Operator: Ladies and gentlemen, good day and welcome to Steel Strips Wheels Limited Q2 FY27 earnings conference call hosted by 360 One Capital Market Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dineshkumar from 360 One Capital Market Private Limited. Thank you, and over to you, Mr. Kumar.
Dineshkumar P: Good morning, everyone. On behalf of 360 One Capital Market, I would like to welcome you all to Q2 FY27 Earnings Call of Steel Strips Wheels Limited. Today, we have with us Mr. Dheeraj Garg, Managing Director, Mr. Rahul Kumar, Chief Financial Officer, Mr. Aditya Dixit, Executive Director, International Marketing and Operations, and Mr. Pranav Jain, Vice President, Finance. We will start the call with brief opening remarks from the management team about the quarter gone by, and then we will proceed to the Q&A session. I will now hand the call over to the management team. Over to you, sir.
Dheeraj Garg: Okay. Good morning, everyone. I hope you are all doing well and have had the opportunity to go through our financial results and the investor presentation, which has been already uploaded on the stock exchanges and our company's website. I am pleased to share that the Q2 of financial year 2027 was the strongest quarter in the company's history, with the highest ever quarterly revenue, EBITDA, and PAT. This reflects our continued focus on strengthening our market position and creating sustainable long-term value for all our stakeholders. Before I walk you through our performance, I would like to highlight that the board has approved an interim dividend of INR 1.50 per equity share. Now, coming to our quarterly performance. Revenue grew 61% YOY to INR 1,930 crores. Stand-alone EBITDA, including other income, stood at INR 237 crores, up 107% YOY.
Dheeraj Garg: EBITDA margin improved to 12.3% from 9.6% in Q2 of last financial year. EBITDA per wheel rose to 404 from 242 last financial year quarter, same quarter last year. This improvement was driven by a richer product mix with a higher share of aluminum wheels, continued cost optimization across all our factories, and a higher contribution from exports. In addition, as mentioned on the last call, we have received price revisions from customers for increase towards input costs other than raw material, which has further supported our margins. Profit after tax grew 209% YOY to INR 119 crores, with PAT margin improving to 6.2% from 3.2%. Turning to our half-year performance, revenue for H1 stood at INR 3,440 crores, compared with INR 2,387 crores in last year's same half, a growth of about 44%.
Dheeraj Garg: Stand-alone EBITDA, including other income, stood at INR 403 crores, up 68% YOY, and EBITDA margin expanded to 11.7% from 10.1%. EBITDA per wheel for the H1 stood at INR 362 per wheel. That was in the full six months of this financial year. Profit after tax for the half year was INR 190 crores, up 115% YOY. Now, let me take you through our segment performance. The alloy wheel segment remained our key growth driver, contributing to about 45% of our total revenue for the quarter and about 42% for the H1. Volumes reached approximately 12 lakh units in Q2 and 23 lakh units for the whole of the H1. Volume growth was driven by premiumization in passenger vehicles and the rising share of EVs in India, while higher aluminum prices also supported revenue.
Dheeraj Garg: Given increasing alloy wheel penetration and strong OEM demand, we expect this upward volume trajectory to continue. Our aluminum knuckle business is progressing in line with our expectations. We remain focused on securing more customer approvals and scaling up commercial supplies. We believe this business will become an important growth engine over the medium term as lightweight aluminum components gain wider adoption across both ICE and electric vehicles. The commercial vehicle segment delivered another very strong quarter and recorded the highest growth amongst all our segments across domestic and export markets. Truck wheel demand was supported by sustained OEM offtake, replacement demand, and infrastructure-led activity. This marks a clear recovery from the weakness we saw in the Q2 of last financial year. The tractor segment performed steadily during the quarter, and our market share improved from 43% to 45%.
Dheeraj Garg: Demand was supported by increasing farm mechanization, healthy rural economic activity, and a growing preference for higher horsepower tractors. We will continue to leverage our established customer relationships and manufacturing capabilities to meet the evolving requirements of tractor manufacturers. In the steel wheel segment, we saw that there was an increased demand for high vent hole wheels. These are wheels that are similar-looking to aluminum wheels but are made out of steel, so the cost is much less than the aluminum wheel. We are pursuing this opportunity wholeheartedly and gaining market share in this segment. Coming to exports. After a soft Q1, export revenue grew 69% YOY in Q2 to reach INR 187 crores, taking H1 export revenue to INR 314 crores, a growth of 16% YOY.
