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Good evening, ladies and gentlemen. Thank you for standing by. This is Steven, the moderator for your call today. Welcome to the post results conference call of AIA Engineering Limited. We have with us today the management team of AIA Engineering Limited. [Operator Instructions] I would now like to hand the conference over to the management of AIA Engineering Limited. Thank you, and over to you all, sir.
Yes. Thank you so much. Thank you all for joining the call. I wish, I hope you and all your family members are safe. I have Sanjay bhai here with me, and this is Kunal. And as usual, Sanjay bhai and I will walk you through the highlights of the numbers, and we'll go into Q&A thereafter. It's been a roller coaster of a month of a quarter for most of us. And we've dealt with new set of issues and variables, I think, from which history will be written going forward. Very interesting learning, very interesting insights coming out every single day. Thankfully, our business is the basic boring industrial B2B, and we continue to do our work in our corner of the world. Thankfully, we've not suffered the fate of a lot of other businesses, which saw business shrink to -- shrink by 80%, 90%, one day to another day. I have -- and I know a lot of you have questions on what's going on now. But let's just wrap up with questions on the fourth quarter of last year. And we'll try and give a little color on what's going on now, and we'll go on to Q&A from there. So last quarter, fourth quarter was -- we did the highest ever dispatches or sales at 82,000 tonnes this quarter. It's purely a coincidence that last year and this year, the fourth quarter has ended up doing substantially more than previous 3 quarters. And as much as we try and pick apart that hair -- pick apart or split in, in terms of why that happened, it's just coincidental that a lot of dispatches happened in this fourth quarter as well. We -- in January and February, I think the company was very alert in sensing that a likely global situation may arise out of what's happening. And we produced a little more and stocked up all our warehouses in January and middle of February, which allowed our dispatches to our customers continue in March, despite India running into lockdown. And that's where we could continue showing sales on the balance sheet. So with 82,000 tonnes of sales, we produced [ 76,937 ] tonnes for the quarter, and we ended the year at 267,000 tonnes versus 265,000 tonnes in last year. Please appreciate that this is despite losing a large volume with iron ore customer in Brazil and one more customer in Africa. So at least 20,000 to 22,000 tonnes of business that would have been in this year. And at which the case, this would have been a decent growth year for us as well. Having said that, we closed the year at 267,000 tonnes with 82,000 tonnes this quarter. And then further splitting apart those numbers, our EBITDA is at INR 213 crores, and -- which is flat compared to fourth quarter last year and also third quarter of this year, which was about INR 218 crores. And right up to profit after tax for this quarter at INR 141 crores, and we closed the full year EBITDA at INR 822 crores and profit after tax at INR 590 crores. That PAT includes onetime reversal of deferred tax of INR 20 crores. So the rest INR 570 crores would be your operational PAT for this year. Full year production is at 271,000 tonnes. And moving on from other income standpoint, fourth quarter export benefits and other operating income stands at INR 26 crores, INR 26.62 crores. And for the full year, it's about INR 90 crores. I'm rounding up figures just for ease of communication. So full year other income -- operating other income at INR 90 crores and export benefits within that at INR 26.62 crores. And nonoperating other income, which is largely our treasury income and foreign exchange movement, for this quarter was at INR 29.21 crores, and for the whole year is at INR 141.91 crores. The INR 141 crores stood at INR 120.92 crores last year. And so this year, we had hedged almost 60% of our receipts for the fourth quarter at an average rate of between 70 -- at a rate between 71 and 73 we saw large depreciation in the category in begin March. So from the hedge levels -- and the hedge levels we saw losses for this quarter. Unfortunately, that did not transfer into -- convert into gains for the quarter. So the foreign exchange -- at the foreign exchange level, we're at loss of INR 2,91,00000 for the quarter. Total cash at the end of the year is INR 1,460 crores, net cash. So gross cash is INR 1,570 crores, and there's a debt of INR 110 crores for a net cash of INR 1,460 crores, that's after the payout of INR 300 crores -- INR 400 crores that we did for dividend, including tax. Net outflow -- gross outflow from the company was [ INR 399 ] crores. After paying that out in the -- in March, we still ended up with net have INR 1,460 crores. From a working capital standpoint, our total receivable days are at INR 650 crores. They're up from INR 533 crores end of December, and -- which was at INR 710 crores in March of last year. So the increase in debt is only just because of increasing sale in the fourth quarter. From a number of days standpoint, it's at INR 86 crores (sic) [ 86 ] versus 83 in the first quarter last year. But we also had some deferred payments from customers just because the world was really struggling with work-from-home and all of that, I think better days are under 80 as we speak. I'm happy to report that we've not seen a single customer failing to pay or any customer running to an overdue situation beyond the standard and customary 15, 20 days or 30 days at best, but for explainable reasons. So absolutely, we've read that most of our customers have seen continued uptake at their end. And hence, their cash flow is being preserved, and in turn, they are making sure that they pay us on time. We've also gone on to make payment to our vendors on time. Of course, it took us 10 days to organize ourselves with work-from-home procedures, and there's a little higher creditor days, creditor amount as on March end, but that got normalized by the 10th of April or the 15th of April. Total number of stocks, the turnover inventory, which is raw material, WIP and finished goods, that stands at INR 571 crores, down from INR 630 crores end of December and about INR 600 crores end of March last year. And that's about 74 days. It's about 8 to 10 days than normal. And that's largely because of the extra dispatches we've done from our warehouses outside of India. So further breakup for this quarter, where we did 88,000 obviously, mining continues to be the runaway segment, where we did 55,000 tonnes in the fourth quarter, and that's up from about 40,000 tonnes the last 3 quarters, the first 3 quarters of this year. Cement continues to be flat. There's also a little higher dispatch in cement and utilities in India and worldwide. And I think customers were also stocking up in anticipation of supply chain interruptions. So that's where 55,000 in mining, 27,000 tonnes, non-mining, for a total of 82,000 tonnes for the quarter. Going forward, I think order book is at about INR 603 crores. Now of course, order book is not a relevant figure that we look at in terms of the flow orders