Rico Auto Industries (NSE:RICOAUTO) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Rico Auto Industries Limited Q1 and FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask question after the presentation conclude. Please note that this conference is being recorded. This conference call may contain forward looking statement about the company, which are based on beliefs, opinions, and expectation of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. From the management, we have with us today Mr. Arvind Kapoor, Chairman, CEO and Managing Director Mr. RK Meghlani, Executive Director Mr. Kaushlindra Varma, Executive Director Mr. Naveen Sohrad, Chief Financial Officer.

0:55 I now hand the conference over to Mr. Kaushalendra Varema, Executive Director from Rico Auto Industries Limited. Thank you, and over to you, sir. Great. Thank you. Yes. Good evening, everyone, and thank you for joining us for the Q1 FY twenty seven earnings conference call of Rico Auto Industries. I hope that you have had the opportunity to review our financial results and the investor presentation, which is available on the stock exchanges and also on the company's website. I would like to start by giving a brief overview of the company and industry and company performance post which Mr. Navin will brief you on the operational and financial highlights for the quarter. The global economy continues to remain resilient, although geopolitical developments, commodity price volatility and changes in the global trade continue to create uncertainty.

1:48 At the same time, the ongoing restructuring of global supply chains is creating opportunities for manufacturing economies that can offer scale, quality and localization. Coming to the automotive industry, the environment remains constructive. Q1 FY twenty twenty seven saw strong production momentum, while the industry continues to undergo a structural shift towards the electrification and hybridization and a greater localization. This continues to create opportunities for Indian component manufacturers, particularly as global OEMs diversify their sourcing and local and global manufacturing partners. Against this backdrop, Ricoh delivered its highest ever quarterly revenue during the Q1 FY twenty twenty seven, reflecting continued momentum across our core automotive businesses.

2:42 Our businesses continue to participate across IC engines, hybrid and EV platform with new programs at different stages of development and ramp up. There are 55 new programs in launch phase, out of which 28 programs already launched and are in ramp up phase. These are long term programs for Toyota, Ford and BMW with program life of more than seven to eight years. All these programs are highly profitable, and we are a single source supplier for all these programs. Our focus remains on flawless execution of these programs and progressively scaling them up as per customer ramp up plan. During the quarter, profitability was impacted by elevated of cost pressure with the raw material price settlement lag being a key factor.

3:34 We also saw elevated freight costs, particularly air freight, as disruption in global shipping routes due to increase in ocean freight transit time from five weeks to nine weeks, which led to greater resilience on the air shipments to maintain supply continuity. We are actively working and discussing with our customers to pass through some of these costs. Our new plant at Hosur is progressing and as planned is expected to do the commercial production in September 2026. This facility will support our hybrid and EV related programs with the key OEMs. Alongside our core automotive business, we continue to develop our presence across adjacent sectors.

4:20 Our railway and defense business are progressing, supported by increasing localization, infrastructure, investments and the government focus on self reliance. In railways, RICOA approvals are progressing and supplies have started. We expected this business to develop progressively and add to the diversification of our businesses. Looking ahead, our revenue outlook remains unchanged and we continue to work towards our previously stated target of around INR 3,000 crores this year, we will be clear confident we will be surpassing this and will be achieving a revenue more than INR 3,200 crores in FY twenty twenty seven. While the current cost pressure and the timing of the customer settlements are likely to keep margins under pressure in the near term, our focus continues to remain on improving operating efficiency, progressing the price settlement and driving the ramp up of newer programs.

5:22 We remain confident to exit the current year near to our targeted full year margins through customer price revisions and continued improvement in operating efficiency. With this, I would like to now hand over to our CFO, Mr. Navin Saurabh to take you through the financial performance. Thank you. Thank you, sir. Let me now take you through our performance for the quarter and provide some perspective on the key drivers of profitability. We delivered the strong revenue growth during Q1 FY twenty twenty seven. Consolidated revenue stood at $7.55 CR compared to $5.43 CR in Q1 FY twenty twenty six, reflecting a growth of around 39 odd percent. EBITDA for the quarter stood at 34.8 CR translating into an EBITDA margin of 4.6%, fair stood at a loss of SIR2.4 compared with a profit of SIR16.7 in the corresponding quarter last year.

