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Ladies and gentlemen, good day, and welcome to the Q3 FY '23 Earnings Call Conference Call of Apar Industries Limited. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ambesh Tiwari from S-Ancial Technologies. Thank you, and over to you, sir.
Hi. Good afternoon everyone. This is Ambesh Tiwari from S-Ancial Technologies. I welcome you all to the third quarter FY earnings call for Apar Industries to discuss business performance and outlook. We have from the management side, Mr. Kushal Desai, Chairman and Managing Director; Mr. Chaitanya Desai, Managing Director; and the CFO, Mr. Ramesh Iyer. I would now pass on to Mr. Kushal Desai. Thank you, and over to you, sir.
Yes. Thank you, Ambesh. Good afternoon, everyone, and welcome to Apar Industries Q3 earnings call. Let me start by giving an overview of our performance and follow that up with a short industry update.
I would then like to get into more details on the segmental performance of the 3 businesses. And post that, we can open up the floor to questions.
So during Q3 FY '23, the consolidated revenue came in at INR 3,942 crores, which is 77% higher than the previous year. This was largely driven by volume growth across all divisions. Our export revenue grew by 144% year-on-year and is today contributing 49% of the overall company's revenues. This is compared to 35% a year ago.
The EBITDA is also up by 174% year-on-year to INR 349 crores at an EBITDA margin percentage of approximately 8.8%. Profit after tax for the quarter came in at INR 170 crores, which is 210% higher than the previous year. It is at 4.3% versus 2.5% in the year ago period.
9 months consolidated revenue stands at INR 10,270 crores, which is 63% higher than a year ago. And our export revenues have grown by 105% for the 9-month period. In terms of some of the key industry highlights, India power consumption logged a double-digit growth of over 11% to 121.19 billion units in December '22 compared to a year ago. The robust growth of the power consumption indicates sustained momentum of economic activities through the month of December. The peak power demand met, which is the highest supply in the day, rose to 205.03 gigawatts in December '22. While the figures for the previous year at the same period were 183.24 gigawatts and it was 182.78 gigawatts in December.
Power deficit in the country rose slightly to 0.6% in the April, November period. India's power consumption logged a high of 9.6% to 343 billion units in Q3 FY '23 compared to a year ago. So, these are all robust growth indicators and clear sustained momentum in the economic activities that are a reflection of the amount of power consumption that the country is observing.
The central government, as most of you may already know, has announced a very ambitious IDSS scheme, largely around improving distribution -- power distribution of approximately INR 3 lakh crores. Of this, about 30% is allocated towards -- spend is approximately allocated towards cables and connectors. It will largely be cable and to a smaller extent conductors. This spending is expected to be deployed in a period of approximately 5 years.
Also, the total outstanding dues owed by the electricity distribution companies to power producers, that is to generation company has nearly halved to INR 675 billion as of December compared to INR 1,210 billion as of December '21. This can be attributed largely to the various steps taken by the government, such as implementation of late payment surcharge rules and provision of a facility for equated monthly installments to utilities.
So if this trend continues, then it is a good sign of more discipline coming in terms of the distribution sector, which so far has been the Achilles heel of the entire power infrastructure of the country. I would now like to specifically talk about the business highlights by each segment.
Our conductor business revenues in Q3 FY '23 grew by 103% year-on-year to reach INR 1,912 crores for the quarter with a volume growth of about 99%. The export revenues grew by 288% year-on-year, contributing to 53% of the division's overall revenues. The premium products in our basket of conductors contributed towards 44% of the revenue mix. The EBITDA per metric ton post ForEx adjustment came in at INR 49,942 per tonne, which is a historic high. The conductor division has seen a transformational journey in the past decade. And I think today, we are reaping the fruits of all those investments and decisions that have been taken and invested in during the past several years, the improvement in the EBITDA is mainly due to the higher share of premium products.
The higher share of exports in the conventional conductors, where our realization is better than in the domestic markets. There have also been a couple of strong tailwinds where we've seen the price of steel having reduced as well as the container freight costs having come down to most destinations as the pre-COVID levels.
During the 9-month revenues, they came in at INR 4,899 crores. So they are 81% year-on-year. Volumes are up 51% year-on-year. The EBITDA per metric ton for the period came in at INR 37,900, which is 125% higher than the previous year.
Our current order book stands at INR 4,885 crores with 44% of the share coming from premium products. So overall, our conductor division has had a very good quarter, and in fact, it's the best quarter that it's had in its all-time history. Coming to the oil division, there the situation has been a little bit more difficult.
In Q3 FY '23, revenues came in at INR 1,245 crores, which is up 38% year-on-year. Volumes have grown by 9% in the quarter, backed by growth in the transformer oil business, both domestically as well as overseas. Exports contributed towards 43% of revenues.
EBITDA post forex adjustment came in at INR 1,646 per KL, and this is in line with the guidance which was given earlier, where there was a clear expectation of lower profitability given certain inventory corrections and price corrections, which were expected.
The lubricant revenues came in at INR 238 crores with a volume of INR 17,063 KL. Looking at the 9-month period, the oil division revenues are up 33% year-on-year at INR 3,489 crores. The volumes grew by 3% in the 9-month period. EBITDA post forex came in at INR 5,190 per KL.
Looking at the cable division. In the third quarter of FY '23, revenues grew by 89% year-on-year to reach INR 1,921 crores. There were significant increases coming from the sale of our elastomeric products as well as exports. Our exports contributed towards 49% of the overall sales in Q3 versus 35% a year ago.
The elastomeric cable revenues are up 29% year-on-year. We continue to see a robust business in the renewable energy space, both domestically as well as overseas. So EBITDA post forex for the quarter came in at INR 109 crores, which is 11.8% of revenues compared to 8.7% a year ago.
Looking at the 9-month period for cables, revenues are up 77% year-on-year at INR 2,320 crores. And again, the elastomeric business and the export business is what has contributed to the growth. The overall export business is around 52% of sales in the 9 months period. The EBITDA post forex is at 9.8% for the 9-month period compared to 4.4% the previous year.
Our business is expected to hit the target which we had mentioned in our guidance of INR 3,000 crores revenue for this segment. So overall, we continue to be quite optimistic about the growth prospects of the company. All the key growth parameters seem intact. We are well placed to tap into the benefits of power infra-led spends, both domestically and overseas in key markets like the United States, Australia, Europe and Latin America, especially as there is this push towards renewable energy as well as the China plus one benefit or opportunity for India continues.
I would also like to mention that we have an updated corporate presentation with significantly more details on the company profile and performance, which has already been uploaded on our website. And specifically, I'd like to highlight that it carries more information not only on customer mix, but also on receivables and receivables funding that we have for the business.
So with this, I'd like to come to the end of my comments. I appreciate the time all of you have taken out for joining this call. And I can open up the floor to questions now, please.
