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Good evening, ladies and gentlemen. Thank you for standing by. This is Nirav, the moderator for your call today. Welcome to the post results conference call of AIA Engineering Limited. [Operator Instructions]. Please note that this conference is being recorded.
I would now like to turn the conference over to the AIA Engineering management team. Please go ahead, sir.
Yes. Thank you, Nirav. Good evening to all of you, and thank you for joining our call. This is Kunal. We also have Sanjay Bhai on the call with us. As always, I'll get into a summary for the quarter, and we can quickly get on to question and answers thereafter.
Finally, this year, over 9 months, we've grown materially from 9 months in the last -- in the previous period. We've seen about -- we've seen a few years where we had different types of headwinds, different headwinds of different natures and which there was some amount of growth-related question.
So I'm happy to report from about 187,000 tonnes from 9 months previous period, we've done 217,000 tonnes and about 30,000 tonnes more for the -- for the 9-month period with about 71,500 tonnes for the quarter. And for the whole year, we should be between 295,000 and 300,000 tonnes, hopefully, crossing the 300,000 mark, finally. So we are happy to report that.
That sales of 71,500 tonnes translates into sales of about INR 1,200 crores -- INR 1,209 crores. And an EBITDA of 39.42%, which is -- this quarter has been very interesting -- like last 3, 4 years for us have been every single variable, every single assumption got tested. There are several things and several wheels in motion. Thankfully, we are in a business where the customer depends on us for keeping his wheels in motion, right? Our product feeds into our supply chain where the end user industry, which is cement and mining. Thankfully, we have been humming in many cases, growing, and our product becomes an important replacement part of their supply chain, of their consumption, of their production.
So thankfully, from a growth standpoint, from a consumption standpoint, while that continues, we saw a lot of changes in terms of raw material, currency, freight costs, right, availability of containers. So finally, it looks like that a lot of those cost pressures are heading away.
So when I look at EBITDA of 39.42% and of course, there were treasury income in that of about INR 40 crores -- INR 40 crores, INR 42 crores, the rest of that being operating in nature. But there's about 5% in treasury gains end of December the rupee was at 82-plus levels. And a lot of our invoicing for that quarter was back to a local lower amount, right? The rupee was weakening in that small period rapidly. So there's an other income, there's an operating other income related to currency.
We also had a very favorable product mix just in terms of this period. So about a 2%, 3% margin that got added on that account. So those 2 put together is about 7% to 8%. There is a margin that's sitting on currency and product mix. On the cost side, we've seen raw materials correct from between 8% and 12%. So there is some ease off.
My -- most of our contracts now have a price pass-through mechanism. So pricing this quarter would reflect the raw material costs in the previous quarter, right? So when the pricing kept going up, there was a pain lag. And now there is -- there will be a small period where the price reduction will follow by a lag. So there is 3% to 4% of that setting, which is all costs related to raw material and freight costs. Some amount of freight cost has also started coming in.
So from a margin standpoint, of course, the next question will be what's our guidance on margin going forward. I think we'll continue with our policy. I think we look at our business over many decades, at least many years in front of us. And when you are building such a franchise, it's very futile for us internally to look at every quarter after others. So while we continue maintaining a 20%, 22% operating EBITDA margin, it is more directional, more indicative than the quarters, especially last few quarters, we have done better than that.
And there have been quarters in the past even worse than that. But I think that continues to remain. I think in the next quarter, we can share a little more sharpened margin guidance for the next year. But for now, the volatility continues. While some raw material prices have reduced, we've seen a bounce back in those rates. So the amount of volatility that we are setting on is unchartered. And in that case, trying to predict variables and then give a margin continues to be a challenge for us.
I think all we are trying to say is that over the last 3, 4 years, our business has demonstrated the ability to work with the clients, work with customers and progressively be able to pass through most costs on the way up. Now obviously, with a fair and square basis, it will be adjusted down. And that's what makes us proud that there's three other franchise we've built where we are not dependent on the wins of how the market moves.
Okay. Moving forward, so EBITDA at INR 483 crores, of course, highest ever EBITDA -- absolute EBITDA margin -- EBITDA amount, absolute value ever. Profit before tax of INR 453 crores and profit after tax of INR 350 crores, which has been a record year as far as profit is concerned -- record quarter. And so 9-month profit remains at INR 787 crores, which is up from INR 425 crores, 9 months last year.
Our export benefits, which is the RoDTEP scheme, Remission of Duties and Taxes, that is at about INR 16.90 crores, largely in line with the previous 2 quarters.
Treasury becomes a little higher this quarter compared to previous is INR 42 crores. And there's a large foreign exchange gain of INR 75 crores. Some part of this foreign exchange also related to cross currency, not just rupee-dollar, but we do -- we have some exposure in other cross-currencies. And this largely reflects a dollar weakening, not just against the Indian rupee, but also cross currencies that we have an exposure to.
Our working capital continues at par. Raw material is at INR 138 crores at 30 days working capital. All our stock, WIP and finished goods is at about INR 1,000 crores -- INR 991 crores, to be precise. And receivables is about 63 days, INR 853 crores. I think all working capital numbers are largely in line.
In this quarter, of the 71,500 tonnes there's a little higher portion that's come from other sectors, which is cement at 27,100 tonnes. Of course, and we keep maintaining that. So 9 months, if you look at it, 73,000 tonnes versus 61,000 tonnes, and full year we'll be closer to say, 95,000 tonnes.
So there's a -- so on a full year basis, non-mining did about 90,000 tonnes, and this year, maybe 10,000 tonnes more. So I don't think we should read a lot into the quarterly changes. Mining is at 44,000 tonnes for the quarter and 144,000 tonnes for full year -- 9 months, sorry, for 9 months, 144,000 tonnes for 9 months and 73,000 tonnes for non-mining, which is cement and thermal utility.
Okay. Some key numbers before we -- a lot of you have those questions. Ferro chrome was around INR 117, INR 120 a kilo at the start of the year, that's between INR 105 and INR 100 a kilo, about 10% lower. And likewise, scrap.
We're sitting on net cash of INR 2,308 crores -- INR 2,300 crores. Full year, we've already -- I've already mentioned, we look at about 295,000, 300,000 tonnes for this year. Going forward, '24, about 30,000 -- 30,000, 35,000 tonnes is something that I think looks doable for now. Of course, that includes mill liners.
So this year -- full year FY '23, we think we'll do about 6,000 tonnes of production and sales from that plant. And about 24,000, 25,000 tonnes of total sales coming from mining mill liners. And that should grow by another 15,000 -- 10,000 to 15,000 tonnes next year. And based on that, about a 30,000 tonnes, 35,000 tonnes overall growth for fiscal year '24.
Lastly as far as CapEx is concerned, for next year, we'll do about INR 300 crores. This year, we've done about INR 135 crores. We have another INR 70 crores, INR 75 crores odd to spend. So we'll do about INR 200 crores of CapEx this year. Next year, it should be about INR 300 crores, which is a INR 200 crores for the griding medial expansion for 80,000 tonnes that we're doing, which will take our capacity from 440,000 to 520,000 tonnes. Some land of INR 30 crores, balancing CapEx and some other enhancements that we are doing at about some another INR 60 crores, 70 crores, INR 80 crores. So that put together is about INR 300 crores of CapEx for the next year.
So broadly, I think while a lot of sectors are worried about 1 global range look like. I think our focus on the core industries of cement and mining, I think continue to give us confidence that irrespective of what happened on global markets, at least in the coming 12 months we've got, there isn't any macro worry -- at least as far as what we have hearing from the customers.
