Q1 2027 Rico Auto Industries Ltd Earnings Call

August 14, 2026

Speaker #1: Ladies and gentlemen, you have been connected for the Rico Auto Industries Limited conference call. The call will begin shortly. We request you to please stay connected.

Operator 2: Ladies and gentlemen, you have been connected for Rico Auto Industries Limited conference call. The call will begin shortly. Request you to please stay connected. Reminder to all the participants that you have been connected for Rico Auto Industries Limited conference call. The call will begin shortly. Request you to please stay connected. Thank you. Ladies and gentlemen, good day and welcome to Rico Auto Industries Limited Q1 FY27 earning conference call. As a reminder, all participant line will be in the listen only mode, and there will be an opportunity for you to ask question after presentation conclude. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.

Speaker #1: Reminder to all the participants that you have been connected for the Rico Auto Industries Limited conference call. The call will begin shortly. We request you to please stay connected.

Speaker #1: Thank you. Ladies and gentlemen, good day, and welcome to Rico Auto Industries Limited Q1 FY27 earnings conference call. As a reminder, all participants are in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Operator: Ladies and gentlemen, good day and welcome to Rico Auto Industries Limited Q1 FY 2027 earning conference call. As a reminder, all participant line will be in the listen-only mode, and there will be an opportunity for you to ask question after presentation conclude. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.

Speaker #1: Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded.

Speaker #1: 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 2: This conference call may contain forward-looking statement about the company, which are based on beliefs, opinions, and expectation of the company as on date of this call. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. From the management we have with us today, Mr. Arvind Kapur, Chairman, CEO, and Managing Director, Mr. R. K. Miglani, Executive Director, Mr. Kaushalendra Verma, Executive Director, Mr. Naveen Sorot, Chief Financial Officer. I now hand the conference over to Mr. Kaushalendra Verma, Executive Director from Rico Auto Industries Limited. Thank you, and over to you, sir.

Operator: This conference call may contain forward-looking statement about the company, which are based on beliefs, opinions, and expectation of the company as on date of this call. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. From the management we have with us today, Mr. Arvind Kapur, Chairman, CEO, and Managing Director, Mr. R. K. Miglani, Executive Director, Mr. Kaushalendra Verma, Executive Director, Mr. Naveen Sorot, Chief Financial Officer. I now hand the conference over to Mr. Kaushalendra Verma, Executive Director from Rico Auto Industries Limited. Thank you, and over to you, sir.

Speaker #1: These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. From the management, we have with us today Mr. Arvind Kapoor, Chairman, CEO, and Managing Director.

Speaker #1: Mr. R. K. Meghilani, Executive Director. Mr. Kaushalindra Varma, Executive Director. Mr. Naveen Sorat, Chief Financial Officer. I now hand the conference over to Mr. Kaushalindra Varma, Executive Director, from Rico Auto Industries Limited.

Speaker #1: Thank you, and over to you, sir.

Speaker #2: Great, thank you. Good evening, everyone, and thank you for joining us for this Q1 and FY27 earnings conference call of Rico Auto Industries.

Kaushalendra Verma: Great. Thank you. Yeah, good evening, everyone, and thank you for joining us for this Q1 FY27 earning conference call of Rico Auto Industries. Sorry. I hope that you have had the opportunity to review our financial results and the investor presentation, which is available on the stock exchanges and also on the company's website. I would like to start by giving a brief overview of the company and industry and company performance, post which Mr. Naveen will brief you on the operational and financial highlights for the quarter. The global economy continues to remain resilient, although geopolitical developments, commodity price volatility, and changes in the global trade continue to create uncertainty. At the same time, the ongoing restructuring of global supply chains is creating opportunities for manufacturing economies that can offer scale, quality and localization. Coming to the automotive industry, the environment remains constructive.

Kaushalendra Verma: Great. Thank you. Yeah, good evening, everyone, and thank you for joining us for this Q1 FY 2027 earning conference call of Rico Auto Industries. Sorry. I hope that you have had the opportunity to review our financial results and the investor presentation, which is available on the stock exchanges and also on the company's website. I would like to start by giving a brief overview of the company and industry and company performance, post which Mr. Naveen will brief you on the operational and financial highlights for the quarter. The global economy continues to remain resilient, although geopolitical developments, commodity price volatility, and changes in the global trade continue to create uncertainty. At the same time, the ongoing restructuring of global supply chains is creating opportunities for manufacturing economies that can offer scale, quality and localization. Coming to the automotive industry, the environment remains constructive.

Speaker #2: Sorry. I hope that you have had the opportunity to review our financial results and the investor presentation, which is available on the stock exchanges and also on the company's website.

Speaker #2: I would like to start by giving a brief overview of the company and industry, and company performance, after which Mr. Naveen will brief you on the operational and financial highlights for the quarter.

Speaker #2: The global economy continues to remain resilient, although geopolitical developments, commodity price volatility, and changes in global trade continue to create uncertainty. At the same time, the ongoing restructuring of global supply chains is creating opportunities for manufacturing economies that can offer scale, quality, and localization.

Speaker #2: Coming to the automotive industry, the environment remains constructive. Q1 FY27 saw strong production momentum, while the industry continues to undergo a structural shift towards traditional electrification and hybridization, as well as greater localization.

Kaushalendra Verma: Q1 FY27 saw strong production momentum while the industry continues to undergo a structural shift towards digitalization, electrification, and hybridization, and a greater localization. This continues to create opportunities for Indian component manufacturers, particularly as global OEMs diversify their sourcing and look for reliable manufacturing partners. Against this backdrop, Rico delivered its highest ever quarterly revenue during Q1 FY27, reflecting continued momentum across our core automotive businesses. Our businesses continues to participate across IC engines, hybrid, and EV platform with new programs at different stages of development and ramp up. There are around 55 new programs in launch phase, out of which 28 programs already launched and are in ramp-up phase. These are long-term programs for Toyota, Ford, and BMW with program life of more than seven to eight years. All these programs are highly profitable, and we are single-source supplier for all these programs.

Speaker #2: This continues to create opportunities for Indian component manufacturers, particularly as global OEMs diversify their sourcing and look for reliable manufacturing partners. Against this backdrop, Rico delivered its highest-ever quarterly revenue during Q1 FY27.

Speaker #2: Reflecting continued momentum across our core automotive businesses. Our businesses continue to participate across IC engines, hybrid, and EV platforms, with new programs at different stages of development and ramp-up.

Speaker #2: There are around 55 new programs in the launch phase, out of which 28 programs have already launched and are in the ramp-up phase. These are long-term programs for Toyota, Ford, and BMW, with a program life of more than seven to eight years.

Speaker #2: All these programs are highly profitable, and we are the single-source supplier for all these programs. Our focus remains on flawless execution of these programs and progressively scaling them up as per the customer ramp-up plan.

Kaushalendra Verma: Our focus remains on flawless execution of these programs and progressively scaling them up as per customer ramp-up plan. During the quarter, profitability was impacted by elevated off cost pressure, with the raw material price settlement lag being a key factor. We also saw elevated freight costs, particularly air freight, as disruption in global shipping routes due to increase in ocean freight transit time from five weeks to nine weeks, which led to greater reliance on the air shipments to maintain supply continuity. We are actively working and discussing with our customers to pass through some of these costs. Our new plant at Hosur is progressing, and as planned, is expected to do the commercial production in September 2026. This facility will support our hybrid and EV-related programs with the key OEMs. Alongside our core automotive business, we continue to develop our presence across adjacent sectors.

Speaker #2: During the quarter, profitability was impacted by elevated cost pressures, with the raw material price settlement lag being a key factor. We also saw elevated freight costs, particularly air freight, as disruptions in global shipping routes led to an increase in ocean freight transit time from five weeks to nine weeks, which led to greater reliance on air shipments to maintain supply continuity.

Speaker #2: We are actively working and discussing with our customers to pass through some of these costs. Our new plant at Hosur is progressing as planned and is expected to start commercial production in September 2026.

Speaker #2: This facility will support our hybrid and EV-related programs with the key OEMs. Alongside our core automotive business, we continue to develop our presence across adjacent sectors. Our railway and defense businesses are progressing, supported by increasing localization, infrastructure investments, and the government focus on surface minerals in railways. RDS approvals are progressing and supplies have started.

