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Mishra Dhatu Nigam Ltd
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Hi, everyone. This is Yash Doshi from SBICAP Securities. It is a pleasure for us to host this call. We have with us Dr. Dinesh Kumar Likhi, CMD and also holding additional charge of Director, Finance for MIDHANI. I now hand over the call to Dr. Likhi for his opening comments, which will be followed by interactive question-and-answer session. Over to you, sir.
Good afternoon to everyone. In fact, I'm happy that I'm interacting through SBICAP to some of the investors, and it is immense pleasure for me to announce, and which already had been put in the public, that 3 quarters which we have completed, company has got best ever sales of INR 509.25 crores, which is 36% higher corresponding to last 9 months. If we see this year, each quarter, we are able to get improvement. From -- quarter 2, we got from quarter 1, 30% improvement; and quarter 3 from the quarter 2, we got 20%. And we expect much higher performance in Q4, as traditionally, the fourth quarters are in the range of 70%, 80% compared to the previous quarter. Now the reasons of this operational improvement which has happened are 2 reasons. One is that we have a good orders from strategic sector called ISRO. The second reason is our equipment, which we have modernized 2 years back, are giving good results. Because of that, we are able to get consistent output. Third reason is that our process has improved and the yield is improved, so that's why we are able to get an output for a smaller input. And this is the reason operational improvements have done -- been done in the 3 quarters, resulting in a good high profit. In terms of the profit also, there are areas which we have got an improvement in the 3 quarters. First is that value of production has increased. Because of the absorption of fixed cost is there, we are able to make certain special material which are in the last phase, the value of production is higher. This year, it's more than INR 800 crores already in the first 9 months. Second is our rejection, as I told, had got reduced. In terms of power and fuel, we got saving compared to the last year, it was 7% of the total expenses, now it 6%. The productivity implied because the pay revision already had been done last year. So we got a productive of 1.364 per employee -- value rate per employee, and saving on raw material because we are buying the large volume because the customers' orders are with us and market conditions have helped. The same trend has been accepted in the PAT area. In the tax area, there is advantage shifting to the new tax. This is basically INR 10.5 crores for the income tax and deferred tax about INR 12 crores, so INR 23 crores advantage has come because of this. Now in terms of our modernizations and R&D. So R&D, we are already progressing in our 3D printing, metal powders project as well as artificial intelligence of alloy design. As far our spring plant is concerned, is the last finishing touch in terms of commissioning and other plant will be coming in the next year middle because equipment have been ordered and this is under construction. Regarding the joint venture company, we have already got the land, and we already have signed the agreement, and the company is already incorporated. We are awaiting some legal clearances from government in terms of the land, so that we can do a foundation laying. Meanwhile, we have made detailed project report as well as we are also ready with environment clearances project also on that before getting to start of the project. Now working capital, yes, because we have got more volume of production, so working capital has increased. That's one of the thing which we're trying to work out by clearing these 2, which are area where we are making the tubes as well as we are making lattice tube. Moment it gets dispersed, this working capital also will get controlled. And the sundry debtors, we have brought it down, which was a bit higher. Now we got to in the range of over 130 days and which is compared to last year, it was 180 days. Order book wise, 70% orders continues to be from ISRO, followed by defense and followed by nuclear energy. And we feel that next year also, the order books will be the similar trend, but will be little increase from the defense sector because of some Make in India programs are going to come in the next year, as well as from the nuclear energy, we will get more orders. So we expect that next year also the order booking will be there to the extent of INR 800 crores, and with a starting order book of about INR 1,500 this year, the 1st April of '20, we feel that our growth of next year also will continue in the same pattern. I think these are the initial remarks. I can take the question and answers on the basis of the 9 months performance or anything you want to ask. Thank you very much.
[Operator Instructions] We have the first question from the line of Yash Doshi from SBICAP Securities.
Sir, just wanted to ask, sir, as you know, our order book is quite healthy as of now. But as we execute this order book, do you think that the pace of order book or the size of order book will grow from here on? And -- or will it normalize at some point of time? So basically, do we have like a very big anchor order, which will keep our order book healthy for a long period of time? And also, if you can just share how much of this order book, if you were to break them into short cycle and long cycle, how much of the current INR 1,700-odd crores order book is in terms of short cycle and long cycle?
