Q1 2027 Pitti Engineering Ltd Earnings Call

August 11, 2026

Speaker #1: Ladies and gentlemen, we welcome you all to the Q1 FY27 earnings conference call of Pitti Engineering Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of the date of this call.

Operator: Ladies and gentlemen, we welcome you all to the Q1 FY27 earnings conference call of Pitti Engineering Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectation of the company as on date of this call. These statements do not guarantee the future performance of the company, and it may involve risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the 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. Akshay S. Pitti, Managing Director and Chief Executive Officer. Thank you, and over to you, sir.

Speaker #1: These statements do not guarantee the future performance of the company, and may involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in listen-only mode.

Operator: As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the 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. Akshay S. Pitti, Managing Director and Chief Executive Officer. Thank you, and over to you, sir.

Speaker #1: There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star, then zero, on your touch-tone phone.

Speaker #1: Please note that this conference is being recorded. I now hand the conference over to Mr. Akshay S. Pitti, Managing Director and Chief Executive Officer. Over to you, sir.

Speaker #2: Thank you. Good afternoon, everyone, and thank you for joining the Q1 FY27 earnings call of Pitti Engineering Limited. Along with me are members of the senior management team and our investor relations partners from SGA.

Akshay S Pitti: Thank you. Good afternoon, everyone, and thank you for joining the Q1 FY27 earnings call of Pitti Engineering Limited. Along with me are members of senior management team and our investor relations partners from Strategic Growth Advisors. Our financial results, investor presentation, and related disclosures are available on the stock exchanges as well as the company's website. I hope you have had an opportunity to go through the same. Let me begin with a brief overview of the broader operating environment and growth drivers. The first is localization in China presents an opportunity. Historically, China has been the largest capacities across industrial areas such as electrical steel laminations, casting, and machining. We are seeing customers increasingly look at India as an alternate manufacturing and sourcing base. This is particularly visible in mining equipment, data center generators, as well as specialized industrial applications.

Speaker #2: Our financial results, investor presentation, and related disclosures are available on the stock exchanges as well as the company's website. I hope you have had an opportunity to go through the same.

Speaker #2: Let me begin with a brief overview of the broader operating environment and growth drivers. The first is localization and China, which presents an opportunity.

Akshay S Pitti: Let me begin with a brief overview of the broader operating environment and growth drivers. The first is localization in China presents an opportunity. Historically, China has been the largest capacities across industrial areas such as electrical steel laminations, casting, and machining. We are seeing customers increasingly look at India as an alternate manufacturing and sourcing base. This is particularly visible in mining equipment, data center generators, as well as specialized industrial applications.

Speaker #2: Historically, China has had the largest capacities across industrial areas such as electrical steel laminations, casting, and machining. We are seeing customers increasingly look at India as an alternate manufacturing and sourcing base.

Speaker #2: This is particularly visible in mining equipment, data center generators, as well as specialized industrial applications. Second, an important trend is a shift of manufacturing from Europe to India.

Akshay S Pitti: Second important trend is a shift of manufacturing from Europe to India. The sharp increase in energy, labor, and material costs in Europe has impacted the competitiveness of European manufacturing. In motors and generators as well as casting and machining, customers are increasingly evaluating India for sourcing and manufacturing. Importantly, this opportunity is not limited to direct exports as an increasing portion of what we supply to the Indian operations of our global customers are eventually getting exported, creating an indirect export opportunity for us as well. The third driver is electrification. Electrification is creating structural demand for electrical steel laminations at both sides of the consumption spectrum. That is the energy generation as well as consumption. We believe this is a long-term trend that will support our growth of lamination business in the future. Within this environment, we are particularly well-positioned because of the breadth of our capabilities.

Speaker #2: The sharp increase in energy, labor, and material costs in Europe has impacted the competitiveness of European manufacturing. In motors and generators, as well as casting and machining, customers are increasingly evaluating India for sourcing and manufacturing.

Speaker #2: Importantly, this opportunity is not limited to direct exports, as an increasing portion of what we supply to the Indian operations of our global customers is eventually getting exported.

Speaker #2: Creating an indirect export opportunity for us as well. The third driver is electrification. Electrification is creating structural demand for electrical steel laminations at both sides of the consumption spectrum.

Akshay S Pitti: The third driver is electrification. Electrification is creating structural demand for electrical steel laminations at both sides of the consumption spectrum. That is the energy generation as well as consumption. We believe this is a long-term trend that will support our growth of lamination business in the future. Within this environment, we are particularly well-positioned because of the breadth of our capabilities.

Speaker #2: That is the energy generation as well as consumption. We believe this is a long-term trend that will support the growth of our lamination business in the future.

Speaker #2: Within this environment, we are particularly well-positioned because of the breadth of our capabilities. We have progressively expanded from lamination into casting, machining, shaft manufacturing, and integrated SMD.

Akshay S Pitti: We have progressively expanded from lamination into casting, machining, shaft manufacturing, and integrated assembly. What differentiates us is our ability to provide multiple components and processes under one roof. This becomes particularly valuable in complex applications such as railways, wind power, specialty motors, off-highway equipment, where customers increasingly prefer integrated solutions rather than a smaller supply base. Importantly, our capacity expansion has historically been gradual and closely linked to customer demand. However, the level of demand and opportunities that we are seeing today require us to undertake larger capacity additions. We have recently commenced operations of the previously announced INR 150 crore CapEx, which was announced last year, increasing our sheet metal capacity to 108,000 tons and augmenting our casting and machining capacity. We are now progressing with a INR 290 crore investment for our greenfield casting facility in Hyderabad.

Speaker #2: What differentiates us is our ability to provide multiple components and processes under one roof. This becomes particularly valuable in complex applications such as railways, wind power, specialty motors, and off-highway equipment.

Speaker #2: Customers increasingly prefer integrated solutions rather than a smaller supply base. Importantly, our capacity expansion has historically been gradual and closely linked to customer demand.

Akshay S Pitti: Importantly, our capacity expansion has historically been gradual and closely linked to customer demand. However, the level of demand and opportunities that we are seeing today require us to undertake larger capacity additions. We have recently commenced operations of the previously announced INR 150 crore CapEx, which was announced last year, increasing our sheet metal capacity to 108,000 tons and augmenting our casting and machining capacity. We are now progressing with a INR 290 crore investment for our greenfield casting facility in Hyderabad.

Speaker #2: However, the level of demand and opportunities that we are seeing today require us to undertake larger capacity additions. We have recently come into operations of the previously announced ₹150 crore capex, which was announced last year.

Speaker #2: Increasing our sheet metal capacity to 108,000 tons and augmenting our casting and machining capacity. We are now progressing with the 290 crore investment for our greenfield casting facility in Hyderabad.

Speaker #2: This facility will help consolidate our foundry operations and provide the infrastructure required for the next phase of growth. Our objective is to build capacity ahead of the demand curve.

Akshay S Pitti: This facility will help consolidate our foundry operations and provide the infrastructure required for the next phase of growth. Our objective is to build capacity ahead of the demand curve. Speaking of sectoral demand and growth opportunity is broad-based. Our data centers have emerged as a strong near-term opportunity, given the significant power requirements for both primary and backup power generation. We are seeing strong demand from customers such as Cummins, Marathon, Nidec, and are also developing opportunities with a couple of more marquee customers. At the same time, we remain mindful that the pace of AI data center investments may not be sustainable indefinitely. Therefore, we are confident about the underlying growth in regular data centers, driven by cloud adoption and data localization. We remain measured in our approach to the overall data center opportunity.

Speaker #2: Speaking of sectoral demand and growth opportunity, it is broad-based. Our data centers have emerged as a strong near-term opportunity, given the significant power requirements for both primary and backup power generation.

Speaker #2: We have seen strong demand from customers such as Cummins, Marathon, and Nidec, and are also developing opportunities with a couple more marquee customers. At the same time, we remain mindful that the pace of AI data center investments will not be sustainable indefinitely.

Akshay S Pitti: We are seeing strong demand from customers such as Cummins, Marathon, Nidec, and are also developing opportunities with a couple of more marquee customers. At the same time, we remain mindful that the pace of AI data center investments may not be sustainable indefinitely. Therefore, we are confident about the underlying growth in regular data centers, driven by cloud adoption and data localization. We remain measured in our approach to the overall data center opportunity.

