. Yeah, on the oil tariff per se, we thought the tariff earlier was about a 25% tariff, but the oil tariff is 25% on top of that. That said, there are certain products of ours which are seen as auto, which have about a 25% tariff, and the non-auto parts, probably the effective tariff that we get is about 33%, 34%. That is the impact. The oil tariffs will start hitting us where there is a certain amount of sharing by us, it will start hitting us mostly in Q3, a little bit in Q4. But we still believe that even with that, we can maintain our margins and we can manage the current situation. I do not see a major concern there. There was one more question that he asked. Tariff, inventory. Yeah. How much increase in the turnover from the CapEx? Yeah. There are two elements to the CapEx. One element of the CapEx, there is about something like out of the INR 250 crores, there is about INR 90 crores, which is a one is to one, where actually it is in the windmill machining business, where the margins are high, but it is a conversion business. The asset turnover ratio will be more like one is to one. So INR 90 crores will add about INR 90 crores. The aluminum business will have a two is to one type of thing. That is, again, about INR 80 crores. So 90 plus 160, so that is INR 250 crores, and the balance should be about four. If we take 80 plus One thirty balance one thirty should have about three at least, no? So about INR 500, INR 600 crores should be what we will get out of that. Okay. Thank you. Thank you. Thank you. The next question comes from the line of Rajiv Ravani, an investor. Please go ahead. Rajiv, your line has been unmuted. You may proceed with your question. As we are not receiving a response from the current participant in the queue, we will proceed to the next questioner. Our next question is a text question from Madhur Rathi of CCIPL. What is the machining capacity utilization currently? How big is the addressable market for air suspension? Currently, what percentage of this market is met through imports? Yeah. I will try to answer the different elements of this question. One second. Where is the question here? It is on top. It is on the top. Okay. One second. I am sorry, what is the first element? Can you just repeat the question? I am sorry. Machining utilization. Machining capacity utilization is we are making all this investment because we are pretty much 100% capacity utilized on machining. We are talking about the windmill related business, I am assuming. In which case, we are absolutely flat out running seven days a week. That said, a lot of the CapEx have been made. There is two machines which have arrived and are being commissioned. So hopefully by end of November, we should get two more machines online, but those two more machines' capacity will also be taken. Third machine probably will come by end of December. So in January, we will have the third machine, and I think probably from March, we will have some amount of spare capacity. But the demand is slightly ahead of us currently. I hope that addresses the question. Air suspension, we used to look at the market pretty much as a traditional OEM market. We have expanded our view and have now started supplying people like JBM, people like Switch Mobility, people like EKA Mobility, and even EKA. As we engage with these people, some of these people who are importing, now they are coming to us. I think that there is still potential for us to grow this business. Second thing is that, when you go to the e-bus, increasingly, people are using both front and rear suspension. The value proposition per vehicle is also going up. We are seeing the growth in this year. This year, second quarter, 29% was the air suspension growth. We expect this growth to continue to be there, although it is very much based on state government tenders that customers bid on. As long as the pipeline is kept fresh, we think that the growth will be fairly strong even for the balance part of the year. We are addressing the imports, by and large. Thank you. We have another text question from the line of Prashant Reddy. Sir, your employee costs and other expenses as a percentage of sales have increased substantially in the first half. What is the reason, and will this ratio continue to be this high? Yeah, we kind of answered this question. Essentially, what I said is that there is a certain amount of skilled manpower that we require, and there is certain seasonality in some of the businesses, like the wind business. We have to keep the people even when the season is down. But the season, as things stand, third quarter and fourth quarter is going to be quite strong. With that, you will find that the employee cost will come down. Secondly, we are also addressing automation and productivity improvements, which should see the employee cost coming down quarter on quarter. For the third quarter, employee cost as percentage of sales should be lower than the second quarter. Fourth quarter also hopefully should be lower than the third quarter. We see this coming down. Thank you. Our next text question is from Vijay Wadhwa. What kind of machines are being added for windmill apart from regular VMC, HMC? Just to help me understand the high asset turnover. Yeah. One is the machines are huge. The typical machine is like a building. It is pretty massive. There is no equipment that we have