See, first of all, let me tell you these orders of out of INR 1,700 crores, the 2-year cycle will be around 8 -- INR 900 crores. Remaining INR 800 crores is, you can serve within 1 year. So that's the way from distribution. But however, since we want to also supply this order, the customer is not going to stop us in case we supply early. So we are scaling up some of the facilities where the bottleneck was there. And next year, somewhere around December, certain facility will come. So we try to reduce the lead time in this area also and give that supply to the customer early. Now the sustainability of the order is concerned, that consistency of space sector is expected to continue. So maybe INR 300 crores, INR 400 crores will come from the space sector. Defense sectors, we expect about INR 250 crores to INR 300 crores type of orders next 2, 3 years. And around INR 150 crores is coming from the energy sector. So we feel, on an average, we'll be booking the order in the range of INR 900 crores to INR 1,000 crores every year. Now with that order coming in and backlog of INR 1,700 crores, it will try to get normalized after 2021 because by the time new facility also come, it will get normalized in the range about INR 800 crores to INR 900 crores in the beginning of the year, every year.
Okay, okay. And sir, the next question is mainly on this discussion at this point. This space program, this ISRO order, sort of how much visibility do you have in terms of how much launches are they going to do and which will help us in our -- expanding our order book, at least, or even maintaining the current order book strength in the space sector?
See, we personally feel, on an average, they will be doing 15-plus launches on an average every year. And we are basically behind by 2 -- because our material supply starts about 1.5 years to 2 years before they launch it. So considering that we are working now for them, whatever launches will happen 1.5 years down the line, we feel 15 launches pace will continue for the next 5 years. So the 15 launches every year being done the 2 years before the order will come to us. And again, after 2 years, again, the order will come -- we'll supply and then another will come. So 5-year horizon 15 launches will result into what I told you the order book from the space sector.
Okay. And sir, is there any scope of improving or increasing the content from each launch? Or that will more or less remain kind of a constant?
See, I will tell you as far as the -- until unless the PSLV design and GSLV designs are doesn't -- do not go under fundamental change, the specific consumption of our material will more or less remain same. It will be a multiple of the launches rather than design. So I don't -- we are not thinking that any design for the next 5 years will go in fundamental change.
We'll take our next question from the line of Abhisar Jain from Monarch Networth Capital.
Congrats for a very good performance. Sir, if you can give some indication that on a 9-month basis in our turnover, what could have been the mix between the 3 key segments that you are addressing, space, defense and nuclear?
Yes, I will say that whatever order book currently we have, the same pattern is going because about -- in 9 months, we have done about 70% to 75% for the space sector and about 10% to 15% for the defense sector and remaining energy sector.
Okay. And sir, would it be fair to assume that the margins will be highest in space or it would be nuclear, but considering nuclear is marginal, so in our mix, space will be higher margin?
In terms of portfolio, I will say that the -- if you put a rank, rank 1 of the margins will be highest in space because of [Technical Difficulty]
Excuse me, sir, we are not able to hear you. Ladies and gentlemen, it looks like we've lost the audio for the Chairperson. We request you to please remain connected while rejoin them back.Ladies and gentlemen, thank you for your patience. We have the line for the Chairperson connected. Sir, you may proceed.
Yes, the question was relative ranking of our margins in the space sector or defense versus nuclear. I was telling that the highest is in the space sectors because their quality requirement and type of customized alloys they are asking. Nuclear also is more or less in the same region, but it is rank 2, maybe on the same range. And the defense will be the last.
Okay. And sir, approximate difference between the margins, could there be any indication that you may provide?
See, I will say that you can take it, on an EBITDA level, 2:1 ratio between defense and space.
Okay, okay. Great. And sir, in terms of the visibility and the scale up from here on a medium-term basis, how is Mishra Dhatu kind of setting itself up? Do we expect that the spending in the sectors that we address will continue to go up? And are we already starting to make some investment therein? Or is those plans still not pumped up and we'll watch how the spending really picks up from government and then take a decision?
No, see, I will put this way that we are trying to scale up our operations by 2 ways. One is that we are trying to modernize our facility considering the prospect in the sector, which we are serving. So 1 year down the line, we'll have more capacity to build up to supply to these customers. The second thing that we are getting certain export inquiries. Now we started building up the export areas also. Last year, we did it to start with, this year also we are doing it. So we feel that in the export market, which is not a similar material like strategic sector like space, but oil and gas and other sectors are asking something. And those export opportunity as well as the prospect of these sectors and additional capacity increase will definitely will see that our growth remains the same for next 3, 4 years.
And sir, in line with that, a bookkeeping question of the CapEx guidance for both FY '20 and FY '21 will be what range?