6:19 From a segment perspective, aluminum casting continued to be the principal contributor accounting for 89% of the consolidated revenue, while the ferrous casting contributed the remaining 11%. Exports accounted for almost 15% of our total revenue during the quarter. While the underlying revenue performance remained robust, profitability during the quarter was impacted by elevated operating costs and certain temporary cost pressures as already highlighted by Kviser. Other operating expenses were higher by approximately 24 CR, primarily due to air freight and sorting costs, which were around 13 CR in this. Along with the inflationary pressures across manpower, power, fuel and gas tools and consumables. We expect air freight cost to peak in Q2 as inventory levels reach the desired position.

7:08 Thereafter, the temporary requirement of air shipments is expected to cease, with shipments progressively returning to the normal sea freight cycle from Q3 onwards. Profitability was also impacted by the lag in the raw metal prices settlement. This was particularly relevant for aluminum where the prices increased significantly during the period. The settlement lag resulted in an estimated impact of approximately INR10 crores during the quarter. Importantly, these cost prices are not structural in nature. We continue to engage actively with our customers for appropriate price revisions and cost pass throughs. While the timing of these settlements will vary by customer and program, we expect the benefit to be realized progressively over the coming quarters. At the same time, we are driving productivity, operating efficiency and cost optimization initiatives across the group to mitigate inflationary pressure and improve execution.

8:03 Looking ahead, the cessation of temporary airfreight, progressive realization of customer price revisions and cost pass throughs together with the benefit from our ongoing efficiency initiatives are expected to support a progressive improvement in the profitability from Q3 onwards. Our focus therefore remains firmly on execution, customer settlements, productivity and disciplined cost management while continuing to build on the strong revenue momentum and the programs underway. Thank you. Now we are open to the questions. Thank you so much. Ladies and gentlemen, we will now begin with the question and answer Participants are request to use handsets while asking question.

8:57 Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Harshil Jawiri with Crown Capital. Sir, thank you so much for taking my question. Hopefully, I'm audible, sir. Yes. Hello? Yeah. Yeah. Hi, sir. So, sir, I just wanted to, you know, ask about the freight cost. Like, I think we said 15% of exports. Right? That would roughly turn out to, right, I think we did 100 crores plus $1.20 crores of exports. So freight air freight cost was higher by 10%.

9:47 That is something that I'm trying to reconcile. Right? Like, air freight would only be for exports. Right? So if exports were such a small amount, then if we had so much air freight, then we would have all the export order would be a loss making order for us, right? Yes. Our export in this quarter was around 10% to 12% and this cost is related to that because we need to ship the parts to meet the supply continuity because these are related to the new program launches where we are the single source for the customer. And we had some issues with quality correlation, where we need to do some certain kind of a correlation in the measurement with the customer and our measuring instrument.

10:37 So that has basically put some parts are on the hold, which will be used in the future, but we need to maintain the we need to ship parts to maintain the supply continuity. So it's a reward, the exclusive supplier, they didn't give us some kind of benefit, like, have we received some kind of because if you like, our margins would be what we are losing in air freight, right? Like, just wanted to understand that how do we reconcile that, sir? This airfreight is an exceptional thing and mainly because it's taking almost nine weeks for shipment from here to from India to The U. S. And earlier, we should get the goods there in about five weeks' time. And now we have extra inventory of almost four weeks in the sea, that's almost nine weeks of inventory of the sea and plus one month inventory.

11:36 We are required to maintain that. Now because this is one. And secondly, there were some issues in our core relations with as far as specs are concerned, those have been sorted out. So this is a temporary phase that we had to go through for the new components that we are shipping overseas. And since the customers are BMW and Toyota, we being a single source, can our commitment is to the customer to see that the lines keep on running. And that's the reason we had to resort to efforts. We are negotiating with them. And in fact, one of the customers has agreed to pay us the freight and which would be accounted for as and when we get it. And that's almost 50% of water will be already incurred. But we've not factored. We've not taken that into consideration at the moment because that will come over time. And so we are talking to our customers, and this will be done. And this extra time of seat time that is taking, that is impacting our supply at the moment. See, the capacity that we built up is as per whatever the requirements are. Now all of a sudden, we had to almost increase our capacity by 25% to 30% so that we could make larger shipments to The U. S. And to Europe.