Kaushalendra Verma: Our railway and defense business are progressing, supported by increasing localization, infrastructure, investments, and the government focus on self-reliance. In railways, RDSO approvals are progressing and supplies have started. We expected this business to develop progressively and add to the diversification of our businesses. Looking ahead, our revenue outlook remains unchanged, and we continue to work towards our previously stated target of around INR 3,000 crores this year. We will be confident we will be surpassing this and will be achieving a revenue more than INR 3,200 crores in FY 2027. While the current cost pressure and the timing of the customer settlements are likely to keep margins under pressure in the near term, our focus continues to remain on improving operating efficiency, progressing the price settlements, and driving the ramp-up of newer programs.

Speaker #2: We expected these businesses to develop progressively and add to the diversification of our businesses. Looking ahead, our revenue outlook remains unchanged, and we continue to work towards our previously stated target of around ₹3,000 crore this year. We are confident we will be surpassing this and will be achieving revenue of more than ₹3,200 crore in FY2027.

Speaker #2: While the current cost pressure and the timing of the customer settlements are likely to keep margins under pressure in the near term, our focus continues to remain on improving operating efficiency, progressing the price settlements, and driving the ramp-up of newer programs.

Speaker #2: We remain confident to exit the current year near to our targeted full-year margins through customer price revisions and continued improvement in operating efficiency.

Kaushalendra Verma: We remain confident to exhibit the current year near to our targeted full-year margins through customer price revisions and continued improvement in operating efficiency. With this, I would like to now hand over to our CFO, Mr. Naveen Sorot, to take you through the financial performance. Thank you.

Speaker #2: With this, I would now like to hand over to our CFO, Mr. Naveen Sorat, to take you through the financial performance. Thank you.

Speaker #3: Thank you, sir. Let me now take you through the performance for the quarter and provide some perspective on the key drivers of profitability. The group delivered strong revenue growth during Q1 FY27. Consolidated revenue stood at ₹755 crore compared to ₹543 crore in Q1 FY26, reflecting a growth of around 39 percent.

Naveen Sorot: Thank you, sir. Now, let me take you through our performance for the quarter and provide some perspective on the key drivers of profitability. The group delivered strong revenue growth during Q1 FY27. Consolidated revenue stood at INR 755 crore, compared to INR 543 crore in Q1 FY26, reflecting a growth of around 39% odd. EBITDA for the quarter stood at INR 32.8 crore, translating into an EBITDA margin of 4.6%, compared to a loss of INR 2.4 crore, compared with a profit of INR 16.7 crore in the corresponding quarter last year. From a segment perspective, aluminum casting continued to be the principal contributor, accounting for 89% of the consolidated revenue, while the ferrous casting contributed the remaining 11%. Exports accounted for almost 15% of our total revenue during the quarter.

Speaker #3: EBITDA for the quarter stood at ₹34.8 crore, translating into an EBITDA margin of 4.6 percent. PAT stood at a loss of ₹3.4 crore compared with a profit of ₹16.7 crore in the corresponding quarter last year.

Speaker #3: From a segment perspective, aluminum casting continued to be the principal contributor, accounting for 89 percent of the consolidated revenue, while ferrous casting contributed the remaining 11 percent.

Speaker #3: Exports accounted for almost 15 percent of our total revenue during the quarter. While the underlying revenue performance remained robust, profitability during the quarter was impacted by elevated operating costs and certain temporary cost pressures, as already highlighted previously.

Naveen Sorot: While the underlying revenue performance remained robust, profitability during the quarter was impacted by elevated operating costs and certain temporary cost pressures, as already highlighted by Mr. Rishi. Other operating expenses were higher by approximately INR 24 crore, primarily due to air freight and sorting costs, which were around INR 13 crore in this. Along with the inflationary pressures across manpower, power, fuel and gas, tools, and consumables. We expect air freight costs to peak in Q2 as inventory levels reach the desired position. Thereafter, the temporary requirement of air shipment is expected to cease, with shipments progressively returning to the normal sea freight cycle from Q3 onwards. Profitability was also impacted by the lag in the raw material prices settlement. This was particularly relevant for aluminum, where the prices increased significantly during the period. The settlement lag resulted in an estimated impact of approximately INR 10 crore during the quarter.

Speaker #3: Other operating expenses were higher by approximately ₹24 crore, primarily due to air freight and sorting costs, which were around ₹13 crore in this. Along with the inflationary pressures across manpower, power, fuel and gas, tools, and consumables, we expect air freight costs to peak in Q2 as inventory levels reach the desired position.

Speaker #3: Thereafter, the temporary requirement of air shipments is expected to cease, with shipments progressively returning to the normal sea freight cycle from Q3 onwards. Profitability was also impacted by the lag in the raw material price settlements. This was particularly relevant for aluminum, where prices increased significantly during the period.

Speaker #3: The settlement lag resulted in an estimated impact of approximately ₹10 crore during the quarter. Importantly, these cost pressures are not structural in nature. We continue to engage actively with our customers for appropriate price revisions and cost pass-throughs. While the timing of these settlements will vary by customer and program, we expect the benefit to be realized progressively over the coming quarters.

Naveen Sorot: Importantly, these cost prices are not structural in nature. We continue to engage actively with our customers for appropriate price revisions and cost pass-throughs. While the timing of these settlements will vary by customer and program, we expect the benefit to be realized progressively over the coming quarters. At the same time, we are driving productivity, operating efficiency, and cost optimization initiatives across the group to mitigate inflationary pressure and improve execution. Looking ahead, the cessation of temporary air freight, progressive realization of customer price revisions, and cost pass-throughs, together with the benefit from our ongoing efficiency initiatives, are expected to support a progressive improvement in the profitability from Q3 onwards. Our focus therefore remains firmly on execution, customer settlements, productivity, and disciplined cost management while continuing to build on the strong revenue momentum and the programs underway. Thank you. Now we are open to the questions.

Speaker #3: At the same time, we are driving productivity, operating efficiency, and cost optimization initiatives across the group to mitigate inflationary pressures and improve execution. Looking ahead, the cessation of temporary air freight, progressive realization of customer price revisions and cost pass-throughs, together with the benefits from our ongoing efficiency initiatives, are expected to support a progressive improvement in profitability from Q3 onwards.

Speaker #3: Our focus, therefore, remains firmly on execution, customer settlements, productivity, and disciplined cost management, while continuing to build on the strong revenue momentum and the programs underway.

Speaker #3: Thank you. Now we are open to questions.

Speaker #1: Thank you so much, sir. Ladies and gentlemen, we will now begin with a question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone.

Operator 2: Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Darshil Zaveri with Crown Capital. Please go ahead.

Operator: Thank you so much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Darshil Zaveri with Crown Capital. Please go ahead.

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

Speaker #1: Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question comes from the line of Darshil Javeri with Crown Capital.

Speaker #1: Please go ahead.

Speaker #4: Hello, good evening, sir. Thank you so much for taking my question. Hopefully, I am audible, sir.

Darshil Zaveri: Hello. Good evening, sir. Thank you so much for taking my question. Hopefully I am audible, sir.

Darshan Jhaveri: Hello. Good evening, sir. Thank you so much for taking my question. Hopefully I am audible, sir.

Speaker #1: Yes.

Speaker #4: Hello. Yeah. Yeah. Hi, sir. So, sir, I just wanted to, you know, ask about the freight cost. Like, I think you said 15 percent was exports, right? That would roughly turn out to—right, I think we did 100 crores plus, 120 crores of exports.

Arvind Kapur: Yes.

Darshil Zaveri: Hello. Yeah. Hi, sir. Sir, I just wanted to ask about the freight cost. I think you said 15% on exports, right? That would roughly turn out to, I think we did INR 100 crores plus INR 120 crores of exports. So freight, air freight costs are higher by 10%. That is something that I am trying to reconcile. Air freight would only be for exports, right? So if exports were such a small amount, and if we had so much air freight, then all the export order would be a loss-making order for us, right?

Darshan Jhaveri: Hello. Yeah. Hi, sir. Sir, I just wanted to ask about the freight cost. I think you said 15% on exports, right? That would roughly turn out to, I think we did INR 100 crores plus INR 120 crores of exports. So freight, air freight costs are higher by 10%. That is something that I am trying to reconcile. Air freight would only be for exports, right? So if exports were such a small amount, and if we had so much air freight, then all the export order would be a loss-making order for us, right?

Speaker #4: So freight air freight cost was higher by 10 percent that is something that I am trying to reconcile right like air freight would only be for exports right so if exports was such a small amount then if we had so much air freight then we would have the all the exports order would be a loss making order for us right.

Speaker #2: Yeah I think.

Arvind Kapur: Yeah. Our export in this quarter was around 10% to 12%, and this cost is related to that, because we need to ship the parts to meet the supply continuity, because these are related to the new program launches, where we are the single source for the customer. We had some issues with the quality correlation, where we need to do some certain kind of a correlation in the measurement with the customer and our measuring instrument. So that has basically put some parts are on hold, which will be used in the future. But we need to ship parts to maintain the supply continuity.

