Craftsman Automation Ltd

NSE:CRAFTSMAN

Earnings Call Analysis

Craftsman Automation's Strategic Growth Amid Challenges

Craftsman Automation faced a challenging quarter but saw optimism in market trends and private CapEx growth expectations. The company's turnover hit INR 1,151 crores, driven by gains in its Powertrain and Aluminium sectors. Increased depreciation and operational costs affected EBIT, which stood at INR 130 crores. Craftsman is investing INR 201 crores in new plants and has acquired a German foundry for EUR 6 million, aiming for a strategic foothold in the high-tech casting market. The company anticipates robust future growth, with significant revenue contributions expected from new ventures by FY '27.

Craftsman Automation's Current Landscape

Craftsman Automation Limited is navigating through a challenging market environment, marked by fluctuating demand across various segments. The company's consolidated turnover for the quarter reached INR 1,151 crores, with Powertrain and Aluminium segments showing mixed results. Notably, the company reported a year-on-year decline in the EBIT to INR 130 crores, attributed to increased depreciation and operational costs. Despite these headwinds, there are signs of optimism as the company anticipates growth driven primarily by an uptick in private capital expenditure (CapEx) and improvements in the truck industry.

Financial Highlights

In the standalone segment, Craftsman recorded a turnover of INR 850 crores, a slight increase from INR 746 crores in the previous quarter. EBITDA for the standalone business was INR 152 crores, and EBIT stood at INR 90 crores. The Aluminium segment has been growing steadily, but overall margins remain a concern, particularly due to rising commodity prices, which have increased by 12-13% year-on-year.

Strategic Initiatives and CapEx Plans

Craftsman is committed to a CapEx of INR 201 crores for FY '25, with plans to establish two new plants — one in Kothavadi and another in Bhiwadi. These projects are expected to significantly enhance production capabilities, particularly in the high-demand segments like wind energy and automotive components. Initial trial production is projected to commence from Q4 of this year, with substantial revenues anticipated in the subsequent financial year.

Acquisitions and Growth Prospects

The company is in the process of streamlining operations post-acquisition of a German foundry that specializes in engine blocks for industrial engines, which adds significant technological capabilities and access to marquee customers. The acquisition deal is valued at EUR 5.5 million (approximately INR 60 crore), and further investments are expected to bolster working capital. This move is aligned with Craftsman's vision to transition from a small to a medium-sized player globally in both Powertrain and Aluminium business, with a target to enhance revenue from the newly acquired segments.

Market Conditions and Future Outlook

While the current quarter has shown some weakness, particularly in the Powertrain segment linked to commercial vehicles, the management articulated a positive outlook. They expect a turnaround based on improving market trends and increased demand for tractors. Management also highlighted confidence in generating upward revenue of INR 125 crores from exports in the coming year and projected long-term growth stemming from the industrial engine sector.

Challenges and Risk Management

The earnings call underscored the challenges in maintaining profitability given the cyclical nature of the market and rising costs. The management emphasized a cautious approach to maintaining financial health, including debt management, as evidenced by the recent repayment of INR 900 crores of debt. This strategic focus is aimed at mitigating risks associated with market fluctuations and sustaining a path toward profitability.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the earnings conference call of Craftsman Automation Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Ravi, Chairman and Managing Director of Craftsman. Thank you, and over to you, Mr. Ravi.

[Srinivasan Ravi, executive]

[indiscernible] market, it has been quite a challenging quarter in view of the elections, the summer and [indiscernible] as far as the market is concerned, [indiscernible] has still not shown any respite it's not declined. It's still on a declining trend, whereas there has been green shoots in the truck industry at the end of the first quarter, 2-wheeler has been very robust. Passenger vehicle has slowed down after a good 1-year growth period.

The key commodity prices, something like Aluminium has increased quite a significant number. It is part of double digit. So strictly quarter-on-quarter or year-on-year is not comparable on the sale numbers. There has been a lot of optimism in the market now and there is an expectation of a private CapEx growth going forward. So this we look forward to in the coming year.

The consolidated financials, I just want to give the top line numbers. Turnover has been INR 1,151 crores. The breakup of that is Powertrain INR 416 crores, Aluminium is [ INR 518 crores ], Industrial & Engineering is INR 217 crores. EBITDA has been [ INR 202 crores ]. And Powertrain has contributed [ INR 107 crore ], Aluminium products is INR 92 crores, Industrial & Engineering is [ INR 14 crores ]. Now it is more or less balanced, I would say, between Powertrain and Aluminium, Aluminium has been steadily growing faster, more of that later.

EBIT has been [ INR 130 crores ]. EBIT has been lower compared to the previous year, INR [indiscernible] crores because of increased depreciation, increased operational costs. And then we would say that the Q1 of last year was a little robust. Q1 of this year has been a little weaker [ in the entire ] market situation.

Standalone highlights, the turnover has been [ INR 850 crores ]. The turnover has increased [ INR 746 crore ], but our Aluminium Powertrain is INR 416 crore, Aluminium is [ INR 242 crores ] and Industrial & Engineering [ INR 203 crore ]. EBITDA has been [ INR 152 crore ] and EBIT has been [ INR 90 crore ]. There also we have done a lot of investments for the future, which is [indiscernible] depreciation. Storage business has shown good growth, but I think the margins are still elusive, more of that in the earnings call -- in the Q&A session later.

