Q2 23/24

Nov 1, 2023

Ladies and gentlemen, good day and welcome to the Wheels India Limited Q2 FY2024 post-result conference call hosted by ICICI Securities. As a result, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Basudeb Banerjee from ICICI Securities. Thank you, and over to you, sir. Thanks, Ganesh. Good afternoon, good evening all participants, and thanks to Wheels India Limited management for giving us the opportunity to hold the call. We have with us the team represented by Mr. Srivats Ram, Managing Director, and Mr. P. Ramesh, Chief Financial Officer. Over to you, Mr. Ram. Good afternoon, everyone, and thank you for joining the investor call. Wheels India reported a net profit of INR 5.24 crores for Q2 as compared to INR 14.53 crores for the corresponding quarter of last year. The Q2 profit was impacted by one-off expenses, notably a one-off charge for pre-delivery inspection charges and a few other expenses. Secondly, I would like to point out that the amalgamation of Sundaram Hydraulics Limited with the company has been completed. The third point that I would like to mention is that if you look at the half year, we found domestic volumes to be at a muted level. Please note that this is a standalone company where honestly, the domestic market for us is really the commercial vehicles, tractor wheels, and air suspension systems. It was muted in the first half of the year. The export business on the other hand, we saw a decent growth. Despite the slowdown in Europe, Asian markets were quite strong. For the balance part of the year, we expect that the CV market should be better and air suspension will also be better going forward. Few other comments I would like to make. Wheels India board has cleared a proposal to move usage of renewable power in Wheels India from 26% to 75% over the next year and a half, by 2026. Second point that I would like to mention is to service our overseas business. We are going to start fully owned subsidiaries in U.S. and Europe, which we feel are required to service the growth opportunities we see in these two markets. With that, I will be open to taking any questions or any clarifications that investors may have. I would also like to say that the investor presentation has been uploaded on the website. Notably, there are four slides that cover the financials for the quarter and the half, which are represented in that. With that, I conclude my opening remarks, and I will take any questions that investors may have. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press * and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we wait for the moment while the question queue assembles. Participants who wish to ask a question may press * and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press * and 2. The first question is from the line of Basudeb Banerjee from ICICI Securities. Please go ahead. Yeah. Thanks, sir. Just to understand that current juncture where the passenger vehicle market growth is also, despite absolute volume being high, is not even mid-single digits. Two-wheeler overall industry growth in first half also not encouraging, and commercial vehicle industry as a whole have elements of cyclicality. What is your view on the overall target industry for you in the coming 12 months? Yeah. I would say that the agriculture tractor market has been a negative performer, and I don't see that changing as one, the rains have been good, the timing is questionable. We don't see the rural situation improving dramatically. On commercial vehicles, I think probably if the infrastructure project execution picks up steam post monsoon, probably I see the commercial vehicles having some improvement compared to the first half. On passenger cars side, Wheels India Limited is mainly on the steel wheel. On the steel wheel, even the DC is increasing. Small car business going down, volumes have been muted. On our aluminum wheel business, one point I would like to mention, we had mentioned earlier that we would start one OEM in the second quarter, and we did start, but that OEM is a new entrant and the volumes have been not as expected. We expect the second OEM, who is a successful manufacturer in the Indian market, to probably start end of the fourth quarter or early first quarter of next year. Okay. Sure. Thanks. I will come back. Thank you. The next question is from the line of Priya Ranjan from HDFC AMC. Please go ahead. Yeah. Thanks. Thank you, sir. Just one thing on the CapEx side, why are you highlighting INR 200 crores of CapEx? I think the aluminum plant is not fully utilized as of now. So the need Yeah for the new CapEx. So let me just comment on that. Do you have any other questions, Priya? I can take all of them together. Yeah. And then the wind, et cetera, are you also looking at more from casting angle or mostly you want to continue with the fabrication et cetera in the wind side? Sure. Okay. So let me try to answer your questions. So you are right. We had indicated earlier that the board has cleared CapEx of up to, I think, more than INR 200 crores in the current year. We have so far spent only about INR 72 crores in the six months, and it is expected that in the full year, the CapEx will only be maybe about INR 80 to INR 90 crores. So there is definitely some amount of deferment