MM Forgings (NSE:MMFL) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Forgings Limited Q1 FY 'twenty seven Earnings Conference Call hosted by three sixty 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 this conference call, please signal an operator by pressing 100 on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kumar from three sixty one Capital. Thank you, and over to you, sir. Thanks, ma'am.

0:46 Welcome to Forgings Limited one two FY twenty seven post results conference call. From the management side, we have with us today mister Krishna, chairman and managing director, and mister, chief financial officer. I will now hand over the call to mister for the opening remarks to be followed by question and answer session. Go ahead, sir. Good afternoon, everyone. Thank you all for joining us on Forgings' Q1 FY 'twenty seven results call. Basically, we've seen considerable improvement in the markets as far as Q1 is concerned and we see the same optimism going through the rest of calendar of fiscal twenty twenty seven and going into calendar 2027 as well.

1:44 With strong momentum from both domestic as well as export markets, particularly The USA. We've seen growth in The U. S. Market, but and also the CV market, the CV tractor and pass car market in India are all running pretty hot. As a result, Forgings has posted a total sales of INR $4.27 crores as against INR $3.69 crores in the corresponding period in the previous year. Our EBITDA stands at 82% gross and INR 75 net of other income at 18% net of other income as against 16% sorry, 19 odd percent considering other income as well. Excluding other income, EBITDA stands at 18%.

2:48 Revenue growth has been almost 16%. EBITDA has grown by the same 16% and PBT has grown by 30%. All this is excluding the sale of assets. We have sold land in the Oregon area of Chennai. We have sold and realized INR 60 crores as net profit, INR 58 crores net of taxes, 64 crores gross. That's the profit on sale of asset, not gross profit on sale of asset. All that has not been factored in into these EBITDA numbers naturally being onetime gains.

3:39 Domestic sales stands at 63.5% and exports at 36.5 at the range 6139% in the corresponding period last year. India accounts for 63.5% U. S, 18 South America, 4% Europe, 14% and others, about 1% of today's sales breakdown. Commercial vehicle stands at 71%, pass car 14% and agreed and off highway 14% of overall sales, balance 1% is others.

4:29 67% is machined, 33% is directly forged. Our heavy coatings constitute 42% of our sales as against 43% in the previous year under IFRS. Sales per tonne has gone up from 193,000 to 202,000, meaning 2.02 lakhs versus 1.93 lakhs in the previous quarter. So these are some of the brief numbers that we have prepared for you. We have this as a PPT that will be mailed out to all of you by the end of this meeting. So with these opening remarks, I would like to throw open the floor for questions, and would be happy to answer whatever I can in the best possible time.

5:26 Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may please press star and 1 on their touch tone 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'll wait for a moment while the question queue assembles. The first question is from the line of from Institutional Equities. Please proceed with your question. Yeah. Thank you, sir, for the opportunity, and congrats on a good set of results. Firstly, sir, we have seen a good growth coming back in q one quarter.

6:15 Just if you can give a view for the full year, what kind of a growth we expect in the domestic and exports market and particularly for The U. S. Market? And also, think very interesting this time, you mentioned a very good mix of machining in the quarter. So what led to the notable jump in the machining mix? Hello, sir? Are we there? Oh, yeah. Sorry. I was there. I muted the phone. So we can look, we did about INR 1,600 crores last year.

7:06 We can expect the same 80 odd percent growth for this year also. So we should be looking at turnover in the region of around INR 1,800 crores to INR 1,900 crores. Regarding machining mix, a lot of money has been invested by the company in the last three years in machining and that has led to a higher machining mix as a percentage of sales. And just on the machining mix, should this current run rate of 67% continue for the rest of the year, sir? Yes. I think it should hover in the 65 to 68% range. Got it.

7:52 So sir, also, I think this quarter, particularly gross margin has seen a notable improvement sequentially on almost more than three fifty bps. Is it part of the reason being a better machining mix and exports mix, sir? We've had yes, we've had overall realization go up, Mamuch, this quarter. So that would definitely result in better gross margin. Got it. And on the just on the employee and other expenses, which had increased Q on Q, any reason for the increase?

8:38 And how do you see the run rate for those expenses? The increase has been steep in Q1, largely because last quarter, the period in the reference, we have not given an increment and that was done only in the subsequent quarter. So this quarter effectively, but this time we had given increment in first quarter itself. So right from April 1. So that is one reason why there is a significant increase in personnel costs relatively speaking. Plus, we've also added some numbers. But overall, now numbers and incremental increases have stabilized. So right through the year, these kind of numbers should hold. Got it, sir.

