Operator: Ladies and gentlemen, good day and welcome to the Shilchar Technologies Q2 and H1 FY 2027 Earnings Conference Call hosted by Avendus Spark. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Ravi Swaminathan from Avendus Spark. Thank you and over to you, sir.
Ravi Swaminathan: A warm welcome to everybody to the Q2 FY 2027 earnings call of Shilchar Technologies. To take us through the results today, we have with us from the management, Alay Shah, Chairman and Managing Director, Aashay Shah, Executive Director, Aatman Shah, Executive Director, Prajesh Purohit, Chief Financial Officer, and Nilesh Pandya, GM, Finance and Accounts. We will start with a brief opening remark of the business performance of the quarter from Alay Shah, and then open the floor for Q&A. Thank you, and over to you, sir.
Alay Shah: Good morning, everyone. Thank you for joining us today. Before we open the floor for questions, I would like to walk you through the performance for the second quarter of FY27 and share some updates on our operation and ongoing efforts. For Q2 FY27, Shilchar Technologies reported revenue from operation of INR 192.61 crores, up 43% over Q1 FY27 and up 12% over Q2 FY26. EBITDA excluding other income stood at INR 40.06 crore with an EBITDA margin of 20.8%. Profit after tax for the quarter stood at INR 32.98 crore with a PAT margin of 16.5%. As you can see from the top-line growth, business momentum picked up notably in Q2 after a slow start to the financial year in the Q1. As we discussed on our last call, Q1 performance was a result of continuing effects of the crisis in West Asia, which weighted on our exports.
Alay Shah: On the export front, conditions in the Middle East improved during the quarter, but they are yet to fully normalize. The higher shipping and logistic costs we highlighted in previous quarter have not eased much. At the same time, exports to North America have gained momentum following the resolution of the tariff-related challenges of earlier quarters. The pickup in North America export has helped offset part of the shortfall in dispatches to the Middle East. On the domestic front, demand has remained very firm throughout. On profitability, our EBITDA margin improved to 20.8% in Q2 from 16.4% in Q1. We expect conditions for export to improve further in the near future. This should translate directly into higher export share in our revenue mix and in turn, a further improvement in margin over the coming quarters.
Alay Shah: On the project front, expansion phase 3, which will add 6,500 MVA of capacity, is progressing as per plan, with commissioning expected in April 2027. Civil foundation work, PEB erection, and utility infrastructure work are in progress, and all major production equipment has been ordered. This will take our total capacity to 14,000 MVA and drive the next leg of growth from FY28 onwards. As for the current year, we remain on track with our revenue target of FY27 of INR 750 crore with the healthy orders in hand and delivery scheduled for the H2 of the year. We continue to see robust order inquiries from both domestic and export clients. With that, I thank you all, and we can now open the floor for questions.
Operator: Thank you very much, sir. We will now begin 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. First question is from the line of Aadesh Gosalia from Spark Capital. Please go ahead.
Aadesh Gosalia: Hello, sir. I hope I'm audible.
Alay Shah: Yes, I can hear you.
Aadesh Gosalia: I had a couple of questions. The first on the working capital, pricing, and the margin outlook that we have. During H1, the net working capital has increased to around INR 200 crores, including the rise in the financial assets to around INR 29 crores and higher receivables. If you can shed some light on, some color on how this has fared and how sustainable this is, and whether for the second half we may see some improvement or whether this is going to continue. On the raw material prices also, how they have fared. In Q1 we had said that the new orders are as per the market prices. How much of that have we been like, the past two has been happening well, and how do we see the gross margins fairing year on year?
Aadesh Gosalia: The gross margins came in at 29% for Q2. Do we see it going higher from here on, or what is the outlook that we have? That is the first question.
Alay Shah: We do not face any problem or we do not see any alarming situation for working capital utilization. We have said this in past, that since we have surplus fund and we do not use any bank facility for working capital, we earn interest out of the customer which establish LC on us for the supply of transformers. That is why it looks on the paper that we are utilizing more working capital, but actually we are earning interest on that. The iron prices have stabilized. Again, it is not as what it used to be, and I do not think that it will completely stabilize till all the Middle East crisis and other things gets concluded. But all the orders what we are getting now is as per the market price, as per the current raw material price.
Alay Shah: Going forward, like I said in my opening statement, the margins will improve with the higher sales of domestic as well as export market.
