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Mishra Dhatu Nigam Ltd
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Ladies and gentlemen, good day, and welcome to the MIDHANI Limited Q1 FY '23 Earnings Conference Call hosted by ICICI Securities.
[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Dr. S.K. Jha, CMD MIDHANI Limited. Thank you, and over to you, sir.
Good afternoon. It's my pleasure to welcome all of you for this -- the meeting after the first quarter results. And I'd like to mention a few things here before I am, in fact, rather than telling over the company, I'd like to get the question from investors, but I'll start from that this year, the first quarter, which we have ended on the 30th of June, the company has clocked a turnover of INR 114 crores.
Almost same as the first quarter of the last year -- Q1 of the last year. But the one significant achievement is that our production has gone up in the first quarter. So it is reflected in the sum of the VoP. The value of production has gone up by almost 90% higher so that this result will be seen in the second quarter.
And the third important point for all these metal companies is that the pressure on the profit is mainly due to increase in the cost of raw material, which includes nickel, moly, cobalt. And also, the increase in the price of fuel. If you can see that we consider we consume the LPG in large quality and also power costs also have gone up because we have to -- whatever we are getting the power from our captive power plant that has not been coming. We are getting from that the Telangana State Power Corporation. So this is what is a major highlights as such for this first quarter. And we have already -- we have made a provision that the dividend is almost similar whatever we have went to the last financial year of the FY '22 of first quarter. And our order book position also is consistent, whatever we have started from the first April to now this day. So I think I'll be happy to take the questions from the stakeholders.
[Operator Instructions] The first question is from the line of Viraj Mithani from Jupiter Financial.
Sir my question is if we see the raw material cost to the percentage of sales in this quarter, it has actually gone crazy high. So I mean what -- can you explain what was the reason for this compared to the corresponding last quarter.
Cost of raw materials you are telling.
Yes. Cost of raw material. No, it is like 96% of the on top line or something. So what happened, if you can just throw some light. And going forward, how are we trying to tackle this?
I think you are talking about the cost of raw material.
Correct. Correct, sir.
Yes. Cost of per meter is high because if you can see the first quarter of the previous year, and now there is an increase in production almost in tonnage for, if you see, almost more than 2x. So naturally, if the production has gone up, it will be -- and it has been reflected in the form of VoP also. And there, it is coming almost 90% higher. So almost 2x increase in the VoP also. These are the factors which have conducted for the raw material convention, number one.
And number two, the prices have also gone up. If you see from the last the first quarter of the previous year and first quarter of current year, almost there's an increase of 25% to 30% increase in the cost of all raw -- major raw materials, which we consume for our production. So these are the 2 main reasons for that.
So -- but we don't have the escalation clause in our contract when we deal with the customer or we have that.
No, no. It's all -- it varies from contract to contract. But now a days, whatever orders we are getting, it will be on the fixed price only.
Sir, then actually, how are we planning the next quarter onward. It will be the same impact or we have taken steps to be taking the raw material prices? Are there any [indiscernible]
Raw material price will be -- there will be a pressure on the margin as the raw material, not only for MIDHANI, for any material company. If you see the results have come out from even any steel plant also, it has been reflected in that. And we are also having the fingers [ on them ]. But we are trying to see that how best we can imply our reverse and recycle our scrap, which we generate internally to minimize the impact of the raw material.
But the cost of -- you see the power and energy that is in form of the LPG and all, it will remain on the higher side. So overall, there will be extension on the margin, if you see in the next quarter also, primarily from the third quarter now it may get normalized. But first 2 quarters, we'll find the impact of that.
Sir, is the value of production increasing that the benefit of that orders will be booked in the next quarter, right? So you see the numbers coming in the next quarters for that, right, which is reflected in this raw material price, is that correct, you think?
Yes, whatever you have seen that higher value on the form of inventory we are having in the more [Indiscernible]. Those things are going to be reflect in the output in sales only. .
Sales will be on the high side.