of CapEx, which is related to any delays in any projects that we have, we hold back on the CapEx. There is nothing which is greenfield. Everything is brownfield and adding to existing capacities. So we have been, as the volumes have not increased significantly, we have also been very circumspect and are only adding CapEx to the extent that the cash flows and the finances of those particular businesses allow. That is on the CapEx side. Coming to the wind business, we are not really adding any capacity in the fabrication, commercial side of the business. On the casting and machining, we have actually scaled up quite considerably. We have been profitable in the second quarter, and in the third quarter, the volumes are going up further. So we see that probably as a growing segment. Even if the wind mill market globally does not grow, there is enough of demand with the existing casting supplier. He himself has got ramp-up plans, so we would align with his ramp-up plans, which are also partially linked with de-risking his geographic footprint. Any idea or any thought from going into the bigger casting for the entire housing for et cetera, for the gearbox, et cetera? Because I think there is a lot of demand on that side, and mostly the casting for those is coming from China. I don't believe that there's any plan. The castings are, Priya, if I can say, the castings are made by the casting partner, and then we are doing the machining. So we are actually doing a conversion operation. He is quite full up, and he's got heavy demand. As a result of that, I think even his existing plans, if he executes, we should see this business increasing at least twofold in the coming year. Okay. How is the outlook for exports market? I mean, Europe. Yes. It is surprising. The last time we had interacted, I said that we were looking at a 20% growth in export. For the first half, we have been able to manage, but Europe is very dull. Very dull demand in Europe, which has been made up by strength in North America and Asia. Perhaps actually the markets that have done well have been Korea, Japan, U.S., maybe Thailand to some extent. Whereas Europe has been underwhelming. Even LATAM has been very muted. But we have made a fair amount of ground with some of these OEMs. We also see in the coming year, especially on the off-road, that is construction and ag, we see demand coming in even going into the next financial year. A couple of other points I would like to mention. Air suspension demand for buses is very strong at the moment. It is normally strong around the time of, just a year before election tends to have strong demand. So air suspension demand is very strong actually. Quarter 3 and 4 will be strong. The other area which probably I would like to mention, which is negative, is that on the mining side of the construction wheel, there has been a cut in schedules, notably in the third quarter. It will get restored thereafter because there is some de-stocking. One of our large customers is looking at minimizing his inventory for his year-end, which is December. So there will be some de-stocking that happens in this third quarter, which may affect production on our side, but from fourth quarter onwards, it will be restored. Understood. What is our ambition? I am just trying to understand what is our ambition in terms of the aluminum wheels, et cetera, because I think that Sure. This is a sunrise sector and many people have entered and Yeah. A couple of points. We started off with export-oriented business. We are currently exporting 23,000 odd wheels. We started OEM suppliers in the second quarter. Unfortunately, the OEM offtake has been very, very underwhelming, being a new OEM. However, the successful existing OEM that we are going to start supplying maybe in end of Q4 or Q1, there has been movement on a positive side. We have also been audited by two of the top three manufacturers in the country. So there is definitely, once you get audited and the system gets cleared, thereafter, RFQs come. So hopefully we will start seeing orders coming in. We have so far LOIs from three customers. One we started supply, the other one we should start early next year. Okay. Got it. Thank you. Thank you. Participants who wish to ask question may press star and one on their touch-tone telephone. The next question is from the line of Ganesh Shetty. Please go ahead. Yeah, sir. Good evening, and thank you for the opportunity. Yes, please. Can you please throw some light on margin improvements? Sure Over a period of time, our EBITDA margins have been very low, and our net profit margin has been very, very dismal. Is there any I agree with you. Let me reflect on that and give you my answer. If you look at the current quarter where the profits were at a very low level, there was a one-time charge for pre-delivery inspection, which was the extent of 10 crores. This is something probably that should have come earlier, but there was a negotiation with the contract manufacturer in Europe. That took time to finalize, which is why we have accounted it in this quarter. But this is really related to last year's problem. That is one time. Other than that, there is almost 5 crores of one-time costs, which have been reflected, which are of various natures. Old wheels being brought