Carborundum Universal Ltd

NSE:CARBORUNIV

Earnings Call Analysis

Stable Performance with Mixed Segment Results

In Q1 FY '25, consolidated sales of INR 1,184 crores remained flat compared to Q1 FY '24. The Abrasives segment grew by 6.3%, while Ceramics and Electro Minerals fell by 6% and 9%, respectively. The company reported a marginal increase in PBAT to INR 149 crores with a 12.6% margin. Profit after tax was stable at INR 113 crores. Guidance for FY '25 includes sales growth of 9-11% and improved margins: Abrasives up by 100 basis points, Electro Minerals by 20-30 basis points. Future growth is expected from the recovery of the Ceramics segment and better performance from subsidiaries like Foskor and VAW.

Performance Overview and Financial Highlights

In the first quarter of FY '25, the company reported consolidated sales of INR 1,184 crores, slightly unchanged from INR 1,184 crores in the same period last year. The Abrasives segment grew by 6.3%, while both Ceramics and Electro Minerals experienced declines of 6% and 9%, respectively. Notably, profit before tax (PBT) margin dipped to 12.6% from 13% in Q1 FY '24, with overall PBT flat at INR 149 crores compared to INR 155 crores a year earlier.

Segment Analysis: Abrasives Lead the Charge

The Abrasives segment showed strong performance, improving its PBT margin significantly from 6% in Q1 FY '24 to 10% in Q1 FY '25, driving a 76% growth in overall profits. This was buoyed by operational efficiencies and increased price realization within the segment. Standalone sales in Abrasives grew by 7% year-over-year to INR 303 crores, reflecting strong demand within the industrial and retail sectors, although precision segments faced slight declines.

Challenges in Ceramics and Electro Minerals

In contrast, the Ceramics segment experienced a PBT margin drop from 28.2% to 24%. The standing out issues primarily stemmed from a shift in product mix and delays in receiving orders, particularly affecting engineered ceramics. In Electro Minerals, PBT decreased significantly, with margins declining to 11.4% primarily due to a drop in price realization impacting profitability—down by nearly 4% to 6%.

Debt Management and Capital Expenditures

The company maintained a strong financial position, ending the quarter with total consolidated debt of INR 112 crores, slightly reduced from INR 113 crores at the end of FY '24. The debt-to-equity ratio was a healthy 0.03, indicating robust capital management. During the quarter, the company spent INR 63 crores on capital expenditures, with plans for an overall annual CapEx budget of INR 350 crores.

Guidance and Future Prospects

Looking ahead, the company forecasts a consolidated sales growth rate of 9% to 11% for FY '25, projecting total sales between INR 5,100-5,200 crores. Segment-specific guidance suggests that the Abrasives segment will see growth of 11% to 12%, while Ceramics and Electro Minerals are expected to grow by 12% to 14% and 5% to 6% respectively. Importantly, the company anticipates an improvement in consolidated PBT margins by 20 to 30 basis points across various segments.

Market Challenges and Competitive Landscape

The company noted ongoing pricing pressures from Chinese imports, particularly affecting pricing within the Electro Minerals segment. Management expressed confidence in navigating these pressures through strategic pricing adjustments and expanding distribution channels. A return to a more favorable pricing environment is anticipated as Chinese prices are reportedly on the rise.

Bottom Line Takeaways for Investors

Overall, the earnings call indicates a company with strong potential in the Abrasives sector, while the Ceramics and Electro Minerals segments require attention to improve profitability. Investors should particularly consider the projected sales growth and the management’s commitment to address market challenges effectively. The company's solid capital management and optimistic guidance for the upcoming fiscal year suggest resilience and potential value appreciation.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Carborundum Universal Q1 FY '25 Earnings Conference Call hosted by Kotak Securities Limited.

[Operator Instructions]

I now hand the conference over to Mr. Aditya Mongia, he is a analyst [indiscernible] sector. Thank you, and over to you, sir.

[Aditya Mongia, analyst]

Thank you, Steve, and welcome, everyone, to the Q1 FY '25 Earnings Call for Carborundum Universal. Introducing the management, which have today with us, Mr. Sridharan Rangarajan, the Managing Director; Mr. Sushil Bendale, the Chief Financial Officer, Mr. G. Chandra Mouli, Adviser Investor Relations; and Mr. Dinesh Kuma, Senior Manager, Strategic Planning.

We would request the management to make the initial remarks on the results that have gone by, post which we can start with the Q&A session. Mr. Rangarajan and your team, over to you. Thank you.

[Chandra Mouli, executive]

Good morning to all of you. I'm Chandra Mouli. Before we begin, as a practice, I will read out our disclaimer.

During this call, we may make certain statements, which reflect our outlook for the future or which could be construed as a forward-looking statement. These statements are based on the management's current expectations and are associated with uncertainties and risks are more fully detailed in our annual report, which may cause the actual results to differ. Hence, these statements must be reviewed in conjunction with the risk that company faces. Thank you.

[Sridharan Rangarajan, executive]

Thank you. Good morning, and were happy to meet you all again. Hope all of you are doing fine. There are rains, natural calamities, I hope everyone is safe and take care of your health.

So good morning to all of you. A warm welcome to our first earnings call for the financial year FY '25. Today, I have with me Sushil Bendale, who is our CFO; and Chandra Mouli, the Investor Relations person; and Mr. Dinesh, Head of Strategic Planning. We will begin this call by providing an overview and then later on, we will have a Q&A from here.

Consolidated results, I'll start with. Consolidated sales for Q1 FY '25 were almost same at INR 1,184 crores compared to Q1 FY '24. Consolidated Abrasives grew at 6.3%. There is a degrowth in Ceramics and Electro Minerals segment by 6% and 9%, respectively. On a sequential basis, Abrasives grew by 3.5%, Electro Minerals was flat and Ceramic has de-growth of 4%.