And sir, my next question is since your subordinates like models like BHEL, Hindustan Aeronautics are guiding very strong quarters. And since we also form a part of a defense. We also supply the defense. So can you give some sense in terms of growth, and like what you see there? And how its going to be planning on? Because they have been guiding very, very strong quarters from now on.
BHEL and SAIL, they are basically the manufacturer of the defense [ pitfalls ]. And there, what will happen is whatever you see the growth because they have a very good order book position now. And also the orders are all long-term orders. So they're planning of that all input material has been taken care maybe couple of years back already. So that -- the pressure which we are seeing on the raw material, they may not see on that sort of pressure.
No, no. But do we benefit for their expansion we supply to them, right, to the defense? So do we benefit from that?
BHEL, no, because BHEL is totally in electronics. But of course, for HAL, we are getting some of their requirements we are meeting from HAL.
Okay, sir. And sir, you talked about the Sukhoi engine part. Can you sort give some color how is it happening now? That certification we talked about in the last call.
Yes. For Sukhoi, a committee has been formed now, which is seeing that how the certification can work and can get expedited. And MIDHANI also is participating in there. So I am hopeful that they will try to see that what product is made and designed in the country. The certification will be faster here. So they are monitoring that, and we are also part of that.
Sir, my last question is what will be the size of that business for us. If you can just give some color on that?
Sukhoi, in fact, we have not in the order yet. [indiscernible]. See, order value I cannot tell you right now. So that is all in that, in fact, the total engine and all if you see it is coming in the thousands of crores, but what MIDHANI made from the raw materials that we have to see that how much quantity they are going to leverage from us.
No, you said will be making some engine parts also in the last call, so some...
No, no, engine part, we are making for -- this is for Jaguar aircraft and this Adour engine. So for that, we are getting the regular order after the execution of 46. Now again, we have got the order for around INR 66 crores order already we have received from HAL for that one. So it is -- we are getting a regular order for that. And the Sukhoi order placement yet to take place. So we obviously that how much parts we are going to immunize in the country. But last meeting, I told that we are developing the grids in advance. So that development, we have taken it forward. And we have come to the stage of -- final state of certification.
The next question is from the line of Rohit Ohri from Progressive Shares.
Sir, two questions. First one is related to the JV that we have with NALCO. So when will you expect that the operations will start?
JV work is going on now, but it has gone slightly slowed down initially because of some issues in the land acquisition and also getting the clearances from environment clearance and all. But now those things are in place, and we have gone to the first stage of appointing the consultant for inclusion of the project, which will take care of the procurement and engineering part of the project.
And also, we have gone for the first phase already. Tender we have floated for getting the interested party who can be part of our -- the supplier of the equipment and technology. So that work has started. And it will take the time which we can get the project to be completed. We are assessing, but it will take some time depending on that. How much they commit when we are getting the -- their offer and order. So that part we are yet to see. But now -- its an early initiative.
So usually for this type of project, once the -- we place the order from that day to execution, it will take 1.5 to 2 years.
Okay. Sir, what sort of investments will be expected from MIDHANI?
MIDHANI, we are part of the -- we are giving the equity of around INR 170 crores.
So these orders from the railways that have started gearing up for mass production of axles and wheels for certain margins as well as LHB coaches. So what sort of opportunity do we see in that domain?
For axle already, we are executing an order of around INR 4 crores -- INR 4 crores to INR 5 crores, it is initial stage. But we have some future indications are there placed -- how much is the supply?
It's around [indiscernible] even better now.
So place we are getting around consistently are getting the orders. So maybe around INR 15 crores, INR 20 crores worth of order will be there in that.
Sir, last question is related to DAC, approving the bulletproof jackets with the Indian standard BIS mark and the level of protection BS-VI. So the requirements is the order -- the entire, I think, is around INR 28, 000 crores. And knowing that the Rohtak plant is almost ready. Sir, what sort of opportunity can MIDHANI get from this bulletproof jackets? Or what sort of bids are there or what sort of tenders must have come, if you can share that?