back, underrecovery of cost, which had been considered. All those points, numerous points taken together is about 5 crores. There is about INR 15 crores in the second quarter accounts which are related to these one-time costs. In terms of manufacturing, in our commercial vehicle line, we actually had a major layout change, and there was some disruption of production due to that in August and September. We are now back on stream, so we will start seeing higher volumes and also the recovery of costs in that business will improve. Third point is that we are looking at pricing wherever we have lower realizations. We are trying to see to what extent we can improve our realizations by talking with our customers. The last point is related to manpower cost. We are looking at some kind of optimization and rationalization of manpower across the various plants. Okay. All these steps are being taken. I think the third quarter exports are low. Probably the fourth quarter onwards, you should start seeing the older type of margins, what we used to have earlier. You should start seeing them coming forth. In the next year, we can follow up from there. Thank you, sir, for the detailed explanation. I also wish to know whether we are doing something for interest cost reduction, because interest cost is also very, very high during these quarters. Is there any plan to refinance our cost, like right issue or preferential allotment? By such ways, that interest or the deposit amount can be reduced, and we will be able to pay lesser amount of interest on our liability. This would be long pending. As a shareholder, I feel that this is a very essential part of our operational efficiency. Can you please throw some light on this, sir? Sure, Rajeev. First of all, as I mentioned, one reason why our CapEx has also been lower is that we are trying to manage the CapEx without actually going in for any additional borrowing. So one way of reducing interest cost is to reduce your debt amount. Further, beyond that, I think a lot of work is going into working capital. Before I hand over to Mr. P. Ramesh to explain in detail what we have done, let me say, at the moment, there is no plan for equity to be brought in, because normally we would bring in equity if we felt that there were some expansionary activities which are taking place. But currently, there is no such plan. But Mr. P. Ramesh, perhaps you can also reflect on his question and try to answer what we are doing to reduce interest cost. Sure. Good evening. One of the major reasons for the interest cost increase in absolute value is the rate hike. If I give a comparison between the last year first six months to the current year first six months, the rate has moved up by about 1.5%. Basically, as you may be knowing, most of the repo rate impact has come in the second half of last year. The full impact is coming in the current half year. That is the major reason for about 1.5% increase in the rate. In terms of reduction of interest cost, the facilities which we have been using, we were able to reduce it to an extent of about INR 150 crores. Out of that, term loan we have reduced about INR 37 crores in the current six months. Another INR 35 to INR 37 crores we will be repaying it in the second half. By that, the fixed loan amount in the overall borrowing will come down to something like INR 45, INR 30 crores. That is one thing. As our MD was saying, the working capital reduction is an ongoing exercise, and hope to reduce the working capital further in the current half year. Now if you look at the free cash flows for the first six months, it is about INR 56 crores positive cash flow after covering the CapEx. We are hoping to do at least the similar amount in the second half. With that, I think we will be able to avoid further borrowings to finance our CapEx. With the improvement of profitability which we are expecting, I think we should be able to reduce the facilities that are there or the freedom that is there considerably. Yes, sir. That is fantastic. That will really help us. Third thing, being a very old and secured company, do we have any opportunities for monetizing our assets in reducing our debt? I am just asking whether there is any possibility in the future regarding this. That is all from me, sir. Thanks a lot for the opportunity. Thank you. Thank you very much. We definitely will continue to look at opportunities like that, and the minute that we have identified one, we will get back to you. Thank you, sir. Thank you. The next participant who wishes to ask question may press star and one on their touchtone telephone. The next question is from the line of Rajkumar Vaidyanathan. Please go ahead. Yeah. Good evening, sir. Thanks for the opportunity. Sir, I have a couple of questions. The first one is on the cash flow. Sorry to labor on the same point. Basically, I want to understand this INR 200 crores that you mentioned that will be funded through internal accrual. Just wanted to know how much will be coming from the working capital efficiency and how much will be through the profitability. Ramesh, you want to take this question? Hello. Yeah. Ramesh, will you take this question or do you want me to take it? No, you can answer, sir. Yeah. So one is, against INR 200 crores as I mentioned, we expect it to be