9:24 Sir, lastly, just on the debt reduction plan with the land sale now and how do you plan to further reduce the debt? And just can you also update us on the interest run rate expected ahead with the change in the on the interest rate policy, which we have done earlier. We hold that last year FY 2026 opening, the debt was around INR $7.50 crore net debt term debt at least. So gross debt, sorry, that will remain at those Sorry, gross debt stood at INR750 crores. That will hold at those levels for this year also approximately.

10:17 So we would be repaying about INR170 crores this year and the same would be drawn back as further loans for future investments being made in this year. So gross debt will remain at approximately the same levels. Got it. So broadly CapEx would be also INR170 odd crores, sir? Yes, approximately INR150 odd crores. Got it, sir. Thank you. Thank you so much for the opportunity, sir. All the best. Thank you. You, sir. Thank you, sir. The next question is from the line of Ramesh from SJ Investments.

11:05 Please proceed with your question. Hi, sir. Thank you for the opportunity. So you mentioned that some tailwinds from The US sector. Could you elaborate further on what exactly you mean by those tailwinds? Is it in the commercial vehicle sector only or other sectors also? For us, it's the commercial vehicle sector. The CV market, particularly Class eight trucks and The U. S. Is moving quite strongly. So we see huge traction there. Got it, sir. And overall, in terms of, let's say, CapEx, we've done a huge CapEx cycle already, and you mentioned the CapEx cycle will further continue. Could you explain on why are we investing so much and are we increasing our capabilities or what exactly is happening in terms of our CapEx building?

11:59 Of course, we are increasing our capabilities in across a wide spectrum of machine products. That is where... It's into machining. Plus, we are also adding a few equipment into our forging tapatur, second is the word. We're adding the 16,500 ton press, which is going to production by end of this fiscal in Q4. And we also have a 4,000 tonne press that has gone into production in the last couple of weeks. So these are the basic additions on the Forgings side apart from a little bit of debottlenecking and replacement CapEx cycle coming in on the Forgings side.

12:53 Got it, sir. So right now in terms of machining capacity, where are we at? And with the expectations, where do you want to end up in terms of capacity at least in machining? Machining is a very mixed bag. I didn't get your name. Ramesh, sir. Ramesh? Yes. Yes. Ramesh. Didn't get machining is a mixed bag. It's very difficult to quantify the machining capacity outright in numbers or in what happens is that if you look at numbers alone, a small product with huge numbers in machining would overshadow a much bigger product with much less numbers. But the bigger product would be more value add and probably also more bottom line accretive.

13:50 So it's tough to give a single number that will quantify the machining side. But one good thing from June, April onwards itself, we have I should have made that in the opening remarks. April onwards itself, we should have run all I'm happy to say that all the cells at Forgings, machining and forging are running to the fullest of capability, not the word capability, not capacity. So April and May were down were hampered by an availability of labor, which was prevalent right across the country. We were not new to it, alone to it. Rest of the country was also a part of the shortage of labor and ours was more different in April and May.

14:42 June was a lot different. We were able to bounce back with new hires, largely local and also a little bit of migrant and ensure that we were out were up trumps in June. And from July onwards, we see that our capability has gone up considerably. Now it's hardly for want of manpower. Few of the few cells have technical issues hidden in them, not much, but a little bit, let us say the last 7% to 10% here and there. So we are now working on harnessing those and debottlenecking. I would say 10 to 20%, not just 7%. I would say it would go over between 15% to 20%. So there is a good growth potential further ahead and we are pushing those numbers from July onwards.

15:33 Got it, sir. Sir, in terms of automation, I understand that we're drilling capacity in machine and four gs. So automation also are we investing in and how much have we invested so far in the last four years? Automation has been largely in the last couple of three quarters only. So overall, I would estimate that our investment in automation is about INR7.5 crores to INR10 crores. So going forward, do we expect a lot more going towards this instead of rest of capacities? Absolutely. This number should triple, if not reach about INR50 crores, INR40 crores to INR50 crores by end of this fiscal.

16:20 At least it should be in the region of INR30 crores. Got it, sir. So you mentioned that INR150 crores are also investing this year. So when do you think we'll Sorry to talking interrupt, Ramesh, sir. May we request that you return to question queue for follow-up? Yes, sure. Thank you. I'll answer this question, and so that you want to benefit everybody else. We would expect this to result in increase in turnover in about two years from now, one to two years from now. You, sir. The next question the next question is from the line of from CD Research. Please proceed with your question.

17:06 Yeah. Hi, sir. So are you facing any pressure from the government to boost our exports? Sorry? Yeah. Are you facing any pressure from the government to boost your exports? No, nothing specific. Okay. I was asking We about lot want exporting and our export ratio or export number, I mean reasonable rate across time. Though in percentage terms exports is up, that's because domestic has grown. You know that. You know all that. Yes, yes, Okay, thank you. I had the right question. Okay.