which can fit into a conference room, for example. If you forget about the machines, the size of the components that we make, a hub of a windmill weighs about 23 tons. We made a product display recently for the promoters in the company, and we had to hire basically a circus tent to fit everything in. If you look at a product which is 23 tons, you need something which is the size of a two-story, three-story apartment, which can actually machine those parts. Largely, the machines are table borer, floor borers, lathes, VTLs. That type of equipment is what we have. Thank you. We have a follow-up question on audio from the line of Samarth Singh from TPF Capital. Please go ahead. Yeah. Thank you for the follow-up. I just had one question. If you could tell us what is our exposure to the North American heavy truck market please. It is very limited in Wheels India. It is relatively insignificant because we are actually more in the construction side of trucks as opposed to the on-highway. So typically when you look at lot of companies, they are into the Class 8 trucks in the U.S. Right. For us, it is more on the construction and forestry side of it, so it does not get affected by the cycles that you have with the Class 8 trucks. Okay. Thank you so much. Thank you. We have another follow-up question from the line of Ankur Agrawal from R.C. Business House Private Limited. Please go ahead. Sir, we have done a lot of CapEx last 2, 3 years, but the top line is stagnant somewhere INR 1,050 crore to INR 1,150 crore in last 14 quarters. Why is it? Okay. Just to answer you, this year first quarter and second year, we have shown 8.60% growth. Secondly, if you look at the CapEx, significant amount of CapEx has gone into conversion type of business where basically there is no material cost. So it is basically on conversion. So your asset turnover ratio on conversion type of business tends to be more 1 is to 1. At the same time, the EBITDA margins are clean, double-digit type of healthy IT type of margins. While the top line has not grown, the bottom line has grown faster than the top line, largely due to the fact that there is a lot of conversion business that has happened. Secondly, the CapEx, like an area like cast aluminum wheel, we have still not hit the volumes, but that should probably happen by the first or second quarter of next year, after which the asset turnover will improve significantly. So I can think that next year you will grow top line by 20%. Is it possible? 20%, it won't be, first. As I said, you know this INR 250 crore, we just explained. INR 250 crore, if you take what investment we are planning this year, we said it will be about INR 500 crore, but it may take two years to reach that INR 500 crore. This is this year's investment. Last year's investment will be something similar, but probably there will be a bit of lag. Last year should happen probably by next year, this year and next year. This year's investment should happen next year and the year after next. Then the possibility of INR 5,000 crore mark by this year or next year? Zaroor. Okay. The margin will be improved to 8%-9% possibly. Yeah. One of the points is we also have been very fortunate that the material costs have been under control. That is another variable that we need to keep in mind, because when material costs increase substantially, there is sometimes a lag which affects our margin. Fortunately, we have not been hit by too much of material cost increase so far. Aluminum cost is rising from last six, eight months. Aluminum may pass through, steel may not be that easy. Okay. Steel may- Steel may have a lag. Okay. One more thing, the tractor industry in India grew in last quarter more than 30%, July, August, September, wholesale. But we have not grown so much. Indian tractor industry is not so much in our portfolio. Our share of business, there are about four or five people supplying wheels for tractors. We have a 52% market share. So whatever is being produced is what we supply. What we sell is a different matter. We supply the production. So sometimes the production is made first, sale will happen later. Sale normally happens during season. They sell a lot during the festive season. So that is why it tends to show a much higher number, but the production happens over longer periods of time. But we have shown strong growth. As a matter of fact, when I talked about the top-line growth, I said tractor and air suspension are the two growth areas domestically. Okay. Next two quarter, there will be some growth from wind energy. We are hoping, yes. Yeah. Okay. Thank you. That is all from my side. Thank you. Thank you. Thank you. Our next question is a follow-up from Rajakumar Vaidyanathan, an individual investor. Please go ahead. Yeah. Thank you for the follow-up, sir. Can you hear me? Yes, go ahead, Rajakumar. Yeah. Sir, you mentioned that you are using about 200 robots in the production process. I just want to know, what is the, robo plus the AI piece, how much investment we are looking at into this, the next 2 to 3 years? It's not a significant amount of investment. One of the things, I'll be honest, if you asked me about a year back, what AI are you using in Wheels India, I would probably answer you saying that we don't use AI. Recently I was in a conference in the U.S., not in a conference, but I was in a discussion in the U.S., part