See, I will tell you that CapEx now will taper off from '21, '22 onwards. The reason is we were doing a large project called plate mill which was customer funded, which is going to get commissioned by this year -- the next year financial around March '21. And subsequent to that, we feel that CapEx, which was in the range of INR 200 crores, will be in the range of INR 100 crores. And we don't require much investment now to scale up because those equipments of -- not of a higher CapEx requirement. So definitely, from now onward, it will be in the range of INR 100 crores from the next year onward.
Okay. So FY '21 onwards, can be around INR 100 crores order for the next few years, sir?
Yes. Yes.
And sir, just last question. Since you mentioned that we expect to maintain the growth momentum that we saw in the first 9 month even going forward. So we had a very strong Q4 last year, more than INR 300-odd crores turnover, whatever. So will that mean that you are confident of even doing better in that in the same way that you have been doing till now?
I feel that -- if you compare between Q4 to Q4 if -- if -- definitely, I should do better than this, but not at the same range what I have done for Q3 or Q2 because the base was low. So considering the Q4 of last year was higher, definitely, it will be a little higher than that.
Our next question is from the line of Ankit Gupta from IndiaNivesh Portfolio Management.
Sir, regarding gross margin I have a certain doubt. Like in last 3 quarters, we have seen gross margin of 9%, cost of materials to be 9%, 11% and 21%. So is this because of the product mix or is it because of the raw material price difference? Any flavor on that?
See, first of all, you should understand, depending on which product mix we are making, the raw material requirement will change. For example, if you talk about strategy sector, the raw material compositions required will be different. But I can tell you, in general, that raw material prices, for us, as a per unit, has come down. A, we had taken large quantity into procurement mode because orders were clear and we booked the orders in larger quantity in terms of raw material. General trend also, when we booked it, the market was on subdued mode and we could get advantage of that. But as far as an aggregate level, it all depends on which product we are doing it.
Okay. And sir, second question, lot of our raw materials are imported from, say, Australia, Russia, China, right?
Yes. Go ahead.
So sir, how much percentage of raw materials are imported? And secondly, due to this coronavirus, has availability of any raw material been impacted?
See, first of all, we don't procure any raw material from Australia. Our sources are, a, Russian sources, that is for titanium sponge material, that either Ukraine or Kazakhstan or Russia. So that's not effected and that we are getting continuously material. As far as nickel is concerned, that come from international market from various -- depending on the unlimited chain. There's no shortage of that and -- the only thing which we are dependent on the Chinese sources called cobalt and moly. The good news is that when the market was on the downside and based on our experience over the last 3, 4 decades, we booked it up to, let's say, June '20, the orders and we -- all material have come. And we feel by next 15, 20 days, this coronavirus issue will get sorted, so our supply from July onward we'll be looking now. So up to July, we are already having material and which is in our stockyard.
We'll take a next question from the line of Manish Jain from GormalOne LLP.
Congratulations on outstanding performance. Longer term, wanted to understand, in addition to the 3 large segments that you have customer base and the oil and gas that you're working on, what are the other industries that you will like to focus on in developing new product lines?
Yes, I will take this question into 2 parts. A, that we need to focus -- continues to focus on these by increasing volume because such margins there will be -- any other sector, if I go to any sector or railway sector, will not be of that margin. So the choice of the strategy of the company, should we migrate to the larger volume with a lower margin or continue to and try to increase in the higher-margin business. So I think the second choice company will take. But I think they'll be also -- because these numbers now in public domain, I personally feel the competitive landscape also will get intensified. And in the times to come, there will be players who will be also trying to produce similar material.So if that competitive market or the supplier starts building up this type of material, maybe that we need to understand, beyond these sectors, what type of sectors we can develop, where the margins can be maintained. Or go for forward integration and get into -- start into parts making and equipment making, so that we can maintain that competitive edge in the market. So these are the two way I can answer your question.
And second is, what will be the annualized contribution to sales from top 10 customers and top 10 products?
See, my point is that, the type of market I serve, this, I will say, top 10 customers will contribute around 90%, 95%.
And top 10 products?
For same -- similar things.
Our next question is from the line of Rakesh Roy from Indsec Securities.
Sir, my first question is regarding your Rohtak plant, sir. Can you highlight on this one, Rohtak plant?
See, Rohtak plant, after this construction of our building, we were constructing the second building and we also ordered the equipment will be get placed. But the good news is that we have infrastructure at Hyderabad unit. So we are able to get about INR 30 crores, INR 40 crores businesses out of Hyderabad unit only with the existing infrastructure. The moment we shift this infrastructure, as well as we get a new equipment, we're going to scale up from this, which I personally feel somewhere around the middle of this year, that is September '20, we'll start.