PBAT for the quarter grew by 3.5% to INR 149 crores, PBAT margin of 12.6% against INR 155 crores in Q1 FY '24 with a PBAT margin of 13%. This was majorly contributed by Abrasives growth at 76%, while Ceramics and Electro Minerals degrew by 20% and 42%, respectively. The PBAT margin for Abrasives dresses improved significantly from 6% in Q1 FY '24 to 10% in Q1 of the current financial year. While Ceramics margin dropped from 28.2% to 24%, and margin of Electro Minerals dropped from 17.7% to 11.4%. Compared with Q4 FY '24, Abrasives margin dropped by 188 bps and ceramics by 120 bps and Electro Minerals these 219 bps. I will cover this in detail as I make my opening remark.

Profit after tax for the quarter was almost flat at INR 113 crores compared to Q1 FY '24. Though there is a degrowth of 16.2% against Q4 FY '24. Foskor Zirconia delivered profits in Q4 '24, but the incurred losses in Q1 FY '25 also profits from VAW Russia is lower, mainly due to exchange impact. I will cover this again in detail. These 2 subsidiaries accounted for about INR 17 crores drop in profit after tax.

Standalone. Standalone business grew marginally by 1% to INR 664 crores compared to Q1 as well as Q4 of FY '24. In comparison to Q1 FY '24, the Abrasives segment grew by 7% and Electro Minerals degrew by 4%, and Ceramics degrew by 6%. On a sequential basis, Electro Minerals grew by 5.4%. Abrasives grew by 3.7% and Ceramics degrew by 1.7%. PBIT for the quarter was at INR 119 crores, representing a degrowth of 2% quarter-over-quarter and 4% sequentially. The PBIT margin dropped from 18.5% in Q1 FY '24 to 18% in Q1 of the current financial year.

Though Abrasive margin improved from 15.3% to 17.6% and drop in margin from Electro Minerals and Ceramics segment resulted in drop by 54 basis points. Profit after tax for Q1 FY '25 was almost flat at INR 93 crores compared to Q1 of the last year and a marginal drop of 1% from Q1 FY '24.

Now I'll go by business. Abrasives. Consolidated Abrasives, revenue for Q1 FY '25 was INR 552 crores, with growth of 6.3% compared to the same period last year and a growth of 3.5% sequentially. standalone business and RHODIUS plus AWUKO showed good growth compared to Q1 FY '24. Whereas the domestic subsidiary, selling abrasives, VAW Russia showed negative growth. Selling was impacted mainly due to slowdown in domestic AWUKO business despite their good performance in export.

VAW mainly had an exchange impact as their sales was flat in local currency. standalone Abrasives for the quarter, the sales grew 7.3% to INR 303 crores compared to Q1 FY '24 and 3.7% sequentially. On a quarter-over-quarter basis, the growth was majorly driven by industrial and retail segment, whereas the major growth is coming from volume -- where the major growth is coming from volume increase. However, there's a single-digit degrowth in precision segment, mainly from exports whereas the domestic market volumes and price remained at similar levels as ahead of the last year.

VAW for the quarter, the sales in local currency grew by 16% compared to Q4 FY '24, mainly driven by increase in volumes. Those sales were flat compared to Q1 of the last year. The drop in volumes was compensated by similar increase in price realization. I'll cover VAW in detail, and I go to Electro Minerals setback. RHODIUS in Q1 achieved a net sales of EUR 17.3 million compared to EUR 15.5 million in Q1 of FY '24 and $17.1 million in Q4 FY '24. This represents a 12% growth over the last year, majorly driven by increase in sales in Europe and Americas. There was an increase in volume to an extent of 9%, while mix and price enabled 1%.

Coming to the bottom line performance, I'm happy to share that RHODIUS delivered profit in this quarter as well and delivered PAT of EUR 0.3 million compared to the loss after tax of EUR 0.8 million in Q1 of the last year. This was on account of favorable raw material price and improvements in production performance and volume. On a sequential basis, there's a marginal drop in profit to an extent of EUR 0.3 million, mainly coming from increase in raw material prices and onetime employee payments.

AWUKO. Coming AWUKO's performance. We achieved EUR 3 million in sales for the quarter, which is around 20% better compared to Q1 of the FY '24 as well as sequentially. The losses after tax has come down from EUR 0.73 million in Q1 to EUR 0.6 million in Q1 of this year. However, the losses has increased from a level of EUR 0.4 million in Q4. As we told earlier, we expect AWUKO to breakeven at EBITDA level in FY '25. The small loss of EUR 0.7 million to EUR 1 million, we still remain -- maintain the same outlook. America, there was a small degrowth of 4%, 13% compared to Q4 and Q1 of last year, mainly impacted due to logistics-related challenges but I think the program for the full year is intact.

I will now cover the bottom line performance of this segment. Consolidated PBIT for the quarter grew significantly by 76% compared to Q1 of the last year. This resulted in margins improving from 6% in Q1 FY '24 to 10% in Q1 FY '25. This was mainly due to better performance in standalone, losses coming down in AWUKO and margins moving better in RHODIUS.

Standalone PBIT grew by 23.6% to INR 53.4 crores quarter-over-quarter and margins improved to 17.6% compared to 15.3% during the last year, mainly on account of product mix, softening of input costs, improvement in operational efficiencies and better realization. Sequentially, the PBIT went down by INR 8.2 crores, mainly due to lower profits from RHODIUS and AWUKO, which we just covered.

