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Thank you so much, very warm welcome to everyone. Thank you for joining the call. I know it's a little later than usual. And if people are joining us from Singapore and Hong Kong, it might be a little late in the day, apologies for that, but our Board meeting was scheduled for a little longer today this time, and so we kept it for 5:00 PM. This is Kunal. I also have Sanjay Bhai here with me. As usual, we will start with a synopsis of key highlights for this quarter and then we will move on to Q&A.We are happy to report tonnage of 66,000 tonnes in this quarter, which is up from about 51,000 tonnes in third quarter of this year and about 58,000 tonnes in the fourth quarter last year. Of that 66,000, about 37,500 -- over 36,000 tonnes comes from the mining segment. So we closed the full year with 228,000 tonnes of sales, and that is around the 230,000 guidance that we had guided to in the last few quarters for the full year.We also closed the year with INR 2,375 crores of top line, of which fourth quarter represents about INR 720 crores, which is up from INR 556 crores in the third quarter this year and INR 608 crores fourth quarter last year. It's about INR 68 a -- INR 108 a kilo of realization for that's a little bit linked to product mix, but also represent some part of the price increases that we have seen on account of the raw material volatility. We've been able to pass through some amount. The higher realization reflects partially the price increases that have come through as well.Going -- carrying on with some other key parameters, our EBITDA is at INR 216 crores for the quarter and INR 657 crores for the full year, and our profit after tax is INR 152 crores for the quarter and INR 443 crores for the full year. Our operating income, which is predominantly export benefits, is at INR 23 crores and INR 70 crores for the full year. If you compare that with the previous year 2016-2017, the export benefits were about INR 58 crores. Other income, which is predominantly dividend or interest on our treasury, foreign exchange gains and fair value of other investments, all put together is at INR 49 crores for this quarter and INR 121 crores for the full year. It is up from over INR 104 crores for the full year '16-'17.Some of the key balance sheet figures, our raw material is at -- is a little lower than what we have seen in the first 3 quarters, but that's temporary. We expect that to be around 35 days. Likewise, our WIP and finished goods were about just under 16 days as we remained flat over there. Our receivables were about 80 plus, taking our total working capital cycle to about 100 days.From a tonnage standpoint, we closed the full year mining at about 139,000 tonnes or [ 138 plus tonnes ], roughly about 140,000 tonnes and also 228,000 tonnes [Technical Difficulty]
Hello, sir. Sir, we are not getting audio from your line. Participants, you are requested to stay connected while we check the line from the management.[Audio Gap]We have the line from the management reconnected. Sir, you may go ahead please.
Yes. Sorry, there's some problem with the call. So, I was talking about the mining side, where we have grown from a 100,000 tonnes in '15-'16 to about 140,000 tonnes in '17-'18, so about a 40% growth in last 2 years. We remain confident in our -- [ about our ] prospects in the mining segment, and we'll talk a little more as we go through the call.One highlight is around tax, where it's about 25% to PBT, our tax ratio, and that's on account of the tax reversal on treasury income, which had finished 3 years. So the provision that we've made for it got reversed in the quarter for the portion that belonged to this quarter with 3 years ending in this 3 months. And on account of that, you'll see a net lower tax amount and slightly higher PAT on that account.Moving on, we've one important announcement to make around our collaboration that we've done with an American company called EE-Mill Solutions. You are aware that we offer grinding mill solutions, which include power consumption and throughput optimization in the cement sector. We are now -- we are partnering with this company to offer energy efficiency and increased output process improvement services for the mills -- grinding mills in the mining segment. And that gets done through the design of the mill liner and that's where we are collaborating with this company. And we believe that we probably would be one of the very few companies that can offer such an improvement, optimizing the circuits for these mills, for these plants, for the mining plants.And in line with that, we are proposing to set up a dedicated plant for the mill lining. We already have land in GIDC estate in Kerala town near Ahmedabad -- Kerala village near Ahmedabad and we already also have the pollution permission. So from start to finish, we can probably get the plant up and about in 18 months to 24 months. And our first estimate of the budget stands at INR 250 crores for that plant. So that's something that got discussed in the Board meeting today, and that got discussed. So linking that back with the CapEx projections for the year, we spent INR 138 crores this year towards CapEx, which went towards the first 50,000 tonne phase that we are adding to -- for grinding media, for going from 340,000 to 390,000 tonnes.An important development there is that we've discussed a slight delay in the execution of this project because one of the companies supplying an important equipment went bankrupt, a European company [ from whom ] we bought went bankrupt, and that delayed our commissioning of that facility, of the first phase. But we expect to get that up and about in the next quarter. And with the balancing equipment, which we'll [ die cast ], if still that doesn't get done, we will constraint to not carry out the balancing melting facilities required for this plant. So with that having said, our target for the first 50,000 tonnes -- the commissioning of the first 50,000 tonnes stands at for December 2018. But notwithstanding