First of all, the INR 28,000 crores, which have been approved by DAC, includes a number of equipments. And I don't know how much is the percentage for bulletproof jackets, which have not declared -- that figure is not with me. So definitely, with this type of approval, we are expecting the tender only floating now.
And finally, we are also gearing up for putting up our production facilities. So I will give you the exact information after getting that what is the value of tender they are floating now. And I think what situation we are going to have. You have -- you are talking about the BS-VI. [indiscernible]
Yes, sir.
So it also has a lot of divisions in that specification. So we are going to see that, then we'll fully work on -- comment on this.
But sir, Rohtak plant is ready as and when the orders might come, is we are going to cater to it.
Yes. Definitely.
The next question is from the line of Hardik Jain from Prudential Partners.
Sir, you mentioned that order book is now similar to what it was in March 2022. So is it around INR 1,300 crores, the outstanding order book?
Yes.
Okay. And sir, last time, you mentioned that we'll be saving around INR 60 crores due to a Wide Plate Mill because we are doing the rolling outside. And once the White Plate Mill starts, we'll do the rolling in-house and we can save around INR 60 crores. So the benefit of the annual saving of INR 60 crores, by when we should start seeing? Can it start from the next quarter?
This -- whatever I have told that we are doing outsourcing for our plate rolling. So that outsourcing, we have stopped. So in the first quarter, we have still around because of that INR 4 crores to INR 5 crores saving is there. But then savings in terms that we are also having the expenditure also. So normally, once you are getting that much saving, on operational costs, we have to do that electricity power and all [indiscernible]. So that we have started. But INR 60 crores only for 1 product, I have not told, it may be the total whatever business we do from that facility.
Okay. So once we start using the full capacity of Wide Plate Mill then the savings would be INR 60 crores.
Yes. Yes.
The next question is from the line of Abhijit from ICICI Securities.
My question is on Pinaka. Sir, would you be supplying any material to the Pinaka order that they're close to formalizing?
So Pinaka missile, we have initially developed the material. But at present it is -- they are getting this material through the open tender. And now open tender, we will also participate. And if we are able to get that [Indiscernible], we can get this order. But the material component is very limited and the cost of material in the Pinaka is very less. It is the material is really lower our sales and its value is realize. So mainly the missile part -- other parts are important, which improves your propellent and control system, those things are important there.
Right. But I think the order price is pretty big, right? So they are talking about...
Yes. Numbers are quite big. Numbers are quite big in that.
Yes. What are your estimate of the total order value? Because I think that [indiscernible] also and given a number of INR 8,600 crores within that, inventory fighting vehicle also within the INR 8,600 crores. But how much would be your addressable market, I assume only...
Frankly, I have not assessed that what is the MIDHANI market is there in that. But for Pinaka missile, as I told you, it is basically the lower less feel where the margin is very less early MIDHANI, we were not able to compete as far as material is concerned. [indiscernible] inventories and other vehicles, where you see in the armor and all, we are already working with that army and all.
The next question is from the line of Shalabh from Snow Ball Capital.
Sir, my question is on inventory. I'm not sure what we currently figure in the balance sheet that I guess the last year, it was around INR 200 crores, even the scrap in the inventory. So I want to know how do we assess what is extractable from this graph? And what is the process of revaluing this inventory in case we are not able to extract the amount of metal that we think we should be able to?
We have 2 types of generation on this craft. Onetime generation is that which we can recycle. Second, we cannot recycle. For recycling scrap almost, we say 70% is there, which you can recycle. And balance, which we have to as a disposed or other we have to keep in the stock.
Okay. So the number that we see in the balance sheet, like for last reported balance sheet 2021, it was INR 218 crores. That is -- so that is the 100% scrap, right? 70% of which probably is recyclable and balance 30% is not, is that understanding correct?