17:54 Thank you, sir. Thank you, sir. Ladies and gentlemen, the line for the management seems to have disconnect. Please hold while we reconnect. Ladies and gentlemen, the line for the management has been reconnected. The next question is from the line of from NS Capital. Please proceed with your question. Hi, sir. My first question is, where are you currently seeing momentum or new avenues for growth in the order book? We recently had a power backup company secure a large order from hyperscalers. Just wanted to know if we are positioned to supply crankshafts for such OEMs.

18:44 Navin, yes, the hyperscaler business is filtering out into the domestic forging market, and there is a strong demand from such companies. You are right. Thank you, sir. My second question is on the power and fuel cost still being elevated despite the addition of green power. Could you please quantify what has led to this? There have been a huge increase in fuel costs in Q1 on account of the West Asian conflict. That has been, of course, over after Q1, it has reasonably stabilized.

19:29 So that is the reason why power and fuel has gone up. Got it. Got it. Got it. Plus, it's actually competitive rising EV power costs due to the policy of the Tamil Nadu government. But that has not come in Q1 of this year. It. Got it. Got it. Another small bookkeeping question on the depreciation. It has gone up 20% year on year. Just wanted to know which facilities or product lines are seeing bulk of these capital additions? Largely forging and machining CapEx. Machining CapEx, I would say, mostly.

20:18 Okay, sir. Okay. So we could see the machining share go up very nicely. Last question before I join That is the intent. Yes. My last question before I join back in the queue is on, We had customers getting added on. Just wanted to get an update on how many customers that we are billing and the pipeline and an overview on that sir? Yes, sure. Abhinavar Rizal is on the cusp of getting its first business. It has gotten its first business and then thrilled to say that we are into initial phases of SOP, startup production.

21:04 And we are producing parts at between production and sample stage, would say, a ramp up stage and that is real good news for us. Thank you, sir. I'll join back with you. Thank you, sir. The next question is from the line of Manas Jain from Sanjay Jain Family Office. Please proceed with your question. Hello, sir. Good set of numbers. Actually, are shareholders of our company for last thirty years continuously. So it's been a very privilege to be a part of this company for last thirty years. So I had just two questions, sir.

21:49 I remember seeing two, three conference calls back, and you also alluded to it saying that the trailer tractor is reducing the front axle demand. So I just wanted to understand, is Forgings looking at entering the trailer axle suspension assembly? I understand the process might be different, and the customer segment is also different. But some of the forging companies have started doing this in order to negate that business loss. So I wanted to understand if we are considering in that direction. Not at this moment, Manav. Any particular reason, sir? Is it margin dilutive to our existing business? Is that one of the reasons? One would be, yes, it's margin dilutive. And second, we have enough on our hands in terms of growth, managing debottlenecking and ensuring that there is further missing of improvement on EBITDA and costs.

22:50 So this quarter has been struggling to just keep supplies going. We have to now organize ourselves on cost reduction. There's a lot to do in the current business. Thank you, sir. Second question, I think I Without getting stuck here, we have to ensure that we are moving along in this line of business first. Fair enough. We have now. So the traction is there very clearly. And we need to carry this to its logical conclusion across the spectrum of the business itself. Okay. Second question, sir. The... I remember I've seen some interview of... Two months back on on one of the media channels where you said subject to any QIP, you might want to do a INR 400 crores growth CapEx.

23:42 So I just wanted to understand. I know it's very far stretched, but I just wanted to understand where are we targeting, like, existing products, existing business, or we are looking at non auto industrial, or we are also evaluating nonferrous products such as aluminum, titanium for aerospace. I'm just trying to understand where our existing machining and engineering capabilities can be leveraged. So where are we looking at for that INR400 crores of growth CapEx? First and primary, we would be looking at our own business. Mainly, we'll hot close to HD Forgings. Okay. That's the primary zone. The second would be anything else in the metalworking space. Okay. In the? In the metalworking space, metal machining, machining, assembly, value added parts. Okay.

24:33 Okay. But so non auto will be industrial, maybe one of the applications you might be looking at? Definitely, 100%. Okay. Got it. Got it, sir. Thank you. Thank you. Thank you, sir. The next question is from the line of Suraj from. Please proceed with your question. Sir, first question is of the CapEx of INR 150 crores, what percentage or what amount would be replacement CapEx and what percentage would be new CapEx? Sorry, Suraj, can you repeat? Sir, of the INR 150 crore CapEx that we plan to do, what amount would be the replacement CapEx and what amount would be for new machineries and equipment growth CapEx? Roughly about INR 30 crores to INR 50 crores will be up to INR 50 crores will be replacement CapEx.