that, we are at 340,000 tonnes, and with the guidance of about 40,000 tonnes of additional sales this year, which would take us to 270,000 tonnes, that would leave us with adequate production capacity for this year. And by end of this calendar year, we should have the first 50,000 tonnes going in and the balance 50,000 tonnes in 8 to 12 months off that date. So total budget for that project, we spent INR 138 crores for first 50,000 tonnes and balance CapEx will be done this year. We are doing the mining lining project for about INR 250 crores and we are considering to invest in 8 wind turbines. As you know, power is one of the largest cost line items for us. We've already bought 2 wind turbines and we have signed a letter of intent for additional 6. So that's about a INR 100 crore CapEx on securing long-term cost efficiency for our power cost. So that -- the mining lining project and the CapEx for the first --balance CapEx for the first 50,000 tonnes and the CapEx for the second 50,000 tons of grinding media, all of this comes to about INR 800 crores, and of which we expect to spend between INR 400 crore and INR 500 crores this year and the balance in '19-'20. So that's the outlook plans for CapEx for next 2 years.I think having touched based on some of these important aspects, we'll just close the session with an update on the business. As you can see, we've continued to add tonnages in the mining side and the total volume increase in this quarter is predominantly a push in the mining side. All our hypothesis on chrome as a solution remains is something that we are pushing actively in the market. And we are hopeful that in next 2 years, within '18-'19 and '19-'20, we add 80,000 to 100,000 tonnes in the mining side. We're making all our efforts in that direction.Two important highlights are raw material. It seems to have stabilized albeit at a higher level. But over last few weeks, we've seen less volatility there. And the other big factor is the rupee. We've long been believers that the currency was overvalued and with it being at current levels around 68, that gives us a little bit of a breather. Of course, our pricing is cross currency, so if the other side has weaken also against the U.S. dollar, we may have to do a lower dollar pricing. But nevertheless, there'll be -- this is a little bit of tailwind for us as the currency weakens.With that, I'll just request Sanjay Bhai to chip in with his insights, and then we'll move on to Q&A.
Well, I think, Kunal, thank you very much. Everyone, a very hearty good evening to all of you. Kunal has covered most of it. Two important -- I would say only one major important update I want to give. This collaboration with this American company is also a very important step in the sense that it gives us that additional wherewithal to have our presence and also bringing the total concept of lowering the cost of ownership in case of mining also, because here with this new design of liners, we'll be able to also help all these mines in significantly reducing power cost, which is again very important cost for mines, apart from the cost of this consumable grinding media. And that also improves our -- it completes the whole picture of making us very, very formidable for penetrating this huge mining opportunity in a very unique way.Rest all, the volumes you have seen in Q4 and as we said, in the current year onwards, about 40,000, 50,000 tonnes per annum is what we are quite confident about. The business undertone remains distinctly firm and we seem to be directionally now quite well positioned to achieve our long-term goals.I think with this, I would request the moderator to throw the house open for Q&A.
Thank you very much. [Operator Instructions]The first question is from the line of Sandeep Tulsiyan from JM Financial.
Good evening. The first question is pertaining to this EEMS technical collaboration that we have gotten into. I wanted to understand what kind of revenue it can generate as in -- will your existing mining liners fetch higher realizations or is it a separate product line which will be sold along with our existing products?
This is existing -- first and foremost, yes, we are currently doing some 8,000 to 10,000 tonnes of mining liners. But what we are now bringing in is patented technology with -- which improves the process efficiency in the liner segment, which actually helps in reducing the power cost. So it's a much superior product in terms of technology and the capability that it brings on table. So the capacity is about 50,000 tonnes, and if you consider -- say, in average for liner segment is about $2 to $3, in that range, at the optimum capacity, it can give you increment $2 to $3 a kilo. So you can do your math, but it's -- more importantly, what will happen, this was one area where we were not able to focus on the process efficiency. So this is an additional strength that we get, and in the process, we become a complete one-stop solution for the mining, for covering every aspect, and that overall therefore improves your positioning and it definitely enables you to do your penetration much faster.
Okay. So it's basically the products. So this INR 250 crore investment will help us have higher realization for mining liners, correct?
Higher realization is secondary, Sandeep. The idea is that we are adding one more engagement point with the customer. It helps us add value to them where we are doing the whole solutions, which is grinding media and liners. A higher pricing is an incidental thing. It is still a mining liner. It's an opportunity to sell an additional product, as well as combine it to make it a solution where we are doing improvements in their process. We're selling grinding media. We also bring mill lining. And in the process, improving the overall realization and profitability, both.
Got it. And for the revenue sharing part, do we have to pay some royalty to [indiscernible]?
Yes, we have to.
It's royalty based?
Yes.
So we own the patent technology, everything. We just pay them annual charge?
That's right. Linked to sales.
