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Craftsman Automation Ltd
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Ladies and gentlemen, good day, and welcome to the earnings call to discuss the financial performance of the Craftsman Automation Limited for the quarter and year ended 31st March 2024. [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 Automation Limited. Thank you, and over to you, Mr. Ravi.
Thank you. Good afternoon, everybody. It gives me immense pleasure in welcoming you all for the earnings call for the year ended 31st March, 2024. A brief note on the market. The commercial vehicle business was more or less flat with the light commercial vehicles, there has been a small uptick, a slight impact. But overall, I think in the mixture, I think it has been flat.
Exports remain a distress for the financial year because of the new developments in the geopolitical situation. On the passenger vehicle segment, we have seen growth in the SUV portfolio, which we are present as Craftsman.
Now I'll go to consolidated financial highlights of 2024. In comparison in FY '23, it's certainly not comparable. So turnover-wise is not comparable, I mean, because we had only 2 months of consolidation of DR Axion last year. So INR 4,452 crores versus INR 3,183 crores. But the breakup of the current turnover of INR 4,400 crore is quite interesting. The Powertrain has been INR 1,558 crore, aluminum products has been INR 2,154 crore. Industrial Engineering has been INR 740 crore. With this, the dependence on Powertrain is reduced, even though Powertrain is good logical growth business for us.
We are no longer dependent only on the Powertrain for Craftsman's consolidated earnings. The EBIT margin has been INR 619 crores against the previous year of [indiscernible], again certainly not comparable. Powertrain has been INR 292 crore, Aluminium products, INR 322 crore and Industrial & Engineering INR 49 crores, unallocated is being INR 44 crores. On consolidated ratios, debt equity, we have a comfortable situation of 0.88, debt to EBITDA, still their manageable level as per our targets are concerned, it is 1.72. EBIT margin has been 14%.
ROCE has declined marginally from 22.3% in FY '23 to 22%. But the ROI has improved from FY '23, which was 19.5% to the current year of 21%. EPS has improved from INR 171.56 to INR 144. Constrained the own funds of 73% stake in DR Axion.
Standalone turnover has grown only marginally. I think it is on record, so I will not elaborate on that matter. There has been some little headwinds in the Powertrain business, which we didn't expect a little because of the slowdown in Brazil, there has been inventory current production, less also in the commercial vehicle slowdown was sharper than expected.
We are geared up for higher capacity in Craftsman as a whole, also the Tier V or the stage 5, as we call it, for the construction equipment we invested early, put up new lines. The government regulation has not kicked in and has been postponed. There has been a similar situation like earlier in the BS6, which has happened. We're waiting for the production to start.
The storage business has been flat more or less for the company because of the slow in the investment by the e-commerce and other related companies. CapEx has been higher than what it was invested earlier for 2 different reasons.
One reason is 2 new clients, we have invested because the market opportunity and the opportunities our Craftsman is quite big. So we decided to take it down considering the future of growth aspects. CapEx stands at INR 580 crores. More of that detail will we go for the discussions.
The major subsidiary, DR Axion, has been INR 1,246 and EBIT has been INR 196 crores. Regarding fundraising, since we have been a little leveraged now because of the huge expansion and also the question which has been done a year or that, we have decided to deleverage by reducing the amount of debt.
So we are raising funds via the public pricing funds. I think the modality of that will be coming in the near future. The timing of that is still uncertain. So it is only the enabling a solution there going forward as of now.
With this, we'll leave the floor open for discussions.
[Operator Instructions] The first question is from the line of Mumuksh Mandlesha from Anand Rathi. We're unable to hear you. May I request to unmute your line?
Is it clear?
Yes, sir, please go ahead.
Just, can you share the value addition numbers for the 4 quarter, sir?
Quarter 4, you want?
Yes.
The Powertrain has been INR 226 crores, aluminum products INR 107 crores on a stand-alone basis, the Industrial & Engineering has been INR 59 crores.
Got it, sir. Sir, just on the margin fall we saw in the Powertrain segment about 300 bps sequentially. Any reason for this fall, sir? Was there any one-off in the number, sir?
There is -- in a way, not directly a one-off, but indirectly, there's a one-off. One thing, we have increased capacity to a large extent. So fixed cost has gone up. So the top line has not improved along with that matter and also be administered for new plants. The Faridabad new plant is ready for -- against Stage 5 production, which has not started.
And the other portion is the other exports have not picked up as we expected. This was the main reason. And the other one-off when you look at it one-off wise, there has been a major inventory correction going into Q4 by our customers. All our leading customers, both in the commercial vehicle segment within the country and also in South America, plus all the other domestic players who are in term -- what we are expecting to move to Tier 5, they had producer inventory on tier 4 products.
Similarly, also on the passenger vehicle SUV sector, after the high in -- for this year, there has been a pile of inventory at the customer end. So there was a correction, which was quite steep. In fact, some of the customers didn't lift materials from middle of March. So that way, it's a one-off.
Would you estimate next quarter onwards, we should be back to at least Q3 level, sir?
I think for the full year, yes, we will be on a growth track. Q1 still will be on in the domestic area will not domestic market, I think -- don't think there'll be much changes, because it will be still muted. But for exports for Daimler, I think that has started in full swing again from Q1.