We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Mahesh Bendre from LIC Mutual Fund. .
Sir, there is a dramatic improvement at our EBITDA per tonne for this quarter. So we are hitting around INR 49,000, now last year we were anywhere within INR 15,000 to INR 20,000. So why this improvement has happened?
Yes. So as we explained in the opening remarks, the conductor division has seen this transformation journey and the higher margin is actually the result of 2 things. One is that the share of premium products is going up, which gives us a higher margin. And second, even on the non-premium products, the proportions of our overseas business has increased. Both has resulted in higher margins.
And also, we have seen some tailwinds in the form of steel prices as well as freight, which has come down since the last one year, which has increased this margin to about INR 49,000 per metric ton.
So if you set aside the benefit of steel prices and the trade cost, transportation costs, so what will be the sustainable EBITDA per tonne we could see going forward?
So in the short term, which is for the next couple of quarters, you will still see EBITDA per tonne, which is relatively high in the INR 30,000 kind of range. But we've given a guidance that sustainably, if you take a longer period of time, just with the structural changes that have happened due to the premium products, we are looking at 20 -- we've given a guidance of INR 22,000 to INR 24,000. As these premium products are growing, the EBITDA per tonne will continue to edge upwards. See, one fundamental mix, which has changed. So Ramesh has already given you that 44% of the revenue has come from premium products.
But when you look at the balance, 56% of the revenues, a large portion of that is actually conventional conductors which have gone overseas as opposed to have been sold in the domestic market, where we have been seeing better realization. The domestic market still realizations are quite poor because the standard itself expected from many of the EPC players are laid at a very low level. Whereas as you go into the more developed markets, which I mentioned in my opening comments, which are countries like the United States, Europe, Australia, Latin America, being standards expected are much higher from suppliers. So we look at the market on a global basis, wherever we see the best netbacks in terms of profitability is when we focus on servicing those contracts.
So in the current situation, we are seeing good opportunities in these overseas markets for standard products, and we are focusing on the domestic market largely for the premium value-added products. So that mix is what is helping drive this.
Of course, the tailwinds, as Ramesh mentioned, there are 2 specific tailwinds which are there, which is that from the time that some of these prices are ported steel prices have moved down. And some of the contracts are DDP contracts. We saw the brutal side of it last couple of years. But in the last 2 quarters, these freight rates have been coming down, so we've been seeing now the benefit of that. So I hope that kind of holistically answers your question.
We have the next question from the line of Amit Anwani from Prabhudas Lilladher.
First of all, congratulations for the great set of numbers. So first question for the conductors business. Just wanted to understand in more detail. You mentioned that the non-premium products are seeing higher exports and HEC, we are largely focusing on increasing the volumes in domestic market. So any color on 2 key geographies where you're seeing the higher traction for standard products or any 2, 3 geographies where you're seeing higher traction for HEC products. Some color on that sense how the market is affecting your products and conductors business and which markets are affected?
So I'm not sure whether we understood your question exactly. But see, the order inflow for high efficiency conductors and the copper products and all continue in the domestic market. And as I mentioned earlier, 44% of our INR 4,800 crore order book, INR 48 crore, INR 85 crore order book is these products.
But the standard products, which are the standard conductors, we have been increasingly getting opportunities to supply overseas where the profitability is better than in the domestic market. So that's the mix that we are...
The question was like you said standard products. Just wanted to understand the major 2, 3 geographies where the standard product...
As I mentioned earlier, the United States is the largest market. And following that, Australia and some markets which are in Latin America.
So can we assume like this are contributing more than half of the exports for standard products?
Yes, yes, absolutely.
Okay. Sir, my question for cables. Are we still sticking to 20%, 25% CAGR from the next 2 years in that? And second thing is you mentioned the elastomeric cables contribution is going up, so if you can just highlight how much percentage it contributed in.
Yes. So we continue our guidance about 25 to 30 percentage on the cable business, as we have been talking earlier also. And sorry, what was the next question on?
Contribution in the quarter.
So the total growth is coming from our HT cable, LT cables as well as elastomeric cables, and it's a combination of domestic as well as exports. What has happened in the cable business is that our share of exports has gone up considerably.
So if you look at the quarter 3, we are close to about 50% in terms of exports, which was just about 35% last year. So the share of exports has gone up, which is what has resulted in the growth of this cable business.
The growth rate we are seeing it's a smaller growth, but our growth has also come from our what we call light-duty cables and the business, which is a distribution-based business. So we started off. First year, we have INR 20 crores and INR 60 crores and last year was INR 100 crores. This year, we should be close to INR 200 crores.
And the following year, we are targeting INR 350 crores in that segment. So that business is also growing parallelly with exports. And then you asked for the growth on what is driving the growth on the elastomeric side. So that growth is being driven by the renewable energy space, the expansion happening.
Domestic?
So we were -- until 2 quarters ago, the business was all purely domestic. But now we have some of the increased capacities, which I had spoken about even in previous quarters for cables that go into both wind mills as well as solar.
And so now the export of those products has also started. So you will see actually, as we get into FY '24, more and more export of these renewable cable is also happening. Cables going to renewable energy space.
And this elastomeric is a higher-margin business?
Yes. The elastomeric cables are very specialized cables. And therefore, they carry a higher margin. We are also one of the few vertically integrated players where we make our own -- we do our own insulation, the polymers that are used for insulation. So we do our own formulation and mixing of those.
Right. So my last question on RDSS scheme, which you mentioned in your opening remarks, and you highlighted that 30% might be allocated to cable and conductors over 5 years, which gives me about 18,000 to 20,000 each year. So if you could just highlight on the addressable market for Apar and how much Apar as an entity can get out of this by? .
So theoretically, we have products that cater to the entire basket of what is required. So these are low voltage and medium voltage cable. It's a combination of underground cables and overhead cable conductors. So we are in a position to actually address all of these requirements, which are there from a product standpoint.
Now it all depends and finally in terms of who the counter-party is and what are the terms and conditions. But my main point of bringing this up is that there is going to be a good growth in the requirement of cables both domestically as well as export.
And usually, when we say 5 years, it is still another year or 2, but the market is going to expand because of this RDSS in addition to whatever else is already there in terms of market segments. So therefore, the overall bullishness on the cable side is also quite high.
Right. Sir, last, if I may squeeze in. So can we assume that we are seeing a sustainable hike, we will continue to see sustainable high growth in exports markets at least in near term across conductors and cables.
Yes, yes, absolutely. We expect the current momentum on the export side to continue not only for the next quarter, but also whatever we can foresee in FY '24 as of now. And as you may be knowing that even in the United States, the infrastructure build and all is already on its way to get approved and executed. So the benefits of some of that have still not come in. This is pre the infrastructure build spend actually taking place.