I have no clear in that. I'll reply it. I'll give you the correct value on that. Do you have a reply? Basically, it's a dynamic one, which we can -- this change will be there. But the current run is how much and what either that will communicate.
Okay. Okay. Why this question comes up for because it's a surprising part of our balance sheet, it goes and sits in that scrap and it has increased significantly over the last many years. So until unless we really use that -- it just fits in the balance sheet, not generating any returns for us.
So that's the genesis of this question, how do we use this finally in the production?
The recent past, we have been trying to use the maximum quantity of a scrap to make a manufacturer product. There are certain limitations [Indiscernible] also. Our customers, they demand that whatever certain products for the aerospace and missile and the other strategic sectors, they say that you cannot use the scrap. And certain times, they send it to scrap coming in only 50%. So whatever we generate in this process of production, we are not able to fully utilize and which I told in the last conference call also, that our products are not of same grade. There are some various variety of ways. .
So the scrap which we generate in the first order cannot be tried in the second order. So this is a type of restriction MIDHANI is having. And those scraps cannot be sold in the open market also. Number -- because which contains some strategic materials. So these are like -- limitations are there. However, we are trying to see that how maximum we can utilize. And nowadays also we are looking -- asking customers to permit us to utilize the scrap certain percentage instead of utilizing complete virgin material.
Right. Sir, in that case, because if customers are also not allowing us to do it and probably we cannot use it in the second order, as you said. Then shouldn't we conservatively revalue this and take the impact in the P&L because there is a value which is showing in the balance sheet, but probably it is not really useful in the business, right?
As you rightly told us any company if the inventory is high, it's not the right indication. And unfortunately, when we are trying to minimize it, the raw material prices have gone up. So whatever we are trying to reduce by consuming scrap, we've not been reflected because the state of [ inaugural price ] have gone by 30%, 40%. So definitely, you'll have -- in terms of the price or cost, if you show the higher value. I think this is the main reason for us in current situation.
Sure. Sir, there was also a media report that there was some proliferate from the scrap. Anything -- any comments on that or how significant was that?
In terms of value, it was not significant. It was whatever confiscated was only 9 -- around 8 tons of scrap. And those scraps are not useful asset in the same form. It was there, but then it was an incident was serious in nature, and we have taken a lot of corrective efforts after that. And we see that our systems become foolproof in the future. So it was basically the alarm for us, but the damage was very less.
Sure, sure. And sir, just lastly, on this quarterly numbers, if we see the change in inventory is higher than actually the raw material we have consumed. So I was just wondering, this means that the products that we -- the cost of the material, which we have added to the inventory is far higher than what we have actually consumed this quarter for this quarter production. So how do we understand that in terms of what is actually the cost of the material which was consumed for the current quarter's production sales.
You see not only the cost of material due to a lot of value addition. So the material which has gone to, say what, finishing stage, subsequently carry the actual price. So we do the valuation this on the areas where materials are lying. So in that respect, we'll find that this type of [ discrepancy ] there.
So it is normal raw material, you are adding your power, your [indiscernible]
Correct. Correct. Just raw material. Everything is there.
Utilizing the manpower, the shipments, all those things are accounted in that.
Sir, which would only mean that what we have added in -- what extra we had produced for subsequent quarters is probably more valuable than what we have produced this quarter, which is why the...
Yes. Yes. Definitely. Definitely. And then what was the [indiscernible]
And [ tonnage-wise ], if you see, tonnage, I am not an exact figure, but we are doing a [ average on ] -- tonnage-wise it was 2x and whatever we have got in the first quarter of FY '22.
Right, right. And sir, lastly, just on the order booking, what is the -- our expectation for the full year in terms of the order inflows that we expect?
This year, we are INR 1,000 crores, we are sure of getting that. And our plan also is to -- our annual plan also is around INR 950 crores also to make that turnover. So we'll be minimum almost similar level of order book. But as I told I [Indiscernible] also in a number of cases like.
[Technical Difficulty]
Sir, we are not able to hear you. Ladies and gentlemen, we seem to have lost the audio from the management's line, please stay connected while we reconnect the management.
Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir.
Yes. I think we already answered where we got disconnected. I don't know. So if you can repeat the questions or...
Sir, am I audible?
Yes, audible.
Sir, this order intake of around INR 1,000 crores that you said before the call dropped off, this is primary from defense?
Yes, defense, mainly from defense.
The next question is from the line of Sanjeev Kumar Damani from SKD Consulting.
Sir, am I audible?
Yes, audible.
Sir, sir, you have pending order of INR 1,300 crore or some odd crores, that is in the price release. So my question was that this is entirely a workable order or many times, orders are received and then a lot of things are pending to be done about it.
Whatever we have seen all are workable order only, this cannot be worked out. And you have rightly said that sometimes some orders will have some developmental issues. So -- but majorities are in the sitting only, developments are very limited.
Okay, sir. Okay, sir. And in the -- one more sense I want to develop that -- I mean, do you foresee or if you can -- if you have your estimate ready -- in next 3 months, these orders will not be completed, I mean we have already passed July. But by September, this order will not get over, sir? Or it will be for the entire year that this will go?
No, this whatever INR 1,300 crores we have shown here, we'll be adding further. There will be some addition also there.
Agree, sir. But the execution, if you have something...
No, no, all we can not execute in this year. All are not executed in this year.
Okay. They are not executive in this year. Okay. Okay. Sir, can you kindly add in your presentation the dispatches that are made to various government departments in the sense like to the defense, to the air side or to the...
Okay, sector wise.
Sector wise. If it is sector wise, that will give us an idea because, sir, you know very well that these days defense even growing like [indiscernible]. And we all investors are lines take our take of shares by investing into the companies which are doing all this work, sir.
Yes. You would like to know the sector wise, space is 37% dispatch, defense 33%. So defense 33% plus 15% around 48%.
48%. Okay, okay.
And others, around 11% is going to the energy and there's some part of the export also.
Okay. Okay. So sir, when we talk state Hindustan Aeronautics or something like that and then...
No, no space means into ISRO.
Directly goes to ISRO only. Okay, okay.
Yes. Yes. Yes.
Not to HAL, Hindustan Aeronautics is not our clients, sir, or are...
Yes, it is genuine defense is coming in the sector of defense and the PSU. It is coming currently under the category of PSU, which it is around 15%. So -- and 33% is coming in defense, which includes coming from the direct from the defense like Indian Navy and we'll get certain time from the armed forces.
Armed forces. And sometime Bharat Earth Movers also maybe giving you certain order.
The Earth Movers, no, actually, they are not even the our type of material.
Our type of material, okay. Sir, can you kindly tell me that are you having monopoly in any of the products that you manufacture that means that you are the only producer in India of that item? Can we claim something about something -- it may not may not be able to name them for security reasons. But anything that we produce is a monopoly in India that you only produce or there are other manufactures.
First point is you are rightly told that certain things we cannot reveal that we are monopolies there. We have monopolies not because of the grade, it is because of the technology. Certain things we have got the technology transfer or we have developed the technology in a period of time, right? There, we are monopoly. Those things are very strategic in nature. It cannot be discussed in an open platform. But however, I can tell you 1 thing on titanium production, we are the only company in India.
Okay. Sir, this titanium use is going to rise in the days to come in defense and core sector as well as in domestic sector also, which will be a growth of this item use -- utility will be there by a common man or for the use of the common man.
Titanium is called novel or golden use of wonder metal. It's called wonder metal, name is wonder metal because call it, its properties are very unique, but it carries a lot of costs. And cost wise, it will not -- it cannot be applied for the common purpose. [Indiscernible] there's an application in defense. And space and defense [Indiscernible] mainly is in the level and in the aerospace that's the sector and partly in the missile also.
Sir, by name indicated this, correct me if I'm wrong, before few years, I heard that America was supplying titanium utensils to India for [Indiscernible] of India.