CapEx for FY '25 stands at [ INR 201 crores ]. We are putting up 2 plants in 1 in Kothavadi and 1 in Bhiwadi, and I will make a separate note of that at the end of this statement.

Acquisition. There actually we acquired 100%, and now the -- I would say, the streamlining of the operations are still continuing, and we are now looking 16 months into the first investment, and we are on the right track. We are running a little more orders, [indiscernible] orders within India, also for export requirements. So the operations are looking robust even going forward.

Now a note on the strategic questions, which we have been planning. We have signed a definitive agreement to acquire [indiscernible] technology, foundry, the assets of [indiscernible] technology in Germany [indiscernible]. And this has got marquee customers for the engine blocks for industrial engines. This is in line with our growth plan even within India. And this has got high technology, highly trained man power, and that has been always in the forefront of casting technology.

We have earmarked totally [ INR 130 crores ], out of that, around INR 60 crores for the acquisition plan. And another INR 60 crores to further put into investment for working capital and is a approximate number because considering exchange rates, which are prevailing at that particular time. So the breakup of that is the asset sale of the share purchase agreement land and building is around EUR 3.5 million. And around EUR 2 million is for the assets and the liquid assets of the work in process and inventory, which is there. So overall, it has been EUR 5.3 million.

And we have planned to invest INR 60 crores into that over a period of time to make it more robust and try to make it a strong business, which will also help us to build up our stronger base within India. The second operational target still it is under work in progress. There is no [indiscernible] agreement signed. There is MoU is signed. [ Duralence ] is close to be completed. So we will be in the coming weeks, we'll be talking about that later.

This [indiscernible] Aluminium business, which is also -- is not a profit-making business currently, but we are very hopeful just like it's complementing our strength there. And plus it is giving access to overseas markets. This company has got a history of 20 years exports to mainly North American market.

Now I will also give a small update on the 2 greenfield facilities that is 1 is Kothavadi, which we announced in 30th October 2023. The Phase 1 is in very good progress that we have been made even though we estimated 24 to 30 months for the implementation. I think within 12 months, we will be able to complete the Phase 1. We'll be able to start some little trial production in Q4 and next year in the second half, we will see a robust revenue coming in from that.

This [indiscernible] will first cater to the wind sector for the wind mill castings for gearbox housing and the critical plant [indiscernible] and things like that. So this is initially targeted for the industry engineering segment of our business. In Phase 2, we'll be targeting the heavy engines, which we are planning to make for industrial engines for the backup generators globally, which is the big showing huge growth potential in view of the artificial intelligence data centers coming up all over the world. So this is on track.

Now the second project, the greenfield project, which we announced in 27 January this year, that is 2024. And we have said 18 to 24 months, but I think we'll be able to complete the Phase 1 project in 15 months, and we are likely to start trial production in Q4 of this year. So this will be fully available for next financial year. We are starting with structural parts of the 2-wheeler, including the alloy wheel and then moving to the engine parts, then to [indiscernible] parts in stages.

Essentially, we have put up the gravity die casting and later on second phase, we look at no pressure as well as high pressure castings. That will also depend on how much investment we go into that will depend on the second target, which we have signed an MoU, how we are going to collaborate with that and then tap the market. With this, I will leave the floor open for Q&A.

[Operator]

[Operator Instructions] The next question is from [ Shagun Beria ] from Anand Rathi.

[Unknown Analyst]

I just wanted to ask, can you provide an update on both the acquisitions [indiscernible] in terms of financials, likely cost of acquisitions and the opportunity from these acquisitions?

[Srinivasan Ravi, executive]

Yes. I had mentioned that the deal has been EUR 5.5 million, and that is plus EUR 0.5 million of debt, so that will be totally a EUR 6 million acquisition. In that, the breakup is [ EUR 3 million ] -- [ EUR 3.5 million ] is for the share purchase for the land and building, which is the fixed asset. And the other fixed assets, including the mobile assets like working capital, it is around EUR 2 million is the acquisition. So we can say that INR 60 crore is the acquisition and we plan to invest another INR 60 crores over a period of 15 months into the company.

[Unknown Analyst]

Okay. And can you provide the margins have been weak this quarter included the Aluminium segment. What is really impacting the margins?

[Srinivasan Ravi, executive]

Aluminium, there is actually, as I mentioned, the -- some market result shows that 15%, the commodity prices have gone up even quarter-on-quarter. Some say, it is 12% to 13%. Let us take the lower number, 12%, 13%. So artificially, the top line is impacted by 12% to 13% that has maybe the EBITDA optically looks 1%, 1.5% lower. We are on track on the revenue business, and Q1 always is a weak quarter for various reasons, one of the leading passenger vehicle manufacture they have planned shutdown and will shut down during the period, middle of May, and there is always inventory correction.

So we are on track on the Aluminium. I think the growth number of [indiscernible] of Aluminium in the stand-alone should be really looked at only as 14% to 15% growth. So when you look at that and then look at the margin, I think the margin area [indiscernible].

[Unknown Analyst]

Okay. And can you please update on that CapEx and the investment guidance for FY '25.