And on the renewable side, as more assets are coming up, it requires not only cabling at the site and then evacuation to the grid, but then the grid is basically a conductor grid that evacuates the power as to whatever is the grid in that particular country through its distribution to customer's tastes.
So in short, the very ups and downs in terms of quarters. But if you look at the trend over the next 3 to 5 years, the trend is very positive because globally power infrastructure is being added.
The next question is from the line of [Gopal Agarwal] from HDFC Mutual Fund.
Congratulations for great sets of numbers.
Thank you Gopal, could you just speak up a little bit because we are the voice is a little soft.
So just wanted to understand the 2 segments that have done well. So in general, what's the outlook on the lubricant? Because generally, this quarter is impacted by inventory and products. So how do you see the segment?
Can you just repeat? Your voice is very low.
I would request you to use your handset to ask a question at this time.
Yes. Hello.
Yes, please proceed.
Yes. So just wanted to understand your outlook on the lubricant business. Because generally, this quarter had a negative impact of currency and inventory. So how is the trajectory on this?
So yes, on the lubricant, meaning -- so let me address specialty oil and lubricant two separately,. So in the case of specialty oil side, which is your transformer oil, white oil, et cetera, this transformer oil volumes have been reasonably good, both domestically as well as export. We had a bit of a cost pressure, which is there. Part of it has come basically from base oil having fallen at a very rapid pace. Some of it is due to the lack of purchase from China, which is the largest importer of base oils in the world.
All of us know the recent quarter problems, which they've had and that has continued into January of this year because of COVID spreading and many establishments and factories not running fully normally. So as a consequence, there was a big drop that took place in spot availability, meaning pricing of spot cargos or various base oils. Also the public sector refineries had a lot of surplus base oil for 2 reasons. One is the overall demand of lubricants has been a bit soft, especially the retail side has been a little bit on the soft side. And I guess this resulted in an untimely or unplanned increase in base oil inventory, which the public sector oil companies had.
In addition to that, we've also had record production of base oils compared to previous periods. This put together resulted in them having excess product. Base oil is a very tricky item to store because it's -- you can only store it in specific tanks or specific quantity. So the volume is getting produced faster than you can evacuate, the only option is to crash the price so that people end up buying it. And that's precisely what happened. We were expecting a little bit of that to happen, but what actually ended up happening was much more brutal than had been envisaged.
Now as we go into Q4, that situation is getting normalized. And my sense is that by the end of this year, that's by March, the situation should come basically closer to normal because I don't think fire sales will continue. There is also an industry view that Chinese demand may come out stronger. And that's the reason why none of the refineries around the world have actually cut production.
So it seems like a bit of a short-term problem. And by the end of the year, I think you should start seeing more normal economics. Lube companies which keep very low inventory of base oil than they buy on a just-in-time basis, obviously they have benefited because they could take advantage of the spot prices. Companies like us run 70% of our purchase on longer-term contracts. And therefore, it has taken longer for curtail to get cleaned out in terms of the inventory.
Got it, sir. Really appreciate. And very happy to see the volume growth and profitability. And just wanted to understand your focus on B2C side on the cable business, because your cable quality is quite good, how do we penetrate market, just your strategy on that?
So on the B2C side of the cable business, it's -- we've taken a strategy of wanting to build that on a step by step basis. I mentioned earlier that from revenue of approximately INR 100 crores as we did last year, we'll be at close to INR 200 crores this year. And we have a target of hitting INR 350 crores in FY '24. So that is largely coming up.
Products are very well received. They're of best quality that is there in the country by a margin. The key is actually adding distribution, and so we've been going about that. Today we have the distribution in the 5 Southern states. We've added Uttar Pradesh. We've also added West Bengal and Bihar, so you know the rollout is happening. And our expectation is that this is slowly increasing on a step-by-step basis.
If there are some basic numbers you like, if you look at March '22, we had about 20 distributors. As we hit December '22, we have close to 100 distributors. If you take our presence in retail counters, we were at 275 retail counters in March. We are at about 1,550 retail counters at the end of December. So that spread is increasing.
And our product, the way we sell the product is by conducting demonstrations to electricians and specifiers. So we were at around 6,000 demos per quarter in the March quarter. We've increased to 25,000 demos in the September, December quarter. So all of these is at grassroot level.
For example for electrician meets we were at about 450 meets in the March quarter, we are at about 2,500 meets in the December quarter. So it's a -- we want to grow this on a grassroot level basis with good distribution. So you will see every year about INR 150 crores getting added in this segment year-on-year.
The next question is from the line of [Charanjit Singh] from DSP Mutual Funds.
First of all, congratulations on great set of numbers. So my first question is regarding the exports market. So while these markets are pretty large and our opportunity size is pretty strong. from the growth perspective in the export segment, how we can see from the next 2 to 3 years' perspective? And do you see the overall mix of export versus domestic increasing further going forward in the next 2 years' timeframe? That's my first question.
Yes. So in terms of overall growth, we expect that the domestic market will grow because of RDSS as well as industry growth and just general GDP growth. The good thing about wire and cable is that anything -- any establishment that builds requires some wire and cable just because of the electricity that needs to be distributed.
So the domestic side, you will see -- you will definitely see growth. That growth will allow us to do a little bit of cherry picking in terms of who we want to service on the domestic side. Our [indiscernible] export market will -- for us, export sales will grow faster than domestic. We've actually invested a lot of money in approval. For example, the United States requires what is called underwriters laboratory approval, UL approval.
So we have the highest number of UL approvals in the addressable segments out of all the Indian manufacturers as of today. We are still working on more approvals. We've now penetrated the European market for cables that go into solar and wind. We already supply a fair amount of cables into Australia, for example, that covers solar, wind. And there, there's a big expansion happening on metros, underground metros and train lines.
So we have -- we've been a major supplier of the Sydney Metro. Now we are bidding on all the other metros over there. So the overseas business, I think, will also continue, and my sense is overseas business will grow at a faster pace than the domestic business.
Got it, sir. Sir, the other thing is like you talked about a lot of these distribution reforms and what we are also seeing on the ground, reconductoring. If you can touch upon that aspect, how these distribution reforms can add to the overall growth for the conductors business and even for our transformer oil business?
Yes. So as far as distribution reforms are concerned, it is much more cable intensive than conductor intensive. So you will see the cable business being able to address a large portion of that opportunity. There are a certain class of conductors called medium voltage covered conductors where you really make a conductor and then you provide an insulation on it.
So it's actually produced by our cable division, even though the alloys and conductors were originally designed by our conductor division, but the finished product is sold by a cable division. So largely, this will be addressed by the cable division.
In terms of transformer oil, you will have more and more distribution transformers going in. And you will also end up having some amount of power transformers, which will bring in power to the grid.