Speaker #2: Therefore, we are confident about the underlying growth in regular data centers, driven by cloud adoption and data localization. We remain measured in our approach to the overall data center opportunity.

Speaker #2: Beyond data centers, we are seeing strong visibility in railways, metros, mining, and off-highway equipment, as well as specialty end-use applications in the industrial sector. Modernization of North American railways and increasing mining activity are all supporting demand for our products.

Akshay S Pitti: Beyond data centers, we are seeing strong visibility in railways, metros, mining, and off-highway equipment, and specialty end-use applications in industrial sector. Modernization of North American railways and increasing mining activity are all supporting demand for our products. Over the longer term, we are also seeing automotive and electric mobility as an important opportunity. While our presence in automotive is currently limited, we are actively looking to participate more meaningfully as India's automotive manufacturing ecosystem expands and electrification creates new opportunities. Overall, we believe Pitti is at an important stage in its evolution. The combination of global supply chain realignment, India's manufacturing competitiveness, electrification and expanding capacities, and capabilities across lamination, casting, machining, and integrated assemblies provide us with a strong platform for sustained growth. Coming to the operational and financial performance for the quarter.

Speaker #2: Over the longer term, we are also seeing automotive and electric mobility as important opportunities. While our presence in automotive is currently limited, we are actively looking to participate more meaningfully as India's automotive manufacturing ecosystem expands and electrification creates new opportunities.

Speaker #2: Overall, we believe Pitti is at an important stage in its evolution. The combination of global supply chain realignment, India's manufacturing competitiveness, electrification, and expanding capacities and capabilities across lamination, casting, machining, and integrated SMDs provides us with a strong platform for sustained growth.

Akshay S Pitti: Overall, we believe Pitti is at an important stage in its evolution. The combination of global supply chain realignment, India's manufacturing competitiveness, electrification and expanding capacities, and capabilities across lamination, casting, machining, and integrated assemblies provide us with a strong platform for sustained growth. Coming to the operational and financial performance for the quarter.

Speaker #2: Coming to the operational and financial performance for the quarter, our revenue mix of traction motors and railway components remains the largest contributor, accounting for 28% of revenue.

Akshay S Pitti: Our revenue mix of traction motor and railway components remained the largest contributors, accounting for 28% of revenue. This was followed by power generation at 15%, industrial and commercial applications at 12%, mining, oil and gas at 10%, special application motors at 9%, and data center at 5%, renewable energy at 3%, other segments at 17%. This diversified revenue profile reflects the broad-based nature of our business and presence across several structural growth segments. Moving to volumes. Total lamination and assembly volumes stood at approximately 19,200 tons, registering a healthy 18% year-on-year growth. Importantly, within lamination, higher value-added assemblies, including integrated rotor shaft and stator assemblies, grew faster than loose lamination. This reflects the continued improvement in the product mix and increasing contribution from value-added offerings. Total casting and machine components volumes stood at 30,191 tons during the quarter, a growth of 4.2% year-on-year basis.

Speaker #2: This was followed by power generation at 15%, industrial and commercial applications at 12%, mining, oil, and gas at 10%, special application motors at 9%, and data centers at 5%.

Speaker #2: Renewable energy is at 3%, and other segments are at 17%. This diversified revenue profile reflects the broad-based nature of our business and our presence across several structural growth segments.

Speaker #2: Moving to volumes, total lamination and assembly volumes stood at approximately 19,200 tons, registering a healthy 18% year-on-year growth. Importantly, within lamination, higher value-added assemblies, including integrated rotor shaft and stator assemblies, grew faster than loose lamination.

Akshay S Pitti: Total lamination and assembly volumes stood at approximately 19,200 tons, registering a healthy 18% year-on-year growth. Importantly, within lamination, higher value-added assemblies, including integrated rotor shaft and stator assemblies, grew faster than loose lamination. This reflects the continued improvement in the product mix and increasing contribution from value-added offerings. Total casting and machine components volumes stood at 30,191 tons during the quarter, a growth of 4.2% year-on-year basis.

Speaker #2: This reflects a continued improvement in the product mix and increasing contribution from value-added offerings. Total casting and machined components volumes stood at 13,191 tons during the quarter, a growth of 4.2% on a Y-o-Y basis.

Speaker #2: On capacity utilization, we witnessed meaningful improvement across our operations during the quarter. Sheet metal utilization increased to 73% in Q1 FY27, compared to 70%.

Akshay S Pitti: On capacity utilization, we witnessed meaningful improvement across our operations during the quarter. Sheet metal utilization increased to 73% Q1 FY27 compared to 70%. Machining utilization also improved to 86% compared to 82%. Casting and fabrication utilization stood at 72%. Turning to the financial performance, revenue from operations for Q1 FY27 stood at INR 529 crores, compared to INR 457 crores in Q1 FY26, a growth of 16% year-on-year. Adjusted EBITDA stood at INR 89 crores, compared to INR 78 crores for Q1, representing a growth of 14%. Adjusted EBITDA margin was 16.8% for the quarter. Adjusted PAT was INR 32 crores compared to INR 26 crores in Q1 FY26.

Speaker #2: Machining utilization also improved to 86%, compared to 82%. Casting and fabrication utilization stood at 72%. Coming to the financial performance, revenue from operations for Q1 FY27 stood at ₹529 crore, compared to ₹457 crore in Q1 FY26.

Speaker #2: A growth of 16% year over year. Adjusted EBITDA stood at ₹89 crores, compared to ₹78 crores for Q1. This represents a growth of 14%.

Akshay S Pitti: Adjusted EBITDA stood at INR 89 crores, compared to INR 78 crores for Q1, representing a growth of 14%. Adjusted EBITDA margin was 16.8% for the quarter. Adjusted PAT was INR 32 crores compared to INR 26 crores in Q1 FY26.

Speaker #2: Adjusted EBITDA margin was 16.8% for the quarter. Adjusted PAC was ₹32 crore, compared to ₹26 crore in Q1 FY26. As the recently concluded capex comes on stream, we are confident of achieving significant growth in the remaining year.

Akshay S Pitti: As our recently concluded CapEx comes on stream, we are confident of achieving significant growth in the remaining year. Therefore, we are revising our annual target to 82,000 tons for lamination from 78,000 tons as previously stated in Q4 conference call. Overall, we remain focused on executing our expansion plans and deepening our relationships with existing customers and capturing new opportunities across both domestic and global markets. With that, I will now open the floor for Q&A session. Thank you.

Speaker #2: And therefore, we are revising our annual target to 82,000 tons for lamination, up from 78,000 tons as previously stated in the Q4 conference call. Overall, we remain focused on executing our expansion plans, deepening our relationships with existing customers, and capturing new opportunities across both domestic and global markets.

Speaker #2: With that, I will now open the floor for the Q&A session. Thank you.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone.

Akshay S Pitti: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Bala Subramanian from Aranyani Capital. Please go ahead. Bala Subramanian, please unmute your line and proceed with your question.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Bala Subramanian from Aranyani Capital. Please go ahead. Bala Subramanian, please unmute your line and proceed with your question.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take the first question from the line of Bala Subramaniam from Aryanth Capital.

Speaker #1: Please go ahead. Bala Subramaniam, please unmute your line and proceed with your question.

Speaker #3: Sorry I'm audible.

Bala Subramanian: Sir, I am audible?

Speaker #1: Yes, please go ahead.

Bala Subramanian: Yes, please go ahead.

Operator: Yes, please go ahead.

Speaker #3: Yeah, good evening, sir. Thank you so much for the opportunity. Sir, I'm looking at high-value stator and rotor assemblies. The volume growth is nearly 37%, which is outpacing loose lamination growth of 16%.

Bala Subramanian: Good evening, sir. Thank you so much for the opportunity. Sir, I am looking at high-value stator and rotor assemblies. The volume growth is nearly 37%, which is outpacing loose lamination growth of 16%. Which are the applications or sectors we have supplied especially for high-value stator and rotor assemblies? Secondly, earlier call mentioned about raw castings, EBITDA per ton, it is around INR 30,000 to INR 35,000, while machined casting is around INR 80,000 to INR 100,000. If you could mention about high value-added assemblies and integrated assemblies EBITDA pattern also.

Speaker #3: So, for which are the applications or sectors we have supplied, especially for high-value stator and rotor assemblies? And secondly, the earlier call mentioned about raw castings—EBITDA per ton is around ₹30,000 to ₹35,000, while machined castings are around ₹80,000 to ₹100,000.

