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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 turn the conference over to AIA Engineering management team. Thank you, and over to you, sir.
A very good evening to all of you. Thank you for joining the call. I have Sanjay bhai here with me. This is Kunal. And I hope you all got a chance to look at the numbers. But nevertheless, we'll walk you -- we'll give you a quick summary on numbers, share a bit of update on the market, and we'll go on to Q&A.
We are happy that this will be our -- we crossed the INR 1,000 crore mark in a quarter, first time in history. And we are very happy about it. We've done INR 1,080 crores of revenue in the quarter, and that came from about 73,000 tonnes of sales and 70,000 tonnes of production in this quarter. We ended the full year with 260,500 tonnes. That's down from 266,000 tonnes that we did full year last year. But that -- this volume figure is in light of 40,000 tonnes that we have approximately lost on account of our reduction in sales in Canada and South Africa. So optically, while it looks like a small reduction, in real sense, we've added more customers to the tune of about 30,000 tonnes so -- for the full year, and this in a year where shipping costs continue to be a headwind and raw materials have been -- and all other items have gone through a serious inflationary trend, as you all know from most of the company's commentary. So in that backdrop, we are happy to report that we've seen -- we've done new customer addition and increased wallet share with our existing customers.
So the full year, from a revenue standpoint, we are at INR 3,500 crores, INR 3,514 crores, and that's up from about INR 2,800 crores that we've done full year last year. Of course, a lot of that is accounted by the increase in the selling price. So the average realization for the full year stands at INR 134, and which is up from INR 105 full year last year. And the realization for the last quarter is at INR 148.
So over the last 4, 5 quarters, you've actually seen the whole pass-through come along. And that was a concern that many people had in terms of how will we be able to pass on our different costs, especially raw material and shipping. And you will see that our numbers now -- our realization reflects a lot of that pass-through come along.
Moving forward, our EBITDA is at INR 264 crores. That's up from INR 192 crores in the fourth quarter last year and INR 203 crores in the third quarter this year, that's about 24.20%, and profit after tax of INR 194 crores. So overall, we had a decent quarter in terms of financials.
Some housekeeping numbers, our export benefits are restricted to what we earn on our nongrinding media exports and duty drawback for grinding media and nongrinding media. The total is at INR 13 crores. At least INR 10 crores is what we have lost on account of RoDTEP, the removal of RoDTEP on grinding media and the reduced rate on nongrinding media. So at least INR 15 crores, I would imagine. So there's a full year impact of about INR 60 crores on account of the RoDTEP changes that came along.
Our other income in terms of treasury is at INR 17.24 crores. Full year is at about INR 97 crores, and that mostly compares to about INR 100 crores we earned full year last year. Full year last year, we also had gains in terms of some of these bond investments we had. So the INR 100 crore also includes fair value gains on some items. Foreign exchange is at INR 21 crores, full year is at INR 58 crores, and that compares to about INR 71 crores last year.
A big point is about our increase in working capital. We've added about INR 600 crores of working capital for the full year. And the total working capital days have moved from 117 to about 124. So as sales have increased from INR 2,800 crores to INR 3,500 crores, INR 700 crores at 120 days, that itself would be about 300 -- INR 250 crores, INR 200 crores, INR 250 crores, and the rest has just come with a onetime addition of -- that we've done for various customers, transit stock, raw material stock and our debtor days.
The quarter, we see an increase in sales -- your disproportionate increase in that quarter ends debtor days, and that gets adjusted for the rest when you look at it on a full year basis. So that's why our net cash is INR 1,850 crores, and that's down from end of last year. We are about INR 100 crores lower than -- INR 200 crores lower than what we were end of last year. So we've deployed money in working capital. We've done about INR 130 crores of CapEx this year, mostly on the mill lining plant. We've done about INR 30 crores on some windmill investments and other CapEx that we have done. So total is at INR 130 crores full year, plus the dividend we paid out and the...
[Technical Difficulty]
We request all the participants to please stay connected while we reconnect the management team. Ladies and gentlemen, the line for the management is reconnected. Thank you, and over to you, sir.
Yes. Sorry about that interruption. So I was saying that we've moved from about INR 1,200 crores, INR 1,300 crores, up INR 29 crores of working capital to about INR 1,834. There's a marginal increase in the number of days from 117 to 124. The rest just reflects the larger revenue and the downstream investments in stocks, raw material stores, et cetera, finished goods, debtors. And so the combination of that has led to a cash balance reducing from INR 2,200 crores to INR 218 crores to INR 1,890 end of this March, comparing March last year to March of this year.
From a volume standpoint, we're down about 171,000 tonnes in mines and about 90,000 tonnes in nonmining application. The mining bit obviously reflects the reduced -- after the reduction of volume that we had from Canada and South Africa.
From a basic update from the business standpoint, we -- the Board today announced a dividend of INR 9 a share, and that will lead to an outlook of about INR 84 crores for the year. CapEx for the -- we're very happy to also report, there's been concerns around growth around tonnages and the guidance for the period coming up. Our concerns around high shipping costs continue, about our inability to -- when you're moving from a forged solution to a chrome solution, there is a large conversation on costs, and the extra shipping cost is creating a headwind in terms of growth.
But like we added 30,000 tonnes of customers last year, we have -- our sales team has projected a growth of 30,000 to 40,000 tonnes this year and next. That is the guidance as far as our teams are going out and approaching customers, looking at conversions, looking at bigger wallet share. And this includes grinding media and mill linings both. So we are happy that with the travel that has opened up, the conversations that we are having with our customers lead us to -- and what we have done last year in a very difficult year, the customers that we have added gives us this confidence that we should now get back on to our growth trajectory.