And then from that substation connecting to the next level of distribution. So transformer oil demand will be kind of linear with the number of transformers which are being supplied. And most of these transformers, almost all of these transformers in the RDSS will be oil-filled transformers.
Sir, last question from my side is on telecom and convergence business, we have seen some ramp-up from your side with new business head. So how is that opportunity shaping up? Maybe it may not be in 1 year timeframe. But in a longer term, do you think that will be getting bigger for us?
It is definitely getting bigger. We've created a separate team within the company, with a separate business leader who is working across the synergy of the divisions that we have focused on this. So there, we have OPGW, which is a big play for us. And you will see within the conductor division more and more of this OPGW turnkey work which we are doing.
In addition to that, the 5G rollout will give a lot of impetus. Normally the fiber optic side and but also the copper side and hybrid products. And so the 5G rollout is going to happen in India, but it has already started happening in the United States and in some of the overseas markets. So we have a set of products which are addressing this.
We are in the process of getting a whole series of products, which are under approval from some of the big players in these overseas markets. So you will see this particular vertical also growing over a period of time, and it's pretty much going to be new growth that is there. Even though it involves conductors and cables, but it's a different vertical and you're addressing a different market segment, which is basically telecommunication and 5G infrastructure.
The next question is from the line of Chirag Setalvad from HDFC Mutual Fund.
So congratulations on a fantastic result. Just a few questions in terms of profitability. You mentioned on the conductor front that the improvement in mix, steel prices and lower freight all contributed. I missed those numbers. So I know third quarter profitability came in at [INR 40,000] a tonne. What do you think is a sustainable level in the near future? And what do you think is the sustainable level in the long term? You mentioned it, but I missed those numbers.
Yes. So in the short term, the momentum can continue. Of course, the exact number will depend on the exact kind of products that we execute. Also depending on how much orders that we get during the period.
But we expect in the short term, it could be in the range of about INR 30-odd thousand per metric ton. But on a sustainable basis, we clearly see to be in the range of about INR 22,000, INR 24,000 per metric ton.
And what caused it to drop? Is it a mix that will change? How much of this INR 40,000 can be attributed to the steel prices and low freight?
So the way maybe to say is that it really depends on your macro and geopolitical situation prevailing. So currently, these situations are all favoring us. And if this kind of situation for us possibly, we could see this high momentum going forward.
But no, we are able to give a visibility depending on what we can clearly see as of now.
Chirag just to just sharpen the sort of numbers or the view here, do you see what has been the transformation in terms of the margin per tonne is that domestic business, South Asia, which is India, Nepal and Bangladesh has seen a lot of high-efficiency conductor supplies as well as copper as a premium product.
And that's contributing towards about 44% of the revenue. The balance 56% today is largely going towards exports and good realizations into fairly developed markets like the United States, Australia and to some extent, Latin America.
So the realizations that are possible there and the kind of competitive intensity is very different compared to the domestic Indian market because the expectations on the customer also is significantly higher. So this mix is what I have given that boost.
If this mix continues, you will be in the INR 30,000 range. But if things are getting fully normalized, there's also some China plus one advantage which we have. So if some of these things disappears, then you will still be at -- just because of the product mix that is available today, you will still be in that INR 24,000, INR 25,000 per tonne range simply because we are selling higher value-added products.
So if you were to model it over the short term, you'll be in the INR 30,000-odd range. If you model it over a longer period of time, INR 24,000, INR 25,000 a tonne can be taken as a base number. And then whatever favorable situations are there will be a top up on that.
Perfect. That's very helpful. And similarly, the Cables business, where do you see sustainable profitability?
Cable business, you see in the last few quarters, our margins have gradually increased. And this quarter, we had 11.8% as EBITDA. We see that on a long-term basis, a double-digit of 10 percentage would be sustainable with the product mix improving with our geography mix improving and also getting high economies of scale.
At this point of time, we are maintaining the guidance of about 10 percentage on the cable business.
The next question is from the line of Mihir Manohar from Carnelian Asset Management.
And congratulations on a great set of numbers. Sir, I wanted to understand around the premium conductor side and given the kind of premium conductor, our percentage is going up and even exports is taking incremental focus, which is leading to higher profitability, I just wanted to understand, isn't the competition putting [indiscernible] over here, given the fact that this part of the business is turning out to be a big profitability business. So how do you see competition largely from Indian players, now looking at exports. And you want to be a local player, [indiscernible]. So if you could throw some light around that? Are there any incremental capacities which are turning up from competition or there's some movement around that? That was my first question.
Second question on the copper prices. Of late around the month, we have seen copper prices going up by 10%. So how do we see that impacting our profitability on the revenue runoff, which has happened on the copper prices. And my third question was on the [indiscernible]. I mean there will be incremental focus which will come on the U.S. infra bill. So what is our strategy here? What is our on-ground people that we have put? What's the GPM strategy? And what kind of business are we possibly looking at over the next 2 to 3 years, specifically from the U.S. infra bill side of the things here?
So I will take the first question first. The competitive advantage as you mentioned on the conductor division, if you look at this, our updated presentation, we have a separate slide that talks about our competitive advantage on conductor cable and Oil division. But just to talk about it, what we feel is that our products, which are premium products as well as conventional products, we have some competitive advantage as compared to the competition.
Basically, in terms of technology and the know-how that is involved in this product and design, which actually acts as a barrier to entry for the competition. And it involves a special shrinking mechanism as well as there is a lot to do with the design of the product, which is something that cannot be easily copied. And it's just not a product supply, but it's the entire turnkey solution that is what we gave for some of the premium products, which actually adds a barrier to competition over there.
Also in terms of conventional products in the exports, if you see a lot of requirements that the customer demands is not only the product but also in terms of reliability, quality and also in terms of the risk management exercise. So you look at the holistic things instead of only looking at the product and the pricing there. And based on the years of experience that we have in this business, we are at a very advantageous position when it comes to supplying these products in the overseas market. Could you repeat your second question? I just missed out.
Yes, sure sir. My second question was on the copper prices. I mean off late, we have seen copper prices going up quite 10% of the last month. So how would that impact our profitability? And if you could throw some light, what is our hedging strategy? Can you throw some color around that.
So the copper price, there won't be any impact because the entire B2B side, we hedged the product on our back-to-back business. So moment we have orders, we hedge -- just like we were running the hedging strategy on aluminum, we run a similar hedging strategy on copper. So you won't see any major impacts due to the movement of copper prices and such. If the prices are high or low are getting passed on to the customer. So we are...
In many cases, it's actually fixed because your order has come at a fixed price and the metal as well is booked back to back on that.
So for example, all the delivery duty for solar cables, windmill cables, for your defense, for the railways, we follow the same strategy, where the moment the order comes, the forward cover is taken or the forward booking is taken and the metal is hedged. Where you are open is, to some extent, on the wire and cable side through the distribution network. But there, we've seen all the major players, they increase and decrease prices on a very regular basis. And their stakes are much higher.