Aadesh Gosalia: Okay. And sir, what about the financial assets going up to INR 29 crore and the receivables have been higher. So, any outlook on that, or what are the financial assets that have increased as well as the receivables going up in the H1?
Alay Shah: So high asset is basically because of the investment what we are doing for the new project. Like I said, once again, the receivable is not actually a receivable. Just to give you an example, we provide a 60-day credit through LC to one of our customer, but he establishes LC for 180 days with interest borne by them. So we just get the money only after 180 days, but with interest. We can always encash the LC after 60 days, and that would reduce our receivables on paper. But after getting 180 days, it shows that receivable is pending, but it is in a secure receivable, which we are earning interest on.
Aadesh Gosalia: Okay. And sir, the second question on the revenue. The Q2 revenue has been one of the best that we have witnessed over the past many quarters. But is this because in Q1 you had mentioned that around INR 30, 35 crore revenue was deferred? So has that revenue come into Q2, and because of that, the number has almost reached INR 190 odd crore? Is that the reason?
Alay Shah: Part of is that and part of it new orders, market situation has improved. Going forward, like I said, that we are on the road to achieve our original target of INR 750 crore sales for the entire year. Meaning that we will be doing more than INR 225, 230 crore every quarter going forward.
Aadesh Gosalia: Okay. And sir-
Operator: I am so sorry to interrupt. Aadesh, you may please rejoin the queue for more questions.
Aadesh Gosalia: Thank you.
Operator: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. We will take the next question from the line of Jiten Parmar from Aurum Capital. Please go ahead.
Jiten Parmar: Good morning. Can you hear me, please?
Alay Shah: Yes. Good morning. I can hear you.
Jiten Parmar: Alay sir, my question is basically on the EBITDA margin from last year. Though sequentially it is up, from last year it is down significantly by 10%. I understand that there could be cost pressures and due to higher freight or something. If you can quantify how much is the higher freight affected us in a percentage terms of EBITDA, that would be great. Do you see that being passed on in the future, or can we get back to the 30% margin which we used to have?
Alay Shah: I think I have earlier also mentioned that once we grow, once we have the new capacity add-ons, the margin to maintain this percentage cannot be ensured. What we are doing is, in net terms we will be doing more profit. With 30% EBITDA, if we have done INR 200 crores, maybe the EBITDA margin will come down, but our EBITDA in value terms will be maybe INR 225, INR 250 crores. That is what we are targeting going forward.
Jiten Parmar: The question regarding the impact of freight as a percentage of EBITDA, sir, if you have any color on that.
Alay Shah: Of course, we would like to maintain the same higher EBITDA, but the market situation, the world political situation, a lot of things are dependent. If you look at our present margin, that is also comparatively quite higher than our peer group companies. We will be maintaining, we will be one of the higher EBITDA margin companies.
Jiten Parmar: Okay. My second question is, basically, with so much of capacity coming in, across the board, all players are increasing capacity significantly. Even consumers are like, for example, Waaree has also come out with their own transformer company and all that. Do you see competitive pressure in the future, which can affect the margins? How such large capacity will be absorbed? Is the demand still intact, and how long of a runway you see for this demand?
Alay Shah: Yes, you are right that everybody is increasing the capacity. At the same time, the demand is also very, very high. If you have certain government data, our power consumption will be doubled in next 3 to 4 years. The AI investment and the data center will require a lot of power. The renewable also is, government is targeting more and more gigawatts every year. This all will create a demand for not only transformer, but all the power equipment. With increase in capacity also, my personal feeling is that everybody will have enough orders to cater.
Jiten Parmar: Okay. That's all. Just if you can answer on do you face any challenges on the margins because of this?
Alay Shah: Sorry, can you repeat the question, please?
Jiten Parmar: Do you anticipate any margin pressures because of this expanded capacity?
Alay Shah: Not for at least another couple of years. I don't think because there is enough demand. After two or three years, I'm not sure, but like I said, the power consumption is very high, the power demand is going to grow, and I think that will drive the demand of all the electrical products.
Jiten Parmar: Great, thank you. If I have any other questions, I'll come back. Wish you all the best.
Alay Shah: Thank you.
Operator: Thank you. Next question is from the line of Prathamesh Sawant from Abakkus Asset Manager. Please go ahead.