We continue to do our work on many fronts as far as customers in mining are concerned, which is now the down process benefits. The whole solution that we are bringing in with our mill lining offering, right? And ultimately becoming a partner to the mining customers, where we're enhancing all benefits that they can accrue by partnering with us and using our products.
So no other major highlights to speak off. I think it will be business as usual for the next 12 months.
Having said that, I will request Sanjay Bhai if he wants to share a few insights and then we'll take to Q&A.
Thank you, and thanks, everyone, for your interest. So it was a very interesting quarter, a very excellent set of numbers, but as Kunal clarified quite a bit of it can be regarded as one-off. Having said that, the basic business outlook remains the same. The opportunity remains equally exciting. And all the efforts are on to take a significant share slowly and gradually away from the forged into high chrome.
And directionally, everything has remained the same. So from a business strategic point, opportunity point, our earlier thought that we should be able to do at least around 30,000 plus year-over-year addition incremental volume. I think all that remains and we believe that as we go ahead, we should be able to share with more exciting news.
So I think with this, let the house open for Q&A.
[Operator Instructions] The first question is from the line of Ashutosh Tiwari from Equirus Securities.
So firstly, on the volume front, obviously, after a very long time, you are delivering very strong numbers. And so in the mining side, it is still driven by copper and gold only? These are the 2 bigger vendors contributed to this growth?
Yes. So copper and gold, and of course, we're doing a little bit work -- some work in iron ore, that also continues to be an area of interest and mill lining, which is not just gold and copper. So I think -- it's a mixed bag at least as far as there is no single ore driving disproportionate volumes.
And you also mentioned about this 6,000 tonnes of production sales from the new plant. This is for full year, right?
Yes. We'll do about -- we've done about 2,500 tonnes till now. In this quarter, we'll do another 3,000 tonnes, total about 5,000 to 6,000 tonnes is what we'll do from the new plant.
Okay. Okay. And cement volumes, like obviously, 9-month figure is probably one of the highest that we have done in the last 4, 5 years in the 9-month period. So is there something to read over there in terms of new addition?
We've done about 20,000 tonnes more, but there's a little bit volume that we've done with one thermal bit in India. But I think broadly 90,000 tonnes -- is 90,000 to 100,000 tonnes, it's not -- 80,000 tonnes to 85,000 tonnes is not going to become 150,000 tonees. So still the materiality is not there.
Yes. But after a long time, we have seen some growth over there. So yes...
Correct, correct, correct.
So thermal, you're saying that has concluded?
We're happy about that, but none of those are factors that will give us material growth going forward.
And this ForEx gain that is part of other income, is it a decent changes due to depreciation of INR versus Australian currency?
So, INR rupee would be about 50%, 60% -- almost 60%, 65% would be Indian rupees, but that is realized unrealized, both put together. And the rest would be cross currencies, or exposure outside of India.
Okay. Okay. And while we discuss our freight costs coming down, but as we look at the freight cost number outlook freight cost number that we reported now as part of profit -- that amount is almost similar in this quarter versus...
You will have to look at our linkage with our export, because we are not reporting our exported figure, right? We are shipping things out and it gets invoiced the following month or the following quarter, right? So that's how we are looking. We know that the freight cost is going down on a -- this is that actually freight cost incurred not the underlying export volume. This does not show that.
So there is some reduction in freight coming -- which has caused to come through. And RM part...
That said, it's not very material, but this is coming on, right? Freight cost, okay some of the lanes that we operate in are -- have seen consolidation and which is where we may not -- we have not seen the kind of reduction -- few other shipping lanes have seen the traffic means that are there. But we are hoping that will happen. I mean, shipping across the board has a weak outlook, right? So I think over next 12 months, that impacts the one cost aspect that will reduce.
And realization should come down from next quarter as the past year happens?
Yes, absolutely.
Yes, correct. Yes slowly. Yes.
And like you said that our total liner -- mining liner will be around 24,000 for the full year. What was the number last year?
About 17,000, 18,000 -- 17,000.
17,000, yes.
So there is another additional -- this new liner have planned of [indiscernible] want to do.
Correct. Correct. Exactly, correct.
Next question is from the line of [ Goel ] a chartered accountant.
Sir, my question is on the EBITDA per tonne side. So basically, it is consistently increasing for the last 3 quarters, right? And 1 year before, these were around 26,000 per tonne. And if I talk about 2021, these were only 24,000 per tonne. But in this FY '23, in 4 segments, these are almost double, double to 47,000. So my question is basically -- exactly what is happening? Is there any change in business economics that I'm not getting?
Because I understand sir, part of the reason could be the raw material [indiscernible] only is happening, including of the raw prices. But the thing is your absolute EBITDA is increasing. And that can only happen if you are able to increase your prices in addition to the cost increases.
I understand your question. So let me first and foremost, Mr. [ Goel ], tell you that you should not look at EBITDA per tonne because it is not a correct reliable yardsticks for 2, 3 reasons. One, we don't operate with a standard product. So we have a very wide diversity of products, ranging from grinding media, then liners for cement, liners for mining, then we have VSM, that is vertical spindle mill pads, where the price range is very high. My point is that volume and pricing, they do not go in parity and hand-in-hand. And because of that, if you don't have a standard unit of measurement, you can't view it as a unit of EBITDA per tonne.
There are multiple -- so there is a product mix, then there are different geographies, different product economics. So we should always look at EBITDA in a percentage terms. That too as Kunal explained, there are, again, on an operating EBITDA side, there are certain one-off sort of benefits that did flow. Then we always do a pass-through. For example, freight is 100% pass-through as additional direct add-on item with the scales.
On the other hand, raw material variation is also passed through on both positive as well as negative side, which, of course, are lag. So when there are so many variables, EBITDA per tonne will be a bit normal. Having said that, we have already clarified what are the reasons why this year you'll see a very sharp -- this quarter with a sharp increase in EBITDA. We have explained that there is some effect of treasury. Even if you remove ForEx, and if you look at pure operations, there also we have a benefit of raw material pass-through, not affected or rather the selling price adjustment not made exactly in tandem with the raw material reduction.
So there are multiple factors, which we have to say. But as we explained, an operating EBITDA of around 22-odd percent, pure operating EBITDA is what -- these are very base case and there are chances it will go up. But at this point in time, we are not giving any guidance on the margin. So this is the scenario, sir.
I can't answer why my EBITDA per tonne is going up or down because I'm not internally evaluating based on that.
Okay. Understood, sir. Understood. And the second thing, sir, you mentioned your volume will be around same like the kind of...
It's not could be like this year, yes.
Okay, yes. And for that -- for the complete year also, you're guiding this 22% to 23% EBITDA margins? Or you're guiding nothing?
We are not guiding. What we are saying is, this is the base case with which we'll be working. Why we are not guiding, we have been in the past saying that our current entire focus is market share and conversion from forged to high chrome. And there are, therefore, very, very different challenges that we are facing.
Having said that, we have a business model is robust to deliver higher margin. Then this 22-odd percent we are talking about. But having said that, at this point in time, we are not saying that we will do it. We are saying this is 100% visible. But right now, there is no guidance on the EBITDA side or on the margin side.
Okay. That was the one point. And second thing is how you look at your top line sir, after financial year '23, in the terms of volume, if you can like?