So we are just a follower in terms of those changes, which happens. So the Polycab, Havells, KEI and RR Kabel are the ones which move the price up and down based on copper movement. And so we will just follow based on the same proportions. So there won't be a major impact from the copper.
Sure. Got it. Yes. And my third question was on the U.S. infra side.
Sorry, it was on?
Yes. The third question was on the U.S. infra side. I mean, given the fact that U.S. have come out with an infra bill.
On the U.S. infra side, the fundamental growth is coming from 3 areas. Number one, cable requirements, which are going into the installations of solar farms and wind farms. Second is evacuation that's happening from that into the grid, which is where the conductor goes into the plate. And the third piece is the actual strengthening of or replacement of old transmission networks, which are there. So we are in a position to actually participate in all these 3.
Sure. Sure. Understood, sir. And just lastly, an extension to the earlier question, which was the on the premium conductor side. So are you seeing competition putting up capacity from the premium conductor space? I mean is industry putting that putting on incremental capacity on that offering?
So we have competitors who are also adding some capacity on that. But here, it's just not a question of adding capacity like in the conventional conductor because most of these are part of a solution that's provided. So there's a design element of the conductor coil. This is a design element of the network that's involved when you do reconductoring.
And then there is also [indiscernible] technology, which needs to be in place. So as a turnkey operator, we actually have the most advantageous position because we have all these 3 elements with us. We have the product, we have a design of the network, and we have the ability to string and deliver the reconductoring or new conducting projects involving these special products.
The next question is from the line of Maulik Patel from Equirus Securities.
I think what you're discussing earlier, I think it's finally taking place for the conductor segment. And good to see that you're still having the confidence that this business will continue to grow. A couple of questions, I think, more on the balance sheet side and on [indiscernible] side. What's the acceptance as of Q3 FY '23?
So our interest-bearing acceptance is about INR 3,400 crores as of December end.
Okay. And that will be other than the normal [indiscernible]?
So we have a long-term debt of about INR 200 crores. And the current maturities of long-term debt is about INR 50 crores.
Okay. Got it. And what kind of CapEx this year, you're spending more on the cable side and not in other businesses. So how much you spent and what's the outlook for the next year?
So the CapEx spend over the next 15 months, we expect to spend close to about INR 300-odd crores between the cable division, which is the lion's share of it, and the conductor division. There will be very little CapEx on the oil side.
And our plan is that not only do we want to put in CapEx to meet the current growth, but now look at ensuring that we have some excess capacity or surplus capacity in place a little bit earlier than the demand comes in and hits.
Because as we are going around the world and getting approvals, and more and more projects are getting approved, we continue to see the growth taking place. So it's more prudent, we believe, to actually put the capacity a little bit ahead of time. So we looked at a new greenfield site for cable.
And in conductors, we've acquired some land right adjacent to our -- one of our plants at Silvassa area and machineries are going in there. So about INR 300-odd crores over the next 15 months is what we expect the CapEx to be in. That should help keep the momentum going in terms of growth, both with cables and conductors.
Sure, sure, sure. And out of INR 300 crores last part I assume that it is spent over the next 12 months, right?
Yes, the whole thing will go in the next 15 months. What is happening today is that the reason why the number looks a little higher and the period also is about 15 months is that if you place an order for equipment today, the equipment delivery times have substantially gone up, whether it is because of manpower or because of electronics. And many critical components for these still coming from overseas markets for Europe and the United States.
So delivery times have gone up substantially. So that's why we don't -- if we want to make sure we don't miss opportunities, we need to invest a little bit of head of the curve..
The next question is from the line of [Vivek Gautam] from [GS Investments].
Congratulations on excellent set of numbers. So few questions is about -- due to Ukraine crisis and now China opening up after 3 years of COVID, it is now instead of the China plus one policy prevailing has been told that exports to Europe and U.S. are suffering because China is able to supply at a competitive price, so how come we are getting so good performance in exports?
And secondly, is there a transformer oil shortage in India, leading to high prices? Even black marketing have been told that transformer oil, which is helping us a lot.
Well, let me address the 2 questions separately. So in terms of the China plus one, I think it's far more -- it's a really strategic decision that many utilities and countries have taken. So it's not related to COVID being there for the last 3 months and COVID going away.
We have seen customers who have taken undertaking from us, there's not a single component that goes into whatever we supply to that country will have a product coming in from Russia or China, for example. So I don't think that China plus one is something in our industry, at least that is going away in a hurry. It's here to stay. And Indian companies actually like us stand to gain because it's part of our strategic vision that buyers are having.
As far as the second question, there is no shortage of transformer oil. We can deliver any quantity of transformer oil. There is no black market transformer oil happening. So I don't know where this has come from. But there is no shortage in short -- there is no shortage of transformer oil either in India or anywhere in the world at this stage. The growth which we have seen has largely been in volume because we've been able to address. We are approved pretty much everywhere wherever the demand is taking place. But on the contrary, because the raw material comps have fallen very sharply, as I mentioned earlier, people like us who work on longer-term contracts have been hit in the short term because we've had to adjust our prices lower than what the supply chain reduction would have normally allowed us. And that will start reversing -- the trend will start reversing in this quarter, probably normalize in the first quarter of next financial year.
And sir, how is the opportunity size and what CAGR we can grow and how sustainable it has been the book performance over the last 2 quarters, sir?
So in terms of sustainability, especially in cables and conductors, cables especially, we can see a 25%, 30% growth to come for the next several years.
In terms of conductors, we've seen growth at least for the next 2 to 3 years, we will continue to see a good momentum as all these transmission networks continue to be built. So this is not a short-term phenomenon. I think it's a big structural play. And depending upon how much infrastructure is replaced in countries like the U.S., you have to keep in mind that a lot of infrastructure they went in between 1945 and 1970 before the oil shot took place.
So as that infrastructure gets replaced, so far people are in some of the other pulling on, pulling on, but this is a finite life that all these products have. They're designed to last for 30 to 35 years. Already in many places, they have lasted for over 50 years. So they'll finally give way. So depending on that, you will start seeing conductor demand growing.
But if you exclude any major -- just a steady growth, you will see at least for the next 2, 3 years clear visibility is available.
And how has been the B2C performance and branding and how are we getting the response under Sonu Sood's brand ambassador?
Our B2C response has been good. I have actually thrown up many specific numbers against one of the earlier questions. But bottom line is that the business has grown last year it was about INR 100 crores. This year, we will be at about INR 200 crores. Next year, we are targeting INR 350 crores.
The next follow-up question is from the line of Amit Anwani from Prabhudas Lilladher.