12:50 And we are doing that, and we are pulling out a couple from wherever possible so that the deliveries are taking place in time and the lines of our customers keep on running. And we also built in. So Yes. This is a onetime thing that happened. And we are very bullish about the exports. The margins are much better. The customers are the best customers that one could dream of and very supportive. And so one of the customers already agreed, but others, we are trying to convince. Besides this, the price increases that because of the inflation of the rupee getting weak, all the other ports, the prices have gone up, and we've also taken up that with our overseas as well as our domestic customers, which is under negotiation at the moment. This is over and above the raw material prices that we are talking Okay. Okay. Got it, sir. And sir, just wanted to understand, I think our last call was in June, right? Two months sort of Q4 would have already been passed. And I think we said we can do 10% plus EBITDA. So we would have known about the situation that's happening. Right? Then why would have we still guided for 10%?

14:03 Like, I think that is something that I think people didn't like. So could you just clarify that what was the issue? Like, it did come later on or what we would have known about this, right? It would be going the war has been going on the lead time would have increased. So why we gave the guidance of 10% EBITDA? When we knew that there were extra cost pressure, even if we are going to recover, but at that time, it was not stated, right? So could you just help us with that, sir? The war started, and we were making shipments from five weeks, it went up to six weeks and seven weeks. And so we were comfortable with the seven week thing. And then all of a sudden, the time went up to nine weeks and nine plus minus one week. It goes up to ten weeks sometimes and also goes to eight weeks. So these are things that we could not we did not factor.

14:52 And but having said that, the customers are talking to us, and we are talking to customers, and we would we had to take in the books at the moment because at the moment, we do not have a purchase order for those components for these extra effort. But when it comes, those will be factored in, that will show us an extra profit in the thing. But the that is one. And number two, we had the initial launch issues when we started shipping and with so much material in the sea. And as a material arrived there, there were some because it's staying in the sea for a longer period, there were also some rust issues started coming up. And normally, in four, five weeks, there is the components are totally protected. So those started showing up and so we had to change our packing and everything. And then but we had to keep the lines running, being a single source.

15:41 So we took this it was a difficult call, but having the commitment with the customer, we had to make the shipments by it. Okay. Fair enough. So Anja, this issue is going to continue in Q2, right? So you can see similar kind of performance in Q2 in terms of margins? The margins will be better. And if I remove the orders, we are actually in the region of we've not like in the month of July, our turnover is around INR 300 crores. And so by that, we are actually going up to INR 3,002 crores, INR 3,300 crores, 3,500 crores. But we are playing a stable, we are talking INR 3,250 crores will be our turnover by the end of the year. So we are very excited that we are wrapping up. We're excited that the business is growing.

16:32 And but this is one pitfall we've had as far as the efforts are concerned, which will cover up. And in Q2 also, there will be some efforts. And Q3 onwards, of course, we should be back to normal. And we are hoping and wishing for the last couple of months now that the war ends and the shipping comes back to normal and the freight rates also come down. So just to add to it, I guess, one of the queries that you raised and why we not preinformed the market. So if you recall, I guess our discussions that were sometime around early June and major portion of this year has happened post that call. So the later portion of June when the situation escalated. So that is how it is, but yes, the discussions are continuously carrying on with the customers. I guess the priority was to stabilize the supply and then start negotiating with the customers and settling whatever airfreight that we can settle with them.

17:30 Okay. Okay. Fair enough, sir. And sir, just wanted to ask with regards to, you know, railways and defense, right? So, I think we had previously guided, like, railways could be, you know, a 100 crore revenue segment and defense also, we are trying to get into. What about these segments like development, if anything happened in this quarter? So good guidance for that, sir. Railways, we submitted our component for inspection and all so that we get the RDSO approval. And we are in that cycle. It's a cycle all the two, three months before we get those commission. We are in that cycle. And there are new component, which will also be submitted to the raisers. But indirectly, we are already supplying to various customers who are supplying to the railways.

18:20 But for the intricate, more profitable component, we want to supply directly and through the railways, and that's the reason we can be RD also. And on the defense side, we like we had mentioned earlier, we're making the shooting ranges, practice ranges for these are computerized ranges in containers. There could be 40 footers, 60 footers, 30 footers and for training purposes. And that is going on. I think we could supply what are the numbers? 200 this year. 200 ranges this year. And we are also giving consultancy for. That is also happening, that's also going parallelly.

