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Bharat Forge Ltd
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Good day, ladies and gentlemen, and welcome to Bharat Forge Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Amit Kalyani. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen, and thank you for joining our call today. As is usual, I'll take you through a quick explanation and talk through our results, and then we will be happy to take your questions and answers.
So ladies and gentlemen, once again, thank you for our Q1 analyst call. Overall, I think we've had a decent performance. We've had a quarter-on-quarter 5% growth. We've had a bottom -- EBITDA growth of about 7%. We've had one of our highest-ever export numbers. This has largely been driven by a couple of factors. One is our export of passenger car components having grown very substantially to its highest-ever number of almost INR 200 crores. And we are getting tremendous new traction in this area from existing customers and also from new customers, both for existing products and new products.
I'm also very happy to report that we are getting business from geographies that we have never been supplying to. So we also see other opportunities of nonautomotive coming from those geographies as we begin to understand those markets and build some presence there.
Aerospace now accounts for more than 10% of our industrial export revenue. This same number for last year was 2%. This is the result of many years of hard work and the start of ramp-up of a couple of our customer programs. We now have, in addition to these programs that are active, 2 new programs that are under ramp-up and totally 2 new customers, in addition, who have given us long-term orders. So we will now have 3 distinct product segments which will allow us to create almost like product verticals within Bharat Forge for Aerospace and become a large meaningful supplier in these areas. And I believe that the best years in terms of growth of Aerospace for us are now about to start, and you will see Y-o-Y very strong growth. As I mentioned, we've also added 2 new customers during the quarter in Aerospace. We have won over INR 350 crores for the India business in the quarter across automotive and industrial applications. And in fact, we see tremendous new opportunities in terms of customers looking at us for business in India for components aggregates, and we see quite a lot of growth opportunities.
We have completed the acquisition of JS Auto at an EV of INR 490 crores. This is a good company. It was purchased on 1st of July, so it will be consolidated in Q2. And this company will be earnings accretive from the first quarter itself. Besides the product that it currently makes, it has tremendous headroom for growth. We can double this capacity with almost no CapEx and double the revenues. Additionally, we get into a lot of new sectors which we didn't have as much presence and become a bigger and stronger supplier in areas such as construction equipment, mining equipment, renewable energy, hydraulics and many other industrial products.
Our balance sheet continues to remain robust. We have a net debt equity of 0.2 and a net debt divided by EBITDA of 0.75. I believe that in the extremely volatile times that we are living in now, it's very important to have a strong financial base and the ability to take advantage of opportunities as they arrive and also the ability to do withstand shocks when they arrive because nobody knows what's on the horizon. 1 year ago, we couldn't have predicted what's happening in Ukraine either. Not that any of us want something like that to happen, but I think it's best to be prepared.
Our European operations have had stable performance in spite of extremely high input prices and slightly weaker end markets. The end markets have got weak for multiple reasons, one of them being tremendous inflation that is there in Europe and the cost of living impact on families there and something that is a once in a lifetime kind of scenario, which many people in Europe have never faced. Energy prices in Europe have gone up by more than 5x from something like EUR 0.075 kilowatt hour to now over EUR 0.40 to EUR 0.41 per kilowatt hour. I'll talk more about the impact of that going forward. So in spite of that, we've had over 8%, 8.5% EBITDA margin.
Our new facility in the U.S. has just commenced manufacturing operation in the April to June period. And as is, let's say, expected for any new facility, it's going to take time for us to prove out the parts, do our feedbacks and ramp-up and get product approval in place. And then we will move to a breakeven and profit situation. So we are currently running at about a little over $1 million a month kind of EBITDA loss, but we expect this to come down as time goes by. And we hope that by the end of the year, this should be above the red numbers.
I'd also like to add that this facility is going to be producing specialty factory components for largely EV and hybrid programs for European, U.S., Japanese and Korean high-end passenger car companies and pick-up trucks and SUVs. The full capacity is booked out for the first phase, and we have got enough orders in hand for setting up the second phase now, which we will now kick off. So this will allow us to double our size of business in this aluminum forging facility in the U.S. over the next 3 years.