Just a couple of questions on any targeted debt level which you are looking in the medium term. And I can see interest costs and financial is at INR 225 crores for 9 months, significantly higher than the last [ 4 ] years. So any elaboration on that? How should we model the interest cost in coming quarters?
So I think so far rates have actually increased over the last 7 to 8 months. And if you see every quarter, our interest cost is going up. In terms of the rate increase, almost Q3 would be maxed out unless any further rate increases are there. And also, it's a function of improvement in the business.
If you see the business is growing you will see the interest cost also going up in line with the volumes there. But these will all be taken into consideration when we price our products to the customers because we take the recent exchange and the recent interest rate at a time when we price to our customers. So you will see an increase in EBITDA as well as you'll see an increase in finance cost as our volumes and interest rates goes up.
But Q3 would be a good approximate at this level of business.
So on a unit basis, I think you're already at nearing the max depending on whatever the FOMC meeting results are. And the number of days for modeling purposes, the number of structure of the receivables, inventory, et cetera, is reasonably steady. So that is what can be used.
In terms of long-term debt, we will -- we have the balance sheet has a capacity to borrow. We have INR 250 crores of long-term at INR 50 crores we have repaid in this quarter. So we intend to take some borrowings for the INR 300-odd crores of expansion. That's in place so that the retail earnings are available for working capital requirements, et cetera.
But modeling purposes you can take the current NOD, number of days for each of these. And they should be reasonably representative of what will happen in the days to come.
The next question is from the line of Himanshu Upadhyay from [Oldtree Capital].
Congrats on good set of numbers. My question would be on capital allocation. So from here on, we have already stated that INR 350 crores is going for CapEx, okay? Can you elaborate how much capacity will increase through this INR 350 crores of CapEx?
So the ratio for most of these is 1:4, 1:5 in terms of the amount of products that can come out. Plus, part of this is a whole greenfield site, which will be 40-plus acres of land. So that there's room to then keep adding machinery as the business continues to grow.
So the key thing here is to look at what will be the return on return on equity that you're able to maintain through this period. So we are already close to about 18.5% to 20%. I think if you take the 9 months it's actually 21%.
But our idea is to not allow the ROE to drop substantially. And most of these projects have a reasonably good payback because the market is already there and most of the market development activities have already been done. So as you ramp up the production we're already working on customers and channels to be in place.
Okay. See, if I break our return on equity, so there are 3 sides. Revenue to gross block, which has been always very good for the company. The revenue to working capital, which has been generally on the higher side. And EBITDA margins on conductor, where we have seen a lot of work which has gone and improvements are, I think, visible and cables also. Is there some scope to improve EBITDA margins on the transformer or sustainably or not just the transformer in the oils business, okay?
And with economies of scale, which is coming because -- is there something you can do to improve working capital further on? What can be the bigger driver of sustainable ROE for you from here on in the working capital side and the EBITDA margin side?
So on the -- let me specifically address the specialty oil segments. So the Specialty Oil segment, you're not seeing any spectacular growth. Growth will be there 5%, 7%.
In transformer oil, the growth may be higher than that as transformer capacities get added, both in India as well as overseas. But you've got white oil and some of these other segments where you may see lubricants, particularly automotive lubricants and electric vehicles start getting rolled out, so the growth on some of that may slow down. Where the company's real growth is going to come beyond the cable and conductor center, where you can clearly see a lot of infrastructure getting added.
Now in terms of the working capital, there is a slide in the deck which gives you an idea in terms of secured receivables that we have. Because wherever we end up giving extended credit to customers it's usually backed by a letter of credit on the other side. You may end up getting payables for some of your raw materials, which is extended. But on the other hand, you also have a whole lot of letters of credit or secured payments on the receivables side.
So both payables and debtors are both, we are working on both sides of it.
And one thing...
And there are interest costs associated with the extended credit, they are factored into the pricing of the of the product. The customer usually has a certain number of days of interest free, and then they add the interest for the extended days of credit. .
And one more thing. Generally, our dividend payout has been between 20% to 30%, okay? Is it higher growth rate what we are visualizing? Do you think the dividend payout ratios will remain the same? Or do you think more cash will be required?
The Board has to decide. But as of now, the ratio that we have is between 25% and 30%. And given if there is continued growth taking place, and I think we probably would still remain in the same range, having a bias towards reinvesting back. Because as I mentioned earlier, I don't see -- we don't see this growth as being a short term and there's market momentum not being short term.
This is a clear opportunity for a company like us to grow not only domestically but overseas. And it does require the right investments to be made and those investments if made correctly will have a good payback.
And the growth what we are expecting is in those segments where my return on equity and capital employed would be upwards of 20%. So that is what we are trying to get. Because commoditized business, you can get anytime. Even in the brand cycle whenever...
ROE is in that range. I mean it's taken a lot of effort to get it to the 20% mark. Every time you have a capital block going on, you can have a short-term drop because it takes a few quarters to ramp up the production and realize the full volumes.
But I think we are at a momentum today where it is possible to be in that 18%, 20% range through all the expansions, et cetera. There is a clear economy of scale available both in the cable and conductor business. So as the volumes go up, there is a converted efficiency, which will clearly kick in.
See, my question was the segments where we are seeing growth because of -- currently, because of high demand it can be a good ROE. But even in the commoditized business sometimes the ROEs can be high because of demand supply. Our focus remains on high margin or high ROC businesses only for growth also that should remain on track.
Yes. So we are -- I don't think you will see a big change in the mix of what we bought from today. The target or the idea would be to keep improving the mix. i.e., which is more value-added products or premium products and then where there are standard products moving to more premium buyers. .
Okay. Okay. And in Europe also, are you seeing growth?
Fundamental things. So I will put it in perspective. You see when you go under the -- when you supply to Indian buyers, they really go essentially on a 2 bid process. So once you clear a technical specification, then it becomes only price.
So if you are 41 on 100 or 99 on 100, you're almost equated. Whereas when you go into the overseas market, that 41 on 100 itself is in the 70s. So the bar itself is much, much higher in terms of what we classify as pass or fail. So that's where I say that you're looking at premium products and for standard products, you're looking at more premium buyers.
And one last one. We are speaking about the U.S., is where a lot of growth is visible, okay? So what is your sense on Europe? Because a lot of other capital good companies on the power side are extremely optimistic on the Europe because of base to heat and so many the energy transition, which is happening -- the business growth, which is happening, what is your exposure and what [indiscernible]?
In Europe, we are also seeing demand in place. We've been successful in starting to supply cables, particularly into the nonconventional energy space, which is both largely solar and also some amount of wind.
So our expectation is, as I mentioned earlier, that Europe is one of the target markets which we have. And with the current issues that we have on both power and manpower in Europe, it bodes well for India. Recently, there was an industry meeting that our commerce minister Shri Piyush Goyal had with the top exporters of the country. And in terms of laying out what is expected over the next few years, there is also -- they already have a free trade agreement in place now with Australia. They have put an agreement in place with UAE. There's a free trade agreement under negotiation with the EU. So if that happens, then Indian products have 3.8% to 4% custom duty, which if that comes off, then that makes us that much more competitive.
