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Mishra Dhatu Nigam Ltd
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Ladies and gentlemen, good day, and welcome to MIDHANI Limited Q2 FY '23 Earnings Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Amit Dixit from ICICI Securities. Thank you, and over to you, Mr. Dixit.
Yes. Good afternoon, everyone. On behalf of ICICI Securities, I welcome all the participants for MIDHANI Limited Q2 FY '23 con call. At the outset, I would like to thank the management for giving us an opportunity to host this call. From the management side, we have with us Dr. Sanjay Kumar Jha, Chairman and Managing Director; and Shri N. Gowri Sankara Rao, Director Finance.
Without much ado, I would hand over the call to Dr. Jha to take this forward. Over to you, sir.
Yes. Good afternoon to all investors joining for this meeting. And before proceeding for your questions, I'll just try to give our view of what we have achieved in this [indiscernible] quarter 2 and Q2 results already is out and the major significant outcome of our Q2 report is VoP, there is a significant increase compared from the last year's VoP of around 41%.
And also, we had -- in spite of having a lot of additional expenditure coming out from Q2, cost of -- the higher cost of the raw material, power, the company has maintained the profit almost similar to whatever the -- like previous year. And also, we have -- if you can see our results, even though the sales is slightly marginally on the lower side, I'm talking about in the first half, we have got -- kept the profit at the level of similar level. Almost the PBT is around 2.6% higher only when compared to the last year. And considering that, only the PAT is slightly on the lower side, very less difference. So these things are -- the data is at level.
In addition to that, I would like to mention some of the other highlights during this period where we have established a number of products coming out from the Wide Plate Mill. And in that, some of the noteworthy developments in the Wide Plate Mill operations is production of nickel base for alloy plates, which we have made some export also within that custody. And we are also seeing the development of another nickel base for alloys required for our production of desulphurization unit required for various power plants which is operating in the country. So that also we have developed successfully. And now we are expecting that and the entire quantities is being imported as of today in the country. We can fulfill the requirements coming out from this facility.
[indiscernible] development are connector with Wide -- installation of Wide Plate Mill and also, as we have told previously, that 8-ton vacuum induction melting also got -- fully all started. The combination of those 2 equipments have given this outcome.
In addition to that, our -- your company also has developed the armor steels, which is being used for vehicle armory in our Rohtak facility. And there also, we have got almost armoring of around 100 number of vehicles. Out of that, already 15 numbers have been rolled out from the factory and balance are under various stage of the fabrication. So the steel develop has been made in our new solution of Wide Plate Mill. In addition to that, we are also trying to see that requirements of armor steel used in various applications of our armored tanks and other ordinance factory -- as well as [indiscernible] requirements, we can meet from this facility.
In this period, in recently collected Defense Expo, we have launched 6 different new products, which includes, as I said, superalloys, nickel base for alloys [indiscernible], then titanium [indiscernible] which we have exported, and also some of the grades of special materials. So these are the highlights coming on from this next -- first and -- second quarter. So -- and in during this period, also we have made some of important MOUs we have signed and essentially [indiscernible], which includes business cooperation agreement with -- going in the area of raw materials, which is being used in manufacture of various type of components in India for their supply chain and in supply chain elsewhere.
So these are the nutshell I have just put a brief things here. Anything special afterwards, now I'll request you to give your queries based on this performance of the company.
[Operator Instructions] The first question is from the line from Aditya Deorah from Divisha Investments.
Sir, you had mentioned in your opening remarks also that the value of production has gone up for this half year and I guess even for the last financial year also, the value of production had gone up. But sir, we are not seeing the corresponding increase in sales. And as a result, our inventory has moved from around INR 800 crores in -- at the end of financial year '21 to maybe INR 1,091 crore at the end of financial year '22, and it has moved to INR 1,280 crores for this half year. So sir, when do we expect that we are able to bill this inventory that we have build, sir?