Okay. I understand. Sir, what about bulletproof jacket? The company has tie up with [indiscernible] regarding bulletproof jacket?
No, they have been tested. They have been found good. Only challenge with us is now, see, that they are looking for a -- little reducing the cost, which we are working on that. These were some of the orders started coming from paramilitary forces. We are making them and supplying it [ for everyone ]. For armed forces and all that, they want -- the cost should be rationalized and some more standardization should be done, that we're working on that.
Okay, sir. Sir, in annual report, the company has mentioned apart from these two sectors, they are looking for in railway and oil and gas. Can you light on this one, scope of business from railway and automobile?
See, as far railway is concerned, we thought of working on 2 things. One is, we have a bar and rod mill, which we want to get to forward integration to make a spring. We realized that railway coaches' springs were giving problem to them. So we have set up a spring plant, which will get commissioned in the middle of the '20, that is September '20. So that was the area that our forward integration get more validation from our bar and rod.Second, we are talking to the railway sectors from this [indiscernible] as well. The joint venture which will be NALCO for aluminum alloy because future coaches has to be made other than the steel, the ingredient utilization will increase. That's the joint venture we have done it. As far oil and gas is concerned, they want to increase their equipment availability longer period. They don't want equipment should go down. So what they started doing that whatever strategy sector material were being used, high nickel alloy or special steel or titanium alloy, they started utilizing it. Though the cost of procurement has become high for the oil and gas sector, what they feel in terms of life cycle, it pays them. So there is a increasing asking on those type of components. The automobile sector also is another sector which has started moving to those metal because BS VI and all that, they require a different material. So they are also moving in that domain type of metal we are making on that. So I think mainly the railway, the idea is to forward integration as well as getting prepared for aluminum alloy and for oil and gas is because they're asking the similar material. The only thing is that they drive by the cost. So we had to cost of those materials for this sector.
Sir, in FY '19, sir, near by 44% of revenue come from ISRO and 30% from the defense sector, sir. Sir, can we take the same number for next 2, 3 years or this will be changed?
No, at least for 2, 3 years -- I'll say, the large -- you take it to 60%, 65% will be from the space and remaining will be from defense and energy. The large portion from the space.
Okay. The 65% is from the space, sir?
Yes, accurate.
For -- in space, this tender basis or nominee basis, sir, order?
See, I will put it into 2 parts. The space sector, there is some IPR-driven product we make it, which has to come to us because nobody can make it, which they approved it. So all 50 launches of this has come with our materials. So that will be on nomination because they have tested our material, it has given them success in 49 launches. They are generic material, which come through tenders. They ask the public to participate. There we have to be the [indiscernible] And I'll say, the ratio of this will be 80-20. 80 is by the IPR-product and 20 is from the tender.
Sir, apart from the Mishra Dhatu, other company in same business, sir -- in your knowledge, sir?
So in titanium, there is no Indian company. So this means if somebody has to take it, it's only import. And on nickel alloy, we are the largest company. There is a very small company, which does a very small quantity. And on the maraging steels, nobody is there. But special steel, yes, there are 3, 4 companies are there which are working.
Our next question is from the line of Vimal Gohil from Union Mutual Fund.
Sir, if you could just highlight something, highlight the progress that we've made on the JV with NALCO? What is the progress there? I think we were looking at a funding -- we were looking at a third partner for funding. When -- so if you could just highlight some progress that is made over there?
See, I will tell you, this company has been incorporated and some positions have been created, and we've taken the headquarter at Hyderabad. Land also has been taken. Now as for the funding is concerned, we are thinking that if third partner comes even in later stage, no problem. So we want to tie up through 2 routes. One is the best route and other is a compulsory converted venture with a backing of the promoters. So if you take CCD and the loan, we don't require third partner at this stage. Because finding a third partner at this stage is becoming difficult, so we're going to tie up with our banking systems, both CCD as well as debt. That is one part we are doing. Second part what we're doing, we're getting the environment clearance for the land which we have taken. And third thing is that we are trying to work on the tenders which we'll be launching for the facility. And lastly, what we have to discuss within the Board is that, should we go in a model approach, take first melting and then rolling and then finishing or should we go from finishing to the melting. That's another way.
Right, sir. Sir, lastly, just wanted to get a sense. The products that we're trying to build in the JV, what is the current import that we are getting for the same products right now?