25:33 Replacement Got it. Sir, on the current gross block of roughly INR2100 crores, what is the peak revenue that we can generate? Close to that number. Got it. And then one last question. What was the revenue from The U. S. Market in the base quarter, like last year same quarter? One second, I'll give it to you. Percentage terms 18% in this quarter versus 15 almost 16% in the previous reference quarter. Got it, sir. Thank you very much. Thank you, sir.

26:21 The next question is from the line of Subratra Sarkar from Mountain Infra Company Limited. Please proceed with your question. Hello? Yeah. Am I audible? Yes, sir. Yes. Yes. Sir, kindly, can you share, like, what is the... Terms of volume, like, what is our share... What is our current this quarter, whatever we have done, and what is our expectation in terms of volume share last year? So I was thinking to last year, so what kind of volume we have been? And, sir, one, there are two clarifications. I I understand that, like, I also follow your company for a long time. So we are operating at this relatively much lower capacity utilization.

27:08 But still, sir, we are continuously doing our CapEx. So in this case, sir, can you guide us, like, what can be the top level or or, like, what can be the key CapEx that we can do or what what is the next one or two years in which direction we want to meet the CapEx and why, basically. So despite having such a under utilized capacity as of now. So... And these are the first, how much does this in that case? We need to additional or whatever? Two years would maybe you can. Can I get your name, please? My name is from. So we also follow your company for a very long time, and we we have we have enough data on it. So that's why, sir, we are asking for some time.

28:06 Your first name, Subra... Subrato, is it? Subrato. Yes. That's Subrato. Subrato.. Yes. We see the capacity utilization is going up considerably, Isabelo. So last year, we did about 78,000 tonnes of sales. And this now we are on we have done about 20,000 tonnes in Q1. We expect Q2 and beyond to be much better, should hover at around 24,000 tonnes for each quarter, 23,000 to 25,000 tonnes minimum in Q2 and beyond.

28:51 So we should as discussed or as we have been guiding, we would expect to cross the 90,000 tonne mark in this year and next year challenge the one lakh, one lakh 10,000 tonne mark. So the momentum is on and we see traction in moving our outputs to one lakh tonnes plus plus. So we are currently from Q2 and onwards, we should be almost at a one lakh tonne per annum range. So capacity utilization is going up. I'm happy to say that.

29:41 From 80,000 tonnes, this year we should be 90,000 plus with a run rate definitely of one lakh tonnes per annum. Maybe we can even end the year with much more than one lakh tonnes. Things hold, we should be able to push the run rate beyond one lakh tonnes. Our internal target continues to hit 27,000 then 30,000 tonnes per quarter. Okay, sir. Just a small clarification, in that case whatever the revenue growth we are expecting almost entirely from volume growth itself. Correct. So the consequence of that is the next part of your questions is where are we investing in. So we are largely investing in the machining side and a little bit on deep not little bit, this year about INR50 crores on debottlenecking, mostly on the forging side.

30:43 So and a little bit of that INR40 crores will be forging, INR10 crores will be debottlenecking on the machining side. So this debottlenecking will result in greater utilization and more machined products going to customers. That's the plan. And sir, most of the CapEx for next two, three years will be from our internal actual sir or we will take some additional debt? No. We do not plan to increase debt beyond these levels. $7.50 to 800 crores is gross debt levels will stand at this point of time. Turnover increases rapidly, Turnover... Since last year.

31:39 I'll Yes. If turnover increases reasonably and EBITDA along with it, at that point alone, we could consider raising gross debt levels. Otherwise, I would like to see it capped around these levels, give or take INR50 crore, not give or take, give INR50 At this point, under for capital, we may not be able to reduce the borrowings, but we want to maintain it as we've announced a few for quite a few quarters. Sir, last clarification, funds we will be receiving because of this landfill, what will be the utilization of that, sir? Go again, Subrata? Yes. Sir, we have...

32:26 This quarter, we have sold our land, and we have realized some money, sir. So that what is what we will do with this? That will be used to reduce our working capital and our CapEx and our capital borrowings. Thank sir. The next question is from the line of Nishant from Shreedev Abrasive. Please proceed with your question. Hello, sir. Hello. Hello. Yes, sir. I have a question about the current capacity utilization. Yes.