See, inventory is a very important part and its important issues, which we are dealing with day-to-day basis. But the major reason for the inventory is build up in inventory because of raw material -- also because the raw material costs have gone up. So we have to also stop some of the requirements coming out required for the nickel-based alloys. And earlier, our production of nickel-based alloys are very less. Now the requirement has gone up for superalloy production. So therefore, it adds to the inventory in a very high-value material and which is nickel, this one is the first part.
And second part that, of course, with, which already you have mentioned -- which I have already told that it is that the -- whatever VoP has been built up. And you said the last year also, it was like that. So if you see the performance of the previous year also, the Q3 and Q4, there is a substantial increase in the sales. So I expect that whatever you have seen now, it will translate into the sales in the coming months. And another part is that this year, since our Rohtak facility also started working. So partly, there also some -- the WIP has been built up because there also you have to provide some of the materials, which we are depending on the outset, on the import, also raw material. So there also, there is some amount of inventory is required to maintain our production on time.
Sir, for this financial year, how much sales growth are we budgeting?
Pardon?
For this financial year, how much -- like what kind of sales growth are we expecting by internal targets?
Our internal target is INR 1,000 crores.
Is it the value of production or the sales?
Sales, I'm talking. I'm not talking about the...
Next question is from the line of Ankit Shah from White Equity Investment.
In Q2 F '22 conference call, the management had talked about having the fixed asset turnover of above 2x from projects such as the Wide Plate Mill and Rohtak plant. However, even later on, it was changed to a revenue of INR 500 crores from White Plate Mill and INR 100 crore for Rohtak plant, which results in a fixed asset turnover of 1x. So can you throw some light on this decrease and help us understand this better?
I -- we said that management projected INR 500 crores of revenue in current financial year.
No. Last year in one of your calls, management had said that we will have a fixed asset turnover of 2x from Wide Plate Mill and Rohtak plant.
I understood the question. What we have projected that once this mill is established fully, we can expect the revenue of around INR 500 crores from the Wide Plate Mill. And now this mill is still under -- this on trial, trial means that we are trying making the products one by one, we are moving from. Once we go to the full scale of any project, you cannot get the full scale of operation in the first year of [indiscernible].
So this year, we will be saying that prices are getting [indiscernible]. And Initially, if you see the first quarter, there were no addition much from the Wide Plate Mill. Second quarter it has improved. And third and fourth, you'll see the further increase in the committed revenue coming from Wide Plate Mill.
Coming to the Rohtak also, Rohtak also started giving in this quarter 1 is -- second quarter only, we have got some addition to revenue. Third, fourth, again, we'll see the minimal change because as I said, things are now in the area that production, we have around 70, 80 vehicles are there for armoring, then we have the jacket for 1,500 also to execute. So these things are moving on [indiscernible] and that increased with that. But the complete INR 500 crores, we are expecting that from the next financial only will start coming once our all the product trends are established.
Right, right. Sir, the peak revenues from these 2 plants will be INR 500 crores and INR 100 crores or will it be higher?
We have -- this is our estimation. See, Our estimations we have [indiscernible] like this. But higher -- possibility is there it can go higher also. But we cannot say right now. With the current market scenario and our execution capacity, we have given this figure. And as we progress -- suppose you have -- you got an order, where your value addition is much higher than sales of the product is very high because of the high value items, it can go and increase, but all depends on what is the market scenario in that case.
Right. Right. And this INR 500 crores assumes what kind of capacity utilization? Would it be like full utilization? Or would it be lower?
It is full utilization.
That's helpful. Okay. Sir, next question is on the LCA opportunity. In the previous call, you had shared that we are awaiting certification for supplying certain raw materials for the LCA order. Sir by when can we expect to get the certifications and what would be the potential order size post the certification are achieved?
LCA order already certification has awaited only for a couple of items, 2, 3 items are there for only. But more or less, whatever we are supplying now is already certified, items are certified, and we are supplying.
Okay. And once these 2, 3 items certification also come in, what will be the potential order size from the LCA opportunity, let's say, per...
I cannot -- we -- see those items which I have told it is not only especially for LCAs, it can go for other requirements also because the materials are used -- common material are used in the different areas. So we are in the mode of now developing those items, the products. So based on our outcome and the cost of production, the order will be placed on MIDHANI. So right now, the values are difficult to predict because their project also will know clarity that how much of the equipment they are going to get the orders from the services. What I mean to say that air force and all.