Electro Minerals -- Consolidated Electro Minerals. On a consolidated basis for the quarter, delivered similar revenue at INR 381 crores compared to Q4 FY '24. However, there's a de-growth of 9% compared to Q1 of the last year, mainly coming from and VAW and CUMI standalone, I'll be covering more details now.

standalone Electro Minerals. Sales for the quarter was INR 189 million crores, which represents a growth of 5.4% compared to Q4 of FY '24 and a degrowth of 4% when compared to Q1 of the last year. There has been good volume growth in aluminas and silicon carbide, sequentially and -- both sequentially and prices remain at a similar level. While compared with Q1 of FY '24, there has been a drop in price realization by 4% to 6%, and you would see that the prices have been dropping since the last year Q1. So that is what this is comparison. So this -- but the volumes remained intact, and we are also doing price corrections, and we will get back to normalcy.

VAW, for the quarter sales grew by 5% to RUB 2.4 billion against RUB 2.3 billion in Q4 FY '24, on account of increase in volumes, mainly. Price realizations were flat. Sales were flat compared to Q1 FY '24. When convert to INR, it shows a downward performance quarter-over-quarter because of strong ruble in Q1 FY '24, where it was converted at RUB 1 equivalent to INR 1.01 on an average, whereas it has become weak at 0.92 in Q1 FY '25.

The operations are running well, and there has been significant increase in sales volumes of our factories and Abrasives by 28% and 14%, respectively. Volume increase in silicon carbide is also very good. Here, I want to highlight that sales volume to export has increased compared to Q4 of FY '24 as well as compared to Q1 of the last year. On this backdrop, the mix towards export sales volume has increased to 43% compared to 40%. They delivered a profit after tax of RUB 287 million in Q1 FY '25. It gains RUB 423 million during the same period of the last year, and RUB 384 million in Q4 FY '24. This was mainly due to exchange impact.

Operationally, VAW is being fine. To illustrate, in March 23, USD 1 was equivalent to RUB 77.98. I'm talking March '23. This became RUB 89.29 in June '23. So when you close the books in June '23, you would restate your receivables and the bank balances and probably realizations. This resulted in exchange gain by restating the foreign currency receivable, bank balance and realizations. However, in March '24, USD 1 was RUB 92.59. This became RUB 85.75 in June '24. This difference in movement is one of the main factors for the reduction in profit to the extent of INR 20 crores to INR 23 crores, which you will see this in other income drop as well. They continue to be debt free and outlook remains stable and positive.

Now I move to Foskor Zirconia. For the quarter, the sales volume increased by 12% to 1,050 metric tons compared to Q1 of the last year and 3% growth sequentially. There is a decrease in price realization. This is the main reason for also the impact in the profitability. So despite maintaining the sales volume, Foskor incurred loss mainly because of lower realization and product mix. We expect Q2 and rest of the year to be better than this and the plans for the same are in place. This covered the revenue portion of the Electro Minerals segment, now I'll cover the bottom line performance of the segment.

Consolidated PBIT for the quarter was INR 43.3 crores, which degrew by 42% compared to Q1 of the last year. The standalone business, VAW and Foskor delivered lower PBIT than that over last year. Standalone business was hit by a drop in price realization. This is compared to Q1 of the last year, moving to lower price of domestic imports. VAW as explained, 2023 crores reduction and profit was mainly on account of the exchange impact in their books. Foskor profits have impacted a drop in price and product mix. Combined together, there was a drop of INR 31 crores in PBIT. Standalone PBT grew by 46% to INR 16 crores compared to Q4 FY '24, and margins improved from 6.2% to 8.5%.

Ceramics. Consolidated Ceramics for the quarter degrew by 6% to INR 270 crores quarter-over-quarter and 4% compared to Q4 FY '24. The drop was mainly from standalone business as engineered Ceramics segment is yet to recover as well as some refractory orders are getting delayed. Standalone Ceramics, the Refractory, Wear Ceramics and Metallised Cylinders business combined together grew 17% compared to Q1 of FY '24. And 1.4% compared to Q4 FY '24 but the degrowth in Engineered Ceramics for overall Ceramics segment resulted in a degrowth of 6.2% to INR 217 crores. And I think I will also cover this in a minute later but I'll wait for that. Subsidiaries in America registered good growth quarter-over-quarter and sequentially, whereas Australian subsidiary was flat compared to Q1 of the last year.

So I'll now cover the consolidated PBIT for the quarter was INR 65 crores, representing a degrowth of 9% compared to Q4 of the last year. This resulted in margin declining from 25.2% in Q4 of FY '24 to 24% in Q1 FY '25. This was mainly due to a drop in margins of standalone business to 22.7% by 83 bps and margins dropped in Australian subsidiary. The drop in margins of standalone was mainly on account of mixed within industrial ceramics and refractories product mix within -- and also the product mix within the Industrial ceramics. I will come back again but I request our CFO, Sushil, to cover the financials in detail.

[Sushil Bendale, executive]

Thank you, sir. So first, I'll talk about the consolidated PBIT margins. For the quarter, consolidated PBIT margin was at 12.6%, compared to 13% in Q1 of FY '24. This was majorly contributed by better performance in Abrasives. Abrasives margins actually improved from 6% to 10% while Ceramics margins declined from 28.2% to 24%, and Electro Minerals margins declined from 17.7% to 11.4%.

Now I'll talk about the standalone. For the quarter, standalone PBIT margin was at 18% compared to 18.5% during the same period last year. Abrasives margins improved from 15.3% to 17.6%. Ceramics margins declined from 26.9% to 22.7% and Electro Minerals margins declined from 11.6% to 8.5%.