[Srinivasan Ravi, executive]

CapEx approximately has been around INR 200 crores for quarter and it's ongoing. So we'll do it on basis of actual requirement of customers. We are negotiating with various customers, it looks very robust. And the export market is also opening up, but there is a question of [ shipping story ], whether we have the capacity to produce for this market or not. So we are taking some.

So we will do the CapEx as and when required on this matter. I know very well that 2 clients are under construction now and under commissioning now. So that is how the CapEx looks. We see potential growth for next financial year to be much bigger than we may increase the CapEx, but now with this acquisition, we are looking at how to distribute the cash flow and question targets how to ramp it up. So it is a work in progress as well.

[Operator]

The next question is from the line of Mukesh Saraf from Avendus Spark.

[Mukesh Saraf, analyst]

So my first question is just looking at the various initiatives you have taken in the sense you're doing 2 large CapEx's. You've just acquired DR Axion just about a year. And obviously, now the German acquisition. So just trying to understand, I mean, is there too much that you're taking on right now? How is the bandwidth at the top management level to kind of execute all these projects. Obviously, your business also is slightly cyclical. So we might encounter some kind of a weak cycle, say, in commercial vehicles. So just trying to understand how are you looking at all of these actions that you're taking.

[Srinivasan Ravi, executive]

I'll answer the first part of DR Axion, DR Axion is now practically 17 months has been completed. I think it is not capital intensive. We are not looking at CapEx there. It's only maintenance CapEx and very margin CapEx. And with this cash flow is excellent, and the management is intact. All the 8 Korean expatriates are continuing their job and there has been no change. We are only supporting that activity in various forms. It has nothing to do with the day-to-day management of the company nor any new customers. All 3 customers have been acquired by the company much earlier to our acquisition. So any customers we had, will be -- now what has added is export to DR Axion Korean, which is added. And the other [indiscernible] a new plant in Pune region is coming up where all the business has been already awarded to their DR Axion.

Apart on that, these are the similar products already in May. So there is the technical team in place and doing it. So as I mentioned, there is no CapEx and there's no increase in management strength, which is required and they are fully capable of handling it. Second thing is about the -- one thing about Kothavadi plant.

[Mukesh Saraf, analyst]

2 CapEx's, yes.

[Srinivasan Ravi, executive]

Yes. The Kothavadi plant is a very strategic investment. Yes, there has been a new recruitment and there is also hitting our P&L for the last 2 quarters, I would say. Yes, that is already factored in the cost run-up, which is going to happen in the next few quarters. So there, we are working in this industry indirectly for last 20 years. And we are well on track for the timely start of production and first time write [ the growth ] of these products. And we have engaged multinational consulting firms Germany to support us on this activity.

And our -- what we hear from our customers that we are on track to break this barrier about the [indiscernible]. Coming to the facility at Bhiwadi. This is the process of what we follow in Craftsman and DR Axion for gravity die casting the parts what we do are equally complex and in certain cases, more complex also. We look at the cylinder heads and center blocks. And now we are looking at other structural parts like alloy wheel and other structural parts of the 2-wheeler going ahead. So this type of alloy, we have been managing these heat treatment or the composition of these alloys and how to melt, how to the process parameters, how to control them for the last 22 years in Craftsman and DR Axion also in India is almost 13 years old now, totally.

So this expertise is already available with us. It's only the product is slightly different. And the product is of high volume, and we don't see a challenge and we -- to put them at the front, we are using the synergy of Craftsman as well as DR Axion for setting up the facility at Bhiwadi. So we have not put up high pressure air casting nor low pressure air casting at Bhiwadi to start with, unless we are successful on the Phase 1 of the project, which we are very close to tracking that. So once we do that, then we'll engage on that. We take a step by step approach on this matter.

[Mukesh Saraf, analyst]

Right, right. And then obviously, you have Sunbeam and the German acquisition as well in the cards?

[Srinivasan Ravi, executive]

The German acquisition has been running. This has been self-contained foundry for a long, long time. So we don't intend to meddle with the management or interfere with the management there. It is part of -- it was part of a bigger [ Gina ] group and [ Gina ] Group has not been paying attention to this particular foundry because they had larger foundries from their fold, and they are acquired new foundries, which they lost some money, and that is the reason I think the insolvent, which is on anyway public domain and not supposed to talk too much about that.

There's a lot of this news of [indiscernible] on the public domain and the news papers itself, in German news papers. So this is an asset, which will -- has been producing and continuously satisfy the customer. We were in touch with the customers and some of the customers are also asked us to acquire this with the promise of continuing the business and they have participated in the meetings also. And this is, I think, the great way to go with. And this size of the acquisition, as I mentioned, it is -- the outflow is 5.5 million including 0.5 million debt what we have been acquiring there. So it was [indiscernible] 6 million. So it's a INR 60 crore acquisition, that is it. So we have planned some backup for further working capital and then a minor CapEx just to be a factor in what is needed for the next 18 to 24 months and just fracture in another INR 60 crores to look at it.

This foundry has been most of its history, if you look at the last decade, it has been a bit positive except for a few years, maybe during the Lehman crisis and during the COVID and things like that. Otherwise, this has been always positive. And the customers are very, very supportive for this because most of the products are they make supply is single source. And this is the -- and when we are buying an installment company, it doesn't come with the baggage of old liability of the worker liability [indiscernible] worker agreements survive, but we have not saddled with the past liability of the pension and things like that, which is part of the insurance, which has been already paid off because we are buying the asset from the insolvency administration totally.