Kaushalendra Verma: Yeah. Our export in this quarter was around 10% to 12%, and this cost is related to that, because we need to ship the parts to meet the supply continuity, because these are related to the new program launches, where we are the single source for the customer. We had some issues with the quality correlation, where we need to do some certain kind of a correlation in the measurement with the customer and our measuring instrument. So that has basically put some parts are on hold, which will be used in the future. But we need to ship parts to maintain the supply continuity.

Speaker #1: Thank you very much.

Speaker #2: Yeah. Our export in this quarter was around 10 to 12 percent and this cost is related to that because we need to ship the parts to meet the country supply continuity because these are related to the new program launches where we are the single source for the customer and we had some related issues with the with the quality quality correlation where our we need to do some certain kind of a correlation in the measurement with the customer and our measuring instrument so that has basically put some parts are on the hold which will be used in the future but we need to maintain the we need to ship parts to maintain the supply continuity.

Speaker #4: So sir we want the exclusive suppliers they didn't give us some kind of benefit like has have we received some kind of because if you like our margins would be what we are losing in air freight right like just wanted to understand that how do we you know reconcile that so.

Darshil Zaveri: So if sir, we were the exclusive supplier, they did not give us some kind of benefit. Have we received some kind of, because our margins would be what we are losing in air freight, right? Just wanted to understand that, how do we reconcile that, sir?

Darshan Jhaveri: So if sir, we were the exclusive supplier, they did not give us some kind of benefit. Have we received some kind of, because our margins would be what we are losing in air freight, right? Just wanted to understand that, how do we reconcile that, sir?

Arvind Kapur: This air freight is an exceptional thing, and mainly because it is taking almost 9 weeks for a shipment from India to the US, and earlier we used to get the goods there in about 5 weeks time. Now we have extra inventory of almost 4 weeks in the sea, that is almost 9 weeks of inventory in the sea, and plus 1 month inventory. We are required to maintain that. Now, because this is one, and secondly, there were some issues in our correlation as far as the specs are concerned. Those have been sorted out. So this is a temporary phase that we had to go through for the new components that we are shipping overseas. Since the customers are BMW and Toyota, being a single source our commitment is to the customer to see that the lines keep on running.

Speaker #2: This this air freight is an exceptional thing and mainly because it's taking almost nine weeks for shipment from here to from India to the US and earlier we should get the goods there in about five weeks time and now now we have extra inventory of almost four week on a in the sea that's almost nine weeks of inventory in the sea and plus one month inventory we are required to maintain that now because this is one and secondly there were some issues in our correlation with as far as the specs are concerned those have been sorted out so this is a temporary phase that we had to go through for the new components that we are shipping overseas and since we the the customers are BMW and Toyota we being a single source we can our commitment is to the customer to see that the lines keep on running and that's the reason we had to resort to air freights we are negotiating with them and in fact one of the customers has agreed to pay us a freight and which would be accounted for as in when we get it and that's almost 50 percent of water will be already incurred but we have not we have not taken that into consideration at the moment because that will come over time and so we are talking to our customers and this will be done and the this extra time of sea freight that is sea time that is taking that is impacting our supplies at the moment see the capacity that we built up is as per whatever the requirements are now all of a sudden we had to almost increase our capacity by 25 to 30 percent so that we could make larger shipments to to the US and to Europe and we are doing that and we are pulling out equipment from wherever possible so that the deliveries are taking place in time and the lines of our customers keep on running.

Arvind Kapur: That is the reason we had to resort to air freight. We are negotiating with them, and in fact, one of the customers has agreed to pay us the freight, and which would be accounted for as and when we get it. That is almost 50% of whatever we already incurred. But we have not taken that into consideration at the moment because that will come over time. So we are talking to our customers, and this will be done, and this extra time of sea freight, sea time that is taking, that is impacting our supplies at the moment. See, the capacity that we built up is as per whatever the requirements are. Now, all of a sudden, we had to almost increase our capacity by 25% to 30% so that we could make larger shipments to the US and to Europe.

Arvind Kapur: We are doing that, and we are pulling out equipment from wherever possible so that the deliveries are taking place in time, and the lines of our customers keep on running.

Speaker #3: Thank you. Thank you very much.

Speaker #2: And we also built in—yeah. So this is a one-time thing that has happened, and we are very bullish about the exports. The margins are much better, the customers are the best customers that one could dream of, and very supportive. And we are trying to convince—besides this, the price increases—that because of the inflation and the rupee getting weak, all the other imports, the prices had gone up, and we have also taken up that with our overseas as well as the domestic customers, which is under negotiation at the moment. This is over and above the raw material prices that we are talking about.

Darshil Zaveri: We can build in.

Darshan Jhaveri: We can build in.

Arvind Kapur: And we also build in. Yes. This is a one-time thing that has happened, and we are very bullish about the exports. The margins are much better. The customers are the best customers that one could dream of, and very supportive. One of the customers has already agreed, but others we are trying to convince. Besides this, the price increases that because of the inflation week on week, all the other imports, the prices have gone up, and we have also taken up that with our overseas as well as our domestic customers, which is under negotiation at the moment. This is over and above the raw material prices that we are talking about.

Speaker #4: Oh okay. Okay. Got it. So sir just wanted to understand I think our last call was in June right two months would have of Q4 would have already been passed and I think we said we can do 10 percent plus EBITDA so we would have known about the situation that's happening right then why would have we still guided for 10 percent like I think that is something that I think people didn't like so could you just clarify that what was the issue like did it come later on or what was we would have known about this right it would be going the war has been going on the lead time would have increased so why we gave the guidance of 10 percent EBITDA when we knew that you know there were extra costs even if you're going to recover but at that time there was not stated right so could you just help us with that sir.

Darshil Zaveri: Okay. Got it, sir. And sir, just wanted to understand, I think our last call was in June, right? Two months of Q4 would have already been passed, and I think we said we can do 10% plus EBITDA, so we would have known about the situation that is happening, right? Then why would have we still guided for 10%? I think that is something that I think people did not like. So could you just clarify that what was the issue? It did come later on, or you would have known about this, right? The war has been going on, the lead time would have increased. So why we gave the guidance of 10% EBITDA when we knew that there were extra costs present, even if we are going to recover, but at that time, this was not stated. So could you just help us with that, sir?

Darshan Jhaveri: Okay. Got it, sir. And sir, just wanted to understand, I think our last call was in June, right? Two months of Q4 would have already been passed, and I think we said we can do 10% plus EBITDA, so we would have known about the situation that is happening, right? Then why would have we still guided for 10%? I think that is something that I think people did not like. So could you just clarify that what was the issue? It did come later on, or you would have known about this, right? The war has been going on, the lead time would have increased. So why we gave the guidance of 10% EBITDA when we knew that there were extra costs present, even if we are going to recover, but at that time, this was not stated. So could you just help us with that, sir?

Speaker #2: Yeah the the war started and we were making shipments from five weeks it went up to six weeks or seven weeks and so we were comfortable with the seven week thing then all of a sudden they the time went up to nine weeks and nine plus minus one week it goes up to ten weeks sometimes and it also goes to eight weeks so these are things that we could not we couldn't we did not factor and but having said that the customers are talking to us and we are talking to the customers and we would we had to take in the books at the moment because at the moment we do not have a particular for those component for these extra air freights but when it comes those will be factored and that will show as an extra profit in the thing but the that is one and number two we had the initial launch issues when we started shipping and with so much material in the sea and as a material arrived there there was some because it stays staying in the sea for a longer period there were also some rust issues started coming up and normally in four five weeks there is the components are totally protected so those started showing up and so we had to change our packing and everything and then but we had to keep the lines running being a single source so we took this it's a it was a difficult call but having the commitment to the customer we had to make the shipments by it.

Arvind Kapur: The war started, and we were making shipments from five weeks, it went up to six weeks or seven weeks, and we were comfortable with the seven weeks thing. Then all of a sudden, the time went up to nine weeks, and nine plus minus one week. It goes up to 10 weeks sometimes, and also goes to eight weeks. These are things that we did not factor. Having said that, the customers are talking to us, and we are talking to the customers, and we had to take in the books at the moment because at the moment, we do not have a particular for those components, for these extra air freights. But when it comes, those will be factored and that will show as an extra profit in the thing.