See, we are talking about 60,000. Already 30,000, 35,000 tonne is getting imported.
Okay. The demand is for 60,000 and 35,000 is getting imported, is it?
No, no, no. I told the capacity of this plant will be 60,000. And this will come up after, let's say, 4, 5 years. Current demand, already 30,000 of the similar material is getting imported. By the time this plant will come, the demand will be in the range of 120,000 of similar product.
Right. Okay. Okay. Okay.
So we are going to start only with 40%, 50% market.
Right. And sir, what is the end usage of this product?
Generally, these are high-end, high [indiscernible] and light. So what will happen that steel which has a high strength, this aluminum which is hard alloy go nearer, not exactly the same, go to near to steel. So they will get required in the railway coaches, automobile vehicles. They require in the defense sectors of aerospace. Being a lighter material and now with this alloy, they become harder and stronger, so they get lot of application in aerospace as well as railway as well as in automobile. Flat product.
Right, sir. And sir, this will definitely make -- in terms of margins, you do expect the profitability of this company will be very -- would be probably similar to what we're making right now or even better?
I will not say better, I will not say similar, I will say good, good one. Because aluminum alloy is also -- for example [indiscernible] you have to categorize, if it is going for defense and space, obviously, on the similar margin like MIDHANI. If it is going to railway as well as automobile, it will be little lower.
Got it, sir. I got your point. Excellent results, sir. Congratulations once again.
Thank you.
Our next question is from the line of Nikunj Mehta from Wealth Guardian.
My first question is a little broader in sense. If I were to ask you to list top 3 risks that you see to MIDHANI as a business entity, what do you say those are?
See, the first risk which I feel is that how we are going to see the competition which may come in next 5-year down the line. I'm talking about 5-year down the line. Because, obviously, now the balance sheets are -- in the public domain, people know -- people know the market, will understand. So I feel entrepreneurial activity will take place in this field. So this is one. And we knew to get prepared that how we do innovation, so that we remain ahead of these people. This is one.
Interesting.
The second is that the technology also will keep on changing. See, these products, after 5 years down the line in terms of there, will get replaced by the composite and nonmetallic materials. So customer will also shift their preferences to these products. You cannot continue sustainability of the model based on the same product, which you had enjoyed, let's say, last 20 years. So the innovation within the company also will decide. That's another risk which we have, that our rate of innovation doesn't cope up with the requirement of the customer, the changing requirement like carbon fiber, composites or nonmetallic material. So one is the competition, one is the technology. And third risk will be there that how we try to get a supply chain of existing raw materials on a competitive price, because assume a situation, something gets throttled by some type, so how we try to do. I think these are top 3 risks. The other risks are like -- are very, very smaller one, but these are the top 3 risks.
Interesting. That's very interesting. Sir, and just another question. We have a few plants that are upcoming. There is a little bit of CapEx happening over last -- this year as well as the next year. Once all this is done, whatever is ongoing, what is the kind of quantum of revenues that we could reach from this INR 800 crores, INR 1,000 crores range that we are today? Where can we get...
You're talking to my company or you're talking to the competitors...
No, no, no. MIDHANI. MIDHANI, sir.
See, I positively feel that the Capex -- I will tell you, this year itself, production-wise, will be 4 digit figures, the scale will be, let's say, INR 800 crores to INR 850 crores type of numbers. I do not know exactly the -- how much fourth quarter will happen. But from here, the type of order book we are seeing and type of CapEx we are doing, I feel that it should be 2x by another 4, 5 years.
2x in another 4, 5 years?
Yes.
Our next question is from the line of Chetan Shah from Jeet Capital.
Just one specification. You talked about the export market and you said that you are looking at a nonstrategic supply opportunities. Could you just give some more elaborative explanation on that, just to give us a sense that what are the market opportunity, which we are looking at and how big that market can be? And what are the margins? Is it something similar to what we are reaching now? Or this is a little lower than our current or existing margin? Just to get the sense of the market and opportunity.
See, I'll tell you, to be very frank, in any export market of -- even in this similar kind, the margins cannot be the similar what we are enjoying from captive customers or the customers who are with us in 45 days. So that is number one. Number two is that, this type of market we need to build up because these -- sustainability of these customers for a longer period cannot be the only strategy of the company. So what we're talking, let it be with lower margins, build up this market because building up this market and having the confidence on our supply, the customer will take some time, right? The Boeing is talking to us. And they talk with large quantity in their supply chain because they want to shift their supply risk from Russia to, let's say, in India. Now when they talk about this -- the supply, obviously, margins, definitely, they will be asking little lower, but that should -- it may gives us sustainability of that. So market is huge. In fact, whatever we are doing currently in titanium, they say, this is too small for us to ask you to become a partner in supply chain. So that's the discussion they want to do.