So, no -- see what happens, we can only give you an indication about the volume, which we have been very consistent. Now we are saying that at least a 30,000-odd tonnes per year incremental volume growth. Having said that, if you see my average realization, in this quarter and the previous purchase was around INR 165 or so per kilo. Now that is a function of product mix. That's a function of the raw material pass-through and the freight pass-through, which has been reflected in a higher realization.
Having said that, if the raw material prices come down in the quarter-over-quarter in a consistent manner and if rate goes down, my realization per tonne can definitely go down.
Now [Foreign Language] it is not possible to let you know today, because even we don't know. So therefore, a volume growth and a very consistent margin is what we are internally looking at. Rather than absolute. Otherwise, this absolute number in tandem, I can say there will be a 10% top line growth, but that may not happen. You get my point?
Understood, sir. Understood.
Next question is from the line of Pujan Shah from Congruence Advisers.
First question would be on the -- first of all, the production per metric tonne and the sales per metric tonne. So in this quarter, our total production is 64,000 metric tonne, and our sales is 71,000 metric tonne. So I think from last, let's say, from 7, 8 quarters, we are lower at production. So are we seeing any difficulty in the production side or like due to installing new facility, it has been like with the low production and it can take some chunk to 75,000, 77,000 in next quarter?
I think it was only a working capital optimization. I mean, that's something that we keep doing. And there was a higher amount of stock if you go back to our commentary over the whole of last year. Because of containers not being available, we were keeping more stock in transit, right, against an order to make sure that customers -- there is no situation when the customer is without supply. I think progressively, as things improve.
Today, we are not speculating on how much improvement can happen. But we've been able to do something, because there is visibility of containers and shipping lines and delivery times. There is some amount of adjustment that we are trying to do at this time. I think it's just an optimization exercise right now.
And just to add, when you said difficulty in production, there is no technical difficulties. It's just an average operating capacity utilization of around 65% that we are currently having. It will incur as the volumes go up, but we can't go beyond 75% or 80% theoretically because this capacity is also calculated based on an assumption about a particular product mix. So there is...
Also Sanjay Bhai, are the plants that we are setting up are higher capacity, right? 50,000 tonnes mill lining plant, we cannot utilize that in the first year. So as we grow and our minimum size of plants is a little higher is where utilization levels appear a little low. That is why we are giving some -- we're trying to give some guidance on sales volume nature for that mill lining.
Okay, sir. Okay. And sir, are the INR 300 crores CapEx, I have actually not get that point. So I missed your point on that one. So is that INR 300 crores plus INR 200 crores grinding media expansion?
Total INR 300 crores CapEx for next year, FY '24, as we speak. Of which majority is towards the grinding media expansion that we're doing. About INR 200 crores goes to that.
About INR 200 crores. And the INR 100 crores?
INR 100 crores, that is, we need to buy land. There's a lot of -- because we are setting a plant, our internal optimization efforts are going on. INR 30 crores towards buying land, and INR 70 crores towards maintenance, CapEx, some other capacity rationalization, et cetera, automation, other projects that we have taken up internally.
Okay, sir. My question would be on the INR 2,300 crores cash. So I assume that INR 300 crores would be deployed in the CapEx part for the next year. Still we hold a INR 2,000 crores of cash and cash equivalents. So what are the plants we are planning to getting into? Are we looking at inorganic opportunities or we are rewarding shareholders for some portion for that?
No. So I tell you, we have been very consistent on this. We are very conscious that yes, we are carrying a significant volume of cash or liquidity with us. Having said that, it's very strategic because: a, as we explained year-over-year, we'll have to do CapEx; b, we will have to invest significantly in our working capital because we are concentrated in India in all of our production-related efforts and the sales happens across 125 countries of the world through a network of more than 20, 25 warehouses that we maintain. And we'll have to ensure that we are able to give just-in-time deliveries to customers.
There could be some opportunity. But at this point in time, we believe that till we reach a reasonable level of sales in mining, and we acquire a decent market share, and we reach a stable -- internally stable situation. We want to have that luxury of carrying a little bit of extra cash and liquidity. Yes, we are conscious that current payout ratios are not high.
Having said that, we are reviewing it, and we will definitely evaluate that if there is a surplus cash available and there is no such opportunity inside, we will take an appropriate call. But at this point in time, at least for next 1 year, we don't want to take any such call.
Okay. Can I squeeze one question more, please?
Yes, sure. Go ahead.
Yes. Sir, on the mining and others, if you see we have been great improvement, like let's suppose -- and so in FY '21, we can see from 20,000 -- from 16,000 to let's suppose we have reached at 27,000 others. So are we seeing the others have been more margin lucrative compared to mining media? Or like the margin have been all dependent to the commodity cycle and how the -- actually the rationalization goes on?
No, no...
I don't think so. Cement and mining largely have a material margin difference. I mean, these are all products for us and pricing for it is a combination of a lot of things. But margin -- the expansion of margin that has happened is, of course, there is some amount of commodity pass-through that is there. That remains and in some part of that, you'll see easing going forward.
Next question is from the line of Priyankar Biswas from Nomura Securities.
So my first question is like when I see your numbers for the 9 months, and it seems that for this year, you are very much on track to do possibly a INR 100 plus EPS. That is what it seems like, I mean just on the 9 months. Now next fiscal year FY '24, I believe that there would be some price pass-through to customers. I mean, as the things cool off, the freight and the commodities. And as you said that like a 22% margin broadly.
So in the next year, how do we grow our profitability or PAT? Because it seems that this year is so high that it even with a, let's say, [ 35 -- 40 -- 30 ] growth next year, it becomes kind of a tough. So that's the first question. So what are your thoughts on that?
So Priyankar, thank you for telling us that here, our EPS will be INR 100 this year. My point is, as a management, we really don't look at the numbers from a narrow standpoint. What we know -- we know what is the opportunity, what is the challenge and what we have to achieve.
So we know that if the opportunity is, say, 2 million tonnes or 2.5 million tonnes, and I'm presently still scratching the surface, so to say, I have to ensure that I keep on going and converting maximum number of mines and reach a position where I become a dominant player in the space where I'm operating. We know that technically -- technologically, we are unquestionably a leader today in the world.
But whether from a market share standpoint, what is it that I want to achieve? So the whole focus is how do we convert mines, of course, make it profitable. And of course, ensuring that once we convert generally, the customer stickiness will ensure that I keep on growing my business with them.
So as Kunal explained and as we are very clear, a one-off can always happen. One-off on the positive side, one-off on the negative side. What is very important is that is my business model robust enough that year-over-year, if I gain 10%, 15% market share or top line and I continuously increase my sales, can I maintain or even grow my basic core operating EBITDA from what is it my current level? My answer internally is yes, yes, we can do that. My business model is strong enough.
Having said that, therefore, we are not worried that in this year, say my PAT bridges reach nearly INR 1,000 crores or say anything closer than that. Then there are years where we had shown that there were dips. Now this is a very different year -- of course, our internal endeavor will be to see that we continue to deliver similar decent numbers. But there is no internal comparison that if this year another INR 1,000 crores, I have to do INR 1,200 crores next year. What is important for us is what is it that I'm gaining, how many new mines I'm gaining, which are the new markets and surmounting and how my traction continues. This is the entire focus. I'm sorry, I'm bit candid, but this is the fact.
So that's quite a nice answer. So since you talked about the markets and all, so actually 2 related questions on that. So like since you are exploring out new markets, so what are the geographies that we are like seeing a very strong traction right now? And parallelly, like within these strong results for the last 3 quarters -- sorry, for this quarter, was there some benefits from the SAL acquisition that you had done to vertically integrate into the raw material space that you have done, I think, 3, 4 months back. Was there any benefits of that as well?