So it will be a mixed quarter, I would say. Q3 and Q4, of course, our costs will be lesser in Q1. I think repair and maintenance is mostly behind us. So generally, I think we'll have a better financial results for Q1, but I don't expect too much top line growth for Q1. Beyond that, I think we are okay.
Got it, sir. On the auto Aluminium performance you saw good margin improvement in the both DR Axion and stand-alone business, sequential margin has improved while the revenues are broadly flat. So what led to the better margins in this business, sir?
I will answer your first earlier question because I left out something. We have invested heavily for off-highway products machining. And also now we are also back on integrating to a certain extent on the costing front. So that has not seen any revenue. There has been only expenses, which has been expensed off because these products are a long gestation for development itself.
So I'll come back to that later in further Q&A. Now on the Aluminium products, I think between the 2 companies, we have a lot of synergies playing around. I mean they're playing out for us in total. That is the major portion. The second portion is the product mix, what we have in Craftsman is all 98% is which is machine.
And most of it is critical machining. So there's a machining value addition, which has played out better for us. The earlier the margins were muted, not only not because of our operational efficiency matters alone, I would say that was only marginal.
But I would say the operating leverage today, capacity utilization has improved and the fixed cost absorption has been better totally. If you look at the value addition portion of it and the -- it is more or less pro rata, maybe some few points improvement is there, but the fixed cost absorption has been far better in the stand-alone business.
In the acquired company also, there has been quite a good ramp up on the revenue as a whole. And the synergies playing out with some better cost management, we're able to manage the margins.
Just lastly, can you guide the CapEx for the FY '25 and '26?
Yes, FY '25, we'll be looking at CapEx -- we'll be completing the Stage 1 of both the Bhiwadi plant as well as the Kothavadi plant in Coimbatore. With that, we'll be looking at a CapEx slightly above INR 500 crores. The exact number we have to face now. I think that is the Board approval. So this is what we look at it.
[Operator Instructions] The next question is from the line of Mukesh Saraf from Avendus Spark.
My first question is on the Aluminum segment. Within the stand-alone business, we're seeing some sequential growth in revenues. Could you give some sense on -- have we started seeing some contribution from some of those export orders that we had to Europe? Have you started seeing some of those and could this ramp up further in this couple of coming quarters?
I mean regarding export orders for the PV, it is starting only from Q1. This has just started now a little. So we will be seeing an offtake from Q2 of this financial year, and it will peak in Q3, Q4 is what we expect on this matter is what are the projections we received.
We have not seen much in the Q4 of last year on the passenger vehicle for export. But domestically, our business for the Powertrain for the passenger vehicles for the stand-alone, we have started production in the Q2, a little. Q3 was the ramp-up phase and Q4 was the -- we have supplied at full quantity that resulted in the numbers. That is going to continue for the full year financial year and for the next year. So orders -- and added to that, I think the export revenue will add to the Aluminium. So Aluminium traction is quite strong, similar to the current year. I mean last year, the current year also looks strong both for Craftsman as well as DR.
Right. So I think you had last time guided that we can do probably 15% of growth in F '25 in the stand-alone Aluminum segment. So you stick by that number, sir?
Yes, we stick by that number on Aluminum growth on a stand-alone basis. And for our subsidiary also, we are looking at some export to Korea, which will come in Q4 of this year, and it is a 3-year contract. I think that is also a good order. And in FY '26, for us, the Talegaon plant of Hyundai also will be an operational, so that also will add some revenue onwards.
Right. Sir, just coming to the Rx, I think sequentially, we've seen some decline. But when you look at, say, Hyundai, Kia's production, there wasn't a decline in production Q-o-Q. Anything we should read into this Q-o-Q decline in revenue sir? 3Q to 4Q?
We have, in the Western region, also a major a few manufacturers as a customer, both for DR Axion as well as Craftsman. We supply the products on the Aluminum casting. There has been a very, very steep inventory correction in that particular quarter. They are ramped up for higher numbers.
Got it. Right, right. I think that's it from my side, sir. Just last bit, sir, within your PT powertrain stand-alone, could you just give the mix of CV, tractors, off-highway?
Yes, please. I will do that and then talk about the top line, you wanted for the quarter 4 or you want it for the full year?
If you could give us both, sir, 4Q and full year?
Okay. The Powertrain revenue-wise for commercial vehicle has been around INR 880 crores, off-highway was INR 272 crores and the tractor was INR 210 crores and the SUV for the passenger vehicles was INR 196 crores.
And for Q4 of F '24 on commercial vehicles, it was INR 217 crores, off-highway was INR 63 crores, tractor was INR 48 crores and passenger vehicles SUV was INR 61 crores.
The next question is from the line of Karan Gupta from Varanium. Karan sir, your voice was not very clear, sir, it's very muffled, sir.
Now it's clear.
Yes, sir. Slightly better, sir. You can go ahead.
So for the quarter 4, can you give us the value add segment-wise?