and invoicing. We did make an interim announcement in terms of what is going on with COVID. With the impact of COVID on our business, one of the decisions that we've taken is to revisit the design and implementation schedule for the grinding media expansion. So we are in midst of 2 expansions. One is mill lining facility and the other is 50,000 tonnes of grinding media capacity. So for mill linings, we are on track to implement that. There was an interruption about 8 to 10 weeks where things got a little awry, but we're back on track. Our equipment is in place, is in transit or at factory, going through commissioning installment. And we expect that by March next year in June, our original target was between October and December, that shifted by 3 months, so between January and March, we should -- we hope to have that facility commissioned. For the grinding media facility, and as we've kept on maintaining that we've had issues with the vendor who supplies our molding machines and we've had a few runs of design changes, we believe we have enough capacity now to just wait it off for next 6 to 9 months. And we hope to give you a better time line on that in the next quarter or at best, the quarter after that. Thankfully, we have the plant. It's like a -- we just need the facility. We just need to install equipment, while the rest of the factor, which is which is a shared power connection solution permissions, all those are in place. So the time line on that facility should be a little smaller than generally what we see on our greenfield project. For the mill lining plant, we've spent INR 60 crores in fiscal '19/'20, and the balance, INR 190 crores should come this year, 2021. So with that INR 190 crores, we've got additional CapEx, which is supporting land for the project and maintenance CapEx for the rest of [Audio Gap] we put together at about INR 60 crores. So the total CapEx for this year will be about INR 250 crores, that includes INR 190 crores for the mill liner facility, INR 60 crores for buying the additional land and the maintenance CapEx that we have to run into it. One encouraging thing that we saw for this year is the strategy on wind mill -- wind power that we set up active wind power facility, Suzlon turbines that we bought at the park, we installed about 18.9 megawatts, approximately 19 megawatts of wind power, and we saved approximately INR 30 crores -- INR 25 crores to INR 30 crores on the credit that we've generated out of that. So very decent savings that has flowed in from the investment in the wind farms. Going forward, I think the main question that everybody has been asking us is around what's happening with our customers, what's happening with demand. I think as we speak to -- with most of our customers, except a few where -- which are in city centers or urban areas, most customers' operations have continued. The only 2 countries that had some sort of lockdown as India and South Africa, except of that, which is where our sales got impacted as well. So this quarter, we'll see reduced tonnages from these 2 countries. The rest of the countries, by and large, continue to operate. Of course, we operate at a little lower volumes, but we have continued. So we are hearing from plants saying they have practically cut down operations or shut operations altogether. So we are very, very encouraged with that. China has clearly is on a roll. So our inquiries from China are at an all-time high, indicating that they are going through not just reopening of the economy, but settling down and looking at capital projects and all of that. We also expect that most countries should be launching their own versions of infrastructure stimulus. It cannot be just financial beyond the point. And any and all infrastructure stimuli will ultimately flow into our customers -- demand for our customers' products because cement plants or iron ore are fundamental building blocks for any infrastructure. So we hear as we speak with a lot of customers that they are hopeful and optimistic that they should not -- I mean, the worst is behind them for sure. Gold, as you all know, is at an all-time high and continues to be a proxy, currency or an investment solution for a lot of people. So gold is okay because those plants are running at full throttle. Copper is largely linked to electronics and other things. I think there, the electronic consumption is not -- they are still out at a very decent pace. We may not grow, but they're not shrinking. Iron ore, of course, is linked to infrastructure, but we see reasonably encouraging signals from our customers on that front as well. So we expect Indian demand to ramp up quickly now going forward. A lot of our customers are all talking about various inquiries slowing in some government projects, infrastructure projects, et cetera. So with that said, I think today, we are running at about 75% pre-COVID levels from a production and sales standpoint. I think we'll hold off for 1 quarter to give a better insight on what that translates on a full year basis and going forward. But at least we have not -- we've clearly not seeing sharp correction that a lot of our -- other -- a lot of other industries are seeing, a lot of other companies are seeing in their revenue and outlook. We are happy that we could start our facilities right after the first -- after lockdown one, we could start of our facilities. We have absolutely no problem with manpower, we paid our workers their wages right through those lockdowns. So we are one of the few companies where we can actually talk about how if you be fair with your manpower, at least that's not going to be a variable that's going to keep you [ hosted ]. So as we ramp up, there is no issue with availability of manpower, a lot of serious SOPs are in place in terms of social distancing and all of that. Very careful that we don't risk exposure of the pandemic at our plants. A lot of -- most of our staff that has worked from home are all working from home. So we could quickly turn around despite us being an industrial business, our staff has really pivoted well to acclimatize with the new environment, so we are up and about. People across the world, we've got people sitting in at least 20 locations outside of India. We've got stock in more than 30 locations worldwide. Even in the harshest lockdown, which was between 24th of March for 21 days. In the last week of March, we exported 7,000 tonnes or 8,000 tonnes. So we are very, very grateful that we've got a great team that's been up and about. Without risking themselves, we could actually make sure that our supply chain worked well. The government gave us all those permissions required because, per se, we are essential that our services are essential to fundamental blocks of the economy. We could export, we could move material, we could let people come to our factories. So I think if the worst is behind, if that's the view the world it takes, I think we're very small in terms of the world, microcosm, to give any large statements. But I think if the worst is behind us, we believe that we are -- we have come out reasonably well in terms of being able to operate sustainably at 75% levels and with a lot of optimism that things should not only correct, but improve from here on. I think that's all from my side. Sanjay bhai, if you want to add anything?