more like INR 150 crores, INR 160 crores, out of which INR 72 crores is already completed. It will actually come part and part. There will be some amount of long-term debt reduction, but I think working capital improvement will also enable us to manage it. And I think the EBITDA improvement in the third and fourth quarter, we should come as we had specific one-time costs in this quarter. That should also help us, enable us to fund the CapEx without going in for additional debt. Ramesh, you want to add anything to this? Yes, sir. The cash from operations and the working capital in the second half would be close to INR 100 crores. Of course, it could be a little more than that, which will cover our CapEx and our loan repayment obligations for the second half. Just to give you a broad picture. Okay. Sir, if I understand you correctly, you are saying go forward, there will be a tepid growth on sales, but there will be a significant margin improvement. Is that understanding correct? I would not say significant margin improvement. I will say definitely the fourth quarter, you should see margins going back to what it was prior to last year. Last year, we got affected notably with the speed governor inspection. So prior to that, what the margins have been in a normal year. Of course, not the COVID year. In a normal year, what it used to be, we should probably go back to that. Okay. Yeah. I think the previous call you mentioned is 2018, 2019 operating profit numbers. That number we will be able to achieve. Ramesh, I do not know whether that is correct. You want to comment, Ramesh? I could not guess his question. He is asking the EBITDA levels that we are at seem to be very low. Yes. I said in the fourth quarter, we should get back to a more normal level of EBITDA. So he is asking, would it be in line with 2018, 2019? Okay. Yeah. I mean, could be. Yeah. Because, sir, I am just going to your previous call notes. I think one of the questions you mentioned that we are looking at achieving the 2018, 2019 operating profit numbers by the end of FY 2024. Yeah. I would say, here probably what we mean is EBITDA percentage would be something similar. Ramesh, do you have a check on this? You can just confirm. Yeah. I mean, investor is correct. He is only paraphrasing what I said, and just asking us to check. Okay. I do not have the 2018 numbers right now before me. I mean, if it is around- Okay. It should probably, so that I can clarify, I think we expect that probably in fourth quarter, the EBITDA has been hovering with 4% or 5% type of level. We expect it to go back to maybe a 7% plus level by the fourth quarter. But you did in 2018, 2019, sir, so that is why I was asking. Yeah, I did not have an automatic recall on the percentage which is why I hesitated. But yes. Our answer is yes. Thank you. Okay. This PDI inspection charges, the amount you mentioned is INR 10 crores, right? For this quarter. Yeah. Okay. FY23, it went close to INR 40 crores. Is that number correct? Mr. P. Ramesh, can you just correct what is the total? I think there will be charges amounting up to INR 7 crores. The net amount is INR 27 crores. INR 27 crores. Because we also have- Plus these INR 10 crores, right? Yeah. It's ten. Okay, sir. Yeah. Thanks a lot. Yes, sir. Thank you. Participants who wish to ask a question, may press star and one on their touchtone telephone. The next question is from the line of Raj Mantri from Concept Investors. Please go ahead. Hello, good evening, sir. Good evening. Sir, can you let us know the margin profile of each and every segment in which you operate? That really, see, we have shared I think the segmental reporting, for the quarter. All I can tell you is that the cast aluminum wheel, which earlier was struggling, while we are not yet at break-even point, is a bit of positive and directionally in the right direction. It is just the volume that will take us to PBT positive. Broadly speaking, I think, the under-recoveries that have happened, have happened more in the export-related markets because pricing tends to be prospective, both in the export market and in the aftermarket. So the aftermarket would be largely commercial vehicles. The export market would be largely agriculture, tractor, and construction equipment. But those will get corrected shortly in the coming quarters. Okay. I am sorry for not answering. I do not have the ready information segment-wise profitability for the second quarter. I am sorry. So I will try to share the best I have to my knowledge. Ramesh, unless you have additional information. No, not at the moment. Okay. Apologies for that. Sir, my second question would be, what is the production volume in CV and PV segment? You are talking about Wheels India, you are talking about the industry? What is the- I mean the commercial vehicles wheel and the passenger vehicle wheel. Commercial vehicles currently, I think, 125,000 plus LCV is about 55,000. If I take LCV, HCV, MCV together, it will be 125 plus 55, which is about 180,000 wheels a month. If you take the PV segment, I will include the subsidiary. So, in Wheels India standalone, it is about, I would say about 300,000. 