No, we can give for the full year the value add segment-wise, I think for Q4, it will not be relevant. So we won't evaluate for the full year on the INR 944 crores on the Powertrain, INR 391 crore on Aluminium products and INR 276 crores on the Industrial & Engineering.
Okay. Aluminium? What's the Aluminium?
Pardon.
Yes. What is the aluminum?
Aluminum was INR 391 crores.
Okay. Okay. The second question is regarding the margin side of the Powertrain and your Industrial & Engineering part. So the Industrial & Engineering part, again, the margin is coming down quarter-on-quarter. So what the -- any volume you are focusing on as of now for the Industrial & Engineering?
I will talk about the Powertrain first as this is a major segment. Powertrain, as I had mentioned in the last earnings call, we are now focused on off-highway and stationary engines, which is under development there. So there have been a lot of development expenses. We have received orders and will not be able to reveal the orders currently, but all of that will kick in FY '26 onwards.
And good traction is there until FY '28 on the new businesses. These are very sticky businesses, and these are all major companies, global companies, and mostly export oriented. And that expenses -- as investment has dragged down some of the margins on the Powertrain, whereas the other existing customers did not have much traction on the current businesses.
Coming on the Industrial & Engineering business, the storage business has been flat totally overall. Being flat, has added to our fixed cost not getting amused because we are ready for more expansion and more growth in the business.
So the -- today, the opening order book is quite substantial. That means 50% of last year's sales from the storage solution, our opening order book is there on April 1. So we are quite confident of growing 25%, 30% in the storage business in the current year.
So that with better overhead absorption, because this is marketing service and also erection, end-to-end design team, everything the overheads are there on the storage solution with better revenue mix, I think the margins will come back on the storage solutions.
On contract manufacturing and other products like the -- other than storage. We didn't see much traction in the last financial year. But here also, we have geared up with the Kothavadi plant, which is a multifunctional plant with addressing the Powertrain as well as the Industrial & Engineering segment. We have started the machining activity for various businesses like the renewal energy businesses, we have started -- revenue stream has started flowing in the last few months, I would say.
So this will -- when it comes to a full year, it will bring revenue. These are gearboxes for the -- gearbox sourcing machining for the wind mill. Later on, we are backward integrating also into the casting at our new facility, which is coming in Kothavadi. This all for export -- our customers are from India, multinational customers are exporting.
So we see a good traction going forward. Today, the base is so small that the small capacity utilization change the margins in a big way. It was a similar case in Aluminum a few years back that on quarter-on-quarter, we were not able to give a very stable number.
And now that the Aluminum business has grown, we're able to be stable and the Industrial & Engineering business, still it is small. If we have to wait for a few more quarters for that to scale up and be more consistent on diluted performance, underserved performance.
Okay. Fair enough. For Powertrain, I have one follow-up on that. Previous quarter, you said there some kind of refurbishment is going on. So is it done now? Or will take 1 more, 2 quarter more?
80% is done. We have to look at the point that FY '19 was a high year. FY '20 was expected to be doing good, didn't do well. We had the COVID. Post COVID, we had done a ramp-up, which was quite steep. So we didn't have some of the maintenance which we should have done. So now we have used this lean year to do the maintenance. 80% of it is done. We will not have a repeat in the current financial year.
Okay. And the equity you were raising around [ INR 40 crore ], right?
So the number is still not finalized. And when we are raising or there's no time line defined to it. Very clear. As I mentioned in the last few earnings call, we are still open for acquisitions within the country. And a small overseas acquisition, maybe much lesser than INR 100 crores, which is give a strategic advantage in one of the key businesses where we are in and where we are focusing for the next decade, I would say.
So with that in mind, also, I think that the CapEx coming in for the 2 plants that is the Kothavadi plant and the Bhiwadi plant, also major investments, and we have borrowed already, okay? We have to reduce our borrowing. That is one of the reasons for this sort of enabling the solution we have taken.
Okay. And the reason behind starting greenfield instead of brownfield, what's the -- I mean, the strategy you are seeing there?
I will now first answer the requirement of a facility, which is a 50-acre campus, the current 50-acre campus is -- which we are there, it is almost full, which is housing all the 3 segments of the business, mainly the Powertrain, the Aluminium products and Industrial & Engineering.
So we've gone for another campus of 50 acres. The land was acquired in stages over a number of years, but we have started the construction activity in the second half of this year after we got commitments from our customers.
These customers are the first customers to commit with an Industrial & Engineering customers, followed by Powertrain customers for the off-highway vehicles and stationary engines. so with this, it is an hybrid foundry, which we are now putting up for the cast iron foundry.
So far, it's notable to note that we continue to work with all our foundry partners wherever they can supply, we continue to source from them. These products are not available for sourcing within India. If the [indiscernible] foundries who are not making these castings and they're also full of [indiscernible], they do not have capacity. And we are having good global opportunity. So we checked with our foundry partners, and there's nothing on the cards for the coming year or 2.
So we decided that we are not going to lose the opportunity, and we've gone for the investment at Kothavadi. So this will be a multi-specialty foundry, but we also got from -- this is from the renewable energy sector, mainly the windmill gearboxes. And this is quite a sizable business going forward also, really stable, I would say, totally overall over the number of years with a focus globally on the renewable energy business.