of a discussion in the U.S. where we were discussing AI. I entered hoping to learn. Then when I heard what these guys are doing, I said, "Shit, we are doing the same stuff." It's just that we all are local. Our AI is all from our state. All our software people are from our state. We don't use any fancy AWS or Microsoft. We are using only local talent, and we're doing it. That's a great thing about India. There's a lot of local talent which is available, and we're able to find solutions just working with local people. Okay. Got it, sir. Sir, the second question is, I see there's a lot of focus on the shipbuilding and ship repair industry in India. I want to know whether any opportunities for us in that sector? Yeah. It's a valid question because welding is one of our capabilities. I'm sorry, but we've not explored it as yet, so I can't really comment. Yeah. Just to pinpoint, I think there will be a tremendous increase in the welders also because of the flourishes, so that's a lot of pressure on the existing industry. Do you see any headwinds for Wheels India in terms of getting the right talent? The right talent is very often a question of training your existing people, treating them well, paying them well. If you do that, typically, you can hold on to talent. That said, it is a marketplace. We will actually have to compete in the marketplace. There are limited resources. Much as we talk about demographic dividend, the actual skilled people is relatively less in India given the growth potential. Okay. Sir, the last question is, your Q3 and Q4 generally is better, I think, in terms of the margin. Can we expect a similar performance with Q4 being the best quarter among the four quarters for this current financial year? The last two years, Q4 has been very strong. I am not sure about Q4. Definitely, in the immediate period, there should be some improvement on a year-on-year basis. Q4, we don't really know, Rajkumar. I have some idea of Q3. Q3, I can comment and say it looks like it will be better. Q4, I still don't know. Yeah. Sir, generally, you discount something in Q4, right? Do you expect similar discount to flow in the current financial year? That will happen. It doesn't mean there's a year-on-year improvement, because that's happened in the previous year, it will happen this year. So the year-on-year improvement also depends on how the sales actually pans out in the fourth quarter. It's a bit early for us to comment. A lot of it also depends on how things like tariff gets settled, how customers start ordering, because people are also waiting to some extent to see how the dust settles on tariff. After that, there will be more opportunities. We're hoping that all that gets addressed. Yeah. Okay. Sir, the last question is on the power cost. Any initiatives we are taking to reduce the power cost in terms of investing in renewables or any other initiatives? We've made tremendous amount of progress. If we're talking about renewable energy, we have actually increased from, we used to be about 25% renewable. We are right now at 68% renewable. So we've increased the renewable percentage in the mix significantly. Secondly, we are also working on reducing the consumption per ton. Last year, for example, we reduced the power consumption per ton by 5%, and we're continuously trying to see how we can improve that in the current year as well. By reducing PNG et cetera. Also, I think PNG is now available in Tamil Nadu, so we are also taking advantage of that. Okay. It will be more a tailwind for us as we go forward, not a headwind, right? Yes. Okay. Got it, sir. Thank you. Thank you. Rajkumar, you had posted a few text questions as well. We hope those have been addressed, too. Yeah. That's taken. All right. Thank you so much. Thank you. Our next question comes from the line of Rajiv Ravani, an individual investor. Please go ahead. Am I audible now? Yes, Rajiv. Go ahead. Yeah. I just wanted to know about the present debt position of the company, divided into long-term debt and short-term debt, number one. Number two, what are the present credit ratings of the company? And number three, what is the market share of the company in India? Sure. I can probably address the market share. On commercial vehicles, we have about a 45% market share. On agriculture tractors, it is about 52%. And on passenger vehicles, as we are largely in steel, it is shared between steel and aluminum. We are about 35% of the market. On the debt, the CFO will answer your questions. Amish? Yeah. Sir, our long-term debt is INR 142 crore as on September. And the short-term debt, basically, which is working capital, is about INR 303 crore. And we have public deposits of about INR 265 crore. Put together, this will be about INR 710 crore as a book debt, sir. In total? In total. What is the average cost of our debt? It is sub 7%. Including the public deposits? Yeah, including the public deposits. In addition to this debt, we also have a discounting facility for about INR 450 crore, which we take it as a debt for all practical purposes. So if you take that, our total debt would be INR 1,161 crore. But the discounting and the short term, it would be as good as short-term debts, right? Yeah, it is a short term. There was a question on the bill discounting. Basically, this is the bill discounting on the steel bills. Purchase is- For purchase of