Now I'll talk about the Abrasives segment. Consolidated PBIT margins for the quarter improved from 6% to 10%, mainly contributed by standalone Abrasives business margins increasing from 15.3% to 17.6%. And this was on the back of better realizations, improved operational efficiencies, losses coming down in AWUKO and margins moving from negative to positive for RHODIUS.

Now Electro Minerals. For the quarter at a consolidated level, PBIT margin has decreased from 17.7% during same period last year to 11.4% in the current financial year. Standalone business, VAW and Foskor delivered lower PBIT than that of last year. Standalone business was primarily hit due to drop in price realizations by almost 4% to 6% due to low price pressure owing to lower price imports. VAW, primarily because of the exchange impact, as was explained earlier and Foskor due to drop in price realization and product mix. But combined together, there was a drop of INR 31 crores in PBIT but standalone PBIT grew by 46% to INR 16 crores compared to Q4 FY '24 and margins improved from 6.2% to 8.5%.

Now Ceramics for the quarter, consolidated PBIT margins declined from 28.2% in Q1 FY '24 to 24%. Standalone margins also decreased from 26.9% to 22.7%. the drop in margins of standalone was primarily on account of mix between industrial ceramics and refractories and the product mix within the industrial ceramics business. VAW delivered better margins while CUMI America and Australia had lower margins than the same period last year.

Now coming to the debt position, there was no debt in our standalone books and total debt at a consolidated basis was at INR 112 crores at the end of Q1 FY '25 compared to INR 113 crores at the end of FY '24 and INR 178 crores at the end of Q1 FY '21. The debt-to-equity ratio was at 0.03 at a consolidated level.

Now CapEx. During Q1 of FY '25, our CapEx investment was INR 63 crores at a consolidated level. ROCE for the quarter, return on capital employed at a consolidated level is 16.9% compared to 19.7% during the same period last year. At a standalone level, it is at 20% compared to 22.6%. For consolidated businesses, ROCE in Q1 FY '25 for Abrasives improved from 9.4% to 15.5%, while Ceramics has declined from 54.6% to 41.5%, and Electro Minerals also decreased from 31.9% 17.8%. for the standalone businesses, ROCE for Q1 FY '25 for Abrasives has improved from 44.8% to 45.4%, while Ceramics and Electro Minerals have decreased.

Now I request Mr. Sridharan to take you through the next section, which talks about our future outlook.

[Sridharan Rangarajan, executive]

Thank you. Thank you, Sushil. We talked about the guidance for FY '25 last time. I will comment on what we communicate and what we expect considering the Q1 performance. We communicated full year consolidated sales growth could be 9% to 11%, and consolidated sales could be INR 5,100, INR 5,200 crores. We are confident of delivering the same. We expect the growth of 11% to 12% in Abrasives, 12% to 14% in Ceramics as told earlier. We remained the same stands for Electro Minerals as well, a growth of 5% to 6%.

Abrasives India growth would be 9% to 11% as communicated earlier. RHODIUS is doing fine against what we planned. We are confident of delivering growth of 10%, what we communicated earlier. AWUKO delivered in Q1 FY '25 plan, and we are confident of delivering what we communicated during our last call, a growth of EUR 8 million to EUR 10 million over FY '24.

Industrial Ceramics, we still hold a growth projection of 13% to 15% in the segment, driven by India and Americas and Australia. Australia in Q1 FY '21 was marginally below the same period last year but it's a very small percentage. Q2 is also expected to be on a similar line. The growth in the second half of the year would be better, which will result in marginal growth in FY '25 against FY '24, what we told earlier. This is based on the -- their order books as well as the projections that we have from some of the key customers.

Refractory, we are confident of delivering growth around 12% to 13% over the last year. They have a very strong order book and there are some delays in scheduling the order that is what is having some seasonality issues but it would happen.

Electro Minerals expected to deliver similar performance over the last year in ruble terms. This is what we have planned and what we continue to keep. Growth from standalone business is expect to be in line with our plan.

For Foskor, though Q1 FY '21 (sic) [ FY '25 ] was impacted, we expect coming quarters to be better. We expect good growth over the last year, but some shortfall from the plan. On bottom line, we are confident of delivering what we communicated earlier. A consolidated PBIT margin to improve by 20 bps to 30 bps. This is what we communicated. We expect similar numbers. Consolidated Abrasives margin to improve by another 100 bps in FY '25. We still hold the same. Ceramics margins should be similar rest of FY '24. Electro Minerals 20 to 30 bps improvement in FY '25. On CapEx side, we are confident of spending INR 350 crores. We spent INR 63 crores.

So by and large, I would say, Q1 the top line and profitability are in line with the last year, it's better than our internal business plan. We expect the second half to be better. All the projects that we plan to execute are in line, and we are confident of what we guide at the last call.

Thank you, and we'll open up for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Amit Anwani from PL Capital.

[Amit Anwani, analyst]

First question is on VAW. So you did highlighted that kind of flattish volumes we are expecting, just wanted to understand, I think we were talking about debottlenecking and I recollect the utilizations were also 85% plus. Just wanted to understand, is there any scope for debottlenecking? What is the capacity utilization? And is there any constraint now with respect to volumes in the coming quarters and years from VAW?

[Sridharan Rangarajan, executive]

Thank you, Amit. I think VAW is doing fine. Capacity utilizations, mainly the silicon carbide is very much on full capacity utilization. The debottlenecking program is happening and it will come on place. But I think when I said flat largely is a function of comparative to the quarters that we are comparing. I think given the circumstances, given what they are all going through that, I think they are doing fine. We expect capacities will be augmented in time over the next year.