No. I think, Kunal, you have elaborately explained the present status of COVID, post COVID, what is the impact. Let's go to the Q&A. That would really help.
[Operator Instructions] The first question is from the line of Ravi Swaminathan from Spark Capital.
Congrats on good set of numbers given the circumstance. Sir, first on our foray with Latin America, will there be some [ shipment ] delays because of the COVID situation over there? I mean, certain countries like Brazil and Peru are pretty hard hit and going there, doing business, meeting clients, et cetera, how we are going to circumvent that?
I think South America -- usually that's a challenge that we'll have to overcome because not only do these countries have their own set of issues with the pandemic, but also staff is -- we don't have so much staff at the plant site, all of that. So Ravi, the first order of the day was to settle ourselves to come out of this crisis, right? So I think the way we look at it is that we believe we're just settling in. We know that we'll run at 75% for sure, and we are ramping up. I think next quarter is a better time for us to give an insight on what's happening. It's too soon to come to come to any judgment on whether it's going one way or the other. So just allow us one more quarter to give you a little more color on what's going on with that. Because the fact remains that if they are running their operations, if Chile is producing copper, all other conditions, we will need grinding media. They will need to look at cost and so on and so forth, right? So I mean the point is that, that reality does not change. Of course, the way we operate, the people have to adjust to the new normal in terms of how we engage, how do we present those solutions and all of that, allow us a quarter more to give a better insight on that.
Sure, sir. And from a mill liner perspective, have we started engaging initial talks with clients for sales of mill liners with the both existing clients and new clients? Is it on? Or is it like -- given the fact that it is on...
The conversation is, like I said, the same thing. My answer remains the same as the previous question. All of that remains on, but when the customer himself is going through crisis within their family, there are various things going on, right? We also can't be insensitive and keep pushing on saying buy our new product and our new solution, right, which is why I'm saying that the order of the day was to just survive, to make sure that we are able to surpass this crisis and stabilize ourself. I think that question just -- we'll just have to defer that as well to the next quarter, Ravi.
Next question is from the line of Ashutosh Tiwari from Equirus.
Congrats on good volume performance. Firstly, if I look at the realization number in this quarter, there is almost 8%, 9% drop versus third quarter. So is it because of product mix? Or there's some pricing correction?
It is product mix. But also, remember, we were telling that the raw material prices have corrected over the last 2, 3 quarters. So those price adjustments have also come in this quarter. There's a lag when prices go up and go down. So some of that was the price adjustment, some of that is also product mix.
Okay. So going ahead, I mean what kind of realization we expect, let's say, '21?
I think INR 101 and INR 110 varies, as multitude of factor, which includes the currency realization, raw material prices and the product mix. I think INR 100 to INR 110 is a safe number to assume.
Okay. And secondly, in terms of currency, I know that we realized in the current quarter what it was, and I mean, based on our hedge position right now, how should we look at FY '21?
So we've got hedges, about 50% of our hedges for the first quarter as well. They ease up considerably from second quarter onwards. So I think the real benefit of the pass-through should come in from the second quarter of this year.
Okay. So I mean, in first quarter, will it be around INR 73, INR 74?
Exactly. It should be between INR 73 and INR 74.
And then...
Right.
And also, sir, let's say, how are we seeing the trend from cement customers, which are, I think, from India as well, as India is bigger in cement than other geographies? Then how you are seeing the trend over there?
I think cement, a lot of -- infrastructure was one of the early starters of all activity in India. And cement guys are seeing traction from that segment, not so much as from real estate projects in cities and all of that. So the -- and these are large consumers of cement, right? Those large highway projects and things like that. So that continued -- started shaking up from, say, early May, late April, early May onwards. When we speak with them now, most of them are cautiously optimistic. I mean they are not saying things will not pick up. They see that a lot of demand coming in. Rural is doing reasonably okay. So broadly, when they look at it, they have a fair expectation of the future.
And utility is only more or less stable because I think coal portion is not impacted that much so far.
Exactly. Coal -- power generation did get impacted, the April and May. I think it's picking up because a lot of commercial consumption went down, right? Industrial activity had also stalled. It's still operating at a lower level. Commercial buildings are not operating. I think power generation is at 70% to 80% of peak for the period, no? So -- but thermal is a small part of our business, right? Even if it falls 20%, it's 2,000, 3,000 tonnes for the full year.
And lastly on this liner plant and customer -- [ reportedly ] a customer. So you had shared a little about -- in case of a gold mine, they are just [indiscernible] also on steel customers in India. So have you tested with -- the product with more customers? And how is the sponsor? So just wanted to understand and see how that line can ramp-up after starting at...