So that way, it is coming at a clean. We are not taking over the foundry as a company. We are buying the liquid assets of the foundry. That is the mobile and removal assets of the foundry and the land and building, we are doing a share purchase agreement, which is part of a [indiscernible], which is a separate company, which is only doing the real estate. So really speaking, we are not acquiring any past liabilities there. And as we listed the foundry, it is running well, doing well. Even in the first 6 months, they have declared a very good positive EBIT on this, and we are confident about it.

Coming to Sunbeam, I'm restricted answer. If I've completed the answer on [indiscernible], I will limit my discussion on Sunbeam because it's still an MoU, it is not [indiscernible].

[Mukesh Saraf, analyst]

So the question actually, sir, I get your point on all the things you mentioned. Just understanding in terms of managing all of these -- I mean, at the same time, are you looking at certain top-level additions to your team? Are you looking at any of these things because to actually turn around or run these foundries, you will need expertise to bring in your processes in place in those plants?

[Srinivasan Ravi, executive]

The [ Coimbatore ] facility, we are -- who were sitting in the [ Coimbatore ] facility and managing, 100% of the people are -- we are taking in our roles that is -- including the 2 main people who are employed by the head office and placed there that is including them, it is 140 and 141 people. So we are -- we sell a certain system. We only need to put somebody for IT, which they themselves will recruit and put it because that was a centralized system. Apart from the IT and the accounts which were centralized, everything was a self-contained ecosystem, which is running even today under insolvency administration for the last few months, seamlessly has been running. So we don't require administration there. We need a strategic direction of what to go and how to go and which direction to take it and how we can also support each other, the Indian operations and their operations supporting only.

So we are not going to put any management in Europe. We are not going to recruit any management in Europe. We may recruit somebody here on a visit basis, not even permanently putting up there.

[Mukesh Saraf, analyst]

Got it. Got it, sir. Just 1 last bit. On your Powertrain segment in the stand-alone business, could you just give the breakup between CVs tractors and off-highway?

[Srinivasan Ravi, executive]

Okay. Before that, I will just touch on Sunbeam in general. Sunbeam is coming with a lot of experienced people, a lot of experience management, a good marketing team and good developmental team, which will actually not only help Sunbeam, it will also help Craftsman to acquire new businesses. So actually, it's strengthening Craftsman Aluminium division when to do it. There's no need for customer to add any top level management for Aluminium because there is enough capacity in Sunbeam's administration, and we have excellent people there.

[Mukesh Saraf, analyst]

Sure, sure. Got that's sir. Got that.

[Srinivasan Ravi, executive]

On the Powertrain, the breakup is top line is 54% on the commercial vehicle breakup of [indiscernible]. And tractors is 14%. And in the partner segment, mainly SUV 16%. So passenger vehicle has seen growth and on other things or stagnated or degrowth.

[Operator]

The next question is from the line of [indiscernible] Agarwal from [ SecomFamily Office ].

[Unknown Analyst]

So in the annual report of 2024, FY '24, you have mentioned that the Aluminium usage in India is around [ 40kg to 50kg ] whereas in other countries it is around 150 to 180 kgs. So what is it? Like why is it in India that we are using so much less Aluminium in the commercial vehicles or any other vehicles? And if we want to increase the usage of Aluminium products, so what other products would be there in which we can use the Aluminium usage? That's my first question, sir.

[Srinivasan Ravi, executive]

I think the question is more pertinent to faster vehicles because it's not commercial vehicles, that is the benchmark we have taken, I think, in the annual report, I think the Aluminium content in Europe as well as in North America has started to increase more than 1.5 decades ago. And now in India, the new platforms are getting introduced, we are seeing more and more Aluminium content because earlier, the platforms which were there, generations old, they had less Aluminium content, only the engines and the transmission area. And the Powertrain area was tweaked and the other body and other interior were tweaked and new models were coming out. Now everybody is going for new platforms in the near future. We'll see Aluminium content surely growing there.

Also in Europe, it surely will always be higher because they are high-performance faster vehicles, the average engine power and capacities are much higher. They travel at much higher speeds in Europe. So we will not strictly comparable, but I think the gap will still continue, but we are at a very low level and surely Aluminium content per vehicle on the passenger vehicle as a car will surely increase.

Aluminium, we are at quite a decent level on the 2-wheeler segment, the Aluminium. There, the 1 trend we see all the [indiscernible] and hubs have gone, which were earlier in steel, mostly it is gone. Now it's all alloy wheel. Earlier alloy wheel was a premium, whether it's a passenger vehicle or even to a two-wheeler, now it is almost everything is coming in the alloy wheel that is also part of Aluminium content.

But the other structural parts of the passer car including [indiscernible] towers or [indiscernible] and all things, it will take some more time to become [indiscernible] Aluminium. But I would say Aluminium is a growing segment in general.

[Unknown Analyst]

Okay, sir. And my second question would be on our capacity regarding the Aluminium casting. So what is our total capacity in Aluminium casting as a whole?