The next question is from the line of Darshil Jhaveri from [Crown Capital].
Congratulations on a great set of numbers. So sir, I'm a bit new to the company, so pardon for some basic questions. So as you said, our EBITDA margin in the conductor businesses, which are at around INR 40,000, they will come down to INR 30,000. So could you just help me with how that works. So we would see a decline in our EBITDA margins?
So what we feel is that depending on the order book that we get, the margins could change. We've got some tailwinds in this particular period. But definitely, the profitable product mix has changed, and that's the reason you see higher EBITDA margin on the conductor division.
Now what -- how exactly this these orders will get executed, it will depend at the end of Q4. But what we are saying is that we're going to build a model for a long period of time or 2 years to 3 years, we don't know how the macroeconomic and geopolitical things will pan out in the future. And from that perspective, we feel that a conservative estimate of about INR 24,000, INR 25,000 per metric ton would be there in the model. That's what we intend to say. But definitely, in the short term, we expect good order and profitability continuing in the near future.
Okay, sir. And in terms of our revenue growth, what can we expect next year? What is our -- any target that we have that we want to reach that number or something that could help me.
The cable business we are talking about 25% to 30%. In our conductor business, you should see at least a 15% to 20% growth between this year and the coming year. The oil business will be closer to about 5% to 7%. .
Okay. So that helps a lot. And with regards to the fluctuation in finance cost, I understand correctly that we pass it on in our EBITDA and that is why we have a higher finance cost. So as the revenue increase, the finance cost would be a similar figure will be dependent on that? Or is that...
As I mentioned earlier if you take the number of days for outstanding inventory, all the components that contribute towards the business as a model is reasonably set. So we don't expect any major change to be there in that.
So really, the movement will be up and down depending on where the interest rates are. So I guess in the shorter term, you'll have higher interest rates when inflation and things come off, then maybe the interest rates will also start coming off.
[indiscernible] into our business, you know, higher interest rates are being taken into account as part of the cost cycle.
Okay. Okay. So that helps. And are new CapEx, so what kind of an asset turn can we expect from it?
So on the cable side, you have, depending on the product, anywhere between 4x to 6x. If you go to house wires, then it can be as high as about 8x to 10x. And in conductors also, it's around 5x to 6x, depending on the nature of the product. .
Okay. Sir. And sir, if I may squeeze in one more question, so what kind of -- what would be our capacity utilization currently?
So currently, most of the cable and conductor products are running pretty much flat out. And that's the reason why this CapEx is being incurred and more equipments are coming in to support the growth.
Our next question is from the line of [CA Garvit Goyal] from [Invest Research].
Sir, my question is from the EPS side. In last conversation from quarter 2 onwards, you were mentioning that the overall EPS will be -- halfway EPS will be in line with the [indiscernible] EPS. But now for the 9 months, it is 103. So where do you see the EPS laying out for entire FY '23, sir?
So we are looking -- we have given overall guidance. If you build that model, we'll be able to know how much will be the EPS. Specifically, we can't comment on exactly what will be the number in the next quarter.
But based on the division top line and bottom line profitability, you'll be able to work out the EPS how it will pan out. Because each of the divisions have different growth rates. So you need to put that math to see how the EPS will move going forward.
Because you are saying conductor business is 15%, 20%. Oil 5%, 7% and cable 25%, 30%. So this seems to be a little bit conservative confusing your first 9 months growth and one side you were also saying that this high growth momentum will continue. So that's why it is little bit confusing regarding the growth guidance.
Yes. So we're looking at the long-term guidance, that's what if you want to put that in the model, those are the guidance numbers that you need to build into that.
If you look at FY '23, you can pretty much extrapolate whatever in the first 9 months. The first 9 months carry forward into the fourth quarter. We are looking specifically at what is expected in this financial year.
It's basically you're saying 9 months, this 9-month section will continue in the...
Our prices is given in the new deck that addresses what the current structure is. EPS by business is indicated also.
So kind of momentum we witnessed in 9 months, we can expect it in the next 1 to 2 quarters, you are saying?
For the next quarter, I mean, we are talking about this current quarter which we average that you see over the first 9 months will continue further.
I mean that's the visibility which we have as of today.
The next question is from the line of [Yogesh Bathia] from Sequent Investments.
Congratulations on a very good set of numbers. Sir, I wanted to know that do you think the worst in the base oil business is behind us, what we saw in Q3, high-cost inventory, et cetera. Do you think it is behind us?
At least in the current situation, I think the worst is behind us clearly.
The next question is from the line of Saurabh Patwa from Quest Investment Advisors.
Sir, congratulations on the great set of numbers. I think a lot of my questions have already been answered. Just 2 things, one on the conductor, for a very long time, we used to give a guidance of -- sustainable margins of around INR 12,000 to INR 14,000 basis of higher margins in HEC, which used to be around INR 25,000, INR 26,000, so is there any possibility of going back to that situation?
No, I don't think we'll go back to the INR 12,000 to INR 14,000. Because if you also look at the product mix that existed in that INR 12,000 to INR 14,000 period, it was largely, a, conventional conductors and b, it was being largely sold in the domestic market, which is very competitive.
So right now, there is a structural shift in terms of the mix of product. And at least, as I have been saying over the last hour, we see more premium buyers coming forth to buy standard conductors.
Do we need to make any adjustments or plans to have a higher share of these products?
No, we made manufacturing fungible. So as a consequence, as the more premium products need to come on board, we already have capacity on the aluminum side. On the copper side, we've been making adjustments and additions as the copper side has been -- the capacity has been going up.
In terms of quality of premium-ness of the products that we can produce, that has always been built into our system. So I think we're just getting more premium buyers who have a much higher standard of what they require, especially when you go overseas, the minimum bar for parking is significantly higher than in the domestic -- the domestic one.
Domestic market, anything that conducts a current is good enough for me there.
True, sir. In the past, you used to highlight that there has been not a lot of conductoring in U.S. and other North American market, and that's why the competition -- there won't be any actually lot of players left there. So now when we see that opportunity actually rising there, is the same true now as well or some Chinese or other players have started getting into that business?
So I think that's holding true that local manufacturing there is not able to keep pace. And I don't think we see investments going in by new -- for new capacity to be added at any huge appreciable pace in North America, Europe, any of these places. Because they're fundamentally not so cost competitive in terms of the operating cost over there.
In terms of this Chinese player, we don't expect anything sudden to happen because many of these buyers are actually quite strategic in that budget. And we've laid down quite clearly the policies. I mean we'd be surprised if it changes dramatically from what we have laid it out to be.