Got it. And of last year's CapEx of INR 800 crores, can you broadly classify how much is going towards the existing capacity expansion of 50,000, balance 50,000 and towards this INR 250 crore in windmill which you mentioned? If you can broadly give a breakup because I was not able to --
About INR 400 crores goes towards the existing -- the grinding media [indiscernible]. It includes some balancing line that we may have to buy for all this expansion and maintenance CapEx for 2 years for all the plants.
Okay. So INR 400 crores for this, INR 250 crore for the --
INR 400 crore for grinding media, balance line and maintenance CapEx for all the plants, INR 250 crores for the mill lining plant and INR 100 crores for the wind turbines.
Got it. Thank you so much for taking my questions.
Thank you. The next question is from the line of Utsav Mehta from Ambit Capital.
Hi, good afternoon. Just wanted a bit of an update on the Brazil anti-dumping duty. I think there was going to be some -- I recall you saying that there was some sort of an update that was expected in April as far as the final decision goes.
We'd requested for a in-person hearing, which has pushed the dates. So we expect this to be now announced in June. But they've made public their technical analysis in which the dumping duty in their working comes to about 12% from 32% at this time. And we are obviously making submissions on that data as well. So since its [ subdued ] right now, we would not be able to speak more, but we are hopeful of a positive outcome there.
Right. But you're saying this reduction from 32% to 12%, that's not out as a ruling yet?
It's already happened.
No, no. It is an internal technical load that they have done on their working that becomes the basis of their final duty notification basically.
Right, but as of now the interim model still demands --
It still continues. Yeah. Till the final order comes, the interim continues.
Right. And just to sort of delve a bit further into this -- into the CapEx plan, just wanted to understand largely, if this mill liner capacity would be the sort of final big bulky CapEx for at least the next 2 or 3 years or are we also looking at some additional products?
No, we're not looking at additional products, but we may enhance the grinding media capacity as we keep making inroads in that space basically.
Right. And one final question from my side in terms of sales and sales cycle, largely with improving commodity prices, have you sort of personally noticed any shortening of sales cycle?
Not really. [indiscernible] on the treadmill.
But any specific geography that you would like to highlight that where off-take seems a lot better than some of the others or...
We work hard. There are very few people who are there in the market space allow us to work on it and then come back when we are actually adding those tonnages.
In fact, everywhere we're watching, things are positive. So we do expect a lot of traction going forward.
Right. And this quarter's volume, there is no sort of additional input from the Barrick order, right, that's expected in 1Q?
Correct.
Okay. Thank you so much for your time.
The next question is from the line of Bhalchandra Shinde from Anand Rathi.
Good evening, sir. Sir, sorry, my call dropped in between, so I don't know whether it has been answered or not, but if you answer the few questions like depreciation cost has declined, is it any specific reason?
The biggest plan that we have till now, it is fully operational, finished 10 years of its life. We got that commission in 2007, and from 2017 onwards all the residual depreciation got canceled.
So a large part of that has moved off the depreciation table.
So the year onwards, overall depreciation rates should be in this range only, or an additional whatever will come afterwards that will get added, right?
Till now, we were depreciating our new Canada plant because we were running one shift. I think we'll be moving that to a 3-shift operation very soon, and as soon as that happens, I mean you will see a spike in depreciation.
Okay. And sir, regarding the price increase which you mentioned, have you done all the price increase or there is still some price increases yet to come over next 1 to 2 quarters?
My friend, it's a continuous process because every new order I will take in terms of new volumes will be at a competitive price, very, very competitive price. There would be process of gradually increase in the prices of the existing customers who have become steady. So, that will -- it will keep on happening. As you can see, the margins are now in a reasonable range and we believe that there is going to be definitely a pressure as we improve our volumes significantly. At the same time, existing customers will -- as they keep on using our products, they are getting more comfortable, and we are able to take a price increase, but there is no such formula. There is no PV formula, as we know, automatically in some industries.
Right. And sir, the volume growth which were happened -- because if sequentially also we see, there was additional 15,000 tonnes which we did. Is it largely because of the customer additions or...
We discussed -- we told you last quarter that some of their material was not billed, right? That will come into this quarter. Third quarter was an anomaly because a lot of our dispatches did not convert into invoice, it was sitting in transit, et cetera.
Okay. So, one can assume that average of 2 quarter volumes will be in the normal run rate and the additional customer-related volumes will get added?
I'll not look at it like that, Bhalchandra, because if customers place orders for 3 months, and then they may consume it over 6 months. It's not one finite set that gets repeated, but we will be doing new customer additions nevertheless.
See, Mr. Shinde, there is no clear quarterly guidance ever given. What we tell you is that over next 1 year, we do expect 40,000, 50,000 incremental volume growth, but that doesn't mean that it will be divided by 4. Our business is not like that. We are very clear. And we don't want anybody to be misled on this.
Right. Okay, sir. Okay. Thank you very much.
Thank you, sir.
The next question is from the line of Bhoomika Nair from IDFC.
Yes. Good evening, sir. Sir, on this tie up with ESM, just wanted to check does this open up a new market for us in terms of primary grinding or does the [indiscernible]?