Dheeraj Garg: This reflects the diversification we have undertaken over the last two years across Europe, Latin America, and Asia, alongside our established presence in the US. As discussed on our previous earnings call, we remain on track to exceed our FY27 export target of INR 600 crores. We remain focused on improving export volumes, strengthening our customer mix, and ensuring that our international business contributes meaningfully to both revenue growth and profitability. Coming to our expansion in Bhuj, both the projects are progressing as planned. The aluminum wheel plant will add 1.2 million wheels of annual capacity, taking our total aluminum wheel capacity to beyond 6.2 million. With our existing alloy wheel capacity running at near full utilization, this expansion is well-timed. The aluminum knuckle facility will have an annual capacity of 1.1 million units.
Dheeraj Garg: We are on track to commence commercial production of knuckles in the last quarter of this financial year, and aluminum wheels should start in early April of next year. Moving on to our CapEx plans, we expect a total expenditure of over INR 600 crores in this financial year. INR 420 crores is allocated to the Bhuj facility, INR 120 crores will go towards increasing our tractor wheel capacity by almost half a million tractor sets in Dappar, and approximately INR 70 crores will go toward machinery replacement and automation, which is our big focus area now and has been for the last couple of years to increase our operational efficiency and strengthen our manufacturing capabilities. On a greenfield expansion, rather, I would say, the board has also approved, subject to regulatory clearances, setting up of a state-of-the-art greenfield manufacturing facility at Sambhaji Nagar, Aurangabad.
Dheeraj Garg: The facility will manufacture alloy wheels and steel wheels for passenger car vehicles and OTR applications and will include also a hot stamping line for body structural parts of the car, which is again a part of our light-weighting strategy to enter businesses that call for light-weighting in cars. The total project outlay is estimated at about INR 1,400 crores, and it is going to be spread over the next 16 months, and this will be funded by a mix of debt, internal accruals, and also likely strategic investments from strategic partners. Looking ahead, we remain confident about the rest of financial year 2027. At the start of the year, we guided our top-line growth of over 20% and EBITDA per wheel of more than 310.
Dheeraj Garg: Our H1 performance has exceeded both, and we are extremely confident of having a very strong guidance for the remaining two quarters based on what we have achieved in the last quarter. Demand across our domestic segments remains strong. Exports are recovering and hopefully, after a new trade deal with America, exports should actually exceed our expectations or our planned revenue this year. Our priorities remain unchanged: operational excellence, expanding our premium and aluminum portfolio, growing exports, having deeper customer relationships, and investing in automation and AI to improve our productivity. With that, I would like to thank all our employees, customers, suppliers, shareholders, and business partners for their continued trust and support. Now we are open for your questions, please.
Operator: Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask questions may please press star and 1 on their touch-tone phone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and 1 to ask questions. The first question is from the line of Aditya Ketan from SMIFS Institutional Equities. Please go ahead.
Aditya Khetan: Yeah. Thank you, sir, for the opportunity, and congrats on a superb performance. Just a couple of questions. Sir, first, when we look in this quarter, obviously the per wheel EBITDA looks onto the higher side when we compare the history over the last few years. What do you see the sustainable numbers, sir, could be going ahead? Also, sir, you had mentioned, like in H1, we have got some INR 183 crore of pass-on benefits. Suppose if we exclude that benefit, what would have been the EBITDA per wheel in the H1, and what would be the sustainable numbers going ahead?
Dheeraj Garg: Let me first of all clarify this doubt in everyone's mind, because this question is being raised by everyone. This INR 183 crore supplementary invoicing is only based on raw material price changes, which are a pass-through. I have repeatedly made it clear to everyone that raw materials are a pass-through. The settlement takes longer. When we report our monthly numbers, those don't incorporate the increase in the selling price of steel or the purchase price of steel, as a result, the increase in selling price of our invoices. This number is nothing but what was actually spent while we were doing all these manufacturing and sales activities in the first six months. This is not to be conflated with an increase in EBITDA. This has no role to play in the EBITDA per wheel or overall EBITDA of the company. This is one.
Dheeraj Garg: Going forward, what we have seen, we have seen an EBITDA per wheel of INR 404, and this is born out of diversification. All our bigger volume, profit on our businesses, for example, CV, which in the first six months, it has grown for 28%, is the highest growth in terms of the domestic market is concerned for steel wheels. Generally speaking, CV wheels, tractor wheels have been showing YOY growth. We have seen exports growing remarkably, the knuckles business growing, and to top it all, aluminum wheels business growing. You have more and more cars requiring aluminum wheels, and we are at the forefront. Ex-Maruti, we have a very dominant market share. We have more than 64% market share ex-Maruti. You can see ex-Maruti, all the car companies that have done well have in fact increased their penetration of alloy wheels in their portfolio.