And also on the capital goods sector, we are seeing that imports are getting reduced, more and more Make in India policies coming up. So we are -- the castings requirements are going up in the country. And there's one of the new foundries, which will be coming up on a global scale in the country for these heavy parts.
I'm talking about heavy parts means anywhere from 1 ton up to 20 tons. And these are -- having critical machining where we already are doing some of the parts machining for the past many years. So this will be a strong point for us. We are still open to working with all the our foundry partners for even buying their castings [indiscernible] and continuing there or working for them in a way. So this will continue our growth path on the Powertrain business, and now it will lead to a new growth area in our Industrial & Engineering business, which was -- we have not been concentrating on the stock for some time because of the other growth -- high growth in other segments of the business.
I mean, the -- the Bhiwadi plant, if I'm done with answering the Kothavadi perspective. Any questions on the Kothavadi perspective? Sorry, Bhiwadi, Kothavadi facility now first.
Yes, you can continue.
On Aluminum, where next 2 years or at least 3 years, we have traction from our Coimbatore plant on Aluminum for Craftsman and also the Coimbatore plant -- sorry, Bangalore plant of Craftsman and also similarly, our subsidiary, DR Axion, all have got good order bookings. So year-on-year growth on FY '25 and FY '26 and even FY '27 is on the cards on the organic brownfield, as you had mentioned.
So this is one thing. But the Bangalore facility is running out of space, so we may have to have 1 more location in the South apart from Bangalore, because our customer demands are going up. That may be coming in phases because if we add on plant early, but we have not been present in the West as well as in the North, all these years.
So we see opportunity there, and we are very strong players in the West. And we see more opportunity in the north. So we are putting up the facility in Bhiwadi. And there also, we are looking at a hybrid plant to start with the Aluminium products.
We are also going for structural products which will be in use of these products may be EV or non-EV also. So that is okay for us that we'll be reducing our dependency on ICE related parts, which we are doing for the 2-wheeler on stand-alone business overall. So that is one big change. And we see a lot of growth opportunities in the Northern region because all the manufacturing is centered in the northern region for the automakers, I would say.
So this is the reason for the greenfield and the distance between South to North is simply too high for any transport of such parts.
[Operator Instructions] Our next question is from the line of Pranay Roop Chatterjee from Boerman Capital.
Am I audible?
Yes, sir, please go ahead.
My question -- I have only one question. Beyond what you have already mentioned, are you able to disclose anything regarding the new off-highway businesses that you will start from 2026 and you mentioned that you have visibility until 2028. Because I'm looking at your business today, your Powertrain and the annual numbers are disclosed, where commercial vehicle is INR 880 crores, let's say, INR 900 crores rounded off and your off-highway is INR 270 crores, right?
So if I look from the next 2 year perspective, we might not see a lot of growth in trucks. In fact, we might actually see a decline. So how large would be the quantum of these off-highway orders, number one? How many clients would they be? Is it like only 1 client or multiple clients that you're working on? And are these orders which have already come in? Or is it that you develop and then you might get the order?
I'll answer your question in total, but I will also have a disclaimer there because we will not be able to make customer names, but because of the competitive nature of the industry and also it's a strategic nature, which we will not be able to disclose.
But within these guidelines, I will answer to the best of my ability. You mentioned right, the commercial -- the off-highway business has been INR 270 crores for the full year for Craftsman, whereas the commercial vehicle business, mostly within the country has been around INR 880 crores. And you're right about that we have to wait for the growth in the commercial vehicle business overall, whereas on the other segments of the business that are multinationals or set up plants for engine export and transmission export to rest of the world.
They go step by step in that approach. They're ramping down their facility within their mother country or maybe downsizing their export orders from their -- from the China facility and bring resourcing them into India. We have to wait for that. They need to get their act right. So it will take -- these are very well-established multinationals we are working with for the last 3, 4 years. Lines have been set up. Capacity utilization has been very, very poor. And -- but we are sure that this business will come in on that segment also, but it will come in, in a year or 2.
So now on the -- to talk about off-highway, I would say -- I will put the off-highway in 2 segments. One is the off-highway on the construction equipment, other as the stationary engines. I will now talk about the stationary engines on power generator business. It is about [ $32 billion ] is the global business. The American #1 and #2 on the world #1 and #2 on these businesses.
And one of these companies, I think, has got a consolidated revenue of more than $80 billion, another is $40 billion, $50 billion, something like that. Bulk of the revenue is coming from the engines and related to the engines only. And we have other players in Europe as well as in Korea, but Korea is out of our market condition and something in Japan.
So we are working with 4 majors now, and 2 of them, we have -- one of them we have received already at the orders. One of them, we are very close to receiving the orders that has been taken forth, takes issued investment from the OEM side also, the invest because of the each of these engines sometimes as big as $1 million each. So the developmental cost is huge, the time is also huge. So we already embarked on that 2 years ago, I would say.
And on the machining side, we have won orders. We are getting this casting from as far as South America and also in -- on part of Europe, I would say, not Europe, but these castings are coming into the country, and we are machining today. So to ramp up and really take the global market by, we need this casting facility.