Coming to Defence. As I mentioned last time that the ATAGS Gun has passed all its trials. And I'm extremely proud and happy to report that our Artillery Gun, which is codeveloped with DRDO, will be showcased in the 15th August, Amrit Mahotsav of Independence Day at Red Fort as a part of the 21 Gun Salute. So this is a matter of great pride for us that it will be shown to the whole nation live over television and something we look forward to.
On e-mobility, we are seeing good traction with domestic OEMs both for components, subsystems and for their local requirements because our components are completely same compliant. Tork Motors, which is a company we have invested and has already started serial deliveries of their vehicles and also are now supplying 3-wheeler powertrains in fairly large quantities. New plant for this company is under final installation. And from November, they will be starting production in a new plant, which will increase the capacity almost 10%.
We have many other initiatives in place both at the organizational level, technology level, digitization and organization structure in order to manage and, let's say, grow at a faster pace. And we'd also like to showcase some new products that we are launching in the next month or 2. And post our Q2 results, we would like to organize an Analyst Day where we are able to show you a lot of these new products and talk through what is happening in the business and what we hope to do in much more granular detail. And I hope that many of you will have the chance to join us.
I think that's really all I wanted to say as an introduction. I have with me members of our finance, investor relations and our business team, and we'll be happy to answer your questions. Thank you very much.
[Operator Instructions] The first question is from the line of Kapil Singh from Nomura Group.
Congratulations on a strong performance for the quarter. First question is on the outlook for each of the segments that we operate in, if you could share -- you mentioned some risks also. So what is the outlook for these segments? And in particular, in each of these segments, if there is something to highlight of what Bharat Forge is doing to gain additional business?
And also on the Defence business, outside the Artillery Guns, if you could share some update in terms of what is the progress there, what are the current revenue on this?
Okay. My colleague Subodh will answer the first part. Second part, I will answer.
So thanks. So the outlook of the various sectors that we are involved in, if I can go geographically, so in the U.S., the Commercial Vehicle segment Class 8 -- 7 and 8 that we operate, at this point, orders are -- with OEMs are secured until end of next year almost. And the rate of cancellations is not that high. The production of the OEMs is stable. There is a lot of talk about some recessionary conditions in the U.S. and so on and so forth, so we have all to wait and watch. But at this point, at least as far as what we see on an operating ongoing business, it seems quite stable. We are not seeing any difficult conditions as of now.
As far as the car segment is concerned, again, similar comments. There are some disruptions because of supply chain and those aspects moving -- that continues. The only thing is it's not just semiconductors, it's a lot of other things. But overall, the production is still stable.
As far as the industrial verticals go in the U.S., I would say they are operating at a stable level. There is not so much of a growth in that, but there is not so much of a decline either. What would be the impact of if there are any recessionary conditions, it remains to be seen. There is, of course, high inflation in the U.S., like there is everywhere. But the general impression is, even if there is an inflation -- even if there is a recession in the U.S., it may not be for a very long period. So it will be a quick one, is the expectation. So we are, of course, watching this closely. We are doing everything we can to grow our share in these segments, not just in the U.S. but in all other segments in terms of trying to derisk as much as possible. So that activity is ongoing.
The same factors in Europe. Europe is, of course, as we all know, a little more volatile than the U.S. particularly because of the impact of the war. The only good thing in Europe is we still see a reasonably strong Commercial Vehicle industry. The segment in which we operate are premium vehicle segments in the passenger car side. The demand there is also reasonably okay for now.
So at this point, we see relatively stable activity for us in North America and Europe. As far as the other geographies are concerned, we have growing presence. And as Mr. Kalyani mentioned, we are also breaking into new geographies, so we are trying to expand our business across all segments.