Speaker #3: So, if you could mention about high-value-added assemblies and integrated assemblies, and EBITDA per ton also.

Speaker #2: Oh, the growth in high value-added lamination assemblies is primarily driven by data centers. It's driven by special industrial use, and mining for highways and railways.

Akshay S Pitti: The growth in high-value-added lamination assemblies is primarily driven from data centers. It is driven from special industrial use, mining of 5G, and wind-based. These are the areas where these higher value-added assemblies are typically used, and that is the sectors, as you can see, which have grown in the recent past. As to the EBITDA pattern of the integrated assemblies, it is very difficult to say because it depends on the kind of casting and machining which has been integrated into the lamination assembly. The margin, we cannot literally go on a EBITDA pattern basis there. It is a mix of all three verticals, which is machining, casting, and lamination.

Speaker #2: So these are the areas where these higher value-added assemblies are typically used, and these are the sectors, as you can see, which have grown in the recent past.

Speaker #2: As to the EBITDA per ton of the integrated assemblies, it's very difficult to say because it depends on the kind of casting and machining which has been integrated into the lamination assembly.

Speaker #2: So the margin—we cannot literally go on the EBITDA per ton basis there. It's a mix of all three verticals, which are machining, casting, and lamination.

Bala Subramanian: Okay, sir. Sir, data center side, you mentioned our revenue share is around 5%. If you look at most of that demand is coming from US and Europe market, especially for data centers. Whether majorly we are supplying domestically or we are also getting lot of traction from exports market side. If we could share, is there any new customer additions across geographies? Whether it is primarily for high-value stator rotor assemblies for cooling and power package system or any other components we are supplying.

Speaker #3: Okay, sir. Sir, on the data center side, you mentioned our revenue share is around 5%. If you look at it, most of that demand is coming from the US and Europe markets, especially for data centers.

Speaker #3: So, whether we are supplying mainly domestically or also getting a lot of traction from the export market side—if you could share that.

Speaker #3: Are there any new customer additions across the geographies? And is it primarily for high-value stator rotor assemblies for cooling and power backup systems, or are there any other components we are supplying?

Speaker #2: So, what we currently classify as data centers in our revenue mix is primarily the power generation side of data centers. Anything that we may be supplying for cooling applications, we would not have that distinction given by the customer to us.

Akshay S Pitti: What we currently classify as data centers in our revenue mix is primarily the power generation side of data centers. Anything that we may be supplying for cooling application, we would not have that distinction given by the customer to us. It would still be classified under industrial use. As far as the data center that is classified into PPT, which is for the power generation side is concerned, we have direct exports to US for one customer, and for a couple of other customers, we are supplying this product in India, which is both used for local market as well as re-export to other countries.

Speaker #2: So, it would still be classified under industrial use. As far as the data center that is classified into PPT, which is for the power generation side, is concerned, we have direct exports to the US for one customer, and for a couple of other customers we are supplying this product in India.

Speaker #2: Which is used both for the local market as well as for export to other countries.

Speaker #3: Okay, sir. So, my third question: the plan, the capex of ₹290 crores—if you could share the breakup between machined components facilities, castings, or assemblies, and if you could share the roadmap.

Bala Subramanian: Okay, sir. My third question, the plant CapEx of INR 290 crore. If you could share the breakup between machined components facilities and castings or assemblies. If you could share the roadmap. I think it is planned to commission by Q1 FY29. How much CapEx by FY27 and FY28 we can expect?

Speaker #3: I think it's planned to be commissioned by Q1 FY29. So, how much capex is expected in FY27 and FY28? We can explain.

Speaker #2: Oh, we have already incurred about ₹60 crores of capex from that ₹290 crores capex announcement. It's a greenfield and expansion, so we have started with the land acquisition.

Akshay S Pitti: We have already incurred about INR 60 crore of CapEx from that INR 290 crore CapEx announcement. It is a greenfield and expansion, so we have started with the land acquisition. I would say that, as you can see on the PPT, slide 5 of Q4, we have given the breakup between machinery and infrastructure investment. Infrastructure investment is about 30% and 70% is going towards plant and equipment. I would not have a quarter on year-by-year expenditure plan, but the capacity is expected for commissioning by Q1 FY30, as we have mentioned in the previous call.

Speaker #2: I would say that, as you can see in the PPT, slide five of Q4, we have given the breakup between machining and machinery and infrastructure investment.

Speaker #2: Infrastructure investment is about 30%, and 70% is going towards plant and equipment. I do not have a quarter- or year-by-year expenditure plan, but the capacity is expected for commissioning by Q1 FY30, as we had mentioned in the previous call.

Speaker #3: Okay, got it, sir. Thank you.

Bala Subramanian: Okay, got it, sir. Thank you.

Speaker #1: Thank you. Participants who wish to ask a question, please press star and one. We will take the next question from the line of Mohit Jain from Deven Choksey PMS.

Bala Subramanian: Thank you. Participants who wish to ask a question, please press star and one. We take the next question from the line of Mohit Jain from Deven Choksey PMS. Please go ahead.

Operator: Thank you. Participants who wish to ask a question, please press star and one. We take the next question from the line of Mohit Jain from Deven Choksey PMS. Please go ahead.

Speaker #1: Please go ahead.

Speaker #3: Hi, Akshay sir. Congratulations on the good set of numbers again. Sir, I have just this question on exports. So, in absolute terms, exports were roughly flat.

Mohit Jain: Hi, Akshay sir. Congratulations on a good set of number again. I have just this question on exports. In absolute terms, exports was roughly flat. Last year we did about INR 137 crore, this year INR 139 crore, or vice versa. You have been highlighting this China Plus One and parent-driven sourcing shifts as a tailwind for you. On the other hand, domestic grew 23%. Is it export flatness just the orders you have been getting in the year, or you are really seeing customer de-risk?

Speaker #3: You know, last year we did about ₹137 crore. This year, ₹139 crore, or vice versa. And we have been highlighting this China-plus-one and, you know, Paris-driven sourcing shift as tailwinds for us.

Speaker #3: So, and on the other hand, domestic group is 23%. So is this export flatness just, you know, the orders using within the year, or are you really seeing customer delays?

Akshay S Pitti: Exports will again pick up in Q3, Q4. The direct exports are remaining kind of steady, registering nominal growth. What is a bigger opportunity for us is the indirect exports. Like I said in my speech, we are seeing increasingly a situation where we are supplying to the local operations of our global customers, and those products are getting made in India and then exported all over the world.

Speaker #2: Up in Q3, Q4. And the direct exports are remaining, you know, kind of steady, registering nominal growth. What's a bigger opportunity for us is the indirect exports.

Speaker #2: So, like I said in my speech, we are increasingly seeing a situation where we are supplying to the local operations of our global customers.

Speaker #2: And those products are being made in India and then exported all over the world.

Speaker #3: Okay. So you're thinking in the second half, you'll see a surge in exports.

Mohit Jain: Okay. You are thinking in H2 we will see a surge in exports?

Speaker #2: Yeah, I think in Q2, Q3, and Q4, quarter-on-quarter, you should be seeing an increment in direct exports as we ramp up the new capacity.

Akshay S Pitti: Yeah, I think Q2, Q3, Q4, quarter-on-quarter, you should be seeing improvement in direct exports as we ramp up the new capacity.

Speaker #3: Got it. And, sir, lastly, we checked that we had some NPV issues—not only us, but the entire industry—because of the war. So, has that issue subsided? And, you know, we were also planning to do some electrification there.

Mohit Jain: Got it. And sir, lastly, we checked that we had some LPG issues, not only we, the entire industry because of the war. Has that issue subsided? And we were also planning to do some electrification there. What is the status there?

Speaker #3: So what's the status there?

Speaker #2: So, we are currently doing the electrification. A lot of it is already done. And right now, there's no LPG issue, so we have steady supplies of LPG coming in.

Akshay S Pitti: We are currently doing the electrification. A lot of it is already done. Right now there is no LPG issue. We have steady supplies of LPG coming in. Whatever is the incremental cost, obviously, is being incurred by the company, and it is being compensated by the customers as well.

Speaker #2: Whatever the incremental cost is, obviously, it is being incurred by the company and is being compensated by the customers as well.

Speaker #3: Got it, sir. Thank you. Thank you, and have a nice day.

Mohit Jain: Got it, sir. Thank you, and have a nice day.