And with that, we are very happy to inform that we are -- we have got back the brownfield expansion for grinding media from the cold storage. We had paused it after the COVID-linked slowdown that was there in calendar 2020. So we are now looking to add 80,000 tonnes of capacity and doing it with an outlay of around INR 200 crores, between INR 200 crores and INR 220 crores of outlay. And it's lower than our normal CapEx for this type of addition is because it's a brownfield expansion. And we should be able to commission that in calendar 2024, basically between 18 and 24 months from now. So that's a good development in terms of giving that visibility in terms of capacity.
And also happy to report that the mill lining plant is nearly ready to commission. We are in the trial phase right now. And sometime in June, we should be announcing our -- the start of that plant. So with that, we are at 390,000 tonnes with the mill lining. We'll be at 340,000 -- 440,000. And with the 80,000 tonnes of grinding media, we'll be at 520,000 tonnes, 0.5 million tonne of capacity for high chrome products. So that's a great number and milestone that we look forward to putting in place and working towards that.
And so the CapEx plan, the outlay for the coming year is at 30 -- INR 300 crores for FY '22, '23. That includes INR 130 crores towards the balancing part of mill lining and the grinding media plant. About INR 90 crores for captive solar renewable wind power generation -- captive power generation, that's hybrid and wind, looking at about INR 90 crores towards that and about INR 60 crores of other CapEx. So a total of INR 300 crores is the guidance for our capital spend in FY '22, '23 and another INR 100 crores to INR 120 crores in '23, '24, which is a balancing for the grinding media plant.
I think those are the key updates for this quarter. From a business standpoint, I think raw material continues to be at an elevated level. Shipping -- with what happened with China and the interruption that came in because of the ports that -- and the third and the fourth order effects of interruptions with shipping because of China still haunts us. There is uncertainty around containers, the cost of the container, et cetera. But I think as a business, we are moving on saying, if it reduces, great. But this looks to be the near-term reality and how do we adapt and work towards that. So -- and our ability to travel allows us to continue having more conversations and hopefully getting back to growth board from this year onwards.
I'll request Sanjay bhai to share his brief from the Board meeting today and then we get on to [ questions. ]
Yes. Thank you very much. Thanks, Kunal, for detailed briefing. And I think while Kunal has covered most of the points, 2, 3 very important key takeaways that we have, even at the cost of being slightly repetitive. One, demonstration of the ability to pass on, almost on 100% basis, all the cost increases that has been further continued and strongly established by the fact that there is a significant improvement in the realization. Both the cost of raw materials plus the cost of freight has been nearly 100% passed on, and that process of passing on continues so -- which is a good sign. And therefore, there is a significant reflection in reasonably strong profit number that the company has posted in the quarter and the year ended March '22. That's point number one.
The resumption of the CapEx plan at a slightly elevated capacity of about 80,000 tonnes brownfield expansion for the grinding media as announced in the Board, and therefore, as discussed by Kunal at an outlay of close to INR 200 crores to be completed over the next couple of years, that is '22, '23, and '23, '24. And reasonable surety given by the sales teams and therefore, based on which Kunal has declared and we have discussed at the Board and it has been declared that we should be able to do conservatively anywhere between 30,000 to 40,000 this year as well as going forward even in next year. But as we progress, as we actually start achieving the numbers, we will talk more about it.
So I think I have -- with this, I request the moderator to throw the house open for Q&A.
[Operator Instructions] The first question is from the line of Ravi Swaminathan from Spark Capital.
Congrats on a good set of numbers. My first question is with respect to overall activity in mining with the commodity prices, especially copper, et cetera, continuing to remain on a higher side. How is the activity across the globe? If you can touch upon whether there is an increase in plans in terms of output across the miners. And is there more mines being opened? So if you can give your thought process on that, it will be great, sir.
Yes, sure. I think nothing more to add than what you read in the newspapers. I don't think we have any specific insight about it. But clearly, they are all doing well. When ore prices are good -- I'm not saying high, when they're good, everyone wants as much tonnage to be produced and sold, right? So everybody is operating at high utilization levels right now for sure. They want to take fewer downtimes as much possible. So anything that helps with them is clearly on the table for discussion.
On new plants, a lot of people are announcing that they're setting up capacity, but it takes time. So it's not going to be new capacity -- for it to come up, which would have been announced recently, that's all -- that's a longer lead time, right?
But overall, it's a good place where our customers are doing well generally, right? No -- nothing specific that applies -- that will change our fortune dramatically. But clearly, customers are keen for a good vendor, having the quality of the product that we have. I think there's a great place to produce these products. And we've got power, we've got skilled labor, all of that. So -- and we're not seeing new players coming in, in large numbers to participate in this industry.
And [indiscernible], as you know, they're not for even simple things like delivery, forget finding people for working on the shop floor. So this -- everything that's happened last 2 years only makes our model even more stronger to stand the test of time.
Got it, sir. And my second question, how much amount of volumes related to Canada, South Africa and Brazil might be still sitting in our volumes of 2 lakhs 50,000 tonnes in the sense that the old...
This year, we did about 10,000 tonnes in Brazil.
Brazil. Okay.
Versus what we've done, about 6,000 tonnes the previous year.
Previous year. So actually, the decline that you are seeing -- so in spite of the new...
Yes. We've added 4,000 tonnes in Brazil. And for Canada and South Africa, we would have lost about between 35,000 and 40,000 tonnes.