Prathamesh Sawant: Hello. Am I audible? Hello.
Operator: Yes, you are audible.
Prathamesh Sawant: Yeah. Thank you for the opportunity. Sir, just two questions from my end. Sir, first, can we have any data on the total MVA sold by us across the two core transformer categories that we have?
Alay Shah: Sorry, can you repeat the question, please?
Prathamesh Sawant: Just wanted to understand based on our total existing capacity, what is the total MVA sold or the units of transformers sold across the two major categories of transformers that we have.
Alay Shah: I can tell you that we are right now utilizing almost 80% to 90% of our capacity, installed capacity. And total MVA in our case is very difficult because, we can give you that data later on, but it varies from the product mix to product mix. If we are making more higher MVA transformer, the MVA will be on higher side. If we are making more smaller transformer, the MVA will be lower, but the total sales will remain same. I can tell you very confidently that right now, last quarter, we have utilized almost 80% of our installed capacity. And going forward in Q3, Q4, I think it will be almost 100%.
Prathamesh Sawant: Okay. Is it the case for us like the other transformer players, the higher MVA that they sold, typically the margin for them improves. Is that the case similar for us? Because we tend to have the highest margins across the other transformer players. But the average product MVA, like we are doing 132 kV for 50 or 100 MVA. That is relatively a smaller MVA product, but still we are doing highest margin. I understand exports may be one of the reasons, but what are other factors that are giving us such superior margins compared to the peers?
Alay Shah: There are lot of factors. One is that for transformer industry, it is not correct to compare MVA with the profitability because there are lot of different products, lot of different sizes, lot of different kV class, and everything has their own working. But we have higher EBITDA margin because of a few reasons. One is that we are into export business. Secondly, that we run our company very efficiently, and productivity is at the highest level in our company. All these factors are involved in having the higher margin.
Prathamesh Sawant: Okay. But typically with the higher kV class, you don't see higher
Operator: I am sorry to interrupt, Prathamesh. You may please rejoin. Thank you for follow-up.
Prathamesh Sawant: Okay. Thank you.
Operator: Thank you. Next question is from the line of Ravi Swaminathan from Avendus Spark. Please go ahead.
Ravi Swaminathan: Yeah. Hi, sir. Thanks for taking my question. My question is with respect to the US market. Can you talk about how the demand scenario is there from the US? What is the kind of lead time that is there for transformer delivery? How is the supply locally? How is the overall demand scenario panning out across all kV classes?
Alay Shah: Yeah. Demand from USA is quite good right now. In between our supply to USA went down, mainly because of the 50% tariff imposed on Indian product. That has been withdrawn in February. So after that, we have started getting orders steadily, and that orders have now increased. The demand over there is also very good. Our customers are projecting more and more demand for coming year also. We will be part of that because we have a good product, good relationship with our customers, and good quality of our product.
Ravi Swaminathan: Okay.
Alay Shah: We are into very specific kV class, so I cannot share or I cannot give you information on higher kV class. But as per my knowledge, I think higher kV class has a lead time of almost 1 year, 1 and a half year.
Ravi Swaminathan: Okay, understood. And this demand is coming from data centers, renewable, or which category from which the demand is coming from in terms of end market?
Alay Shah: It's not any specific demand, but it's a mix of everything. We cater the customer's demand of transformer. It can be data center, it can be distribution network, it can be substation. It all depends.
Ravi Swaminathan: Okay. Got it, sir. Yeah. Thanks a lot.
Operator: Thank you. Next question is from the line of Het Shah from QuantAM AMC. Please go ahead.
Het Shah: Yeah, thanks for the opportunity. Just two questions from my side. What is the export domestic mix for the quarter and H1, and order book as on date?
Alay Shah: We have an order book of more than INR 550 crores going forward. Like I said earlier in my opening remarks, we are on track to achieve more than INR 750 crores of sales, which was projected in the beginning of the year. The export domestic will be in ratio of around 60% to 40%. 60% domestic, 40% export, which is likely to improve in the coming quarters.
Het Shah: Okay. Of the INR 500 crore order book, what is the export domestic mix?
Alay Shah: Again, it is the same ratio, about 60/40.
Het Shah: Okay, fine. Thanks a lot.
Operator: Thank you. Next question is from the line of Samar from Spark Capital PWM. Please go ahead.