Speaker #2: Yeah, thank you.

Akshay S Pitti: Yeah, thank you.

Speaker #1: Thank you. We will take the next question from the line of Rahul Kumar from Vaikaria Fund. Please go ahead.

Akshay S Pitti: Thank you. We take the next question from the line of Rahul Kumar from Vicaria Fund. Please go ahead.

Operator: Thank you. We take the next question from the line of Rahul Kumar from Vicaria Fund. Please go ahead.

Speaker #3: Yeah, hi. Thanks. I think, congratulations on the great share of numbers, actually. Just one question on this margin: Actually, if you see, you know, the value-added product mix has actually improved for the lamination.

Rahul Kumar: Yeah. Hi. Thanks. I think congratulations on the great set of numbers actually. Just one question on this margin. If you see the value-added product mix has actually improved for the lamination, as well as the machine component also have improved as a share of overall business. But if I look at the margins, they are more or less flat. So what would have driven that?

Speaker #3: As well as the machine component also have improved as a share of overall business. But if I look at the margins, actually, they are more or less flat.

Speaker #3: So, what would have driven that?

Speaker #2: So, if you look at the cost in the P&L, manpower cost is slightly higher when compared to the previous time, and that's primarily because of the capex that we have incurred.

Akshay S Pitti: If you look at the cost in the P&L, manpower cost is slightly higher when compared to the previous time, and that is primarily because of the CapEx that we have incurred. We have put in all the manpower and expenses in place. As we start using the capacity and the operating leverage kicks in, the margin will improve.

Speaker #2: We have, you know, put in all the manpower and expenses in place. As we start using the capacity and the operating leverage kicks in, the margin will improve.

Speaker #3: Okay. Okay. Okay. Is there also a case that, you know, the traction motors which you supply are of higher margin versus the company average? And given the fact that I think this quarter there is some more softness in the traction motors, does that also lead to some margin softness?

Rahul Kumar: Okay. Is there also a case that the traction motors, which you supply are of higher margin versus a company average? Given the fact that this quarter there is some more softness in the traction motors, does that also lead to some margin softness?

Speaker #2: No, I would not say that would be the case because if you see the other three segments which have really grown very well in this quarter—namely, your mining and oil and gas segment, as well as the special purpose applications—these typically have a superior margin when compared to even railway products in certain cases.

Akshay S Pitti: No, I would not say that would be the case, because if you see the other three segments which have really grown very well this quarter, namely your mining and oil and gas segment as well as the special purpose applications, these typically have a superior margin when compared to even railway products in certain cases.

Speaker #3: Okay. Okay.

Rahul Kumar: Okay.

Speaker #2: So it's just that the operating leverage needs to kick in, because we have finished the capex of ₹150 crores, and obviously the staffing and variable costs have all come in, and the leverage is not coming in terms of the operating leverage.

Akshay S Pitti: Also, it's just that the operating leverage needs to kick in because we have finished the CapEx of INR 150 crore, and obviously the staffing and variable costs have all come in, and the leverage has not come in in terms of the operating leverage.

Speaker #3: Understood. Got it. Got it. Got it. So, I think you have actually mentioned in the opening remarks about upgrading the volume guidance for this year to 82,000.

Rahul Kumar: Understood. Got it. I think you mentioned in the opening remarks of the upgrading the volume guidance for this year to 82,000. If extending this, let's say to FY28 and FY29, what are the targets for that and do we have the capacity or you will decide to expand, let's say at the end of FY28 or something like that?

Speaker #3: So is extending this, let's say, to FY28 and 29, what are the targets for that? And, you know, do we have the capacity or, you know, you will decide to expand let's say at the end of FY28 or something like that?

Speaker #3: So if I have to look,

Akshay S Pitti: If I have to look beyond FY27 towards 2028 and 2029, like I had mentioned, I think in one of the previous calls, we are strategically would look to have a fully owned facility in Bangalore, akin to something like a facility that we own in Aurangabad today. Eventually that is something that we should start working on. If I look at the capacity side, with this 82,000 tons being the target for current year and 108,000 tons being the capacity, we only have a headroom to grow about 8,000 tons with the current facility, assuming the 80% operating efficiency. Also, definitely for FY28, there will be some incremental CapEx to increase the capacity, but we will do it closer towards Q3, Q4 timeframe, because we can still moderately expand in some of the facilities.

Speaker #2: FY27, towards '28 and '29, like I had mentioned, I think, in one of the previous calls, strategically we would look to have a fully owned facility in Bangalore, akin to something like a facility that we own in Aurangabad today.

Speaker #2: So eventually that would is something that we should start working on. If I look at the capacity side, with this 82,000 tons being the target for current year, and 108,000 tons being the capacity, we only have a headroom to, you know, grow about 8,000 tons with the current facilities assuming the 80% operating efficiency.

Speaker #2: So, definitely, for FY28, there will be some incremental capex to increase the capacity. But we will do it closer towards the Q3, Q4 timeframe because we can still moderately expand in some of the facilities.

Speaker #2: Over maybe ’28 and ’29, we should be looking at doing a capex in Bangalore for that facility which I mentioned.

Akshay S Pitti: Over maybe 2028 and 2029, we should be looking at doing a CapEx in Bangalore for that facility, which I mentioned.

Speaker #3: Okay. Understood. Understood.

Rahul Kumar: Okay, understood.

Speaker #2: But there will be a lot of tracking it very closely with the market trends and how the demand is shaping up, because we don't want to be exposed on, you know, making the investment and not having the business.

Akshay S Pitti: We'll be tracking it very closely with the market trends and how the demand is shaping up, because we don't want to be exposed on making the investment and not having the business.

Speaker #3: Okay, okay. But in terms of volume growth, let's say if we are looking at 17–18% growth for this year, for the next two years, do you also want to look at a similar kind of growth, or, because of all these...?

Rahul Kumar: Okay. But in terms of volume growth, let's say if we are looking at 17%, 18% growth for this year, for next three years, do you also want to look at similar kind of a growth or because of all these-

Speaker #2: If I just look at the outlook and the demand forecast from the customers, we do see that kind of growth over the next three years.

Akshay S Pitti: If I just look at the outlook and the demand forecast from the customers, we do see that kind of a growth over the next three years. But it is coming from segments which are, I would say, can change very quickly. So like mining and oil and gas are segments which go up very fast and can correct very fast. And data center is obviously a very new segment, and it is growing very fast. So it is something we do not want to invest ahead of time too much for.

Speaker #2: But, you know, it's coming from segments which are I would say can change very quickly. So, you know, like mining and oil and gas are segments which go up very fast and can correct very fast.

Speaker #2: And data center is, you know, obviously a very new segment and it's growing very, very fast. So it's something, you know, we don't want to invest ahead of time too much for.

Speaker #3: Understood. Understood. Understood. Okay. And I think we had done the expansion of the casting facility also in this quarter. I think you guys just finished.

Rahul Kumar: Understood. Okay. And I think you have done the expansion of casting facility also in this quarter. I think that is finished. So if I remember right, the last time you had mentioned that the volumes for the casting target would be somewhere around 16,000 for this fiscal, right?

Speaker #3: So, if I remember right, the last time you had mentioned that the volumes for the casting target would be somewhere around 16,000 for this fiscal.

Speaker #3: Right?

Speaker #2: Yes.

Akshay S Pitti: Yes.

Rahul Kumar: And I think currently the share of your machine components is, I think, 60% plus. So do you want to maintain a relatively sharp jump back to the almost 60% kind of a jump over the last year? So do we have the demand visibility for that? And two, I think, what will be the share of machine component in that?

Speaker #3: And I think currently the share of your machine components is, I think, 50–60% plus. So do you want to—I mean, do we want to maintain that? That's a pretty sharp jump, actually, almost a 60% kind of jump over the last year.

Speaker #3: So, do we have the demand visibility for that? And two, what would be the share of, you know, machine component in that?

Speaker #2: Yeah, I would say that both the product categories are growing. Casting and machine components—obviously, the growth in machine components is higher, as more and more customers want machine components rather than just a raw casting as a supply chain solution for them.

Akshay S Pitti: Product categories are growing, casting and machine components. Obviously, the growth in machine components is higher as more and more customer wants machine components rather than just a raw casting as a supply chain solution for them. We have very strong visibility in the machining space. So part of the CapEx that we have announced, INR 290 crores, taking the machining capacity to 10 lakh, 80,000 machine hours, will be progressively implemented over the next few quarters. I mean, every quarter on quarter we will be having capacity addition, so you should see machining volume increase. Casting capacity has gone to 24,000 tons. We would be upward guiding the casting numbers to about 17,000 tons as well.