Yes. See Ashutosh, this is Sanjay. One, please understand that after last week of March until now, as we speak, most of the focus of all existing players, including ourselves, was to ramp up the production and take it as close to the pre-COVID level as possible. What has happened for all the developmental efforts, just Kunal answered to a previous question, there are end number of projects in pipeline for liners and for many other products. But that product, new projects or new customer development activity has virtually come to a standstill, as we speak, because of the fact that all of them have faced similar issues. They may not have stopped their mines, but there will be definitely some reduction in their production levels, their output levels. We could also not supply to them for at least more than a month, 1.5 months. Now supply has started. What was extensively discussed today is that over next 2, 3, 4, 5, 6 weeks, all those reestablished contacts, communications, development, rephased, please understand, as we speak, international travel is not happening today. You can't fly down to Europe or USA or Latin America, no. Nor can our people from Europe or U.S. travel to the customer site because most of the people are scared, correct? Most of the people have their own internal restriction. So our focus first is restart your operation, stabilize them, allow people to work from home, allow people to be comfortable. We are just about, hopefully, think the end of that phase. Now the next phase obviously will be how soon can we put the developmental work back to normal. We are hopeful that by next 2, 3 months, we should be able to reach the pre-COVID normal even from a developmental perspective. So none of the customers whom we were talking earlier have said, yes, we are back now, no. What they say, we don't know when we can resume that new initiatives. So that reality we will keep in mind. Therefore, to the previous question, we said one of the previous participants that internally also, we are assessing the situation, reworking our strategies, given the constraints, not me, everyone else is facing, correct? So I definitely believe that my next couple of months, things will be much more clearer. We will be able to tell you that, yes, mine #1, 2, 3, 4, 5, the work has started. 3 other mines, they are saying, no, right now, we can't do. Very honestly, it's all a process of assessment. And our whole endeavor is we don't want the developmental efforts put in now to go back burner. We want to bring it to its logical conclusion. We don't see any reason why a copper mine or a gold mine or an iron ore miner will tell me no. Correct? Because most of them are operational, they have to ramp up, I will ramp up and then we will back to development.
Next question is from the line of Renjith Sivaram from ICICI Securities.
Congrats on good set of numbers in the challenging environment. Sir, we had lost this value of 15,000 tonnes. So what is the current status of that? Have we got the confidence now that 15,000 tonnes per annum, will it add up this year or will it take some more time?
So we -- like we said, we are not taking the means of specific quarter, iron ore, large iron ore customer that we had, looks like that we may not get that volume this year. We'll be hit. There's a radio silence. So we don't know what's going on. We have not budgeted them for this year. We'll see. I will share more information as time goes, during the year, we will see.
Okay. And...
Hello? Go ahead, Renjith.
Can you hear us?
[Audio Gap] by 120 bps.
Renjith, can you repeat your question?
The raw material to sales have increased this quarter despite the raw material prices coming down, so before everything...
See the -- that last 2 quarters, we've seen reduction in raw material, our selling price has not got adjusted, the part 2 came in this quarter. Where you're really seeing, it's not raw material going up. The selling price got adjusted, which is where the realization went to INR 101. That was the previous question also. It went from INR 107 or INR 108 last quarter to INR 101 this quarter. Part of it was product mix, but also you had some part of price adjustments flowing past.
But just to add, if you see the overall year, it is, I think, about 41% is the consumption ratio after taking into consideration the stock effect. Vis-à-vis it's about 42% last year. So this year, there is actually an improvement overall over the [ whole -- full year ].
Okay. But what is your sense regarding the ferrochrome prices?
I mean, this is maintainable, no problem. Depending on where the currency, raw material and the product mix ends up, it should be between INR 100 and INR 110 for the full year. That is the realization.
Realization.
Okay. Okay. And sir, this mill liner, did we find any more new customers in terms of the trial runs because we had a lot of customer feedback, at least 3, 4 customers, who are very delighted regarding the savings that they were able to derive. So was there any more customers who came out with the feedback where some trial runs of these mill liners done? The reason I'm asking this question is, sir, March, our facility will be done. So from next year onwards, we have to start the sales of these mill liners. So are we...
I will just tell you 2 things. One, even without the facility, the sales that we are doing of mill liners for mining is good. I think that the run rate continues, we've done almost 16,000-odd tonnes, notwithstanding the fact that facilities are not ready. So that itself speaks that yes, now the commercial results are now regular and coming. Secondly, sir, whatever we were on a very positive note, unfortunately, during the last 3 months, there is no further developmental work. Everything has come to a standstill and as much as new developments are concerned. As you will appreciate, these are very engaging exercises where our people and their people have to closely interact, there is a continuous exchange of information plus physical experimentation at the customer end. All those activities have come to a complete stop after with the lockdown and this overall pandemic situation. We believe that hopefully as soon as the international travel restrictions are down, I mean, as we are -- and as soon as our people are in a mental trim to travel across the world, I think somewhere around July and/or August that developmental activity should restart. This is our belief. We believe we will pick up the thread from where we left somewhere in the middle of March. And whatever we have lost, we should be -- our endeavor will be to gain and try to see that we take it to the logical end. None of our customer has said that now that whatever we have done, you please now don't send your people or let's not reengage. We will have to reengage, and we will try to take it to its logical end. So it's just, in true sense, a real moratorium for everything as RBI has used it in their package, that everything has come to sort of a standstill in terms of developments, which we are trying to reactivate with our full might.
Okay. And sir, just reconfirming our CapEx for this year is INR 160 crores towards mill liner and INR 50 crore towards land?
No, no, INR 190 crores towards mill liner project, INR 60 crores is maintenance CapEx, INR 40 crores is maintenance CapEx, about INR 20 crores for land. About INR 250 crores is...
Yes. So it's about INR 250 crores.
Total INR 250 crores, right? The INR 190 crores and INR 60 crores.
The next question is from the line of Bhoomika Nair from IDFC Securities.
And congratulations on a decent set of numbers in a challenging environment. So just want to understand is, in the fourth quarter, we saw a fairly decent bump in terms of volumes, particularly in the mining segment of almost 82,000 tonnes. Now I would understand that this would be kind of the fact that of our development activities through the year. So while you mentioned that there is some pause on development activity and new customer acquisitions in the near-term when thing settled down, but would it be fair to say that what we have acquired during FY '20, largely, which is visible into the fourth quarter, that should kind of continue going ahead?