Okay, we would have lost that much. But what kind of volumes we are still doing in those 2 geographies? Any sense...
We would have done about very small cement quantity in Canada.
Okay.
Nothing with the mining side.
Okay, okay. And South Africa also will be very small quantities as of now?
Yes, yes, yes. Very small, 6,000, 7,000 tonnes.
Okay, sir. Got it. And how is our traction in newer geographies like Chile and Peru, et cetera? Any sense on that, sir?
Quite nice. But like I said, travel has begun now, and that's our highest focus as far as grinding media is concerned. We are making all efforts. We hope we have good news to share in the next 2, 3 quarters there, on [ that front. ]
Got it, sir. And my final question is with respect to the mill liner. So basically, have we already started engaging with our customers for sale of mill liners given that the plant is going to start in the next 2 to 3 months? What kind of volumes...
No, no. The plant is starting this month, in the next 30 days. And we've started work now. I mean now that the plant has clear path to commissioning and travel has started, we're not going to let the plant sit idle, and we are hoping that we get a different traction from this year itself.
Okay. And what kind of volumes we can expect, say, this year or probably next year? Any steady-state volume numbers that you have in mind, sir?
I do not have that overall revenue. Overall, we're doing 30,000 to 40,000 tonnes, which is [ all ] put together.
Additional.
Additional. I mean you're talking about additional mill liner volume from this plant to be 30,000, 40,000 tonnes in the next 2 months.
The plant can produce -- at 90% utilization, 80%, 90%, between 40,000, 45,000 tonnes, which we hope to fully utilize the next 3 to 4 years.
Next 3 to 4 years. Okay. Got it, sir. And what kind of realization, sir? So basically with all the price increases that has happened, will it be ballpark around INR 200 to the kg? So that kind of realization is possible?
Like we already explained, there's a grinding media or nongrinding media portion in our current sales. With what we're trying to do in mining liner, is that mix will continue to prevail. So it will not be skewed towards on the lower side. I don't think you should project an upside with the realization on mining liner.
The next question is from the line of Ashutosh Tiwari from Equirus Securities.
Firstly, on this guidance of 30,000 to 40,000 tonnes extra volume, so generally, in our business, we would have probably done the trials and also you must be fairly confident of these volumes from new mines, right?
Yes, yes, yes. I mean that's the effort that we have done. We did this in last year, right? Unfortunate that duty stuff came up and we had to lose volumes or this would have been a growth year for us. And we are -- the concern was shipping, and we were hesitating to say we can grow despite high shipping, but we spent a year with a high shipping rate, more than a year, right? And the change in mindset is that, [ you're right, Ravi, this is what ] -- we can't live hoping that freight goes down and we'll grow thereafter. That's what -- that's the mindset change that has happened over last quarter or 2.
Saying -- assume that this prevails, what does life look like? What can we achieve keeping that in mind? And that's why we are saying, okay, it looks like we should be able to continue to grow despite those challenges in high freight cost.
And generally, these new volumes will come from which minerals? Any color there? Is it more gold or copper? Or any color you can provide over there?
On all 3. I mean I don't think fair to segment this at this stage.
So Ashutosh, what's happening...
This is more a directional...
Exactly.
For last 2 years, 2.5 years, right, 2 years, I mean, we've been discussing all sorts of problems. I think here's where they're turning that leaf, turning the page and saying, we are looking to grow now. There is -- travel was a problem, COVID-related travel restrictions were a problem, high shipping rate cost, plenty things going wrong last 3, 4 years. It looks like that now all that is behind us. The teams are in place. All efforts we've done in the last 2 years are ready.
So it's a directional conversation saying it looks like that we should be able to grow. I don't -- it will not be fair to go into further dicing on how and where all that is done, but I think allow us to deliver on it at this time, and we'll keep sharing what we have done.
And on the Brazil side, where we have done 10,000 you mentioned was last year. And this is despite the duty of, I think, 10%, 12%, which is there on the product over there. So is it like the earlier -- I know customers coming back to us or there's something else?
No. So we're doing -- it's a combination of things, Ashutosh.
Okay. Okay. But is it the same customers, which are, I think, in that market?
We've done -- we've added a customer also over there, but it is also the other customer that we had before.
Yes. I don't think we'll be able to share too much because it's information related to the customer. But -- and whether this year 10,000 is going to become 20,000, we don't know. I think -- but maybe steady state for Brazil for this year.
Okay. There was a mine that closed, I think, I don't know the name, [ Samara ] or something, which is supposed to come up...
Volume is expected to materialize as an opportunity. Not yet, I don't think that's continued to convert -- or it's in the process of discussions.
Okay. And lastly, whatever increase which happened at the customer level in terms of stocks, that is now done. So beyond this, there won't be any further addition [indiscernible] new customer in terms of inventory at the warehouses?
That's a tough one. See, the thing is that is oversea. We always explain that a high shipping cost is a cost issue, but it's also reflective of the turbulence in the shipping in the ocean freight market, right? And if I'm a customer and if I'm waiting to -- on a critical product, right, that can stop my plant. And if I'm buying that overseas, then I'm depending on that supply chain that I have no control on, right? And if the shipping rates are higher by 3x or 4x, it's just symbolic of the stress and the problem that is there in that supply chain.
So that's where it comes from, whether -- what happens -- whether customers -- so the easiest way to tell the customer is that I'll put more stock on the ground, I'll put more stock in transit. So that even if there is a problem, you don't have to -- you will not be left -- your plants will not get shut, and that's on us, right?
