Q4 23/24

May 21, 2024

Ladies and gentlemen, good day and welcome to Wheels India Limited Q4 FY 2024 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing Star then Zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Basu Banerjee from ICICI Securities banking and over to you, Mr. Banerjee. Thanks, Manav. Good afternoon. Good morning to the participants at other locations. Thanks to the management of Wheels India Limited for giving us the opportunity to host the call. We have with us the senior management represented by Mr. Shiva Prasad, Managing Director, and Mr. P. Ramesh, Chief Financial Officer of Wheels India Limited. Without wasting any time, I would like to hand over the call to the management for their initial remarks, followed by Q&A. Over to you, sir. Thank you, Basu, and good afternoon to everyone. Thank you for attending our fourth quarter call. The company has actually had a flattish sales, with sales actually coming down marginally to INR 1,167.46 crores compared to INR 1,172.43 crores in the fourth quarter of last year. On the profit as well, net profit was INR 36.83 crores as opposed to INR 22.39 crores. When you look at what actually happened for us in the fourth quarter. Fourth quarter actually saw a slowdown in the agriculture tractor wheel business that we had. January, February, and March were much lower, and the industry per se actually had a de-growth compared to the previous year. The second segment that was affected was the commercial vehicle segment, where post January, February, and March, offtake was very minimal. As a result of that, we actually had a de-growth in the domestic business. However, the export business grew, and we did about almost INR 390 crores of export in the fourth quarter. So the product mix changed, moving away from domestic and towards export. Definitely, this helped improve the profits. Also, in one of the export businesses, there was a raw material advantage that we got in the fourth quarter, which we were able to hold on to, and that also contributed to the improvements in profit. So if you look at the businesses in the fourth quarter, which did well on exports, construction wheels, aluminum wheels, and hydraulic cylinders were the three segments that did well on the export front. On the domestic front, air suspension system for buses did well and will continue to do well. In addition to this, the board has also recommended a dividend of INR 7.39 per INR 10 share, and that will be taken up in the AGM later in the year. With that, I have completed my brief. One more comment I would like to make. Another notable change when you look at quarter-on-quarter, is that the machining of large castings, where we had just about started in December in the fourth quarter of last year. In this year, we had fully ramped up, and the volume had doubled. That is a profitable business, and that also contributed to the additional profit in the fourth quarter. With that, now I am open to any queries and questions that people may have. I await people to please dial in and ask their questions. Thank you so much. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press Star and Two. Participants, I request you to mute yourself while asking a question. Ladies and gentlemen, we will wait for a moment while the questions are coming in. For a reminder, you may press Star and One to ask questions. You may press Star and One to ask questions. We have our first question from the line of Amit Kiran Mangale from SMIFS Limited. Please go ahead. Hello, sir. Congratulations on the good set of numbers. Yes. Good afternoon, Amit. Thank you. Sir, can you just help me with how much is the total steel capacity we have, and how much is the alloy capacity at present? If you can give a mix in the revenue also, please. Yeah. We make multiple products. There is wheel products and non-wheel products to start with. We are also in construction and agriculture tractor, which are not really automotive. Let me just put it this way, I think the aluminium sales, and Ramesh, correct me if I am incorrect here. The aluminium sales is about 8% of our mix. Would that be correct, Ramesh? Yes, sir. Aluminum sales would be, yeah. It's about 8% of our sales. You have to understand that for the company, commercial vehicle wheels, tractor wheels, construction wheels, the windmill segment, air suspension segment, and other segments, not all of them are necessarily wheels. Understood. Sir, what would be the current revenue potential from the current capacity you have at present? Yeah. Based on what we have and what we hopefully will start next month with the second aluminum OEM getting on stream, I feel a year from now, we should come maybe just sort of double of what we are doing. Right now, we're doing about something like 23,000 wheels a month, and we should probably be closer to 35,000-40,000 wheels a month a year from now, by fourth quarter. Okay. Sir, on the CapEx side, can you help me with where we have spent CapEx in FY 2024 and what will be the annual CapEx run rate for the next 3 years, please? CapEx in FY 2024 was directed at, A, I believe there was some CapEx towards cast aluminium, more on finishing operations. There was CapEx which was related to machining