So we look at quite a sizable opportunity here. So we are looking at in 4 years' time, maximum 5 years, at least $100 million increased revenue on the Powertrain business for this segment of off-highway and Industrial & Engineering. The growth is coming not only a little from mining and other things yes, it is coming out of mining. Now base metal prices have shot up, your copper has shot up. So mining is going to increase. It is one portion, which you are all aware.
What has changed in the last few years is the power generation required for artificial engines, data centers, which is quite big. So this -- for the pipeline to fill, yes, there are alternative storage solutions, which are coming up as backup power. But the group in the steep ramp-up requirement for these particular areas is also giving a good opportunity for Craftsman to enter the business.
Coming back to the -- whether it is a nice engine. Today, these engines are almost coming to producing the carbon footprint by 90%. They have multiplex fuel. They have HVO as a fuel. So, -- and we're also working on hydrogen engines. The same engines are now flexible.
I think there are big major companies in Germany, which are leading this sort of development apart from our market leader to leaders in the U.S. North American market, which you are very much aware. So this is also the power density of these engines are increasing. So this -- when power density needs to increase that commercial needs to take a higher pressure with multiplex that new developments are also happening.
And when new developer is happening, sourcing needs to be redefined. And when sourcing needs to be redefined, there's geopolitical situation, the China [indiscernible] because everybody wants one more manufacturing facility other than China. It was always in Europe or in -- but in South America, these capacities were the -- I mean that there or suppliers were there. Now with Europe, the workforce a little shrinking, and the opportunity for India growth story has to come.
So it is a chicken and egg story. And unless we have a sizable infrastructure, we cannot talk to these 4, 5 majors in this business. So -- and we are not present in this business. And our foundry partners are also working with us on the same product line. So we have always given orders to them or working with them on this matter.
So that is the parallel activity. Wherever they are not able to supply or that it's out of their current manufacturing scope that is where we are investing. So this growth story will go up at this 100 million in 4 to 5 years' time. Our only additional business on the -- not the organic growth in the current off-highway business, this new business will yield around $100 million.
The next question is from the line of Basudeb Banerjee from ICICI Securities.
Yes, and first, just continuing with the earlier question.
Sorry to interrupt, sir.
I'm not able to hear you properly, sir.
Is it audible?
Yes, sir, this is better.
So just continuing with the previous question, like truck revenue plus tractor both are going through decline fees as such for almost for the last 6 months. And as you said, OHT is also not doing well. So under that circumstance, how do you look at Powertrain overall as a revenue for next fiscal and how to look at the other new areas in FY '25, cushioning our powertrain chief at all, not 2 years or beyond. So if you can just explicitly highlight how to look at in revenue next year?
And second question is, as you said, 80% of repair and maintenance for work is done, maybe one more quarter left. So post that, how much margin improvement in Powertrain one can expect because operating leverage in Powertrain ideally should remain subdued. In fact, incrementally, it might worsen further. So how to look at Powertrain segment margin in '25?
My sincere request is, we have been always very careful about giving any guidance, and we have not given any guidance in the past only some broad numbers.
Broad only, not the specificity...
Yes, thank you. So for what we see is our current business will be flattish on the Powertrain. Our new business, a small portion is kicking in, in this year. So again, we will see high double digit, high single-digit or low double-digit growth on the Powertrain. But with better cost control, I think we'll be able to deliver better results with also the repair and maintenance more behind us in this financial year.
So we can expect a better year as far as Craftsman is concerned.
And second thing, sir, there's too much of dicotomy on one side, so much news on government CapEx, infra projects, metal mining doing well. And on the other side, commercial vehicle demand remaining subdued almost for preceding 6 months and the outlook is also subdued for a, I think the foreseeable future. So being a key supplier to commercial vehicle cylinder blocks, sir, how do you see demand outlook from the key CV OEMs in whatever period you can explain, sir?
While I mentioned on FY '25 and the most part of FY '26 also, will be more or less, as you had mentioned, what I also -- I foresee on this matter. But the next change has to come on the higher horsepower engines. If you look at all the developed markets, they're operating between 350 to 450 horsepower engines. Currently, all of our engines are most 90% of engines are below 250 horsepower. So I see that as a step change. This means bigger engines, bigger gearboxes, more fuel efficient trucks per kilometer covered on this matter.
Higher torque on the gearboxes today, 1,300 newton-meter is what is the maximum here in India and most of them are operating at 1,100 newton-meter. So we see that in the global scale, 1,600 newton-meter and the -- any commercial vehicle is whether it is -- even countries like, of course, China, but also in countries like Brazil. Also, they have moved to 30 liter engine long back for a major portion of the requirement. They don't call 300 horsepower truck as an heavy-duty truck. So this is the big growth driver from FY '27 onwards for Craftsman, when this change starts to look place.
But in the meantime, yes, there will be subdued growth on the Powertrain business for this segment, I would say, the commercial vehicle segment. So it will start. I hope I've answered that overtly.
Yes, yes, definitely. So you believe by FY '27 onward these domestic CV players will start focusing on further higher tonnage trucks and higher horsepower engines themselves. That's for but the fleet owners will also benefit from better fixed rate cost per unit.