Sure, sure. So sir, one follow-up question on the same. Suppose any kind of project or opportunity which comes up on export side, say, Boeing as an example, do we need to go and set up extra capacity, some extra CapEx on that? Or that is something which will take a call once some more clarity emerges out of that? Just trying to understand the cash flow...
I will tell you very simple. We, transferring the prospect of existing customer, so we are scaling our capacity.
Right, sir.
And if these customers, after qualifying us and they make us a supply chain partner, so -- we can start with them -- let's say, 25% capacity can be spared to them.
Right, sir.
So our CapEx, the type of equipment we're talking, it's a knowledge that is more important. Creating another infrastructure for them for a larger capacity is a matter of 18 to 21, something.
Okay, okay. Got it. So there is no major lead time which we require to set up a facility?
Hardly 20% with them when they tie up with you, and then build up on that.
Correct. Sir, one last question. What is normally the lead time in terms of the sales cycle? So once you approach a customer for export opportunity to take it to the big or a larger scale, is it like 3 to 5 years or lesser than that?
No, no, no. See, export market, let me tell you, the lead time will be as low as -- I will say, not more than even 3 months.
Okay.
So you have to anticipate their orders, they will tie up with you and they'll say, yes -- they cannot -- and typically, Indian customers will say [Foreign Language] I will give you an order, give you after 1.5 years. Export market cannot accept this type of thing. They say, you anticipate, you work with us and then give us the supply. 3 months is a largest time. Sometime, they say spot sale that you stock it.
Our next question is from the line of Yash Doshi from SBICAP Securities.
Sir, just wanted your comment on the working capital. Sir, how is it exactly -- currently, what is the number of later days? And in next year, as the defense order proportion increases, sir, do we expect this to kind of deteriorate a bit because base orders, the working capital terms are better than the other sectors? So just wanted your comment.
Are you talking about working capital or are you talking about sundry debtor.
No, sir, working capital in general. And [indiscernible] debtors have been...
In general, see, already got in 9 months about INR 800 crores. And I think, this working capital will come down next year because something is there already in our progress, which is the products that got finished, we have to supply it. We are just in the packaging and all that. There's one order for nuclear sector for tubes, and one is for another tube for the nuclear sector. So we are in the finishing stages. This year, we'll not be able to close it, but next year we'll close it. The second thing, even if defense sector comes, and in terms of payment and all that, sundry debtor if you talked it, I feel about 130, 120 days will be maintained. So I don't think it will become worrisome, otherwise it will improve next year.
We'll take our next question from the line of Ankit Gupta from IndiaNivesh Portfolio Management.
Yes. Sir, one bookkeeping question. Can you tell me the sales volume for the 9 months?
In terms of tonnage, you're asking?
Yes, tonnage, yes.
Tonnage, I will not be exactly able to tell you, but take it as not more than 7,500 tonnes.
7,500 tonnes?
Yes.
For 9 months, right, sir?
Yes.
Our next question is from the line of Aman Vij from Astute Investments.
On the JV side, so you talked about 60,000 tonnes of capacity. So at peak, what kind of sales can we do from that JV?
See, this is approximately 60,000-tonne capacity plant. When it comes on a full capacity, you can assume -- multiply -- 4 lakh per unit our realization and multiply by 60,000, you will get that type of revenue.
Okay, okay. And you had mentioned that for nickel we have one competitor, but not for titanium and maraging steel. So any particular reason we...
I just was off. Can you repeat your question?
Sir, you had mentioned that in titanium and in maraging steel, you don't have any competitor.
Fair enough.
And for nickel [indiscernible] special steel, we have. So any particular reason, titanium and maraging steel competitors are not there?
No. See, the scale of the titanium in the market in India has not gone to that level that people would have come in the competitive landscape, that's number one. And people have not thought because the demand, total together in India consuming 300, 400 tonne, finish level.
Okay.
Now, if this starts increasing, people may come forward or they may find out some way of getting into value chain. So that was the reason of titanium. As far as the margin is concerned, the type of infrastructure required for that, people are not having. And people are not aware of that. And this got developed to whether as a partnership where the product development was done between, let's say, space and the missile business with MIDHANI. Now if somebody has to come, a, he has to create infrastructure, has to learn how to make it and they have to open up to those people.