[Amit Anwani, analyst]

Sure. Second, sir, I wanted to have an update on the Chinese dumping impact you did alluded in the previous quarters also. In Abrasives, I think we are facing issues with respect to the retail Abrasive and there was a strategy that would like to enhance the distribution channel. And there was some competition from the other paint companies. So just wanted to have an understanding how the quarter was in Abrasives with respect to the Chinese competition and local competition, and also Electro Minerals, on aluminas where we are facing the realization issues. So if you could elaborate on these points here.

[Sridharan Rangarajan, executive]

No, I think as we communicated in my opening remarks, Abrasives segments are doing fine, and I think the growth rate is also compared to what is happening with the competition we are tracking better. Our programs of strategy are coming in place and it is paying dividends. We feel that the pricing pressure from China would continue for some time but I don't think it is going to be for long. In terms of the aluminas if you look at the trades from Q1 of the last year, it continued to fall, I think, because of the competition. We see some correction. In fact, Chinese prices have started going up. And so starting next quarter, we are also putting up the price, and we think that there would be a reversal in the price happening in Electro Minerals.

[Amit Anwani, analyst]

Sure, sir. Lastly, few other companies who are exporting or highlighting the container availability issue and logistics issue witnessed this quarter. So do you see that -- so first of all, any impact you see? And will that be any risk to our export shipments because of this for this year?

[Sridharan Rangarajan, executive]

Yes. I think it's a 2-way issue both in imports as well as in export. This logistics issue, availability of containers as well as the freight movement have been impacted, and I think all of us are going through this issue. Sometimes it cause us delay, sometimes it cause us higher freight costs, all these combinations that we are facing, and we are working with the customers as well as with the logistics agency to see how do we address this, and this is across.

[Amit Anwani, analyst]

Are we factoring in some bit of it in our growth guidance?.

[Sridharan Rangarajan, executive]

I have already factored in, in whatever I have told.

[Operator]

The next question is from the line of Ravi Swaminathan from Avendus.

[Ravi Swaminathan, analyst]

My first question is with respect to the Ceramics and Refractory business, you had mentioned that this year's -- this quarter's decline has been because of the Engineered Ceramic that a lot of business from that single customer and Refractory is also slowing down a bit. Just wanted to check with you, has the kind of -- is there a bottoming out that is happening with respect to that business from that single customer? And why there has been a weakness with respect to refractories, is it more related to election related issues or something of that sort?

[Sridharan Rangarajan, executive]

Yes. I think -- we -- Q1 of the last year was also a high peak as far as the customer that we are talking about. But since then, the company has picked up. We feel that Q2 onwards, this pickup will happen and we have factored in whatever guideline that I've shared some time back now considers all this, and we are confident of delivering a higher growth in Ceramics. Based on the interactions with customers and order book, we feel that we will do that.

As far as the Refractories, no impact due to elections but obviously certain customers inspection because a lot of this is also dependent on their project execution time lines and inspection of the products. So there are some delays. And based on that, some invoices could not happen in Q1 but given their strong order book that what we are seeing, we feel that together, we will deliver the guideline that we have communicated.

[Ravi Swaminathan, analyst]

Understood. And if you could talk more about the -- any progress to some of the special and specific areas that you are looking at like high-purity silicon carbide. Last call, you had mentioned that you would be adding per month 6 tons. And similarly, graphene, synthetic graphite. If you can talk about incrementally what has happened in these segments in the past 3 months. And over a 3- to 5-year period, cumulatively any ballpark numbers in terms of revenue and profitability that can pan out in these subsegments?

[Sridharan Rangarajan, executive]

So the progress is going well as per the time line as far as the HPSIC project is concerned. And I think we are tracking to the time line. And I think as we communicated earlier, this would solve both semiconductor and technical ceramics market, and we have tracking to the time line and schedule. So we should be fine with that. We are also fine with the project execution in industrial ceramics as well as the semiconductor ceramics. That project is on, and I think we have started the CapEx program for that.

Similarly, also the CapEx program for the defense side is also on. So all these programs, whatever we communicated is very much in line and progressing as per our internal schedule, and we feel that those should be coming along as per our internal guideline.

[Ravi Swaminathan, analyst]

And high purity silicon carbide, any top line that we can kind of think of over the next 2, 3 years? So this 6 tonnes per month would translate to roughly around 70 tonnes per annum and the realizations are like 25, 30 times more than the existing silicon carbide realization. So it's like if we put a rough math, it comes to around INR 20 crores, INR 25 crores of revenue. So is that the kind of fair assumption in terms of overall revenue potential that is there in the near term, in the next 2, 3 years for this business?

[Sridharan Rangarajan, executive]

So thank you for taking effort to do some calculation, Ravi. We would come back and share with the larger team as and when we are ready with the project and then some progress we are making in that direction. It would be a better job at that point in time for us to communicate.

[Ravi Swaminathan, analyst]

Understood. And any progress on graphene, synthetic graphite, what are the potentials there?

[Sridharan Rangarajan, executive]

So graphene, as we said that I think we are working on multiple areas, biopackaging and then the car detailing are the 2 areas. Other than that, we are also working on the rubber and cement and a few coatings. These are the areas that we are currently working on. The progress is good. And I think as I communicated in the last call, this will be small, incremental, but over time, we will build that capability. I think allow us a reasonable time. And I think this should become a good reasonable business as we progress. Give us some time. I mean this should be a 3- to 5-year window but it should happen.

[Ravi Swaminathan, analyst]

Okay. Any addressable market size for graphene in India or abroad, any number that you have in mind, sir?

[Sridharan Rangarajan, executive]

These are all good market size. We are looking at the opportunity set in multiple areas are really good. Hence, we feel -- and also it gives us an advantage -- competitive advantage in our core product as well. So hence, together, we feel that it is -- these are all good bets to make and that is why we have taking it.