New product range, Bhoomika.
Okay. So, it's not really that the market -- addressable market in any sense expands?
See, what happens, this was a very critical factor because this technology is very unique in the world. It's a patented technology. It makes dramatic improvement on the -- apart from everything on the cost factor for the mine, and it improves their grinding circuit power cost efficiencies, okay? So, what happens? It helps you in getting access to lot of customers for the liner. And in the process, therefore, it also opens up your revenue for approaching more customers or having a quicker penetration for grinding media. You get my point?
Right. Understood.
So, if you see what we have been doing over last 3, 4 years, we have been slowly and gradually improving our positioning and changing our orbits. So we initially started with a pure cost equation, then we focused on the down process and efficiencies as we discussed in terms of reduction in cost of other consumables like cyanide, et cetera. And also...
[indiscernible] et cetera. And then, for the overall grinding process, what we wanted to optimize that grinding process, I think this will help us in doing that. The way we say that we're experts in cement, I think we are reaching that position where we can address every possible requirement of a customer.
Okay. So, this would basically help us, probably, conversion of clients which takes a little longer time could probably shorten that process. Would that be a fair understanding?
And their liners. Liners is an important market.
Absolutely. Okay. And we should look at -- with this capacity, once it gets operational, we will have [ 440,000 tonnes ] plus 50,000 tonnes or total capacity would increase to like 90,000 tonnes?
Absolutely right.
Okay. And in terms of the power plants that we spoke about, what kind of savings can we get over a period of time in terms of our manufacturing once these plants are operational?
How much time we take for the plant to stabilize?
No, you've ordered some wind turbines, right, for reducing our power cost?
To get commission this month or early next month -- June -- some time it next month, and once that they achieve performance, we'll move forward with other things. But the result would be [indiscernible] 2.1 megawatt WTG, which are very efficient. Their generation is also latest, so they are high on generation about 30%, 31% efficiency. And that will start having its impact on our power cost in a gradual manner, but you can see full impacts from next year. So add the 16 megawatts, we can hopefully assume that it should effectively help in generation of almost 4 to 4.5 megawatt of power effectively, which will help me in reducing or getting credit of those many units from the State Electricity Board.
Right. Okay. Fair point. And the last question is on the Brazil thing, which you mentioned, has been a little delayed to June. Sir, if I remember correctly, had they ordered up to March and the client was taking up material up till then, so does the off-take of volumes continue into Brazil or as of now, it's kind of on fall?
Absolutely continuous every single month.
Okay. Great, sir. Wish you all the very best, and I'll come back.
Thank you, Bhoomika.
Thank you, Bhoomika.
The next question is from the line of Ashutosh Tiwari from Equirus.
Yes. Hello, sir. Congrats on good set of numbers.
Thanks, Ashutosh.
Firstly on this liners part, will these be a sea liners or hydro liners?
Hydro, absolutely.
Okay. And secondly let's say, the liners basically your grinding media balls are spread as consumable, even after [indiscernible] last 4, 5 years. So, then these liners are also be like the same way they're consumed or even at designing stage of the mill, you have to get involved.
No. It's a consumable. It might have a slightly longer life. So average life could be 4, 5 months for the standard type of liners, but they are consumable in nature.
Excuse me, this is the operator, Ashutosh, I'm sorry to interrupt, we are getting a lot of echo from your line, if you are on speaker, please turn that off.
Is it better now?
Yes.
So asking that can the liners design be changed in a mill during the life cycle of the mill?
That's what we're doing, yes. And that's exactly what we do in cement also, Ashutosh.
Okay. Got it. And secondly what was the hedge rate in the current quarter and how it will move going ahead?
[indiscernible].
[indiscernible] rate for us in the last quarter, fourth quarter.
INR rate.
It's about 64 -- I think [ 64.75 ] or so.
[ 64.65 ]?
[ 64.75 ] approximately.
Okay. And this will move to -- I mean, Q1 we saw solid moment, while Q2 volumes will be 67?
We will see improvement by Q3. We had taken hedges.
Yes, obviously it doesn't seem that [ over the next 2 ] quarters always go to higher levels.
It will. But we are trying to be, as in the past I have said, we are trying to be agnostic. It is now turning to be beneficial, that is okay. But we always wanted to look at it without any extra tailwind or headwind coming from FX side.
And sir, lastly on the Brazil part, roughly what percent of our volumes come from Brazil?
Is it okay if we don't share that just now.
Okay, fine.
Okay, sir. Thanks a lot.
Next question is from the line of [ Abhinav Malhotra ] , individual investor.
Yes, sir, good evening. Sir, my question is about new collaboration about the mill liners. I have 2 questions. First, is it exclusive agreement or do our competitors will also have this technology?
This is absolutely exclusive.
Okay, great. And sir, the second question is could you share some more information about the customer acquisition process in these middle liners, like with relative to the time scale and the customer acquisition costs that we currently take from the HCMI grinding space?