So that can be a brand name, utensils are never made in titanium. It can be a brand named by some company. But titanium has its application mainly started from that naval and mainly from aerospace. If you see that all our aircraft engine components, a lot of things are made of titanium.
The next question is from the line of Parimal Mithani from Credential Investments.
Sorry to interrupt Mr. Mithani. Sir, there's a lot of disturbance from your line.
From my line?
Yes, sir.
Can you give me a breakup of the current order book? And sir, second question is, in terms of how do you see the order intake coming in which are the areas that you see growth coming next year or so?
You give me some time. I will -- order book breakup.
Okay. And sir, how do you -- since our book is really executable orders over a 3-year period, right? Sir, if I'm correct in this?
Yes. First of all, I'll just answer your question about the order book. We have -- total order book is 1,377. And the breakup is like that, not in terms of percentage here, I'm not having that -- even calculate from that. Its around 600 plus is for our space. 300 plus for naval sector, missile around 130, 100 coming around the energy and balance -- aero is 67. Armor 65, railway 12.5 and other are miscellaneous [ numbers ]
Okay. And sir, how do you see -- since there's a MOD budget in terms of shipyard, in terms of aircraft and all that, is quite high over a period of time.
And how do you see the [ running ] role in it, sir, going ahead?
You're talking about the defense acquisition and clearance and all?
Yes. Defense acquisition in terms of aircraft, the new destroyers, the previous orders, which the defense has already given to SAIL. Currently, how do you see your position in things of going ahead, sir.
Whatever the platform you are seeing, the materials are mainly sourced from the different vendors. MIDHANI also is part of that, and we are participating in the different tenders. And as for the price alone, we are winning the tenders. So as and when the requirements are coming everyday. But so far, on the volume of materials, I'm not finding the huge volume they have. No tender has come with the big volume they are coming out .
We'll move on to next question. That is from the line of Viraj Mithani from Jupiter Financial.
Yes, sir, if you can give us some color in [Indiscernible] and like how is this year plan in next year would be in terms of growth, profitability and margins.
I can do one thing. We can give you some in the, in fact, here. But in summary, I will say that we have given the targets of around 25% growth every year. So the idea behind that 25%, it is coming into every sale since we have to grow by 25%. Profit also has to go accordingly and...
[Technical Difficulty]
Dr. S.K. Jha, we have lost your audio.
Ladies and gentlemen, we seem to have audio from the management's line. Please stay connect. Please stay connected while we reconnect the management.
Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Over to you, sir.
Yes. Okay. So I think we were discussing about what is the growth plan and projections for profit [Indiscernible]. So the plan -- you know that -- see, we are with the Ministry of Defence, the Ministry of Defence has given a target of the [Indiscernible] is the turnover now. So they are looking for almost 2x the turnover to go up by 24, 25. And export has to go from -- right now, we are around $1.5 billion. It has to go to $5 billion. So our target also has been aligned accordingly. Wherever today, we are from that, we have to go to almost double, we have to go to our turnover. And also export has to go financially very high. Export is currently to 3x in a [indiscernible] total.
So sir, it means that next year we'll do around INR 1,000 crores top line and around INR 200 crores -- INR 220 crores profit because we endured 21% net margin. Does it mean that going by the numbers. So what you're guiding us are you telling about the [indiscernible]
You can infer from that, but I cannot say about this figure. I cannot share about this figure, but definitely, our target is to go for the -- to meet the requirement of our department.
So net margins would be 21% only now. Net margins would be going down because of the commodity inflation competition [indiscernible]
I cannot say on this figure. That figure is very difficult to predict right now. In fact, we would have the right people to predict because our predictions are not so accurate. We are basically in the market, we know what is the forecasting [ on any day ]
Okay. And sir, this we talked about INR 1,000 crores orders with -- so this is INR 1,000 crores plus INR 100 crores total.
Yes. Yes. Yes. INR 100 crores is there. INR 1,000 crores for this year.