[Operator]

The next question is from the line of Harshit Patel from Macquarie Securities.

[Harshit Patel, analyst]

So firstly, on the clean energy piece of the business, you have earlier indicated that we were in discussion with multiple other players as well, mainly in the developed countries to get the approvals, getting trials done, et cetera. Has there been any meaningful progress on that? Have we started getting some revenues from any of these customers?

[Sridharan Rangarajan, executive]

So in the sector that we are serving, this is on the solid oxide fuel cells. There are -- we are working with the biggest person in that field. And there are -- others are very, very small and picking up. I'm not sure where you got this information that we are working with multiple people, et cetera. So this is a program where our concentration is only on this single customer. But I think what we are working on is diversification in semiconductor fab equipment-based ceramics. There's 1 clear area. We have got significant approvals and we are also getting orders on that direction, and that is why we are making an investment in separate capacity.

That, I think, will one track and also the defends and aerospace another track. These are the 2 tracks. The third track is going to be on electronic semiconductors, this is -- sorry, electronic ceramics. That is 1 track we are working on. I think shortly, we will also make fuel capacity investments for that. So these things will help us to diversify and grow in newer and also meaningful market size areas.

[Harshit Patel, analyst]

Understood. Sir, just a follow-up to that. Even your annual report mentions that a lot of new product development is happening in the armored vehicle protection, you also just mentioned the same, and we have also done commercialization to a significant scale. So could you give some flavor in terms of whether this is for domestic market or for exports, the size of this business? And who are the competitors that we're complete with over here?

[Sridharan Rangarajan, executive]

So to start, it will be for domestic market. And then as we start completing and also making the domestic market satisfied, we will work on the export market. The market size is quite large. And in fact, we are playing in a very niche area. So I think we will make an investment in CapEx to the tune of about, say, INR 30 crores to INR 40 crores. So that's the CapEx program that we are looking at. The revenues, et cetera, as we made sure we will share.

[Harshit Patel, analyst]

Understood. Sir, just lastly, on PLUSS 2 years ago, I think the plan was to breakeven in FY '24. However, that has not happened. I think we have still incurred losses last year. So what is the trajectory here in terms of revenues, margins, breakeven, et cetera. Also, depreciation seems to be quite high, both in PLUSS as well as in RHODIUS. So are these the -- so the current run rate will sustain in the foreseeable future? Or do we expect this depreciation to come down?

[Sridharan Rangarajan, executive]

So as far as PLUSS is concerned, we have been making profit in the last 2 quarters, and I think there really encouraging order book we have. And definitely, we are expecting breakeven and better performance this year. And I think you are -- when you talk about depreciation, you are talking about probably the intangible write-offs, perhaps that's what...

[Harshit Patel, analyst]

Yes, sir. Correct.

[Sridharan Rangarajan, executive]

I think this will taper down. As far as RHODIUS is concerned, it should taper down after 3 years. So I mean, 3 years after FY '25, it should taper down. And I feel that at this point in time, RHODIUS is making profit even after the PPA adjustment. So we feel they are tracking to the program, both PLUSS and RHODIUS in good shape.

[Harshit Patel, analyst]

Understood. Sir, just lastly, on the tax rate. The tax rate at the subsidiary level seems to be very high for this particular quarter. Is there any specific reason for that? Also, going forward, what would be the blended tax rate for us at the subsidiary level? That would be my last question.

[Sridharan Rangarajan, executive]

So I think for you're keen [indiscernible], I think you have done a very good analysis. I think the tax rate is higher, largely because the deferred tax benefit is not taken in Foskor. Hence, that is taking this tax rate higher. I feel that the broadly the overall company's tax rate should be in the range of 28% to 30%. That should be the broad level we should look at it.

[Operator]

The next question is from the line of Bhoomika Nair from DAM Capital.

[Bhoomika Nair, analyst]

Sir, you highlighted new areas such as HPSIC, defense and aerospace, SOFC, electronic ceramics, et cetera. While I understand we might not be able to outline your revenue guidance kind of a number. But can you talk a little bit about what is the addressable TAM out here? How this market is growing, and what is -- who are the players that are there? What is the competition like as such in this market? So if you can just talk a little more in terms of the TAM, which will help us to kind of at least understand where we could possibly grow to.

[Sridharan Rangarajan, executive]

So I think -- I talked about at least 4 different things. I think as far as the semiconductor and aerospace and defense, we should start seeing the benefit flowing in a year's time. As far as the electronic ceramic business is concerned, we need to put up some capacities. My guess is that in 18 months to 24 months, it should start happening. HPSIC, as I said, we should start seeing this benefit in FY '26 onwards, we should start seeing this. That's a broad time line I can talk.

[Bhoomika Nair, analyst]

No, sir, I was basically trying to understand the market size and how large it can -- is this and what is it growing at over more like a 2, 3-year time frame? What you feel that how large can this possibly get from that perspective?

[Sridharan Rangarajan, executive]

Absolutely. So we will share this, Bhoomika, I think, at an appropriate time once these are in place. I think we feel these are quite interesting size that we are looking at and interesting opportunity for us. This is part of our long-term strategy program and -- so definitely, we will share as we mature into this.

[Bhoomika Nair, analyst]

Sure. Sir, the second question is in terms of the Ceramics segment, which has -- the Engineered Ceramics has impacted the performance over the last few quarters, since we are kind of recovering and you think this is kind of coming to a bottom, where do we see the growth really playing out? And how do margins come back to 26% plus kind of levels out here?