Dheeraj Garg: To run. That is the reason why we are running at almost 5 million capacity in aluminum. In fact, in this month, we will cross 5 million. Necessity is the mother of invention. We got more orders than we had capacity for, but we were able to de-bottleneck the factory, and you will be happy to note that we have increased the capacity by 10% in this month of October. We will cross 5 million. It could be close to a number of 5.4 million annualized basis. One could assume that, yes, the capacity, because of de-bottlenecking in aluminum, has increased organically, without having to expend much money, or rather no money. We've been able to increase our productivity by 10%, more or less. Going forward, these things, enhanced capacity output from Mehsana, increased demand for CV products. CV is on an absolute tear.
Dheeraj Garg: Exports are doing great. All this means that, going forward, this EBITDA level of INR 404 should be sustainable, and perhaps we will exceed that. For example, October has been a great month. If this trend continues in November and December, then obviously we will have a much better number in EBITDA per wheel.
Aditya Khetan: Got it, sir. Sir, onto the newer CapEx aligned of INR 1,400 crore. Sir, is there any internal workings on the IRR for alloy wheels and steel wheels? Also, sir, because this is a big number, how much contribution would be from internal accruals debt? Because already our debt is onto the higher side. Any workings on that, sir, at all?
Dheeraj Garg: These projects are going to be highly profitable, first of all, let me put it this way. The IRR, right now, I think what I have understood is that we have got a ROCE of 24% in the first 6 months of this financial year. I think Sambhajinagar addition would only add to this number. So we would be looking at higher than 24% return on assets, return on capital employed.
Dheeraj Garg: So I think one need not worry about the return because we are getting close to the customer. We are getting into a business where freight plays a big role, and Maharashtra, as you know, is growing in terms of automobile investment and volume growth. So I think this really brings a lot of operational leverage to us by being closer to the customer. Plus, the new investment that we are doing are going to be much more automated than the previous investments. So this would mean that we would be able to bring our costs down and become even more competitive in the market in India. So I am very confident that we will better what we are right now getting on ROCE.
Aditya Khetan: Sir, just one more follow-up onto the last answer you mentioned on the per wheel of INR 400 that is sustainable. Sir, considering the benefits we have received in H1, you see these benefits will continue even for FY28, and whatever sort of capacity expansions we are doing, that is fine, but still this number looks onto the much higher side, INR 400 per wheel. So what is the confidence that we are building like this number can be sustainable or a realistic number also would help, sir, for the next 2 to 3 years.
Dheeraj Garg: Listen to me. How are you saying that special circumstances were prevalent in the H1 this year? What is your premise here?
Aditya Khetan: Because, sir, we are finding this pass-on of RM pricing that has helped to boost the per wheel and also
Dheeraj Garg: No, sir. You are absolutely mistaken. I told you repeatedly that the raw material is a pass-through. I do not want to repeat myself again on this. There are no special circumstances in the H1. Please, I do not know how you are getting this impression.
Aditya Khetan: Okay, got it. This number would be sustainable. Like, sir, you mentioned some INR 400 per wheel that could be sustainable.
Dheeraj Garg: It could be, that based on operational efficiencies and higher volume growth. As I told you, we have been able to unearth 10% more capacity on the alloy wheel business. That should be a great sign for profitability growth per wheel.
Aditya Khetan: Got it. Sir, for FY28, sir, just one last question.
Operator: Mr. Ketan, I am sorry to interrupt you, sir. There are others who are waiting for their turn. I will request you to kindly rejoin the queue for follow-ups.
Aditya Khetan: Okay. Thank you.
Operator: Thank you. We will take the next question from the line of Aryan from Aequitas Investments. Please go ahead.
[Analyst] (Aequitas Investments): Congratulations on the results. Just wanted to understand more on alloy wheels. You mentioned that you have very good market leadership in India, but I think a good growth lever for us is exports. So exports, if you could just give some kind of color on what is our global market share or standing in the global market. Who are the other global companies which we compete with? What is the price differential? What is the technology or the product specification differential where we can come ahead or where we can compete? Just some color on that.
Dheeraj Garg: I am not able to follow what your question is. Can you summarize what your question is?
[Analyst] (Aequitas Investments): Global market alloy wheels, competitive intensity, which are the players which we compete with, price competition, and the product specific competition.