Sir, I get that. I do get your logic. But I'm just saying that now that process is largely done.
Explaining that it can go up. It can go up, but it can go by a few hundred crores, plus and minus. It's not -- you're not putting INR 2,000 crores more into working capital, right? It will be stock against orders. My only simple point is that it will be -- even if it increases a little, it will be against a confirmed order that the customers are going to pick up. It's just that he wants us to be deploying it on the ground.
So Ashutosh, in terms of number of days, if you say, the probability of number of days reducing is not there. But we should be able to maintain the same or similar levels in terms of, say, 75, 80 days of WIP and finished goods, about 20 to 30 days of raw materials and about 75-odd days of debtor.
But the point exactly -- want to grow. We want to grow. And...
So as the sales grow, obviously, the absolute terms, the holding can go up because we will have to stock, we will have to maintain finished goods, mainly finished goods at various warehouses. But this is proportionate to the increase in sales. So that way, in terms of number of days, absolute -- I think it should be more or less -- it may not be able to reduce. It will not increase also dramatically in terms of number of days sales.
Got it. Got it. Lastly, on the realization of U.S. dollar, INR, what is the rate that's realized in the quarter? And what should it be going ahead?
Average -- just hang on one second. Full year, it was about INR 74.50. For the quarter, should be about INR 75, INR 76. That was the number on top of our heads, but between INR 75 and INR 76.
It should improve going ahead. Okay.
Yes, yes, yes.
The next question is from the line of [ Ritesh Shera ] from [ Lucky Investment. ]
Sir, I have 2 questions, one on your mill lining plant. So this facility and the sales cycle for this, how -- what would be the strategy? And how easy is it considering the fact that in this, we are seeing customer adoption towards the rubber plus metal-based mill lining? So some comments there. If we were gainer on ferro to high chrome, here, are we slightly at a tougher situation?
So the mill lining that we are selling to is an application which is mutually -- generally mutually exclusive to rubber because rubber exists on the secondary and the tertiary side. Metal exists on the larger mills called the SAG mills or the primary mills. Generally, that's occupied by rubber -- by metal, which is where we -- our products exist. Where rubber is concerned, they're moving rubber to rubber and metal, okay?
I don't think in those high larger mills with high impact, there is a migration from metal to metal rubber. Generally, I mean, we've not come across such instances. So we are talking of a market where we are competing with other metal lining producers, right? And the strategy is to convert them into our design versus what is the incumbent design, and that's the whole play in the market. There are 3 or 4 players. All of them are developed -- except one, everyone else is a developed country producer with their -- with a different cost structure, right?
So first, we are competing with their efficient structure. And the second is more important, we have a business that we can dramatically change operating parameters for a customer using our design linings, right? And that's where we exist. We are not -- so when you move from -- when we were introducing alloys, it was a rare cost advantage, right? A person moving from hypothetically rubber to rubber metal is aware of cost and the life of the lining conversation here.
In our case, the whole conversation is to improve throughput by 15%, 20%, reduce power consumption by that expense, right? So the benefits are several times of the cost of the parts. So the benefit that one would achieve with changing the alloy or improving their rates are far smaller than the realm of what we are discussing right now in our mill lining strategy.
And what is the market size of this and those 4 players?
300,000, 350,000 tonnes annual consumption.
Okay. And the size of those 4 players? And is it the same customer to whom you have to sell? Or do you have to develop a completely new customer?
No, the same customer. They're all -- similar old consumers.
So you will also go through a -- because the plant is coming now, you will go through your own sales cycle in this product because you...
So we're selling 20,000 of these parts to the mining customers from our existing plants, right? It's not a new product for us. We do equivalent size or a little less size, and we're already doing mill linings for cement business for the last 30 years. It's not a new business for us. It's just the mining application, which is grinding at the mining end, is something that is a catch-up for us as far as the process is concerned or the mining application is concerned. And that's where we are -- we have invested that time over the last 3, 4 years because if you're setting up the plant, that is something that we will spend time on. And we believe now we are ready to take advantage of that.
Okay. My second question is, sir, on your GP and the freight cost. So what we see, your gross profit per kg has continuously increased, which has over larger -- over the entire extent, taken care of the freight cost increase. And yet, we are a net gainer when we look at your EBITDA per kg since the last 3, 4 quarters that we are seeing despite your raw material price rise and freight costs rise.
Should we assume this absolute EBITDA per kg to sustain? Or there has been a fair bit of volatility in your business. We were at INR 30 plus per kg some years back. Then we are at about INR 25, INR 26. We started the year at INR 25. We're ending the year at INR 31. So what would be your best guess in terms of the profitability per kg?
So I'm Sanjay here. First, at the outset, I want to clarify that internally, the yardstick of measurability is not per kg. We have been clarifying this on a few earlier occasions as well for the very simple reason that we work with a very diverse product mix, comprising of casting; and within casting family, several products like cement, few mill liners; via cement, our grinding -- sorry, our mining liners; and a variety of different products. And then there is a whole vast gamut of different types of grinding media balls ranging and tailorized and customized for various types of requirements.
So there is not a standard product and therefore, EBITDA or realization per kg is generally not the right yardstick. So we look at more as a percentage of operating EBITDA. That is point number one.
Point number two, the function of increase in realization is not merely the freight cost but also the capability for passing of the raw material price increase. And therefore, this -- the blended effect is -- effectively, what happens is the sales volume and the realization goes up [ fixed over it remains. ] And the absolute terms profitability improves. But if you look at percentage of operating EBITDA, it is actually going -- has gone down a little bit. This is because the freight cost is passed on, on an actual reimbursement basis, and there is no profit element there, as you will appreciate.