So there will be INR 2,300 crores, right? Total in order book.
[indiscernible] I'll be [ issuing ] INR 5 crores also for the statement.
So what is the order book time line, sir, like order book would be INR 100 crores [indiscernible]
It varies. A lot of variations are there. Lot of variations are depending on the product because. MIDHANI product profile [indiscernible]. We make a small wire of around 100 to 250 to 280 mm of bar. So there are various type of products there. We make a small wire to wondering of 3-meter diameter. So my point is that we have various type of product profile. Depending on the product and all, we decided that what will be the time of the year.
What would be the average time -- if you can just guide earliest time of execution, it's not like 1.5 years or 2 years? Or how do you think -- how do we look at it?
One year you can take.
One year, I can take. Okay.
Yes. Yes. Average 1 year.
Average 1 year. Okay.
The next question is from the line of [ Kabir ] from [ Adhikari ]
Sir, my question is regarding this about the addressable opportunity for aerospace like in next 10 years around 100 or the fighter jets is going to be developed, manufactured in India. So of it, what could be the size, addressable possible size, market size for a company like MIDHANI. And also in next 10 years, also, there will be a hypersonic missiles where a lot of specially graded -- grade high alloys or metals will be required. So if I put together in this context, so can you please help us understanding the requirement of -- of the requirement and the marketable -- possible marketable size?
This exercise has been already done by our consultants recently. And they have given the business potential as we have mentioned about some of the programs. So the signals are not clear right now its under evaluation and ministries already has taken for its valuation. And we are expecting sorted results will come out. We may discuss afterwards. But as you have rightly told that these programs are there in the country now. And it is moving at a better higher pace.
But whatever you have mentioned, those things are time taking -- do not translate immediately. But initiatives have been made and visibilities are good. In the sense that as you mention of the fighter planes. Now the fighter planes engine has to be purchased on the outside or made in house. So these are the different [Indiscernible] are there, work we do in that direction. But if it is going on the outside, entire seems to be from coming from the outside only. similar use case for the overall of the engine MRO facility. Now MRO [Indiscernible] come from only 2, 3 MROs recently coming when the material go up. So these things are very -- in this industry, I will not be able to comment on this. But MIDHANI has a better opportunity because we are already supplying the raw materials from last 35 years.
Okay. Sir, if you exclude this engine part, so for this airframe and all, so far rightly, recently, there's a INR 46,000 crores of orders given to HAL for Mark 1A. So in that, what could be the size of this material for airframe and all and other whatever required maintenance, et cetera.
Yes, we have told very correctly that we are doing the aero engine. Aero engine is the biggest, as material cost is price is the highest in that. And second comes the frame. Now the frame is also not made from the engine material. Whatever you are seeing is getting under imported source only. So the balance material left are very limited in quantities. There also, as -- tell you the, number of things are coming from the outside. So still, we have a lot of things in the line. But productively, we are doing immunization and it will be getting reflected better and after 4 to 5 years in LCAs, once the immunization is complete. And even the engine also is our own engine. Now engine also the entire engine is coming from outside.
Okay, sir. Understood. Sir, my last question is, would you think your competitors in this business where you are right now? .
[ Kabir ], sir, you are asking the name or you wanted to [indiscernible] there.
Yes, name. The companies that are [indiscernible]
Actually, the main -- people are there. Now there are a lot of people are there in India, started manufacturing. So it is quite -- it is a good market for us [Indiscernible]. So [indiscernible].
The next question is from the line of Darshan Shah from White Equity.
I have 2 questions. One on the inventory side. So we are carrying inventory of almost INR 1,000 crores versus our revenue of INR 800-odd crores. So what is the normalized level of inventory that we are seeing? And by when do we expect to get that?