Sir, is it possible to share some idea about the per unit order size? Just a ballpark number, just for us to understand the scale of the opportunity?
For LCA we'll tell you that, we'll give you the input.
Sure. Sure. Then the next question is on the inventory side. Can you share the amount or percentage of non-recyclable scrap that is sitting on our balance sheet? And what would be our plans for the excess scrap and potential inventory write-offs that you could be looking at in next 2, 3 years. Just more color on the inventory piece if you can share?
See, whatever is the non-recyclable scrap you are talking, normally the scrap, which we cannot use, we'll resell, we'll sell in the market. We'll auction and then we will sell. Whatever we can recycle, that only we keep with us. So a question of that scrap retaining it has gone out right. Of course, it may remain for some times till we get the right price and we get the right customer. Because the number of times if you auction and you are not getting the correct price, we not sell. We'll try to see that how maximum benefit company can get by reselling those scraps.
Adding further, certain scrap we cannot sell up due to the government regulations are there. Excess scrap we cannot sell. So those stock also [indiscernible] is meant for internal use as and when we get a state of order. Definitely our scrap level is more, there is no non-recyclable scrap like that, [indiscernible] we will sell the scrap the wherever [indiscernible]. Whenever it is internally usable, then our scrap is not a input scrap or excess scrap, these are high-value scrap. If I able to use in production process, it gives me good margin.
Correct. Sir, this scrap is largely going to be metals, which would not require any write-offs as such?
Write-offs are not done. We will write-off them.
Yes. Sir, next question is on the exports. So how do you see exports shipping up over next, let's say, 2, 3 years? And any certifications that we expect to receive in near future, this financial year or maybe next financial year, which could boost exports?
Yes. Export, we are doing right now -- even though certifications are not required in that area already, we are looking that [indiscernible] export. And as you said, for certification, certification also the work-in-progress. And we expect by this year's end, we're not -- by mid of the next year, we'll start getting the certifications.
And sir, on that basis also with the export potential for us and what kind of exports are we looking at for the next 2, 3 years?
Our export potentials are -- good potential is there, but only issue today is the payment conditions and pricing. So we are seeing that based on those 2 aspects, we are booking the export. So potential is quite good, but the only thing that you have to get the proper price as well as the 7 tons also. We have a number of vendors, outside customers, they are asking for almost a credit-based supply system. So credit-based supply systems is not acceptable in our case. So we are looking for alternative that's how we can meet their expectations by adopting certain change in our, say, that business conditions.
Okay. On next taking on Su-30MKI engines. So we understand that HAL is likely to get -- or HAL has potential orders for Su-30MKI engines about 240 engines and 80 engines for mid-'29. That order size for HAL would be around INR 33,000 crores. So do we see any opportunity for us flowing from these orders?
Su-30 Is a licensed agreement with the Indian supplier to HAL. Now question is that how much percentage they allow them to be made depends on the type of contract they sign. We are not aware of that. What is their conditions in that -- on the -- as far as the material is concerned. But they are also looking for to even for the existing fleet also. But then as I said, unless the Indian supplier is not giving the permission, you cannot use materials, which is not certified by them.
So India is looking for that sort of development, but it has not resulted in the clear-set it in the business proposition. However, developmental work, I mean, MIDHANI, your company is doing. We have taken some kind of steps to [indiscernible] the alloys, which are very critical for Sukhoi 30 engine. So we are working towards that. When we come to the business case, we'll definitely inform the investors.
Yes. And on the MiG-29 engines, is it a similar situation or Air Indians materials allowed?
MiG-29, I have no idea precisely what is the material. But for MiG -- other MiG-19, we have done the materials earlier. But whether they are going to utilize, again, I say, Indian materials, it all depends on the type of contract they enter with the supplier. So -- for which I do not -- we don't have the right information at this stage.
Sir, the next question is on the...
[Operator Instructions] The next question is from the line of Venkatesh from LogicTree Investments.