On the raw materials, we don't share our detailed costing, but there are generally yardsticks or benchmarks agreed based on which we keep on discussing quarter-over-quarter the price increases.
So I think more or less, if I may want to make a statement that at a pure operating EBITDA level of around 20-odd percent, 21%, I think we should be able to maintain that going forward with a significant increase in volumes as guided by us. And we should be able to improve it also gradually as we move forward. But at this point in time, we are not giving any guidance about improvement in EBITDA or operating profit margins.
Again, on the GP, per kilo, therefore, with the same logic, we would rather want to restrict ourselves to the EBITDA percentage to sales as the most reliable yardstick, and that is where I, therefore, have to request you to kind of look at it from that angle.
The next question is from the line of Bhoomika Nair from DAM Capital.
Congratulations on the good set of numbers. Sir, my first thing is I wanted to clarify, you said 6,000 to 7,000 tonnes FY '22 from Canada and South Africa. This is in FY '22 totally? Or was it only in fourth quarter?
What is the question?
Canada. Full year.
Full year.
Yes, yes, yes.
And quarter would have been -- it's very minimal volume, right? I mean not be 1,000 [indiscernible].
[indiscernible]
Okay. The other thing was Brazil has done around 10,000 or -- I remember it sort of used to do something like 20-odd thousand. So are we seeing that kind of scaling up in the next 2 years from Brazil as well? Oh from -- yes.
The Brazil answer was just indicative, I think -- like I said, we cannot keep slicing -- at that time, we lost 16,000 or 18,000 tonnes. So it was a material event, right? We keep losing and getting customers at times because of different conditions. Yes, I don't think 10,000 tonnes in this year -- if adding 60,000 to 70,000 or 80,000 tonnes in the next 2 years, it's at 320,000, 330,000 tonnes. Our 10,000 tonne volumes again becomes nonmaterial, right? We may do more. We may do less, but given that there is one customer that has a higher volume, we would prefer not to keep specifically talking about the volume over there, right? We may get 5,000 tonnes more, we may not, right? But the materiality is not there anymore. In our growth plans, we do not -- we're not counting on it to come back.
Got it. Got it. Fair point. So the other thing was when we had started with the EEMS solutions, we were talking to 10, 20 customers on trial basis, et cetera. And clearly, there was a lot of saving and -- from a client perspective, where we were quite positive on. So if you can just give a status on how things are today, what kind of volumes are coming from the EEMS part of the business and where this can possibly scale up to given now that the mill lining plant will be operational.
So at the time, we had discussed and talked about EEMS simply because we have signed an agreement with them. Our mill lining strategy is very independent of that, yes? It is not contingent on what that collaboration is going to bring to the table. Our endeavor is to -- our strategy is to bring value to the customer in addition to the way rates and other benefits that we bring, right? And there are many moving parts in that strategy.
One of that is what comes to the table from that EEMS collaboration. But if you're going to add 40,000 tonnes in the next 3 years in the mill lining space, it will be a combination of many other things that we are doing. EEMS will be one part of that. But there is a lot of internal competency that exists along with other partners for offering those value-add benefits, right? The design of liner is one, metallurgical solutions is another, so on and so forth.
The next question is from the line of Amit Dixit from Edelweiss.
Congratulations for a good set of results. I have 2 questions. The first one is on essentially order book, right? So if I see order book, it is on the lower side -- seems to be on the lower side. Is it a function of price or volume? So that is the first question.
We -- because now we have moved to rate contracts with a large number of customers, and they place monthly orders, quarterly orders for deliveries in the near future, right? So as a practice, we are not adding contract orders under the order book. And that's why this figure looks -- I don't think that's a material figure now.
Okay. The second question is essentially on your growth plan. So if I look at the global major miners, I mean, like Vale, Glencore, and I won't go into specifics because you won't go into specifics. So their guidance and rather stake on mining plant, it's very static guidance. I mean you talk of any metal player for FY '23. So I just wanted to -- and the number that you have -- are targeting, 30,000 to 40,000 tonnes, is quite material. So I mean just wanted to get that what gives you the confidence of achieving these kind of numbers when the guidance from some miners itself is very placid.
Our targeted conversion from forged to high chrome use. So we're talking of the huge headroom that exist today between the level of penetration that we have done in the 3 core ores on which we are concentrated upon, that is gold, copper and iron ore, where we believe that the combined market of conversion from the present conventional forged to our high chrome use is most conservatively anywhere between just around 1.5 million to 2 million tonnes per year between these 3 ores -- main ores, okay?
As against that, the penetration is about 15% between us and our competitor, which means we are focused on converting those who are existing and already operating with some other alternate product that is forged media or some different types of liners into our high chrome-specific grinding media or liners. Therefore, we are agnostic. Let us assume the industry doesn't grow for the next 5 years. It doesn't matter. We want to increase our market share or wallet share by conversion. And not -- therefore, we are not dependent upon the growth.
And that is why our confidence -- you see, because there's a tremendous effort that goes on our sales and our project development teams. When they start interacting with the mine, they demonstrate, they give -- we give them trials. Then there are mutual interactions. We go back and forth. The process goes on for 1 or 1.5 years. So it is this process, which, as Kunal explained in the initial part of the call, was disrupted due to COVID, but which has now, over the last 6 months, really gained traction, which makes our sales teams give us the confidence that now we are in a position to commit that yes, there is a lot of development efforts, which is now gaining traction. And therefore, based on that, we should see this much volume -- additional volume coming incrementally at least year-over-year. And this is all from conversion and not dependent upon the growth cycle or increased CapEx requirements, et cetera, of miners.