Dheeraj Garg: Okay. For aluminum wheels, the majority of the competition is based in Turkey. Turkey, we are much more competitive than Turkey, not only in manufacturing cost, but also in logistics, we are very competitive. Not discussing what is happening right now in the Hormuz, but generally our freight from India are very competitive compared to Turkish exports to Europe, for example. So we have a good competitive edge on the cost front. In terms of quality, you have to match global standards. There is no other way. So it is not a differentiator, it is an absolute requirement. If you have to sell aluminum wheel in the export market. I think that should answer your question.
[Analyst] (Aequitas Investments): What is the qualification cycle year, do you not face any competition from China?
Dheeraj Garg: Qualification of what?
[Analyst] (Aequitas Investments): Time qualification. Once you have given the product, how much time does it take to get onboarded?
Dheeraj Garg: Yeah. About 9 months. After you win the business, it is about 9 months cycle for a new program.
[Analyst] (Aequitas Investments): No competition from China yet?
Dheeraj Garg: No. China, there is anti-dumping duty on Chinese wheel exports. So China is out of the market. We are competing in America, but we do not supply to America.
[Analyst] (Aequitas Investments): Okay. Why do you not supply to America? Is it a geographical issue?
Dheeraj Garg: No, because of the Chinese competition.
[Analyst] (Aequitas Investments): Okay. China can't supply to America. Just wanted to understand more on the hot stamping CapEx, which we are doing. What is the competition here and what exactly value we'll be adding? Is it synergistic with the other products which we have or it
Dheeraj Garg: The thing is, the customers are the same. The buyers and the customers are the same or similar. They're looking for strong suppliers. This is a new business that is going to grow globally also. It's a new technology to lightweight the cars, and with electrical vehicles and generally CAFE norms, you need to have lighter vehicles. More and more, cars are requiring the structural parts to be made out of hot stamping process, because the hot stamping process brings the weight down of the part. Since our customers are going to be in Nagpur or Nashik, we will be very close to the customer by putting this investment. We obviously are making this investment for a specific customer. We are not just shooting in the dark that we'll stick somewhere.
Dheeraj Garg: We are doing this because the customer has asked us to set up this factory.
[Analyst] (Aequitas Investments): And what is the competition here? Are any other auto companies already doing this at the scale which you want to do?
Dheeraj Garg: Yeah, there is a company called Gestamp, which is a multinational, multibillion-dollar group out of Spain. And they are our competition. There are other players also. JBM is also getting into it, and there are two more players, Autogen from Korea. But there is enough market for competitive players. People who have good technology, who have good process controls, who have good execution capabilities, these companies are always in demand for such new investments.
[Analyst] (Aequitas Investments): What is the asset turnover for this kind of CapEx in the hot stamp?
Dheeraj Garg: I think we are targeting INR 170 crores, all including land, building, et cetera, in this, and we should hit a turnover of close to INR 400 crores on this investment.
[Analyst] (Aequitas Investments): All right, sir. Okay, sir. Thank you very much. All the best and congratulations.
Dheeraj Garg: Thank you.
Operator: Thank you. The next question is on the line of Ansh Gupta from Niveshaay. Please go ahead.
Ansh Gupta: Hi, am I audible?
Dheeraj Garg: Yes.
Operator: Yes, you are.
Ansh Gupta: Good morning, management, and congratulations for good set of numbers. My first question was on the margin side. As promised, what is the margin gap between steel, alloy, and knuckle side? Excluding the INR 140 crore reimbursement that we got in Q2, what is the clean EBITDA per wheel in the revised FY27 guidance?
Dheeraj Garg: I have already clarified this question in the beginning, that supplementary invoicing has no bearing on the EBITDA.
Ansh Gupta: Okay. Sir, can you give the margin gap between steel, alloy, and knuckle side?
Dheeraj Garg: I can say that the aluminum segment, which comprises of aluminum wheels and aluminum knuckles, is about 40% more than the steel segment, the EBITDA per wheel. More or less, I can't reveal to you the exact numbers in each segment. But I can tell you that's more or less the ratio.
Ansh Gupta: Okay, understood. My next question was on the SOB side. Shares fell at the Escorts HMSI and Tata Alloy side this quarter. Was that because of a capacity limit or did you lose on price? And does it come back after coach?
Dheeraj Garg: Man, I don't know what your question is again. What are you assuming?
Ansh Gupta: Yeah. My question was on the SOB side. Shares fell at Escorts HMSI and Tata Alloy side this quarter. Was that because of a capacity limit or did you lose on the price?
Dheeraj Garg: The share of business with Tata, I do not think we have lost any share of business, but perhaps in the presentation it is not clear. One second.
[Company Representative] (Steel Strips Wheels): Overall increase.
Dheeraj Garg: Our overall tractor market share has gone up by 2 points. I mean, we have gone to 45%. I do not know why are you assuming that we lost market share in Escorts.