Arvind Kapur: But that is one, and number two, we had the initial launch issues when we started shipping, and with so much material in the sea, and as the material arrived there, because it is staying in the sea for a longer period, there were also some rust issues started coming up. Normally in the four, five weeks, the components are totally protected. So those started showing up, and we had to change our packing and everything. But we had to keep the line running, being a single source. So we took this. It was a difficult call, but having the commitment to the customer, we had to make the shipments by air.

Speaker #4: Okay, okay. Fair enough. So, sir, this issue is going to continue in Q2, right? So, can we expect a similar kind of performance in Q2 in terms of margins?

Darshil Zaveri: Okay. Fair enough. And sir, this issue is going to continue in Q2, right? So we can see similar kind of performance in Q2 in terms of margins?

Darshan Jhaveri: Okay. Fair enough. And sir, this issue is going to continue in Q2, right? So we can see similar kind of performance in Q2 in terms of margins?

Speaker #2: The margins will be better and if I remove the always we are actually in the region of we not like in the month of July our turnover is around all close to 300 crores and so by that we are actually going up to almost what 30 to 3300 crore 35 close to 3500 crore but we are playing it safe and we are talking 3250 crores will be our turnover by the end of the year so we have very excited that we are wrapping up excited that the business is growing and but this is one pitfall we've had as far as the air freights are concerned which will cover up and in Q2 also there would be some air freights and Q3 onwards of course we are we should be back to normal and we are hoping and wishing for the last almost couple of months now that the war ends and they the shipping comes back to normal and the freight rates also come down.

Arvind Kapur: The margins will be better. If I remove the orders, we are actually in the region of, like in the month of July, our turnover is around close to INR 300 crores.

Darshil Zaveri: Fair enough.

Darshan Jhaveri: Fair enough.

Arvind Kapur: So by that, we are actually going up to almost what, 30 to INR 3,300 crore, close to INR 3,500 crore. But we are playing it safe, and we are talking of INR 3,250 crores will be our turnover by the end of the year. So we are very excited that we are ramping up. We are excited that the business is growing. But that is the one pitfall we have had as far as the air freights are concerned, which will cover up. In Q2 also, there will be some air freights. Q3 onwards, of course, we should be back to normal. We are hoping and wishing for the last almost couple of months now that the war ends and the shipping comes back to normal and the freight rates also come down.

Speaker #4: So, just to add to it, I guess one of the queries that you raised was why we did not pre-inform the market. If you recall, I guess our discussions happened sometime around early June, and a major portion of this air freight has happened post that call, so the later portion of June when the situation escalated. So, that is how it is. But yes, the discussions are continuously carrying on with the customers. I guess the priority was to stabilize the supplies and then settle whatever air freight that we can settle with them.

Darshil Zaveri: Okay.

Darshan Jhaveri: Okay.

Naveen Sorot: Sir, just to add to it, I guess one of the queries that you raised that why we not pre-informed the market. If you recall, I guess our discussions happened sometime around early June, and major portion of this air freight has happened post that call. The later portion of June, when the situation escalated. That is how it is. But yes, the discussions are continuously carrying on with the customers. I guess the priority was to stabilize the supplies and then start negotiating with the customers and settling whatever air freight that we can settle with them.

Speaker #4: Okay, okay. Fair enough, sir. And sir, I just wanted to ask with regards to, you know, railways and defense, right? So, I think we previously guided that railways could be a Rs 100 crore revenue segment, and defense also we are trying to get in. So, what about these segments—like, any development, if anything happened in this quarter? If you could guide us for that, sir.

Darshil Zaveri: Okay. Fair enough, sir. Sir, just wanted to ask with regards to railways and defense. We made previously guided like railways could be INR 100 crore revenue segment, and defense also we are trying to get in. What about these segments, like development, if anything happened in this quarter, so you could guide us for that, sir?

Darshan Jhaveri: Okay. Fair enough, sir. Sir, just wanted to ask with regards to railways and defense. We made previously guided like railways could be INR 100 crore revenue segment, and defense also we are trying to get in. What about these segments, like development, if anything happened in this quarter, so you could guide us for that, sir?

Arvind Kapur: Sir, railways, we submitted our component for inspection and all, so that we get the RDSO approval. We are in a cycle. It's a cycle almost 2, 3 months before we get those permissions. We are in that cycle, and there are new components which will also be submitted to the railways. But indirectly, we are already supplying to various customers who are supplying to the railways. But for the intricate, more profitable component, we want to supply directly and through the railways, and that's the reason we get the RDSO. On the defense side, like we had mentioned earlier, we're making the shooting ranges, practice ranges, these are computerized ranges in containers. They could be 40-footers, 60-footers, 30-footers, and for training purposes. That is going on. I think we could supply, what are the numbers?

Speaker #2: Railways we submitted our component for inspection and all so that so that we get the RDSO approval and we are in the cycle it's a cycle all but two three months before we get those permissions we are in that cycle and there are new component which will also be submitted to the railways but indirectly we are already supplying to various customers who are who are supplying to the railways but for the intricate more profitable components we want to supply directly and through the railways and that's the reason we're getting the RDSO and on the defense side we like we had mentioned earlier we making the shooting ranges practice ranges for these are computerized ranges in in containers they could be 40 footer 60 footers 30 footers and for training purposes and that is going on I think we could supply what are the numbers?

Speaker #4: Up to 250 okay.

Naveen Sorot: Around 200 this year, sir.

Darshan Jhaveri: Around 200 this year, sir.

Speaker #2: We'll be supplying 200 ranges this year and containers, yeah. And besides that, we are also giving consultancy for shuttle ranges, yeah, that is also happening; that's also going parallelly, yeah.

Arvind Kapur: We will be supplying 200 ranges this year.

Naveen Sorot: Containers.

Arvind Kapur: Containers, yeah. Aside that, we are also giving consultancy for-

Arvind Kapur: Containers, yeah. Aside that, we are also giving consultancy for Double ranges, yeah. That is also happening. That is also going parallelly. Yeah.

Naveen Sorot: Double ranges.

Darshil Zaveri: Double ranges.

Arvind Kapur: Double ranges, yeah. That is also happening. That is also going parallelly. Yeah.

Speaker #4: Okay, that's really great to know, sir. And sir, is there anything that I should just—

Darshil Zaveri: Okay. That is really great to know, sir. Is it any-

Darshan Jhaveri: Okay. That is really great to know, sir. Is it any-

Arvind Kapur: See, just to add, there is progress. It is slow, but it is surely there.

Speaker #2: Just to add, there is progress. It is slow, but it is surely there. Thank you.

Operator 2: Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Our next question comes from the line of Sunil Kumar Daga with Sunil Kumar Daga HUF. Please go ahead.

Operator: Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Our next question comes from the line of Sunil Kumar Daga with Sunil Kumar Daga HUF. Please go ahead.

Speaker #1: Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Our next question comes from the line of Sunil Kumar Daga with Sunil Kumar Daga HUF. Please go ahead.

Speaker #4: Hi, this is Sunil Kumar Daga. My question is with respect to this—just in the distance, sir mentioned that there was a ₹10 crore increase because of freight, up and down, but freight percentage to sales is 87% this time as compared to 53% in the last quarter.

Sunil Kumar Daga: Hi, this is Sunil Kumar Daga. My question is with respect to this thing. Sir mentioned that there was a INR 10 crore increase because of freight up and down. But freight percentage to sales is 67% this time as compared to 53% in the last quarter. If there is only 10%, there is a difference of, I presume, more than 13% in the cost of materials.

[Analyst]: Hi, this is Sunil Kumar Daga. My question is with respect to this thing. Sir mentioned that there was a INR 10 crore increase because of freight up and down. But freight percentage to sales is 67% this time as compared to 53% in the last quarter. If there is only 10%, there is a difference of, I presume, more than 13% in the cost of materials.

Speaker #4: If there is only 10%, there is a difference of, I presume, more than 13% in the cost of materials. Hello.

Speaker #2: So, can you repeat the query?

Darshil Zaveri: Sir, can you repeat the query?

Naveen Sorot: Sir, can you repeat the query?

Speaker #4: My query is with respect to my query is with respect to purchase as compared to sales March quarter it was 67 percent it was 53 percent and this quarter it is 67 percent so I similar June quarter it was 55 percent in the in the concall just now we had you said some there was a 10 percent increase because because of some rising cost and all but this 10 crore increase is not reflecting the 13 percent cost cost which has been so extra cost which has been shown in the published account for the June

Sunil Kumar Daga: My query is with respect to purchase as compared to sales. March quarter, it was 53%, and this quarter it is 67%.

[Analyst]: My query is with respect to purchase as compared to sales. March quarter, it was 53%, and this quarter it is 67%. June quarter, it was 55%. In the phone call just now we had, you said there was a 10% increase because of some rise in cost and all. But this INR 10 crore increase is not reflecting the 13% extra cost which has been shown in the published account as of June.