My question is on what is the kind of opportunity size our company can target over the next 4-5 years broadly, both in terms of domestic as well as exports? And is there a company that we can benchmark ourselves with globally before it goes in the same space and we will probably at a significant scale or something, just for comparison?
This question is very apt question you have asked and already -- as far as the benchmarking is concerned, it was done earlier, and it was seen that MIDHANI as far as the profit percentage and all this matching with the leading international manufacturer in the similar domain.
But the volume-wise, our volume is very less. So the volume depends on that how your domestic industry is growing, and you have rightly told about next 4, 5 years. I see next 4, 5 years, the scenario is very good for the entire Indian industry, which is operating in the area of defense manufacturing because of the various policies and various -- the steps taken by Ministry of Defense in the notion of various equipment that forms materials in the area of defense. MIDHANI is also a part of that. And I think that -- our growth also is being on the similar lines, as you see in the other PSU.
The difference only in our case and other case that we are not indirectly getting the equipment of [indiscernible] coming to us, we are basically some sort of raw material supplier moving to that. And their moment it is coming out in raw material price, there is a lot of competition among the various manufacturers in India. And in the same past, many new entrants as well in this field. So it met a monopolistic area. We have to be competitive. And we are also competitive in there today. A lot of orders we are getting on the competitive bidding only. They're not coming directly in our lap.
So I think there is a good opportunity as our efficiency is going up and the market also is growing. So it is very good opportunity for us to get the market. Now in the quantum and all, the target which has been set up by Ministry that defense manufacturing should go 2x of whatever we are doing today, almost INR 1,25,000 crores of turnover and then around $5 billion of export. We are also trying on that similar. And accordingly our targets also have been fixed year after year.
Right. So is it fair to expect that we could probably double our revenues over a 4-year period, sir?
Yes, there are targets are there, but then we have to do a lot of work behind the scenes that our infrastructure has to go up, more license plan has to pick up. So a lot of investments are required in that area. We are working towards that.
The next question is from the line of from Romil from Electrum PMS.
Am I audible?
Yes, yes.
Yes. Sir, I just want to understand a couple of things. One is on your titanium business, so can you just explain this business? I mean, what kind of products you make, what is the process? What are the raw material sources, some bit of margin outlook and everything on this particular part of the business?
No very [indiscernible] question you have asked, titanium. So let me tell you first, titanium is called a wonder metal. And why is it called wonder metal because it has a very wide market especially because of its lightweight and high strength ratio, it is a lightweight and high strength. It has a tremendous application in the area aerospace And other side, also, it has a very good corrosion resistence especially against the seawater. So if you see that this material can work on the -- above the ground in the aerospace. On the other side, under seawater. So if I'm clear about the application, then I can proceed further.
Sure, sure. Absolutely, sir.
Yes. So because of this nature and very good properties and in addition to that, other properties also high temperatures, then it convert on the high temperatures. So all these properties make it very unique material. And MIDHANI, our company, we have that [indiscernible] of this alloys from last 25 to 30 years we are working on these alloys. So we have a complete control of the process.
Now you have asked about the raw materials. Raw material in this case today, we are depending on the import. Raw material, we are not able to manufacture in India. Again, it is an economy of scale because our requirement of -- raw material of called titanium response is only 800 tons to 1,000 tons maximum. And the plant is economical, if you go 5,000, 10,000 tons. So that's why our production of titanium in India, even though it is taking place very lower scale, its cost is very high. So we have to depend on the -- totally on the import of the titanium [indiscernible].
And with the current world scenario, which we see in the -- that like in the aftermath of Ukraine and Russian conflict, there is definitely very much pressure on the supply chain of this material. So we are also getting affected. And -- but so far, we are able to manage and that's why earlier, when we are discussing about the -- some of the requirements of inventory also probably that is one of the reasons we have to stock some more quantity so that we should not suffer for want of material in the immediate future. So -- and our target is that whatever we are producing today from there less scale, we are going to almost double our production. So we are setting up a facility, new facility is coming up where my titanium production is going to increase by 2x.