of large castings that took place. I believe there was some CapEx related to commercial vehicles and at least some CapEx related to tractor wheels. This is FY 2024. Ramesh, we spent about, I think, INR 140 crores, something like that. INR 141 crores. INR 141 crores. Including process upgradation. This is also including upgrading of processes, maintenance, everything included, INR 141 crores. In the coming year, we believe we will spend slightly in excess of INR 200 crores of CapEx. In which areas we will spend? Just coming to that. The areas where we will spend CapEx-- Before I tell you that, let me also tell you that very often when you spend the CapEx, the lead time is like 12 months. There's a kind of a one-year lag from spending the CapEx to actually starting the production in lot of the cases. If I look at the INR 200 crores that we are looking at spending this year, I will say that there is CapEx which is related to the machining of large castings. There's some CapEx towards cast aluminium wheels because, again, this is 2026, 2027 we're looking at. Some CapEx on earthmoving and tractor wheels, some CapEx on hydraulic cylinders, and the balance is just maintenance-related CapEx. Okay. And sir, about alloy wheel, how much is the capacity for alloy wheel at present, the car alloy wheels? So currently, including what is getting commissioned probably in this quarter, our capacity will be about 42,000. You have to understand, for capacity, the capacity of the furnace, capacity of the plant is much more. We just basically add low-pressure die casting machines and machining cells, and that makes up the difference. So on an annual basis, we will keep adding these cells, and I think once we reach about 50,000, 60,000, we will be full up, and then we will have to start a fresh CapEx cycle to add the cells. Yes. So sir, this alloy capacity is on GDC or LPDC? LPDC. Great. Just last question on the outlook for the industrial component business and for the exports outlook also, please. Yeah. So I will start with exports first. So on the exports front, we expect a flattish year, partly due to the fact that I think the retail-related customers who we service have done an inventory correction in April. So the first quarter will be relatively less, but we should be able to make it up. The other point I would like to mention is that while we have won a lot of business, a lot of that business is coming at the tail end of the year. So it will likely feed into FY 2026 much more than. It will be full year addition for FY 2026, but it may come in only in February. So a lot of the export business that we are seeing is coming at the tail end of the year. So that is the reason why we probably would have a flattish kind of forecast on exports in the current year. Although the fourth quarter will be better. Industrial products, we do see growth. Machining of large castings, while it may not show as higher growth as we saw last year, because last year was basically ramping up to better capacity utilization levels and now we are just adding equipment. But there will be maybe about 20% type of growth in that particular business. Hydraulic cylinders, we do believe we can show considerable growth in the coming year, and that is why we are also investing in hydraulic cylinders. Okay. All right, sir. Ansumeth, many thanks for answering the questions. Thank you. Thank you so much, Ansumeth. Thank you. Thank you. A reminder to all participants, you may press star and 1 to ask questions. You may press star and 1 to ask questions. We have our next question from the line of Dhaval Shah from Koch Capital. Please go ahead. Hello, Mr. Dhaval, are you there? Mr. Dhaval, are you there? We are able to hear you. Hello. Hello. Yes. Good afternoon. Good. Thank you all for taking my question. I wanted to ask, what is export as a percentage of total revenue in last year, FY 2024? Last year it was about 26%. Okay. And these generally supply to Caterpillar, right? Yeah, they are one of our big customers. Yes. Okay. In India, we supply to JCB? Yes, we do. Okay. Construction including domestic and export, the overall percentage of our revenue? If I include in construction, if I also include in addition to wheels, fabrication, and hydraulic cylinders. Mr. Ramesh, please correct me. It will be about 22% of sales or more than that, Mr. Ramesh? It is about 24.5%. 24.5%. Things related to infrastructure, which is construction equipment, is 24% of your revenue. Correct. Of which majority should be domestic or export also? No. Export is majority because Oh we are a very large player in the earthmover wheel segment globally. Okay. And margins? Margins I would say are quite healthy, towards double-digit margin overall as a segment. But I would say the fabrication segment is The fabrication part, which is relatively smaller, is more a single-digit margin, and the wheels and cylinders are both double-digit margins. Okay. A few years ago, I think when our margins were very depressed at around 5%, you had said that it will take us some time, but we will reach 9%. This quarter, I saw your EBITDA margin was 8%. So will this sustain? Let me just explain this. We actually get some amount of turnover discount from some of our