So I think the answer, to put it in a summary way, I think most of our customers are still showing a lot of confidence in the year going forward, especially in the U.S. In Europe, people are talking on a shorter time horizon. But if you look at the advantages that we bring to the table, I think we are in a strong position. And that is why we continue to strengthen our position on our balance sheet, our technology, our customer traction and intimacy and take advantage of whatever opportunities arise. And sometimes you have to create opportunities. So that's the way I'd look at it.
You asked me a question about Defence. So we have 3 verticals within Defence. One part of the business is -- are capital items, which is things that are procured for the fight and move and that kind of part of the business, which is Artillery Guns, your vehicles and other specialty products. The second is all our spares and consumables. So we currently have a well-balanced business between them. Currently, our business is, I would say, between INR 300 crores to INR 400 crores a year of spares and consumables. And our business on the capital side is currently largely vehicle led. And we have a business of roughly about INR 200 crores to INR 250 crores a year currently on the vehicle side. This can go up, and we're looking at global opportunities in this.
And we're also looking at global opportunities under consumable side. So if you look at today our total business, I'd say it's somewhere in the region of INR 400 crores, INR 500 crores a year. And 2, 3-year horizon or, let's say, '25, '26 horizon is how do we take this to INR 1,500 crores a year plus INR 300 crores, INR 400 crores of exports. We're looking at growing the business 3x and creating a suite of products that will keep giving us this kind of business going on and also look at global opportunities because some of the new products that are developed in India are really world-class. And we have the opportunity to supply them globally.
Okay. Great. We look forward to that. And just a second question on financials. I see that gross margins on raw material sales have actually come down. So if you could give some color because steel price has actually gone up. So how -- is there some inventory and how to think about gross margins over the next couple of quarters?
There's some inventory impact. But if you look at the operating margin, which is raw material and variable cost, then it is more or less stable as compared to last quarter. In fact, it has gone up by 44 basis points as compared to last quarter. So if you look at inventory plus -- sorry, raw material plus variable cost.
Okay. So now that the steel price is coming down, I was just trying to understand how does this evolve as we head into the coming quarters.
In this quarter, we have not seen any of the softening of prices. It might -- we are looking at some reduction in prices. But for this quarter, there was no reduction in prices.
This quarter, you mean quarter ending June, right?
Quarter ending in June.
Okay. Okay. But what I'm asking is July to September we should expect some decline. So will the RM to sales improve further or will it stay here? Just trying to understand that.
If the price goes down, then you will see some improvement in margins, but it's optical. And -- at the time of increases, its optical decrease in EBITDA. But what you should look at is EBITDA per tonne, which is on an improving basis.
The next question is from the line of Binay Singh from Morgan Stanley.
The first question is on our European business. Is the full impact of the inflationary pressures on gas prices and all that we are seeing in Europe, visible in this quarter's earnings?
Yes, it is.
Okay. And secondly, on the North Carolina sort of facility, our U.S. forging facility, earlier we had talked about $80 billion to $85 billion revenues in Phase 1. So that should largely play out in FY '24, right?
Yes.
So to an extent when we -- so FY '23 is the year of breakeven, whereas FY '24, you will start to generate sort of mid-single digit or higher margin in that.
Yes, absolutely. '24, we will have a positive margins for sure. And as I mentioned earlier, we now need to very quickly start the setup of the second Phase because we have orders for almost 4 million pieces. And our first line on this capacity was about 2.2. So we will be able to double that in '25, '26.
And is it fair to assume that the margins there in -- when the first phase is fully operational will at least be similar to the level that you have seen in Europe, which is high single digit or so?
No. I would say that slightly higher in -- I would say 10%, 11%, 12% should be doable, when it stabilizes You're talking about EBITDA margins, right?
Right, right, yes.
I would say 10%.
And then just looking at the Aero business, it seems like a pivot this quarter, right? So finally, we are seeing the revenue scale up. And earlier, we had often talked about an aspirational target of $100 million coming from this vertical. Any time line you would think that given the 2 customer orders, 3 product verticals that you're looking at?