Speaker #2: We have very strong visibility and in the machining space. So part of the capex that we've announced to 190 crores taking the machining capacity to 10 back 80,000 machine hours, will be progressively implemented over the next few quarters.

Speaker #2: I mean, every quarter-on-quarter we'll be having capacity addition, so you should see machining volume increase. Casting capacity has gone to 24,000 tons.

Speaker #2: We would be upward guiding the casting numbers to about 17,000 tons as well. And out of that, the share of machining would depend on how quickly our machines come in and we are able to put them to use.

Akshay S Pitti: Out of that, what will be the share of machining would depend on how quickly our machines come in and we are able to put them to use, because the current capacity utilization on machining is almost 86.33%. That is the biggest bottleneck for us in terms of ability to grow the machine components. It is not the order book, the ability to get machines fast enough.

Speaker #2: Because the current capacity utilization on machining is almost 86.33%, and that is the biggest bottleneck for us in terms of ability to grow the machine components.

Speaker #2: It's not the order book. It's the ability to get machines fast enough.

Speaker #3: Understood. Understood. So in summary, I think we can see a sharp jump in casting volume over this year, and depending upon the machining capacity, we can also ramp up the higher value-add machined component as well.

Rahul Kumar: Understood. So in summary, I think we can see a casting volume sharp jump over this year, and depending upon the machining capacity, we can also ramp up the higher value-add machine component as well.

Speaker #2: Yes.

Akshay S Pitti: Yes.

Speaker #3: Okay. Okay. That's great. Just one last question. On the debt plans—last time when we had discussed, the debt was a bit elevated because of the higher inventory situation, right?

Rahul Kumar: Okay. That is great. Just last question, on the debt plans. I think last time when we had discussed, the debt was a bit elevated because of the higher inventory situation there.

Speaker #3: So, what is the situation now, and, you know, where do we want to—or where would the debt settle—over, let's say, the next one or two years?

Akshay S Pitti: Yes.

Rahul Kumar: What is the situation now and where would the debt settle over, let's say, next one year or two years?

Speaker #2: So right now, the net debt is somewhere around ₹491 crore as of last quarter end. And we have already incurred, like I said, about ₹60-odd crore of expenditure out of the ₹290 crore.

Akshay S Pitti: Right now the net debt is somewhere around INR 491 crores as of last quarter end. We have already incurred, like I said, about INR 60-odd crores of expenditure out of the INR 290 crores. Despite that, we have been able to meaningfully reduce our net debt, and I think there is still potential to further rationalize our working capital to the tune of about INR 25, 30 crores.

Speaker #2: So, despite that, we've been able to meaningfully reduce the net debt. And I think there is still potential to further, you know, rationalize our working capital to the tune of about ₹25–30 crore.

Speaker #3: Okay. Okay. Okay. Okay. But actually, our interest cost hasn't actually gone down. I think it's even though the debt has actually reduced.

Rahul Kumar: Okay. But actually, our interest cost has not actually gone down. I think it is even though the debt has been reduced.

Speaker #2: Yeah, so that's the finance cost. Actually, this quarter, if you see, the dollar has moved quite sharply due to the West Asia crisis, and there's a forex impact of about ₹2 crore, which is, you know, accounted in the finance cost.

Akshay S Pitti: Yeah. That is a finance cost. Actually, this quarter, if you see, the dollar has moved quite sharply due to the West Asia crisis.

Akshay S Pitti: And there is a Forex impact of about 2 odd crores, which is accounted in the finance cost. The interest and bank charges are about INR 19.6 crores and the Forex impact is about INR 3 crores, not INR 2 crores, my mistake.

Speaker #2: The interest and bank charges are about ₹19.6 crores, and the forex impact is about ₹3 crores—not ₹2 crores, that was a mistake.

Speaker #3: Okay, okay. Understood, understood. Okay. So that is more related to the currency translation rather than actual interest. Okay, understood, understood.

Rahul Kumar: Okay. Understood. So that is more related to the currency translation rather than actual interest?

Akshay S Pitti: Yes.

Rahul Kumar: Okay. Understood.

Speaker #2: If you have to take a comparative number, for Q1 FY26, it was, I think, about ₹1 crore, which was a forex impact. So, the rationalization of interest and cost and bank charges has taken place, but the forex is not, you know, allowing it to be visible on the P&L.

Akshay S Pitti: If you have to take a comparative number for Q1 FY26, it was I think about INR 1 odd crore, which was a Forex impact. So the rationalization of interest and cost and bank charges have taken place, but the Forex is not allowing it to be visible on the P&L.

Speaker #3: Understood. Understood. Understood. And just the last question, I think, on the other income part. If I remember correctly, we had done, I think, ₹400 crore of capex, and every year we are getting this incentive from the state government.

Rahul Kumar: Understood. Just a last question, I think on the other income part, if I remember.

Akshay S Pitti: Yeah

Rahul Kumar: We had done, I think, INR 400 crore of CapEx, and every year we are getting this incentive from the state government. You were having some shift of this seven-year plan to nine-year plan. Can you help us understand how would it pan out in terms of impact on P&L for this year and the next year?

Speaker #3: And you were having some shift of this seven-year plan to nine-year plan. Just, can you help us understand how it would pan out in terms of impact on the P&L?

Speaker #3: For this year and the next year?

Speaker #2: So, we had done a ₹220 crore capex, which was giving us the incentive in the previous years. From this year, we are supposed to move to the expansion plan, which we had done of ₹400 crores, which would have typically yielded somewhere around ₹40 crores a year.

Akshay S Pitti: We had done a INR 220 crore CapEx, which was giving us the incentives in the previous years. From this year, we are supposed to move to the expansion plan, which we have done on INR 400 crores, which would have typically yielded somewhere around INR 40 crores a year. However, the eligibility certificate that we had received is for a seven-year reclamation period. The runway for us to recover the money is much higher than what the current sales are. We are evaluating whether to start claiming the incentive from current year or next year so as to maximize the net cash flow. More or less, we are coming to a conclusion that this year we would not be taking the incentive income because we would not be able to recover a large chunk of the money that we can recover next year.

Speaker #2: However, the eligibility certificate that we had received is for a seven-year reclamation period. So, the run rate for us to recover the money is much higher than what the current sales are.

Speaker #2: So, we are evaluating whether to, you know, start claiming the incentive from the current year or next year, so as to maximize the net cash flow.

Speaker #2: We are more or less coming to a conclusion that this year we would not be taking the incentive income, because we would not be able to recover a large chunk of the money that we can recover next year.

Speaker #3: Okay. Okay. So, last year, I think we had some 20-odd crores in Q2. That was basically the previous capex, which has not recurred this year.

Rahul Kumar: Okay. Last year, I think we had some INR 20-odd crores in the Q2. That was based on the previous CapEx, which will not reoccur this year. This INR 400 crores you are actually discussing with the government for nine-year plan, so possibly the next year onwards you will start accruing that. Is that correct?

Speaker #3: This ₹400 crores, you are actually discussing with the government for a nine-year plan. So, possibly from next year onwards, you will start echoing that. Is that correct?

Speaker #2: If you are able to successfully get the nine-year plan, then you take it this year, because then the required run rate to claim would be much lower.

Akshay S Pitti: If you are able to successfully get the nine-year plan, then we will take it this year because then the runway to claim would be much lower. Otherwise, we will try to defer it to next year so that the sales increase and then the opportunity to reclaim the money is higher.

Speaker #2: Otherwise, you'll try to defer it to next year so that the sales increase, and then the opportunity to reclaim the money is higher.

Speaker #3: Understood. Understood. Understood. Okay. Understood.

Rahul Kumar: Understood. Okay. Understood.

Akshay S Pitti: It is dependent on the government's decision. So we may or may not do it this year.

Speaker #2: So it's not dependent on the government's decision, so we may or may not do it this year. But definitely for next year, we should not be very late.

Rahul Kumar: Understood.

Akshay S Pitti: But definitely for next year we shall be getting it.

Speaker #3: Okay. Okay. Okay. Okay. Understood. And the previous incentive is already exhausted.

Rahul Kumar: Okay. Understood. The previous incentive is already exhausted?