There are many advantages on this matter. Now if you look at Craftsman's Powertrain business on the commercial vehicle segment itself, we have grown because not because the numbers have grown in the last 4, 5 years until last year. It is because of the trust becoming from a light, medium duty to upper-medium duty. There's not heavy duty, really, in that sense.
So we have benefited from the per vehicle content because of the larger engine, not the power -- the transmission and axles. The engine, per se, 98% of the engines being sold in the country are in the range of 6.7 liter. So whereas globally, more than 80% is with 30-liter engine. So what it means is overloading a smaller engine needs to lesser efficiency of the Powertrain itself, okay. So this will change in the coming years, surely.
Second point is, it is able to cover more highway. I mean the highways are good, of course, it depends on the highway. If they're good, they're able to make more trips per month. So the cost comes down quite dramatically for the fleet owners in the fleet advantage.
But to put it in a simple manner, where I just request the understanding of the gentlemen and -- ladies and gentlemen, who are in this call, I'm not making an apple-to-apple comparison, sorry for that. I would say 8 years are going to [indiscernible] in the [indiscernible] sector, so this also is an ongoing migration on the horsepower and the tonnage of the vehicles, I would say.
The slow moving trucks will start dissipating the market in 3 to 4 years' time is what I see.
The next question is from the line of Jinesh Gandhi from AMBIT Capital.
A couple of questions from my side. First, clarification is to.
May I request you to use your handset, sir. Sir, your audio is muffled, sir?
Is it better?
Yes, sir. You can go ahead.
So firstly, on the Rajasthan plant, you indicated the start operations in FY '25. Is that understanding correct?
Trial production will start in FY '25, yes, it will mature in 50% capacity we get to place in FY '26, for which we already have received the orders. 50% of the client is already booked for capacity that will be operational for FY '26.
Okay. Okay. And secondly, with respect to the Powertrain-related orders which you are talking about, which you are expecting it to go to about $100 million in 4 to 5 years' time. Would this be largely done at the new Coimbatore plant, and that's why the need to expand even when we are seeing some bit of nativeness in the overall Powertrain business? Is that what is the new component?
The off-highway for the global market will be only from Coimbatore, the machining will continue at the existing facility, where we invested quite sizable amount in the last 2, 3 years for the machining and we are already doing the machining. As I mentioned, castings are coming from outside the country, and we are machining and we also secured orders for that.
And the castings will come from the new Kothavadi facility. We are also getting castings from our very renowned famous foundry partners for supporting us for that, which falls into their capacity branded. There is -- they are pretty placed orders with them. We are working together as partners in that business.
And all that validation takes 6 to 9 months because of the customers' high registration for validation because of the cost of the product and the risk of the product is very high. So all this will take place in the next 12 months. We will see revenue starting to kick in from the Q3, Q4 FY '26 onwards.
And FY '27, I think there will be a steep growth trajectory there.
Okay. So effectively, these -- I mean the segment which you're talking of OHV and Industrial & Engineering segment, practically, the first phase seems to be now largely booked based on the run rate, which you're expecting $100 million by the next 4 to 5 years' time.
I will reel off some names, not in necessarily order, and I'm not saying who is our customer, who is not our customer. We're not into -- are we in contact with them. We have NDAs we don't want. Look at Europe. Europe, majors are, Rolls-Royce, of course Rolls-Royce, [ falls in Tu ]. Then we have Jenbacher, which is also they make a lot of gas engines. Then we have Liebherr, which is also a leading construction equipment manufacturer and engine manufacturer. We have [ MAN ], of course, they are not only the truck, there are stationary engines. Then we have the very big players. And also the big player in U.K., which is, of course, owned by CAT, which has Perkins and we have Caterpillar themselves, you have Cummins themselves.
So this is -- you look at the size of these companies and the revenue then what they generate and how much of the revenue comes from the Powertrain business, directly related to the Powertrain business. You'll be astonished to see when I said that the business is quite big. I just put a $32 billion. But if we add these revenues of these companies, it will be very, very much, much higher than that.
I just put the station engines number up to $32 billion. So when these companies want to grow at 10%, then you can understand the size of the offering, which is there for us. We are very miniscule on that matter. And in North America, there has been announcements for 30-year plants, 40-year-old plants, which has not expanded for so far.
Certainly, their announcements have come for $70 million, $1 billion only in assembly capacity expansion. And everybody is booked with orders. I think this is in the -- as far as in the market news.
[Operator Instructions] The next question is from the line of Vaishnavi Deshmukh from Yashi Securities Private Limited.
First question of me is from the Aluminum division. First thing is that now Aluminium has become our biggest segment, if you see the consolidated numbers. And what is your outlook for the Aluminum prices? And we have around INR 1,000 crores of inventory line. So what kind of inventory it is. Is it high cost or low cost? Can you show some light on this?
See, the Aluminum prices, I mean, as I mentioned, the base metal price now, it is increasing overall. Yes -- but anyway, this is a pass-through for our customer. The inventories are covering all the 3 segments of the business on the consolidated basis. It is not only that.