I think the band line will be smaller than grinding media because the replacement is quite quick and there will be significant engagement over a shorter period basically, where we are going, explaining the process, explaining our designs, we will be taking on responsibility for the performance thereafter. So, I think it will be lower than the grinding media cycle for the new customer, but please understand our objective is to become a solution partner, not just sell mill lining. We will be doing mill lining, we will be doing grinding media, and we will be doing process optimization. So, that's where we will be. Our objective will be sale of package.
So it will be -- the time line will be much lesser?
Yes, you are right.
Okay. Thank you so much. That's all.
Next question is from the line of Grishma Shah from Malabar Investments.
Good evening, sir. Thanks for taking my question. Quick one, as we installed these windmills, do we have tax rates and will the tax rate...
We just get accelerated in depreciation but that's not so much, so nothing significant.
Okay. And the other thing was on the mining liners. You mentioned some $2 to $3 per kg, what was that? Was it the cost, was it the pricing?
Those are selling price for mill linings. Somebody asked us what was the -- what will be the -- telling how what will the realization be on the product.
Okay, fine. Thank you so much.
Next question is from the line of Bhalchandra Shinde from Anand Rathi Securities.
Sir, regarding this EEMS only -- it's like on the mining liners, when we started the grinding media, we started with [indiscernible]. These mining liners will be primarily used in primary mining activities or where exactly?
It will be primary mill.
Primary is more. Yes.
Will it means it will create inroads for us to get into more into the primary mining activities?
We are only in the primary segment. So this is -- it will help us as a solution provider, Balchandra. Don't look at it singularly as it will get our access to primary. We are doing mill improvement for the grinding mills by offering a package, which is mill liners with our design. With this design and grinding media together, that will ultimately result in a solution benefit.
So we will be looking more towards like formulating a contracts where we will maintain everything related to that process?
No. That -- I mean it's too early to start talking about that. For us, it's primarily a new product, 50,000 tonnes. Even if you do 40,000 tonnes of production from that facility, that's about $80 million to $100 million of revenue that can accrue out of it, and helps us with a different level of engagement with the customer, it will help us expedite our entry into the segment, and become a solution provider partner for the customer.
See Mr. Shinde, just to elaborate, which is -- this is very critical factor. Cost savings is always an important criteria, so you will say consumable, grinding media costs we are savings by better efficiencies, that was the starting point. Then, we went ahead and we also explored about the benefits of down process, improved yields et cetera. Now, this particular grinding liner technology is very unique in the sense that it helps the mine to save 8% to 10% of power costs, which is a very, very major cost for mining, the way it is very important cost for cement, correct? So, we are improving the grinding process efficiency by this unique product conventionally as compared to conventional liner. This is something different and unique based on a completely different patented technology and that gives us a lot of edge as a total solution provider for mining in as much as grinding is concerned. You get my point?
Yes, got it. So as such -- as you said that 8% to 10% power cost saving, it's like when we talk about the grinding media bump for the mining, it's around 2 percentage of the cost when we use high-chrome kind...
Wrong. You are wrong my friend. It's not 2% of the cost. It can be [indiscernible] 8% to 10%.
Cost of mill internals totally, including grinding media, is about 8% to 10%. That varies depending on the way rate, the throughput, the output that they are having, but reduction in wear cost is not the objective. The reduction in their power cost is the objective, and improving their throughput, right?
Okay, thank you very much sir.
The next question is from the line of Charanjit Singh from B&K Securities.
Sir, my question is on this -- the new tie up which we have done. Like how large is this market and who are the other players in this market and what are the kind of technologies. You have mentioned that there is a patented technology, which this company has. So, who are the other players who are bringing in the similar other kind of technology?
From a metal lining standpoint, the market could be between 300,000 tonnes to 500,000 tonnes of annual consumption. And of that market, we've got various supplies, we've got 2 large suppliers, and maybe 2 or 3 smaller -- 2 smaller suppliers in the market who are supplying the conventional design.
Okay. And sir, this tie up is only for certain geographies? How...
They are for all mill linings, everywhere.
Okay, sir. Sir, you also mentioned about certain -- the volume pickup was also because of one of the customer didn't pick up certain volumes in Q3. So do you see that continuing in Q1, Q2 also, but volume pickup from that fragile customer? And how much of that....
If I had a crystal ball to guess and tell you that. But Q3 what we've said is not customer not picking it up. We couldn't invoice because it was sitting in transit. Invoicing happens based on [indiscernible] and which is where we had some -- we only had informed that there is about few 4,000 or 5,000 tonnes of that material sitting in transit. I think that was a one-off thing whether that will happen in first or second quarter, difficult to estimate today.
Okay, sir. Sir, the last question from my side is in the primary media, we have been doing a lot of marked ball tests at the mining customers. How is that process going on? Have we added process to the [indiscernible]?