3.5 lakh wheels, and there it would be about something like 5.3. So 5.3 plus 3.5 would be the total if we include the subsidiary company as well. Lakh wheels a month. Okay. It takes 36 months, 12 months. I said 3.5 lakh wheels in tires alone and 5.3 lakh wheels a month in subsidiary. Okay. If we include both, it is 8.5 to 9 lakh wheels. My second question is, whole CapEx would be funded through internal accruals? Yeah. So far, we have managed to fund it through internal accruals, and we are hoping that with better margins or lesser one-time costs in the third and fourth quarter, that we will be able to fund the CapEx that we plan for the year. Okay. Yes, through internal accruals. Thank you, Prataji. Thank you. The next question is from the line of Jay Rajan from Dolat Capital. Please go ahead. Hello, everybody. Thanks for the invitation. Sir, my first question is on the basis of alloys. How do you expect to take alloy wheel business further? As you said, export market is doing well, so what sort of margin guidance should you give us for the coming year? Yeah. As I said, currently, most of our volume is export and domestic while we have one OEM, the volume is negligible. We are currently doing about 24,000 wheels a month, and we expect that probably by same time next year, we should be doing closer to 35,000 to 40,000 wheels a month. Okay. Thank you. On a follow-up question again, sir, do you have plans to enter further CapEx for ramp up this volume or this should be coming from that INR 200 crore you mentioned previously? Yeah. I don't see any major CapEx coming for this volume. If we make investments, we will make investments for the coming year. I still don't know whether we are going to make CapEx in cast aluminum wheels. If we make it will not be for the current year because the lead time, I suppose, is 12 months, so it's more likely to come into play the following year. Okay. Sir, another question. Could you just give us your estimation of the market share in the PV segment for the steel wheels and alloy wheels? Okay. So steel wheels, my understanding is that we have about a 40% market share. Aluminum wheels, we are literally not there because we have only one customer, so it will be a very minuscule market share percentage. Probably if you ask me the question at the end of the next financial year, I may have a more substantial answer for you. Sure, sir. Thank you so much. And thank you very much for the rest of it. Thank you. Thank you. The next question is from the line of Jeetu Panjabi from EM Capital Advisors. Please go ahead. Hi. Thanks, Srivats Ram. Just a clarification. I heard you along the way saying that Europe is very soft and you have grown exports at 20% over the last six months. I do not know if that is an accurate number, but where do you see growth coming from in exports over the next 12 months? What are you optimistic about? What are you not optimistic about? Sure. How do you see volumes and growth numbers playing out? So, the areas where we've been affected have been, yes, largely Europe. Europe is very soft, and they showed degrowth in the second quarter and a half also for that matter. We've also seen some amount of weakness in LATAM, in Latin America. Broadly speaking, if you look at these markets, I don't see any dramatic increase in market size, be it U.S., be it Asia, be it Europe, be it LATAM. None of these markets are going to grow. So essentially, where we look at growing our business is where we are winning new business. We're winning new business, for example, on light construction wheels, some medium construction wheels, probably from the fourth quarter of this year. Then we are also looking at larger tractor wheels, which are used in Europe and North America. These are the three areas where we see export potential. That said, I think it would be probably muted. While we had very strong growth in export this year, next year would be quite challenging, and we may need new business just to ensure that we show some growth and don't degrow export in the coming year. Okay. And you think financial year FY24, you still maintain a double-digit growth or that'll be tough? We are at 7.7%. We are not at a double-digit growth rate. We are at a high single-digit, mid to high single-digit growth. I don't see that changing dramatically. Next year, the other areas that we are looking at, which are relatively new areas for Wheels India, we're looking at growing our fabrication business in export, and we're looking at growing our hydraulic cylinder business in export. That will come in the next financial year. These are two new areas which are long lead areas where we see a potential for growth and have interest and inquiries from customers. Which markets are these in? These are largely North America and Europe. Okay. Good. Thank you, Mr. Ram. All the best. Thank you. Thank you. The next question is from the line of Ganesh Shetty. Please go ahead. Hello. Yeah. Hi, Ganesh. Go ahead. Thank you for the call. Sir, I just want to know the amalgamation of Sundaram Hydraulics, how this is going to impact on our top line and bottom line. Okay. Sundaram Hydraulics, as we also said in the press note, has been fully amalgamated into Wheels India. In all respects, it is now on the same SAP system as what we run the main company. If you look at last year, I think they did INR 108 crores of top line. And in the current financial year, we expect them to do about INR 130 