33:12 And how do you plan to increase it, sir? Like do you have any plans of capacity expansion in near future? I just answered that now Nishant and answered Subhoto. So last year we did 78,000 tonnes of trucks of sales. This year in Q1 20,200 tonnes. And from Q2 onwards, we expect to strike somewhere between 23,000 and end the year at about 25,000 plus tonnes. And one more question, sir. Are we catering to any EV business? One second. It should mean a run rate of one lakh tonnes a year and that should set the tone for FY 2027 to reach one ten thousand tonnes.

34:02 Hopefully the equipment utilization is behind us. Okay. And one more thing, sir, are we capturing to the EV business, two wheelers or three wheelers? We are catering from you say from the EV sub or you're talking from the parent company? No, sir. From the parent company, sir. Fine. That's an easier question to answer. Yes, we are serving products to EV customers or that go not EV customers that go into electric vehicles across several platforms, but not two wheeler, four wheeler.

34:55 Thank you, sir. Thank you, sir. One line of products grows export, another line is growing domestic. Thank you, sir. That's all. Thank you, sir. The next question is from the line of Rajesh Maru from MoneyCurve Analytics. Please proceed with your question. Yes. Good evening, sir. Thank you for the opportunity and great set of numbers. One of my questions has already been answered. I have one more clarification, sorry, if this is a question. We are setting up our large base of 16,500 tonnes. And you have already said that in next, its revenue will creep in next two years.

35:43 Do we have plan to move towards hyperscaler or any other segment like defense or anything which you are looking to explore the opportunity with this kind of capacity, sir? We are definitely moving into businesses that support hyperscalers. No doubt. We see that right in front of us and a lot of business is coming our way. But with regards to defense, it's a mixed bag. It's a mixed bag because once we get into the business of defense, it won't stop with just serving the Indian market. We will start looking at capacity utilization.

36:31 Airlines may not fill up entirely with the business from Indian defense. So immediately we look at what we can do outside of the country and that's something which at a personal level I'm not so inclined to. Thank you, sir. So the line for the current participant has dropped. Should we move to the next? Yeah. Yeah. Of course. He'll he'll join back if he is required. Okay, sir. The next question is from the line of Ramesh from SG Investments. Please proceed with your question. Mr. Ramesh, your line has been unmuted. Please proceed with your question.

37:27 As there is no response, we'll move to the next question. The next question is from the line of from. Please proceed with your question. Thank you very much. Sir, can you help us understand why did other expenses increase by 35% year on year? Just give me a few minutes, I'll come back to you on that. Sure. Okay. I don't have the my team is throwing it up. Hold on. Yes. Your other expenses will be a combination of couple of things. One is fixed other what is attributable to the regular other expenses coming in the P and L.

38:24 And it will also have a component of it is export expenses relating to freight. Freight has risen sharply. I'm hearing tobacco. Sir. Other expenses, what we call as the traditional other expenses, the overhead of running an organization like starting from rent up to fax and paper and computer, IT, blah, blah. That runs at an increase of around 10%. From INR 8 crores, it has gone up to INR 9 crores. It. The biggest question in quick nutshell, the biggest jump in other expenses of around INR 4 crores, 4.2 crores is increase in the published results.

39:17 Of that export expenses itself accounts for INR4 crores. Got it. Understood. That is largely due to rates going around the state of Hormuz for obvious reasons. Understood, sir. Sir, can you help us understand why is the revenue from Europe declining for us? Because U. S. Has grown, domestic business has grown. Europe has grown de grown volume, surprise for me. I don't think so. When we look at the last four quarters, like in Q2 FY 'twenty six, we were INR 82 crores from Europe, which became INR 89 crores, then dropped to INR 68 crores and now INR 59 Basically, Europe is a stable market and it goes reasonably up and down in tune with demand. Nothing noteworthy from Europe in terms of no business has been lost.

40:42 That much again, I can say very clearly. It's just customer demand that's going up or down. See. You are saying, here that European Forgings shops are shutting down. So that should be a large opportunity for us, right, and it should reflect in the growth. Yes. Overall, the trend continues. Sir, in terms of machining, what would like what percentage of our gross block would be the CNC machines? Ladies and gentlemen, the line for the management seems to have dropped. Please hold while we reconnect them.

41:29 Ladies and gentlemen, the line for the management has been reconnected. Thank you, and over to you, sir. Suraj, sir, your question is answered? No. My question was how many CNC machines do we have and how much does that amount to of the INR 2,100 crores gross block? A tough question, Suraj. I don't have that number across the board. It will run into hundreds that I can tell you. I'll note it down. We'll note it down and we'll come back to you on this. Sure, sir. Thank you. But I can tell you what it constitutes, one sec. I can tell you what our investments in Machine Shop constitutes out of the 2,100.