Okay, okay. And currently, what percentage of our sales are coming from, say, these 2?
Currently, this year it will be, I will say, 60% to 70%.
Sorry, how much?
60% to 70%.
Okay. And maraging will be how much of that?
See, margins also will be around 33% type of...
No, I'm asking about maraging steel.
Maraging steel?
Yes.
No, I told together. Sorry, I told together.
Okay. And maraging steel will be how much of that?
Maraging will be, let's say -- the portfolio will be about 50%.
[Operator Instructions] Our next question is from the line of Rakesh Roy from Indsec Securities.
Sir, I have one question more, sir. Sir, what type of product we are supplying for defense, sir?
See, defense, we are supplying, number one, that material for making the gun. So they make a barrel. So what we do, we make the melting and make a slug and then they forge it further to the gun, that's number one. And there is another T-72, T-92, there is something called beach blocks and fail tubes. So there are various components of, let's say, the tank, T-72, T-92 tank. So we supply the material. Then they have armor vehicle, so which they're in Jabalpur. They want plates and sheets for that, that we supply it. So primarily, their own system which they integrate, they require various small components, either in the tank area or in the vehicle area.
Okay. So sir, government is going to acquire nearby 8,000 [indiscernible] guns. So if any -- you see any order comes from their side?
Yes. So these orders for the gun side, when it goes to we and some other customers, we expect the materials wise, they'll be sourcing from us only.
Okay. So sir, for -- if we take one example, for example take Dhanush gun, how much the order size from MIDHANI for 1 unit?
See, this is -- No, I will put it this way, that if they get it, let's say, 1 gun, I will say, I will get it to that extent of 1 -- INR 2 crores type of orders -- INR 1.5 crores to INR 2 crores type of orders.
INR 2 crores -- nearby INR 1.5 crores to INR 2 crores?
Yes, yes.
Okay, sir. Okay. Sir, my next question is regarding, sir, your debtor days for FY '19 is 181 days. This will improve or...
No, no, this was -- this -- the debtors were in the -- 181 days were last year we closed it. These are -- already we have come to 133 days. So I feel that this year we'll close in the same, around 150 days, and we'll be maintaining next year also similar level.
Our next question is from the line of Abhisar Jain from Monarch Networth Capital.
Sir, just on the point that you mentioned in one of your risks that the technology change in the next 5 years, and hence, innovation within the company needs to match up to remain in -- as competitive as we are today. So sir, what is company right now doing for that? Like, how many people you have already allocated for, say, product innovation and development? Or what kind of spend you are planning for R&D going forward, if you can throw some light?
On an years basis, we are spending about INR 20 crores on R&D, number one. That's in expenditures we are doing. But in terms of the project, which we have taken, we feel that 3D printing as a product will be finding application more and more, but the product everybody is making, but what people do not have is the alloys product. So that's one area. We are working on that, and we'll come out. The second is that people are talking about sustainability of the input material. Boeing has started utilizing some of the scrap material and all that. We are trying to recover some of the material lying with us, can we get a virgin material out of this. That's another area. Nonmetallic areas like carbon fibers, the technology-wise, India is not mature in terms of carbon fiber. So what we're doing, we are talking to a Russian company which will bring the fiber here, make the cloth and make the component of that. And in the area of ceramic material like boron carbide, we are trying to develop some material in India. So these are the areas we are working on that. In terms of manpower, we have about 15 to 20 people working on R&D area. And in addition, we have a collaboration with IIT, some 5, 6 IIT, we are working on that. Some international organizations who are in R&D like Russia and Europe, we are working on that. So it's a collaborative mode. It's a captive mode. And then we have a DRDO Research Organization, which are working with us. So I think these are the complex way of working on innovation. And these are the areas we are working on that.
Okay. And that's very helpful, sir. And do you think that we will be building up as we go forward capability in these areas, like the spend as well as the number of people? Since you mentioned this as a key area which we need to be focusing on or to be -- from a company point of view, from a risk point of view. So will we scale up this area, per se?
I will say the scaling up not in the people, not scaling up people, but in terms of real, like a project by the time, time line has to be compressed. See, for example, if developing an alliance within India for the product 3D printing, it takes 5 years. By the time, you become -- world becomes generic. Artificial intelligence for alloy design, if you become 5 years, you remain laggard. So the biggest challenge will be not in terms of people, not in terms of scaling up. The speed by which we do innovation, that has to be quicker. Otherwise, the innovation will lose its meaning, let me put this way.