Samar Gupta: Hi. Good morning, sir. Thank you for taking my question. Most of the questions were already answered. My question is on the order book. Sorry, on the utilization. The utilization, as I heard correctly, it is going to reach 100% in the next 2 quarters. Is it correct that the production will reach 100% in the next 2 quarters?
Alay Shah: Yes, that's right.
Samar Gupta: Okay, sir. Do we have the order book executable over the next six months?
Alay Shah: Yes, very much.
Samar Gupta: And-
Alay Shah: Like I said, we have orders on hand of almost INR 550 crores and we are getting new orders also. This H1, I think we have done about INR 330 crores in sales. Even if we do additional, say, INR 500 crores, we will reach to much more than INR 800. We have started getting orders for even the Q1 of next year.
Samar Gupta: Correct, sir. How is our export looking in terms of region-wise? Has there any volume picked up in Europe specifically?
Alay Shah: Sorry, can you repeat the question please?
Samar Gupta: How is the volume in export market? Is it picking up in Europe region and any other regions?
Alay Shah: We are exporting in Europe, but not much. We have started putting efforts in past one year by participating in exhibition. The result will come maybe in next year or next to next year. Besides that, we have some presence in Middle East and North America.
Samar Gupta: Right, sir. Last question. In the last quarter transcript or last quarter con call, you mentioned that for FY27 you are aspiring for INR 800 crore revenue. Is that still intact?
Alay Shah: Yeah. It will be more than that.
Samar Gupta: Okay, sir. That was my question. Thank you.
Alay Shah: Thank you.
Operator: Thank you. Next question is from the line of Rakesh from I Value Worth. Please go ahead.
[Analyst] (I Value Worth): Yeah. Thank you for the opportunity. One question I wanted to ask on the pricing power. Since we are seeing the raw material costs are going up, is it something we can pass it on to the customers? How is the response analysis?
Alay Shah: Can you repeat the question? I am not able to hear you properly.
[Analyst] (I Value Worth): The question is on pricing power. Since there is a fluctuation in the raw material cost side, we saw that it has increased. When there is an increase in the raw material cost, is it something we can pass it on to the customer? How is the pricing power?
Alay Shah: Yeah. Based on the current market price of raw materials, we decide our cost of transformers and go to the customer. All these new orders, what we are getting is based on the present raw material price prevailing in the market.
[Analyst] (I Value Worth): Once we pass on this to the customer, I think we can reach our earlier EBITDA margin of something close to 30%, because we are passing on this raw material cost. That is what it was affecting our margin. That is one of the reason. Is it something that we can pass it on to the customer, so we can make a good margin?
Alay Shah: No. I think we had discussed this in past that in the month of March, there was a sudden increase of all the raw material costs because of the Middle East conflict. That was a very unusual situation and that does not happen on regular basis. During that period, whatever orders we had, we had to go back to our customer and ask for the price revision. But now things have stabilized and whatever present material cost is there, based on that we do the costing and quote to our customers.
[Analyst] (I Value Worth): Okay. Okay, sir. Thank you.
Alay Shah: Yeah. Thank you.
Operator: Thank you. Next question is from the line of Pankaj from Avus Capital. Please go ahead.
[Analyst] (AVUS Capital): Very good morning and thank you for the opportunity. I think you may have answered this question, but my apologies, my line got disconnected in between. My rest all other questions were answered. The only question I have is, what is the number guidance you have for FY27 in terms of operating margins? I know Q2 we did 20 odd percent. I also understand that you have said that it will improve thanks to increasing exports, but what is the number you have in mind?
Alay Shah: Like I said earlier, the Q2 has much better margin than Q1. Going forward with 100% capacity utilization and inflow of export orders, the margins will improve in Q3 and Q4. But I cannot tell you any numbers. It is difficult for me to even guess.
[Analyst] (AVUS Capital): Okay, sir. Thank you. That is all I have.
Operator: Thank you. Next question is from the line of Maitri from Sapphire Capital. Please go ahead.
Maitri Shah: Yeah. Hello, am I audible?
Alay Shah: Yes, I can hear you.
Maitri Shah: Yeah, hi. Good morning. Just one question. Once we are entering the higher class transformers of 220 kV, have we received any approvals for the same? Do we have some order book or some soft commitments on orders once we start our new line, we can start the production. Just some clarity on that.