The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
Congratulations for good numbers. So you mentioned that while you lost some 40-odd thousand because of Canada and South Africa, you gained about 30,000-odd tonnes from new customers. Could you give us some flavor of who these new customers are? And where are we getting these new customer wins?
Difficult -- I said we are not actually sharing the names of the customers as a matter of policy. But just to give a little flavor, the key geographies where we are very bullish and we see a lot of traction is the Central America, the Latin America part, that is the entire South -- Latin America, then South Africa -- I'm sorry, the entire African region, Australia, CIS. These are the regions where a lot of traction we are seeing, a lot of additional incremental customers we have gained in the core 3 ores that we are talking about, that is gold, copper and iron.
Fair enough. Maybe second question is, I mean, on your upping of the guidance on the capital expenditure side from 50,000 tonnes to the 80,000 tonnes. Could you just help us understand where -- I mean, why is it going to take 2 years? Because this facility was actually under the expansion mode for some time and a few machines only were being held on. So why is it going to take 2 years? Because this expansion...
18 to 24 months, right? I'm just -- because equipment lead time is there now. It will be at least 12 months lead time for the -- I mean, today, a car takes 8 months to 10 months they're waiting, right? I mean the equipment that we're ordering is at least 12 months of delivery time. So I think 18 months -- we'll have to create a balancing infrastructure also. You were there at the plant. There is -- the expansion still needs -- the civil work needs to be done, but within the plant. So what do we say? We're not going to make land acquisition. We don't have to apply for pollution, environmental clearance. Power is there, the captive -- the substation is there with the capacity to enhance.
Those things take away now, today in India, anywhere between 12 and 15 months. That portion is eliminated. But from the day we start to get-go, ground break for that brownfield, it is minimum 18 months just because of the delivery time, the installation, the commissioning, all that put together. So 18 to 24 months is a -- I don't think it can be lower than that.
Sure. So is it that the equipment lead time has gone up?
Exactly, exactly.
Understand that. And lastly, do we have -- if you could give us just flavor -- I mean, you've talked about it extensively, but on the new mill liner expansion that we are targeting, do we have any case studies or, I mean, that where we have customers and we have already installed some of the trial units and then we are confident of scaling that up on a 3-, 4-year basis?
Absolutely. No, no, more than a few now. Absolutely. And we've done that -- and see, this is not new for us, right? In the cement side, that's a day job. Every single nongrinding media part that we install, which is vertical mill parts and tube mill parts, every single casting goes through every single solution we offer -- has gone through that, right? So in that sense, it's not a new thing that we're doing. It's just that knowledge for the mining application is a variable that's new for us. Everything else is something that we've done, right? The DNA is still the same.
[indiscernible]
Yes. And those solutions -- more than a few case studies now. We are doing 20,000 tonnes a year already. So this is adding another 40,000, 45,000 from 20,000 is not even a very ambitious figure, right? It's easily doable in the scheme of things now.
Sure. Last question, from the nonmining volumes, what would be cement? And -- because we have seen some growth in the nonmining side. So is it largely driven by cement? Or...
All of that growth is cement -- most of that growth is cement.
Okay. And of the nonmining, what percentage would be cement roughly?
90%. Almost -- 85%, 90%.
The next question is from the line of Amar Maurya from AlfAccurate Advisors.
Thanks a lot, sir. My question has been answered. Thank you.
The next question is from the line of Priyankar Biswas from Nomura Securities.
My first question is, like let's say hypothetically, if there were not much of great disruptions, let's say, on the container availability, on those, so how much potentially extra volumes you could have done in FY '22, rough estimate?
[ Hypothetically ] answering your question. You see, when -- at the beginning of COVID, we were all geared up for similar kind of volumes coming from FY '20, '21. At that point in time, we were talking of 25,000, 30,000 tonnes per annum. So I think as a hypothetical answer, you can take it at 25,000, 30,000 tonnes a year, which we have now clearly said -- and we were very conservative in even -- not giving any guidance. Still, we saw it happening with confidence coming from our sales teams, and that is why this time, while we had already indicated earlier, we are talking of anywhere between 30,000 to 40,000 should come based on the developments that are ongoing, number of mines that are under development, the response that we are receiving from the customers, the time lines that we are anticipating. And all those things factored into as a part of the careful budgeting exercise, which is elaborately carried out by our business development and sales teams.
So sir, similarly on these lines, so now you are saying that probably we'll do 30, 40 kt over FY '23 and '24 each year. Now I would guess that since you were speaking of mill liners included in these volumes, and as Kunal was saying, like in 4 years, maybe you will have 80% utilization. So is it fair to assume that within this 30, 40, at least 10, 20 at the minimum level would be mill liners? Or could it be even higher?
Out of this 40,000, you can say that every year, maybe around 8,000 to 10,000 tonnes incremental could be mill liners.
Okay. So the rest will be your grinding media? So broadly, like 25, 30 kt grinding media is here broadly?
Right.
And sir, one more question. So there were trade actions like in Canada and South Africa, where especially Magotteaux was the local manufacturer. Now with -- now what I observed is that among significant geographies, only in U.S.A., Magotteaux has local manufacturing presence. So what do you think about any possibility of trade actions in U.S.A.? Is there already some kind of import duty that we face in U.S.A.? Like, what is your take on that? Any possibility about disruptions in U.S.A.?