Sunil Kumar Daga: June quarter, it was 55%. In the phone call just now we had, you said there was a 10% increase because of some rise in cost and all. But this INR 10 crore increase is not reflecting the 13% extra cost which has been shown in the published account as of June.

Speaker #2: so there are two there are two different questions I guess you have combined both of them one is regarding the extra cost on the air freight and the sorting side which was almost at around 10 crores that amount other expenses side and not in the raw materials and if you look at the air freight and sorting I guess 12.8 CR constitute almost 2.2 percent of the profitability on the raw material side if you look at the way the aluminum has moved up if you compare Q1 current year versus Q1 last year for a specific grade the increase is almost 57 percent so even if let's say these increases are passed on to the customers you will find that in terms of percentages the RM as a percentage of sales will move up okay so this is side it was 230 or 240 last year and they said it was almost 340 or 345 or something 349 349 so triple two Q1 last year triple two Q1 last year triple two last year so that is increase that is there and which is to be passed on to the customers and there's a lag in that and that's why you see the raw material on the higher side at the moment

Darshil Zaveri: These are two different questions. I guess you have combined both of them. One is regarding the extra cost on the air freight and the sorting side, which was almost at around INR 10 crores.

Naveen Sorot: These are two different questions. I guess you have combined both of them. One is regarding the extra cost on the air freight and the sorting side, which was almost at around INR 10 crores. That amount comes under other expenses side, not in the raw materials. If you look at both the air freight and sorting, I guess INR 12.8 crores constitute almost 2.2% of the profitability. On the raw material side, if you look at the way the aluminum has moved up, if you compare Q1 current year versus Q1 last year for a specific grade, the increase is almost 57%. Even if, let us say, these increases are passed on to the customers, you will find that in terms of percentages, the RM as a percentage of sales will move up.

Sunil Kumar Daga: Yeah.

Darshil Zaveri: That amount comes under other expenses side, not in the raw materials.

Naveen Sorot: If you look at both the air freight and sorting, I guess INR 12.8 crores constitute almost 2.2% of the profitability.

Naveen Sorot: On the raw material side, if you look at the way the aluminum has moved up, if you compare Q1 current year versus Q1 last year for a specific grade, the increase is almost 57%. Even if, let us say, these increases are passed on to the customers, you will find that in terms of percentages, the RM as a percentage of sales will move up.

Sunil Kumar Daga: Mm-hmm. Okay. This will only-

[Analyst]: Mm-hmm. Okay. This will only-

Arvind Kapur: Just to give you some figures, on the aluminum side, it was INR 230 or INR 240 last year, and this year it is almost INR 340 or INR 345 or something. Isn't it?

Sunil Kumar Daga: 349.

[Analyst]: 349.

Arvind Kapur: 349.

Naveen Sorot: Triple to Q1 last year.

Arvind Kapur: Huh?

Naveen Sorot: Triple to Q1 last year.

Arvind Kapur: Triple to last year. So that is the increase that is there, which is to be passed on to the customer, then there is a lag in that. That is why you see the raw material on the higher side at the moment.

Sunil Kumar Daga: Mm-hmm. How do you foresee future market?

[Analyst]: Mm-hmm. How do you foresee future market?

Speaker #4: How do you foresee future fortunately this quarter it is coming down slightly and we hope that it keeps on sliding down and but we don't know what the US decides to do if they continue with the war again there could be a spike but at the moment there seems to be a relief from that might have done some hedging for the aluminium prices and all we don't do hedging on the aluminum price because it is decided by the customers and they are the ones who announce the price and they are the ones who actually negotiate with the various vendors and suppliers they announce the price and what is the forecast for Q2 considering the since we have already crossed 45 days or so like I mentioned that in the month of July we have done almost three three three hundred crores and we are heading for 840 crores how much 840 crores can you repeat again can you repeat again yeah yeah we will be crossing 840 crores for Q2 and the total comes about 3000 250 plus and Q3 will be crossing 8 8 850 and then Q4 is about 900 so that is the revenue number thank you

Arvind Kapur: Fortunately, this quarter it is coming down slightly, and we hope that it keeps on sliding down. But we do not know what the US decides to do. They could deal with the war again. That could be a spike, but at the moment, there seems to be a relief in that.

Sunil Kumar Daga: You might have done some hedging for the aluminum prices and all?

[Analyst]: You might have done some hedging for the aluminum prices and all?

Arvind Kapur: We do not do hedging on the aluminum price because it is decided by the customers, and they are the ones who announce the price, and they are the ones who actually negotiate with the various vendors the price. They announce the price.

Sunil Kumar Daga: Mm-hmm. What is the forecast for Q2, considering since you have already crossed 45 days or so?

[Analyst]: Mm-hmm. What is the forecast for Q2, considering since you have already crossed 45 days or so?

Arvind Kapur: Like I mentioned that in the month of July, we have done almost INR 300 crores, and we are heading for plus.

Sunil Kumar Daga: INR 840 crores.

Naveen Sorot: INR 840 crores.

Arvind Kapur: How much?

Sunil Kumar Daga: INR 840 crores.

Naveen Sorot: INR 840 crores.

Naveen Sorot: Can you repeat again?

[Analyst]: Can you repeat again?

Arvind Kapur: Yeah. We will be crossing INR 840 crores for Q2.

Arvind Kapur: Yeah. We will be crossing INR 840 crores for Q2. The total comes to about 3,250 plus. Q3 will be crossing 850, then Q4 is about 900.

Arvind Kapur: The total comes to about 3,250 plus. Q3 will be crossing 850, then Q4 is about 900.

Naveen Sorot: That is the revenue numbers.

Operator 2: Thank you. Sunil sir, you may please rejoin the queue for your question.

Operator: Thank you. Sunil sir, you may please rejoin the queue for your question.

Speaker #1: Sunil sir you may please rejoin the Q4 I have not no no I have not closed I have not yet I I have some I request you have already asked two question two to three questions let us rest please let them ask

Arvind Kapur: No, I have not. I have some more questions.

[Analyst]: No, I have not. I have some more questions.

Operator 2: Sir, I request you have already asked two to three questions.

Operator: Sir, I request you have already asked two to three questions.

Sunil Kumar Daga: Let him ask, please. Let him ask.

Kaushalendra Verma: Let him ask, please. Let him ask.

Speaker #2: yeah yes and then yeah sir your shared ed the projections projected numbers for Q2 Q2 Q3 and Q4 how do you see if we can label and pet levels considering we are barely plus in this no Q Q2 pet level will be better but Q3 will we will come back to normal because there will be no no premium freights and there would be the we would have settled for the for the for the raw materials and also the price increases that we've demanded for the labor etc from the domestic suppliers as well as our overseas suppliers so we we have a certain figure which we have not factored in at all at the moment but that's quite a substantial figure which we are taking into consideration that includes the gas and oils and etc etc everything and also the carbide inserts etc okay thanks thank you but we'll surprise you by the end of the year despite the air freights which we'll get to some extent would be we will claim it from the customer we will we stand by about our commitment as thank you so much sir unless question come from the line of Saurabh Jen with Sunidhi hi Investment please go ahead hello yeah thanks for the opportunity sir just a small clarification before I ask my questions so EBITDA margin during the quarter stood around 4.5 4.7 percent and you say by Q3 Q3 assuming the thing settle down on the West come back to our trajectory of around 10 percent so can we expect Q2 be somewhere in between yes it will be in between okay and sir my first question is.

Arvind Kapur: Yes, Sunil.

Sunil Kumar Daga: Sir, you have shared the projected numbers for Q2, Q3, and Q4. How do you see EBITDA level and profit levels considering that we are barely plus in this thing?

[Analyst]: Sir, you have shared the projected numbers for Q2, Q3, and Q4. How do you see EBITDA level and profit levels considering that we are barely plus in this thing?

Arvind Kapur: Q2 PAT level will be better, but Q3 will come back to normal because there would be no premium rates. We would have settled for the raw materials and also the price increases that we have demanded for the labor, et cetera, from the domestic suppliers as well as our overseas suppliers. We have a certain figure which we have not factored in at all at the moment, but that is of course a substantial figure which we are taking into consideration. That includes the gas and oils and et cetera, everything, and also the carbide inserts, et cetera.

Sunil Kumar Daga: Okay. Thanks.

[Analyst]: Okay. Thanks.

Operator 2: Thank you.

Operator: Thank you.

Arvind Kapur: We will surprise you by the end of the year. Despite the air freight which we will get, to some extent we will claim it from the customer. We will stand by what our commitment is.