All right, sir. Excellent. And sir, also on the competition that you mentioned, since now our details are in open, and that will, obviously, trigger some level of competition. So sir, can you provide some benchmark figures, if, say, somebody wants to have some similar capability at even, say, 1/4 of our size, what CapEx would it entail, other than the capability, of course, but from a financial...
No, no, I think, you should think of financial capability, rather CapEx, which is very -- I will put anybody of it, let's say, how are the sizes of MIDHANI can come in the range of, let's say, I will say, less than the INR 300 crores, INR 400 crores. So that's -- the quantum of CapEx will not be important for any indefinite to come. The more important will be how he builds up the capability and how frequently he builds up the capability.
And even some of the larger players in the metal or alloy industry will not be having that capability or can't build that capability soon enough? Sir, what would be your take on that?
No, no. See in the semi, we'll categorize into 3 categories. Metal alloys company of a volume game cannot do this business. So if -- for example, if somebody is making 1 million tonne -- 500,000 type of material, the system process, the capability is not which can be translated into this business. So that's one part. They need some time. And they have to unlearn or learn something new. The second thing is that, even if they are trying to work out, they have seen that how they get qualified from the customers in terms of the technological process and qualify their material. That is second in this industry. And the third one is very important. If they're going to do the similar thing which people are doing it, how they replace the existing people. The price will not be the criteria. Generally, what happens, the replacement of substitution from the competition on the price is one of the criteria. Here, price will not be the criteria. On what criteria they will say replace MIDHANI's maraging materials, the price will not be the criteria. It is just getting qualified and ensuring that their next 10 launches will not fail because of their material.
Our next question is from the line of Aman Vij from Astute Investment.
Sir, could you talk about the opportunity in navy and aerospace for us?
Yes. See, navy definitely, I cannot -- there are certain projects of submarine which are going to come. And we are going to amend certain procurement policy. Earlier, we used to say that whosoever is the technology partner can decide the material. We are trying to work with the government that whether they can not from MIDHANI, but any Indian material should be purchased, and that should be the first preference. If that comes, obviously, the consumption of the steel, especially the special steel for the submarine project, will increase. I'm not talking about submarine, which is strategic in nature and I cannot discuss. So those are things we definitely are going to have that material. And aerospace, the challenges in aerospace -- so far, we are working on a replacement. Until unless the product like engines -- until unless proportion systems comes to India, I don't think the growth from the material perspective will be high in aerospace that reflects 3, 4 years until -- yes, basic program of the Government of India of making indigenous engine and for that the funds are getting allocated. If those projects comes through, the material requirement of titanium and nickel alloy will also increase. So this is the way I look at it, navy and aerospace.
And any chance we can go for the civil aviation sector outside India? Or do we -- we don't have...
See, that depends upon what type of spares they're looking for and what type of material. Those people who are supplying these subsystem or equipment, they definitely must be having the supply chain. Entering from the start from the material, going to their supply chain on MROs and the civilian, I don't think immediately will happen, but when they set up the facility here, they'll start looking at it. Now some people have started in Hyderabad asking the material, they are reporting from abroad, they say why you cannot have it from India. So those small, small quantity requirement will come from those sector.
Our next question is from the line of Sandesh Shetty from PhillipCapital. It looks like Mr. Shetty has moved out of the queue. We'll take our next question from the line of Ayush Agarwal, an individual investor.
I had just one question. In the last con call, we had mentioned that INR 100 crores -- of around INR 100 crores of revenue wasn't dispatched because we didn't receive the clearances. So was it dispatched this year?
Yes. So whatever clearances were required, they have come. And what I told in this year, we have -- going to finish to 95% some of the product. So value production this year will be high, but we'll not be able to dispatch it. This year, the situation is different than the last year. We made the material, but it is 95% completed. So that will come next year. So our production of value will be higher in this year.
So last year, INR 100 crores, this year, we had booked, right?
We have put it in this year.
Ladies and gentlemen, that was the last question. I would now like to hand the floor back to Mr. Yash Doshi for closing comments. Over to you, sir.
Thank you, everyone, for joining this call. Sir, any closing comments you want to?
No. Thank you very much to everyone. And I think this type of questioning by the investors always help organization to also reflect -- some questions were very interesting, where we also have to reflect while we work on that. So it gives two-way type communication. They understand and they try to get confidence on the company. As are concerned, we get independent views, questions based on certain professional thinking. It gives, basically, some ideas to the management also. Thank you very much to everyone. And thank you to SBICAP for giving this opportunity to MIDHANI also.
Thanks, sir. Pleasure is ours.