crores to INR 140 crores. So they probably will show anywhere between 25% and 35% growth. There is fairly strong demand on their side. And earlier they were not as financially strong. I think Wheels India is adding a lot of strength to them in terms of finances. So now it is up to the team to step up and execute. But it has been profitable, and we see them on a Somebody asked about Wheels India EBITDA. Their EBITDA, at least in the immediate term, may be better than Wheels India. Thanks, sir, for the explanation. Sir, one more area of operational efficiency is energy consumption. As you mentioned, going ahead, we are going to have renewable energy as our main source of energy. Do you think that will make a major impact on our EBITDA margins going ahead? It will make some impact. It won't make a major impact. Definitely, there are savings that will come. A lot of these projects will get executed probably mid-2024. So those savings will probably come in from that time period. I'd also like to mention that we are now looking at capturing digital information related to energy costs, and we're hoping that by having effective live information, we can take further stock of the manufacturing practices and look at changing manufacturing practices to reduce energy costs. So there's a detailed work which is going on related to energy, water, and air. It used to be a quarterly type of reporting, now it's come to monthly. Yeah. Sir, one more area of special efficiency is by introducing new manufacturing technologies like AI and all. Is there any progress the company has made in this regard? That's all from me, sir. Thank you very much. All the best. Nothing really on AI, but digitizing is something that we have started making investments. We are doing digitizing on two fronts. One is in terms of data capture, and the other one is we are trying to see whether we can do visual digitization and thereby automate some inspection processes which are being mobilized. So these are the two fronts in which we are looking at. In that visual digitization, there are some algorithms which you could argue incorporate machine learning. It is not AI. Thank you very much, sir. That is all from me. All the best. Thank you. Thank you. Participants who wish to ask questions may press star and one on their touchtone telephone. The next question is from the line of Jayaraj N from Dolat Capital. Please go ahead. Hello, sir. Thank you for taking my question again. I am Jay from Dolat Capital. Sir, actually, I was going through the last transcript of your con call where I saw that you were into manufacturing. You are manufacturing fabrication for railway. Am I right? Yeah, we were manufacturing. Yes, please go ahead. Yeah. Sir, you had mentioned that you are now preparing yourself for manufacturing fabrication for high-speed trains that is Vande Bharat. Sir, could you just give us an update on that plan? Yes. Let me be honest. Yes, we are looking at that. We have not been able to make much progress because we went through a whole phase of optimizing our manpower in that particular division. But now that it is optimized, I think it is something that we can definitely look at. If not by the fourth quarter, but definitely something that we are looking at. We were not able to proceed because we wanted to first rationalize the manpower. There was a comment, I think, in the last investor call on manpower costs. So we immediately went into it and looked at all the areas, and this was one area where we had excess manpower and have rationalized. So we will look at it going forward. Sure. Thank you. Sir, another question. I was going through the annual report and I saw there is a gain with stopping investing, right? I am sorry, I did not get it. Can you repeat it? There is an appreciate gain with an obviously stopping investing. Yes. Since two years I see there is a drag on your business because of this. Is there a way that or are there any plans to turn around that business at all? Yeah, we do have plans. I think steel cast iron wheels is not a growth business. It is a business which is going to decline. With that in mind, of course, we are doing some plant-related rationalization, which should be executed in the fourth quarter. But above and beyond that, we have also raised the point with the joint venture partners, saying that we need to look at some other business other than steel wheel business. We are still examining it, and it is at very nascent stage of discussion. But at some point, we will look at adding products so that there is some growth potential for the joint venture business as well. Sure. Sir, my last question would be on the raw material side. Sir, how do you see the outlook going ahead considering the situation in Middle East, oil pricing and- You are talking about the steel market? Overall raw materials. So steel industry has said there will be a marginal increase in steel costs in the third quarter. At the same time, the global industry benchmarks are not really seeming to suggest any big increase in steel price. We will have to wait and watch. I think the challenge is that the steel industry's largest segment base is infra. Almost 30%-35% of the steel industry product goes into infra. And there in India, there is very strong growth as you people are