That's -- that will involve some amount of speculation on our part to say what are the odds and the likelihood. I think first of all, and then speaking about Magotteaux, I think it's also not appropriate for us to specifically talk about their plans and what they're working on. As a philosophy, freight was a problem last 4 quarters. We are now seeing we'll still grow -- let freight do whatever it has to do, right? Our business cannot be contingent on a duty, on a freight structure, on price increase, on different things, right?
So duty comes or duty does not come. We're back at 10,000 tonnes in Brazil here at [indiscernible] 16, right? Does that demonstrate that there is a business model and strategy in place that is far above incidental events that can come across, right? So it may come, it may not come. The point is that, that's not going to stop us from growing, Priyankar.
So right now, there are no duties? Or is there some duties?
There's a 2% or 3% import duty from India into U.S., custom duty.
And sir, the last question from my side. Recently, you had put out on the exchange regarding some fraudulent activity, some employee regarding like on the technology front or something. So what exactly happened? I mean is there any risk that our...
I think it's, again, [ duties ] -- there are things going on. And so -- and it is what we have reported. I don't think we'll be able to speak for -- nothing that has a -- that material implication that I can speak about right now. But it was important for us because it can have material consequences. It's a [ subduties ] matter in other -- if we are not alert about it, right?
Just to add, there are no financial implications as of now.
The next question is from the line of Sandeep from JM Financial.
First question is pertaining to if you can share the metal-wise split broadly for last year between the 3 major ores just to get some sense of what contributes how much on a historical basis, not forward-looking.
All 3 represent growth opportunity for us. We are agnostic to what gold and -- gold and copper, we're able to add down process benefits, which is increasing recovery, et cetera, and which is -- that's our -- those are ores of interest to us. But iron ore also is one very large market, and that continues to be an important -- and application for us.
Just in terms of percentage contribution to total volumes, how much would be each...
I mean it will be difficult. Like it's not something that we track because it does not -- financials don't change based on that, right? We're agnostic to what ore type. So it's not something that we would really like to share at this time, that level of detail.
Okay. Second question is on the price pass-through. You did mention that for raw material, price increases entirely taken care of the price hikes. But on logistics costs, to what quantum has it been passed through? And what still remains with us?
Sorry, your voice broke. Can you repeat?
So in terms of price pass-through, we have passed through the entire raw material price hike. But in terms of logistics cost increase, you mentioned it's largely pass-through, but we still are bearing some of that increases in our cost. So what would that quantum...
Again, a directional answer. I don't think you should look into detail beyond -- that concept is that we are passing through, right? We thought that's going to be a challenge. But we are passing through. And that depends, by the time we pass through, costs go down, then we would refrain from holding it. So I don't think we'll have an exact number. I think we passed through 60%, and 40% we are in the process of. But there is some portion that has to still come along. But there are many variables linked to it.
Okay. All right. And one question is on the mill liners business. You did highlight that in terms of, say, 40,000 additional volume, 8,000 to 10,000 tonnes can come from mill liners, which should be nearly 1/4 of the new volumes. So in terms of proportion, because you're doing only 20,000 tonnes in liners as of now. So wouldn't that lead to higher realization?
But we already have in our current 260,000 also nongrinding media and grinding media bit, right? So in the -- in -- when we go from 260,000 to 300,000 tonnes, that additional 10,000 is also not going to move the needle significantly, right? So to just keep with the current mix going.
Okay. Okay, understood. And lastly, if -- on the succession plan, would you want to make any comments over there? What is the Board thinking about it?
There, I think Sanjay bhai...
Yes. So we have been very consciously -- over the last couple of years, the Board and as well as the top management has been taking action. So first, the search is actually on for a global CEO, and that is going on in very serious earnest. Second, personally speaking, Mr. Bhadresh Shah, in his individual capacity, is now practically not involved in most of the key operations. So he hardly ever visit any plant, doesn't take any direct sales calls. Everything is done independently by professional teams across the globe.
So business development and marketing, that part also is practically -- is on the hands of sort of a position. Obviously, finance or procurement, et cetera, is absolutely not being taken care -- so the only function he plays is more on a very wider strategic role. And I think going forward, we should be able to ensure that there is a very seamless succession plan, which has been put in place. So we are already working -- in all seriousness, we are working on that.
Okay. So instead of a family member, we'll have a professional global CEO who will be leading the company going forward, yes?
Exactly. Exactly.
The next question is from the line of [ Adithya ] from [ SIMPL. ]
Just wanted to understand, recently, India was in a kind of free trade agreement. And so Australia is a key market for us. Is there any benefit which will accrue to AIA because of these agreements?
Well, actually, this free trade agreement is an additional feature. We are in the process of examining it. But the development that we do with a client is actually agnostic to any further benefit that we may get out of an FTA. So very honestly, we haven't really considered weighing those benefits. But there will be some incremental benefit. But the point I'm trying to make is that we are agnostic to FTA. So whether there is an FTA or not, that benefit itself can be translated on a one-to-one bilateral basis.
Like Australia, for example, it goes -- the duty is at 4%. It goes to 0% in 4 years. So there is some benefit at least for the Australia FTA. For others, I mean, it's a work in progress.
And my next question is our power costs part. They used to be around 10% to 11% of sales. They've come down to 9% this year. So just wanted to understand, is this a one-off? And should we not look more into it? Or are we seeing some benefits from the windmills that we have developed over the years?
It's -- yes. So basically, what is happening, we -- you are looking at the net power cost. So we have been progressively installing more and more windmills.