[Srinivasan Ravi, executive]

See, I will -- I've been saying this at least in almost in the all Aluminium, unfortunately, even after the acquisition, as Craftsman Group on a consolidated basis, we are subscale. We are not able to even attract any multinational customer to look at us because the number which we are talking about today is very, very small. Our consolidated number is hardly [indiscernible] INR [ 2,000 ] crore, whereas the global companies are anywhere between, say, INR 10,000 crores to INR 20,000 crores in that region. So we are talking about China plus one, we are talking about growth opportunity. We are talking about export opportunity. But unfortunately, sadly, we do not have the capacity to fill it. So this is the reason of our little -- I will not say aggressive, but I will say strategic steps which we are taking, that we are not trying to build up everything on the greenfield because the greenfield is then to acquire a customer, to develop a product or get it approved and then ramp up the production, it takes 5 years, and there is a huge drain on the investment, which is done because of the start-up costs and the preoperative costs and not only that, the losses incurred in the first 2, 3 years of operations.

So we are doing acquisitions where we can turn it around quickly. But we have already proved out one. The second 1 is still at an MoU stage, but we are confident that we can work with the management, which is very excellent management in technical management, I mean, and also the administration is also good. So we can leverage that. The global clients are there for you to see on their website because as signing an MoU, we are not able to talk too much about it today.

So that far, we are clear. And the -- our own strategic initiative on Aluminium, we have taken the volume runner from the structural parts, which so far we are not present. EV or not EV, these structural parts will remain on the 2-wheeler business and in the future, we are also going into special parts of the passenger vehicle. So that way, we are having the balanced Aluminium portfolio.

Before we acquired DR Axion, if we member right, the -- our dependency on 2-wheeler market was close to 70% and then even though we added [indiscernible] as a customer, [indiscernible] ramping up in this financial year after a 2-year delay, and we are seeing good growth traction in the next year. Even then Craftsman [indiscernible] still dependent on 2-wheeler to a great extent. But after DR Axion acquisition, now the passenger vehicle segment on the consolidated basis is much, much higher than the 2-wheeler business.

Now there is an export, which is hardly 10% even on a consolidated basis, let's not even 10%, 5% to 10% on the Aluminium segment of the business currently with possibly Sunbeam, I think Sunbeam has got a good exposure to export is almost 15%, 20% direct export and the orders which we acquired also is which I cannot openly talk about it because we are in a [indiscernible] stage. So it is showing a lot of promise going forward. So the global market is already available. So this means that we'll be spread not only within India on the passenger and 2-wheeler business, but also for the passenger vehicles outside India.

[Unknown Analyst]

Sorry to interrupt sir, but I did not get your number of units. I mean, the capacity you said, I was not able to hear. Can you repeat that, sir?

[Srinivasan Ravi, executive]

Sir, capacity, you're talking about tonnes or something because it is misleading, as I mentioned, because the -- we are talking about tonnes, we can sell 1 tonne at 2 lakhs, and we can sell 1 tonne at 3 lakhs, we can sell 1 tonne at 4 lakhs. So this is a little misleading number because the structural parts, simpler parts are at some pricing, there are very, very simple parts on ADC Aluminium with Aluminium price system is lower and the tonnage. So overall, when you look at the tonnage currently, we are hiring, it is close to around 60,000 tonnes to 70,000 tonnes depending on product mix, we are at that range currently.

So if that is giving you an answer for the INR 2,000 crores to INR 2,200 crore turnover currently, you can understand that the simpler 2-wheeler parts like the covers, they are only 2 lakhs per tonne. Whereas if you look at the higher commodity and the passenger vehicles, cylinder heads and all, they are more than a 3 lakh a tonne, so it will not be apple-to-apple, I would say.

[Operator]

[Operator Instructions] The next question is from the line of Senthilkumar from Joindre Capital Service Limited. Please go ahead.

We move to the next question from [ Verma Danish ] from [ Verma Associates ]. Please go ahead.

[Unknown Analyst]

My question is on the Sunbeam transaction. I understand that we have signed the MoU and it's still in the initial stages. But as per the MoU, it says that we have excluded Gurgaon. But the credit reports are is that it houses a lot of export business. Is this outside the scope of the transaction?

[Srinivasan Ravi, executive]

The scope of the transaction is the entire business. So the MoU, because of the -- there is a labor issue, which is going on and the land is retail prime land. So decision has not been taken how to handle all that. I think the current management is working out all that even we are not exactly participating in that situation because we are an outsider. So we didn't want to take any past associated risks, which are there. But the business by itself, the Gurgaon plant -- most of the business has been transferred to other plants. I think 50% has been transferred. I think 40% of Gurgaon is there. Today, as we speak, in the entire revenue stream, it is around 15% to 20%, but you're right about the -- some of the critical revenue streams are coming from there for export market, which customer consent is required to shift it. But there are new customer orders, which are there, which under development or has to be coming into production in the coming few quarters.

So that anyway has to go to new site, which the current management has already taken permission from customer because they declared that they're not willing to expand Gurgaon facility or add any machinery there. So that is a call which will be taken at appropriate time. But to answer your first question, it is the business in total, missionary in total and the land and building in the initial discussion was excluded. And the that plant was supposed to be managed by them to until they find a resolution with the labor also. So this is what is the question and the debt, they have to settle the debt also. That was the part of the discussion. So I'm not supposed to talk anything more than this. Sorry, I cannot answer any more questions on this.