Speaker #2: The previous one is already exhausted in terms of cash flow. We get to receive roughly about 70-odd crores from the government, which is expected to come in the next 9 to 12 months.

Akshay S Pitti: The previous one is already exhausted. In terms of cash flow, we are yet to receive roughly about 70-odd crores from the government, which is expected to come in the next nine to 12 months.

Speaker #3: Okay, got it. Understood. I'll get back in touch with you.

Rahul Kumar: Okay. Got it. Understood. I will get back into queue.

Speaker #2: Yeah.

Akshay S Pitti: Yeah.

Speaker #1: Thank you. Participants who wish to ask a question, please press star one. We will take the next question from the line of Shrikant from Pinpoint X Capital.

Akshay S Pitti: Thank you. Participants who wish to ask a question, please press star and one. We take the next question from the line of Srikanth from Spinpoint X Capital. Please go ahead.

Operator: Thank you. Participants who wish to ask a question, please press star and one. We take the next question from the line of Srikanth from Spinpoint X Capital. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Sir, thank you. We have capabilities in making the startup floater and shaft. Are we supplying our motors to industrial robot-making companies presently?

[Analyst] (Spinpoint X Capital): Thank you. As we have capabilities in making the starter, rotor, and shaft, whether we are supplying our motors to industrial robot-making companies presently?

Speaker #2: We don't make the motor. We make the components for motors. I'm pretty sure that some of our customers will be supplying these motors to many robotics companies.

Akshay S Pitti: We do not make the motor. We make the components for motors. I am pretty sure that some of our customers will be supplying these motors to many robotics companies. For example, we supply machines or laminations to ABB, and they also make robots. We supply to CG, we supply to Siemens, and I am pretty sure they supply to companies like KUKA and others for robots as well.

Speaker #2: For example, we supply robots—sorry, machines or laminations—to ABB, and they also make robots. We supply to CG, we supply to Siemens, and I'm pretty sure they supply to companies like KUKA and others for robots as well.

Speaker #2: Okay, okay. Then the next question is that we are increasing the casting capacity of our machines. As we have wind energy customers presently, are we planning to provide some new SKUs, like casting components, to the same wind energy companies going forward?

[Analyst] (Spinpoint X Capital): Okay. Next question is that we are increasing the capacity casting in machining. As we have presently wind energy customers, are we planning to provide some new FKK liquid casting components to the same wind energy company going forward?

Speaker #2: So, wind energy for us is a lamination side business. We don't do much for wind energy in the casting. On the casting side, our largest customers would be coming from the mining segment and the railway segments.

Akshay S Pitti: Wind energy for us is a lamination side business. We do not do much for wind energy in the casting. On the casting side, our largest customers would be coming from the mining segment and the railway segments.

Speaker #2: Okay. The wind energy castings, the wind energy castings are very, very large. Now, if you see, nobody is making a 1 or 2 megawatt turbine.

[Analyst] (Spinpoint X Capital): Okay, how about

Akshay S Pitti: The wind energy castings are very large. If you see, nobody is making a 1 or 2 megawatt turbine. People are doing 3, 4, 6 megawatt turbines, and the castings are 20 tons, 30 tons. So that is actually beyond our manufacturing capability today in terms of equipment.

Speaker #2: People are doing 3, 4, 6-megawatt turbines, and the castings are 20 tons, 30 tons. So that is actually beyond our manufacturing capability today in terms of equipment.

Speaker #2: Got the point. So, how is the traction from mining companies from the USA and Europe presently? Or is the inquiry something like this? It's very good.

[Analyst] (Spinpoint X Capital): Got the point. Sir, how is the traction from mining companies from USA and Europe presently? Are the inquiries something like this?

Akshay S Pitti: It is very good. I think that is one of the key sectors which we are seeing, which will grow for us in the casting and machining space. You can see in Q1, already mining as a segment has grown substantially for us from 5% of revenue to about 10% of revenue.

Speaker #2: I think that's one of the key sectors that we are seeing, which will grow for us in the casting and machining space. You can see in quarter one, already mining as a segment has grown substantially for us, from 5% of revenue to about 10% of revenue.

Speaker #2: Our final question is going to be very helpful. Can you discuss the application of our components in green hydrogen and marine applications? What is the usage of our components in the industry?

[Analyst] (Spinpoint X Capital): And final question, it will be very helpful. Can you application of our components in the green hydrogen and marine applications? What is the usage of our components in that two industries?

Speaker #2: That's two industries. So, in the green hydrogen space, we make anode and cathode plates for hydrogen electrolyzers for a customer in Europe. These are basically stainless steel components which are machined and supplied to that customer.

Akshay S Pitti: In the green hydrogen space, we make anode and cathode plates for hydrogen electrolyzers for a customer in Europe. These are basically stainless steel components, which are machined and supplied to that customer. It's not a very large business. If I'm not mistaken, it's about EUR 2 odd million kind of a business with the potential to grow, and this is something they keep saying all the time, that there's a potential to grow, but we always see it stuck at EUR 2 million. Coming to your marine thing, we classify that under special purpose motors. We do make components for marine propulsion, electric propulsion for marine ships, basically. We make marine generators.

Speaker #2: It's not a very large business. If I'm not mistaken, it's about 2 odd million euro kind of a business. With a potential to grow and I mean, this is something they keep saying all the time that there's a potential to grow, but we always see stuck at 2 million.

Speaker #2: Coming to your marine question, we classify that under special purpose motors. We do make components for marine propulsion—electric propulsion for marine ships, basically.

Speaker #2: We make marine generators, okay. Whether there's scope to increase the order book from these two segments going forward—if I think about it structurally, there are good tailwinds.

[Analyst] (Spinpoint X Capital): Okay. Whether there's scope to increase order book from these two segments going forward?

Akshay S Pitti: If I think about it structurally, there are good tailwinds. Europe and most of the world has mandated that in the coastal waters, people should not use diesel engines. They should use cleaner electric propulsion, so there would be tailwinds. In terms of our ability to expand, it all depends on how quickly the market expands. We have a large market share with the key customers who make these propulsion systems in Europe, and as they grow, we will grow that segment as well.

Speaker #2: Europe and most of the world have mandated that in coastal waters, people should not use diesel engines; they should use cleaner electric propulsion.

Speaker #2: So, they would be tailwinds. In terms of our ability to expand, it all depends on how quickly the market expands. We have a large market share with the key customers who make these propulsion systems in Europe.

Speaker #2: And as they grow, we will grow that segment as well.

Speaker #3: And one final question: we have superior capability in machining, so are we planning for any gear segment machining concepts? Are we planning to introduce that from new capex?

[Analyst] (Spinpoint X Capital): And one final question is that we have superior capability in machining, so we are planning for any gear segment machining concept. So just planning to introduce some new products.

Speaker #2: Sorry, I didn't get that. Did you mean, are we planning to do gear machining?

Akshay S Pitti: Sorry, I didn't get that. You mean, are we planning to do gear machining?

Speaker #3: Yeah, so we have very strong capabilities in machining, and we have some industrial customers who need gears. For a gear, you need a superior complexity of machining.

[Analyst] (Spinpoint X Capital): Yeah, that's right. So we have very strong capabilities in machining, and we have some industrial customers who need gears. For a gear you need a-

Akshay S Pitti: Yes

[Analyst] (Spinpoint X Capital): superior complexity of machining. So we are targeting such type of customers. Because gear machining is machining any component is very critical. So we have some strong experience from last many years. That's not my question.

Speaker #3: So we are targeting such type of customers, because gear machining or machining to any component is very critical. So we have some strong experience from the last many years.

Speaker #3: That's not my question.

Speaker #2: No, so we are not planning to enter the manufacturing of gears per se. The industrial gear manufacturing would be a capability that we have, and we can do.

Akshay S Pitti: No. We are not planning to enter the manufacturing of gears per se. The industrial gear manufacturing would be a capability that we have and we can do. However, in terms of a margin profile, we find that the products that we are making for mining, off-highway vehicles, and special purpose applications are far superior. Eventually, yes, that can be an opportunity to expand our business into.

Speaker #2: However, in terms of margin profile, we find that the products we are making for mining, off-highway vehicles, and special purpose applications are far superior.

Speaker #2: But eventually, yes, that can be an opportunity to expand our business into.

Speaker #3: Sure. Sure. Thank you.