suppliers. Unfortunately, it all comes in the fourth quarter. Oh. Our accounting, we tend to account it in the fourth quarter. But I would say probably slightly more than 1% will be that. You are saying that 7% is a sustainable margin. Yeah, something towards that. Yes. Okay. We should ask, how far we are from 9% in terms of time? We have to regain 2% margin, based on our aspiration to touch 9% margin. Yes. We need to do that. If I recall, either the last investor call or the call before that, one of the comments that people had made was the manpower cost was running away. The current year, we actually focused on controlling the manpower costs. We are now working on energy and fuel costs, which I think in the current year will continue to come down. This year, we are also trying to improve the performance of the subsidiary. While WIL as standalone has been profitable, there is a loss-making subsidiary. We are also trying to focus on that and try to bring that to breakeven point. These are what we will be focusing in the current year. Currently, we can work with 7% or 8% margin. I really don't want to project numbers, but Yeah the lower of the two numbers is what I would suggest. Okay. Which other segment we are seeing. Because the commercial vehicle, everybody is not very bullish on the first half of FY 2025. Even Maruti and Hyundai are not guiding for much higher growth for the next year in FY 2025. Some part of FY 2025 will also go into election. I would say that, what kind of revenue growth we can just aspire for? I am not asking for guidance. No. I will just share with you what our customers have shared with us. You are right. On commercial vehicles, most people feel it will be flat for the year. On passenger vehicles, I think the industry has indicated 5% growth. On agriculture tractor, which is the other relevant segment, if the monsoons are good as IMD has predicted, then the second half should be good, but the first half is still very muted. This is a guidance as far as the domestic market. Air suspension on buses will continue to be strong. We won't see any issues there. As I indicated, construction equipment, wheels, as well as hydraulic cylinders should have some growth. That in a sense covers where we see growth in the coming year. Mm. Okay. Do you feel that double-digit growth is something which we can aspire for, but it will be back-ended, second half? If the economy really steps up, then it will reflect in our customer schedule. Then growth can definitely happen. I'm just telling you what I'm seeing at the current moment. Sure. Okay, sir. Thanks a lot. Thank you. Thank you. We have our next question from the line of Abhijit Bora from Awari Ventures. Please go ahead. Yeah. Hi, can you hear me? Yeah, I can hear you. Please go ahead. Congratulations for the good numbers. Thank you. I just wanted to ask one thing. Where do we stand with our railways plan? Because I've seen on the side that our railway, we were trying to mobilize the labor staff, and the Indian government is very active on pushing new Vande Bharat and stuff in this system. Obviously we are right now in the election cycle. So where do we stand on that part? Yeah. We are really not pushing railways. If I can just be very clear. Barring any residual orders that are there, we are not looking at new business from Indian railways. We are looking at developing ourselves as a supplier to people like Alstom, who then feeds into the metro system. Do you understand what I'm saying? Okay. One more question. Sure. Basically, we are going to be using more of our profit for CapEx expansion next year, as you mentioned. What part of it will be also helping the also reduce the debt that we have? Yeah, the debt. We've been managing the company for the last, I would say, one and a half years or so. We've been managing the company based on free cash flows. Essentially, while we have CapEx plans, they need to be free cash flows that come from the business, and based on that, we've been making investments. All right. Of course, there are some commitments, some new businesses, which we need to make CapEx before the business comes. Yeah. Which probably, on a project basis, we could prioritize outside of this free cash flow logic of CapEx. Yeah. But I think even with that, Mr. P. Ramesh, would you like to answer the gentleman's question? Yes, sure. Yeah. Sir, our free cash flow would cover the CapEx estimated for FY 2025. In a worst-case scenario, the debt will remain at the present level, and if you are able to optimize the working capital the way we have taken it, the internal plan, we may be able to also reduce the debt further in FY 2025. You would have noted in FY 2024, we brought down the debt by something like close to 47 crores. Yeah. We may be able to do it depending on how much we are able to optimize the working capital, and how far is the sales growth and other factors. Okay. Yeah. One last question. Where do we stand with the alloy wheel? Alloy wheel, we have been a little slow on that. Yeah. Aluminium wheel is doing very well. Last question. Yeah. Yeah. I also answered this for the previous person who asked the question. Yeah. We are doing about 23,000 wheels a month currently, and we expect to do closer to 40,000 wheels a month by March of next year. All right. Okay. Thank you so much, sir. All the best and looking forward. Welcome. Thank you so much. Thank you. Thank you. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. We have our next question from the line of Abhishek Singh from Morgan Capital. Please go ahead. Hi. Thank you for the opportunity. So, how much CapEx did we do last year, and what is the CapEx plan for the coming two years, that is FY 2025 and 2026? Will that CapEx be specific to aluminum wheels or for the other products also, like steel wheels and suspensions? Okay. Abhishek, thank you for the question. Last year, we spent INR 141 crores on CapEx, and in the coming year, we expect to spend slightly more than INR 200 crores on CapEx. In the year after that, we would also expect to spend something similar. This broadly is related to the quantum of CapEx. Coming to specifics of the breakup, the CapEx is actually, as I replied to the first person who asked the query. The CapEx is related to all segments, commercial vehicle segment, construction, agriculture tractor, hydraulic cylinders, machining of casting, and aluminum wheels. So aluminum wheels, we are right now, I think at least till next year, we are only making the de-bottlenecking CapEx in terms of the die casting machines and the machining centers. The paint plant and the foundry are adequate for the current volumes. Thereafter, perhaps we may need to make an investment, but at the moment, aluminum is only. I would not say it is a small part, but it is a part of the total package and not the largest part of the total package. What is the gestation period? How should we understand the ramp-up of the CapEx? Like the one that we did in FY 2024, INR 140 crore. Until when will it start fetching revenue? If you look at the INR 140 crore, it will honestly kind of kick in from June onwards. Okay In terms of being commissioned. I would not say the entire INR 140 crore, but I would say it is a long gestation period item, which was probably ordered in the beginning of the year, last year. It will come into production in June, which is notably related to machining of large castings and cast aluminium wheels. The balance will probably come in the fourth quarter of this year. All right. Typically, I would say 12 months is probably a good guesstimate of gestation. All right. Understood. That was my question. Thank you. Thank you. Thank you. We have our next question from the line of Rajakumar Rajanathan, a shareholder. Please go ahead. Yeah. Good afternoon, sir. Congratulations for the good set of numbers, first of all. Sir, I have been listening to the call. You mentioned that 7% is a sustainable operating margin that we can look forward for the upcoming quarters. The upcoming year, I think this year we are capable of coming close to that is what I suggest. Okay. And upside- Okay. On a full year basis, yeah. Sir, in terms of revenue, what is the outlook you have? Do you think the revenue will also be flattish, or we can expect some increase in revenue top line rise? See, we have budgeted a flattish type of single-digit type of revenue growth. But if the market is post monsoon, if the market is stronger, then our revenue growth will be more. On the export front, the reason why we are kind of flattish in terms of our predictions is because we are a number of platforms which are coming on stream, but they are unfortunately coming only in the fourth quarter. So which is why we have not actually predicted any big growth in export. Although there are significant platforms we are working on. They will be coming in the fourth quarter. Okay. Got it, sir. Sir, any outlook on the subsidiary, because I see that the losses have come down in Q4 and they have come down substantially between Q3 and Q4, the standalone consolidated numbers. I see the 7 crore losses come down to almost 1.5 crore size. So is this sustainable or are there any one-off sales? No, we are working on it. We feel that probably by the end of the coming year, we should get it to a breakeven level. Maybe even earlier, but at least by the end of the year, we are hoping we can get it to breakeven stage. You mean breakeven for the whole year? Is that what you are saying? Yes. Okay. That is what our attempt is. It is very starting there, but that is the plan. Okay. Sir, just couple of more questions, if I may ask. Sure. I was just looking at what are the levers available for. I know the margin you mentioned 7% on an overall basis. In terms of the levers available for improving the EBIT, it could come more from increase in scale and through the debt reduction or rather if there is any government movement in interest rates. Is that our assumption or are there any levers that I am missing out? Yeah. I would probably say that there are some segments for the company which are strong in terms of relatively stronger margins, notably machining of large castings, cast aluminium wheels, hydraulic cylinders, even air suspension to some extent. Any growth in these segments will definitely improve our profitability. We are also trying to see to the extent to which we can come up with a better pricing mix of products by which we feel our margins should