19:08 That's really great to know, sir. And sir, is it any... That is see, just to add, that is progress. It is slow, but it is surely there. Our next question comes from the line of Sunil Kumar Daga with Sunil Kumar DagaHF. Please go ahead. Hi. This is Sunil Kumar Bhagavad. My question is with respect to this thing... Just in the... This thing. Sir mentioned that there was a 10 crore increase because of freight up and down, but the rate percentage to sales is 67% this time as compared to 53% in the last quarter.

20:03 The 10 crore... There is only 1010%, there's a difference of, I presume, more than 13% in the cost of materials. Hello? Sir, can you repeat the query? My query is with respect to my query is with respect to purchase as compared to sales. March quarter, it was 67%. It was 53%, and this quarter, it is 67%. Similar June quarter, it was 55%.

20:52 In the phone call just now, we had, you said some there was a 10% increase because of some rising cost and all. But this INR 10 crore increase is not reflecting the 13% cost, which has been sort extra cost, which has been shown in the published account for the June. So there are two different questions. I guess you have combined both of them. One is regarding the extra cost on the airfreight and the sorting side, which was almost at around INR 10 crores. That amount is somewhere other expenses side and not in the raw materials. And if you look at both the airfreight and sorting, I guess, 12.8% CER consumed almost 2.2% of the profitability.

21:39 On the raw material side, if you look at the way the aluminum has moved up, if you compare Q1 current year versus Q1 last year for a specific grade, the increase is almost 57%. Even if let's say these increases are caused on to the customer, you will find that in terms of percentages, RM as a percentage of sales will move up. Okay. So this is only... Just to give you some figures on the aluminum side, it was INR $2.30 or $2.40 something last year. And as I said, it's also $3.45 or something. Can that? INR $3.49. INR $3.49. So... Triple to Q1 last year. Triple to last year. So that is a increase that is there and which is to be faster with the customer, then there's a lag in that. And that's why you see the raw materials are on the higher side at the moment.

22:35 How do you foresee future, Madam? Fortunately, this quarter, it is coming down slightly, and we hope that it keeps on sliding down. And but we don't know what The U. S. Decides to do. They could deal with the war. Again, that could be a spike. But at the moment, there seems to be a relief on that. We might have done some hedging for the aluminum prices at all? We don't do hedging on the aluminum price because it is decided by the customers, and they are the ones who announce the price, and they are the ones who actually negotiate with the winners, the price, they announce the price. And what is the forecast for Q2? Considering the since we have already crossed forty five days or so?

23:27 Like I mentioned that in the month of July, we have done almost 300 crore and we are heading for a plan. INR $8.40 crore, sir. How much? Can you repeat again? Yes, you repeat yes. We will be crossing INR $8.40 crores for Q2. And the total comes about INR 3,250 plus. And Q3 will be crossing INR $8.50 crores and then Q4 is about INR 900 crores. Sir, that is the revenue number. Thank you. Sunil sir, you may please rejoin the queue for more No, no, I have not yet I I have Sir, I request you have already asked two quest... Two to three questions.

24:15 Let let let him please. Let him ask. Yeah. Yeah. So that. Yeah. Sir, you have shared the projection projected numbers for Q3 Q2, Q3 and Q4. How do you see EBITDA level and lower levels? Considering we are barely plus increasing. So Q2 pattern will be better, but Q3 will come back to normal because there would be no premium rates and there would be we would have set up for the raw materials and also the price increases that we've demanded for the labor, etcetera, from these domestic suppliers as well as our overseas suppliers.

25:04 So we have a certain figure, which we have not factored in at all at the moment, but that's a part of the financial figure, which we are taking into consideration. That includes the gas and oil and etcetera, etcetera, everything. And also the carbide inserts, etcetera. Thanks. Thank you. But we'll surprise you by the end of the year despite the average which we'll get to some extent would be where we will claim it from the customer, we will stand by what our commitment is. Thank you so much, sir. Our next question comes from the line of Saurabh Jain with Suniti Investment. Please go ahead.

25:51 Hello. Yes. Thanks for the opportunity, sir. Just a small clarification before I ask my questions. EBITDA margin during the quarter stood around 4.5%, 4.7%. And you say by Q2, Q3, assuming the things settle down on the West Asia crisis part, so we'll come back to a trajectory of around 10%. So can we expect Q2 be somewhere in between? Yes, it will be in between. Okay. And sir, my first question is on growth, you have done wonderfully well with 39 growth, and you have actually increased your guidance from crossing INR 3,000 to INR 3,200 or INR $2.50 crores for this fiscal.