The first in primary, secondary and tertiary have all been there since the time we have been in the mining segment. So far us there is very little difference in our approach to primary, secondary or tertiary. So, we've done enough work, we've got at least 30% to 40% of our volume comes from the primary segment. And much more tests are going across the primary, secondary and tertiary segments.
Okay sir. Thanks sir, that's all from my side. Thanks for taking my questions.
Thank you. The next question is from the line of [ Suryanarayana Reddy ] from SBICAP Securities.
Good evening, sir. The question is regarding your licensing arrangement and the investments that you're making, if you could give us a sense of what sort of margins that you expect to make and how long will the CapEx take to fortify?
About 15 to 24 months is the time for us to set up the -- commission the plant. I think it's a unique opportunity for us to, as I explained before, to actually upgrade our engagement level at a different -- to a different level. To engage with the customer, where we are saying we will go and improve your process and that also for optimized systems for mining plant is not a small feet for us. So it's a strategic move. We believe it will be decent margins. I think it'll be premature for us to start talking about margins when on a public forum for this product line, but I think we'll be largely in line with the product portfolio that we currently have.
Okay, that's it. Thanks.
Thank you.
Thank you sir.
Thank you. The next question is from the line of Rajesh Kothari from ALFAccurate Advisors.
Good evening Kunal Bhai, good evening Sanjay Bhai. My first question is in terms of this new line, what is the number of major players and what is their kind of current revenue size or current volume size? Question number 1. Question number 2 is whether these tie-ups, is it exclusive to us or whether other players also have the similar technology, and if yes, how it differentiates versus others? And question number 3, just like in mining when we had initially kind of a penetrative pricing policy, do you think in this business also in the initial years it will be like a gradual moving the learning curve before you come to the maturity?
I think -- so I'll answer the first question -- the 2nd question first is that this is a patented technology, which is where we are working with. It's not something that other -- we don't believe other suppliers in the market today have a similar offering Number 1. Number 2, there are about 3 players, 3 or 4 players which currently serve the market. So like for everything else that we do there is always an incumbent, because we are replacing our end-incumbent to supply our products. So about 3 or 4 organized players in the market.
Can you name them?
There is a company called Bradken, B-R-A-D-K-E-N. There is company called Elecmetal, E-L-E-C-M-E-T-A-L, and then there 2 other companies.
And the total, the Number 1 and Number 2 will be having what kind of market share?
I think between the 4 of them, they would have about 60%, 70% market share, but there is large amount that gets made by smaller companies, companies from China also exporting into the market. So, these are the 4 organized sector players.
Sure. So basically, when they are offering the solution your positioning is that you can offer liners along with the grinding mill internals, whether they are only into the liners, something like that?
We are offering a different solution in the mill lining where we can improve throughputs and we can reduce power consumption for these mills.
And what they are offering?
They are just offering us mill lining, which is a -- this is conventional mill lining, it has got nothing to do with the process.
Oh, I see. So you are the only player therefore what you are trying to suggest is that with such kind of technology solution approach, you will be the only one or somebody also there like you?
We believe we will be the pioneer with this partnership in this space, that's our attempt right now. As far as mill lining design is concerned whereby we can approve these benefits for the customer once. But please understand, we are then marrying it with our grinding media and where there are other benefits. There are benefits of, of course reduced to wear cost of the grinding media, but also down process benefits like improvement in recovery, reduced toxic creation consumption, et cetera. So it becomes a whole package that the customer has one-stop solutions, where we are saying we can optimize our mills, we can increase throughput, we can reduce power, increase recovery, it is a very different engagement level that we -- this is a strategic move for us to really engage at a different level with the customer.
So in this entire solution-based approach, now you have liners which you are adding to the portfolio. Are there any more complementary, what I would say products which are available in the part of this total solution or is the only thing? Or there are many more business components?
No, this is it.
And most of this other -- just to answer one part of the question, we are not into grinding media high-chrome, which Kunal explained. We are not into high-chrome grinding media.
I see. So you'll be probably the only player who is also into grinding media, so you can offer like a composite package kind of thing?
Yes, exactly.
So for you the wallet share can be at a much more economies of scale kind of thing. Cost of customer equity is already done kind of thing. So, it is same customers you can approach with the new product and, of course, new customer you can approach with both the products?
And it improves the overall ability to penetrate faster and convert the customer from forged to high-chrome.
I see. So, in 24 months this project will commence the operations. So, basically we have to assume April '19 -- April '20?
You are right. Through 18 months or 24 months, but we do have some little production of these products, which we can shift to the new design and technology and start servicing our customers as and when the demand comes. So the trials and all those things have already started. So my point is that I am not necessarily going to wait for initiating the sale of this product linked to the commercialization of my new projects. You get my point?
In terms of the trail run or in terms of the testing of the product?
No, let me explain. So within my existing facility, which is not a dedicated facility I can still produce this product with the new design.
Okay. With this new patented technology, you mean?