increase. Okay. And sir, lastly, one housekeeping question. Share some. This is from Mr. P. Ramesh. If you see the cash flow statement for the current year, I see there is a non-moving provision in backdate of INR 18 crores that is showing up in the full year cash flow, whereas this item was missing in your September cash flow. Just wanted to know what is this issue? If you could give some color on this. P. Ramesh, you want to take it or I can take it? Yeah, you can take it. Okay. Go ahead. Sir, the difference is related to. We had a distributor of wheels in Europe, and in the beginning of the year, he had actually told us that he is going to restructure his business, and there was a hope that the business will continue. But towards the latter part of the year, it became very clear that he has no such plans. We made a provision, and we have written off the debt which is due from him, as he is also not made payment for a long period. We followed our debt provision policy that we have in the company. The company has a policy for writing off debtors more than a certain number of days. We are just following that policy. The 18 crores that you mentioned essentially is covering bad debts, inventories which are beyond a certain period. Okay. This was done in Q3 or in Q4, sir? This INR 18 crores. Ramesh can answer that. Ramesh? Partially in Q3, about 5.7 crores in Q3, the balance in Q4. This will be a one-off item, right? We are not going to include it. You have done 8% margin despite this provision thing. Yeah. Of course, we also have the year-end turnover discount, which is a one-time gain we get every year. But yes, correct. Okay. Yeah, because your real margin should be then more towards 9%-10% than the 8% that is showing up. Right? That's what it is. Probably. You are being conservative, sir, then in terms of giving guidance of 7% margin. Yeah. We also need to see. When we look at aging, we also have a sense of will there be something else in the coming year. We have to provide for contingencies when we are making predictions to directors. It's not as if everything is known about what will happen. We do budget conservatively. If we exceed the budget, I am sure nobody will complain. But we are following conservative principles. Yes. Okay. And sir, lastly, given the impending U.S. election, do you think it will impact your export markets for the coming financial year? I hope not, because U.S. is a significant market for us. Almost INR 500 crores worth of sale is from the U.S. market. We believe that even if the incoming president is belligerent and puts a duty on Indian products, we still believe that the other country will probably also face the same disadvantage. From a relative viewpoint, we may be in the same place. Oh. Sir, lastly, any asset monetization opportunities that we can look at towards this debt reduction? I don't believe we have anything. Anyway, Mr. Ramesh, anything that you have in mind? I have a couple of comments, sir. One is, if you look at our debt, the long-term debt is about INR 62 crores. If you look at the entire debt for that, it is largely the working capital, which is based on the drawing power available towards the receivables and the inventory. I think, first, we don't have an asset to monetize. The debt reduction would happen in due course with the improvement in the free cash flow. With the improvement in EBITDA, you will also find that most of the metrics would be in line with the prudential financial company. It won't be like a situation where we need to really take efforts for also reduce the debt. Okay. In terms of guidance, last year we had done about INR 122 crores with the interest and items. Do you expect any drop in the upcoming year or it will be relatively the same? The interest on a standalone basis is about INR 109 crores. Okay. The interest would remain at the same level because currently the interest has jumped because if you recall in the previous year, the repo rate was hiked about five times during FY 2023. The full year impact has come in the current year, and that's why the interest has gone up to something like INR 109, INR 110 crores. It would remain with growth, which we are expecting to happen in FY 2025, the interest would remain in absolute value at the same time. Okay. See, also, we are not assuming any interest rate correction and things like that. Yeah. Of course, if those happen, those are above and beyond this. Yes. Okay, got it, sir. Thanks a lot, sir. Thanks for answering all my questions, all the way together. No problem. Thank you so much. Thank you. We have our next question from line of Ganesh. Good afternoon, sir, and congratulations for good setup number. Thank you, Ganesh. Yeah. Sir, as most of my questions are answered, I just have one suggestion. As our interest cost remains very high, also the debt restructuring is nearly not possible for us, can we have some QIP or right issue so that even that amount we can use for debt repayment and we can have higher profitability in cost. Can you please throw some light on this, sir? I appreciate your applying thought towards us and your suggestion, but I think at the current moment, we believe that, we will constantly work diligently on an annual basis and find