steels, because it is on a shorter credit period between around 30 days. Cost includes even the bill discounting cost, right? Yes. Yeah. So including bill discounting, it is about INR 1,160 crores, which is almost similar to what we had on 31/3/2025, which is about INR 1,148 crores. So if you look at the last two years, we are hovering around this number, plus or minus 10-15 crores. Any plans of raising further debts in the short term, in the near future? Not really. Yeah. No. The short-term debts would obviously be linked with the working capital levels. Yes, they are all working capital and against the current assets. As exports increases, that also increases the debt. The last question is about the credit ratings of the company. Yeah, see, we are rated by two agencies, and our present rating is A. Can you tell me which are the agencies, rating agencies? Yeah. One is ICRA, the other is India Ratings. India Ratings. Yeah. Both have given a stable outlook. Wonderful. Thank you so much. Thank you. Thank you. Rajiv, has the text question you posted been addressed as well? Yeah, that's been addressed. Thank you. Thank you. We have a text question from Rajkumar Vaidyanathan. Any bad debts provisions made or any reversals made in H1 FY 2025-2026? Yeah. See, as a matter of routine, it is being done. We have an internal accounting rule in terms of provisioning. Based on that, there will be kind of reversals that would happen. If you look at for H1, it is actually, I would say, a positive reversal. Yeah, just one second. He's just pulling out the numbers. Yeah. So it is about INR 18 lakhs is kind of a positive reversal on this thing. For the six months, it is about He is talking about the For the six months, it is about INR 1.05 crores, which is again a positive reversal. So write back basically. Write back. There are accounting rules which defines by the age of the invoice or by the deductions. Typically OEM customers, they deduct some payments. So internal rule says if the issue is not resolved within certain days, it has to be provided. Supposing after four, five months, if it is resolved, then the provisions get reversed. Thank you. Yeah. Our next text question is from Lala Ram. Is the entire bill discounting on account of purchase of steel from domestic steel mills? Yes. I would say 95%-96% it is that. Small percentage would be non-steel bill discounting. Thank you. Participants who wish to ask questions may click on the Raise Hand icon tab available on your toolbar or on the Q&A tab available on your screens. We have a question from the line of Vijay Wadhwa, an individual investor. Please go ahead. Vijay, your line has been unmuted. You may proceed with your question. Hello? Yeah, go ahead, Vijay. Yeah. Thank you. I had a question about the machining capacity. You said that you have large boring machines and lathes. When you say asset turn is 1x, are you billing the machine value within the year? Is that understanding correct? No, no. It basically means that typically a INR 1 crore investment will result in a turnover of INR 1 crore. That's what I mean. Typically people ask, investing INR 100 crores, how much top line will you get? Top line is about INR 100 crores. INR 100 crore investment. Machining capacity, just to answer you, is very hand to mouth, which is why we've been investing almost INR 100 crores this year. All these are very long lead time items because typically these machines, there are only one or two manufacturers in the world, and it takes about 15 months for it to come in. We're just starting to get the machines out of the INR 100 crores invested, just starting to get machines from this month onwards. Probably from November to January, we will be able to step up our production because we're getting these machines. Thank you. Just to take it further, if you are billing roughly the machine investment within the year, would it be right to understand that there is almost a 40% margin on this turnover? That may be a bit high, but you are directionally correct, that may be a bit higher than what we get. Okay. Roughly what percent of our turnover is machining right now, and where do you see it doubling in the next 2-3 years? Okay. To answer the second part of the question, yes. The first part of the question is fairly minuscule because we are doing about INR 10 crore a month, and the monthly turnover of Wheels India is about INR 400 crore. Right. Profit angle, if you look at it, is significant for the very reasons that you mentioned. Thank you so much. Thank you. Thank you. As we have no further questions from the participants, I now hand the conference over to Mr. Srivats Ram for closing comments. Over to you, sir. Thank you, ladies and gentlemen, for your questions. I think we also gain a lot. You help us introspect, and you also give us ideas through a lot of the questions that you ask. I always look forward to the interaction with you. We will definitely take some of the inputs that you've given into our planning going forward and look forward to interacting with you in the coming months. Hopefully, God willing, things move in the right direction. Definitely, sentiment is more positive than what it was maybe about six months back. Look forward to interactions and look forward to meeting your expectations. Thank you. Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines. Thank you. Thank you.