Ansh Gupta: Sorry, sir. Yeah. Sorry. Last question. Where do you see the export versus domestic revenue mix in 2 to 3 years? Can SSWL become India's largest alloy wheel exporter? How much of those exports?
Dheeraj Garg: Yeah, I think the last question is quite relevant, that yes, we already are the largest, and we will become a major supplier of aluminum wheels to the international market. Insofar as the ratio is concerned, I think all businesses are going to grow. So ratio I cannot spell out, but for sure we will target in three years' time an export of at least INR 1,500 crores, if not INR 2,000 crores. But INR 1,500 crores is visible in three years' time for us.
Ansh Gupta: Yes, sir. Any revised FY27 guidance?
Dheeraj Garg: For this year, I think you can construe from what we have delivered in Q2, and I think if things go well in terms of demand, then we should exceed what we have done in this Q2. So you can from there figure out what kind of revenue or what kind of EBITDA, what kind of net profit we will make.
Ansh Gupta: Understood, sir. Lastly, on the hot stamping side, are we having any anchor customers, and can you give a light on that, the hot stamping part?
Dheeraj Garg: Yeah. As I said that we are putting up this hot stamping factory for a customer that is situated in Maharashtra, close to our factory. That's your anchor customer. Besides that, we are talking to other customers for the hot stamping space, and this business is going to grow. Once we start production, and we are targeting to start production next year, around this time or a little bit later than this time, the Q4 of next calendar year, for hot stamping.
Dheeraj Garg: By then, if we are sold out, I think when the plant starts, it will start with a sold-out capacity, because that's how this business works, that you integrate it with the customer and take up the volume that is required for that customer. Very soon, during the execution itself, we will be adding another line, depending on how many other businesses we convert. Right now we are talking to two other customers, and the conversion is very possible in the near future.
Ansh Gupta: Understood. Thank you so much, and congratulations for good sets of numbers.
Operator: Thank you. The next question is from the line of Shashank Kanodia from ICICI Securities. Please go ahead.
Shashank Kanodia: Yeah. Good morning, team, and congratulations for stellar performance. Sir, firstly, you just guided the EBITDA per wheel in aluminum is 40% higher than steel. Our understanding the past was that aluminum wheel, EBITDA per wheel is roughly twice of the steel. Is it changed in that sense?
Dheeraj Garg: Yeah, I think in that, what we were comparing was passenger car to passenger car. Now, what the number I have given you, that includes CV, tractor, EV, and everything.
Shashank Kanodia: Okay.
Dheeraj Garg: Obviously, the benchmark is different.
Shashank Kanodia: Understood.
Dheeraj Garg: And you are right. If you look at a pure play, pass car to pass car, aluminum versus steel, then it is definitely twice.
Shashank Kanodia: Okay. Secondarily, the supplementary allowance thing is well taken. Just wanted to understand, the amount that you mentioned as INR 140 for Q2 and INR 183 for H1, is it just for this period or is it cumulative of, let's say, four, five, six quarters in total?
Dheeraj Garg: No, boss, it is only for April through September.
Shashank Kanodia: Okay. Only for that period.
Dheeraj Garg: Yeah. We don't settle so late.
Shashank Kanodia: Okay.
Dheeraj Garg: We settle late, all right, but not that late. Everything gets settled within the financial year.
Shashank Kanodia: Okay. And sir, thirdly, the greenfield plant CapEx that we mentioned about putting it off grows, even if we make INR 400 as EBITDA per wheel on this, the capacity that I have mentioned, I think we are going to generate closer to INR 200, INR 220 crores of EBITDA and post depreciation roughly from INR 70, INR 88 crores, which makes it just 12%, 13% ROCE incremental business.
Dheeraj Garg: See, you are trying to put numbers in my mouth. I do not want to reveal my numbers. But all I can tell you is that we are bringing in operational efficiencies, as I mentioned in my speech. We are bringing in proximity to the customer. We are cutting on the freight costs. So these are very important things in aluminum wheel. One thing I can tell you, and that is something that is important for everyone to understand, that SSWL is the lowest cost producer of aluminum wheels and steel wheels in the world, barring China. So I will not comment on the Chinese cost of manufacturing at all because a lot of that is subsidized. But ex-China, our factory in Mehsana has the lowest cost of production compared to any competition.