I am not going into the timeline. But I will only say that we are definitely on track to achieve that.
Yes, that is good, too. And lastly, just 2 housekeeping questions. One is...
I'll give you an example. If you follow our PV story, when we talked about it about 5 years ago, people didn't know where we were going to get this and were a little skeptical, but we achieved it. And the same thing, I would say, will play out in this.
Yes. But this is actually very encouraging to see because this is where the PV business in terms of contribution used to be in FY '16.
Exactly, you would see the same.
Yes. And in fact, I think the showcase of the Guns at the Independence Day and, in fact, all the commentary that is coming from your side, it seems that on that side of business also we should see an order inflow this year finally taking place.
Well, all the signs are pointing towards that direction. Let's hope.
And just 2 housekeeping questions. One is, what is the USD-INR realization for the quarter? And secondly, if you could just share the agriculture number within domestic industrial business, the agri business.
Realization of 78 -- agri was about INR 55 crores. Any other questions?
The next question is from the line of Ronak Sarda from Systematix Group.
Sir, first question is on the export passenger vehicle business, like you just alluded, has seen a very secular growth. So if you can help us understand what worked for us there, what kind of products have we added over the last few years and what's the trajectory like for the next 2 to 3 years?
See, what worked for us is we have been working on this very consistently for the last 5, 7 years. And in any passenger car business, particularly when it happens from offshore, there is a very high degree of credibility involved because the volumes are high, the customers are very demanding and so on. So let's say, over the last 3, 4, 5 years, we have been performing and doing our bit. And now we are -- we have established a very strong track record of deliverability. And based on that, we are gaining traction to grow especially because the same cannot be said about the supplier base in the outside world. So we bring in a much more credibility and much more dependability as compared to them. So we are seeing that traction. And that is something that we continue to leverage on. And we are expanding our product offering as well as we speak. So it's a combination of various things.
So what we've also done is, traditionally, we used to only make engine components. One of the areas where we have gotten into is now transmission and driveline components, highly complicated and highly differentiated products. So products that companies used to make in-house we are now making and supplying in a fully machine condition.
Right. Got it. And a question on the overall CapEx for FY '23, if you can help us understand stand-alone plus overseas, what would the CapEx be?
We'll look at a CapEx of about INR 250 crores in India. Our EV business will be somewhere in the INR 125 crore or so region. In the U.S., our total CapEx only for the second phase, if we do it, will be about $75 million over a period of 2 years. This will be actually next year and year after next. It will not be incurred this year. And in Europe, it will be a small, I would say, EUR 10 million, EUR 15 million CapEx, which is basically for machining and some value-add, et cetera. So just to recap, the CapEx in India will be INR 250 crores plus about INR 125 crores or so, INR 375 crores. And the other 2 CapEx's will be over 2 years.
Got it, including the electric vehicle CapEx or that is...
Electric vehicles will be there, we are building 2 new plants.
Right. So on electric vehicle, I mean on the Tork side, I mean if you can help us understand where do we see, I mean, the overall, let's say, revenue potential breakup between, let's say, the OEM part where we are selling motorcycles and then the components and subsystems.
We are not selling motorcycles. Tork is selling motorcycles.
Okay. And the component and the subsystems will be from Bharat Forge?
A lot of components and subsystems will be from us. So motor, motor controller, the BMS, battery, all that will be made by us. Allow me for -- till the Q2, because I'd really like you to see it. We'll give you a very good idea of what we are doing when we have our post Q2 analyst call -- analyst meet, rather.
The next question is from the line of Pramod Amthe from Incred Capital.
Amit, this is with regard to your industrial division, where you have added inorganic capacity. And it looks like the really GDP forecasts are shaping up for the global markets that run-up for exports or industrial can be cut short. So how are you looking at the industrial division export opportunity in case there is a weakness or the recession type of environment based up in the global market, one? Or do you like to add up any more capabilities there as an opportunity going forward?