[Operator]

The next question is from the line of Neil from [indiscernible] [ Crist ].

[Unknown Analyst]

So I broadly have 3 questions. One was on Sunbeam. Firstly, so if you just look at the kind of performance as they have over the last 5 years, they are [indiscernible]. I think [indiscernible] coming.

[Srinivasan Ravi, executive]

Sir, we're not able to hear you at all clearly. I think there is a lot of disturbance because you are on speaker can you...

[Unknown Analyst]

Sure. So firstly on Sunbeam, so we are acquiring an asset which is quite stretched over the last 5 years, we look at the numbers after the [indiscernible] acquisition, they have been [indiscernible] losses. And their debt on book is also quite high. So just wanted to understand what your rationale behind this is. Obviously, I know the customer so far and all is there, but besides there anything that you're missing out of? And what is the kind of projection that we have done in terms of the turnaround we can do in this company?

And secondly is on the acquisitions post this. So once we are done with -- once you're done with Sunbeam, how many acquisitions can you expect more from this QIP money and in which segment plus geography can we expect.

[Srinivasan Ravi, executive]

You're right about your [indiscernible] Sunbeam. FY '24 numbers are not finalized that are not in public domain. In fact, [indiscernible] numbers are there. It is for everybody to see there, what is really happening. Top line has been around INR 1,200 crore -- in the range of INR 1,200 crore. I think as you can see also in the FY '22 or FY '23 number, whichever has been published, you can see a high manpower cost, which is there, which is not proportional to the turnover of INR 1,200 crores totally.

So you can also understand that they have been trying to shift the plant and we created one more plant in that aspect so there has been shifting costs, there have been duplicate investments which are there. So definitely it has been stretched. So I want to put it a matter of fact, very, very clearly, we are not taking over any debt of the company. That is clear on this matter. So that is 100% very clear on the -- from day 1 on this matter. So whatever is the finalization that's going to happen, it will be for the business and assets somewhat on the team of [indiscernible] but whether we are taking over the assets or we're taking over the company, only time will tell. I don't want to comment on that. But we are not really paying for the company, for the taking over the debt is what you need to bear in mind.

So I think beyond that, I will not be able to say anything because still it is -- and we are very, very prudent to use the money of the company. You will see how we have used DR Axion and certainly, you've also seen the German acquisition, the acquisition cost is only INR 50 crores, but we are putting in another [ INR 60 crore ] as in precautionary method for the [indiscernible] requirements. And we are sure that it's already a bit positive. So we are sure about the returns and return of capital. So we're very careful about using the money.

The third point about how many more acquisitions. Yes, this question of DR Axion has been Aluminium and Sunbeam is ongoing. I think it's finalized yet. It is, again, on Aluminium. The [indiscernible] is on the Powertrain portion of the business. And we will be looking at further within India only, not outside India or possibly just engineering and also Powertrain, which is a composite or it may be a composite unit also. We'll be looking at that particular portion. Everything depends on our financial metrics, how we are able to take it up. And as 1 question had to come from Mr. Mukesh that our [indiscernible] we always consolidate on whatever we take over. And once we are sure about it, then only we'll move to the next step.

There's a lot of dialogue happening over the last 2, 3 years on M&A, which we cannot disclose. But whatever works for us and whatever we are capable of managing and turning it around, we will touch upon it.

[Operator]

The next question is from the line Vinay Nadkarni from Hathway Investments Private Limited.

[Vinay Nadkarni, analyst]

Just that's 1 question. On the German acquisition, what is the revenue expected? And when will it grow it? And what kind of EBITDA are we looking at?

[Srinivasan Ravi, executive]

I would say that the past 3 years of revenue, which is -- sorry, calendar year '24 is not published yet, but I know an approximate number, but the -- whatever '21, '22 and '23, we already put on the -- our website -- already been put. Calendar year '21 was EUR 23 million. So we will just take a number of INR 100 crore. So the convert it was INR 232 crores in '21 calendar year, '22 was INR 255 crores. And the calendar year, '23 was INR 257 crores. And calendar year '24, as I understand from the management, it is around a similar number. So it's around INR 250 crores is the top line. And they have been having high single-digit EBITDA.

[Operator]

The next question is from the line of Senthilkumar from Joindre Capital Services Limited.

[Senthilkumar Natarajan, analyst]

I have 2 questions. First of all, this quarter, we have repaid around INR 900 crores of debt, right? So how much we can save in terms of the interest cuts in the forthcoming quarters of FY '25?

[Srinivasan Ravi, executive]

So the stated objective, whatever you've done is very clear, is the debt reduction is one is INR 250 crores was for the acquisition of DR Axion is very clear in the stated proceeds. And [indiscernible] was for general corporate, which is around INR 300 crores. So only INR 650 crores was going to debt reduction.

[Senthilkumar Natarajan, analyst]

So what will be the gross rate at the end of FY '24 -- FY '25.