ways of reducing our debt and improving our profitability. If we are going to raise capital, I would rather raise capital towards some major expansion rather than purely debt reduction. At the current moment, there's no such plan. But thank you for your suggestion. Thank you very much, sir. That is all, sir. Thank you, sir. Thank you. Thank you. We have our next question from line of Kiran, a shareholder. Please go ahead. Kiran, hi. Hello, Pavan sir. Good afternoon. Yeah. Good afternoon. Sir, I have one question. With respect to alloy wheels, from the previous calls, if I am right, we were doing around 25,000 wheels per month, and in Q4, we were expected to add one more domestic wheel customer. Can you just throw some light on this, sir, because even in this Q4 also, we are at the same or similar level? Correct. The new customer starts actually in June. We have actually already produced, ready to make the first shipment. I think they will take maybe one quarter to start ramping up to noticeable volumes. Probably, if not Q2 or Q3, we will start seeing the volume ramp up. The starter production for the customer starting in June. Okay, thank you. Sir, another question related to wind energy sector. Can you just throw some light on what is the opportunity size within domestic and what will be the opportunity size within export, like in market size and actually just throw light on where we are right now? I think the domestic market is quite flat at the moment. I don't think there's any significant preference for wind, which is there in government policy. On the export market, we have started supply towards offshore platforms, and it's expected that in the West, the offshore platforms will be a major area of growth. Outside of this, we work with our partner, Bater, who makes castings that we machine. I think as they look at ramping up their India operations, we will also be able to ramp up our machining to match their casting capacity. Thanks, sir. One last question. I think, we had a plan to increase the renewable energy consumption. By say, 2026, I think it was around 75% is what our plan. Could you just share the progress and how much cost we would be saving based on which projects, sir? Okay. I will answer it maybe not exactly the way you want me to answer, but let me answer the question. Sure. Yes, you are right. We are looking at increasing the percentage of energy from renewable from 26% to 75%. That is a stated purpose for the company. We have made some headway, but there are a couple of contacts which are probably taking longer to negotiate for us to put in place. I will say that about, let's say, roughly about half of what we thought we will do, we have done, but we are constantly working on other opportunities in which we can ensure that we make up to the 75% level. Other thing which we are doing is that we are working on reducing energy consumption in the company. A couple of technologies that we are adopting, to reduce fuel consumption, notably within the company. It will be a combination of one side, yes, increasing renewable offset, but B, also what can we do internally to reduce consumption. Combination of these two things will come in. You asked about how much money we will save. All the projects are projects which have decent timelines in terms of payback. Most of the projects that we have are within a couple of years. Thanks sir. No worries. Thank you. Thank you. We have our next question from the line of Ankur Agarwal from R.C. Wealth Solutions. Please go ahead. Hello. Yeah. We are doing CapEx, like this year we did CapEx of INR 140 crores, next year INR 200 crores, next year INR 200 crores. What asset turnover ratio comes, that is, after doing this CapEx, what are we expecting in two-three years? There are two things here. One thing is that whenever we do CapEx, that capacity is on the ground after one year. Effectively, if you do CapEx today, generating sales because of that CapEx, happens only after one year. Okay. It is a little lag of one year. जी। From that angle, if you see, whatever investment was made of INR 140 in the last year. जी। The sales that will be generated from that investment, will be generated this year. And the investment of INR 200 crores that we are talking about this year, will come from next year. Sale effect. Asset turnover ratio, what remains of the INR 200 crore CapEx? How much volume increases? No. In that angle, if you see, whenever we increase the CapEx at a go, last year it was INR 140, the previous year it was the same. The asset turnover ratio did not change that much. When we are doing a CapEx of INR 200 crores, there will be a slight impact for one year, but from the second year it will more than make up. In the coming two, three years, is it possible to reach around INR 7,000 crores, INR 8,000 crores? Yes. See, asset turnover ratio is also slightly misleading because we are also investing in the machining of castings. Machining of castings is a conversion business. The margin is more, but the material cost is not there. You understand that the asset turnover ratio will not be the way the conventional business is. In the conventional business, when you look at the sales, asset turnover, material cost, everything