26:47 So just wanted to know how much of this 39% growth has come from high metal prices? I think it's about 100 crores to 200 crores in this, which is it could be because of high metal. The exact figure is I can share with you later, but that would be there also. So in this, Saurabh, if you look at stand alone for the company, I guess the impact of raw material is almost INR 100 crores. So the $5.81 crores that you are looking at, if you net off and if you let's take the same base as was even last year, this number will be somewhere around $4.81 CR. Stand alone, yes. On a console basis, so it would be are you seeing INR100 crores of the impact due to metal prices, higher metal prices? So around INR650 odd crores.

27:44 So this is on a stand alone number. So you can increase that INR100 crores by another INR10, INR15 crores to give you a consort number. Okay. Fine. Fine. And sir, what would be your CapEx guidance for FY 'twenty seven and 'twenty eight? Okay. We at the moment, the projects, the 54 projects that are in hand, we are making investments there, but we are also curbing the investments. And but having said that, after this, I think for one year, we are going to invest only where we're absolutely necessary. And otherwise, we'd like to stabilize and be able to run all the assets to full capacities. And once we stabilize, then thereafter, we'll look at some larger projects. But it's only the small expansions of capacity increases in to our domestic customers and our overseas customers, that is what we'll do at the moment. But newer projects after these 54 projects are over, we will first stabilize and then make the investments.

28:50 Sir, if you can just quantify for FY 'twenty seven and FY 'twenty eight, it would be really helpful, including your maintenance CapEx and all what is the usual entry. No, we will share with you. Okay. And my last question is on in the presentation, have just published Slide 30 about the digital transformative initiatives. Can you please provide some more color? What kind of investments are we planning here? You have, you know, put several points on the side and what areas are we going to invest and how it is likely to play out in terms of profitability and all? What is, of course, we are learning more and more about AI, and our people are getting engaged in that. And we're looking at how AI can be used for improving the productivity.

29:50 And we have started using for designing and also for... Okay. A lot of information and also trying to improve our manufacturing capability and ability and productivity of the machine client. We are also adopting it for designing of dyes, etcetera, and that's a nascent state, but we are in the process of doing that. And we are also connecting all the equipment so that the monitoring can be done very effectively and the machines can be utilized very efficiently. We have already done this on a couple of lines. Those are very successful, and we are further trying to improve that.

30:37 And then we will replicate that across the board for all the lines with the information available readily to us for every line. And also the losses and the with this, the advantage we get is that product will improve, we'll be able to control the losses or loss of time, etcetera, very well. Okay, sir. That's all from my side. Wish you all the best. Thank you. Thank you. Our next question comes from the line of Hetan Bhauricha with Sequent Investments. Sir, my first question is on the Railway and the Defense. So have Railway or Defense contributed anything in Q1?

31:30 Yes. Both our regulars are there. Sir, if you can share the number, if you can last quarter, I think you mentioned it was roughly around INR 4 or INR 5 crore. So... We will check the number with you. Yes. And sir, till then, if you give the number, should I ask my second question? Yes, please carry on. Yes. So the second question is on the guidance. You mentioned we are still looking at 3200, 3300 kind of top line with improving margin trend. So assuming if you want to achieve 10% margin for full year FY 'twenty seven, so is it you are mentioning our margin will be better than 10%, 11%, 12% in H2, which will eventually lead us to like 8%, 9% margin in the year?

32:28 So the 54 projects that we have that gave you mentioned that we are launching on the proposal launching, 28 have been launched and others have been launched. Those are definitely better margins and those are with the current prices of raw materials. And so the margins are also calculated accordingly, much better margins, and those are the volume which are actually going up. And we've also done a lot of saving as far as the machining is concerned. There is a cost reduction that has happened. We've worked a lot on our rejections, and we try to also that is also adding to the kitty. And the margins are definitely going to improve. And our target, we had mentioned last year that our target should be around 12%. We will be achieving the 12% target. And but unfortunately, this airfreight came in because our commitment to the customers and being a single source, we did not want to lend the customers down.

33:22 And so this expense came, but we will honestly try to claim whatever we can. Even though about I think 9 crores to 10 there is a certain percentage that has been agreed by the customer. But then there's a sorting cost of the rust and other component that had happened in The U. S. That we are trying to see how we can reclaim from the customer or at least reuse the components by cleaning them up and all that. That's sorting enough to take care. Yes. That is well taken, sir. But what I'm asking is to achieve a 10 margin for the full year FY 2027, eventually, you will have to do like 12%, 13% margin for the rest of the quarter? Update the job, let's see.