We have a lot of steel also for our storage solution business, that is long gestation, the variety of steel is large. So we did not have any impact on the profitability per se, but maybe the -- optically, the EBITDA margin or maybe EBIT margin -- EBITDA margin may come down, but I don't see any difference on the return of capital or the profitability.
Okay, sir. My second question would be, can you give the segment-wise breakup for the INR 500 crores of CapEx that you will be incurring in FY '25? And what kind of APU would be there? But I think this -- for FY '25, it would -- only trial production will commence and it will start 50% capacity would be for FY '26? When the rest will be commencing?
Yes. See, the year, it is a very, very difficult question. I think it will appreciate it when I think many of the audience would have visited our plant also and some [ other location ]. We have a shared plant across 3 segments of the business. So when you're putting up infrastructure at the industrial stage, the basic infrastructure like the power, the buildings as and when the segment improves, then we are able to allocate this segment.
Yes. Now in the Kothavadi facility, as I mentioned, the foundry is a common foundry for the Industrial & Engineering as well as for the Powertrain. So how much of this equipment will be allocating to that will depend on the order portion and actual usage of the customers. Some will be -- mostly will be shared equipment, some maybe specific equipment, but the specific equipment will be booked on that.
Now coming to the facility in the Bhiwadi region, we are starting with Aluminum and it is 100% of the Aluminum business to start with. But the land and whatever other things we have taken on the buildings, what we are putting up, the buildings will be put up also for other segments of the business in the course of time.
So we will be continuing to expand on the CapEx in stages there.
The next question is from the line of Krishna Kukreja from Lucky Securities.
Yes, sir, this is Pritesh. I didn't understand your comment on the growth challenge in the Industrial piece of the business. Because I think it's back to back second year...
Sorry to interrupt, sir. May I request that you use the handset, sir? Your audio is echoing, sir?
It's audible now?
Yes, sir, please go ahead.
So it's back to back 2 years where the growth is a little bit different from what the beginning of the year, it is promised. Now this year also, you are starting the year with a guidance of fairly higher growth. So first to understand what is the challenge here in this business? And what makes you, again, there that you will be having a double-digit growth in FY '25?
We'll come from a fact about today the storage business is 20% of our Industrial & Engineering business. And that is not an order book which we carry for years. And totally, it is an EPC sort of business or a product sort of business. And when there is some headwinds in the market as far as the -- our customer is concerned, they can postpone their CapEx.
That is the challenge. What we've given to given e-commerce, it is in the public domain that all of them stopped investing in the last financial year, totally. So now rather -- in spite of the e-commerce, they have been very, very low for us, we have managed to hold our top line in this area.
So our order -- firm order book today for the industrial, for the storage business, which is forming 50% of the Industrial & Engineering business is that we are now opening order book from an order book of 50% of last year's sales. So that is the reason we are saying that we'll be able to grow.
So what was this order book at the beginning of last year, sir?
It was negligible. I would say it was hardly INR 60 crores, INR 70 crores. Now this year, we're opening the year at INR 200 crores.
For the storage business, which is half the business of Industrial & Engineering, right? That's how you make?
Yes. This is the reason I'm mentioning that I don't want to give guidance and being asked the question because we have to listen to what customers say, customer can order and not lift the material also on this matter. So I will be very careful here after by giving a number. But I inform I'll give a number. Yes, in good faith. Sometimes we say that we'll be able to grow, but there are been -- today, there has been interest costs have gone up, there has been election coming up. All of us is known already, but we didn't know about the Red Sea issue or we didn't know about this Middle East conflict.
All this is there. So we have to take it as a pinch of salt that we are able to manage [indiscernible].
and between last year's INR 500 crores CapEx and this year's INR 500 crores CapEx promise, what kind of assets are coming up?
We have mentioned that we are putting 2 greenfield facilities, 1 at in Coimbatore, which is Kothavadi and the one at Bhiwadi. This is in addition to the general maintenance CapEx and the normal capacity balance CapEx across all our 13, 14 plants across the country.
So at Coimbatore, you will have the Aluminum capacity coming up. And at Bhiwadi, you will have a Powertrain?
No. Coimbatore is the Industrial & Engineering business and the Powertrain business for the heavy engines and the capital goods that is the Kothavadi facility, which I explained thoroughly, this is the foundry, which is coming up. I spent a few minutes quite there, and the Bhiwadi facility is for to start with on the Aluminum side.
[Operator Instructions] The next question is from the line of Karan Gupta from Varanium Capital.
Again, the question related to the previous question. So we are raising [indiscernible] maybe debt and over the next couple of quarters, maybe which is not sure. But anyhow we have the debt, right? So what's the plan to deleverage the balance sheet. That's one.
Second is, what's the cash flow we are estimating from these 2 new plants, which will cover our debt over the period of time without raising much external debt. So that's the kind of [indiscernible] I'm asking.
Thank you, Mr. Karan Gupta on this question. Now we have -- we started during an IPO stage of around INR 1,400 crores top line and our consolidated revenue was nothing different from the top line totally. So now we are at a different number, and there's a big outflow towards the acquisition of DR Axion. [ INR 375 crore ] money has left the company to create an asset, which is also giving a good return on the -- our investment totally.