Okay. And sir, what are the products that you are manufacturing in titanium right now? And when this new facility come up, the CapEx and the new products that will be there?
Titanium, we are producing right from heavy forging to even a small thickness of wire also. MIDHANI product is diverse. We make plates, we make seats, we make foil. We make the rims. And we also -- we are also making different casting. We are making different types of SMAs. So titanium production, in our case, we are making any size and shape you ask, if MIDHANI is capable to make that.
Okay. And sir, who is the competition in the titanium business directly competing with us in India?
India so far an industry called PTC has come up in Lucknow they are doing only in the one of our product with titanium casting.
Okay.
But people may enter in this business, [indiscernible]. But this technology is slightly difficult. So it takes time for people to get out.
[Operator Instructions] The next question is from the line of Renjith Sivaram from Mahindra Mutual Fund.
Congrats on good execution, though the bottom line is a bit stretched. So just wanted to understand because this I see look at the broad commodity prices have come down, so was there any inventory-related readjustment in the income statement this quarter because the prices have come down?
Prices of -- I don't think anything has come down so far.
Commercial steel prices have come down, not in special steels
Yes.
Usually, only [indiscernible] RSF...
Sir, sorry to interrupt you, but your sounding little distant, may I request to speak little louder.
But we are not using that commodity steel in our manufacturing. So what we are talking about the price is those areas where the prices have come down. We are also -- I tell you that prices -- our raw materials are mainly nickel, cobalt, moly,[indiscernible]. So there, the prices have not come down, in fact. So there is a pressure on the price as on today also. So I don't see any reason there that we have just because of that. And so I think that is -- any other -- you want to make?
When I read your annual report, you have this R&D tied with Carborundum for ceramic-based armor plates. So what -- how large is that opportunity? Will everything will shift to ceramic? And like what is the status of that? Will that be manufactured in Carborundum facility and the SM build over Rohtak? Or will...
This is Carborundum I have seen in context with one of our products called bullet-proof jackets. With Carborundum, we are trying to see only the silicon carbide price, we wanted to procure and see that -- with using that size, we wanted to make the bullet-proof jackets. So this is still in the R&D developmental mode. But if that development is completed and we are through in our development, you might have seen a lot of requirements are coming for the bullet-proof jacket, either from the Paramilitary Forces or from the Armed Forces.
So there immense potential in that area. But nevertheless also we have lot of manufacturers in that extent also. Jackets and all a lot of people are there in India to make that. So how much we are able to capture, we will tell you whenever we get the certain amount of orders. But that is in context of the development of a specific product, it is not a substitute of the metal, which we [indiscernible].
Okay. Okay. So you are not substituting the current metal with that?
Yes, no.
Okay. And sir, this Rohtak, when do you expect this Rohtak facility will be in 100 -- in terms of utilization level at a normalized level and what kind of revenues can we expect from Rohtak, if not this year, next year onwards and incremental revenues?
This year, we are targeting around INR 100 crores, but let us see. We have the order book -- order is there. We have the order to be able to execute and complete but there are certain constraint on the supply chain. So we are assessing some problem in the completing all orders. But we are making an attempt to get almost INR 100 crores of sales coming from the Rohtak facility.
Okay. And in terms of the future growth opportunities like in future, if we are going for this -- Rafale is currently now imported. So is there any chance that the future Rafale, the material technology and requirement will be done by us instead of importing from France? Is there some thought like that or for any other major aircraft we can look at we being the sole supplier of the material?
First of all, I'll tell you MIDHANI cannot saying today that we are the sole supplier of the materials. Because in India, a lot of other companies, they have come up with the various facilities in the area of special alloys production. [indiscernible] it has that our alloy is certified for the aerospace application. Now coming to the Rafale, Rafale is basically -- the special part today is completely [indiscernible]. So we are going the companies, then only we can make. That is number one.
Number two, coming from the aero engines, the aero engine is either Safran or [ GE ] whatever thereby -- it has been supplied through the complete setup of OEMs [indiscernible] elsewhere. Now unless India developed its own aero engine or some OEM set up the facility in India and then utilize our material, certified material then only it is possible in their domain. So that's why recently it was felt that why not, we should anodize the materials for Sukhoi you know very well, it is a Russian origin. So we are working towards that. So definitely, as you progress, one development will give the chance of getting the other one. So we are working towards that and see that how our company can capture the other market if it comes to operate in India.