No. Sanjay, I'll take that. So first question, I think when Sanjay meant new markets, I mean, there is enough work that's already done. We just have to harvest those efforts paying cut. There is not one new mine that we are going to where we expect a lot of work to come. That is there has been dogged in our perseverance and our efforts to keep engaging, keep demonstrating that we can be a valuable partner. It's a longer lead cycle as we continuously try to explain.
And the benefit of this long lead effort is that once we are in, it remains for a longer period. We don't go through the vagaries of subsequent economic cycles. So I think from the market standpoint, business as usual, that was in my initial commentary, there's nothing material that we haven't mentioned or talked about.
The ferro chrome part, the agreement that we have done, I think, is on track. I mean we are slowly ramping up progressively, which they are also listed companies. So I don't think we want to speak much about it. I think it will just remain as one of our supply partners, along with other purchase vendors that we buy from for our raw materials.
Kunal Bhai, I actually meant like, whether there were some benefits from this agreement this quarter like...
No. We didn't say -- it was not benefit-linked, right? It was more trying to protect the supply chains. More than anything else, ferro chrome is an important raw material for us. And there is a plant in Gujarat, which is getting the raw material and it just gives us comfort that if something were to happen to the large 1 or 2 other vendors we are buying from, there is supply chain visibility.
Okay. And Kunal Bhai, just last one question from my side. So it is a bit maintenance related. so what is happening is like investors nowadays are often asking this question. Like on the carbon border adjustment tax that the Europeans are proposing and maybe it becomes more prevalent in the whole world. So what are our thoughts regarding reducing the carbon footprint? So any steps that you are planning to take with [indiscernible]
We are very proactive. We are very conscious, Priyankar. Last year, I think 23%, 18% or 23% it's not on top of my head, but a reasonable amount of power came from our own renewable sources, right? And I think we'll take it to the max possible, which is 30% or 35%, given we are a foundry where our loads are not -- loads are variable, we cannot go to 100%, right? So the base load that we consume based on current policies in states where we are present, we can go up to 30% or 35%. I think 30% broadly is what we will surely go to.
It also saves us cost. So there's no reason for us to not pursue that. Over and above that, there's a large carbon footprint saving that we do or reduction that we do on the customer side, right? If you are helping to produce more if you're helping to recover more metals from the waste ore that goes out or reduce power consumption at their end, right? That's a material or reduce the toxic waste at the mining side.
Mining companies -- reduction of footprint at their end is what a large part of our business is. So I mean, we are doing work to quantify and put numbers around that. It's not easy because we don't get a lot of that data back from the customers, right? Or rather endorse data from the customer, they don't want to share their numbers.
But we know it's a very material this thing. But power is one of the biggest carbon footprint from our standpoint. And if we can -- we're already 20%, 23%. If we go to 30%, 35%, that itself is a material step forward for us.
Next question is from the line of Abilasha, Individual Investor.
Sir, can you explain the establishment strategy like we have our current land in this warehouse globally. So how do we decide it? Is it volume dependent? Can you elaborate on that?
I think warehouses are not in the sense that other companies have where you have a stock of material than whoever comes you replenish or fulfill from that location. A lot of our -- most of our warehouse is barring, I think, 2 or 3 locations are customer-specific stocks. So when a customer places an order on us, given that we are not based in those countries, right? We are based in India. We're producing and exporting out of India. They get comfort if there is stock on the ground closer to them.
So and we are doing a door delivered supply. We are not using the third-party intermedial doing the fulfillment or the last mile sale to the customer, right? It's under our own agents, which is where a lot of these stock point locations are stopped, meant for a customer against an order which is already placed, right?
So the strategy is that if there's a customer placing 10,000 or 15,000 tonnes of products from us, which is 1,000 tonnes a month, we are very happy to stock 2 or 3 months of stock closer to his location, so that he gets a visibility for between 4 and 6 months, and that absorbs the need for a local plant for us. So it's built. It's more customer-specific and depending on the ocean lines, et cetera, around that country.
Okay. Sir, but my understanding is that we have line warehouses, right? And considering that you said that the stocks are customer specific. Now we are in various customers across cement and mining specifically. So in term, it would be 1 warehouse it would be carrying a different kind of stocks for different kind of customers, right?
A warehouse would be specific to a customer, but it could be at same point where other -- what is -- what are you coming to? What's your end question? I didn't understand. A little bit of context or what you're trying to get? Maybe the answer is different than what I was going to say? So what's that -- what are you coming to?
We have more. We are talking about 18 to 20, not 9. I don't know how from where you got this number. Maybe you're referring to the...
No, no, Sanjay Bhai, I'm just saying that what is 9 -- it keeps changing, right? Today, a customer changes, we may agree for a direct supply. The number of warehouses is not material. What is your question? What's the context that you are trying to understand?
So the context is, I'm just trying to understand is how our modest [indiscernible] of the business is in terms of supply? So when you say it's a direct supply, then is [indiscernible]
More than 70% supply is direct. It is more than 65%, 70% of my supplies direct. For the balance, and that's customer specific, there is no rule of thumb within that. We're depending on customer circumstance, between 1 and 3 months of stock, is kept for their comfort. When we start off. As we go forward, they get more comfort, we try and reduce that stock. But there is no rule of thumb. There is no specific overarching generalized statement I can make about our strategy for that.
Okay. Okay. Understood. Understood. Sir, can you explain that where is the application of a forged media, which is still better than a high chrome?
I think -- can we take that question offline. There are many other investors who probably understand the difference we've been talking about it. Sanjay Bhai, if you don't mind, we can spend half an hour, if you explain a little bit more under how forged and what our strategy is?
Fundamental question because everything is a grinding application. The only thing is our media reduces the wear rates and make the whole process efficient, otherwise, it's the same.
Yes, but it will require a little more context. I think just for the benefit of anyone else on the call, if you don't mind, we can have an offline chat and explain a little more of what we're trying to do with this.
I just mentioned where I was coming from, and then I'll go to the next question is that in the Canadian antidumping tribunal order, it was mentioned that SAG mills only use forged and not high chrome. So that was just the context where I'm coming from.
First of all, [ Foreign Language] there is no criminal action there. It is just Magneto -- we compete with Magneto. And as a competition, they do various -- they try various means to keep -- as a defense mechanism, right? They have a local plant over there. And they're going to a body where they're alleging that there is a competition-related issue. So -- and we are fully cooperating. It is a sub-judice matter, I may not be able to speak more about it. But it is a market where we are already supplying high chrome and they are also supplying high chrome.
Yes, I understand. I didn't mention anything criminal. I just mentioned what was mentioned in the tribunal order, sir?
Tribunal order, you mentioned criminal.
He mentioned tribunal. Yes.
Tribunal, sir, not criminal.
Sorry, sorry, sorry. My bad. It is more the market is high chrome, where we are as in Magneto are supplying, and it's related to those supplies.
Okay. Understood. Sir, in the R&D expenses, where do they get reflected in the annual reports under which head do they represent?
R&D expenses are not in nature of where we invent a new alloy. A lot of work that we do is [indiscernible] if we're doing a new design, if we're doing a new alloy, we were trying different combinations of industries and metallurgy and micro structure related to heat treatment on top of that. Most of that work is where we're doing a supplier, right? Depending on end-user conditions, we design a product, we design the shape of the part or if there are castings. And the alloy of its grinding media, the alloy or what size to use depending on that end user condition.