So the debt portion has been towards a good allocation of capital, we are very, very, very careful on this matter. And today, when we are doing some organic growth, unless we have that sort of capacities, the global opportunity is going to slip with the base of currently on a top line of around INR 4,500 crores, how do we grow at double-digit growth. This is quite substantial going forward.
Unless we are ready with the investment there. So I request your kind understanding of that subject. Now what happens, we don't grow, or we grow late. We grow late, we made -- missed the bus on the business. As and when we get an opportunity, we have to grab that opportunity and move ahead. Otherwise, we will be stuck with the growth of the existing customers where within we have to answer that our customers didn't pick up the material. So we have to create new customer, new avenues for growth so that we can sustain this growth.
The other thing is the double-edged sword, no growth means where we can be attacked on the inflationary angle. So on the old products, always, there is a risk of declining margins over a period of time because of the inflationary pressure totally. So we need to get new businesses at new prices and emerging businesses also. So that is the reason we want to keep this.
And we are very close to -- I don't want to talk about numbers. I think we are not far away in the next year to INR 1,000 crore EBITDA number. I think this is -- we may not get there. But what I'm trying to say is that your company is safe enough on a situation that it is interesting for many multinationals to work with Craftsman without any sector concentration nor any customer concentration.
If there is a sector concentration or a customer concentration, it is more risky for the Craftsman by itself and that's also a big risk to our shareholders' returns.
Okay. Okay. But any guidance on cash flow generation from these 2 plants? What we are estimating because currently, we are in the run rate of around INR 500 crores of cash flow.
What additional incremental cash flow we are estimating from this year?
So if you look at our debt itself, minus INR 375 crores invested in the DR Axion, and minus the 2 plants where we invested roughly INR 1,200 crores. Around INR 100 crores already invested into the 2 plants put together in the last year financial itself. When you remove that INR 475 crores in overall, I think organically, our debt would have been very low, if not for these sort of investments.
And we have borne the interest also for the year and has seen a cushion that is also depressed our PBT in a way. Stand-alone PBT. But look at the consolidated PBT would have been benefited from that.
The next question is from the line of Jinesh Gandhi from AMBIT Capital.
Can you give revenue breakdown for the.
Your audio is very muffled.
Sorry, we're not able to hear you.
Yes. Can you share the revenue for storage business for full year?
It is flat as the last year, which I already mentioned.
Okay. Got it. And of this, is the share of automotive storage gone up or that also has been stable?
No, we don't give an automotive storage. Our automotive storage is negligible. I will not say we are automotive storage. We don't have induce segment, it is totally different in that way.
With respect our business on the storage in a different way. You're talking about automated. Is it? Automated is around INR 100 crores of the -- 28% of the total storage business.
Automotive storage is around 28% of our total storage.
Okay. Got it. And lastly, DR Axion, we have seen a credible expansion in margins over the last 4 quarters since we acquired the company. Would it be fair to say the current margins of 20% plus are largely reflecting for your efficiency measures, which you have put in place in the last 3, 4 quarters. And from year on margins, should be -- remain stable at around 20% level or you see further headroom to expand?
See, I have to be very careful when I answer this because on this matter. This is a plant which is set up in 2006, right? So then in the next few quarters, we'll start doing some repair and maintenance there. There will be also modernization of things which will come up in the next few years.
There will be also -- it is -- the -- of course, the workforce, they're able to cap it at a certain level or even in a way for the products we reduce, we're able to improve the working efficiency at the plant level, but this also requires some semi automation and automation. So there can be increased depreciation gradually over a period of time.
So I think more or less, it depends on the utilization of plant. We surround these margins plus/minus, we should be there. You see we are also dependent on the power and fuel cost, which is not passed on to the customer in that way. Second thing is also inflationary pressure on the wages, which is also not passed on to the customer. What the DR Axion has seen is an addition of customer ramp-up of a customer, the benefit they got in the last financial year.
So adding more revenue as I said, we have got some -- we are likely to get some orders from the final state repeating some orders for export to Korea and also the Talegaon plant of Hyundai, how well they do for the -- their sales will depend on our margins.
Ladies and gentlemen, that was the last question for today. As there are no further questions, I would now like to hand the conference over to Mr. Srinivasan Ravi for his closing comments.
Thank you very much for attending the conference as well as all the questions we have answered. What I wish to say as Craftsman, we have a philosophy, we should have an engineering advantage, and we should be not dependent on 1 sector or 1 segment of business. And we have been broad-basing our businesses in the same strength what we have.
We have not gone beyond our portfolio, what is there. We are able to interrelate our 3 segments of the business and accordingly, diversify, allocate capital and we have been very responsible on all margin acquisition of whatever we have done so far.
This is the creating philosophy we're going to go ahead. India is changing on the manufacturing footprint. We are now reviewed that the global companies very seriously, but we also should need the capabilities and capacities to execute those orders.
So there has to be a time lag between investment and returns. So I think that is what today from the base of current base, we are trying to go into the next orbit of the growth rate. So there will be some time lag, and I request all of your kind understanding for this time. Thank you, once again.
Thank you. On behalf of Craftsman Automation Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.