Operator 2: Thank you so much, sir. Next question comes from the line of Saurabh Jain with Suniti Investment. Please go ahead.

Operator: Thank you so much, sir. Next question comes from the line of Saurabh Jain with Suniti Investment. Please go ahead.

Saurabh Jain: Hello. Yeah, thanks for the opportunity, sir. Just a small clarification before I ask my questions. EBITDA margins during the quarter stood around 4.5% to 4.7%, and you say by Q3, assuming the things settle down on the West Asia prices part, will come back to our trajectory of around 10%. Can we expect Q2 be somewhere in between?

Arvind Kapur: Yes, it will be in between.

Saurabh Jain: Okay. My first question is on growth. You have done wonderfully well with 39% growth and you have actually increased your guidance from crossing INR 3,000 to INR 3,200 or INR 250 crores for this fiscal. Just wanted to know how much of this 39% growth has come from high metal prices?

Arvind Kapur: I think it is about 100 out of 200 crores in this, which could be because of high metal. The exact figures I can share with you later, but that could be there also.

Naveen Sorot: Sir, in this sort of-

Saurabh Jain: Yes.

Naveen Sorot: If you look at standalone for the company, I guess the impact of raw material is almost 100 crores. The INR 581 crores that you are looking at, if you net off and if you let us take the same base as was Q1 last year, this number will be somewhere around INR 481 crores.

Arvind Kapur: Standalone. Yeah.

Saurabh Jain: On a console basis. You are saying INR 100 crores of the impact due to higher metal prices, so around INR 650 odd crores.

Arvind Kapur: This is on a standalone number, so you can increase that INR 100 crore by another INR 10, 15 crores to give you a console number.

Saurabh Jain: Okay, fine. And sir, what would be your CapEx guidance for FY 2027 and 2028?

Arvind Kapur: Okay. At the moment, the 54 projects that are in hand, we are making investments there, but we are also curbing the investments. Having said that, after this, I think for one year, we are going to invest only where absolutely necessary, otherwise, we would like to stabilize and be able to run all the assets to full capacities. Once we stabilize them, thereafter, we will look at some larger projects. But it is only the small expansions of capacity increases to our domestic customers and our overseas customers. That is what we will do at the moment. But newer projects after these 54 projects are over, we will first stabilize and then make the investments.

Saurabh Jain: Sir, if you can just quantify for FY 2027 and FY 2028, it would be really helpful, including your maintenance CapEx and all, what is the usual trend there.

Arvind Kapur: We will share with you.

Saurabh Jain: Okay. My last question is on, in the presentation you have just published, slide number 30, about the digital transformative initiatives. Can you please provide some more color? What kind of investments are we planning here? You have put several points here on the slide. What areas are we going to invest and how it is likely to play out in terms of profitability and all?

Arvind Kapur: What is, of course, we are learning more and more about AI, and our people are getting engaged in that. We are looking at how AI can be used for improving the productivity. We have started using for designing and also for a lot of information and also trying to improve our manufacturing capability and ability and productivity on the machining line. We are also adopting it for designing of dyes, et cetera. That is in the nascent stage, but we are in the process of doing that. We are also connecting all the equipment so that the monitoring can be done very effectively and the machines can be utilized very efficiently. We have already done this on a couple of lines. Those are very successful, and we are further trying to improve that.

Arvind Kapur: Then we will replicate that across the board for all the lines, with the information available readily to us for every line. Also the losses. With this, what we get is that productivity improves, we will be able to control the losses or loss of time, et cetera, very well.

Saurabh Jain: Okay, sir. That is all from my side. Wish you all the best. Thank you.

Arvind Kapur: Thanks.

Operator 2: Thank you. Our next question comes from the line of Hiten Boricha with Securin Investments. Please go ahead.

Operator: Thank you. Our next question comes from the line of Hiten Boricha with Securin Investments. Please go ahead.

Hiten Boricha: Yeah. Thank you for the opportunity. My first question is on the railway and the defense. Have railway or defense contributed anything in Q1?

Arvind Kapur: Yeah.

Hiten Boricha: If you can share the numbers, because last quarter I think you mentioned it was roughly around 4 or 5 crores.

Arvind Kapur: We will share the numbers with you.

Hiten Boricha: And sir, till then, if you gave the number, should I ask my second question?

Arvind Kapur: Yeah, please carry on.

Hiten Boricha: Yeah. The second question is on the guidance you mentioned. You are still looking at INR 3,200, INR 3,300 kind of top line with improving margin trends. Assuming if you want to achieve 10% margin for full year FY 2027, is it you are mentioning our margin will be better than 11%, 12% in H2, which will eventually lead us to 8%, 9% margin in the year?

Arvind Kapur: Well, the 54 projects that KB mentioned that we are launching or those are launching, 28 have been launched and others are being launched. Those are definitely with better margins and those are with the current prices of raw materials. The margins are also calculated accordingly, much better margins, and those are the volume which are actually going up. We've also done a lot of saving as far as the machining is concerned. There is a cost reduction that has happened. We've worked a lot on our rejections, and that is also adding to the kitty. The margins are definitely going to improve. Our target, we had mentioned last year that our target should be around 12%. We will be achieving the 12% target.

Arvind Kapur: Unfortunately, this air freight came in because our commitment to the customers and being a single source, we did not want to let the customers down, so this expense came. We will honestly try to claim whatever we can. Even though about, I think, 9 to 10 crores, there is a certain percentage that has been agreed by the customer. There's a sorting cost of the rust and other components that had happened in the US. That we have to see how we can reclaim from the customers, or at least reuse the components by cleaning them up and all that. That sorting will have to take place.

Hiten Boricha: Yeah, that is well taken, sir. What I'm asking is to achieve a 10% margin for the full year FY 2027, eventually you will have to do 12%, 13% margin for the rest of the quarter.

Arvind Kapur: Just see.

Hiten Boricha: Okay. We are confident on that point.

Arvind Kapur: Yeah, we are very confident of what is happening unless something else happens in Iran or something, then it will not be in our control. Whatever is happening now, if this continues, I think we are fairly confident because fortunately, the Indian market is also growing.

Hiten Boricha: Correct. Sir, on the follow-up of that 54 new projects, if you can share some color on that, what exactly are we doing with our new customers? It could be helpful, sir.

Kaushalendra Verma: These projects are with our custom global OEMs like Toyota, BMW, and Ford.

Hiten Boricha: Yes.

Kaushalendra Verma: Ultimately, our components will get into the to deliver to these components. These are long-term programs, as I mentioned in my opening remarks.

Kaushalendra Verma: Ultimately, our components will get into the to deliver to these components. These are long-term programs, as I mentioned in my opening remarks. With a program life of around seven to eight years. As Ambica mentioned that these are the programs which are on the recent cost structure and having a very high profitability.

Kaushalendra Verma: With a program life of around seven to eight years.

Kaushalendra Verma: As Ambica mentioned that these are the programs which are on the recent cost structure and having a very high profitability.

Hiten Boricha: Okay. So approval and everything is already done for this componentry, right?

Kaushalendra Verma: Say again.

Hiten Boricha: Approval has been already.

Arvind Kapur: Yes.

Hiten Boricha: Okay.

Kaushalendra Verma: Yeah. For 28 programs which have already gone into the SOP, for that all customer approval and everything is in place. Only that we will start the stuff.

Arvind Kapur: Like in Hosur, we will be adding more components. That project starts on September, October onwards, we start the production. Those will be the new launches that will happen there. There are launches taking place in Chennai, there are launches taking place here in North India as well. Sandeep, you want to add something?

[Company Representative] (Rico Auto Industries): No, sir. These programs, what we are mentioning already, they are in the ramp-up phase, most of the programs, and the new ones that are going to start Bathindi, Bhiwadi, and Hosur.

Naveen Sorot: No, sir. These programs, what we are mentioning already, they are in the ramp-up phase, most of the programs, and the new ones that are going to start Bathindi, Bhiwadi, and Hosur.

Arvind Kapur: Those will start in September, October, then slowly ramp up. Some are going to start in February, March next year, and they start ramping up a couple of months later. We are in that cycle now.

Hiten Boricha: Okay. Sir, these components are for ICE as well as EV, right?

Kaushalendra Verma: For Hosur facility, these are mainly for the hybrid and for the EV.

Hiten Boricha: Okay.

Kaushalendra Verma: In the northern part of India, these are mostly for the ICE also. Ford is-

Arvind Kapur: ICE, EV also, and hybrid also. Yes. So it is a mix of hybrid, ICE, and EVs.