Dheeraj Garg: And when we start in Sambhajinagar, those facilities are going to be more automated and they are going to be more operationally effective in terms of bringing the cost and rejections down. So what you will see in Sambhajinagar will, on an operational level, be at least 25% more productive than what we are currently doing. So you can imagine what we are trying to create with new technology. So right now, our moat is not going to be based on volumes or customer relationships alone. It is going to be based on technology, and technology that differentiates in terms of cost, in terms of actual weights of the wheel, and the total cost of purchase for the customer. So it is a win-win for all sides. So that is how we are building our moat in this case.
Dheeraj Garg: It is something I am glad that I am talking about it because I have not spoken to the investors on this account, that we are increasingly confident of increasing the gap between our nearest competitor in terms of productivity, in terms of efficiencies, in terms of cost per wheel, and that is a big thing. When I say that I will have a very strong ROCE in Sambhajinagar, it is borne by a lot of factors, maybe a couple of factors I have not spoken about. But you will see the results when they come out.
Shashank Kanodia: Great. But over the initial period
Operator: Mr. Kanodia, I am sorry to interrupt you, sir. I would request you to kindly rejoin the queue for follow-ups, please. There are others who are waiting. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to only two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Rahul Jain from Capri Global Ventures. Please go ahead.
Rahul Jain: Hello, sir. Can you hear me?
Dheeraj Garg: Please.
Rahul Jain: Good morning, sir.
Operator: Yes.
Rahul Jain: Okay, sir, congrats on the great set of results at first.
Rahul Jain: Thank you.
Rahul Jain: Sir, you had mentioned about the strategic partners for the newer CapEx. Can you discuss in detail who the technology partner is and-
Dheeraj Garg: You are talking about which? Partner or strategic partner? What are you talking about?
Rahul Jain: Strategic partner, which you are telling on the newer CapEx, sir. INR 1,400.
Dheeraj Garg: Yeah. There are a couple of them, and they predominantly work in the commodity space. I cannot reveal you more than that they are commodity players and they are our partners for a long time. They are partners with us since we started our factory.
Rahul Jain: Right. Okay, sir. Regarding the export business, we have targeted around INR 600 crores export target for this year.
Dheeraj Garg: Yeah.
Rahul Jain: How much of it are we targeting from other than steel wheels? In next fiscal year
Dheeraj Garg: Good question.
Rahul Jain: Yeah.
Dheeraj Garg: It is a good question. I do not have those figures with me, but all I can say is that there is a growth in exports for aluminum wheels and steel wheels, both put together, and this INR 600 crores might go to INR 700 crores, INR 750 crores, depending on how soon we get the trade deal from America.
Rahul Jain: Right.
Dheeraj Garg: We have about 5 months left. I think a lot can happen in these next 5 months. Luckily, we have capacity, and we have capacity coming up in truck wheels. We have capacity coming up in
Rahul Jain: True
Dheeraj Garg: aluminum wheels. We have capacity coming up in tractors and in cars. All in all looks great. In fact, I talked about this in my previous calls, that there is a lot of OEM business we have won in steel wheels, and that should start playing out next year. Once that happens, that is going to be a big growth driver. Let me clarify this to everyone. Next year we see a big increase in exports, mainly from OEM exports of car steel wheels, car aluminum wheels, and truck wheels from Europe. We won certain certifications for light-weighting wheels, which were very difficult to get by, took us 12 years to get them. But now luckily, it has happened, and we have this approval for selling to OEMs like MAN, Scania, all the big guys, Daimler, for example.
Rahul Jain: Right.
Dheeraj Garg: That thing is going to play out. It will start playing out in Q4 this year itself, of financial year, and next year should catch a massive speed. You will see a real turnaround in the steel wheel business. Do not count this business down. Earlier I had mentioned that input costs are coming for two years and they finally arrived.
Dheeraj Garg: Now you see the difference in the EBITDA margins. But when you wait till you catch the wind on the volume growth, volume growth of OEMs, not fickle orders from distributors, but OEMs sitting in Europe. That is going to be the growth driver for export going next year. When I say INR 1,500 crores, it is quite possible even with the current set of circumstances from the US.
Rahul Jain: INR 1,500 crores which you are mentioning for the export-
Operator: Mr. Jain, please rejoin the queue for follow-ups, please. There are others who are waiting. Thank you. The next question is from the line of Nishita from Sapphire Capital. Please go ahead.
[Analyst] (Sapphire Capital): Yes, hello. Congratulations on such good set of numbers. I just had a few questions. My first question is on our total capacity. I just wanted to understand, at the start of FY28, we will have 21 million of steel wheel capacity, 6.2 million of aluminum wheel capacity, and 1.1 million of aluminum knuckles capacity. Is that right?
Dheeraj Garg: Yes.