42:17 If you give me a minute, if you give me a look at that sheet for you. That is possible. One second, hold on. I'll get back to that answer. We have the data, just fishing it out. Sure. Sir, two quarters ago, you had mentioned about reaching INR 3,000 crores in revenue by FY 'thirty. Do we still look to that number? Yes. The next question is from the line of Gautam Khishan, B. Mehra from three sixty one. Sir, as we move Very well, sir. Thank you. Sir, as we move from 20,000 tonnes per quarter to 25,000 eventually to 27,000, 30,000, where do you think or believe your maximum growth could come from? Is it the Indian markets or the European markets or the American markets or a combination of all?

43:38 Combination of all. First answer will be combination of all. India today being 63% of our sales naturally will carry a lot of the tailwind. We're also getting a lot of order wins on the export side. So that also augurs well. And overall, I would say numbers should go across the globe. See the point is, Gautam, many customers are also setting shop in India. So global customers or some amount of global business is becoming Indian business. Right, sir. Sir, and just a small follow-up. So of, you know, the last, say, three, four cycles, do you think the combination of all three regions of yours, this is the highest growth you could see, the current cycle?

44:33 Please repeat, Gautam. So we've had multiple cycles over the last twenty years. The current combination of business being raised from India, Europe and America, do you feel the current scenario is the best in the last three or four cycles that we've seen? I think so. Okay. Haven't seen level of, what shall I say, strength in demand across all customers. At some point of time some customer, some reason or the other has been more abundant. But this time around it's as I told a few minutes back, every cell, every machining line is running to the fullest of its capability.

45:25 We tons to go in terms of productivity improvement, at least from my vision. So we are working and my team is working really hard on that. We have a lot to do on the productivity side even at these levels. So that's the headroom that we had. But having said that, today every line is virtually running at its reasonable fullest. But that can be pushed by another percent easily. Understood, sir. Is Okay. Some cases, it takes a lot of work. But that work is anyway it's a must, it's unavoidable and it must be done to improve the overall asset utilization organization.

46:14 And wherever during such quests we find that we have to debottleneck or replace, we are also considering that. Okay, sir. Thank you. And we look forward to fantastic numbers in F twenty seven and F twenty eight. Congratulations once again. Thank you. Thank you, sir. The next question is from the line of Prajesh Maru from MoneyCurve Analytics. Please proceed with your question. Thank you for this opportunity again, sir. In last two, three calls, you had consistently said that we have taken some cost saving measures in terms of saving the power and fuel cost, in terms of interest cost as well as labor cost by putting robotics.

47:11 And if I'm right, in one of the institutional costs, you had said that you are also incrementally trying to use AI to become more efficient on the ancillary functions of the company. So given all these things, sir, and with the volume going up, do you see any headroom for EBITDA margin to expand from current 18% level, sir? And if yes, then what kind of margin we can see, sir? Thank you. Thank you. Can I get your name, again? My name is Prajesh Maru, sir. Oh, Prajesh, you were there a few sir. Sounds earlier or just before Gautam actually. Yes, Rajesh, there is a scope for EBITDA improvement.

47:58 I would be the same naive to say that there is no scope or that we have reached peak EBITDA. There is a scope and we have to work on it to get to I would say, all previous listing, our target would remain a 20 plus goal. We have to squeeze out another 2%, 3% from the system. Thank you, sir. 1% is I can I have the clear visibility for 1% to 2%, but I would say two percent to 3% should that should be our goal and that's a challenge for the team?

48:46 Thank you, sir. Thank you so much. Thank you, sir. The next question is from the line of C. A. Garvik Goyal from Sireni Alpha Analytics LLP. Please proceed with your question. Am I audible? Yes, sir. Yes. Sir, my question on working capital side. Like in last two years, we see the working capital around 30% of the revenue. And in FY 'twenty four, this is about 23%. So in given stand alone revenue and the operational contract around $40.09 crores. So have you able to convert this cash in trade receivable and other in quarter one, FY twenty twenty seven? And is there any working capital intensity still there? Or we can come with 23% as we passed performance?

49:52 Very good question, Derivik. We are working on this increase in working capital and it is our endeavor to bring it down. That's the goal. No doubt about it. Okay. By cutting down on inventory. And to answer a previous I don't know, Yuaj's question about AI? No, sir. My question on working capital. Mahesh, Maru asked it. Yes. Yes. I'm sorry. One second. Using the two together, we are using now AI tools to identify where the inventory is getting stuck. Last believe me in the last seven to ten days, it's become a real it's become a revelation on stuck inventory.

50:44 So many teams are now a rapid action force has been formed to dissolve this inventory, if I can use the word, literally push it out which customers want. And second is to get down our money that is stuck in goods. So point well taken. That is one of our goals for the months to come. And in answering this, I also would say that Rajesh's question on AI tools that we are using those effective quite we've started using at least to crunch the data and see the insights are amazing, really amazing.