So as I have mentioned before, I see the industrial vertical as one of our biggest growth drivers. Today, our industrial vertical is roughly INR 1,000 crores. When we add JS Auto to it, it becomes about INR 1,400 crores. And I think that we need to grow this at double -- strong double-digit rate CAGR over the next 3 to 4 years. And I think that is what we should get from it.
I think we have plenty of opportunity. We have good facilities, good people most importantly, and very good customers who are all growing their business with us. So we are going to grow this business quite substantially. I mean I think you'll be quite happy to see the way this grows in the next 2, 3 years.
So you are not worried about the CapEx cycle getting shorter in those developed markets and then you may have to delay your ramp-up plan?
No, not at all.
And second one is with regard to the global CV cycle. Considering that we have a much longer experience in handling those cyclicalities, do you see this time the cycle -- the up and downs or the down cycle will be as deep in the past or you get from the customers the actions who didn't hit the peak itself properly because of supply constraints, so volatility will be much lesser going forward?
It's a very difficult question to answer. I think you ought to look at it from 2 different geographies. In the U.S., the inflation is largely due to overall commodity price increases everywhere. In Europe, the inflation is due to everything that is happening globally plus what is happening uniquely in Europe, which is energy. So it is very difficult to be able to say that it will be all the same everywhere. So therefore, I don't want to hazard a guess on this and give you some answer.
But the point is, if you build a business model where you have strong customer relations, you understand your market well, you have strong financials, you have strong technology and you have capacity, you can take advantage of good times and bad times. In good times, we have growth. In bad times, we are suppliers who die. Okay, not everybody can survive. So you just have to be quick, nimble, good at what you do and strong. And then you can take advantage of both. I'm not saying that we're going to buy anyone, I'm just saying that there will be companies that will no longer be viable. And somebody will have to produce what they used to produce.
And are there any new wins because now there are more EVs?
Lots. So we've had a lot of new wins. We've had new wins in fast car, in industrial, in CV, in Defence, in Aerospace, in every vertical.
I was specifically asking for the -- since there's some traction on the CV, EV drive, which is happening in some of the markets.
We are doing a lot of work in that area. And once again, as I mentioned, in the Q2 post-results analyst meet, as you will see a lot of new things that we are doing.
The next question is from the line of Vinit Bajaj, an individual investor.
What is the demand of Class 8 truck in Europe and North America?
Mr. Bajaj, my colleague who looks after the sales and business development will answer this question. one second please.
Demand scenario, I am asking, we are getting new orders?
Yes. Yes.
Yes, we are getting new orders.
Any numbers? specific?
The market, you mean the market -- the U.S. truck market is supposed to be in the region of 300,000 trucks. And Europe is similar. Last year in the U.S., it was about 275,000, 280,000, so this year is expected to be close to 300,000. And Europe is more or less in a similar range.
Is China a major competition from export side or is it any other country?
China is not a competitor on the export side to a large extent in these markets. Other countries, yes, they are.
Mainly America.
Mainly in U.S. and Europe.
Yes, U.S. and Europe.
Okay. China is not on the heavy trucks market?
They supply components to their own market, not globally. The global companies are buying less and less from China.
Or any new products we are developing on EV side?
Yes, we're developing a lot of new products which will be shown in about 3 months.
The next question is from the line of [ Peter Agnil ] from KSEMA Wealth Management.
Sir, I was just wondering, what is the geographical revenue breakup for this quarter and how much of the revenue loss because of the situation in Europe and Americas this quarter. And what is the provision you have kept for the entire year on a worst-case scenario basis?
It's there on Page 6, the full revenue breakup by geographies.
Okay. And then what percentage of the steel pipe prices have you been able to pass on to customers?