Bhoomika, your question is a leading question. Okay. Now my answer will be a bit guarded because of the fact that yes, whatever we achieved last year was a sort of a pre-COVID situation, even from many customers who had given orders and they are going ahead. Now for a full 12-month working, I'm repeating, for a full 12-month working, logically our answer to be that yes, whatever we have achieved, we should be able to continue. However, the fact of the matter remains that while our endeavor will be to continue, the fact remains that some of these customers, although they are continuing, they are continuing at a low scale. So they may take some more time to reach the same scale as they were in the month of Jan/Feb. You understand? Some of them, therefore, may not automatically mean that it will be -- whatever is divided by 12, will be now equally valid for 9 months from July. This is a guided answer, but it is a fact of the light that while our endeavor will be that yes, logically that business cannot go away, yes, you're right, it will not go away. But wherever it will start to come back to us with the same concentration and at the same level, is something that we'll have to wait and launch. But yes, theoretically, you're right. That business is in my pocket, and it is -- most of it is repetitive, it should come. But it will not automatically mean that it will come immediately from July. You get my point?
Got it. Got it. Got it. Quite clear. So basically, the customer acquisition is in. Now it's upon them on what utilization levels that they are running it, and that's how the ramp-up will come back in that sense.
Exactly.
And sir, broadly, what is the level of activity, how low has it come down? I mean, even for -- so it's back at 75% compared to 4Q levels, in that sense?
Sorry?
How is our activity levels today?
Is that 75% is compared to an annualized number or more compared to like a 4Q kind?
See annualized -- I mean, whichever you cut it, I'm just -- we're just talking about pre-COVID, right, so pre-COVID which was annualized to 65%. I mean we're just generally saying our facilities, our manufacturing, all of that is between 7%, 75% now. But at an annualized level, you consider that, right? See Bhoomika, it is only logical that Q2 should be better than Q1 and Q3. Q4 should be really, really normal and really good and kicky. This is a normal presumption or assumption based on which we are working. However, as I said, since there are many factors, which are still not clear, we are a bit cautious. We don't want to rush into anything in terms of giving you any type of guidance, except for the obvious fact that has this COVID thing not have come then this year would have seen a definite 15%, 20% growth, correct? Now COVID has come, COVID has impacted really many things, not necessarily from a long-term, but definitely, from a short-term to a near short-term perspective. Whatever we can achieve and whatever we can recover, that is our endeavor. Better wait for some more time where we get a little better clarity, so we can share it with you.
Sure. And you said that South Africa sales were also impacted, how -- because of the lockdown. What percentage of our volumes would be coming from South Africa on a broad basis?
Between 20,000, 25,000 tonnes from South Africa itself.
Okay. Okay. Okay. And...
No, so about 3,000, 4,000 tonnes is a current impact. But listen, these are all things that are shifting regularly, so yes.
Yes, yes because, obviously, depending on how you get a new customer in another geography kind of [ jump in ].
Yes, yes.
Got it. Got it. Sir, just in terms of the rupee, the dollar realization for this quarter, what was this?
For the fourth quarter, it was about INR 73.
Okay. And for the full year?
Full year, I don't have it on top of my head.
As in Q3, approximately...
Approximately INR 70, INR 71.
INR 71.8 [ per se ]. We will get you that data. It's not material, like you know, because that gets adjusted, right? The dollar pricing is reset. So per se, INR 75 is good for a short term, but over a period, it just gets passed through, so.
Got it. So basically, what we are seeing in the realization is an impact of more of the lower raw material and the product mix, which is why the realization is not held up?
Exactly.
The next question is from the line of Anupam Gupta from IIFL.
So basically, in your commentary, you highlighted the impact across the 4 ores that you operate in. Just to get a better sense for, let's say, if we take FY '20 for the full year, what was the broad distribution of the volumes across the [ ores ]?
We are not sharing that in more granularity than this. But largely, we don't see an issue one between the other, right? We're seeing all 3 coming back online today.
Platinum part was, anyway, a small volume.
Platinum is between [indiscernible] the rest is the other 3.
Right. Understand. Okay. And similarly, in geography wise, you mentioned South Africa. What was LatAm as part of the volumes if you were a --
Anupam, it will not help get any better sense on the business. We have spread, and we're doing all -- we don't have a focus on one geography or other, right? We're just trying -- we're going out systematically with customers with ore types.
And as it is a very important market and currently, a very solidly focused market right now, as we speak, because of copper and.
Right. Understand. Secondly...
On LatAm.
Okay. Okay. Sir, the second question. So you said your development activities have slowed down. So obviously, liners is one part of it, but...
Anupam, the answer was not that it has slowed down. The answer is that when we have been asked about the prospects of the future, I said, let's just hold on for a quarter because it's too soon to generalize and say, I mean, just -- there are various things at play. A lot of people are adjusting to things, right, to say these are good to seeing things. We just saying we are holding off for one quarter. That's all.
Yes, no problem. So the question coming from there was basically, let's say, the contribution from new customers during the year is lower versus, let's say, previous year. And given that your commentary in the past has been that you generally are willing to take a focus on market share even at the cost of margins to some extent, will FY '21 see a benefit because of that, basically, every other factor as is, but do you see a benefit from that factor in terms of margin?
That's -- in isolation to answer that, if you can tell me what -- where will raw material be, where will...
No, I understand.