Okay. And sir, lastly, if I can ask 1 more, like you if I say -- look at the overall space opportunity now that most of the space engines are now cryogenic or everything is going to be manufactured in this. So what is our overall contribution in this space as a segment? And how do you see that?
Yes. Since our contribution has been announced today also rocket motor casing and material required for various fuel tanks and also we use for cryo and semi-cryo special casting special steels, special alloys, they're all going from MIDHANI only. So -- but then likely towards the future, the other manufactures also are coming up. So we have bigger than them market share but their volume also will be going up because there's a big ambition or big plan for Indian defensing industry, and that is -- those plans are coming to the reality, definitely, MIDHANI also will be benefited, our volume also increase and maybe other also.
We have -- again, we have one advantage that our material has proven for the last 35 years. So they can have more. But then the price also is the one factor which we have to be very competitive.
[Operator Instructions] The next question is from the line of Charanjit Singh from DSP Mutual Fund.
Sir, my first question is regarding overall order inflow scenario, maybe the tenders, which you would be seeing in the pipeline. If you can tell us in terms of how defense segment would see the growth pace in nuclear, are we seeing good pipeline building up? That's my first question.
Yes, order flow, we are expecting that whatever order portions are having today of INR 1,500 crores, order book will remain after the closing of [ this 78 also ] This is our expectation. And we are also trying to see that how we can get the other product also in our fold, which includes the export, which includes the certain things require from our Wide Plate Mill as it progresses, if we get converted into some of the products into the large volumes then that -- but this is their all a future for which our team MIDHANI is working very hard. And as we progress, as we get some good business into area, definitely, we'll be telling to the investors. But as you have rightly told, there is a lot of requirements coming out from these sectors right now. We are also hopeful that whatever best we can capture in the advantage as far as.
And sir, if you look at the a lot of CWIP also in the process. And -- so what is our gross block right now and on that gross block, what is the kind of asset terms and revenue generation, which we can do?
This question, I'll give it to our Director Finance to answer. Here.
If you see our gross block presently INR 937 crores and with the addition of INR 982 crore after capitalization, one more addition of INR 100 crores will come. Nearly, you can see that by the year, it will be INR 1,100 crores. And we are expecting at the same level of the same level of spreads or same level selling INR 1,000 crores. Seeing that all the new -- whatever new facilities have come if it is stabilized and if it creates some production level, we can easily same level of gross block as our revenue.
Sir, but the asset turns here will be like we have already all about 2x. So it should be a much higher top line, what we can deliver?
I could not understand your -- your telling that asset turnover ratio, you're telling?
Yes, sir. Yes, sir. Yes.
Asset turnover ratio...
Asset turnover ratio normally withing total FX. Our total FX are mainly INR 2,900 crores. Only if you take non-current assets, it is around INR 1,100 crores -- INR 1,121 crores. At that level, we can achieve but if the total is INR 2,900 crores or INR 3,000 crores once it is resumed [indiscernible], our turnover will be around 40%, 35%-40%.
Okay. Sir, on the space side, we had earlier seen there was a weakness in terms of the launches. How is that opportunity building up now going forward? Are you seeing that traction going to pick up on the space front?
Yes, we are also listening through media only. And also recently also, I have seen that there were news that more than 300 satellites are already in the queue and [indiscernible] having the good [indiscernible] to utilize that opportunity. So definitely, those things it has to go into the orbit, you need more and more launch vehicles. So I see that it will pick up now as the time goes on.
Okay. Sir, lastly, if you look at from BDL's perspective, so ASTRA and other missiles increasing need where more domestic missiles will be kind of integrated with the current platforms. So how do you see that now shaping up going forward, especially from ASTRA and other missiles programs? And what percentage of that order if BDL gets can benefit MIDHANI?