aware. So as a result of that, they are saying that, "Global is fine, but in India, there is growth in steel demand." So they are trying to push the prices up. Eventually, the company will have to look at what is cost effective for the domestic industry, what is cost effective for the export industry. We will have to look at a cost-effective source to continue our business with both the domestic and the export business customers we have. Sure. That is from my side. Thank you a lot, sir. Thank you, guys. Best of luck. Thank you. The next question is from the line of Harshit Agarwal from Wells Fargo. Please go ahead. Hello. Hi. Yeah. Hi, Harshit. Go ahead. I just had one question. This was with regards to the high interest and financing cost. I know this has been answered in this call before that for the current year, we are managing it using the CapEx and the internal accruals. Given the global macros and the high interest rate scenario that is expected to persist, how would we be trying to finance it for the upcoming years, let's say for the next year, when the interest rates are expected to be high? How do we plan to rationalize our interest and financing cost for the upcoming years? On two fronts. One is I think, as Ramesh mentioned, we are really looking at what we can do to squeeze our working capital. At the same time, we have a fair export portfolio where the terms tend to get stretched and stretched because of the logistics related time, et cetera. We believe that in the next year, the CapEx may not be to the same extent as we had this year. At the current moment, we feel that there could be some debt reduction by lesser CapEx. At the same time, we have not yet worked out our budget for next year in terms of CapEx and OpEx. I can't really comment, but I do believe that it will be less because when I look at a number of the businesses, we are in the phase of finishing our capacity expansion. The next year we would have the capacity available. We would not really require massive CapEx from that perspective. I think the CapEx reduction and better utilization of what is already there will do two things. One is it will reduce our interest rates because of lesser borrowings. Secondly, it will also improve our EBITDA because of better utilization. Okay. I do not know whether I have answered your question. I am just trying my best to I can add a couple of points. Sure. The cash from operation is also expected to move up from where we are today. With the margin improvement, the cash generation is expected to move up. The factors, if you look at our debt equity, even this quarter, it is 1 to 1.01. It is not a very highly leveraged company. Maybe it looks like a leveraged company because of the low EBITDA, which this company for this quarter is little pronounced. With the improvement in margin, I think the key ratios would be quite okay. The thing is we will continue to steward the working capital and reduce the limit utilization and manage the capital in a way that the business will generate the cash to take the capital, so that we do not really borrow additional amount. But if you look at our analysis, the interest reduction is predominantly coming from the repo rate increase. It is not coming from a higher utilization of the limit. Utilization has actually gone down. What is the reduction in utilization, Dinesh? About ₹150 crores in this quarter compared to the last year quarter. I hope that answers your question, but feel free to ask if we missed anything. Yes, sir. I am content. Thanks a lot. Thank you. The next question is from the line of Rajkumar Vaidyanathan. Please go ahead. Yeah. Sir, thanks for the follow-up. Sir, you mentioned that there are some employee actions planned in the upcoming quarters. So I just want to know, these actions are planned as a function of the projected lower demand and lower capacity utilization, or is it due to digitalization and other operational issues? No, it is largely volume-based. Sorry? It is largely volume-based. Because, see, the other thing is there are areas where the volume goes down, there are areas where the volume goes up. Earlier, we were looking at the manpower as individual separate business units. Now, the company operates with two presidents who have a number of units under them. There is a rationalization that is taking place where wherever the manpower requirement is there, if there is shortfall, we move it from the areas of underutilization to higher utilization. That is actually what we are doing. There is no reduction in manpower per se from digitization. Okay, got it. Thanks. Are there any other questions? That is about it. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Once again, thank you. I really do value the interaction with investors because you always ask the most interesting questions, some of which enable us to revisit operational strategies or strategic directions that we've taken, and we keep looking at what we are doing in the light of your comments and your queries. I do recognize the fact that the performance has been below par in this quarter. As I mentioned, we hope to correct the ship and get it back to where it was by the fourth quarter. Look forward to all your support. Thank you very much. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.