Yes.
By when you can use them -- ?
Control have enough capacity, so we'll need a larger capacity that will go in some of the other market.
That I understand. Say on the same thing, let's assume within first 12 months, since now you have got technology, within 12 months what kind of a production you can achieve considering the target market and considering the efficiency?
[indiscernible].
No. You already said from existing itself also you can start, am I right with the new technology. I'm not talking when commencement of the new plant, that any way will happen after 2 years.
Yeah. I think easily 5,000 tonnes to 10,000 tonnes as and when the demand comes, of course.
As and when the demand -- and when the new project starts, that is March-April 2020, in the first year you would assume about what a 35% kind of utilization?
I think so. Yeah, yeah, yeah. Definitely.
Or it should be more?
Yes, as I said we are not into a line production of a standardized product, but we have to create a capacity based on the potential that we see. So when we did this collaboration --.
And minimum economies of scale, so this is the plant that we are setting up we would hope that the product takes off, but it is difficult to start off right now to say exactly, I mean where we will be in the year one, but probably 20% to 30% utilization is a fair expectation.
Okay. My second question is with reference traditional business, particularly cement application business, what is the FY18 growth?
It's a flat month, at a flat phase.
So, this lasts 4, 5 years being kind of the flattish numbers kind of thing, non-mining things, so out of your total cement --?
Having shrunk globally we have continued to maintain the -- we were not shrunk because of shrinking market. Cement has not -- has been doing very poorly worldwide.
Okay. And how much of this total cement is in India, of your total volume?
India would be about 20%.
That's great. So India must be growing little bit higher.
20%, 25%. yes, India is growing, but even that's not now material to the scheme of things where we are now.
Okay, perfect. Great, thank you. I will take questions offline. Thank you very much.
Thank you.
Thank you.
Thank you. The next question is from the line of Hitesh Kumar from Aksa Capital.
Hi, thanks for the opportunity. My question is again on the new product line, the mining liners. What would be the difference in the cost of the conventional liners vis-a-vis the liners that we plan to manufacture? And as you said, the benefit is about 8%, but then 8% in terms of the power savings --?
No. Hang on, step back. First of all, there is no difference in the product, its a different design, it's a patented solution that we're putting in place. The cost to manufacture may or may not be very different, Number 1. Number 2, the benefit cannot be generalized, because that depends on the mining conditions of that operating -- of the mill that we target. So the boilerplate solution where everywhere we go, we can offer our solution for a benefit. We believe it should be more than 8%, quite significantly more than 8%, but that's something that we'll have to go, do a study for each mill and its operating condition and then divide what that benefit potentially could be.
Got it. So in terms of cost to the customer, it would remain the same as compared to the conventional liners, right?
Overall cost will go down no, if you see this power cost also --.
I'm just -- I'm just referring to the cost of the consumables for the customer. That would remain the same.
Same but the cost of ownership will come down.
Got it. And is this a standard product or you'll have to design -- come up with a design based on the mill conditions, just like how you're doing for grinding media?
No, it will be mill condition driven.
Okay, got it. So the second question is on the -- I mean you just said it's not specific to any geography. I'm sure your JV partner also would be present in certain parts of the world. So how would you --?
[indiscernible] they're not the manufacturing company.
I see, okay, got it. That's it from my end. Thanks.
Thank you.
The next question is from the line of Chintan Sheth from Sameeksha Capital.
Yes, thanks for taking my question sir. On this early tie-up, you said there won't be much cause differential between the traditional versus the new technology. But it will add on the royalty part, which will be additional cost to you that can be inferred from your comment.
No, we are just talking about the product. Of course, we'll -- that will be a pass-through, it's a general question on the product. It doesn't cost us to do more. Of course, all of that will be factored when we do our pricing. If you are selling at $100 and this customer is saving $30 on account of that clearly there will be some price advantage that we'll have. But its too early to start talking about all of that. Clearly there's a strategy in place for pricing, which we explained from a margin, the question that got asked about margins. So we believe that margin should be broadly in large with the current portfolio, it factors the costs, it factors royalty expenses et cetera.
Sure. And existing traditional liners your making is around 8,000 tonnes to 10,000 tonnes volume which can be easily shifted to this new technology as well.
Yes.
Then that can be a broader target for next year, that can be presumed?
Exactly. We'll work with our existing plans. Absolutely right.
Correct, okay. And sir, on the tax rate, can you just explain, you mentioned something in the opening commentary --?
Yes, we have -- as you know, we got about INR 1,000 crores plus treasury and all of that is invested in liquid funds, so the income tax rules around that are, if you hold that investment for 3 years then there is no tax payable when you redeem that investment. So some of those investments have been made in 2015, between January and March of 2015 matured, they finished that 3-year cycle in this quarter. Jan to March 2018 and hence all the provision that was made was if you don't cross that milestone, you still have to provide for tax on that income. Provided in the balance sheet moved as a reversal in the P&L in this quarter for whatever amount that caused the 3-year threshold.