So most -- a lot of our innovation comes from giving a solution to a set of end user conditions. Unfortunately, it's way difficult to carve out expenses across the value stream and park those under R&D expenses, because a lot of R&D that gets classified is more related to innovation and you know which is going to lab or you've got a bunch of people whose costs gets allocated over there. Most of these are costs that are operational in nature and are accounted as such.
Okay. So that will be a part of COGS basically, right?
Yes. It's basically a part of operating expenses. Correct.
Okay. Sir, can you explain what percentage of our receivables are parked as retention money?
Nothing. There is no retention in my business. We are not EBG contractors.
Okay. Because there was some mentioning of retention in the annual report, that's where I think it came from. Okay, no problem, sir.
Hardly anything.
But not a material amount. I mean there could be some customers where there is some performance. If you have given a new product and some amount, but it's very -- it's not a material amount, maybe it's an accounting classification, but nothing material that -- as a concept, we don't supply where our money is tied to an end goal, right? It's led to -- except if it's a trial also given some new guarantees to get in or do additional work.
The next question is from the line of Dhananjai from ASK Investment Managers.
Maybe you mentioned this, but what volumes are you targeting this year and what we're targeting next year?
Around 30,000 tonnes, additional -- incremental additional. We are talking about close to 300,000 tonnes this year and about 330,000 tonnes around that about next year.
Okay. And 330,000 tonnes next year. And this includes, you mentioned 24,000 tonnes from the mill liners for next year?
No, no, no. Mill liner is a part of my total volume. We are talking of incremental volume.
Okay. And you said -- and you got INR 300 crores CapEx in FY '24, INR 200 crores for grinding media; liner, INR 30 crores; other, INR 60 crores, INR 70 crores. Is that right?
Yes.
Correct.
Next question is from the line of Charanjit Singh from DSP Mutual Fund.
In a very tough environment with so many challenges, we have been able to achieve very good volumes for the first 9 months. Sir, my first question is in terms of when we look at despite the duties which got imposed in 3 different regions, we have been able to achieve a good set of volumes and have been able to make up for the 25,000 to 30,000 tonnes of shortfall in volumes. Sir, can you just touch upon, has it been our new customer acquisition, which got accelerated, which helped us or any specific region or customer, which helped us achieve this in a very tough environment? That's my first question, sir.
So I think it is -- it's just that those 4 years, 3 years, we didn't grow because of those reversals, but the whole thesis, sir, was that there is enough market for us, right? We've been talking about market in excess of 2 million tonnes, 2.5 million, 3 million tonnes even for forged material, where chrome is only 0.5 million tonnes, and there is this reasonably large runway for us to continue to grow.
It's just that we talked about it, and these reversals meant that our growth was not visible, right, here? I mean -- so we've made good some of that and continue to grow. The idea is that if our thesis is correct, if our understanding of the market is reasonably on cue, we believe that chrome is a better solution than forged in material working conditions, in material number of mines where which will allow us for that growth runway. As we grow, this is all unchartered for -- even for an Indian company to be selling directly to consumers in 120 countries, and this is not a commodity product, which are solution-driven where we engage. There are consequences of using our product, right?
And to that extent, that's the time it takes and which is what we've not been able to really plug and say, I'll grow x amount this year versus next just because of the business making cycle there is. But I think this growth has -- it's a mixed bag. It's existing customers having grown. But clearly, these are new customers where we migrated from forged into chrome. So I think it's the whole thesis that we've been talking about coming forth in this -- in this volume addition that has come along.
Sir, the other aspect is now again for the next year, we are very positive in terms of doing 30,000 to 35,000 tonnes of incremental volume. So here, will you be able to help us in terms of the incremental, how much will be from new customers, how much from existing customers? And how is the new customer pipeline looking like from a number of mines that you would be targeting?
In our case, even if it's the same customer, if I'm getting more volume, it's like a new customer for us because whole effort is different. Then it's not where the customer is growing or giving us half and saying, next time, I'll give you more. right? If we -- so if it's a different side of the same customer, therefore, it is completely independent of work that we've done before. The whole effort to do proof-of-concept to make sure we are doing enough trials to give comfort, discussion on pricing. Okay, there will be some relief that there is a reference from a related mine site. But the large part of the effort remains the same.
So the new 30,000 tonnes is -- the 30,000 tonnes you're talking of, I would say, at least 85% -- 80%, 85% would be new customers.
Okay. sir. And sir, we also talked about liners now picking up pace in terms of overall volume next year. So -- and we have been doing a fair bit of testing with the customers. So do you think that next year, as our solution gets implemented, there could be a positive surprise to that? And in terms of EBITDA margin or the profitability profile you have touched it also earlier. But has there been any kind of an increase in the overall profitability, what we see on the liner side?
Liner is still 25,000 tonnes or 300,000 tonnes. [indiscernible] even 8%, 9%. And like we explained mining liners are part of the non-casting, non-grinding media piece of what we do, which anyway has had a higher margin compared to grinding media because of cost, effort, everything is not comparable. So I don't think so it is more mining liner related margin.
But clearly, I think there is -- as we go forward, as the world realizes that -- today, you don't get people to do menial tasks, let alone intriguing a high-end work in the Western world. It's starting to reflect in China. It will happen in India, right?
I think for a type of business that we are in, where you need hands to do work. You need skilled hands wanting to work on the shop floor. I think India remains a great place. And going forward, we just remain optimistic about it that there are enough works in the business that a fair margin would continue. Now the fair margin is a very complex subject. And to that extent, we're coming from [indiscernible] Bhai, the whole philosophy is that we want to keep this business for many more decades.
And 20, 22 is a robust margin. We've done 25, We've done 28 in a quarter, we've done 18 in others, and that's linked to a lot of other things. So we stopped spending our time and effort to postulate what will it be next year or this quarter.
From a margin standpoint, please allow us that we are not able to give more color on -- beyond what I've just said. From a tonnage standpoint, I think mill liner is exciting for us, just that the whole competency is coming together. It's a very -- it's a product aligned to everything else that we are otherwise doing. But we've seen many, many years where we've talked about it and not delivered or the growth has been slower. .
I think 30,000 is a good place for us to start and stabilize from. Maybe a better guidance in another 12 months, right? Mining liner is also fairly due for us. As a philosophy, we would not want to extrapolate 1 or 2 good quarters into a guidance going forward. So I think 30,000 tonnes is a fair guidance to leave it for now.
Next question is from the line of Bhoomika Nair from DM Capital Advisors.
So most of my questions have been answered. Just 1 or 2 things. You mentioned that there's -- we've started now kind of the pass-through is much more easier with the client. So if you can just take a step back, how is the nature of the contract in terms of raw material pass-through or freight pass-through or any other cost pass-through. How has that changed over the last 2 to 3 years in January time frame?
So when the raw material costs were going up, I think the pass-through was coming along. But by the time you pass-through -- see, first of all, it's that the discussion on pricing is very dicey, right?
It goes up, but you -- when you -- when it's going up, you always feel this is the top and chances are it's coming back. You don't want to waste your conversation with the customer on a pricing discussion, unless it's inevitable and required, because there are plenty other things that we do with them, right? I want a higher price because of a better value addition and not because my raw material price went up.