Are you talking about ASTRA? ASTRA is definitely -- is the -- of ASTRA every year, hardly 100, 150, 200, they're not beyond -- they're not beyond that. So corresponding to that, we are getting the orders and we are only supplying in areas. But other missiles like Akash is already, we have given all the raw materials required for the Akash. Unless they get the first order then only we can get for Akash. And also, we have certain other missiles, which they are producing for naval applications and all. So we are supplying raw materials in that.
Okay. But on an annual basis, is there any number which you can highlight that from the missile programs, how much revenue which you can achieve as more of these missiles get approved?
Right now, exact figure, I'm not having, but I understand. Almost last year, how much we have done?
INR 200 crore.
So last year, we have done about INR 200 crores business. This year also, maybe similar to that coming from missile sector.
Okay, sir. Sir, just lastly, the nuclear side, what we are seeing is there's a lot more traction when the orders are getting placed to the [indiscernible] manufacturers and the other larger contractor. So on the nuclear pipeline, anything you can highlight for us?
Yes, nuclear business also projects are getting on the fast track now, but -- so far, what we are involved in the manufacturing of certain products like metals tubes we are supplying already and we have some new requirements also, I hope it will be coming up. But again, there also MIDHANI is not the only supplier, we'll have lot of competition in that. Another area is that some requirement for [indiscernible]. So already, we have on order, which we are executing now and also participating in some other orders also.
So we are...
Whatever we -- Though -- our product range required for nuclear business already we are working with them. So the pumps and all is not our domain, which is done by like -- even the [indiscernible] were also done by LNG or some other companies. We are only [indiscernible] raw materials.
Next follow-up question is from the line of from Ankit Shah from White Equity Investments.
On the precious metals plan that you shared in the last 2 quarter, can you update us on the progress on that? And as a follow-up, are we looking at appointing some better internal auditor, [indiscernible] ENY or anybody else to strengthen our internal controls?
We have already our internal auditor is there, and they are already taking care of our auditing system and all. You know that we are having a quarterly review of the audit results. It's being monitored by some independent directors are there on our Board. The systems are well placed. Requirement of the consultants arises when we have some expected problems. So for which also recently Ministry has appointed certain consultants and they have submitted the report on our business growth plan and which we are considering -- and we are trying to see that how it can be implemented.
Okay. And update on the precious metals plan that happened?
Which one?
Sir, there was precious metals plan CBI directed some people...
Okay. Okay. That was a small theft took place. It was basically theft of scrap, not in the precious metal. It was theft the scrap reported in the media and the people involved in some contact workers, some security staff, they were being like arrested and later on, it was investigated. But it not [indiscernible] if any precious material, it was a scrap, which normally used recycling in our system.
Right. Right. Can you share some light on the same. Actually, what was the quantum of this scrap that was stolen?
I'm not the right position to us because they are already -- investigation is done by CBI, so [indiscernible] with them. I do not right to. But precious -- so what they have given in the media also and what we have also seen that 950 kgs were intercepted by CBI. Beyond that, we don't have the information.
[Operator Instructions] The next question is from the line of Rohit from Progressive Share Brokers.
Sir, am I audible? .
Yes.
So 3 or 4 questions. The first one, you're saying that Q3 and Q4, you will see a pickup, and that is slightly a bit of bullish commentary to reach INR 1,000 crores. So sir, what are the factors that will cause this? One, it is because there is a slight change in the product mix? Or is it because of the short cycle kind of orders that you have? Or is it because of the absolute ramp-up that we see in the plant?
[Foreign Language] I'll just -- Both the things are not required in our case. Our conversion cycle time is slightly on the longer one because we are dealing with a very precious materials. So the number of states required for processing those materials are quite large. And that's why you'll see that whatever we produce, let's say, in the first quarter, I were sometimes able to do supply in the second quarter or in the third quarter. Because the decision time for the material for manufacturing to supply runs in the average almost 7 to 8 months. So this is the reason for precisely for getting so much [indiscernible]. Nothing else, otherwise beyond that.
Okay. Sir, you did touch up on certain issues related to Russia, Ukraine and raw material and nickel molybdenum. So going forward, do you think you'll be able to maintain the EBITDA margins of 30%, 33% that we usually have?