[indiscernible] harder. So it's like the mileage on the car, right, as in conditions, yes, but we will not help get a perspective beyond that on margins. It has a lot of factors at play. I mean, respond to this situation, will they bargain harder? We don't know, right? So I mean, again, not here to give you an answer and misled, so to speak, we don't know. I mean it could work their way. But per se, it's not something that what we are really focusing, margins and all of that, ultimately, if we have a solution that adds value to the customer, margins follow. So it's not a question of whether we need more or less margin. I think that's not something that as a company, as a philosophy, as a strategy to ever be focused on. The idea is that keep making sure you add value to customers, do enough things around that and margins follow. Question is with regard to reality, how will things change? What happens to travel? What happens to meeting people? Do customers really want to meet before they decide? These are -- it's too soon to generalize. Maybe next quarter, will also be too soon. This is reality, is going to stay for next 2 years like that. We're still coming to grips with it. It's just that we are fast, and we're happy to report that we are past that crisis stage, and we are now in this stable settling stage. We feel good and comfortable that we have passed all of that, the labor issues; currency, where will that go, lot -- plenty of things raw material, supply chain movement, trucks, all of that. Thankfully, all of that looks to be in a settled phase. I think, beyond that, any other diving into the future is going to be a risky game for both -- you and us, both.
Okay. And just to book keeping question. So what should be the tax rate for this year, next year, both '21, '22?
This will be about 22%. This year, it is at 17%, but that's because of the reversal of the previous peak year's deferred tax. So 22% will be the -- 22% of PBT will be the tax guidance going forward.
Okay. And beyond the INR 250 crore CapEx which you will do in this year for the liner capacity, what is the balance CapEx left for the media capacity whenever it comes?
Yes, that INR 250 crores of media CapEx is there, but that will happen next financial.
The next question is from the line of Priyankar Biswas from Nomura Securities.
Very strong showing in the volumes for 4Q like last year. So my question to you is, like I was just trying to get the concept clear actually. So as you say that you maintain a lot of inventory near the customer sites, I mean, the mining side.
Correct. Yes.
So during the lockdown, like, let's say, till, let's say, 20, if we were something like that, you wouldn't be able to do production. But your inventory that is there at customer site that would still be selling on, right? Effectively based on the drawdown that's happening?
Correct.
So when you are saying that you're right now at 75% of pre-COVID levels, so are you mentioning it more like on a production...
No, no, from a production to [indiscernible] standpoint method.
So this is production basis, 75%.
Production and sales also because like we saw some parts of the customers are working at a reduced level, some OpEx has gone down. India is still ramping up. So 75% on a production and sales basis, both.
So 1.5 months or so...
Yes, sir, I agree to that. But initially during the lockdown your production would virtually be 0. I mean, let's say, for the first 2, 3 weeks.
That is true. That is true.
Some sales would be still happening because of the high inventory that you would be making.
That is true. That is true.
And my second part is, like you were saying that lockdown was stringent in India and South Africa. So what is the situation right now in South Africa? Are they relaxing? And what is happening in that?
Yes. It's like India, where industrial activity has started for people's movement and all, similar to India, actually.
So their demand levels are coming back gradually. I mean...
It is gradually coming back, yes.
And for the rest of the world, how would you quantify, like vis-à-vis?
Rest of the world, none -- except a few plants, which are in urban centers, most have continued operation. We, per se, do not lose only a handful that may be affected outside of that. So most plants are operating and have continued their operations. Obviously, some have reduced their scale of operation in anticipation of a lot of things, all local issues. Everyone has their own situation in terms of responding to these things. But they are all operating, first of all, at reduced utilizations. Reduced could be 50%, 80%, 90%, some may be at 100%, also, I mean.
So not an absolute lockdown, like in India, or?
No, no, no, no. Correct.
And sir, last question from my side, is like during the lock down, there was a lot of issue that was there regarding, let's say, truck logistics and the internal logistics, largely, in India. So you actually need to export your products, let's say, from Mundra port or maybe...
Didn't have a problem with export. Everything was available for the export ecosystem.
So you did not face any roads, state, related issue or something like that?
So they did not the state boundary, no.
The next question is from the line of Bharat Shah from ASK Investment.
It's not Banik Shah, Bharat Shah. Two questions. One, see if we have to assume the worst about China threats and things going to uncharted territory, what can be the [ hit ] quantification, both on the top line side, vis-à-vis from the raw materials side?
So from a supply standpoint, we have 0 dependence on China, hardly anything coming from China. In fact, we are buying some equipment for them. We are planning for the grinding media next way. That also we are possibly considering European alternatives. So I think no impact from a supply standpoint. From a sales standpoint, we do about 3,500 tonnes of very special castings that we sell on a -- those are premium castings, we sell on an advanced term basis, at best, it could be that. If you project absolute breakdown of commercial relation between the 2 countries, I don't think it could be anything beyond that.
And that specialized casting would be what kind of percentages are top line?
Top line would be about 30%.
Worldwide, you think China or worldwide, otherwise you're saying, right?
Of our total turnover. Of our total...
Total turnover. So we do about 50,000 tonnes of castings and the balance is grinding media, 215,000.
So Bharat bhai, that will be [ 85% ] in volume terms.
Sorry? How much?
No, no, no. Out of 267,000 tonnes last year, that volume to China is only 3,500 -- 3,500 tonnes. 3,500 tonnes, okay, 3,500 tonnes, so that way, from a tonnage perspective, it is quite negligible.
And from the revenue perspective?
Average. So about 25%, broadly, about 30%, 25% to 30%. Bharat bhai...
Bharat, can you ask your question again?
I am saying supposing there is a complete breakdown...
Between China?
Between China and India.