is there. But this new machining of castings business which I think, in the last year we did about INR 71 crores. In that INR 71 crores, there is no material cost. Okay. It is all conversion. If you look at the asset turnover ratio, it can be a little misleading. Okay. Will the margin improve a bit? That is, when this high-end work comes, the margin will improve to 8%-9%. Yes, the margin is definitely improving. I think next year also it will have an impact. Okay. Because in the peer group, like Steel Strips Wheels, their margin is 11%-12%, so we are a little low on margin level. Yes, that's fine. Our product profile is slightly different. They are mainly in cast aluminium wheels and steel wheel automotive. We are in the construction equipment, windmill equipment segment. We are in different segments. We are competing in the automotive wheel, but the rest of the segments are not there in those segments. Our margin should be better, in which we do not have any competition. No. We will definitely try. What you are saying is absolutely right. We will try, and I'm confident that in two, three years we will reach the level that we earlier also communicated. Yes. Because in the last four, five years, there has been no improvement in performance as it should have come. Looking at all the industrial growth, I think there should be a good improvement in the next two, three years. No doubt. I am confident there will be an improvement. But we will see, sir. After one year, I will definitely show you something. Okay. Thank you, sir. Thank you. Thank you. We have our next question from the line of Shashank Anoia from ICICI Securities. Please go ahead. Yes. Hi, good afternoon sir. Congratulations for the set of numbers. Thank you, sir. Yes. I just wanted to check, will it be possible for you to share your operating level margins across your steel wheels and alloy wheels? Yes. See, alloy wheels, I think because we have a foundry and paint plant capacity of, say, about 60,000 a month. We are operating currently at 23,000. So the margin right now is still negative. Although in the fourth quarter it improved significantly and is only marginally negative. But I feel that once we go to the 40,000 level, I think the margins on aluminum wheels will increase. Broadly speaking, steel wheels are single-digit margins. Construction equipment wheels, hydraulic cylinders, air suspension, and machining of large castings, the windmill related segments, all these are double-digit margins currently for Wheels India. Right. Sir, between you and the nearest competitor in the alloy wheels space. Is it just a mix of you being the lone alloy wheel that is impacting your margin or any other process inefficiencies that you feel needs to be corrected for us to follow the double-digit range? No, the product change is very different. He is making about 2.5 million aluminum wheels. We are making one-tenth the volume. He is not making any windmill parts. He is not making any construction-related parts. So the product mix is completely different. It is like comparing Tata Motors with Maruti. Right. Sir, lastly, for the next three-year, five-year vision, do you feel that we can be clocking something like 18%-20% kind of ROE profile or something like 11%, 10% kind of margin? Sir, at least revenue-wise, let us say next three years, five years down the line, how do you see that company shaping up? I definitely am looking at a 15% return on capital employed. I think that is something that we will reach. I know because the three quarters of the year were quite difficult. It is only in the fourth quarter that we made some progress. But we are confident that in a couple of years, we will come closer to that 18%, so that you guys also believe it. Sure. Thank you so much. That is all from my side. Wish you all the best. Thank you. Thank you. We have our next question from the line of Amit Hiranandani from PHB One. Please go ahead. Thanks. Sir, generally, you give some segment-wise revenue breakup. Can you please help us for FY 2024, CV, non-auto, and exports, please? Yeah. Exports was about 26% of sales. The construction business, as Mr. Ramesh had earlier clarified, which is made up of really automotive wheels, hydraulic cylinders, and some fabrication for construction, all that total is about 24.5% of sales, but that 24.5% also includes exports. The tractor segment is roughly about 20%, CV is about 25%, PV is single digits, the air suspension is single digits, and the windmill sector is also just about maybe 10% of turnover. So that's the rough breakup. Okay. All right, sir. Thank you so much. Thank you. Thank you. We have our next question from the line of Aditya Jain from Robo Capital. Please go ahead. Yes, Aditya. I'll give you. Yes, go ahead. Mr. Aditya? Mr. Aditya? Oh, he is not audible now. Yeah, we can hear you. We're audible now. Okay. Thank you for having me again. I'm asking if you can share the market share details of CV, tractor and the PV segment. Okay. So in the commercial vehicle segment, I think we have 30. On the CV segment, I'm probably breaking up MCV, HCV, and LCV. Okay? If you look at MCV, HCV, I think about 37% market share. On the LCV segment, we have, I think, 58% market share. Tractor