So it started with saying maybe here at the top will come along to it. But obviously, the formula, the pass-through all of that is there. So costs, raw material costs, there is a fair bit of pass-through, but even if there's a pass-through, customers are always coming back and saying, can we do 80% of this, 70% of this, all of it. They are large customers. Right?
So raw material -- and by the time the pass-through came up, the prices of raw material costs went up higher even, right? And that cycle was there for 2 years, so we never went to fair margin. I recovered, but by the time, the cost went up again.
Big thing about passing through of the shipping cost. That was never part of the contract. And it's still not part of the contract. It is that, here's my shipping cost and here -- because I can't contractually either [indiscernible] wanted to -- there's a little bit of complex science behind shipping. .
I think the big win for us was to be able to pass-through that, right? That was a direct question on my model where I'm producing in India and supplying to the rest of the world. And shipping rates go up and there are local incumbents, right? Maybe this forging guys and others, thankfully, all of it came through. All of my shipping cost has been passed through.
I don't think many companies can play claim to this statement, right? To that extent, there is -- this reinforces that everything that we're doing, the cost structure that we have, the talent that we have in India, right, the place that we have built in and the global footprint and the structure that we have, it's over a 3-year period. I think that's what's the endorsement that comes through. So I think the contract is still a pass-through for costs. Shipping is something that is something we discussed on a spot basis.
So just to quickly add, I think most of the contracts are long term, 3 years or above. And the purchase orders are typically for a quarter. So this adjustment they happen quarter-over-quarter. It doesn't happen every month.
Got it. So now on the way down, right, when commodity prices are starting to slightly correct, though there is some bit of volatility, rate is obviously falling down quite a bit. So would that also get passed on with a decent lag now where it is again customer...
Sanjay Bhai saying it's a quarter mill. Raw material is a quarterly adjustment in a fair number of contracts. Raw material is not something that we want to sit with and keep talking about each time. So where raw material pass-throughs are coded into a large number of contracts and that will happen as is. So wherever the price is at the end of the quarter, that becomes the basis for the subsequent quarter.
Fair point. And the rest of it will be based on discussions of how much [indiscernible]
There's a time line between coding everything and for example, auto component companies where their customers are tying them every nut bolt into cost and structure is there, right? And that's something that whether -- that's a structure you want versus where we are, where there is -- we would like to keep discussion, because there's a value add is we are winning along. Right? We are not replaceable vendor because there is always a conversation, my sales guys always at the site to discuss new opportunities to add values, right? The discussion on pricing should be the last conversation, right? So that's where...
Yes. Got it. Got it. Sir, the other thing was just what has been the price range in ferro chrome of late in terms of December-January, because there was some up move in commodities? Are we saying...
Exactly. It reduced -- but it went down, say, by 15%, went up by another [ 50% ], but bounced back. I think it would be about 10% lower than about 9 months ago, 10% to 12%.
Okay. On the volume trajectory, clearly, it's very happening to see the kind of up move that we are seeing close to 300,000 tonnes this year, next year is about another 30,000, 40,000 tonnes. And if I look at mining within that, it will be about 200,000 tonnes.
Now in terms of the overall market, obviously, it's much larger. What can possibly help accelerate this additional volumes to maybe 40,000, 50,000 tonnes kind of a range or higher? What additional steps do we need to do kind of to grow at a faster pace? Where does the shipping point come? Where we see a faster acceptance or faster turnaround with new clientele or...
I think the emphasis is, Bhoomika, it's been a 3-year wild ride. I think it's just to stabilize, continue to grow. Our customers are not such that we are not an e-commerce business where there is hyper emphasis on high growth, right? The idea is that we want to grow, but we have to grow making sure we're not doing anything inadvertent at the customers end, right? We don't want to go, give out guarantees or give out benefits, that may not accrue and leave that conversation with a heartburn.
I think 30,000 tonnes for now is a fair amount of growth. Of course, we can do better and more, but I think given the variables, given what we have seen over the last 5, 7 years, we would rather wait and watch. There could be opportunities to do more. But for now, as we learn about the world and growth within this environment, I think we'll be happy with the 30,000 tonnes for now.
Next question is from Bhavin from SBI Mutual Fund.
So my question is, the EBITDA margins that you have reported in this quarter of about 30%, excluding the non-operational income and foreign exchange gain. If you were to take business as usual, we understand it's not never the case, but given the lead lag in pricing on, what would have been a normalized margin in this quarter if you take off those [indiscernible] into consideration?
We have not done that exercise. I mean we can do it, but I don't think it helps us any better doing the bridge. We'll have to work on with what that margin would have been.
It is clear that, the way around -- we have been saying that our normal operating EBITDA and a normal set of circumstances could be anything in the region of 22% or thereabouts a little higher also. Yes, we have been reporting better operating margins. But as we have been repeatedly saying, we are not giving consciously any guidance. So I think a very base case scenario of 22% would be a better number to work with on a long-term average basis. It can move up year-over-year. But at this point in time, we are not giving any guidance on that.
Sure. The second question, again, which is a subpart of this. And if I look at your employee cost over the last 3 years, the quarterly average has been in that INR 36 crores, INR 38 crores a quarter. Over the last 3 years where we have seen significant amount of inflation, you have increased capacities and volumes. If you could give us a perspective how has this been managed? Is it through increased automation, lesser manpower working with incremental -- it would be useful to understand as we see that at least 1.5% has come from the operating leverage benefit only from the employee basis.
I think -- but that will catch up over the period, anything employee inflation in India is already picking up. But over the last 3 years, you're absolutely right. We've done a lot of optimization. We used the COVID period, we were already lean, right? We have already -- we don't have a fancy headoffice. There weren't lost in my P&L, which was outlandish. There weren't any -- there is no fat in my overhead. But nevertheless, we went through the plant, we optimize -- tried to optimize whatever people spend.
So during those 3 years we try to keep the same absolute number, which is by some optimization at the plant level, all the capacity in the production we added, we tried to do it without additional staff. I think broadly, that was what we started with. And -- but this figure, we'll start seeing some amount of increase there. Also our manpower cost, some amount of contractual manpower costs, it should have gone up, are sitting in other costs. So you will have to add both to see the real impact.
At an employee level, I think it is -- I don't know what it was last year, the year before that, but we've done some amount of optimization and the balance is in my other expenses -- under other expenses.
Just one thing to add, Kunal, as a percentage, it might appear to be dropping. But if you compare absolute numbers, this is about 10% increase year-over-year as a normal increase about 7% to 10%, yes. That's what it is. But percentage would appear to be a little drop.
Yes. Manpower is absolute. We try to do manage growth with the same manpower, I think, Exactly.
Okay. So the other question is on the realization. We have seen about almost INR 172 a kg this quarter. And you mentioned about a softening of the input prices, which will now come in. So what we want to understand is, in your pricing how have the structure like -- because freight is a large element, what part of your pricing or the contracts that you have are CIF-linked pricing and given that the volatility that we have seen in freight is also negative.
And if you were to take these one-off element and the volatility out, this INR 172, what directionally would we see it like 10% lower in the subsequent quarters?
Very difficult to put a number to it, but gradually, yes, it can go down a little bit. What exactly how it is going to go down. Frankly, it's very difficult to decide, very difficult. Because see, everything is not automatic, like -- so it's always subject to some negotiations. So if it goes up fast, it may not go down in the same proportion or with the same speed. But around over a long-term average, if commodity cycle goes down, there would be a reduction, maybe 5% to 10%. But again, it's a gas. There is no arithmetic, which we have put to it yet.