Alay Shah: Yes. We do not have any approval. Once the plant is commissioned, only then we can apply for the approvals of 220 kV class transformer. But I have said earlier that in the same plant, we will start manufacturing the lower kV class transformer till we get the approval for higher kV class and we start getting orders. But a lot of our customers to whom we supply the transformers right now, they also require 220 kV class transformers. And we have a verbal commitment from them that once the plant is ready, they will definitely support us with the orders.
Maitri Shah: Got it. And how long will it take us to get those approvals? 12 to 18 months or maybe faster?
Alay Shah: It will be anywhere between three to six months.
Maitri Shah: Okay, that is great. These are from the existing clients, the approvals will be in the three to six months.
Alay Shah: Correct, yes.
Maitri Shah: Okay. The margins on these higher class transformers, what sort of differential do we earn from the current transformers that we are selling?
Alay Shah: I do not see any change in the margin. I think it will be probably the same as.
Maitri Shah: Yeah, sorry, I couldn't hear you.
Alay Shah: I think as per the kV class will remain same.
Maitri Shah: It will remain same. Okay. You mentioned that our export contribution for the second quarter was close to 40%. What contribution did US have in that?
Alay Shah: It will be anywhere. It's very difficult to say this number right now, but it will be anywhere between probably 40% to 60%.
Maitri Shah: 40% to 60% from the export sales.
Alay Shah: Yes.
Maitri Shah: Once the Middle East kind of starts contributing, maybe from FY28 perspective, what sort of contribution are you expecting from the export sales? How do you see that jump kind of helping our margins and sort of a steady state margin once the plant is also operational and once we have a higher export sale, what sort of EBITDA margin do you want to target?
Alay Shah: For FY27, 28, we are targeting almost INR 1,000 crores in sales. But domestically, say right now even on EBITDA margin.
Operator: I am so sorry to interrupt, sir. We are not able to hear you.
Alay Shah: Hello.
Operator: This is better, sir.
Alay Shah: Hello.
Operator: Sir, you may please proceed. This is better. We can hear you.
Alay Shah: So like I said, for FY27/28, our sales target will be INR 1,000 crores.
Alay Shah: The export mix, I cannot say anything right now because that depends on the situation. But for
Alay Shah: the export and the domestic.
Maitri Shah: Okay. The EBITDA margins, that will be once everything kind of starts getting to a more stable.
Alay Shah: It is very difficult to predict, but we would like to maintain probably same or higher EBITDA margin.
Maitri Shah: Higher EBITDA. Okay. Yes, that is it, Sumanta. Thank you.
Operator: Thank you. Next question is from the line of Aadesh Gosalia from Spark Capital. Please go ahead.
Aadesh Gosalia: Yeah. Thank you for the opportunity again. Just continuing on the margins front itself. Sir, historically, we have been, if we see from 2024 to 2026, we have been a 28% to 29% kind of EBITDA margin company. I understand the geopolitical situation and everything, the way it is panning out, for you, it is difficult to predict. But if you can just give a qualitative idea on how we are looking at it internally that whether those kinds of margins are achievable going ahead or right now 21% to 25% would be a reasonable. Like the current margin of Q2 would be a reasonable number or something higher to 24%, 25%. Just some idea on some picture on what you are internally looking at. If you cannot just give a proper number, but some color would be really helpful.
Alay Shah: I have already answered this earlier to someone, that we are not looking at the percentage, we are looking at the absolute number. So last year we had an EBITDA of more than INR 200 crores. The percentage may be, for example, 30%, but coming year, we are targeting more than INR 200 crores of EBITDA. It can be INR 225 crores, INR 250 crores. So percentage may be lower, but the value terms it will be higher and that is what we are targeting.
Aadesh Gosalia: On a INR 750 crore revenue target, we are looking at around INR 200 to 220 crores of EBITDA.
Alay Shah: We are going to try to achieve that, yes.
Aadesh Gosalia: Okay. Yeah. That's really helpful. Secondly, on the exports side. Have we changed any, like the way we have been booking orders and interacting with our customers, but since the situation has changed, have we changed the approach the entire export market in any different manner, even with our existing customers? In Q1 we faced a deferment of orders. Have we changed our approach in any manner or we are continuing in the same manner like the terms of the booking?