[Srinivasan Ravi, executive]

No, I will not be able to comment on that because whether Sunbeam goes through or doesn't go through and how we are CapEx we are seeing FY '26 to unfold. The real China plus one unfolds, we want to be ready. The China plus one doesn't unfold, we should not be overexposed to see stand what we are taking. There is a lot of rationale behind what we are doing of detailed study about all the manufacturing countries in North America as well as in Europe. And we see a tipping point that the winds may grow in India direction provided the suppliers are ready to deliver the global requirements. So that to our investments will depend on the customer confidence and the orders for which we are going to get in the future.

[Senthilkumar Natarajan, analyst]

And my second question. Obviously, last few quarters, I could see that Powertrain business, we are reporting a negative growth on EBIT level. EBIT level on year-on-year basis. So when can we expect a positive growth on this business particularly?

[Srinivasan Ravi, executive]

There are 2 tailwinds, suggest to happen. One tailwind is, of course, the commercial vehicle pickup, which is a common public domain, everybody knows that the customers what they're doing and what is the commercial vehicle sales somewhere it has been behaving post FY '19. And little that some uptrend post COVID. And after that, it is subdued, but I think it's all related to the GDP growth of the country. Surely, there is replacement market. I don't see that this trend can continue. Negative trend on the power, I mean commercial vehicle can continue for long, maybe for a year more and then afterwards it should pick up. Tractor has already seen some come back to a decent level what we are seeing in the month of this particular month of July. And the tractor [indiscernible] seem to be agreed for the coming year. So both are related to the Powertrain.

On the passenger vehicle segment, we are doing decently well already, and there is nothing which will improve from that particular point. If we have got some more business on the passenger vehicle segment on the Powertrain, which will have some financial results coming from next financial year. This is the total headline, but I want to now highlight that. Last 3 years, we have been working on 1 particular segment, the industrial engine segment. First, we have set up a emission shop for that. Emission shop is mostly ready in the last 2, 3 years. We have diligently invested. Now for the foundry, we have not gone for the engine blocks, we have gone for [indiscernible] in foundry because there is a lot of development cycle time with 2, 3 years for a large engine block paying 10 tonnes [ or 6 ] tonnes because engine block will cost anywhere INR 10 lakhs, INR 20 lakhs per part totally. It is not about a simple part.

And the development cost is running to INR 20 crores, something like this, which customer has to bear, even more, including the testing. So the [ gestation ] period being very, very long. We have been very careful about committing, but I can confidently say one thing that we are very, very secure for future growth in the Powertrain in the industrial Indian segment. That is when, when we are very confident we renamed the out of our train division to Powertrain division totally. And all our customers are in the range of maybe INR 40 billion crore INR 60 billion crore sort of revenue customers, which are only making engines, I would say, totally but mostly 90% of the -- 80% of the revenue are coming from engine and Powertrain related activity. And this is a tip of iceberg and this I mean the forging companies have been very, very good at exploiting this for decades together. But on the cast and foundry segment, nobody was able to do this activity nor the machining capability for this high level of machining was there.

So we are entering into a new segment of the market, which we have very high growth potential. So when will the potential happen, it will happen from FY '27 onwards, FY '26 from Q4 onwards, it will start seeing. But after that, we will see, I think, many years of good growth in the Powertrain regardless of the commercial vehicle business. But we also see headwinds in Europe and U.S. for Tier 1 companies, which more and more outsourcing is coming to India. That is also will be another tailwind.

So Powertrain by itself, it is a lull now, but the long-term prospects are very, very strong. And I want to answer on previous question about Aluminium from, I think, 3. I think out 10 minutes back, on per tonne basis. See, I think we are not valuing whether the Powertrain distance per tonne or Aluminium and Powertrain. So alum Aluminium has also got very, very critical machining. Now what we are targeting for exports is not only Aluminium casting by itself, is machining strength also, which is portray in that. So calculating capacity by tonnage will not be the right thing on this matter.

And we've proved over a period of many, many years that on high-end missioning we have proved very well both on the Powertrain as well as on Aluminium.

[Operator]

The next question is from the line of Joseph George from IIFL. Please go ahead, sir.

[Joseph George, analyst]

I just have 1 question that's in relation to the German acquisition. So you'll be investing, say, approximately INR 120 crores. And if I look at the current revenue run rate of about EUR 25 million. For next year, it will add maybe 3% or 4% to your consolidated revenues. So when I think about it, for 3% or 4% addition to revenue, you're going to a completely new geography, INR 120 crores is not a big number, but completely new geography, new challenges, et cetera. So I wanted to understand what really is the grand plan behind all of this? I'm sure you're not making this acquisition for 3% or 4% addition to revenue. So is it that the EUR 25 million revenue can go up 2x, 3x based on the current capacity that they have? Or is it that you can use that technology to maybe introduce new products in India for Indian customers or whether you can get orders from European or American customers for manufacturing these products at a lower cost in India with some color on all these things, please?

[Srinivasan Ravi, executive]

Thanks, Mr. Joseph for this question. I want to say that the engine manufacturing is still the larger engines, we are talking about 12 cylinder, 16 cylinder, 80 liters, 120 liter, 150-liter sort of engines is an exclusive club of less than 6 players globally, totally overall. And if we look at the largest players, their revenues are in upwards $50 billion, and the smaller players are operating between $10 billion to $15 billion. Hardly, there are 6 players in the world, and they're exclusive. And some of them have got their own foundries, which is catering to their own requirement. Most of them have got their own machine shops, and the costing is not a very critical situation for them because of the product, which is highly sensitive and should be highly durable, and this is never come out of the North American and the Western Europe market.