[Sridharan Rangarajan, executive]

I think that is already factored into the overall guidance that when I talked about. We considered the specific engineered ceramics mix getting changed is part of our margin guidance that I've talked about overall ceramics. I think give us 3 more quarters, you should see that end of the year, we will be similar to the guidance that we have given. And it will start stabilizing that. I think that is what I would share. And that also the customer with whom we are working is also showing us the signs of their order intakes and other things are getting better. We will get better is what our current discussion tells us. So we should get back to the broad guidance that we shared in the last quarter, which I repeated now. End of this year, we should see this one happening. So the blips in this quarter [indiscernible] please, don't keep this. I mean, it is a reality but I think we will get back.

[Bhoomika Nair, analyst]

Sure. The last thing is on RHODIUS and AWUKO. We're seeing a ton around, we're seeing improvement. When do we start seeing improvement in terms of these? Margins actually moving towards high single-digit levels. How is the -- and if you can also comment about the demand while obviously we're working on a lot of cost efficiencies, which is driving the improvement in margins. But if you could also touch upon the demand aspect in the European markets where we cater to.

[Sridharan Rangarajan, executive]

So I think we shared that there is a quarter-over-quarter of roughly about 12% growth in RHODIUS and 20% in AWUKO. Predominantly growth is coming from the volume side of it. So we see that the demands are slightly better and the effort that we are putting is also getting better. So it is a combination of both. The margin getting better right now is a lot of the efficiency effect as we rightly pointed it out. When we guided I think a couple of quarters back, we talked about EBIT margin in RHODIUS, et cetera, getting better, would take about 3 to 4 years.

This is what we said that time. We are still maintaining that stance. And I think they would get back to the earlier levels of margins that they were delivering. I mean, we need to back off the PPA because that's an internal one, and it will drop off after 3 years. So I feel that they should get back to their normal level of margin by then. So that's what I see.

[Operator]

Next question is from Mohit Pandey.

[Mohit Pandey, analyst]

I hope, I am audible?

[Sridharan Rangarajan, executive]

Yes, Mohit. There was some gap in between but we're now able to listen.

[Mohit Pandey, analyst]

The first question is on Electro Minerals. So sir, when we are maintaining the full year guidance for revenue. So if you could elaborate on what are the assumptions on the price hike and volume there for Electro Minerals for the balance year?

[Sridharan Rangarajan, executive]

It, I think we did talk about this last time also, we are not sharing this in specific about price and volume. This is -- the overall total percentage is what we are guiding. It's a combination of, one, the standalone growth, Foskor growth compared to the last year because for 1 quarter, they had a -- sorry, Q2 and Q3 of last year, they had an impact, which I think they would come back, which is consistently then they are doing 1,000 tonnes plus, including this quarter. So combination of all that is what we guided as an overall growth rate for the Electro Minerals, which we are reiterating that we'll be maintaining that.

[Mohit Pandey, analyst]

Okay. Sure, sir. Sir, secondly, -- so I think you indicated that some of the pricing pressures are easing in Electro Minerals. So I wanted to understand what -- if any kind of impact that has for the Abrasives margin, [ was that the ] raw material there?

[Sridharan Rangarajan, executive]

So we feel that we should pass on this price increases back to the market. But there could be some timing difference arising out of that. So that I think we should be able to manage it is what our current feeling is.

[Mohit Pandey, analyst]

Okay, sir. Sir, thirdly, on the defense ceramics for the armored vehicles. So if you could elaborate if our offerings are substituting some of the existing ceramics that are being used or these are completely new innovative offerings. So that would be very helpful.

[Sridharan Rangarajan, executive]

Yes. So this is for 2 different types. One is body armor and then the vehicle. These are the 2 areas that our focus is on. Currently, these are imported into India. This will be import substitution programs.

[Mohit Pandey, analyst]

Understood, sir. Okay, sir. And is there any benefit you're driving from the import substitution list that the government put out on the defense side from time to time? Or this is not a part of those lists?

[Sridharan Rangarajan, executive]

There's no benefit that we are working with any government program. But our existing competitiveness and capability is getting recognized because the government of India took a call that they will not do import of products and they will be self-reliant, that gives us -- the Atmanirbhar Bharat gives us this boost.

[Mohit Pandey, analyst]

Understood, sir. Sir, and last question, I think you explained this but I could not get this. On the other income, why is there such a fall, I could not understand earlier?

[Sridharan Rangarajan, executive]

Yes. So I think we explained to you earlier is that last year, that is Q1 FY '24, our Russian business will restate their receivables in dollar and euro terms based on what they closed at 31st March 2023, and the change difference then versus now is what is causing this problem. I will repeat what I said. In March '23, USD 1 dollar was equivalent to RUB 77.98, and in June '23, it became RUB 189.29. So this resulted in a gain. Now the same 2 periods, if you have to compare it in '24, that is March '24, it was $1 equal to RUB 92.59 but it went down to RUB 85.75 in June '24, and that is what is the swing that has caused and this is the difference you are seeing it in other income as well.

[Mohit Pandey, analyst]

Okay, sir. Okay. So it will possibly have some impact in the coming quarters also because of [indiscernible] and other income?

[Sridharan Rangarajan, executive]

When I looked at some 4 years of number that FY '23 was an exceptional year. And to go through this, it will take 8 quarters, which probably we are in the last leg of that quarter. And I hope next year, next quarter onwards, it should not have this kind of wide stream.

[Mohit Pandey, analyst]

Okay, sir. And very last question. So how big would our R&D team be now as we're doing so many initiatives? Will it is possible to share that, any idea?

[Sridharan Rangarajan, executive]

I think we did share this in our annual report, I don't remember but this should be 50-plus employees on that. But I think, in the next call, I will definitely share this in specific.