Hiten Boricha: Okay, understood. Cool. Okay, sir. Sir, that number you were supposed to give, sir, the revenue from-

Arvind Kapur: My defense guy is on leave today, so the nominee is sitting here.

Naveen Sorot: My defense guy is on leave today, so the nominee is sitting here.

Hiten Boricha: Understood. No worries, sir. I will take it up.

Arvind Kapur: I think it is in the region of about 5 to 7 crore, but I will give you the exact figure.

Naveen Sorot: I think it is in the region of about 5 to 7 crore, but I will give you the exact figure.

Operator 2: Thank you, sir. Our next question comes from the line of Basant Bafna with Sunidhi Securities. Please go ahead.

Operator: Thank you, sir. Our next question comes from the line of Basant Bafna with Sunidhi Securities. Please go ahead.

Basant Bafna: Congratulations for good top-line growth. Of course, the adjusted margins are much better than what optically it looks like on the reported numbers. My questions are little going to be more strategic in nature. If you see last five years, your top line has gone up almost INR 600 crores, from INR 1,900 crores to INR 2,500 crore, broadly from 2022 to 2026. In that period, we have done a CapEx of almost INR 1,000 crores on an average of INR 200 crore per year. Now you guided that, why it took us almost five years, where we did a CapEx of INR 1,000 crores, where we could not able to grow the top line, even the one time of CapEx that we did. Now, what is changing in the company?

Bajrang Bafna: Congratulations for good top-line growth. Of course, the adjusted margins are much better than what optically it looks like on the reported numbers. My questions are little going to be more strategic in nature. If you see last five years, your top line has gone up almost INR 600 crores, from INR 1,900 crores to INR 2,500 crore, broadly from 2022 to 2026. In that period, we have done a CapEx of almost INR 1,000 crores on an average of INR 200 crore per year. Now you guided that, why it took us almost five years, where we did a CapEx of INR 1,000 crores, where we could not able to grow the top line, even the one time of CapEx that we did. Now, what is changing in the company?

Basant Bafna: We have seen multiple changes, not only on the top-line growth side, but on the margin guidance and on this 3x top-line growth that we are talking about by 2030, then board level changes, then a lot of process optimization and back-to-back SAP implementation, then talking to customers for price increases. Can you just say what is something which is changing in the company right now, maybe after a lull of five years, where we are now giving a significant growth guidance for next four or five years. If you could just outline the broader strategy of the management while making those changes on each and every front. If you could just touch base on the broader roadmap on that, it will be really helpful, sir.

Bajrang Bafna: We have seen multiple changes, not only on the top-line growth side, but on the margin guidance and on this 3x top-line growth that we are talking about by 2030, then board level changes, then a lot of process optimization and back-to-back SAP implementation, then talking to customers for price increases. Can you just say what is something which is changing in the company right now, maybe after a lull of five years, where we are now giving a significant growth guidance for next four or five years. If you could just outline the broader strategy of the management while making those changes on each and every front. If you could just touch base on the broader roadmap on that, it will be really helpful, sir.

Arvind Kapur: I will give you a very broad picture as to what is happening. I would like to mention, of course, the board has changed and everything is happening. We started focusing on the high tonnage parts. High tonnage part means for the aluminum die casting, we started focusing on machines which are above 1,000 tons. Going up to 1,400 ton, 1,700 ton, 2,000 ton, 2,700 ton die casting machines. Those are expensive equipment. To give you an example, 2,700 ton machine, the basic machine landed cost is about INR 25 crores, and it is another INR 10 to 15 crores is the infrastructure around it that is to be built up. We have got seven, eight of those machines now. Now these machines, when they come in, each die can cost you about INR 8 crores for those die casting machines.

Arvind Kapur: It is a process of making the dies, of setting up the plant and also starting the production and setting up the equipment and machinery and setting up the infrastructure for that. The projects we have taken up are long-term projects, unlike some of the projects were awarded to us almost a year and about two years back, and which are coming to production now. The Hosur facility, the project was given to us last year, and now the facility is coming to production. These are the projects which the OEMs take up long-term, but they want a fairly early commitment where the investment also starts taking place. The testing and the running of the equipment by the local OEMs is done much before the time the production comes in, we come into production.

Arvind Kapur: The investment actually takes place and there is zero turnover that actually happens. It is only the sample making that we do. Now all those are coming into focus. The other thing we have done is the productivity on the equipment. We have managed to improve the productivity of equipment. We have been able to pull out a lot of CNC machines and redeploy them into newer projects and the other investments which are taking place now. We are minimizing the investment, but focusing primarily on the turnover which is happening here and also focusing on the bottom line. With this, the die casting capacity is also better utilized now, and our iron capacity also will be better utilized. That is also going to have a major impact. You will see the impact this year and next year also.

Basant Bafna: Got it. Sir, I know I can remember the older days when you were the king of that area, and now maybe in last four or five years, maybe 10 years, you have done good CapEx also, but you have lost that glory that Rico was enjoying maybe 10 years back. A lot of other auto ancillary companies who were much smaller than you have grown sizably, much stronger, and bigger in last 10 years. Probably I would say it is a lost decade for Rico, but of course, we have brought up the capabilities and now we have done INR 1,000 crore CapEx. What sort of numbers that you can achieve?

Bajrang Bafna: Got it. Sir, I know I can remember the older days when you were the king of that area, and now maybe in last four or five years, maybe 10 years, you have done good CapEx also, but you have lost that glory that Rico was enjoying maybe 10 years back. A lot of other auto ancillary companies who were much smaller than you have grown sizably, much stronger, and bigger in last 10 years. Probably I would say it is a lost decade for Rico, but of course, we have brought up the capabilities and now we have done INR 1,000 crore CapEx. What sort of numbers that you can achieve?

Basant Bafna: You have already guided, but my only submission there is that without CapEx, with the INR 1,000 crore CapEx that we did in last five years, what sort of top line is achievable by us with minimal maintenance CapEx we can go ahead with to achieve this INR 7,500 crore top line guidance that you have given for 2030?

Bajrang Bafna: You have already guided, but my only submission there is that without CapEx, with the INR 1,000 crore CapEx that we did in last five years, what sort of top line is achievable by us with minimal maintenance CapEx we can go ahead with to achieve this INR 7,500 crore top line guidance that you have given for 2030?

Arvind Kapur: See, there would always be maintenance CapEx which will always be there, but we can achieve a figure of about INR 4,000 crores in the setups that we already have at the moment. There would be investments in the dies, especially for any new component coming, there are special dies which are made, and those investments take place. We normally try to claim that money from the customer upfront, but in some cases like Maruti and all, they do not pay upfront, they do it in the piece price. With the other customers, we do request them to pay us upfront. We try to minimize whatever. We can touch a figure of about INR 4,000 crores plus.

Basant Bafna: Okay. Without any significant CapEx.

Bajrang Bafna: Okay. Without any significant CapEx.

Arvind Kapur: Without significant. I would say without taking up a major project.

Basant Bafna: Okay. Got it. And sir, broadly, if we try to judge the impact of aluminum prices which is there, which has gone up 57% for some grades that you have talked about. So, that is something which is an unknown. We don't know that how it will behave maybe this year or next year. So when we are giving this INR 3,250 crore sort of guidance for this financial year, what is the aluminum price that is under the assumption so that at least we can correlate in the future that how that movement is happening and where the numbers are going to behave?

Bajrang Bafna: Okay. Got it. And sir, broadly, if we try to judge the impact of aluminum prices which is there, which has gone up 57% for some grades that you have talked about. So, that is something which is an unknown. We don't know that how it will behave maybe this year or next year. So when we are giving this INR 3,250 crore sort of guidance for this financial year, what is the aluminum price that is under the assumption so that at least we can correlate in the future that how that movement is happening and where the numbers are going to behave?

Arvind Kapur: Impact of the raw material, I can give you the exact value, but I think it should be in the region of about INR 200, 250 crores.

Basant Bafna: Okay. I am trying to say that this USD 3,300, which is the aluminum price right now. So when we are giving this guidance of INR 3,250 crore of top line for this year, what is the aluminum price that we have made an assumption, which probably we can correlate the ruling price in MCX is around USD 3,300.

Bajrang Bafna: Okay. I am trying to say that this USD 3,300, which is the aluminum price right now. So when we are giving this guidance of INR 3,250 crore of top line for this year, what is the aluminum price that we have made an assumption, which probably we can correlate the ruling price in MCX is around USD 3,300.

Arvind Kapur: INR 3,250 a kilo. 300,000. Yeah.

Basant Bafna: Okay. Got it, sir. All the very best, sir, for the coming quarters. I hope that we deliver what we are guiding to the market.