Alay Shah: No, we are continuing in the same manner.
Aadesh Gosalia: Okay. Thank you. That's it. All the best.
Alay Shah: Thank you.
Operator: Thank you. Next question is from the line of Het Shah from Quantum AMC. Please go ahead.
Het Shah: Yeah, thank you for the opportunity again. In Q4 FY26 export domestic mix was 30% 70%, and our gross margins were 31%. In this quarter, with export share being higher, gross margins have dipped. If you could explain whether we are still maintaining those high margins in exports or even there we have to take up a bit of a dip on the margins. Yeah, that's it.
Alay Shah: No, our, I think, export margins are pretty much same what we did in previous years.
Het Shah: Okay. Thank you, sir.
Operator: Thank you. Next question is from the line of Ravi Swaminathan from Avendus Spark. Please go ahead.
Ravi Swaminathan: Yeah. Hi, sir. Thanks for taking my question again. This question is with respect to the domestic demand. Among the three broad categories in terms of demand from generation side, which is solar, thermal, et cetera, and then transmission side and distribution side, how would our business mix be? In terms of solar, past three, four years, the growth in solar capacity addition has been quite good, and last year 45, 50 gigawatt would have been added. A similar run rate is enough to achieve the government's 300 gigawatt of target. So where from do we expect the incremental growth addition from the solar generation side? Or is there any other further drivers which are there, like nuclear, et cetera, which can drive growth in terms of demand?
Alay Shah: No, I think all the sectors are growing. Solar is growing, wind is also growing in a big way. This new BESS, battery energy storage system, is having a huge requirement, and it is going to be huge going forward. The transmission and all this, when you generate there you need to expand the transmission line also. You need to expand the distribution line also. So it's a multiple effect. Everything will be having a larger demand.
Ravi Swaminathan: Got it, sir. Thanks a lot.
Operator: Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Next question is from the line of Rahul Bajetia, an individual investor. Please go ahead.
Rahul Bajetia: Hi. Thanks for taking my question. We are bringing this massive capacity online in this year and next year. But our H1 top line is quite flat year-on-year, and our profitability is also dropping, of course, due to our product mix change and the export problem going on. But is it a risk that we are expanding capacity right now, as the CapEx cycle in all of these data centers may cool off, or even in renewables? What is the specific utilization rate that we require on this new capacity to break even? That is it. That is my question.
Alay Shah: See, we are in business. We need to expand. We need to grow. We cannot be stagnant. If we do not grow, people will say that, "Why you are not growing? Market is so good." If we grow, then people say, "Why you need to grow and bring down your profitability?" It is a very tricky situation. But of course, growth is good. When you grow, sometimes initially you might have to compromise on your margin, but once the brand name is established, once the customer has the confidence, the margin will improve. Demand is there. Everybody knows that the power demand is increasing, and it is going to be increased in coming 10, 15 years. The capacity what we are installing is hardly anything. Probably we might have to announce further expansion also.
Alay Shah: Answering your last question, only 35% to 40% utilization of the capacity will be a break even for us.
Rahul Bajetia: Thanks. Just a small side question. What is our approximate baseline in EBITDA margin between our domestic solar or wind transformer and our exported one?
Alay Shah: Export EBITDA margin is on higher side. I cannot There is a difference
Operator: I am sorry, sir. We are unable to hear you.
Alay Shah: Can you hear me?
Operator: Yes, sir. Now it is audible.
Rahul Bajetia: Audible, yes.
Alay Shah: I cannot share the exact figure of the export EBITDA and domestic EBITDA, but export margins are much more than the domestic margins. We are trying to keep a balance in executing our orders.
Rahul Bajetia: Okay. Thanks. That will be all. Thanks.
Operator: Thank you. Next question is from the line of Mohammed Nameer from EcoQuantum Solutions. Please go ahead.
Mohammed Nameer: Hi. Thank you for the opportunity. Am I audible?
Alay Shah: Yes, we can hear you.
Mohammed Nameer: Historically, lead times for your transformers average about 12 to 18 months. What are the delivery lead times today? Are clients placing advance bookings specifically to secure manufacturing slots?
Alay Shah: Like I said earlier, the delivery period varies for different kV class. Higher kV class, it is more than 1 year. For lower kV class, it can be anywhere between 3 months to 6 months. Of course, customers are interested in booking the slots if you have a spare capacity, because the demand is very high.