[Operator]

The next question is from the line of Aditya Mongia from Kotak Securities Limited.

[Aditya Mongia, analyst]

So a few questions from my side. Firstly, on the Abrasives part, if I focus on the standalone business, there's broadly been close to a 10%, 11% growth over the last 2 years in the first quarter. Could you just kind of -- and we do understand that you're gaining back share on a basis of...

[Sridharan Rangarajan, executive]

Aditya, could you repeat that question, please? Sorry, I missed your point.

[Aditya Mongia, analyst]

Sure. Absolutely. Sure. So the question is on the demand environment in the Abrasives segment on the standalone side. There's been about a 10%, 11% growth on a 2-year basis in this segment. And we do understand that certain strategies are starting to play out. But at a very market level, it appears to be that the demand isn't as robust. Could you give us some more sense of what is driving the numbers for you and presently the market down?

[Sridharan Rangarajan, executive]

So I think -- honestly, I think the market is growing well, it's our reading, because of many factors the kind of infrastructure investment that it goes through. Second is the kind of the spend that happens on building construction, residential and commercial complexes, bridges, roads, all these leads to a lot of abrasive need. The second driver is the industrial need as well. That is also requiring a lot of the abrasive need.

So when we feel that these -- combined all these factors, I think with the industrial activity growing in India, coupled with the future investment that the programs that the government of India is projecting and the GDP growth, at least 7% plus is being looked at. Obviously, the market size being large, our own assessment is about INR 10,000 crores plus the market size, should grow quite reasonably well. So hence, we feel that this is what we are looking at.

[Aditya Mongia, analyst]

Understood. The second question that I had was that you talked about the pricing pressure from the Chinese from an import perspective. I think on the Electro Minerals side and the fact that it won't last for very long. Is that based on early signs that you are seeing? Or let's say, are we kind of lobbying with the government for having some kind of duties we put? What gives you that confidence is what I'm trying to engage over here?

[Sridharan Rangarajan, executive]

Lobbying with the government is we are continuing. We are continuing that process. But I think what we are seeing, the reality is that in some products, I'm not an expert on China, don't hold me for that, but I think we see that the prices they are putting up at this point in time. We don't know what exactly is the reason for that because probably they have already bottomed out the way they have put up. The price down in the past might be hurting them, could be hurting the cash flows, all that could happen. And hence, that could be a reversal on that. This is what we think.

[Aditya Mongia, analyst]

Understood. There's a last few questions from my side. Firstly, on Foskor profit last quarter and then a loss. Is it something just volatility not concerning? Or how do you think through the situation over there?

[Sridharan Rangarajan, executive]

Absolutely, volatility concerns us. I mean this is a great concern for us. One is, see, what I'm looking at positively is that they are able to deliver 1,000 tonnes. That's number one. And number 2 is what constant this time this problem is the first factor is that they could not buy raw material because their working capital facility was not there, which is probably a self-inflicted wound. And they have to resell some of the working progress that cost them significant sum of money, which is probably -- should not have happened. I mean, that's something I feel it is not the right thing to do.

The second factor is, I think, is the price fall. The price fall is a combination of mix between Z450 and [indiscernible] product. We feel that the Z450 should pick up, which is our sweet spot, and I think it should happen. So yes, to answer your question, I feel that it really -- the fluctuation really hurts us, but we are confident that they would get back.

[Aditya Mongia, analyst]

Sure. Last question from my side. Maybe this into a discussion that at least I had with you maybe more than a year back. What would be the key capability gaps in your portfolio? If anywhere you would want to focus a lot more like we've seen AWUKO, we've seen RHODIUS, but if you were able to thinking from a 3- to 5-year perspective, are there meaningful capability gaps? And can we kind of organically do something about it? Or would we have to rely on inorganic measures to move forward? And that is my last question.

[Sridharan Rangarajan, executive]

Yes. I think I'll just combine this with the earlier question, Mohit asked. I'll respond to that as well. The total R&D headcount is about 103 technical professionals, 26 PSCs we have at this point in time. And we have collectively filed 156 patents and 403 papers as this R&D team. But I think we need to do quite a lot. So we are taking a relook at the R&D support and augmenting the R&D at all the 4 divisions, which I think is a current program that I am keenly looking at is to revamp this and support how do we invest more in that. And that could be a combination of many things augmenting here, tying up centers abroad, making sure that we even be willing to work outside of India work on this. Some of the areas would help us to augment and supplement the current capability that we have and that would probably help us in the long run. We are currently working on a long-term strategy going up to 2030.

Clearly, this is one area where we need to invest in. We are working on that in the next 3 months, we will have a program of what are all the things that we need to do, like how should we revamp our structure in Abrasives, Ceramics, in the Mineral side, all that is part of that. That perhaps also answers your question.

[Aditya Mongia, analyst]

Steve, if you could check if there are no more questions, we can bring this conference to a close.

[Operator]

Yes, sir. There are no more questions for today. I would like to hand the conference over to the management for their closing comments.

[Sridharan Rangarajan, executive]

So thank you. I think, as I said, Q1, we have similar to the last year, both in top line and bottom line cash flows are good. Balance sheet is good. Programs, whatever we started working on. We are well on trajectory. Happy to note that the Abrasives domestic growth as well as margins are decent and starts paying off. I feel that the overall guidance that we talked about for the full year still we hold. Give us a couple of quarters more to see, and then you will start seeing this. Ceramics, as a whole, I think the second half will be better.

So by and large, I feel that this is a year where broadly will be in line with what we are looking at. Of course, when we meet next quarter, we will share more. Thank you, and thanks a lot for all your support. Bye.

[Operator]

On behalf of Kotak Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.