Normalized level of inventory projections are being given by the consultant right now. And we cannot reduce immediately. But our efforts are on, as I told earlier also, we have tried to reduce it, but then the raw material prices have gone up in the recent past. So I am not seeing in the near future it will come down. Where the pricing level has gone up. And at the same time, there's a supply chain disruption also. So because of that, we have to stop. We cannot go to the situation where on monthly or bimonthly basis I can buy the material, I can run my store. So I think these are the main of given reasons for getting higher inventory, but it will get addressed, we are trying to address it by consuming more and more scrap. We see that our raw material collection will come down.
Okay. And second question is on the LCA aircraft opportunity. So in some of the earlier calls, we have mentioned that the per aircraft of raw material requirement will be around INR 25 crores, INR 30 crores, is that correct? .
Yes. I believe why the requirement is there. But why it has happened that initially -- for initial fleets of 15, 20 aircrafts, since HAL, our materials are not certified. So HAL has taken the preference stake to buy the material from the outside. And slowly, they are giving the orders for immunization. So right now, we have an order of around INR 20 crores, INR 25 crores of orders for LCA and it is getting added further as we progress.
The next question is from the line of for Abhijit.
Just to add to the aero question, please. So out of total INR 65 crores of order books that you have from aero, INR 25 crores is from LCA, and the rest is from development materials for AMCA, is that right?
No, no. AMCA is not included in that. We have for aero that or [Indiscernible] -- [Indiscernible] that engine disc. Then also we have for this recovery dry engine is there for GTRE.
But these are what slow-moving orders or what?
Not slow moving, these are all very fast moving orders.
Okay. So they're procuring materials for Kaveri engine on a regular basis.
Yes, it has started now that Kaveri engine, dry engine has started for -- you must have heard about India has done the first trial is taken for UCAV. That is unmanned aerial combat vehicle. Already, they have taken the first trial and now the idea is to make more and more. So there, the engine will be used from that Kaveri dry engine.
Okay. Okay. Okay. And yes, got it, got it. But -- so this would be onetime orders, right? I mean as of now, it looks like it would be onetime order.
No, no. I think if it is getting cleared, the India is going for a big way to manufacture that UCAV because you need a lot of deliveries.
Right, right.
High-end delivery.
But they have stabilized the technology and all, as in...
I do not know the exact performance of the first flight, but it was reported, it has given a good performance.
Got it. And any execution delay that you would have faced because of lack of materials, say, from Ukraine or Kazakhstan or that region?
We'll not delay in our institution, but some sales got affected in our last financial year because of them. And then there is a cost of the raw material has gone up because of this war. So those are the major factors which is affected.
But this year, will there be any effect on sales because of supply disruption?
Not sales I'll tell you, but on the margin it will be there.
Margin impact would be there. Okay, okay. But you -- from your commentary, it seems that some of the margin impact is there in Q1 also. But on an overall scale, it does not show maybe because of the mix side of the option.
Mainly because utilization has improved. So we have tried to compensate with the scrap utilization. Results are on to do that. But as we are able to. So there, you will have to also see the production all been affected. So the technology has to be reverse in that sale. So you cannot go for the full scale at one but to go scale wise.
Right. Got it. Just to go back to last point, which is UCAV, which you guys are just procuring for, is it Kaveri? Is it TAPS or something else?
What is the name, maybe say, I understand the name is different. Ghatak.
T-A-P-S. TAPS.
TAPS. I do not know, but the engine name is -- some name, I'm not so clear. So basically what name maybe I am not clear, which is for [indiscernible]
Ladies and gentlemen, that was the last question. I now hand the conference over to Dr. S.K. Jha for his closing comments.
Yes. Friends, it was a very nice interaction. So whenever I interact with the team, a lot of worries, a lot of things come to us. And with me, entire team was also there with new finance and marketing and corporate planning, completed in [Indiscernible] when they have been part of this meeting. So I hope whatever we have discussed here, it will further give our commitment to meet the expectation of the stakeholders and MIDHANI has been very fortunate that we have got -- all of you have got the confidence on us. And I am sure that with the future performance. It will be kept and we'll be meeting all our expectations and better scale, more than [indiscernible]. Thank you.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.