Look, I am not going to share that level of detail with you. All I will say is that, as a company, we have a policy of passing on price increases which are out of our control, okay, whether it is raw material or other trades and things like that. But this is a dialogue. We want more. They want to give less. It's always never easy, but you have to find a good relationship and make it happen. But this will happen. Our team is working on it. And I think most of our customers have now agreed, and this will get corrected in the prices going forward.
[Operator Instructions] The next question is from the line of Sonal Gupta from L&T Mutual Fund.
Amit, just like if I look at the numbers for the last couple of years, I mean ex of the standalone, you've done a CapEx of INR 600 crores and INR 700 crores for the last 2 years. So -- and so just trying to understand like...
Not INR 600 crores, plus INR 700 crores in total.
Total -- I mean annually, right? So last 2 years. Yes. So...
No, ex standalone, we have not done that much CapEx.
I think -- I mean like -- trying to just looking from Q4 cash flow statement.
No, you're saying ex standalone, means not including standalone, right?
Correct.
Yes, that's correct. That's correct.
Yes. So -- and like you're mentioning again like...
So basically, look we built 2 new plants. We've built a plant for aluminum forging in Germany, and we've built a plant in the U.S.
Right. So -- but like you're saying that we're going to be making like a 10% to 11%, 12% EBITDA margin, so potentially single-digit EBIT margins on these sort of investments. So your return on capital is fairly low.
No, hold on. I'm not -- I did not talk about margin for those facilities. I said on an a overall European basis, we will do a double-digit EBITDA margin.
Okay. Okay. So I mean these would be...
Aluminum business will be higher. Steel business will be lower. On a blended basis, it will be a good number. No, we wouldn't make investment if we didn't generate adequate returns, please be rest assured.
Got it. Got it. And -- okay. So the aluminum business should make like we made in the BS VIII mid-teens sort of a margin to high-teens sort of a margin?
Yes, yes, that is the goal. Mid to high -- mid-teens and above.
Got it. Got it. And just on the -- I mean, like we're seeing wage cost pressure is also increasing like even in European countries. So what is the outlook there now, I mean, once you have these -- I mean I know currently you maintain about 8.5% EBITDA margin. But how do you see that sort of getting absorbed?
I would say that they're still targeting to generate 8%, 8.5% margin for the year. And hopefully, yes, there are wage inflation issues. It's about 7% to 8% in Europe and maybe 8% to 9% in the U.S.
Right. And yes, so do you think you'll be able to pass it on?
You have to reprice your products.
Right. Right. But you think that will be possible or it will take a longer negotiation process with the customers?
Look, it's not easy, but it's something that we have to do, and our team is committed to it. So we are done. We are working on it.
Got it. And just the last question. Could you just talk about -- I mean on the oil and gas side, what is the traction you're seeing in the U.S. because we have a fair amount of exposure to Shale. And -- earlier you were talking about -- I mean, some -- a few years back, of some new products and new customers being added in the space. And now that the space is coming back, what's the expectation?
So the Shale Gas, the fracking segment in the U.S. is doing reasonably well from a demand point of view. As compared to, say, 5, 7 years ago, the players are following a very fiscal prudent policy. So they are not -- they are controlling the amount of investments quite aggressively. So as such, we are seeing a fairly stable demand pattern there. We expect this demand pattern to be stable for the next maybe at least 1 or 2 years, if not more.
We are also working on adding new products. We continue working on adding new products. In the last 2 years, we have added a couple of new products, and we are actually working on -- we are working on gaining traction there. So all said and done, we have a stable situation when it comes to the U.S. fracking side of the business.
[Operator Instructions] The next question is from the line of Jay Shah from [ Capital PMS ].
Congratulations for a great set of numbers. I just wanted to ask one question on the business side. When you say that we've got these particular order wins, what is our preparedness for these order wins? And how does the contract work like from the day of signing to when does it go into production? And say, God forbid, if there are some uncertainties, do we have capacities that are fungible that we can use it for some other?