Our sales of INR 50 crores will be affected, first.
Okay. That's all that.
Exactly.
Okay. That's all that, I wanted to know on that front. And on raw material, it is negligible and substitutable if it is required.
Absolutely. It's not material at all, sir.
Okay. Secondly, if the rude interruption by COVID were not to occur, what would -- what would be your thought of the current year in terms of asset?
We're looking at -- this year, we did 267,000, between 290,000, 300,000 tonnes is what we were working with. And we were to give a guidance this quarter for the next year, I think that's where we would have been.
290,000 for FY '21, we would?
290,000 to 3000,000 tonnes was broadly where we were hoping to be this year.
The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
And excellent performance amid the crisis. So I have 3 questions. First is on the capital allocation. So you we are really happy that you raised the dividends to INR 36 from INR 8, which is about 58% on the payout basis. So can we take this dividend payout as a normalized basis for now on?
Not really. Our policy still remains at 20% of consolidated profit. That's our dividend payout on a going-forward basis.
Understand. Because -- actually, the reason I asked is because we are on a tapering slope for our capital expenditure, and our free cash generation will just bloom up. And hence, I was asking this question.
I know, I know. But if you had asked me before COVID, we would have said yes. So I think it will be premature for us to start thinking about doing things with the cash. I think we've been extremely blessed to be in a situation where there was surplus cash and we knew -- we had clear visibility to plant for growth and continue to invest in new factories despite -- we believe that this is a great time for a company like us to go out and do things that accelerates growth, that accelerates our market position. And just having that cash on the balance sheet in times like this has just been a great mental plexing. So if we stick with 20% for now, I think the Board actively debates that. This was the first quarter after, maybe, 10 quarters or 15 quarters where excess cash was not discussed. So I think we'll leave it at that for now.
I understand. And the second question is, so we have been maintaining about a month of inventory at our warehouses, which is closer to the customers and which actually helped us during the last quarter. And while our underlying growth has been a cheaper cost versus the competition, and we are mitigating it by having a month of inventory closer to the customer, with the current crisis, do you believe that maybe that 1 month needs to be revisited and if yes, maybe if you could help us with the thought process?
Not really. We don't get -- we should do that if we expect for the supply chain. We -- of the point, we are -- we believe that countries are done with lockdowns and we may see Chennai doing a week of lockdowns in borders and all of that. But otherwise, it's free and clear. We don't want to go out and dump more material over there. We're doing it selectively, where we think there is an issue where we need to be more prudent. But not a single customer has -- we've appreciated a continuous process. Customer doesn't get a product if plant stops, not a single customer through the worst of the days was affected. So at a custody, 30 days, because you're applying 30 on a full sale basis, while we're keeping stock only for mining customers where that throughput is clear. So I think it will stay at that level for now. We are not increasing those level for now.
Sir, we lost the line for the current participant.
Yes, we will continue at current levels, Bhavin Bhai.
We move to the next question from the line of Amber Singhania from Asian Markets Securities.
Congratulations on good set of numbers. Most of the questions has been answered, just one incremental question on China. On our incremental growth volumes, which we were planning pre-COVID, are we factoring in China as a large contributor to that as we have seen the very good inquiries from there? And do we see a risk on those incremental growth coming in from China side? And if we were factoring in, roughly what kind of growth?
No. The answer was more directional to say that, when China gets up and going, it doesn't mean we sell more tonnage, but that means that consuming more, producing more steel, buying more electronics, which means mining customers will do well. Part of the world's mineral ore goes to China in some form, either intermediate or in ore format. So the point is that if we are seeing more inquiry from China, and China is starting to do things on the ground, it portends well for the world at last. That's what we are trying to say. Our 3,500 tonnes, even if it become 4,000 or 5,000 tonnes, I mean, that 30%, 40% growth, but not material in the scheme of things. I think it was more directional in terms of China is going to lift the world economy from its own consumption. Despite all that we say about China, we believe that they have a very important role to play to get the infrastructure rolling and the domino effect of that for everyone in the world.
Okay. And secondly, just on the competition side. Now in the last 5, 6 months or last couple of years, we have seen that Magotteaux as other companies are also planning to expand capacities. And is there anything changed in last 5, 6 months or 6, 8 months, so from that competition landscape vis-à-vis what is your last year?
Nothing that has been reported about, not really, no.
The next question is from Shreyas Bhukhanwala from Canara Robeco.
Sir, two questions on was on Samarco, which was one of our clients, which went off 3, 4 years back and were supposed to come maybe this year. So any time lines on that, sir?
Not really. We were doing a good volume with them. I think we should be natural beneficial when they come for. We'll share when they do, but nothing as of it, nothing near your horizon as of now.
Sure. And sir, secondly was, again, on the margin. So you said 2 reasons, majorly being one was the price adjustment, which could be this quarter. And on the product mix side. So when you say product mix, so is it largely with the patterns or different segments? Or how is it at this point?
The product mix, what happens is we do more than 100 alloys. So the selling price varies based on the cost price. You do 10% chrome, we do 30% chrome. It doesn't mean a more expensive product is -- it sells for a higher selling price. So the product mix is when it's not a margin determinant. It's just what cost of products that we have sold in that period.
Sir, so basically, your margin -- lower gross margin, so can it mean be majorly attributable to the price adjustment?
Some part is price adjustment.
Price adjustment, we believe, is about 3% to 4% and 3% is the product mix.
The next question is from the line of Sparsh Raina from Mirabilis.
Congrats on the good set of numbers, sir, I had two questions. One of all was, first of all, the mining volumes have increased by 9% in this quarter. So has there been any overpull or demand from the customer side, as in they have been stocking more?