Mohammed Nameer: Okay. Understood. What will be the share of 220 kV class transformers in your overall revenue mix once you receive the approvals? Will you be able to utilize the entire expanded capacity by FY29?
Alay Shah: Yes, that is the plan. Based on the outlook, we should be able to utilize 100% by FY29. We are adding 220 kV class capacity by almost 6,500 MVA. So that much will be the contribution out of total 14,000 capacity what we have right now.
Mohammed Nameer: Just a last clarification from my end. You said you will be doing INR 200 crores EBITDA at a revenue of INR 750 crores this year. That implies 26% EBITDA, but 26% EBITDA margin for the whole year. Are you expecting 30% EBITDA margin in H2 in order to achieve the INR 200 crore EBITDA for the entire year?
Alay Shah: These figures are our assumption, and we are expecting more export orders. Based on that, we are targeting this.
Mohammed Nameer: Understood. Thank you.
Operator: Thank you. Next question is from the line of Basant Bansal from NBG Investments. Please go ahead.
Basant Bansal: Good morning. In your product profile, how much is distribution transformer?
Alay Shah: Distribution transformer, we hardly make. We make in very less quantity. Major is all renewable transformers.
Basant Bansal: Okay. You said that your next 2 quarter run rate will be around INR 225 crore. Your execution plan are in place to achieve those numbers?
Alay Shah: Yes, of course.
Basant Bansal: Last thing from my side, the raw material cost used to be around 60% of your sales value. Now it has increased to around 71%, 72%, and that seems to be the main reason for bringing down the margin. I believe that this raw material increase is transitory in nature. Can it come down again?
Alay Shah: Frankly speaking, I don't think that the raw material price will come down. But you never know. Nobody can give that very accurately. But like I said earlier, with this higher raw material cost, our sales price has also gone up now.
Basant Bansal: Mm-hmm. So your sale price has also gone up?
Alay Shah: Of course.
Basant Bansal: Has it set off the increase in raw material cost?
Alay Shah: Yes, to some extent.
Basant Bansal: To some extent. Going forward, we should consider margin of around 23% to 24%?
Alay Shah: We will be trying for that. Yes.
Basant Bansal: Okay. Thank you. That is all from my side.
Operator: Thank you. Ladies and gentlemen, we will take the last question from the line of Neeraj, an individual investor. Please go ahead. Neeraj?
[Shareholder] (Private Investor): Yeah.
Operator: Yeah.
[Shareholder] (Private Investor): Is my voice audible?
Alay Shah: Yes, we can hear you.
[Shareholder] (Private Investor): You are targeting INR 1,000 crore revenues by March 2028, and the new capacity would come down by April. Do we not foresee that number is conservative, and what would be the numbers for FY29?
Alay Shah: I don't think it's conservative, but like I said, FY28, we are targeting about INR 1,000 crore, and FY29, we will be targeting anywhere between INR 1,250 crore to INR 1,500 crore.
[Shareholder] (Private Investor): But with the new capacity coming in, that leads to what revenues if you are working at 100% capacity?
Alay Shah: With 100% capacity, we can do maximum INR 1,500 crore.
[Shareholder] (Private Investor): Okay. With the scenario, there is a shortage of the transformers globally and more demand. Can we foresee that next year itself, we can utilize the majority of the capacity as the plan goes live?
Alay Shah: No, it is not possible because it is not that we turn on the machine and the transformers are being produced. There are a lot of things which are involved. First is the approval, the trained manpower, the quality system, all those things. So it takes time.
[Shareholder] (Private Investor): With the cash flows being generated, any plan for diversification or acquiring into the related field, some businesses? Are you exploring something on those lines?
Alay Shah: Yes, we are exploring.
[Shareholder] (Private Investor): Okay, and which set of companies or sectors would that be?
Alay Shah: I cannot tell you that because of the NDA, what we have signed. But once things progress, we will definitely make it public.
[Shareholder] (Private Investor): Okay. Thank you very much.
Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I now hand the conference back to management for closing comments.
Alay Shah: Thank you everybody, and like I said, we are on track to do a better Q3 and better Q4. Things will improve in terms of sales and profitability for sure. Thank you everyone for participating.
Operator: Thank you very much. On behalf of Avendus Spark, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.