Bajrang Bafna: Okay. Got it, sir. All the very best, sir, for the coming quarters. I hope that we deliver what we are guiding to the market.

Arvind Kapur: Yeah.

Operator 2: Thank you.

Operator: Thank you.

Arvind Kapur: Thanks.

Operator 2: Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Next question comes from the line of Jalak Rathi, an individual investor. Please go ahead.

Operator: Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Next question comes from the line of Jalak Rathi, an individual investor. Please go ahead.

Jalak Rathi: Hello.

Operator 2: Yes.

Operator: Yes.

Jalak Rathi: Am I audible?

Operator 2: Yes, you may proceed. Yes, you are.

Operator: Yes, you may proceed. Yes, you are.

Arvind Kapur: Yes.

Jalak Rathi: In the last concall, Arvind sir said about the CNC machines that you will be selling in the market. If you could give an idea about that, like what is the spare capacity, and do we have customers on board?

Arvind Kapur: Yeah. We have already started delivering and that is expanding and the process is on. We have actually sold more than we are making. That is the situation at the moment, and we have not factored that as far as the total-

Jalak Rathi: Revenue

Arvind Kapur: revenue is concerned.

Jalak Rathi: What is the spare capacity, if you could give a number? We have 3,000 capacity that we are using for captive consumption, right?

Arvind Kapur: I did not understand your question. 3,000 is not the capacity. Those are the machining centers we are having. If you talk about the capacity in terms of the numbers, this year we are planning around 100 machines, so that is the plan. The 3,000 is the number of machines which we are currently having in our- 3,000 number of machines we use for production purposes in our plants. It is over 3,000 machines. These are the new CNC machines that we are selling to- Earlier we used to make it only for ourselves, now we started selling to customers outside.

Jalak Rathi: Okay. What kind of revenue or margins are we expecting from this?

Arvind Kapur: Margins are definitely better than in the machine tools side. We could sell, but we've not included that revenue in the current three quarters of the guidance that we have given. The railways will add on, and also this will be add on.

Jalak Rathi: Okay. Do we project any major revenue? We are projecting major revenue coming from railways and defense. Do we see this as a major segment of revenue, CNC machines, or it is just a-

Arvind Kapur: It should become a major revenue. Now, see, this is the first year we're doing it, so we are also testing the market and we're also getting feedback for our equipment. Earlier we were using it internally, but now since we have customers outside, we are getting feedback and we are also upgrading whatever the expectation of the customer is, and we're trying to see their expectations.

Jalak Rathi: Okay.

Arvind Kapur: Our target is to sell 100 machines this year.

Jalak Rathi: Okay. Any approximate number that you are getting? Some sort of number, if you could give.

Arvind Kapur: Revenue?

Jalak Rathi: That would be helpful on the cost side, on the revenue side for the CNC machines.

Arvind Kapur: About between INR 35 to INR 40 crores.

Jalak Rathi: Okay. There is a land which is for held for sale. Do we have customers, and where will the money go for that land, the property in Haridwar?

Arvind Kapur: Oh, that one.

Naveen Sorot: Land for sale.

Arvind Kapur: No, no.

Jalak Rathi: There is an asset, 10 crores asset, 2 acre land.

Arvind Kapur: One minute.

Naveen Sorot: The total payment we receive by 30 December.

Arvind Kapur: By 30 December, we will get the complete payment on that.

Jalak Rathi: Okay. We will be getting INR 10 crores.

Arvind Kapur: Yeah.

Jalak Rathi: That will be used for debt repayment. What are we going to use that for?

Arvind Kapur: We will use it for whatever repayment is required. We will do that.

Jalak Rathi: Okay. Thank you.

Operator 2: Thank you. The next question comes from the line of Darshil Zaveri with Crown Capital. Please go ahead.

Operator: Thank you. The next question comes from the line of Darshil Zaveri with Crown Capital. Please go ahead.

Darshil Zaveri: Hi, sir. Thank you so much for letting me ask a question again. Sir, just one more question in terms of land only. Sir, we have another land bank also, right? What are our plans with that, sir?

Darshan Jhaveri: Hi, sir. Thank you so much for letting me ask a question again. Sir, just one more question in terms of land only. Sir, we have another land bank also, right? What are our plans with that, sir?

Arvind Kapur: See, we are talking to people, and there is an active discussion taking place, but we cannot say anything before things are actually done. Maybe we give you the news sooner than later.

Darshil Zaveri: Okay. That is really great to know, sir. And sir, just out of this, sir, our hedging policy, because there is so much fluctuation in aluminum prices, do we plan to at least do some future hedge, so at least the cash flow that we are giving in that, so at least some part can be saved? What are your thoughts on that, sir?

Darshan Jhaveri: Okay. That is really great to know, sir. And sir, just out of this, sir, our hedging policy, because there is so much fluctuation in aluminum prices, do we plan to at least do some future hedge, so at least the cash flow that we are giving in that, so at least some part can be saved? What are your thoughts on that, sir?

Naveen Sorot: Darshan, commodity is not something that we are banking on. So our endeavor will be whatever price that we are paying to purchase our raw material should get passed on to the customer. So what we are working on, not exactly hedging, but to cut down on any kind of lag that we currently have. So if you recall last time we discussed that almost 75% of the customers are already converted to real-time settlements. I guess that 25% are still to be onboarded, so we are working on it. So once that is done, we will probably eliminate the lag impact that we are reporting every quarter.

Operator 2: Thank you. Darshan, have you done with the question? Darshan, can you hear us?

Operator: Thank you. Darshan, have you done with the question? Darshan, can you hear us?

Darshil Zaveri: Yeah. I am saying if the follow-up, I can ask for this question then. Hello?

Darshan Jhaveri: Yeah. I am saying if the follow-up, I can ask for this question then. Hello?

Operator 2: You may.

Operator: You may.

Darshil Zaveri: Yeah. Just the 75% is the value of the revenue or the number of customers? We had a significant aluminum business, so just wanted to ask about that, sir.

Darshan Jhaveri: Yeah. Just the 75% is the value of the revenue or the number of customers? We had a significant aluminum business, so just wanted to ask about that, sir.

Naveen Sorot: If you look at, Darshan, for a standalone number, the lag impact for the quarter is only INR 3.3 crore. You will recall the last quarter, the number was quite big, INR 7 crore. I guess that is because the 75% of the customer by value has already converted. I guess we are working on the balance. Once that is done, I guess there is no separate hedging that will be required for us to do.

Darshil Zaveri: Okay. That is great. That is it from my side. All the best, sir. Thank you.

Darshan Jhaveri: Okay. That is great. That is it from my side. All the best, sir. Thank you.

Operator 2: Thank you. As there are no further questions from the participant, I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team.

Operator: Thank you. As there are no further questions from the participant, I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team.

Arvind Kapur: This quarter has been tough, mainly because of the air freights and the sorting costs that we had to incur. But we are very confident of what is happening. Like I mentioned about the month of July, the revenues have gone up, and gone up much further than whatever we declared the last quarter. And by the end of the year, we will be crossing INR 3,250 crores in any case. And the profitability also, you will see the change there and whatever costs, mainly the air freight costs, we are trying to recover maximum from our customers. Whatever we can, we will do that. Besides that, there are other costs which we have factored, which we have already filed a claim, and we are fairly confident that those will also start coming.

Arvind Kapur: In fact, some of the costs have just started coming in, and we are talking to each and every customer. And by next quarter, I think we will be able to tell you as to how many have already agreed to whatever requests we have made. This is primarily on the oil gas, all the imported materials like carbides, et cetera, and also the general inflation that segment, and the labor cost, which went up, which the government of Haryana, they jacked it up by almost 40%. That was a major impact. Those discussions are going on, and we are confident that in this quarter, we should be able to settle most of them.

Arvind Kapur: It will take us a little longer time with our overseas customers to convince them that because of the inflation, there is the manpower cost and the gas and the petrol cost, or the oil cost has gone up. And we are on it, and we have already made requests to them, and hopefully that will also get settled.

Operator 2: Thank you so much, sir.

Operator: Thank you so much, sir.

Arvind Kapur: Thank you so much, and we assure you that we will do better the next time. This quarter is also going to be challenging, primarily because of the air freights. But the next quarter onwards, you will be very happy to see the result.

Operator 2: Thank you so much, sir. Ladies and gentlemen, on behalf of Rico Auto Industries Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Operator: Thank you so much, sir. Ladies and gentlemen, on behalf of Rico Auto Industries Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Arvind Kapur: Thank you.

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Q1 2027 Rico Auto Industries Ltd Earnings Call

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