51:33 Because it's able to map down and say this is the data, these are the parts, these are the particular part numbers which are required and in stock and we need to push these. So it's giving a lot of insights to the management team. And I hope in the next few weeks, we should see not I hope, I expect over the next few weeks just to start yield results. And what we want to do as a result of this is to convert our WIP to the barest minimum, say a week time and move everything else as finished goods. Overall, there would be a reduction in inventory numbers, but not to insanely low levels. But at some point, I would focus on getting that inventory to a bare minimum in WAP terms, means work in process terms and push the numbers on convert all that into what we call as RFD or ready for dispatch.

52:33 Okay, okay sir. And that's all my questions. Thank you, sir. The next question is from the line of Priyankar Sarkar from Square sixty four Capital Advisors, LLP. Congratulations on a good set of numbers. Sir, just one basic question. Is there any update on that enabling QIP resolution that the Board had passed a few months back? Yes. I answered it a few rounds back. The QIP is largely centered around a sharp opportunity that we might see in market. So we are certainly it's on the cards and we are mulling it at an appropriate time, we would definitely consider it.

53:33 Sure sir. Thank you very much and wish you all the best. Thank you. Thank you sir. The next question is from the line of from. Please proceed with your question. Oh, yeah. Hi. Hi. My question has been answered already. Thank you. Okay. Thank you, sir. The next question? Please go on. Before you could identify the next caller, please. One of the data that was required was what is our CapEx in the machining side and are we where have we put the money in. So overall, we have invested about INR 1,100 crores in the machining side, of which in the last five years, we have put in INR $6.25 crores.

54:34 And last ten years, the number is about INR1000 crores. So INR100 crores prior to ten years has now become INR1000 crores in the last ten years and that of that INR thousand crores, INR $6.25 crores has been invested in the last five years. I hope I'm clear. Just repeating the numbers, about 1,100 crores overall on the machining side, of which INR 100 crores dates back beyond ten years, INR 1,000 crores is for the last ten years. I'm giving approximate numbers, okay, all rounded off last INR 10 INR 20 crores.

55:20 So INR 1,000 crores for the last ten years and of this INR 1,000 crores, $6.25 crores in the last five years. Sir, should we take next question? The next question is from the line of Ramesh from Investments. Please proceed with your question. Hi, sir. Thank you for the follow-up. So as you already alluded to, spent around INR the last ten years. Right? So I'm just trying to understand how did the capacity develop over ten years ago, how much is the capacity? As in what is it today in machining today? Machining capacity is extremely difficult to pin down in terms of numbers or in terms of tonnes because I can tell you there's one part that is very heavy and requires relatively especially.

56:26 Another family of parts, very popular, today accounts for about a good portion of our sales, which is heavy and requires extensive machine. Then there are light parts that require less we'll try to quantify this over a period of time. Give a couple of months. I'll want to put noted down from the first question that Mumuch himself has asked. So right from there, this question is persisting. We have a number tracker, but that number tracker is of no use to you guys. So we need to quantify machining capacity. We'll work on it and come back to you with a method of quantifying our own machining capacity.

57:14 Sorry that we're answering such an important question in such a vague manner, but that is the way things stand. We will apply our mind and try to put bring some method to that madness if ever we can. Understood, sir. Got it, sir. That will be helpful. Just and one more thing, I mean, American opportunity, right now, contribution is around 10% or 15%, right? Where do you think this contribution from U. S. Is going to expand to in the next years because you are very bullish about it, right? It's around 16% now, if I'm not mistaken. And U. S. Should increase by around should hold these levels 18% now. It should maybe increase by 1% or two The rest of the world is also growing.

58:03 This time around, it's not just one point that is growing in regards to the others. Every zone is reasonably growing, barring a little bit of a blip from Europe. So Got it. So just understanding just one more thing, trying to understand the market. So most of our exports go to Europe, Just trying to understand, are Forgings more used in Europe than U. S? Is that the fact or is it just that we have a longer relationship with the European customers than U. S. Customers? Could you explain trying to get the... No, those parts are used in any economy. In any economy, forged parts are used. Now because without forgings, you don't have motion as we know it today. As engineering stands today, forgings are at the center of where motion is, where transportation is.

58:55 So we know how both are so critical to any economy, right. But what happens is that where these get consumed is the original equipment manufacturers or the Tier 1s. Now where are they located? And therefore, where does it get gets sent to those geographies. Obviously, it will be unwise to say that the rest of Asia is it will be downright foolishness to say rest of Asia is not at all into the transportation or the forgings market. Rest of Asia is huge, Japan, China, Korea, but these are all traditionally closed markets as India is. So that is the reason why everybody looks at forgings, castings and all into Europe and Americas.