Sure. As things stand today, given the current freight and the input prices, what would this INR 172 be? Will it be like as you mentioned, there is a lag impact.
That's why I explained, no, we have not done any math to explain that Q4 met now, by Q1 next year is [indiscernible] over a longer period, if not strictly quarter-over-quarter. If this trend continues, it could be 5% to 10%, yes.
Understood, okay. The other question is on like when we had the question on the Canada. One of the explanation that you had highlighted that, okay, now all is not gone, but given the way the freight has gone up from $3,000 per container to $8,000, $9,000. It's become economically questionable because of the freight.
Now that freight has reversed completely, could we expect that 50% is not lost. And can you see that reversing? Or are we already seeing that reversing because the freight normalization has already happened?
I think as a decision as far as Canada is concerned, given its subsidies because they're investigating it again, we don't -- there is a large market for us across the world. I don't -- we would rather not keep talking about Canada as a specific point. I think it may come, it may not come, some may come, some may not come. I don't -- we are working in a way where that's incidental, right? Just like cement is today, right?
It happened tomorrow, something else will happen, right? Now there is a conversation. There's a local plant and there's an authority involved looking into it. And to that extent, you would rather be into a free market situation and do our bit.
So if it's okay, we would rather -- we have decided not to speak about the Canada business, and we consider it not a material part of our operations.
Last question. There was a lot of effort being put across on some of the South American markets, which are large copper-producing mines but share here is much lower. Could you talk about the progress that we have had since a year or so that we have renewed focus on [indiscernible] world?
So again, that -- the whole effort there, we are making a lot of effort in those markets. A lot of -- there was a lot of large pushback on account the freight costs, right? We just became the highest freight cost from India were to south of America, South America. And there was no commercial conversation or viability given that highest cost. Now that shipping rates look to be on their way down, they're still not corrected as much.
I think it's just becoming an interesting time. We are doubling our efforts over there. It remains a very, very important market for us, and we hope that we have something interesting to share in the next few quarters.
Sure. So in our guidance of incremental volumes of 30,000, 35,000 for the next financial year, have we built in something coming from -- incrementally from the South American, Latin American market or it's agnostic of that?
Yes. Again, it is agnostic of that. Okay. Today, we are saying there will be some -- our plans are very different. We want to do much more. There's a lot of effort already cut down, right? So something from South America may come and something else may not come. I think 30,000 is what where we are comfortable.
That this much should happen. I mean it's not contingent on 1 or 2 or 3 mines coming up or not. We have assumed some portion of our considered market not coming. Now whether that does not come from South America or another market, I mean it is a question today.
[Operator Instructions] Next question is from the line of Anupam Gupta from India Infoline.
So just quickly harking on the realizations a bit. Do you have a sense of what the exit rate of relation was versus 169 for the quarter, which you have reported?
Sorry, say again?
The exit rate of realizations, let's say, what you repriced in December versus for the average of the quarter? Was there a material difference?
Second quarter was 167, third quarter was 169.
So let's say, what I'm asking is, what was it in December if you have that sort of a sense versus average over quarter?
And I don't have that number, no.
Which is the -- you're talking about particular month?
Yes, whatever signed, to look at it, what sort of reduction has happened in December, although October, November [indiscernible]
No. It is not monthly. It is -- our generally, the pricing is for a quarter, which is based on the previous quarter's costs. So we don't have a monthly adjustment, Anupam.
Fine. Okay. And sir, second question, I just want the exports mix. So as a revenue, we know that 80% is exports. But let's say, if you look at in terms of volumes, what is the export mix? And again, within mining and non-mining what is the export mix, if you can broadly give us that?
I don't think it will help the underlying question that you may have. I think we'll leave it to this macro figures.
Next question is from the line of Amar Maurya from AlfAccurate Advisors.
Two questions. Sir, you indicated that 3,000 tonnes was from the new plant. So basically 6,000 tonnes is from the old capacity for the mill lining, right, 3,000 tonnes additional we did this quarter, correct?
No, no, no. I was only saying that what -- there is a general question on what's the update with the new plant. I preempted that by saying whole year, we'll do about 5,000 to 6,000 tonnes from the new plant, which is part of the total approximate 24,000 tonnes that we'll do full year for mining mill liners.
Okay. So -- but then, sir, capacity doubled, right?
Capacity is 50,000 tonnes for the new plant. Correct. So when you say 6,000 tonnes from the old plant [Foreign Language] 18 came from the existing plant and 6 from the new plant. That's broadly what I'm saying.
Okay. Okay. And then year-to-date, okay, year-to-date?
Not year-to-date, for fiscal year '23, that's the guidance.
That's the guidance, okay. But then we expect the utilization of the new plant, let's say, what would be the utilization for '24 then?
'24, we'll do about 50,000 tonnes. Our guidance was adding 10,000 tonnes approximately each year to be fully utilized between 4 years and 5 years, right, in 4 to 5 years. So that -- we are on pace for that.
Okay, perfect. Perfect.
Hopefully, we'll do better than that, but at least that much.
Sure, sure, sure. And secondly, sir, this power cost, I mean, even in this quarter reduced significantly. So should we see that further going ahead in the quarter, the power cost will reduce further?
Power cost reduction is, I think not really material. There's also this cost savings that we accrue from our captive power sources, plus the little bit of efficiency that keeps in. Otherwise, I think I don't think cost will reduce. It in fact, it will only increase because of the state electricity board where we buy from, we don't expect a reduction there going forward.
In this quarter per tonne, power cost has reduced. That is what I'm asking.
Per tonne, I've not done the math, but that's all sort of fixed and other things, right?
Again, the power cost is a function of 2, 3 things, how much WTG credit we got, how much production was more or less. So there is a -- based on variance analysis we do quarter-over-quarter. So this quarter, one of the key reasons is that there is actually a reduction in production.
No, exactly. Per tonne should not impact, right?
No, no, no. So again, that's exactly what I'm saying. Don't go on per tonne basis because we don't do internal per tonne calculations at all. And it is very, very misleading. A large volume plant is operating at a higher capacity vis-a-vis a semi-automatic or manual large casting plant operating at a different metrics. So therefore, it's very difficult. We don't do per tonne. It's not possible. Per tonne power cost is not possible. Actually, it will not give you the correct [indiscernible] survey.
And our cost, in fact, if I just do the math, we've produced 80,000 tonnes at a cost of INR 102 crores last year -- last quarter, it was about 100 -- INR 1.27 and that's about INR 1.03. I don't know where you got the reduction actually.
So Kunal, it's very difficult. We don't [indiscernible]
No, that's not reduced. No, no, let me clarify, cost has not reduced per tonne -- per tonne of production. It has, in fact, gone up slightly. We can take this offline, but for 80,000 tonnes, there's INR 103 crores. For 65,000 tonnes -- 64,000-plus tonnes, it's about INR 84 crores. That cost has not reduced. You can just do the math again and connect with us offline if you still want to unpack that further. Yes?
The next question is from the line of Sajan Kumar, individual investor.
While you continue to using the cricket [indiscernible] while you continue to guide like Dravid, but your actuals are like Sehwag hitting the ball out of the park. So I just wanted to know why you have remained so conservative in your guidance?
Sir, when you run a business like us, you'll realize the amount of variables that we work with. We -- honestly, the idea is again, I'll give a short 0.5 minute answer. We actually focus on the long term. A lot of our customers are there for a long period, right? There's a lot of solution-driven conversations happening. It is as long as I'm doing that job well the outcome is going to be okay, right? And that's where all our effort goes into the outcome, currency changes, raw materials change, shipping cost change, the competitive scenario changes some duties position comes in. The idea is that despite all of this, how can we continue to grow and keep a decent margin and keep the market for a few decades going forward, right?