[Analyst] (Spinpoint X Capital): Sure. Thank you, sir.

Speaker #1: Thank you. We take the next question from the line of Sai Shreyas from Scientific Investing. Please go ahead.

[Analyst] (Spinpoint X Capital): Thank you. We take the next question from the line of Sai Shreyas from Scientific Investing. Please go ahead.

Operator: Thank you. We take the next question from the line of Sai Shreyas from Scientific Investing. Please go ahead.

Speaker #2: Hello. Am I audible, sir? Yes? Yeah. Hi, sir. Thanks for the opportunity. So, I have a couple of questions. The first one is: Can you confirm whether the current utilization numbers are on the latest expanded capacity?

Sai Shreyas V: Hello. Am I audible, sir?

Akshay S Pitti: Yes.

Sai Shreyas V: Yeah. Hi, sir. Thanks for the opportunity. I have a couple of questions. The first one is, can you confirm whether the current utilization numbers are on the latest expanded capacity? If yes, given the company's operating at higher utilization, why is the margin in the same range and is there any meaningful margin expansion opportunity going forward?

Speaker #2: If yes, given that the company is operating at higher utilization, why are the margins in the same range? And is there any meaningful margin expansion opportunity going forward?

Speaker #2: So if you look at the capacity utilization, it's at 1.8 thousand tons for lamination in Q1. So the higher utilization is on the higher capacity.

Akshay S Pitti: If you look at the capacity utilization, it's on 108,000 tons for lamination in Q1. The higher utilization is on the higher capacity.

Speaker #2: Okay. So, is there any chance of margin improvement, and any guidance for FY27? Definitely. Overall margins will improve as the utilization percentage increases towards 80%.

Sai Shreyas V: Okay. Is there any chance of margin increment and any guidance for FY27?

Akshay S Pitti: Definitely, our overall margins will improve as the utilization percentage inches up towards 80%. How much it will improve quarter on quarter is something I would prefer not to say right now.

Speaker #2: How much it will improve quarter-on-quarter is something I would prefer not to say right now.

Speaker #3: Okay, thank you, sir. And the next question is: What would be the full-year tax rate? Because in last year Q4, you had told that it would be around 33%.

Sai Shreyas V: Okay. Thanks, sir. The next question is, what would be the full year tax save? Because in Q4, you had told us that it will be around 33%. Is it the same or is there any reductions?

Speaker #3: So, is it the same or are there any exceptions?

Akshay S Pitti: Sorry, I couldn't hear your line clearly. If you can repeat the question.

Speaker #2: So sorry, I couldn't hear your line clearly. If you can repeat the question?

Sai Shreyas V: Sir, what would be the tax rate for FY27? Because in Q4, you had mentioned that it would be 33%.

Speaker #3: Sure. Okay. What would be the tax rate for FY27? Because in Q4, you had mentioned that it would be 33%.

Speaker #2: No, it will be about 25%, not 33%. This effective tax rate is about 25%. In quarter one, we have a lot of right-of-use assets for our lease assets.

Akshay S Pitti: No, it will be about 25%, not 33%. This effective tax is about 25%. Q1, we have a lot of right of use assets for our lease assets, and that has incurred the deferred tax, and therefore we have a lower tax rate on the PNL for Q1. But the full year tax rate should be closer to 25%.

Speaker #2: And that has incurred the deferred tax. Therefore, we have a lower tax rate on the P&L for Q1. But the full-year tax rate should be closer to 25%.

Speaker #3: Okay, okay. And one last question. So given that the ₹150 crore capex project is completed, is there any target towards debt reduction, that by FY28 or FY29 we will repay the debt?

Sai Shreyas V: Okay. One last question. Sir, given that the INR 150 crore CapEx project is completed, is there any target towards debt reduction that by FY28 or FY29, we will have repaired the debt?

Speaker #2: See, the debt number is going to be dynamic. We already have a ₹290 crore capex ongoing, of which ₹60 crore is spent. Like I mentioned to someone in the previous call, if I look towards FY28 and FY29, there will definitely be a requirement to enhance capacity, as lamination demand in the market continues to grow.

Akshay S Pitti: See, the debt number is going to be dynamic. We already have an INR 290 crore CapEx ongoing, of which INR 60 crores is spent. Like I had mentioned to someone in the previous call that if I look towards FY28 and FY29, definitely there will be requirement to enhance capacity in lamination as the market continues to grow. Then towards FY29, definitely there will be a need for a facility in Bangalore. So the CapEx needs of the company for growth will continue. However, there will be earnings. Now, how that will impact the net debt year to year, again, will depend on how quickly we do the CapEx or we defer the CapEx.

Speaker #2: And then towards FY29, there will definitely be a need for a facility in Bangor. So, the capex needs of the company for growth will continue.

Speaker #2: However, there will be earnings. Now, how that will impact the net debt year-to-year, again, will depend on how quickly we do the capex, or if we defer the capex.

Speaker #3: Okay. Okay. And one last question: is there any opportunity for inventory reduction and lower working capital? And do we expect the cash flows to improve?

Sai Shreyas V: Okay. The one last question is there any opportunity for the inventory reduction and lower working capital? Do we expect the cash flows to better increase?

Speaker #2: So, like I said earlier, about ₹20–25 crore is the potential to optimize the working capital. Beyond that, there would not be any opportunity to further optimize the working capital.

Akshay S Pitti: Like I said earlier, about USD 20,000, USD 25,000 for the potential to optimize the working capital. Beyond that, there would not be any opportunity to further optimize the working capital from today.

Speaker #2: From today.

Speaker #3: Okay. Thank you, sir. Thank you.

Sai Shreyas V: Okay. Thank you, sir.

Speaker #2: Yeah.

Akshay S Pitti: Yeah.

Speaker #1: Thank you. We will take the next question from the line of Pulkit Singhal from Dalmers Capital Management. Please go ahead.

Akshay S Pitti: Thank you. We take the next question from the line of Pulkit Singhal from Dalma Capital Management. Please go ahead.

Operator: Thank you. We take the next question from the line of Pulkit Singhal from Dalma Capital Management. Please go ahead.

Speaker #2: Thank you for the opportunity. You know, when I look at the business over the last three years, the return on capital has fallen from 19% to almost 15%.

Pulkit Singhal: Thank you for the opportunity. When I look at the business last three years, the return on capital has fallen from 19% to almost 15%. Obviously, there was spate of acquisitions also. Whatever you are saying in terms of FY27 also, this business seems to be just around, even for the future. How do you see this trajectory? Would it change? Any particular initiatives that you are doing to raise the return on capital? What should we think about?

Speaker #2: Obviously, there was a state of acquisitions also. But whatever you're saying in terms of FY27 also, you know, the business seems to be just around even for the future.

Speaker #2: So, how do you see this trajectory? Would it change any particular initiatives that you're doing to raise the return on capital, or should we think about it?

Speaker #3: See, the last ticket capex sales will be behind us, apart from the Bangor capex. I would not see that there would be any last ticket capex required to invest in land and infrastructure.

Akshay S Pitti: The large ticket CapExes will be behind us, apart from the Bangalore CapEx. I would not see that there would be any large ticket CapEx required to invest in land and infrastructure. Beyond that, the investments would center mostly around equipment and that will, again, push up your ROCE. Currently, if you see the mix of CapEx which was done, and therefore the increased deployment of CapEx, a large chunk of that has gone towards land acquisition and building creations.

Speaker #3: Beyond that, the investments would center mostly around equipment, and that will again push up your ROCE. Currently, if you see the mix of capex which was done and, therefore, the increased deployment of capex, a large chunk of that has gone towards land acquisition and building creation.

Speaker #2: Okay, so the CapEx for the next three years—what would that likely be? And what kind of incremental turnover can they provide?

Pulkit Singhal: Okay. The CapEx for next three years, what would they likely be and what kind of incremental turnover can they provide?

Speaker #3: So if you have to really look at it, again, this is not something we are currently approved as a board or announced. But if I were to assume that we go ahead and make a facility in Bangor, that would entail a capex of roughly about 200 odd crores.

Akshay S Pitti: If you have to really look at it, again, this is not something we are currently approved as a board or announced. But if I were to assume that we go ahead and make a facility in Bangalore, that would entail a CapEx of roughly about INR 200 crore. And then in terms of another equipment, about INR 200 crore. So INR 400 crore plus the INR 290 crore which we have announced would be capable of taking us to a top line of closer to about INR 3,000 to INR 3,300 crore. Comfortably to that level.