34:09 Okay, okay. So we are confident on that point? Yes, we are very confident on what is happening unless something has happened in Iran or something, then it won't be in our control. But whatever is happening now, if this continues, I think we are very confident. Because fortunately, the Indian market is also growing. Got it. Got it. And sir, and one on the follow of that 54 new projects, if you can share some color on that what exactly are we doing with our new customer? These products are with the custom global OEMs like Toyota, BMW and Ford. Ultimately, these our components will get into the to deliver to these components.

34:59 People. These are long term programs, as I mentioned in my opening remarks. I mean the program like around seven to eight years. And as Ambition mentioned that these are the programs which are on the recent cost structure and having a very high profitability. Okay, okay. So approval and everything is already done for this component, sir, right? Say again? So approval has been on Yes, for 28 programs, which 28 programs, which has already gone into the SOP, for that all customer approval and everything is in place, only that we will start the start. Like in Hosur, we'll be adding more components. That project starts on September, October onwards, we started production there. Those will be the new launches that will happen there. And then there are launches taking place in Chennai, there are launches taking place here in North India as well.

35:52 Sandeep, you want to add something? So these programs, what we are mentioning already, they are in the ramp up phase, most of the programs and the new ones that are going to start for three d, Bawal and Hosur. Those will start in September of two months and slowly ramp up, some are going to start in February, March next year. And they start ramping up a couple of months later. So we are in that cycle. Okay. Okay. And sir, these components are for eyes as well as EV, right? For Khosur facility, these are mainly for the hybrid and for the EV. In the northern part of it, these are mostly for the ICE also. And it's for the ICE, EV also and hybrid also. Yeah. So it's a it's a mix of hybrid, ICE and EV.

36:44 Okay. Understood. Cool. Okay. Okay, sir. Sir, and that number you were supposed to give, sir, revenue from My defense guys are leaving today, but the nobody is sitting at the store. Understood. No worries, sir. I'll take it off. I think it's region of about INR 5 crores to INR 7 crores, but I'll give you the exact further. Thank you, sir. Our next question comes from the line of Bajan Bafna with Suniti Securities. Please go ahead. Congratulations for good top line growth. Of course, the adjusted margins are much better than what optically it looks like on the reported numbers.

37:32 So sir, my questions are little going to be more strategic in nature. If you see last five years, your top line has got up almost INR 600 crores from INR 1,900 crores to INR 2,500 crores broadly from 2022 to 2026. And in that period, we have done a CapEx of almost INR1000 crores on an average of INR200 crore per year. So now you guided that why it took us almost five years where we did a CapEx of INR1000 crores where we could not able to grow the top line even the one time of CapEx that we did. So now what is changing in the company? We have seen multiple changes not only on the top line growth side but on the margin guidance and on this 3x top line growth that you're talking about by 2030, then board level changes, then lot of process optimization and back to back SAP implementation, then talking to customers for price increases.

38:33 So can you just say what is something which is changing in the company right now, maybe after the level of five years, we are now giving a significant growth guidance for next four, five years? So if you could just outline the broader strategy of the management while making those changes on each and every front. So if you could just touch base on the broader roadmap on that will be really helpful, sir. So just if you will just I'll give you a very broad picture as to what is happening. Like you mentioned, of course, the board has changed and everything is happening.

39:22 We started focusing on the high tonnage parts. High tonnage part means for the aluminum die casting, we started focusing on machines, which are above 1,000 tonnes. So going up to 1,400 tonnes, 1,700 tonnes, 2,000 tonnes, two thousand thousand seven hundred tonnes die casting machines. Those are expensive equipment. And like to give you an example, 2,700 tonne machine, the basic machine cost landed cost is about INR 25 crores. And it's another INR 10 crores to INR 15 crores is the infrastructure around it that is to be built up. So we have about INR 700 INR of those machines now. Now these machines, when they come in, die can cost you about 8, crores for those die casting machines. So it's a process of making the dies of setting up the plant and also starting the production and setting up the footprint of machinery and setting up the infrastructure for that.