[Analyst] (Sapphire Capital): Okay. What utilization are we expecting in these facilities in FY28?
Dheeraj Garg: I have mentioned this previously too, that we expect 100% utilization of these facilities next year. As soon as they are commissioned, we should reach the 100% utilization rate in maybe three to four months maximum of starting of commercial production. Yes. We could easily say with a high degree of confidence that we will cross 80% for the whole financial year in these new facilities. You will also see a lot of growth coming in from the brownfield expansion. Please do not preclude that. We have added capacity in the tractor segment. We have added capacity in the truck segment. These capacities are already sold out given the current state of affairs, this bull run is just not stopping. Even today, we have customers crying for materials, even though we are more productive than previously. In fact, all our factories are more productive.
Dheeraj Garg: We are producing more parts in the same day, in the same 24 hours than we were doing it, let's say, three months ago in each of our facilities. You will see a lot of growth anyways coming from the organic or what you call brownfield expansion. Yes, the new capacity enhancement in Bhuj should be taken at 80% utilization for next financial year.
[Analyst] (Sapphire Capital): Right. Okay. The overall capacity with the brownfield expansion is going to be what I mentioned, right? 21 million.
Dheeraj Garg: A little bit more because, as I said, we have de-bottlenecked our facility in Mehsana, and we have added about 600,000 wheels there. You can say 5.4 million aluminum wheels plus 1.2 million in Bhuj, so that is 6.6 million. Then we will add another 2.5 in Sambhajinagar, that will take it to 9.1. I think that looks a pretty healthy situation. Also remember that we are going to be very competitive with the new facilities, much more competitive than Mehsana. This message I think should run universal, that our new facilities in Sambhajinagar are going to be very efficient, are going to be much more profitable than Mehsana or Bhuj.
[Analyst] (Sapphire Capital): Sambhajinagar facility, when will it be operational? You mentioned hot stamping will operationalize.
Dheeraj Garg: Next year, around this time, the fourth quarter of next calendar year, that is when we intend to sort of get it commissioned and ready for trials and approvals.
[Analyst] (Sapphire Capital): What sort of steel wheel capacity are we adding in Sambhajinagar?
Dheeraj Garg: We are adding 2.8 million steel wheels, 2 million PV cars, and 1.8 OTR. There is a lot of demand for exports from here, and we did not have the current range, so we are going to target that current range, target those export markets with this new buildup. Plus, there is local demand that we were uncompetitive with because we were away from the customer, for example. We were away from John Deere, we were away from TAFE. We were away from certain customers in the south, for example. So we bridge that gap and it eats a lot of our competitive ability. So this plant will absolutely be a winner from day one.
[Analyst] (Sapphire Capital): Right. Because we are going to be operationally more efficient, we can expect our EBITDA per wheel to improve in FY27.
Dheeraj Garg: What I have been guiding.
[Analyst] (Sapphire Capital): Right. So, we can reach around 450, 500?
Dheeraj Garg: Yeah, why not? I think with just the richness of the product mix itself should take us there eventually. Yeah, absolutely.
[Analyst] (Sapphire Capital): Okay. My last question will be on hot stamping. So, what sort of capacity are we adding for hot stamping?
Dheeraj Garg: I think we mentioned 183,000 stamps. That is how this counted. It is basically
[Analyst] (Sapphire Capital): 83,000 stamps.
Dheeraj Garg: INR 400 crore turnover, as I mentioned.
[Analyst] (Sapphire Capital): Is it 83,000 stamps?
Dheeraj Garg: 183,000.
[Analyst] (Sapphire Capital): 183,000. Okay. Got it.
Dheeraj Garg: So that's what I'm saying. INR 11 lakh.
[Analyst] (Sapphire Capital): Thank you. Thank you so much.
Operator: We'll take the next question from the line of Abhay Tibrewal from Vision 8 Investments. Please go ahead.
Abhay Tibrewal: Yeah, thanks a lot, sir. My questions have been answered, but, majorly, sir, because of the global uncertainties and all, you are not seeing any risk in freight costs and all in any of your exports. Just wanted to get a sense on that.
Dheeraj Garg: So right now we are whiplashed with this trade market a lot. But still, the freight is prevalent for others also who are competing with us. But yes, when the freights come down, our competition and competitive ability will further increase. That is why I am very bullish on exports now. Once this US-India trade deal happens, then it will be a very clear direction. In fact, next time when we speak in January, we will have more data to tell you as to where we look.
Abhay Tibrewal: Okay.
Dheeraj Garg: But OEM exports are going on. So OEM exports are going on and as we have added capacity, and we are going to get new businesses on stream. As in how they come in on stream, they will take up our increasing capacity also. So we are very sanguine about this at the moment. We are fine.