59:47 These are this kind of metalworking is popular and strong in the Asian economies and not and is declining in the other economies. Got it, sir. So basically U. S. And Europe is where this capacity is reducing and we are our opportunity also lies there. I was just trying to understand a little bit also South America. It's also a tight South America at that list. Not South America, the capacity are declining. So not a tough question to answer that. Now Brazil is fighting back. There are a lot of indigenous forges now coming up in Brazil. A lot are coming up in Brazil. It's quick to write off and say South America is a declining market. South America is another market where there is scope.

1:00:38 That much I can very clearly say. Understood, sir. That's fair. So I was just trying to understand the roots of why European customers are much bigger competition in terms of revenues. Just trying to understand what exactly why are because usually it is other way around U. S. Is a higher proportion compared to Europe. They are high cost economies, high labor cost economies. So labor and cost pressures ensure that such businesses go out of those geographies. Got it, sir. But for us how did was it... Any of the GDP post by the U. S. Government in recent times. The none of the forging buyers in The U. S. Have bought as a result of that.

1:01:24 Fortunately for Forgings, huge fortune that none of our contracts rebar their customs duty. So that would have been held otherwise. So since even though there is huge amount of duty imposed, customers are still buying means that they are not able to one, setting up these capacities is difficult. Setting up a forging capacity, getting hold of people to operate forging process and processing the parts, it's not easy, it's damn difficult. Even in India, Forgings will be a sector that will be difficult to man in the next few years, man or woman I can use the word.

1:02:12 Currently we have we do have a significant portion of women coming into our workforce. Ultimately the point of the matter is that these economies will find it difficult to and also those skills get lost over a generation. If for twenty years you haven't forged, then getting this back is difficult. But you can also jump the skill game for quick thing in glances. India jumping the three g, the GSM bandwagon. We didn't go through the CDMA route and struggle on the mobile phone side, connectivity side. We straightaway jumped into GSM and we left forward by about twenty years. So like that in the Forgings side, it is possible to somehow gain, but that will have to come in very restricted circumstances where there is huge level of automation and you had a poor in capital, which means that you need to have customers who are backing you to the hilt.

1:03:13 So all these are strategic seismic shifts in the costing landscape, which will take will be very difficult to unravel. Understood, sir. So just one last question. I'm just trying to understand. So you mentioned that because of declining capacity, we're getting orders. So probably our main competition is China. So where do you think we're getting most of orders? Is it because the declining capacity or China repurposing? We are getting new orders also because customers there are growing their business. And they want to source from BCC or LCC, best cost countries or low cost countries for those respective parts. So it's wrong to say those markets are in pure decline alone.

1:04:03 For all that, The U. Market may be growing also in four gs, for all that, I have no clue. But many orders are coming our way across the global landscape because customers want to buy from India. See ultimately, N2 at an entrepreneur or at an organization level to service a business at 18% EBITDA will be lot higher than servicing a same business at 5% EBITDA. Yes, sir. Fair enough. Right. So that N2 makes for customer satisfaction. Got it. This is my perspective over the last fifteen, twenty years.

1:04:50 That will be very difficult. I'll check. Okay. How much more expensive would be compared to Sir, 2025 we'll take this as a last question from you due to time constraints, sir. That's fine. Thank you. Thank you. Thank you, sir. I will send you a question by voice mail or something, and we'll try to answer it for you. Ladies and gentlemen, that was the last question for today. Due to time constraint, I would now like to hand the conference over to management for closing comments. Thank you all for participating with your time and as usual with your questions, which have given us a bit more of insight into our own business.

1:05:39 And hopefully, we see more of this as we go on. And I expect that Forgings would do strong in the quarters to come with about targeting 25,000 tonnes of sales at a bare minimum in the coming two to three quarters, reach that and then look beyond to touch 27,000 and then 30,000 tonnes every quarter, thereby quickly galloping to a capacity utilization of around 120,000 tonnes backed up by strong machining exposure. As we see, most of the orders that we are getting now are all machined and very few are as forged.

1:06:27 So that in turn means that capital requirements are more. So as we move forward, we see challenges in the cost side and we also need to do some trimming internally in terms of both costs as well as working capital and inventory, which all came up over the last few months internally as well as in this meeting. So thank you all for your wonderful participation and looking forward to posting better numbers in the and much more growth in the quarters to come with the hard work of the team and of course God's grace. Thank you all. Thank you, sir. On behalf of three sixty one Capital Market Private Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank you.