You can consider 9%. It's a benefit of the captive renewable that we have, yes?
Yes. So that should be the rate going forward or we can expect some more from it?
That comes to this for now.
Around 9%, yes.
The next question is from the line of Anupam Gupta from IIFL.
So just one question. You have said 2 things on freight. Firstly, on the existing operations, you have been able to pass it on to customers on a very regular basis and it is reflecting in margins. And secondly, for new customers, you are saying that this was a hampering factor for conversion. So let's say, when you talk about 30 to 40 kt of new volumes next year, should we assume that to start off with, you'll have discounts to cover the freight just to ensure conversions? And then later on, you will be able to pass it on to customers and margins will be [indiscernible] for the new customer specifically?
No, I don't think so. See, what has happened that as you mature and as your position becomes more and more consolidated, this kind of very fine math...
Yes, it's a very simplistic question. I don't -- I mean, realize there will be many other variables that -- I mean, beyond just the freight cost, right? We are saying that high freight is a reality for the medium term, near to medium term. We have created a model around it, right?
And we have been able to pass it on with...
As a concept, saying -- using pricing is not a preferred method, right? Rather focus on value addition and then demonstrate that and work harder on it.
Product mix -- many factors, yes.
The next question is from the line of Sumit Jain from ASK Investment.
Sanjay bhai and Kunal bhai, congratulations, very good set of numbers. Just on to the previous question, when eventually shipping issues get resolved in the medium term, then this 25,000, 30,000 tonnes that could have happened, that could be additional. Is that the correct understanding?
It comes with the metrics, right? This is, again, a directional answer. This is why. We are finally going from saying we are worried this, that going to saying it looks like we're back to growth. I think allow us a few quarters, we'll have much more direct clarity as we are going, right? 30,000, 40,000 is a good number to start with and target. And we hope we do more, but the idea is to keep doing that for a longer period, right? And that's what the focus is right now. We do 10,000 tonnes more or 20,000, does not change the needle because we want to become 0.5 million more tonnes in next 5 years, for example, right? That's the direction. Now 10,000, 20,000 tonnes early or later will not change the directional answer.
Okay. Okay. And the current mill lining sales at 20,000 tonnes. What is the capacity?
50,000 tonnes, the new plant. Total is about 70,000 including existing plants.
Okay. Okay. And you said Australia, the current duty is 4%, and it will go down to 0% in 4 years due to the FTA?
Correct.
Right. And then there's one question on the balance sheet. Your other fixed -- other noncurrent assets are at INR 319 crores. There's a rise there, if you can explain.
Okay. I will come to that question on noncurrent assets. Can I take that off-line with you? I don't have the answer immediately with me.
Sure. And you just said -- I just wanted to confirm, the power cost would now be in the range of about 9% of sales.
9% to 10%. Again, we're doing power trading. We're doing renewables, right? Renewable also has a cycle, it's not all 12 months. Wind is concentrated in [indiscernible]. So again, 9% to 10%, and we'll leave it at that. It's not an exact number. It will be this much.
The next question is from the line of Amit Anwani from Prabhudas Lilladher.
My first question is on the mill liner side. As you mentioned, you must be adding 50,000 capacity. Just wanted to understand how big this market is. What is the competitiveness? And who are the leaders now? And where does the AIA would be aiming to in 3, 4 years in this space?
Hello, can you hear me?
Yes, sir.
Okay. So the total additional capacity that we are creating is about 50,000 tonnes. And the market, as we already explained earlier, of mill liners could be anywhere in the region of about 300-odd thousand tonnes. We are already doing about 20,000 tonnes. So we should find a decent traction going forward based on whatever indications we are getting from the sales.
So how much would be the current market share? Or any competitor in terms of this business?
So there are major global players who are already active in this. They are all key global players with whom we are competing, but we are pitching on a unique design platform based on our technology tie-up with the American company, plus our own research that we are doing. And therefore, that way, we are in a -- we believe we are in a competitively better position. So we should be able to get a decent market share.
More importantly, there is also an element of cross-selling, which is always there because while we sell mill liners, we also push grinding media and vice versa. So that helps us in increasing our wherewithal to approach a customer with a comprehensive solution.
Right. Sir, next question on the base volume. So for this year, the existing base volume falls to like 30,000 tonnes. How much of this volume where we are immediately competing with the Magotteaux [indiscernible] the plants near supplying to the several customers?
I don't think that's an answer that we'll be able to share. I mean we compete with forged guys where we convert into chrome.And obviously, we compete with Magotteaux on the chrome side. So whatever is chrome is theoretically, they are in the same market.
So basically, what we are trying to understand is how much of this volume could again be at risk of duties, which have been facing for 12, 18 months.
No, no, no. So I think there is a mix up here. First, let's understand this. The current year sales is about 260,000 tonnes. That includes hardly a few thousand tons of -- 6,000 to 7,000 tonnes of sales, which has come from Canada, where there was a new...
No, no. Total between 8,000 and 10,000 tonnes, that's come from South Africa and Canada.
Yes. Sir, my question was out of 260,000, 30,000 is from the new customer side.
Correct.
And after the loss, we have 230,000 base volume side?
Yes.
So out of this 230,000, I just wanted to understand, is there any volume which is at risk of competing with Magotteaux or coming under any such duties in future?
Not really. Not really.
As there are no further questions, I would now like to hand the conference over to AIA Engineering management team.
All right. Thank you, everyone, for joining the call. As usual, Sanjay bhai and I remain available for any off-line questions that one may have. Thank you so much, and have a good evening.
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