Let me answer your second question first. First of all, all our facilities are fungible, okay? We only have to change some tooling. Secondly, how long does it take after an order to get into production really depends on what the product is. If it's a product that we make regularly, then the whole product knowledge, process knowledge, everything is ready. Then it's just a matter of developing dyes, tools, fixtures and all that and getting into production. That could be as much as 3 to 6 months and then, of course, trials and testing and stuff like that. But if it's a complete new product or it's a product for a segment like Aerospace or something like that, Defence, which is very, very critical, that requires longer testing. That could be as much as 12 to 18 to 24 months. So it really depends. There's no one-size-fits-all answer for this. It depends on the product. It depends on the industry. It depends on the customer and the segment.
The next question is from the line of Ronak Sarda from Systematix Group.
Just wanted to understand on the Europe business, given the sharp variable cost increase in terms of energy prices. So how are the new orders wins or the new RFQ's being priced? Are we getting the entire cost increase passed on?
Any new orders that we are quoting will take new pricing into account, okay? And obviously, with existing clients, as I mentioned about few times on this call, it's a process of working with your customers and getting reimbursed for whatever is the delta.
Got it. But the new orders, there is a clear acceptance of the new prices. So there is no issue in getting those...
Look, I wouldn't. We wouldn't -- our team wouldn't quote a price which is not right, right?
Got it. And second -- lastly, the acquisition for JS Auto, has that amount been paid? And is that -- will that be part of the -- part as a subsidiary or that will be directly part of the standalone business?
It's 100% -- it's under industrial subsidiary. It's 100% owned and 100% -- we paid -- we paid all the money, 1st of July.
Paid on, sorry, 1st of July?
That's the day we bought the company.
Okay. And from an accounting perspective, will this be part of standalone or, sorry...
It will be a part of consolidated accounts. It would be a subsidiary of Bharat Forge.
The next question is from the line of Abhishek Kumar Jain from Dolat Capital.
Sir, what sort of the benefit do you see for exports due to the higher manufacturing cost...
I can't hear you, Mr. Jain. Very unclear.
[Operator Instructions]
Sir, what sort of benefit do you see for export due to the higher manufacturing cost in Europe?
See, there are multiple factors. One is, obviously, there will be a difference in cost right now. Second is ability to continue manufacturing sustainably on a longer term and availability of energy. So there are many factors. But please remember, it may also affect some of our customers. There is right now a lot of shuffling taking place with large companies which are looking at, where else they can produce things they produce in Europe in order to reduce their overall costs.
Okay. And sir, this quarter, the consolidated EBITDA is lower than the standalone on absolute basis because of the subsidiary losses. So what is the outlook for the consolidated EBITDA margin going ahead?
So we have talked about this also in the past that any start-up that we have, a greenfield startup, if you remove that, then we will continue to have a positive EBITDA. And once that also -- in 6 to 9 months gets stabilized, it will all add positively to EBITDA. And also, if you are comparing on a consolidated basis, if you are comparing with the earlier quarter, please be aware that since we have taken out the quarter at between our consolidation, the sequential quarter is actually 6 months for overseas entities.
But this quarter, subsidiaries manufacturing cost has gone up by around 1,000 bps, I mean, from 40% to 49%. If we deduct the standalone...
You get on a call with our team separately and discuss this because I don't have the granular information.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Amit Kalyani for closing comments.
Good afternoon, ladies and gentlemen, and I really thank you and on behalf of our company and our team for your interest and questions. And if you have any further questions or require any more clarification, you know who to call in our company. I look forward to your continued support. And we will definitely keep you well advised -- keep you advised well in time of the -- in Analyst Day that we will have in post Q2. I promise it will be interesting and exciting. And you'd see a lot of new things that we have done. And it will give you a glimpse into what Bharat Forge is transforming into in the next few years. So thank you very much. Have a happy Raksha Bandhan and wish you all good health. Thank you. Bye, bye.
Thank you. On behalf of Bharat Forge Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.