Great sir. And just one last question if I add. [indiscernible] conductor side, I know you mentioned it in Gujarat, but in Orissa where we have another conductor plant, we have some arrangement that we could get a liquid metal module. So can you [indiscernible]?
So the capacity for rods that we are adding is being added in Orissa. But the conductor making capacity we are adding in Silvassa. Simply because if you see a higher and higher percentage of exports taking place, we are today exporting from both the Silvassa plants as well as the Orissa branch and export logistics out of Orissa are not the best, whereas we are getting more and more options for export out of Silvassa, because you have the IC which has now been taken over by Adani Logistics. They are increasing capacity there.
There are more ports coming up in and around Gujarat. So Silvassa is a very good location for manufacturing for export.
Understood. And sorry, how is our [indiscernible] plant doing? We had plant with bulk exports from there.
[indiscernible] Plant has been doing quite well. In fact, their volumes have been consistently growing. We are at almost 18% above the same period previous year for this particular quarter.
The Middle East has been doing better because of the current oil prices, et cetera. And they're able to -- how we hold energy situation also better. So our expectation is that growth from that plant will continue to come, especially on the transformer oil side. The white oil, et cetera, is in trouble because the 3 largest countries that buy in Africa don't have foreign exchange, which is Egypt, Nigeria and Ethiopia. But the transformer oil side is coming from the more industrialized countries and we have the whole GCC, you have Latin America, Europe, everywhere power conductors going in, distribution contractors and transformers going in. So the transformer oil side seems quite good.
The next question is from the line of [Dhavan Shah] from AlfAccurate Advisors. .
So I have a question on the conductor side. In the slide, you mentioned the revenue mix between exports and premium products, so would it be possible to share the volume number, volume mix between exports and premium of the -- out of the overall 44,500 tons for this quarter?
So you see, if you take premium products as 44%. And if you take exports, that is also almost 50%. So the amount of standard conductor sold in the domestic market is very, very low. .
Volume-wise, it will be the same? The revenue mix will be the same?
We can't speak about volume because there are so many different types of products, shapes and sizes. Basically, I think the value mix will give you an idea of what's happening. And in fact, that would have been of the major reasons why the profitability has also been a bit higher. .
Okay. In terms of the EBITDA per tonne, can you please share the differentiation between the exports and premium products against the INR 49,900 a tonne, what we have done.
We don't want to go down to such a granular level because along with you, we have competitors who are also looking for that information. So I think to the extent it's possible for us to give information, I think, we've already displayed. .
Okay. And suppose, let's say, I think you also mentioned that some input inflation resolved and lower freight cost, which has helped to include EBITDA per tonne. So if you exclude these 2 things, then what could be your EBITDA per tonne against the INR 49,900?
We put a base case of INR 24,000 to INR 25,000 per metric ton. And then we've also given what could be tailwinds which are there, which is, i.e., standard product export continues at a higher pace [indiscernible] if steel prices remain steady then that helps.
So our expectation is that in the long term -- in the short term, we'll be around in the INR 30,000 in terms of value addition. In terms of longer period, you can take INR 24,000 to INR 25,000 per tonne. That forms the base number going forward.
So against the base number, would it be fair to assume that the premium product EBITDA per tonne would be roughly 1.5x to 2x against the business?
So depending on the product, we have classified a basket of products. If you look at that range of products, and it is compared to typical -- if you compare it to domestic transform conductor, it's at least 2x of that.
In terms of the overseas conductors, it's somewhere in between. It will be order to order country to country, et cetera. So that's why we try to simplify it by giving EBITDA per tonne considering a certain product mix.
Right. So this premium product is entirely for the domestic market, right? 44-odd percent?
Yes. Largely going into India, Bangladesh, Nepal mostly -- because it's been done largely on a turnkey basis. .
Right. And what is our overall market share in this segment in this product?
So on the premium, depending upon, of course, so if you look at the copper products, we may be in the 15%, 20% range. The railways, we are much higher, we are at about 40%, 50%.
And if you look at HEC, high-efficiency conductor, et cetera, we would be at least 40% -- 40%, 45% market share. Because it's dominated currently by [indiscernible] Sterlite Power, there are obviously, over a period of time more players will come in. But so far, we've been able to hold a fairly good market share.
The next question is from the line of [Bobby Jairam] from [Falcon Investments].
Do you do EHV cables?
We don't do EHV cables. We basically go up to 66 KV. So that's actually considered as medium voltage or in some cases high voltage, but not extra-high-voltage.
Any plans to get into that?
Not at the moment. Because the products which we have at the moment where we have the approvals, we have the expertise in place, we see a fairly large addressable market there. And our current focus is to address extra high-voltage situations by medium voltage covered conductors or by conductors. .
Okay. Got it. And the other thing, you said the U.S. is a major market for exports, right. But I was wondering, these countries have a lot of local procurement rules. So how is this going to impact you? They all want it locally manufactured, right, ideally. So how is that going to impact your export trajectory?
So I don't see any emphasis on local manufacturing coming from, for example, the United States because there just isn't enough local manufacturing. And if you look at the unit cost of production there relative to a place like India, it's much cheaper to produce here and ship.
There is some pressure in terms of having availability of stocks. So we do have many large distributors who buy and stock our products and then resell them to utilities there. We've also been investigating, looking at setting up a manufacturing facility at some point, which is nearer to the United States, you know, to service the U.S., Latin America, et cetera.
So you can then -- once you have a site there, then you can have some production going from there and then also production coming in from India. But at the moment, for whatever our immediate plans are, we can easily service them from our plants in India. You see a lot of the project sites which are there, they don't need overnight delivery. They have a planned project delivery schedule.
So when a solar plant is being built or a wind farm is being built, there is time available to manufacture and deliver the product to the site within the window that the customer defined.
Right. No, that's perfect because I thought the Inflation Reduction Act specifically asked for products to be locally manufactured.
So right now, it's not hurting us. We are examining manufacturing in geographies like Mexico, Colombia, these sort of places -- where Mexico of course has an advantage because it falls under NAFTA, and it's considered as a local manufacturer.
But most of these cases just the physical availability of product itself is not there. And the cost of manufacturing there is relatively very high compared to what would happen over here.
As that was the last question for today, I would now like to hand the conference over to Mr. Kushal Desai for closing comments. Over to you, sir.
Yes. Thank you very much for being on this earnings call. Just in conclusion, I'd like to say that the opportunities that we see in our business will present itself not only in the short term but also in the medium term. And we will continue to remain focused on the products and markets, which we have established ourselves in because we see good growth coming in from those areas.
And with that, our objective and aim would be to continue to sustain good momentum as we go forward. So thank you very much for being on this call, and look forward to interacting with you all in the future. Thank you.
On behalf of Apar Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.