When we look at it, I think 20%, 22% is a fair margin to keep. If you look at us on a 10-year period, we may not be very far off from there, right? Now when costs are going down, and previous quarter, raw material savings are still big, we've not passed through that. There will be some amount of extra margin sitting over there, right? That's what we have explained.
So our guidance does not adjust for time line related differences that may come along. I think that's the only difference to that -- in our guidance.
No, no, I completely understand. No, no, I just wanted to congratulate for the great performance. Sir, just to elaborate on the same point, I just want to know how much of ForEx movement you need to pass to the customers? Or is it something that will be retained by the company? The reason why I'm asking, since this year, rupee has depreciated almost 10% vis-a-vis the dollar. That could have also contribute to your EBITDA from whatever the constant 22% to 24% guidance.
Yes, so that -- absolutely, but it does not flow. It's not like an IT company selling to a U.S. market where Indian costs affects margins, because even though I'm selling in U.S. dollar or a large part of our business in U.S. dollar, we are -- there is actually 120 countries on the other side in which they're importing in the local currency. When the -- so -- India rupee has weakened, the factor is dollar has strengthened, right, across the basket of currencies.
So when Indian currency is weakened by 10%, the dollar pricing may have to be reduced to adjust for the local currency increase. So it's not a one-way street for us. But generally speaking, directionally, a weaker rupee is better than a stronger rupee, right? Because if the rupee strength then we have to go ask for a higher dollar price. When they were lower -- when I have to reduce my dollar pricing, it's a happier place to be than the otherwise. So directionally, yes, it helps us. But in reality, a lot of that has to be pass-through just for us to remain competitive for the customer in their importing currency.
Got it, sir. And so the next -- second question is you have almost INR 2,300 crores of cash. So I just want to know any plans on the usage? Are we looking at any backward integration strategies?
Nothing to that extent. We just believe and like we be saying our best is still ahead of us. We are excited of what's presented in terms of the landscape. And I can actually become a very different business going forward in 3, 4 years, and cash allows us to have that wider vision. But as of now, nothing outside our core business. There is no fund use plan outside of what we are doing, which is working capital or factories for our business.
[Operator Instructions] Next question is from the line of Aditya Khandelwal from SIMPL.
Sir, I just wanted to get a better understanding of the mill liner market. So like in grinding media, where the chrome is gaining market share was over. So just wanted to know, that has also happened in the mill liner segment like chrome is gaining market share over existing market?
Not really. Mill lining has a different alloy base. And we have -- we are trying to introduce new alloys, but it is not forged versus chrome, it's the existing incumbents, but it's low-chrome product. And we are in that same alloy range, if I were to use that word. The differentiation for us comes in terms of design of the liners. And of course, with the metallurgy that we are offering ultimately resulting in benefits for using our product versus the competition in the mid-lining pace.
Yes. So the reason I'm asking was because there's another listed player, which claims that is hybrid mill liner, which is made of steel and rubber and got the same benefits, which we have with our chrome mill liners. So just wanted to know your views on it.
I'm not sure we've understood what their claim is. But rubber and steel are generally mutually exclusive. There are operating conditions where steel is a better solution and then there are operating conditions where rubber is the de facto. And there will be overlap conditions where either can work depending on some other variables, but that's our understanding of the market.
I don't think I can reflect or respond to someone else's view on that. That's for you to verify. Whatever is the steel market, in our opinion, is and will continue largely to be a steel market. Of course, if the carrier of some overlap operating conditions where rubber could be a solution. And likewise, where rubber can be replaced by steel on the other side. So with the caveat of that overlap, we believe steel alloy will -- steel as a material will continue in the market that we are serving.
Sir, just one last question. So you mentioned that we should look at the company on an EBITDA margin basis. So your realization comes down and the margins remains the same. So the EBITDA on absolute basis would be a little lower, but with volume growth, our EBITDA would be on an absolute basis remained the same or show some kind of growth in the next year. So that would -- would that be a correct understanding?
Technically. Theoretically, what happens that when my margin remains constant, sales, theoretically, it comes down a little bit. Then in terms of percentage, actually, it will grow a little bit, as a percentage of sales, correct? Having said that, there are multiple variables with which we work. One is product mix. Second is the status of pass-through, which is a particular product at times and we do multiple products like castings, liners, grinding media. So depending on product mix also, it plays a very major role in pushing the EBITDA needle, either which way.
Having said that, technically and theoretically, if I work with a basic understanding that I want to earn and maintain my margins, then in percentage terms, in a falling pricing scenario, actually, the margins will go up as a percentage. That's the theoretical answer.
The next question is from the line of Sujit Jain from ASK Investment Managers.
Did I hear it correctly that every year mill liner volume can go up 10,000 tonnes. So let's say, in FY '24, it could be 34,000 tonnes.
No. So you see, we are talking of a consolidated volume this year, which Kunal explained about 20,000 tonnes, 23,000-odd tonnes. Our retail capacity of the new plant is about 50,000 tonnes. We are also doing some liners from our existing plant. So we believe that over the next 2 to 3 years, we should achieve an optimum -- near optimum capacity utilization. But an exact number of 10,000 is not what we are talking about. We are talking of a directional opportunity or the opportunity is good our efforts are on, let us see. But we're talking of a blended volume incremental growth of 30,000 tonnes. So we are not saying [ Foreign Language] mill liner is now [ Foreign Language] No, we don't do that.
Second question is on Brazil that I think was to come up 5 years after the initial duty, which was in December 2017. So it should have and could have come up for hearing in Brazil, if you can quickly give an update on that. December '17 was when it was imposed and this period was for 5 years.
Yes. But so it will be -- we'll see next year. But as of now, currently, we have already -- as I explained in the earlier call, we already started supplying on a decent basis to Brazil, and they are paying the duty. So very honestly, we have become agnostic to the anticipating duty scenario in Brazil.
It should have come up for hearing again with the government in 5 years, December '22. That was the last understanding that we had.
Yes, it will come up. It will come up. But as of now, we have not heard anything of that.
Can you hear me?
Yes.
We can hear you.
Yes. It will come up for reassessing middle of next year, middle of this year, '23.
And currently 11.8% duty?
Correct.
Yes. One last question is on SAL. Sir, how much of your raw material is basically ferro chrome and how much would be scrap? Ferro chrome broadly.
25% of my purchase -- of my consumption -- I mean production.
SAL would be 25% of your ferro chrome?
No, no, no. SAL would be how much? SAL would be just 1 of the 5 vendors that we keep buying from [indiscernible] I don't think there'll be materiality to their supply immediately. Ultimately, we'll see how they scale up and what happens.
So you said 25% is ferro chrome of the RME?
In volume terms.
Yes, yes, yes. And typically, for 100 tonnes, you'll require 110 tonnes of RME?
Correct. Correct.
Thank you. As there are no further questions, I now hand the management -- I now hand the conference call to the management for closing the conference.
Thank you, Nirav, for taking this. Thank you all for joining the call. As always, Sanjay and I will remain available for your questions, follow-up questions off-line. And we look forward to engaging again for the fourth quarter numbers. Thank you, and have a good evening.
Thank you. Thank you all.
Thank you very much. On behalf of AIA Engineering Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.