Abhay Tibrewal: Okay. And sir, in the last conference call, you had been cautious for EBITDA per wheel number for INR closer to 310, and suddenly we are seeing a very increased confidence, like you have been talking for closer to 400 plus. So what gives you this confidence in this challenging environment?
Dheeraj Garg: I think I talked about input increase, cost increases from 2% to 5% I mentioned, if I am not. Maybe 2% to 10% I mentioned to you. We have been able to get our increases. This has been due for the last 20 years. We were always subjected to competition, competition. This time we broke free, said, "You have to cover our costs. We are making money through aluminum wheels or knuckles or exports, but it does not mean that we will continue subsidizing our existing business with you." The OEMs understood that.
Dheeraj Garg: They need more wheels. By the way, there is a shortage of capacity in the market. There is a shortage of capacity in the market. We told the OEMs, "If you want me to build a factory, it has to pay for it. The way it will pay for it is you have to increase my prices on the existing business, otherwise, I will not invest in them." The OEMs understand that they are getting wheels for the lowest price in the whole world, including China. The price of steel wheels was so low, it was abysmally low. We then decided not to work on those margins. Then you add operational efficiencies also. Obviously, the volumes have gone up. It is becoming a good mix for us.
Abhay Tibrewal: Mm-hmm. Sir, very encouraging. Thanks a lot, and wish you all the best.
Dheeraj Garg: Thank you.
Operator: Thank you.
Dheeraj Garg: I think this is the last question we will take.
Operator: Sure, sir. This will be the last question for today from Shashank Kanodia from ICICI Securities. Please go ahead.
Shashank Kanodia: Sir, just wanted to check this INR 1,400 crores useful initial capacities you mentioned, but will there be a scope of further expansion of capacity at Aurangabad, right?
Dheeraj Garg: There will be. We have a big chunk of land, hot stamping we will expand. As soon as we get the next order, we will expand our hot stamping line. That will come at a marginal cost because most of the expenses will be done in the first phase. Similarly, if at all we need to add more capacity, then perhaps we will add in a different product, for example. It could be knuckles, for example. We could be looking at adding capacity of knuckles here. That could be one thing to watch out for.
Dheeraj Garg: If we have to add more aluminum wheel capacity, then we will probably go to the south, get closer to the customers there, also be participating in the export market. This is how we would look at it. Sir, what is the project IRR for this Aurangabad? Internally you must have worked upon, what is the project IRR you are working in? Look, there are many things I cannot share with you, but I have said that in the beginning that the ROCE for these investments would be better than what we are actually getting at the moment. So it will be +20. You can figure out the IRR, how much it would be.
Shashank Kanodia: One last thing.
Dheeraj Garg: That is how we do it.
Shashank Kanodia: Yes, sir. Sir, last quarter, the CV and the tractor did well, right? Now, hypothetically, we are sitting on a very high base and this kind of segment taper off going forward. Still we are confident of maintaining this closer to INR 400 in EBITDA per wheel?
Dheeraj Garg: Well, this is a point that we will have to address. Obviously, this will impact our EBITDA per wheel if the volumes go down. That is very clear. But right now, we do not see, in fact, in CV, we see a desperation from the customer to secure product. We were quite surprised. Normally, we expect this season to be a little bit loose after Diwali. But this month is absolute. In fact, this month, let me tell everyone here that we will have our highest ever CV sales in our history by a wide margin. It is quite shocking to us also how this is happening, but we are able to generate this kind of interest from the OEMs. Tractor, of course, tractor is growing about 15% in volume in the H1.
Dheeraj Garg: Even if this growth goes to 10%, or we do not believe it will go down to 10%, I think it will cross 15%. Right now, we have withstood the shock of the Iran war. I do not think worse is going to happen. From here on, things are going to get better. But if even then the things do not fall into place the way they are at the moment, then yes, it will affect our EBITDA per wheel.
Shashank Kanodia: Understood, sir. Thank you so much, and wish you all the best.
Dheeraj Garg: Thank you, everyone, for this call.
Operator: Thank you.
Dheeraj Garg: Thank you.
Operator: Ladies and gentlemen, due to time constraints, this will be the last question for today. I would now like to hand the conference over to Mr. Dinesh Kumar for closing comments. Over to you, sir. Mr. Kumar, you are audible. Please go ahead.
Dineshkumar P: Yeah. Thank you, everyone, for joining the call.
Operator: Thank you. Ladies and gentlemen, on behalf of 360 One Capital Market Private Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.