Right now, I see with the annual product mix, it may be possible to maintain that, not -- I'm not see any reason why it should not be there. But then the factors are there where we now, see, as I told, cost of production has gone up because of the raw material cost and also, we have taken the orders with the fixed rate from the customer. So definitely, it is going to give pressure on our margin. So far, it has not been reflected because of certain -- maybe if you have taken to reduce the conversion of raw material or improve our efficiency.
Let's see how we are able to take up the challenges in the future. But we have some excellent plan on hand to take up those things like a reduction in the convention of raw material -- pure raw material.
[indiscernible] more scrap.
So more scrap recycling or getting the -- so those things are in the line now.
Okay. sir, if I were to beak the order book into defense, space, railways and others, how would that be currently?
Yes. Order book position, I have -- around 40% is coming 40% to -- 55% is almost defense now. Space is coming around 35% order book position and balance around, say, armor is around 3% or 3.5% like that.
So my last question is related to the NALCO JV. Since last 3, 4 years, there has been a absolute delay in that. So sir, any thoughts on what is causing the delay apart from the land acquisition issue, which are there? Or are you looking at some new property or land where you would go ahead with this Utkarsha Aluminum Dhatu Nigam Limited?
See, First of all, I believe this project is not derailed, in fact, is a very high value in nature. So once a company like MIDHANI wants to invest our money, where we have my view told that why our margin is quite high. And then we are keeping the equity in that project. We have to see that our return on investment should be good. So considering that, since project evaluation was done 4 years back to get the certain amount of written-off on investments, we thought this is the right time we should reevaluate that in the current world scenario and then take a call whether it will invest or not.
Probably, that is the one reason, which has led us to give some time -- takes some time, which is already on the way now, and we expect that in a couple of months, we'll get the right information. If the inputs are encouraging coming from the consultants, we will definitely take up the project fast. But on the ground lot of work we have done, all clearances are there, we have consent to establishment, we have taken the Pollution Control. We have taken the approval from the Ministry of Environment and Forest clearance is there first clearance is there. So all clearances are there now. And also, we have appointed a consultant, which can go for procurement and [indiscernible] system, [indiscernible] and all.
So these things are already in place. We'll be giving you the right information at the appropriate time. Even our pavement construction for pavement also tendering is over. And we have already set the firm, which can pick up our first phase construction, first phase technology as well as an equipment supplier that also has been finalized. We -- but then as I told, investment before going for investment, we need that clarity and then only we'll come to the Board getting the approval for investment.
So when do you think that the Phase 2 could also be completed with that all the returns are favorable for us?
Phase 2 also, [indiscernible] already in hand, we have made all the tender documents is ready. Moment, we see that Phase 1 is clear, Phase 2 is for the tender.
Sir, our approximate investment would be in the range of INR 1,000 crores, 1,500 crore, is it fair to assume that?
The total investment is [ INR 4,000 crores ] for the project. And that's why our equity is not efficient, which I told you. So that's why even if you go to any investors also for money in the bank, you have to come -- go with the proper business proposal. So precisely, we are working for that.
As are no further questions, I will now hand the conference over to Mr. Amit Dixit for closing comments.
Yes. Thanks, moderator. I would like to thank everyone for attending this call and a fruitful discussion that we had this afternoon. I would now like to hand over the call to Dr. Jha for any closing comments. Over to you, sir.
Yes, I believe at the end, I tell you this quarter 2 has been very, very difficult for us because the prices have gone up for all the communities. In this situation, maintaining the profitability has been a big challenge. But again, I appreciate your questions and the customers' confidence that we are able to get this type of performance at [indiscernible]. But definitely, we'll try to see that our performance improves further, and we can establish the MIDHANI as one of the important company where investors will have the interest.
And also, now we are entering our 50th year of our formation. So this is a golden jubilee year for our company. The day starts clocking from today. So we see that in this period, company should do a lot of projects, establishment and products. So we are trying to see that we can get everybody -- performance from this company overall.
Thank you very much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.
Thank you.