40:11 So and the projects we have taken up are long term projects, unlike some of the projects were awarded to us almost a year and our two years back and which are coming to production now. The facility, the project was given to us last year, and now the facility is coming to production. So these are the projects which the OEMs take up long term, but they want to commit fairly early commitment where the investment also starts taking place. And the testing and the running of the equipment by the local OEMs is done much before the time the production comes in we come into production. And so the investment actually says that there's zero turnover that actually happens. It's only the making that we do. And but now all those are coming into focus and the other thing we've done is the performance of the the productivity of the equipment.

41:05 We've managed to grow the productivity of the company. We've been able to pull out a lot of CNC machines and redeploy them into newer projects and the other investment, which are taking place now. So we are minimizing the investment, but focusing primarily on the turnover, which is happening and also focusing on the bottom line. Now with this, the die casting capacity is also better utilized now and the our iron capacity also will be better utilized. So that is also going to have a major impact. You will see the effect this year and next year also. Got it. So sir, I know I can remember the older days when you were the king of that area. And now maybe in last four, five years, maybe ten years where you have done good CapEx also, but you have lost that glory that Ricoh was enjoying maybe ten years back. And a lot of other auto ancillary companies who were much smaller than you have grown sizably, much stronger and bigger in last or ten years. So probably I would say it's a lost decade for Ricoh. But of course, we have brought up the capabilities and now we have done INR 1,000 crore CapEx. So what sort of number that you can achieve? You have already guided. But my only submission there is that without CapEx, with this INR1000 crores CapEx that we did in last five years, what sort of top line is achievable by us with minimal maintenance CapEx we can go ahead with to achieve this INR 7,500 crore top line guidance that you have given for 2030?

42:36 There would always be maintenance CapEx is still largely there. But we can achieve a better about INR 4,000 crores in the setup that we already at the moment. There would be investments in the ties, especially for any new component companies that are special ties with them in. And those investment take that, we normally try to claim that money from the customer upfront. But in some cases like Marufian or they don't play upfront, they do it in the piece price. And but with the other customers, we do request them to pay us upfront. So we try to minimize whatever but we can set a figure about INR 4,000 plus. Okay. Without any significant CapEx? Without significant. Without I would say, without taking up a major project.

43:23 Okay. Okay. Got it. And sir, broadly, if we try to judge the impact of aluminum prices, which is there, which has gone up 57% for some grades that you've talked about. So that is something which is an unknown. We don't know that how it will behave maybe this year or next year. So you are giving this INR 3,250 crores sort of guidance for this financial year, what is the aluminum price that is under the assumption so that at least we can correlate in the future that how that movement is happening and where the numbers are going to behave. In fact, the raw material, I can give you the exact value, but I think it should be in the region about INR 200 crores, $2.50 crores.

44:14 Okay. No, then I'm trying to say that this INR 3,300, which is the aluminum price right now. So when we are giving this guidance of INR 3,002 and 50 crore of top line for this year, what is the aluminum price that we have made an assumption, which probably we can correlate the ruling price in MCX is around $3,300 $3,300 $3,003,320 rupees a kilo, 100,000, yes. Okay, okay. Got it, And all the very best sir for the coming quarters and I hope that we deliver what we are guiding to the Yes. You. Thank Next question comes from the line of, an individual investor. Please go ahead.

45:10 Hello. Hello? Yes. Am I audible? You may please... Yes. You are. Yeah. Yeah. In the last con call, Arvind sir said about the CNC machines that you'll be selling in the market. So if you could give an idea about that, like what's the spare capacity? And do we have customers on board? Yes. We have already started delivering, and that is expanding, and the process is on. We have we've actually sold more than we are making. So that's the situation at the moment. And we've not factored that as far as the total revenue is concerned.

45:57 Like what's the spare capacity, if you could give a number because we have 3,000 capacity that we are using for captive consumption, right? I didn't understand your question. 3,000 is not the capacity that are the machining centers we are having. But if you talk about the capacity in terms of the numbers, this year, we are planning around 100 machines. So that is the plan. But the 3,000 is the number of machines which we are currently having in our 3,000 number of machines we use for production purposes in our plants is over 3,000 But these are the new CNC machines that we are selling to earlier this to make it only for ourselves. Now we started selling to customers outside. Okay.

46:43 So what kind of revenue or margins are we expecting from this? Margins are definitely better in the machine goods side. And we're going to tell about we've not included that revenue in the current 3,250 guidance that we have given. The railways will be on and also that will be add on. Okay. So do we project any major revenue like we are projecting major revenue coming from railways and defense. Do we see this as a major segment of revenue CNC machines or this is just It should become a major revenue. Now see, this is the first year we're doing it. So we are also testing the market, and we're also getting feedback for our equipment.