segment, we have about 54% market share. The PV segment, let me put it this way, I think because the steel part is declining, but at the same time, with the largest manufacturer in the country, we have the larger market share between the two players. In the steel wheels? Yeah. Aluminum wheels are too small. I don't think we- Yeah It don't really count because we're just starting off. Okay. All right, sir. That is all my questions. Thank you. Thank you. We have our next question from the line of Nishant Wadhwa from PHB One. Nishant, please go ahead. Yeah. Thanks for the opportunity. Congratulations for the results. Sir, just a few questions. Just to understand your opportunity on the railways and wind side on the domestic market, can you please help us in terms of what kind of turbines are you supplying to in terms of the size and what can be potentially the content per turbine that you guys can supply currently? You mentioned that domestic is still slow, but just for our understanding, probably it is slow everywhere. But the market opportunity as per the end manufacturer is growing quite rapidly, touching potential 5 GW. Right? Are we more on the offshore side, that is why we will not play too much in the domestic? No, let me clarify. We started off actually at 2 MW. Now we do absolutely nothing for 2 MW. We do more of 3 MW, 4 MW, 6 MW, and we have also just started for 15 MW, which is offshore. Even some of the 6 actually, some of the 6 also is offshore. So we are in both onshore and offshore. See, there is a slight disconnect between people who announce parks and the production. When you hear about people saying they are adding so much capacity and wind, so much capacity, it does not necessarily translate into production in the immediate period because this is a capital goods market which has a lead time. That is probably why you are saying that market share no growth is very good, but at the same time, they say, how come you are not excited about it? Yeah, sure. I only go by schedules that I get from my customers. They have a pipeline, so it really is related to what is the pipeline of stock that they have and whether they feel they need to ramp it up or slow it down. To also understand your segment better, is this statement correct? That, say, this is a legalized phenomenon and if the underlying and any manufacturers continue to invest, you will also start to see that benefit trickle to you in similar proportion. Yeah, I think if you have successive years of rapid growth, then you will start seeing it reflect in terms of manufacturing. Okay. Would you be comfortable sharing any market share data with us on this space? In the local market, how much would you be able to generally have as a share of business? No, I think the parts are very different. It is not like automotive where it is straightforward, and you can say so many wheels or so many suspension systems. We do a variety of different fabrications on a windmill. All I can say is that in the segment, we are one of the leading manufacturers who also exports in sizable quantity overseas. That is all I can say. We do not have a sense of what is our market share. For large multinational companies, we are a preferred supplier. Okay. The second one on the railway side, you guys do the planes and the boat stuff. Here, what is the medium-term plan, in terms of how do you, because there is obviously a big round of ordering cycle that is happening across the large customers. Are we participating in some of these opportunities which might justify or to scale? Yeah, we are actually not really aggressively participating on the government tenders. Okay. We are not entirely comfortable with the system there, but with some of the multinational companies like Alstom, we are trying to become a qualified supplier, and then we will look at that segment. Would it be fair to put a two-year timeframe for you to be seeing meaningful revenue from this space? Yeah, I think so. If we are able to crack it, that is reasonable time. My last question is, as you mentioned about the machining mix. What is your overall target in terms of, let us say, next two years out, where would you want the machining mix to be for the overall business? The machining is machining of large castings. We are adjacent to a large casting manufacturer. Our plans are really aligned with his capacity plan. As he ramps up his capacity, he has plans to ramp it up significantly. Maybe not double, but close to double in the next, say, 2 to 3 years. As that happens, we will also acquire capacity to match that. Okay. Thanks a lot, Suresh, and all the best. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments. Thank you so much for all your interest and your questions. We always look forward to interactions with investors and shareholders, as you do ask questions that we don't always think of, and it makes us think in retrospect, and sometimes also gives us direction in terms of the way the company should go. Thank you so much for your interest and interaction. We look forward to interacting with you and hope that we can continue to perform well and meet your expectations. Thank you so much. Thank you. Thank you. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.