Speaker #3: And then, in terms of other equipment, about ₹200-odd crores. So, ₹400 crores plus the ₹290 crores which we have announced would be capable of taking us to a top line of closer to about ₹3,000 to ₹3,300 crores.

Speaker #3: Comfortably to that level.

Speaker #2: Okay. But since earlier, I mean, the business mix is also changing in terms of machining, etc., and that probably reflects better in terms of the margin aspect.

Pulkit Singhal: Okay. But since earlier, the business mix is also changing in terms of machining, et cetera. That probably reflects better in terms of the margin aspect. So historically, your margins have been 14%, 15%, and now closer to 16%, 16.5%. How should we think about it three years out? Is it going to be closer to 18%, 20% or will it just be a very slow gradual increase from here on?

Speaker #2: So, historically, your margins have been 14, 15 percent, and now closer to 16, 16 and a half. I mean, how should we think about it three years out?

Speaker #2: Is this going to be closer to 18–20 percent, or will it just be a very slow, gradual increase from here on?

Speaker #3: So for sure, it will be closer, it will be upwards of 18% for sure, with the capex on the casting and machining coming online.

Akshay S Pitti: No, for sure it will be closer. It will be upwards of 18% for sure. With the CapEx on the casting and machining coming online and the value-added products increasing as well as the core drop products increasing, the margins should be closer to 18%, 18.5%.

Speaker #3: And with value-added products increasing, as well as the core drop products increasing, your margins should be closer to 18, 18.5 percent.

Speaker #2: Okay. But the casting capex would probably impact margins negatively at first, right? I mean, in terms of—

Pulkit Singhal: Okay. But the casting CapEx would probably impact margins negatively first, right? I mean

Speaker #3: That is unfortunately the case for us. We are always having that capex, which is putting pressure on ROCE, and before the operating leverage comes from the capex done, the other capex kicks in.

Akshay S Pitti: That is unfortunately the case. We are always having that CapEx which is pulling the ROCE and before the operating leverage comes from the CapEx done, the other CapEx kicks in.

Pulkit Singhal: Right.

Speaker #3: So, in regards to the ₹150 crore capex, in quarter two, quarter three, and quarter four, it's going to be the output of that capex. However, the ₹290 crore capex has kicked in.

Akshay S Pitti: If you look at the INR 150 crore CapEx and Q2, Q3, Q4 is the output of that CapEx. However, the INR 290 crore CapEx has kicked in.

Speaker #2: Yes. Yes. So what is the peak revenue, let's say, from the current facilities? I mean, the current capacity, whatever we have.

Pulkit Singhal: Yes. What is the peak revenue, let's say, from the current facilities? I mean the current capacity, whatever we have.

Speaker #3: From the current capacity, if I exclude the 290 crore ongoing capex, and look at it, it should be about 2,500 odd crores.

Akshay S Pitti: From the current capacity, if I exclude the INR 290 crore ongoing CapEx and book at it should be about INR 2,500 odd crores.

Speaker #2: 2,500 crores, and this goes to, let's say, 3,500 crores—1,000 crores by incremental 700 crores of capex which you talked about.

Pulkit Singhal: INR 2,500 crores and this goes to let's say INR 3,500 crores, INR 1,000 crores by incremental INR 700 crores of CapEx, which you talked about.

Speaker #3: By incremental 700. But then that's not the full potential, because you are investing in land and building in Bangalore as well as the foundry, which will be capable of much more.

Akshay S Pitti: By incremental 700, that's not the full potential because you are investing in land and building in Bangalore as well as the foundry which will be capable of much more.

Speaker #2: Okay. Okay. And lastly, on the project business, we also had some thoughts. Do we have some thoughts around that?

Pulkit Singhal: Okay. Lastly, the project business also we had some thoughts. Do we have some thoughts around?

Speaker #3: See, right now, if you look at it in terms of capital deployment, we are having a handful over here. And we are trying to manage the deployment of capital as judiciously as possible.

Akshay S Pitti: See right now if you look at it in terms of capital deployment, we are having our hands full over here and we are trying to manage the deployment of capital as judiciously as possible. While that is an opportunity which is quite enticing, I am more inclined to stay in my lane and do the business that we know well.

Speaker #3: So, while that is an opportunity—which is quite enticing—I am more inclined to stay in my lane and do the business that we know well.

Speaker #2: Right. Right. Fair point. So, last question—just to confirm, tax rates are expected to be 25%. Is that understanding correct for this year and going forward?

Pulkit Singhal: Right, fair point. Last question, tax rates are expected to be 25%, is that understanding correct this year and going ahead?

Speaker #3: Yes.

Akshay S Pitti: Yes.

Speaker #2: But other income, we will not get for this year, and it will start next year onwards only—the incentive.

Pulkit Singhal: Other income we will not get for this year and it will start next year onwards only.

Akshay S Pitti: Yeah.

Pulkit Singhal: The incentive.

Speaker #3: Yes.

Akshay S Pitti: Yes.

Speaker #2: Okay. Got it. Thank you.

Pulkit Singhal: Okay. Got it. Thank you, Nimesh.

Akshay S Pitti: Yeah, thanks.

Speaker #3: Yeah. Thanks.

Speaker #1: Thank you. We will take the next question from the line of Rahul Kumar from Vaikariya Fund. Please go ahead.

Akshay S Pitti: Thank you. We take the next question from the line of Rahul Kumar from Vicaria Fund. Please go ahead.

Operator: Thank you. We take the next question from the line of Rahul Kumar from Vicaria Fund. Please go ahead.

Speaker #3: Yeah, hi. Sorry, can you just give us your guidance? I mean, your targets for the big-time part for the next two years—whatever your targets are.

Rahul Kumar: Yeah, hi. Sorry. Can you just give us your guidance, I mean, your targets for EBITDA and PAT for next 2 years? I mean, what are your targets?

Speaker #3: Hello? Sorry. I think sorry. I think I was on mute. If I start from current year, I would look at a EBITDA of roughly 370 odd crores based on the current outlook.

Akshay S Pitti: Hello? Sorry, I think I was on mute. If I start from current year, I would look at an EBITDA of roughly INR 370 odd crores based on current outlook. For the next year, we should be looking at a turnover above about INR 2,500 crores if we don't do the CapEx. I'm obviously going to talk X of the incremental CapEx for lamination. At a 90,000 ton operating level, we should be looking at a INR 2,500 crore turnover and an EBITDA margin of about 17%, 17.2%.

Speaker #3: For the next year, we should be looking at a turnover of about ₹2,500 crores if we don't do the capex. I'm obviously going to talk about the incremental capex for lamination.

Speaker #3: So, at a 90,000-ton operating level, we should be looking at a ₹2,500 crore turnover and an EBITDA margin of about 17–17.2 percent. Okay.

Pulkit Singhal: Okay. Got it. Understood.

Speaker #3: Okay. Got it. Understood.

Speaker #1: Thank you. Navisend Chairman, due to time constraints, this was the last question. We now conclude the question-and-answer session. I will now hand the conference over to the management for their closing comments.

Pulkit Singhal: Thank you. Ladies and gentlemen, due to time constraint, this was the last question, and we conclude the question answer session. I now hand the conference over to the management for their closing comments.

Operator: Thank you. Ladies and gentlemen, due to time constraint, this was the last question, and we conclude the question answer session. I now hand the conference over to the management for their closing comments.

Speaker #3: Thank you, everyone, for your time and for joining us today. We appreciate your continued interest and support as we move into FY27. Our focus remains on disciplined execution and improving working capital, completing ongoing capex, and scaling machine components.

Akshay S Pitti: Thank you everyone for your time and joining us today. We appreciate your continued interest and support as we move into FY27. Our focus remains on disciplined execution and improving working capital, completing ongoing CapEx and scaling machine components, strengthening our position as an integrated engineering partner for customers across India and global markets. Thank you.

Speaker #3: Standing by our position as an integrated engineering partner for customers across India and global markets. Thank you.

Speaker #1: Thank you. On behalf of Pitti Engineering Limited, that concludes this conference call. Thank you for joining us. And you may now disconnect your lines.

Akshay S Pitti: Thank you. On behalf of Pitti Engineering Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.

Operator: Thank you. On behalf of Pitti Engineering Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.

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Q1 2027 Pitti Engineering Ltd Earnings Call

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