And in Western Europe, Germany has got the bigger [ sale ] and we have a few players in the U.K., and that is it totally. So now when we are acquiring a small portion of a foundry, larger foundry group, we are backing into the exclusive club with small entry fee, I would say. On our own to develop all these products, it is going to take 5 to 8 years' time and to get the confidence of customer. So this is -- and its growing business. Now the order book for these customers are totally full for many years because of the data centers, especially for artificial intelligence, which is coming up.

So we are seeing a double-digit growth for many years for the -- this sort of industrial engines. And new engine development also is taking place in a big way because of the emission norms and now it's all flexi fuel, the same engines are being used for [ hydrogen ], vegetable oil and I would say, LNGC, GCA, diesel, gasoline, all this now is making -- everybody is making [ multiple ] engines.

So power density is increasing and set up a revolution in the entire engine world totally for backup power generation. So this means there has to be capacity build up somewhere in the world. We see North America, there's no capacity buildup. In Brazil, no capacity buildup. That is the -- one of the largest foundries also is in Brazil. Then in Europe, the headwinds, what is happening. So the other dominant factor is China, which already has got a lot of share of this business and then the end customers are not willing to increase their share of business again to the same country, which is having some geopolitical situation.

In their mind, they would rather like to do it in India, but there is no Indian supply. This is the problem. The second most important point is the manufacturing base in Germany is a little declining because of, again, political situations and other change in the workforce attitudes in the younger workforce. The new workforce, which is coming. So you might have read in Bloomberg that manufacturing has a decline even in countries in Germany, which is all published news. So we see that this China plus one strategy or to be a replacement for Europe or replacement for American manufacturing for these large engine blocks in India is a very good -- we stand a very good chance.

So for that chance, we need to leapfrog over our competition, rest of the world, I think we are making the right move at the right time. So it's the business is much, much larger in scale than the question plan, what we have put in Germany.

[Operator]

The next question is from the line of Mukesh Saraf from Avendus Spark.

[Mukesh Saraf, analyst]

In my other comments, you had mentioned that you're actually not looking to put the foundry capacity for those stationary engine blocks. So would you kind of -- where would you be able to source those raw castings from them for the business that they're looking beyond say FY '26?

[Srinivasan Ravi, executive]

I think I should rephrase my earlier statement, I think I've been misunderstood, sorry, about it. I said that the development cycle for these engines are -- the blocks are 2, 3 years and no foundry can afford to put up -- nobody can put up [indiscernible] and wait for 4 years for the product to click. And no customer is going to place order on a greenfield foundry for the things blocks, which is highly risky for them. [indiscernible] a product like [indiscernible] They would invest INR 20 crores, INR 30 crores per part for engine. -- from their side, investment for the tooling and the, I would say, the engine testing procedures.

So we have put a general engineering foundry in Phase I, which is catering to general engineering parts, including wind turbine gearbox housing, which is a ready market for us. We are already mentioning those parts. And already, we are to start with the development of the parts. These cycle time for development, are within 6 months to 9 months. And we have secured orders for engine block, and that will already is under development. But the invoicing or the sales will come in only in FY '27 Q4 onwards. That is the gestation period. So that is the reason the foundry will be initially called an industry engineering foundry, then it will become a composite foundry for industrial engineering as well as Powertrain. So for that to reduce the learning and to also to give more confidence to the customer and to have a footprint in Europe, I think the [indiscernible] and we are well known to work very, very closely with German with full trust. We have seen that [indiscernible] the leading truck manufacturer has already completed now 15 years and going stronger than ever.

[Mukesh Saraf, analyst]

Sure, Understand that. Understood. And the other question that I was having with on your stand-alone Aluminium business. I think previous quarter you had mentioned that around this first quarter, we'd start seeing the export orders for the passenger vehicle side of it start kicking in. So have we started seeing any of those orders getting commercialized in this first quarter?

[Srinivasan Ravi, executive]

We've done 2 trials shipments already completed. Third trial shipment is going next week. And production has started to start from Q4 onwards. Next year, we are looking at an upward revenue of around INR 125 crores on the export of this particular product to Korea.

[Mukesh Saraf, analyst]

Okay. So the -- I mean, while your trial has started now, you're saying that only Q4 onwards the major supplies will start.

[Srinivasan Ravi, executive]

Yes. We started supplying. It's already under testing and things like that. And Q4 means from December onwards, we will start shipment for them, they always do the calendar year subject. So I think we will see Q4 revenue and next year full year revenue will be there.

[Operator]

As there are no further questions, I would now like to hand the conference over to Mr. Srinivasan Ravi for closing comments.

[Srinivasan Ravi, executive]

Thank you very much for patiently listening through the earnings call and participating in the earnings call. I think I wish to reiterate that we are subscale in the powertrain as well as in the Aluminium division and when we look at the growth opportunities for the global requirement, we need to change our mindset from small scale to at least medium scale, I would say, in the global context. So this is what the journey Craftsman wants to undertake and we want to be a global player in the Powertrain as well as in the Aluminium business. And I thank all the investors for their time support for all these years and also for a successful raising for the QIP. Thank you very much.

[Operator]

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