Not really there because our transit itself is 4 to 6 weeks. So I mean, this is just -- it just happened this quarter where things -- the previous 2 quarters were also soft, so some amount of invoicing has happened this quarter. Like we said, when I talked about the numbers that there is no sub-context to it. It's just -- I think it's better to look on an annual basis than one quarter to other.
Sure, sir. So the second question was regarding have we seen any lost clients post COVID? Or are we expecting any loss in any of the clients from mining post COVID? Or everyone is on -- till then, they will stick with us.
By and large, we expect most clients to stick with us.
The next question is from the line of Charanjit Singh from DSP Mutual Fund.
So our business is quite far in different geographies. So on the logistics front, how are things and you think like their formalization will still take much more longer and in terms of inventory levels, replenishment at the site level, when do we see that now picking up going forward?
Replenishment at the site level, meaning?
Sir, the warehouses.
Yes, yes. So from a logistics standpoint, so dispatches for, no, it is absolutely no problem. However, so therefore, in one of the previous questions, Kunal explained also, that we also do not find any reason to rush into creating more stuff with certain clients. However, what I was trying to refer to in an earlier answer is that if I have to send my people today to, say, any part of the world, and physical movement is today restricted, we cannot because international travel has not started. So some of whatever we can do over Internet or on calls, audio, video, whatever, our people spend 6 to 7 hours a day just on various types of con calls, either video or audio. But the fact means that for a real final kickstarting of the results, in terms of new development, we will have to wait till the physical travel eases out. So that is one basic problem that I was referring to. But except for that, I think from movement of goods, there is no issue at all, nowhere.
Okay, sir. And sir, the other thing is, like you mentioned, developmental activity could take ahead. And it could -- now the customers may take some more time to actually finalize this conversion, which was happening for -- in our favor. So how did this impact? Maybe our trajectory of the volume growth rate can get pushed out by another 1 or 2 years, something like that? So how we should look at this impact on the development activity? And can you see this resumption of development activity soon or it will now be a little longer-term process?
Didn't you think America's coronavirus will start going down. I mean these are all -- I can answer question. But the point is that there are too many variables that we are living in. Like I explained, again, on previous questions, we are very grateful to be today in a situation where we are getting settled. We are at 25% volume. We're seeing customers are paying us. Our cash levels were, which were INR 1,460 crores end of March are now at INR 1600 crores and plus. We're going on with that CapEx. So I think talking to -- it almost feels insensitive to go and get the customers in and then talking about migration and transfer and better solutions and all of that. I think most customers, like us, have also gone through their own journey of discovering where the market -- I think 4 weeks back nobody knew whether iron ore is going to collapse or copper is going to collapse, the world is going to stop. So I think most [Audio Gap] like us, are in a phase of just discovering themselves, getting a sense on really what's that demand that will likely continue and not evaporate, one day to another day, settling in, like I explained before also, that if they're going to consume grinding media, there is a cost. And if there are opportunities to save cost, in today's time, it only becomes better in terms of looking at such projects. Now -- but a lot of customers, engineers are also working from home. Will they be comfortable doing that without meeting people? I mean these are questions very difficult to answer in terms of when that will improve or what will happen. But as we look at it, we are a basic commodity. As the world engine starts kicking in, consumption will go up from where it is today. It's already going -- continuing on. It's not collapsed. It very likely will improve from where it is. And we have initiatives that will help customers reduce cost, improve throughputs. I mean there is no reason why that should not continue. But maybe a quarter or with a better time in terms of really getting a sense on where that comes from, I think next quarter or the quarter after that will be much better placed to answer that question.
We'll take the next question from the line of Bhavin Vithlani from SBI Mutual Fund.
I'm sorry, I got disconnected. So I actually heard you now answer. Sir, the last question, which I had out of the 3. So if you can give us a sense on the geographical volumes? And that actually is one of the modes where if one part of the world actually gets impacted, you have the other 2 offset.
Right.
Right.
So can you help us with what percentage of volumes will be to -- may be to an Australian continent, Africa, or Latin America?
You want what percentage goes to each country? Sorry?
Yes. Yes, broadly, the top...
We don't segment internally, Africa -- I mean, it's 4 sites. We are agnostic to whether it's an Australia or Africa. I mean that's not something that we do in our head naturally. But if it helps you get some insight out of it, we can share that with you later on.
You're right. Let me just give you Australia is important, South Africa is important, Brazil, Canada, U.S., these are all countries we're doing significant volume. Most countries, which are either cement producing or and/or mining ore producing is where we are present. If you go and do a search on which are countries producing gold, copper and iron is all that we are present in. So broadly, we are in more than 125 countries for cement, for mining [Audio Gap]Mining would be around 25, 30 key important countries, which are North America, Latin America, Australia, Africa, East Africa, South Africa, CIS, Russia, so there where we are very widespread. You're right. Maybe 1 or 2 countries not doing very well is not going to make a huge impact. We are that way, very, very diversified.
As there are no further questions, I now hand the conference over to the management for closing comments.
All right. Thank you so much, guys. Ahmedabad is very closely following Mumbai in terms of corona pandemic for all of us, I wish. And since most of you are from Mumbai, I wish all of you get to go back to offices soon, stay safe, and I wish you all the best, and we look forward to connecting again end of first quarter. And hopefully, we can share a little more insights on a few questions about our future. Thank you.
Thank you very much. Have a good evening.
Thank you very much. Ladies and gentlemen, with that, we conclude today's conference. We all thank you for your participation and for using Chorus Call Conferencing Services. You may now disconnect your lines. Thank you. Have a great evening.