47:30 Earlier, we were using it internally, but now since we have customers outside, we are getting feedbacks and we are also upgrading whatever the expectation of the customer is and we're trying to exceed their expectations. And... But our target is to sell 100 machines this year. Okay. Any approx number that we are getting? Some sort of number if you could give? Revenue. Revenue. That will be helpful. On the cost, if I could, on the revenue side for the CNC machine. About between 35 to 40 crores. Okay.

48:19 And we have also there's a land which is for held for sale. So do we have customers and where will the money go for that land, the property in Haridwar? Oh,. There's an asset, 10 crores asset, two acre land. One and one and two. Total payment we receive is December 13. By December 30, we'll get the complete payment of that. Okay. So we'll be getting 10 crores that Yeah. Will be used for debt repayment. What are we going to use that for? Well, use it for work, but whatever repayment amount. That's how we do that.

49:12 Okay. Thank you. Thank you. Our next question comes from the line of Darshil Jawiri with Crown Capital. So just one more question in terms of land only. So we have another land bank also. Right? What are our plans with that, sir? We are talking to people, and there is an active discussion taking place, but we cannot say anything before things actually done.

49:58 So maybe we give you the news sooner than later. Okay. Okay. That's really great to know, sir. And sir, just out of this, sir, our hedging policy like because there's so much fluctuation in aluminum prices, do we, you know, plan to get... Like, at least do some future hedge? So at least the cash flow that we are, you know, you know, giving in that, at least some part can be saved. What are your thoughts on that, sir? The sense of commodity is not something that we are banking on. So our endeavor will be whatever price that we are paying to purchase our raw materials should get passed into the customer. So what we are working on not exactly hedging, but to cut down on any kind of lag that we currently have.

50:48 So last time we discussed it almost 75% of the customers are already converted to real time estimates. Again, the 25% are still to be onboarded. So we are working on it. So once that is done, so we'll probably eliminate the lag impact that we are reporting every quarter. You. Darshil, have you done with your question? Darshil, can you hear us? Yeah. I'm saying if the follow-up, I can ask for this question then. Yeah. Hello? Yes. Just the 75% is the value of the revenue or the number of customers? Because we had like a significant aluminum.

51:36 So I just wanted to ask about that. So if you look at the recent for a standalone number, the lag impact for the quarter is only 3.3 CR. Even because the last quarter, the number was quite big, I guess that is because 75% of the customer value is already converted. I guess we are working on the balance. So when that is done, I guess there is no separate hedging that will be required for us to do. Okay. That's great. That's it from my side. All the best. Thank you. Thank you. Thank you. As there are no further questions from the participant, I now hand the conference over to the management for the closing remarks. Thank you and over to you, Tee. So this quarter has been tough mainly because of the upgrades and the sorting costs that we had to incur, but we are very confident of what is happening.

52:31 Like I mentioned about the month of July, the revenue has gone up and gone up much further than whatever we declared the last quarter. And by the end of the year, we will be talking INR 3,250 crores in any case. And the profitability, also, you'll see the change there. And whatever costs, mainly the average cost that we are trying to recover maximum from our customers. Whatever we can, we will do that. Besides that, there are other costs which we've factored, which we've already filed a claim, and we are very confident that those will also start coming. In fact, some of the costs have some have just started coming in, and we are talking to each and every customer. And by next quarter, I think we'll be able to tell you as to how many have already agreed to whatever requests we have made.

53:24 This is primarily on the oil gas, the all the imported materials like carbides, etcetera, etcetera, and also the general efficient that segment and the labor cost, which went up, which is incumbent of Ariana, they jacked up almost 40%. That was a major impact. And so there are those discussions that going on, and we are confident that in this quarter, we should be able to settle most of them. The time there'll be it'll take us a little longer time with our overseas customers to convince them that because of the inflation, there is cost and the gas and the petrol cost or the oil costs have gone up. And we are on it, and we've already made request with them, and we hopefully, that will also get settled.

54:22 Thank you so much. We assure you that we'll do better the next time. And this quarter is also going to be challenged primarily because of the efforts. And for the next quarter onwards, we'll be very happy to see the result. Thank you so much, sir. Ladies and gentlemen, on behalf of Rico Auto Industries Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines.