Action Construction Equipment Ltd

NSE:ACE

Earnings Call Analysis

Robust Q3 FY24 Performance with Upgraded Guidance

In an earnings call, Action Construction Equipment Limited celebrated their best-ever quarterly performance, with Q3 FY24 revenues surging by 36% year-on-year to INR 753 crores and a 34% increase over the nine months to INR 2,076 crores. EBITDA jumped to INR 125.89 crores, a 98% yearly increase, while PBT and PAT expanded by 470 and 377 basis points to INR 300 crores and INR 229 crores, respectively. Gains were led by the Crane segment, which soared by 43% to INR 552 crores, and the Construction Equipment segment, which grew 45% to INR 90.35 crores. With India's economic prospects looking strong and the company's CapEx plans on track, including new crane manufacturing facilities expected to be fully operational by Q4, the company upgraded its guidance, expecting over 30% growth in the Crane segment, around 50% in Construction Equipment, and 15-20% in Metal Handling and Agri segments for the current year. This aligns with India's increased capital expenditures in infrastructure and manufacturing, supporting the company's optimistic outlook for sustainable growth.

Historic Performance and Q3 FY24 Standout Results

Action Construction Equipment Limited celebrated an exceptional quarter ending December 2023, witnessing their best financial results in company history. They recorded a significant 36% year-over-year growth in operational revenue, reaching INR 753 crores, alongside notable expansions in profitability margins. The EBITDA soared to INR 125.89 crores, achieving a margin of 16.22%, while Profit Before Tax (PBT) and Profit After Tax (PAT) margins stretched to 14.76% and 11.41%, respectively.

Nine-Month Financial Triumph

The nine-month period ending on December 31, 2023, highlighted continued success with operational revenue climbing by 34.34% to INR 2,076 crores. EBITDA nearly doubled, with a 98% surge year-over-year, and PAT showed an outstanding growth of 110%. The company experienced considerable margin enhancement across the board and saw an upward trend in key financial metrics, with sequential quarterly improvements as well.

Segment-Wise Accelerated Growth

The company's Crane segment strengthened its leading market position with a remarkable 43% revenue increase year-on-year. Growth was also pronounced in the Construction Equipment and Metal Handling segments, with revenues up by 45% and 9%, respectively. The Agri division, however, remained stable without significant growth, maintaining a consistent margin. This diversified portfolio of segments demonstrates the company's strategic adaptability and execution prowess.

Optimistic Revenue Growth and Margin Outlook

Looking forward, management has forecasted an optimistic outlook, upgrading their guidance to a 30%+ growth in the Crane segment for the current year, along with substantial growth in the Construction Equipment and other segments. They anticipate an overall company growth rate exceeding 32%, while expecting to retain the existing margins. This confidence stems from a strong performance trajectory and the robust demand environment projected for their products.

Strategic Harnessing of India's Growth

India's economic landscape appears promising with increased capital expenditures and infrastructure investments. The Interim Union Budget for 2024-2025 emphasizes an 11.1% increase in capital expenditure to INR 11.11 lakh crores, likely benefiting sectors relevant to Action Construction Equipment's operations. The company asserts readiness for the expected economic acceleration and is preparing to sustain growth, aligning with India's goal to become the third-largest global economy in the coming years.

Earnings Call Transcript 2024-Q3

[Operator]

Good evening, ladies and gentlemen. I'm Telshia, moderator for the conference call. Welcome to Action Construction Equipment Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note this conference is recorded.

I would now like to hand over the floor to Mr. Mohit Kumar from ICICI Securities Limited. Thank you, and over to you, sir.

[Mohit Kumar, analyst]

Thank you, Telshia. Good evening. On behalf of ICICI Securities, I would like to welcome you all for Q3 FY '24 Earnings Call of Action Construction Equipment.

To discuss the results today, we have with us Mr. Sorab Agarwal, Executive Director; Mr. Rajan Luthra, Chief Financial Officer; and Mr. Vyom Agarwal, President.

I will hand over the call to the management for his opening remarks, post which we will start Q&A. Over to you, sir.

[Sorab Agarwal, executive]

Yes. Good evening, everybody, and welcome to this earnings conference call for discussing the results for the quarter and 9 months ended December 31, '23. I take this opportunity to wish all of you a fabulous New Year, with good health and happiness.

Along with me in today's earnings con call, we have our CFO, Mr. Rajan Luthra, and our Head of Investor Relation, Mr. Vyom Agarwal. I hope that you all have had a chance and opportunity to look at the company's financial statements and the earnings presentation, which have been circulated and uploaded at the stock exchanges.

Over the last few years, guided by our focus on customer centricity, execution and agility in operations, we have been able to set our company on the course of a predictable and sustained high performance trajectory. And today, we have the opportunity to highlight our execution rigor through our robust performance.

To brief you on the financial performance of the third quarter of FY '24 on a stand-alone basis, the operational revenue grew by 36% on a year-on-year basis from INR 555 crores to INR 753 crores, which is our best ever quarterly revenue so far. The EBITDA of the company grew to INR 125.89 crores as against INR 67.67 crores in the corresponding quarter last year. The EBITDA margin expanded by 415 basis points to 16.22%. The PBT stood at 14.76% at INR 114.58 crores, and PAT margin was 11.41% at INR 88.52 crores. The PBT and PAT margins expanded 400 and 340 basis points, respectively, on a year-on-year basis.

I'm delighted to share that these are best quarterly revenues, EBITDA, PBT and PAT numbers in the history of our company.

For the 9 months ended FY '24, the operational revenue grew by 34.34% as compared to a similar period of FY '23, and stood at INR 2,076 crores, with EBITDA of INR 329 crores, which is 98% growth on a yearly basis. Our PBT grew by 105% to INR 300 crores. Our PAT stood at INR 229 crores, which grew by 110% on a yearly basis. The EBITDA margin expanded by 480 basis points to 15.44%. PBT expanded by 470 basis points to 14.09% and PAT margins expanded by 377 basis points to 10.77%.

Now let me give you a sequential perspective. For the third quarter FY '24, the operational revenues grew by 12% on a quarter-on-quarter basis. The PAT during the quarter increased by 20% on a quarter-on-quarter basis, and the PBT and EBITDA numbers registered a growth of approximately 19%, respectively, with further expansion in profit margins. The company sustained its growth momentum across all operating segments during the quarter gone by.

In the Crane segment, we fortified our dominant market leadership position and registered revenue growth of 43% year-on-year to INR 552 crores, with margins of INR 16.24 crores -- 16.24%, which expanded by 280 basis points. The Construction Equipment segment clocked revenue growth of 45% to INR 90.35 crores, with EBITDA expansion of 143 basis points, leading it to 11.7%. The Metal Handling segment grew by 9% and recording revenue of INR 48.3 crores, with margins at 16.3%, which expanded by 65 basis points. The Agri division was more or less flat and registered revenue of INR 62.4 crores, while maintaining margins at 3.85%.

Our consistent strong all-round performance is a testimony to our strategic clarity, strength of our brand, capabilities, execution skills, along with agility in running the business, and most importantly, the determination and passion of our talented, purpose-driven team members.

On the operational side, the global economy remains sluggish largely due to structural weakness in the Chinese economy. And in advanced economies, growth is set to slow to 1.2% in 2024 from 1.5% in 2023 as per World Bank estimates.

India remains a bright spot amidst slowing global economy with real GDP growing by an impressive 7.6% year-on-year in quarter 2 FY '24. This was driven by multidimensional and purposeful policy interventions by Government of India, with particular focus on infrastructure and manufacturing sector.

The growth momentum in India continues to be strong. We have taken global headwinds and higher interest rates in our stride. Consumer sentiment remains healthy and with improved capacity utilization across sectors for industries.

These factors are ideal for an uptick in private CapEx and will continue to aid our future growth. This makes us believe that the demand scenario for our products should be further strengthened and will continue to provide strong growth momentum for our company in the medium to long term.

As discussed during the last con call, our CapEx plans are on target and the new manufacturing facility for higher capacity slow cranes that is truck cranes, crawler cranes and rough terrain cranes, along with expanded capacities for pick and carry cranes, forklifts and tower cranes have been made partially operational in the previous quarter and shall become fully operational by end of Q4 of the current year.

Looking at the buoyancy in the Indian economy and keeping in mind our future expansion plans, the company has finalized to acquire additional 80 acres of land in close facility of our existing manufacturing sector as our existing land parcel of around 100 acres would have limited our growth prospects beyond INR 5,000 crores of revenue.

Looking ahead, we would like to upgrade our previous guidance and expect a growth of at least 30%-plus in Crane segment for the current year and reiterate our growth rates of around 50% in Construction Equipment segment and 15% to 20% growth in Metal Handling and Agri segments during the year. On the whole, we are now looking at growth in excess of 32%, with consolidation in margins at current levels for the company.

Further, our honorable finance minister has presented the Interim Union Budget, which sets out a realistic and inclusive vision for the nation. A mix of judicious and bold policy moves has placed India in a sweet spot, which bodes well for our company in the medium to long term.

The capital expenditure outlay has been stepped up by 11.1% to INR 11.11 lakh crores in '24-'25. Allocation towards capital expenditure and infrastructure layout will enhance opportunities for investment in sectors like railways, roads, urban infra, housing and defense.

With equal and focus on the manufacturing sector, our country is on the move and is moving fast to realize our honorable Prime Minister's vision of making India the third largest economy in the world within the next 5 years. I recall his famous words for all of us, [Foreign Language]. And we would like to assure all stakeholders that we are well prepared, future-ready and remain optimistic about the medium to long-term prospects of the company and believe that our building blocks are firmly in place for sustainable growth in all of our 4 business segments.

With this, I would like to open the call for question-and-answer session, please. Thank you.

[Operator]

[Operator Instructions] First question comes from [ CA Garvit Goyal from Nvest Analytics ].

[Unknown Analyst]

Am I audible?

[Sorab Agarwal, executive]

Yes, you're audible.

[Unknown Analyst]

Congrats for a good set of numbers.

[Sorab Agarwal, executive]

Yes. Thank you.

[Unknown Analyst]

My first question is on your guidance for FY '24, actually, and for next 3 to 4 years as well. So looking at first 9 month numbers, and you also mentioned 32% growth for FY '24. So it seems you are comfortable to achieve INR [ 800 ] crores kind of revenues in FY '24. So what are the underlying factors across our segments that give the management the confidence in reaching the ballpark number of INR 5,600 crores in next 3 to 4 years as per the earlier guide?

[Sorab Agarwal, executive]

The overall -- first of all, you have to understand that our company is operating in infrastructure and manufacturing space, apart from logistics and agri, but with the infrastructure and manufacturing being more prominent. And I think the entire country's focus and the government's focus is on creating assets, doing capital expenditure and focusing on increasing India's manufacturing progress.

So owing to all that, in the last -- in FY '21, we had thought that we were at INR 1,200 crores revenue approximately, that we will -- we plan to double it by FY '24. That is make it INR 2,400 crores. But by FY '23, we had already achieved INR 2,200 crores. So it was much faster than what we had anticipated.

And going forward, looking at the momentum, looking at the growth prospects looking at the overall scenario in the economy and, let's say, utilization levels of all companies manufacturing sector and government focus on infra, we feel that this momentum is here to stay.

And let's say, if you take FY '23, INR 2,200 crores is our base. So we should easily be able to double it to INR 4,400 crores by FY '26. So from FY '23 to FY '26, easily INR 4,400 crores. And going forward, yes, what we just said, that's also possible by FY '27, doing somewhere close to what INR 5,500 crores, INR 5,600 crores.

[Unknown Analyst]

Okay, sir. And sir, looking at like infra growth you mentioned. So how do you see our product market catering the different aspects of this expenditure? That is one. And considering that this CapEx growth is nonrecurring in nature. So do you see any kind of demand slowdown after 1.5 years or 2 years for our products?

[Sorab Agarwal, executive]

Yes, I really cannot comment on that. But like I said, let's see, if I talk about the core portfolio cranes, they are used both in infrastructure as well as manufacturing. So about 50%, 60% is towards infrastructure and construction, including real estate and balance is hardcore manufacturing. So both these things are growing. And the machines have a life depending on the machine between 8 years to 12 years, 13 years, depending on the usage and, let's say, the maintenance of the machine.

So -- but I think in our country, not for the next 3, 4, 5 years, I don't think we expect a slowdown. Rather, the whole world is focused in a way that India is one of the best investment opportunities with respect to growth. We also have a population which is consuming and it is pretty big in size. So I don't see and rather that's why we have about 100 acres industrial part where we are currently set up, and we have consumed about 80, 85 acres there with our recent expansions. And we realized that -- which has given us a capacity today of achieving revenue up to INR 4,000 crores. And we realized that the additional land, which was available, we could only go up to INR 5,000 crores.

So keeping in mind our future plans, that is why even we have decided to go ahead and buy about 80 acres more land parcel. So that land availability in chunk is not a hindrance to our future growth.

[Unknown Analyst]

Understood, sir. And sir, coming on the innovation side, like you mentioned the electric cranes. So what is the status of that product? And what are the development on this side? That is one. And secondly, what kind of demand outlook do you see in the upcoming quarter for this particular product?

[Sorab Agarwal, executive]

We have had a lot of interest in the last 8, 10 months ever since this machine has been available with us. Everything is ready. We are ready to go to the market. We have been ready for the last 3, 4 months, totally. Unfortunately, as mentioned in the earlier con call, we are still awaiting the CMVR, central motor vehicle rules, to be formulated for electric construction equipment, which has been pending at -- as of now, they are pending at Ministry of Road Transport and Highways and we expect that to go through any time.

So as soon as that happens, we can start delivery. Maybe it can happen in this quarter. That's what it appears to be. And apart from that, our other technical innovation, which is also first in India, the aerial work platforms, self-propelled aerial work platforms, 21-meter and 27-meters height. And going forward, obviously, we'll be adding more models to it, a 40, 44-meter model. So they are also -- we are ready to go to the market, and we expect to start deliveries by -- within February or early March.

[Unknown Analyst]

So this February and early March?

[Sorab Agarwal, executive]

Yes.

[Unknown Analyst]

So are these rules any kind of certification like what kind of these things -- like can you put some color...

[Sorab Agarwal, executive]

Yes, I've understood your question. See, any vehicle, which plies on the road, which travels on the road like a car, commercial vehicle, SUV. So they need to have a registration number, an RTO number. To get a registration number, you need to be certified as per CMVR rule, central motor vehicle rules, that your vehicle is safe and meets all the regulations for motor vehicles so that it can safely ply on the road.

So this -- the rules are CMVR rules and the certification is given by Automotive Research Institution of India, ARAI or ICAT, and there are other 3, 4 such agencies. So we are just waiting for the CMVR rules. As soon as we get it -- we have the draft rules and our machines totally comply with it.

So once the final rules are gazetted, we will just take a certification from ARAI after the inspection, and we can sell our machines so that they can also travel on road and they can have a registration number.

[Unknown Analyst]

Understood, sir. Understood. And one last question, then I'll join the queue. We have observed a significant improvement in our margin profile Q-on-Q, for the last, I think, 4 to 5 quarters. So could the management elaborate on the reasons behind this improvement? And furthermore, do you believe the current margin can be sustained as we scale towards the revenue target of, say, INR 5,500 crores in next 3 years?

[Sorab Agarwal, executive]

The main reason behind this is the company's hard work and obviously, operating leverage, which has played in our very strict and well monitored cost controls in place with respect to any type of cost that we incur. And so we have -- I think this year, we expect to finish with a 15.5%-plus EBITDA level on a whole year basis, which is definitely much better, 11.33% was the EBITDA level last year.

And going forward, I think it is sustainable. Obviously, there are some caveats. Unless and until there is some huge fluctuation in commodity price. I think that is the biggest risk that I see with respect to margins. But on the better side, I would say that with every about INR 400 crores, INR 500 crores increase of annual revenue, I think we can look at further expansion of around 75 to 100 basis points with respect to our margins owing to operating leverage.

So once from current years, let's say, even if we do a 32%, maybe upwards of INR 2,800 crore maybe touching close to INR 2,900 crores. Obviously, that will unfold by end of March, and going up to INR 5,000 crores and beyond. So I feel that with every INR 500-odd crores of additional revenue, our margins have -- still have a scope to expand further.

[Operator]

[Operator Instructions] Next comes from [ Nishan Parikh ], an Individual Investor.

[Unknown Attendee]

Congratulations on great set of numbers. So I wonder, how are we planning to foray into the defense sector? And what products are we looking over there?

[Sorab Agarwal, executive]

We have already started supplying to defense sectors in the last 3, 4 years and reasonably -- in a reasonably meaningful fashion with respect to our plans, especially in the last 1, 2 years. Currently, 2%, 2.5% of our revenue we are already garnering from the defense sector. And see if I talk of the types of machines, which we have -- which is -- the orders are under execution. The last big order -- order execution was about a 500 or 550 -- it was a MPT. It's a multipurpose factor. It was a 4x4, special purpose built with different type of attachments, which the army required, that we have executed in the last 1 year.

And currently, there are some special 8-ton forklifts about 60 numbers, which is under execution. There's special purpose build cranes for MR -- medium-range surface-to-air missile, MRSAM project and each of them costing about INR 70 lakhs, INR 80 lakhs, which is under execution. Then there are 60-ton truck-mounted crane, which is purpose built on the army 8x8 special vehicles, 8x8 or 6x6, I'm forgetting. So each one of them costing about INR 1.5 crores, INR 2 crores. These are used for the bigger missile handling like Agni, Prithvi, the heavier missiles, so they need a 60-ton crane at a particular radius.

Similarly, on a regular basis, we are about to receive an order of around 99 and another order of around 66, 2-ton, 3-ton forklifts. And very recently, army, which is a very big win for us that the requirement is more than 330 units of forklifts, which we had supplied with similar model to them 6, 7 years back, 7, 8 years back.

So about 330 units of this forklift and this has come under proprietary. So that means we are the only bidders and obviously, inflation adjusted, we can quote over the last 7, 8 years price and the army will buy from us. So this is a repeat business of something we did 6, 7 years back, 7, 8 years back.

And as of now, one of the biggest requirements where we are working with the army is for 1,800 numbers of -- it is called RTFLT, rough terrain forklift. It's really not an RTFLT. They call it that. It is special-purpose telehandler wherein our company and one of the other bigger manufacturers in the country, 2 of us participated on an NCNC basis, no cost, no commitment. We made the prototype machines over the last one year. And these machines were fielded in the month of November, December.

And I'm very happy to tell you that we have been technically qualified after all the trials that happened in Leh, Ladakh, very rigorous trials and they also open up the -- strip down the machine, put it together, do everything apart from checking the endurance in minus 20, minus 30 degrees.

So we are very hopeful that over the next 6 months, so this will be our biggest order in terms of value from the army which we are expecting, which can be close to anywhere between -- because plus/minus INR 700 crores.

[Unknown Attendee]

All right. So this -- so are -- so this army orders will be double digit as a percent of revenue going ahead? I mean around 8%, 9% to 10%, you can say?

[Sorab Agarwal, executive]

It is also increasing very fast if you see. So looking at that, I think what we are targeting is upwards of 5% to be conservative. But we are working on most of the special requirements which the army has, which they were earlier importing or those requirements are not fulfilled. So it can be anybody's guess, but I would peg it at 5% going forward over the next 2, 3 years.

[Unknown Attendee]

Great, sir. Sir, last question, are we seeing any inorganic opportunity going ahead?

[Sorab Agarwal, executive]

Sorry. Sorry, sorry, I'll just finish. I just forgot something. Apart from that, we are currently executing rough terrain cranes special order, these machine costing between INR 1.5 crores to INR 2.5 crores for the Indian navy. That is under execution. As a matter of fact, 510 of these cranes will be supplied within this quarter itself.

[Unknown Attendee]

To the Navy as well now?

[Sorab Agarwal, executive]

Yes, navy, air force, army, all 3, apart from BRDO plus, plus, plus, the base workshop, everywhere.

[Unknown Attendee]

Great, sir. Great. Okay. And my last question is regarding, are we exploring any inorganic opportunities going ahead?

[Sorab Agarwal, executive]

Yes. We were looking at -- we have 2 small ones. We have finished that was 1 year back, 1.5 years back. We discussed a lot on the past con call. You're looking at one more, but I don't think it is going to happen because we are not able to meet the price expectations of the seller. But going forward, we are looking for inorganic growth within the country. And we feel that we'll have one very big opportunity coming soon over the next 6 months, 1 year, I really can't say it.

So which will be a game changer for our company, especially in the crane segment. if something like that happens, and then we have indications that there's a possibility. And apart from that, we are now also looking at some acquisitions in maybe Mainland Europe.

[Operator]

Next question comes from Amol Rao from Kitara Capital Private Limited.

[Amol Rao, analyst]

Congratulations. It's a super performance once again and you've made a habit of delivering great numbers. Sir, just taking you up on the quarter, from last quarter, you haven't mentioned that the slight pileup of inventory because of the festival season, which has been cleared up, that has been cleared up and that situation hasn't recurred, right?

[Sorab Agarwal, executive]

Yes. As a matter of fact, we were short of machines eventually by end of December.

[Amol Rao, analyst]

Okay. That's a good problem to have.

[Sorab Agarwal, executive]

That is to say that we could have done even more revenue. And apart from that, to be very frank with you. I think it's been about a year, a little more than a year. We had KPMG as our statutory auditors. And now we have E&Y as our internal auditors last 6 months. So these guys have also changed the process of reporting sales and made it maybe the strictest possible in the country. I do not know only for us.

So they have also been instrumental for reducing our sales that we report for the last 2, 3 quarters. But nevertheless, the inventory is in control and we expect to bring it down to a level which we had planned earlier. I think last year, we finished at 99 days. Hopefully, we should be lower than that by end of this year. Maybe our target is about 90 days. And...

[Amol Rao, analyst]

Which is the industry norm.

[Sorab Agarwal, executive]

Yes. And our receivable days, end of last year were about 26 days. So we are already currently at about 21 days, and we are happy about it that we were able to do a good job there. And creditors it floats between plus minus 90 days, 85 to 90 days. So we are very much on target.

[Amol Rao, analyst]

Excellent, sir. Sir, one observation about this quarter, sir, our material handling business, we had our CapEx, which is -- which we have been doing for the last 6, 8 months. Sir, is this jump in material handling dispatches because of this CapEx, some capacity has come in....

[Sorab Agarwal, executive]

You're talking of the...

[Amol Rao, analyst]

Dispatches, sir.

[Sorab Agarwal, executive]

Dispatches of...

[Amol Rao, analyst]

Sir, even the forklift business was supposed to get some additional capacity...

[Sorab Agarwal, executive]

Yes, I've understood your question. Definitely, it is adding to that because we've made it operational -- partially operational, this CapEx in the last quarter. So that also helped us in achieving better numbers. And our crane dispatches have definitely increased because of that. And further by end of March, it will be further streamlined when they're fully commissioned. And to be very frank with you, the last leg, which will happen by June end, that will, I think, now eventually make us capable for 1,200 cranes in a month.

Currently, we are at 900 to 1,000. So -- and for material handling, because we were setting up a new plant for some other products. So the capacities were to get unlocked there. So that has also happened. And I'm sure, going forward, even metal handling numbers, you'll see much better growth than 15%, 20% on a yearly basis.

[Amol Rao, analyst]

All right. And sir, you had also -- you also alluded to some clarity coming on the emission norm deadline. Has that clarify emerged? Or is it still not clear whether the government is going to stick to the April...

[Sorab Agarwal, executive]

No, the draft notification has already come through. It happened, I think, in end of December, and it was to be gazetted end of January. I'm sure it would have been gazetted. And as per that, the new emission norms for construction equipment, that is CEV V from CEV IV, will become applicable now from -- it has been delayed by 9 months. So from 1st of April, it has been shifted to 1st of January '25.

[Amol Rao, analyst]

Excellent. Excellent. And wish you all the best. And sir, last -- I'm sorry, one question if I can squeeze in.

[Operator]

[Operator Instructions] Next question comes from [indiscernible] Enterprises.

[Unknown Analyst]

Hello. One moment.

[Sorab Agarwal, executive]

Yes. Please go ahead.

[Unknown Analyst]

Yes, one second, please. Congratulations for an excellent quarter. I have a few questions for you. My first question is in the previous conference call, you indicated that we'll be selling the large crane, the crawler crane, the all-terrain crane that we are entering into and EBITDA margins of 10% plus. Our overall EBITDA margins are at least 15% plus. So if we are going to sell this large cranes and EBITDA margins of 10% plus. Does it mean that they will be margin dilutive. Does it mean that they will be margin dilutive and not margin accretive. That is my first question.

[Sorab Agarwal, executive]

What is your second question? Should I answer the first question? Okay. I'll do that. Sir, the crawler crane and truck-mounted cranes we are already doing currently...

[Unknown Analyst]

Okay. My second question. What about my first question?

[Sorab Agarwal, executive]

Yes, that's what I'm answering now. The crawler cranes and truck crane business currently is around 10% margin. And we've expanded our capacities on the capability of 7, 8 cranes per month, now we can do about 30 to 40 cranes in a month. which will become totally functional in this year. And I'm sure with -- from doing 5, 6 cranes in a month, once we go to 20, 30 cranes in a month or, let's say, 200, 300 cranes on an annual basis, 400 cranes. The operating leverage will again kick in here like you've seen in all other businesses, whether it was the backhoe loader or whether it is the Pick-n-Carry cranes or the tower cranes. And the margins will fall finally in sync with the company at about 15%, 16%.

Apart from that, the Chinese have been dumping these cranes for the last 5, 6 years at ridiculous prices. And that is the reason that the margins here are at about 10%. So -- but obviously, they cannot continue to do so going forward, only for the reason because they are suffering very much in their own countries and their other markets because of the slowdown within China, and especially in the construction and real estate sector. So all that will play very well for us. So hopefully, I believe that in the next 1, 1.5 years, our margins should stabilize along with the company. That's my belief.

And apart from that, there is something else, which I really cannot disclose to you, so we should be in a position in making some really good announcement over the next 1 to 2 months, which will change the game for bigger cranes for our company and for our country as well, because right now, our country has become dependent on the Chinese machines in the last 4, 5, 6 years for the bigger cranes. I think that will start to change in the next year. And we would lead that change.

So I really can't disclose more than that. So maybe in the next 1 to 2 months, we'll come out with a very good announcement. And this announcement will also help us improving our margins. So that's all I can tell you at the current juncture.

[Unknown Analyst]

Okay. My second question is the excellent performance of this quarter was almost completely driven by crane. I'm talking quarter-on-quarter, not year-on-year. Now quarter-on-quarter, what went wrong? Firstly, what went wrong with the construction equipment segment? Why was there a de-growth in this particular quarter compared to the previous quarter? And secondly, what specific sector are you taking to increase the sales growth of materials handling and agri equipment segment, specifics is what I'm looking for.

[Sorab Agarwal, executive]

Okay. So first to answer your question on backhoe. Sir, I don't think anything went wrong because if you look on a year-on-year basis, we were able to grow around 45%. So that in the same time last year and this December, we grew 45%. Yes, on a quarter-on-quarter basis, there were 15%, 16% dip in the revenue. That was primarily because most of the backhaul orders are sold in the retail market and all the retail buyers and hirers, they are very conscious that they do not want to buy the machines in December. They want to buy them in January. So that was one of the reasons that quarter-on-quarter basis, we witnessed a small dip. But if you look at the year-on-year basis, I think we are very much on track. We wanted -- we forecasted about 40%, 50% growth in this segment, and we are very much on track. And I think when the year finishes, we would be 50%-plus again in this segment.

Metal handling, we had projected 15% to 20%. Agri, we had projected 50% to 20%, and we are very much on track. So if you look at the 9-month growth for metal handling, we have grown by about 14%, 15% already. And if you look at agri, we have grown about 18%. So I fail to understand from where you get the idea that it is not growing.

[Operator]

Next question comes from [ Nihar Shah from Crown Capital ].

[Unknown Analyst]

Yes, sir. On the overall basis, I understand that we have 32% growth expected unless your introductory commentary where you even guided for crane and construction revenue growth. Can you just give me that number, please?

[Sorab Agarwal, executive]

Yes. Let me pull out that paper. The overall basis, we should be growing maybe slightly more than 32% in this year, but let's say 32%. And crane would be 30%. Construction equipment would be 50%. And both material handling and agri would be 15% to 20%.

[Unknown Analyst]

Okay. Okay, sir. And going forward, do you expect any one particular segment to be more concentrated on?

[Sorab Agarwal, executive]

Traditionally, we started as a crane company, and we had the first mover advantage. So even till date crane is our biggest segment. So -- and the country is growing, the market is growing, the economy is growing, so it is definitely a little biased towards the cranes. But we feel that the growth -- yearly growth in our construction equipment segment would generally be much faster than crane segment. So even if you look at the 9 months in the current year, I think the crane has grown by 33% so far. But construction equipment has grown by 72%.

But the overall contribution of cranes to our revenue is much more at about 70%-plus as compared to 12% of construction equipment. But the growth rate of construction equipment will be faster than crane because there, our base is already much bigger, and we are already at about 63%, 64% market share. So -- because we are the market leaders and we are growing with the market. But in construction equipment, we have an opportunity to even take up some market share from competition.

[Unknown Analyst]

Okay. Okay, sir. And just to just reconfirm like by FY '26, we are hoping to do about INR 4,400 crores in revenue?

[Sorab Agarwal, executive]

FY '26, INR 4,400 crores. And if everything goes well, FY '27, plus/minus about INR 5,500 crores.

[Operator]

[Operator Instructions] Next question comes from Suhrid Deorah from Paladin Capital.

[Suhrid Deorah, analyst]

Congrats on another excellent quarter. I just have 2 clarification questions. I didn't catch, you mentioned some INR 700 crore order from the army. What is this for?

[Sorab Agarwal, executive]

It's a special-purpose machine. It's called RTFLT, rough terrain forklift. But actually, the product is called a telehandler. So army had this requirement of a very special, very compact 1.5, 2 tons lifting capacity, each machine costing somewhere between average of about INR 35 lakhs plus taxes about INR 40 lakhs, 45 lakhs.

For -- and they wanted 1,800 numbers because this is a special purpose built, the specifications, the height, the gradient capability and the overall dimensions. So -- and this product was not available off the shelf. So it was especially evolved for this requirement by us. And it was fielded in the army for trial. These trials are called NCNC, no cost, no commitment trials. And we have been technically -- everything has gone through. The technical approval is more or less happened. I mean the paperwork is happening. And over the next 3 to 4 months, there will be -- already the bid and everything is in place.

So we are very confident it will commercially go through because we are the only Indian bidder, and our competition is with a foreign company. So we are very hopeful it will go through. And so that is about 1,800 units and average price around INR 35 crores, you can very well multiply and calculate.

[Suhrid Deorah, analyst]

And this will be -- this one order will be a onetime order? This is something that will be repetitive?

[Sorab Agarwal, executive]

Just like forklifts, normal forklifts, just like other machines if the army repeats, I'm sure this is one of those products because this is going to be the future of main metal handling in army bases camps, apart from underground ammunition dumps.

[Suhrid Deorah, analyst]

Okay. Understood. So we executed what period of time?

[Sorab Agarwal, executive]

Can you just repeat your question, please? Pardon me, I could not understand...

[Suhrid Deorah, analyst]

This is -- these orders is to be delivered over what period of time?

[Sorab Agarwal, executive]

I think we'll get 2 to 3 years. That is what -- I don't remember the exact bid documents. But I think there's 2 to 3 years. So if it goes through over the next 3 to, let's say, 3 to 6 months, let's take 6 months. So let's say, by July, August or whatever. So I'm sure we can start execution by Q3.

[Suhrid Deorah, analyst]

Okay. Got it. And my second question was referring to a comment you had made on a previous call. You were earlier talking about some international deal or either an M&A transaction or some sort of agreement where there will be contract manufacturing or something of that nature. Is there any progress on that?

[Sorab Agarwal, executive]

Yes. In the recent past, we have started supplying backhoe loaders to an American company, North American company, which is selling it in the South American continent, and we are doing contract manufacturing for them for backhoe loaders. It's basically OEM. They have picked up one of our standard export models, and we have configured it for them.

Something similar has already initiated in Turkey, where we have just supplied the first units now. So obviously, it will totally go through over the next 3, 4 months. But again, in Turkey, we have also started doing this OEM or let's say, white labeling for tractor segment. And so we've already supplied some units, and that too, they were supplied in CKD form. So I think this has started. So this is some sort of, let's say, contract manufacturing or OEM manufacturing or white labeling.

But apart from this, more importantly, I would say that we are about to tie up with one of the world players for a product category to be made in India for the Indian market and also for the global market, which I think in the product segment can be a game changer. Unfortunately, I cannot say more than that. If everything goes well, we should be in a position to announce this maybe as early as March because most of everything is already negotiated and done with them.

[Operator]

Next question comes from [ Punit Jhaveri ], an Individual Investor.

[Unknown Attendee]

Congrats on a very good set of numbers. Just wanted to check on an update on the order with the Republic of Ghana. What has been the status? And is there any update on that?

[Sorab Agarwal, executive]

Yes. We were very hopeful as the indication given to us that the money would have come through in December, January. Our agreements, they are in place, but unfortunately, Ghana has defaulted on some of the payment obligations. And their IMF loan has come through about, I think, $1.8 billion first tranche is already released. I think it will take another 2, 3, 4 months before the system normalizes, and they are able to -- but we are on priority #1 with respect to this project from India, even in the Indian Embassy in Ghana. That's what I understand.

So I mean, we are just waiting for the payments to come through because we do not or cannot start any execution in Africa without payment certainty. Some companies like JMC and Afcon, their money is stuck in Africa.

[Unknown Attendee]

Understood. And this is a little broader question on material handling and agri. Specifically, we've seen construction equipment do very well over the past 2 years. I think the way that you've guided quarter-on-quarter that construction equipment has come back very well. Is there any sir, just -- can you give us some granular details on material handling? What do you see in the next few quarters? Or where do you see it going -- and do you see this growth rate to come up from [ 15%, 20% ] to a higher rate, which we've seen in cranes and construction equipment at a much higher rate?

[Sorab Agarwal, executive]

Yes. I think it would start to happen in the next year from Q2 onwards but especially Q4 onwards next year, because we are working at totally upgrading our range of equipment -- metal handling equipment to world-class levels with respect to every aspect of the machine. So this -- and these products, we expect to launch Q3 latest by Q4. Our work has just started on that. So I think that will further help us garner more market share and obviously take advantage of increasing market.

But till such time, yes, we are very much focused on further strengthening our infrastructure with respect to that. The sales are not increasing at the pace we would have wanted them to be. But yes, in saying that, also, I would say that we have been projecting 15%, 20%, and we've been getting that. But yes, just -- believe me, I'm more dissatisfied than what you are.

[Operator]

Next question comes from Arushi Shah from Sushil Financial Services Private Limited.

[Arushi Shah, analyst]

I have 2 questions. In our agricultural segment, we've now seen a dip in the volume. So is that -- overall, is that close to come up, like the volume degrowth turning into a growth trajectory. And also, there has been a rise in the price realization. So how...

[Sorab Agarwal, executive]

Ma'am, if you can repeat your question again and be a little louder, something is not right with your line.

[Arushi Shah, analyst]

Better now?

[Sorab Agarwal, executive]

I think so, yes.

[Arushi Shah, analyst]

Yes. So we've seen a degrowth in the agricultural equipment volume. So when is that going to turn around and turn into a growth sector. And also have we taken a price increase for the agricultural equipment? And my second question is what [indiscernible] give some color on that...

[Sorab Agarwal, executive]

Let me first answer your first question. Let me first answer your first question because the second question, in any case, I was not able to make out. We will discuss it after first.

There is really no degrowth in terms of revenue from the agri sector. Yes, the numbers have been a little down because I think in the last quarter, we were focused more on, let's say, last 2 quarters on the bigger horsepower tractors. So that was the reason. So overall revenue growth has been there. But maybe the number growth might seem to be muted or on a little lower side. And price increase, obviously, we -- because we are a small player in the agri or the tractor segment as compared to all other people. So we follow suit with respect to other big players. And time and again, alongside we do have price increase in the same thing. And what was the second question?

[Arushi Shah, analyst]

Can you give me an outline of your CapEx plans for like short and medium term?

[Sorab Agarwal, executive]

Yes. In the current year, I think we'll be doing close to about INR 100 crores plus/minus. And next year, I would say, with respect to expansions further, it will be close to INR 50 crores, INR 60 crores and apart from some maintenance CapEx. So maybe totally, it can go up to. Luthrasab, totally next year, maybe INR 800 crores again?

[Rajan Luthra, executive]

Excluding land, is about [ 200 ], this is excluding land.

[Sorab Agarwal, executive]

Yes. And apart from that, I just mentioned that we have finalized to take over a big chunk of land. So that would be close to about INR 160 crores, INR 170 crores of expenditure, which will -- some part of it will go through within this year and most of it in the next year. That is separate because that is for future expansion.

[Arushi Shah, analyst]

Okay. And if I could just squeeze on the macro question. Like if at all, what are the headwinds we see for our business? I'm sure we're very well-versed with the infrastructure policy of the government. But what are the basic headwinds, if at all? And how are we positioned?

[Sorab Agarwal, executive]

I really do not see any much headwinds at the current juncture. But obviously, there are always -- there's always a slip between the cup and the lip. Maybe if Vyom or Luthrasab, would want to answer this, if something comes to your mind?

[Vyom Agarwal, executive]

Yes, sir, I think the major segment could be the commodity inflation. Something that we had seen post-COVID, there was a huge rise in the commodity prices, specifically steel...

[Sorab Agarwal, executive]

But Vyom, luckily, if there is huge fluctuation with a lag of 2, 3 months, we are generally able to pass it on to the customers, right?

[Vyom Agarwal, executive]

Yes, of course. We are taking...

[Sorab Agarwal, executive]

[indiscernible] What other things comes to your mind, Luthrasab?

[Rajan Luthra, executive]

I don't think so. Right now, geopolitical situation I don't think so it is moving in an adverse direction, but that is the only thing what we can think of. Otherwise...

[Sorab Agarwal, executive]

That can affect our export -- future export targets a little bit, especially because we've seen a little slowdown in export only in the last quarter, especially because of logistics, because logistic costs increased 2, 3 times and certain orders were delayed for execution. So yes, geopolitical things, especially happening at the seas apart from a little slowdown here and there in the world can affect our export plans where we want to go to 10% and then 15%, so that is a small risk. Yes.

[Arushi Shah, analyst]

And our dividend policy continues to remain as planned?

[Sorab Agarwal, executive]

Yes. And I'm sure with the company growing further and earlier, we were distributing between 5% to 10% of our net profit. So going forward, we will go, I think, from 10% to maybe even higher up to 15%, 20% of our profits.

[Arushi Shah, analyst]

Best of luck, and congratulations for the numbers.

[Operator]

[Operator Instructions] Next question comes from [ Ashwin D'Souza ], an Individual Investor.

[Unknown Attendee]

Are you guys able to hear me?

[Sorab Agarwal, executive]

Yes, yes. Loud and clear.

[Unknown Attendee]

So I just want to inquire about the land parcel that we are trying to acquire. Like is it already done? Or is there some expected time frame by which it will be confirmed?

[Sorab Agarwal, executive]

See, the agreements are already done. The advances have been paid, and the final payments and, let's say, the transfer of title, deeds and all, that is expected to go through some part of it within March this year and the transaction to be finished by May of this year.

[Unknown Attendee]

Okay. My second question is more related to maybe new products, okay? I'm sorry if somebody has already asked this, but I just wanted to understand, are there any new segments, okay, I mean the infrastructure profile of the country is changing, okay, where new things are been done, are we looking at maybe creating new products from our perspective to address to such opportunities?

[Sorab Agarwal, executive]

Yes. Definitely, we are working on that. And in the same breath, I would say that our electric crane, which we introduced is a totally new segment in terms of nobody -- it's like a blue sky territory. So that hopefully should get commercialized with this quarter. Aerial work platforms, we will be the first in India and always have that first-mover advantage. So that, again, is getting commercialized in this quarter.

Apart from that, another new product, telehandler that, again, we expect to commercialize within this quarter. Rough terrain cranes, right now, we have started with a 45-tonner and a 75-tonner. So obviously, we started delivering them in this quarter, especially to the Indian navy, like I mentioned. And going forward, we will also have a 20, 25-ton and a 30-ton model to further -- and a 50, 55-ton to augment the entire range. And as of now, practically nobody is doing that in India, we have to depend on imports.

We are also working on another new project -- product called the reach stacker which is used for container handling, loaded container handling, 40, 45 tons weight up to 4, 5 higher. So with 0 import, export increasing, especially, I would say, going forward exports increasing. So the logistics and the container stations, already they use such machines. They are big machines each costing about INR 2.5 crores, INR 3 crores. So we are right now working at evolving the technology for the same, and it has already been done.

So hopefully, the prototyping will be done over the next 1 year and then maybe 1, 1.5 years down the line, that will come up. And I'm sure there are some more products in every category that we do. I'll have to just quickly reset my mind if I missed something, but I'm sure there are 1 or 2 things I would have missed. So -- but if you talk about segment, I would say aerial work platform and telehandlers and rough-terrain cranes and reach stacker they are totally different segments in which we were not present.

[Unknown Attendee]

Yes. And congratulations to the management and the entire company on the excellent performance that you guys have been delivering, okay? Keep it up for the future.

[Sorab Agarwal, executive]

Thank you.

[Operator]

Next question comes from [ Sarika K ], an Individual Investor.

[Unknown Attendee]

If you can share the volume growth on the crane segment specifically?

[Sorab Agarwal, executive]

You want to, what do you want from us? Earnings growth?

[Unknown Attendee]

Volume.

[Sorab Agarwal, executive]

I've not been able to understand your question. So sorry.

[Unknown Attendee]

Okay. What has been the share of the volume growth in 43 -- like the 43% has been the overall growth under crane segment for this quarter. How much has been on account of volume?

[Sorab Agarwal, executive]

On account of volume. Are you talking with respect to only the crane segment?

[Unknown Attendee]

Yes.

[Sorab Agarwal, executive]

Do we have an answer to that, Vyom? With respect to your earnings presentation, I'm sure you give the crane numbers. I don't have the earning presentations in front of me, unfortunately. Vyom, you are there?

[Vyom Agarwal, executive]

Yes, sir, I'll just give the volume numbers.

[Sorab Agarwal, executive]

Just give me the volume numbers.

[Vyom Agarwal, executive]

Yes. So cranes, 9 monthly volume numbers have grown from 4,627.

[Sorab Agarwal, executive]

No, not 9 monthly. She's talking about the 45% growth in crane. So we are talking about December '22. No, sorry. Not, December specifically, what am I saying. December '22 number for cranes, do you have it on your earnings presentation?

[Vyom Agarwal, executive]

No, we have given the 9 months on the presentation, but I will just fetch them.

[Sorab Agarwal, executive]

9 months. So let's answer on the 9 months, sorry. What are the crane numbers...

[Vyom Agarwal, executive]

On a 9 monthly basis, compared to last year, the number was 4,627 and currently 9 months FY '24 number is 6,135.

[Sorab Agarwal, executive]

So this seems to be I think -- yes.

[Vyom Agarwal, executive]

For the construction equipment, the number has grown from...

[Sorab Agarwal, executive]

Let's stick to this, 1,508 divide by 4,627. So we have seen 33% increase in numbers. And same is the growth with respect to revenue, more or less similar. Maybe there is a 1% difference in the revenue part.

[Unknown Attendee]

Okay. I believe majority actually the jump, which we actually have captured has been on account of the higher range cranes, which have been introduced of late and the pickup which we have actually...

[Sorab Agarwal, executive]

No, no. What I'm saying is for cranes of all types for us, in the first 9 months, we have sold 32.5% more in numbers. And in revenue terms, it is 33.15%. So more or less, they correlate. So that means either whether because of product mix or whether because of pricing, the number of cranes sold is more or less equal to the number of the revenue that has increased.

[Unknown Attendee]

Okay. So probably -- okay, so the new cranes, which we actually aspire to introduce, what's been the impact of those cranes on the overall revenue that...

[Sorab Agarwal, executive]

Yes, they will help us increase the average price realization and eventually...

[Unknown Attendee]

So for that reason, I actually wanted to understand how much has been on account of volume in the third quarter? And how much further we can go from here on?

[Sorab Agarwal, executive]

I think we will do a separate call. We can organize with Mr. Luthra, Mr. Vyom, because we have limited time on this call to start calculating data right now.

[Unknown Attendee]

No, issues. No issues. Secondly, coming to the capacity utilization under construction equipment segment, where do you stand now?

[Sorab Agarwal, executive]

We are currently at about 50% to 60%. We can do about 2,400 units of these machines annually. And currently, we are at 50% to 60% utilization.

[Unknown Attendee]

Right. And when we aspire for an acquisition, what would be the size? Is it going to be closer to INR 1,000 crores?

[Sorab Agarwal, executive]

See, there are 2, like I said, one would be a much smaller one, which we are looking at in Europe. We are also looking at some -- there's a consultant in place and we are looking at some different targets, talking to a lot of companies. So that we have a base in Europe, and we can make some machines for the European market in India and sell them through this company, one is that. And second, I really can't put a number to INR 1,000 crores, but I think it is going to be a big acquisition, the one in India, if at all it happens.

[Operator]

That was the last question for the day. Now I hand over the floor to management for closing comments.

[Sorab Agarwal, executive]

I think a lot of interesting questions today. And a lot of you congratulated us for our numbers. And I hope and pray that the country keeps on doing well. We also fall in track like we already are and keep on performing the way we have been doing in the past, in fact, in the last 2, 3 years. And I would say that our economy right now is very buoyant, especially owing to manufacturing and infrastructure sector and the focus is -- and our company is very well placed to capitalize on the growth and the buoyancy, which is there currently in the market. And we are expecting at least a 32% revenue growth in the current year, with around a 15.5% plus EBITDA margin on a whole year basis.

Our capacities have increased and will be more or less fully commissioned by end of March, which will help us further grow our business. Our defense business has been reasonably robust, and the orders that we got in the past, some of them have been executed, balance are under execution. New, bigger orders are in pipeline for the next year. I believe that our short-term and medium-term prospects are very well in place, and we are very confident for the long-term prospects of the company.

And as conveyed earlier, between FY '23 and FY '26, we've again, keeping FY '23 as base of INR 2,200 crores. I mean, we really expect to double ourselves by FY '26 to 4,400 crores. and going forward to up to INR 5,500 crores in FY '27.

With that, I would like to thank you all for joining the call, and thanks a lot. Bye-bye.

[Rajan Luthra, executive]

Thank you. Thank you, everybody.

[Operator]

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [ Door Seva's ] conference call service. You may disconnect your lines now. Thank you, and have a good day.