Sure, sir. Understood. Thanks for taking my questions sir.
Thank you.
Thank you. The next question is from the line of Ishan from Edelweiss.
Hi, good evening. This is Shraddha here. So just extending the question of the technical collaboration. Just wanted to understand what is the cost of this mill internal to the -- so 8% to 10% of the cost in a mining company is the grinding media. So how much is the cost of the mill internal and with the power saving that we're talking about, potentially like what is the overall cost saving --
I think we will share a little more flavor on that maybe in the next call. We'll come back with a some more color on this market segments Shraddha.
Okay. So essentially, I mean it's like a 1% saving cost over and above the --.
It is not about the cost of the mill internal, the play is not to reduce the ware cost, it's not the way we are positioning grinding media. Here we are trying to save power cost and a material amount of power and improvement in through-puts.
I mean all in all, it would be a savings for the miner, right?
Absolutely, a material amount.
So, say if there was --
And the cost of this material becomes insignificant, basically what I am trying to tell you is that, it is not -- that's not something that gets factored if that's the saving we can actually demonstrate.
Okay, fair enough. And just secondly, on this demand that we are seeing in the mining uptick, are we seeing any demand related to the CapEx picking up in the mining cycle or it's still the same consumable demand?
I think we had seen -- we have seen some gold and copper companies announce plans for additional CapEx, but that's a long cycle. So nothing that translates into business for us at least this year or the next.
Apart from the -- materiality as far as we are concerned, our focus is on existing mines in the consumable site. So our focus is also not so much on going after new capacity addition.
Sure. Alright. Thank you.
Thank you Shraddha.
Thank you. The next question is from the line of Alder S from Slam.
Hello.
Alder your line is unmuted. As there is no response, the next question is from the line of Shreyas Bhukhanwala from Canara Robeco Mutual Fund.
Thanks for the opportunity. Just wanted to ask whether our biggest competitors also provide such innovative solution?
Well, they are in the business to be in competition and we are competing with them. But I don't think what we are talking of if you're referring to the new collaboration with ECMS, I don't think they have this type of solution with them.
Okay. Thanks.
Thank you. The next question is from the line of Pranav Gokhale from Invesco Mutual Fund.
Good evening sir. On this new thing is EML in any way connected with this deal -- is connected also with CCS?
No, not really.
Okay, because I believe EML also has a tie-up with CCS which does similar thing. So now your tie-up, is it an exclusive tie-up or have they got out of the tieup of CCS, which is why you have a tie-up with them?
What is CCS?
Complete Comminution Solutions Pty Ltd. This is a --.
No, no, see this is exclusive.
Okay. Because I think the founding director is also the guy who is also in EML, Mr. Latchireddi.
Yes, but this has got nothing to do with it. That could be for other technology. This is going to be exclusive to us.
Okay, now within this what will be AIA's role? AIA will also be included itself in the testing design of this entire circuit or --?
We will be the one sharing the design based on the operating condition, we'll be the one who'll be adapting to metallurgy, producing it, installing it, monitoring it, everything [indiscernible] with us.
Thank you. The next question is from the line of Amber Singhania with Asian Markets Securities.
Hi, Kunal Bhai. Hi, Sanjay Bhai. Thanks for taking my question. Just getting some more idea about this liner facility, you mentioned that the overall market is around 3 lakh to 5 lakh tonnes per annum. So out of this, how much has already converted into chrome?
All of which is chrome, my friend.
So, it's not something where we --?
It's not actually high-chrome, it's called -- it's a low-chrome product, and that's the standard solution for this -- in the -- for the mining liners.
So there is no substitution which we're doing, we're just providing a better product with a power saving option rather than what we're doing in grinding media --?
We're doing what we historically do, which is the golden triangle, where we are taking the knowledge of application and knowledge of design with our knowledge of metallurgy. We're making a combination of all of this to ultimately provide the benefit that we're talking about. It cannot be done in isolation. One cannot just come and do something that's independent of all of these 3 things.
No, because on grinding media side, we are substituting the forged media with our high-chrome product?
That's a different product in a different positioning, know?
Okay. So already the industry is using the chrome and we're providing a better solution over and above that, right?
Correct.
Okay. And secondly, before our tie-up with this company, with whom they had a tie-up and who are supplying the product?
I don't think we should get into all of that just now, but they are experts in this field. I think we can leave it at that for time being.
Okay, sure. Thanks.
Thank you. We have the last question in queue from the line of Brinkle Shah from ASK Investment Managers. It seems Brinkle has exited the queue. So, sir, there are no further questions. So I would like to hand over to you for closing comments.
Thank you so much. We're -- always, Sanjay Bhai and I shall be available for any offline questions. Thank you so much for being on the call and look forward to hear and talking -- sharing some more updates on our business in the next quarter. Thank you. Have a very good evening.
Thank you very much. Ladies and gentlemen --.