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Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of Pricol Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Pricol Limited.
On behalf of the company, I would like to thank you all for participating in the company's earnings call for the first quarter of financial year 2023. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature.
Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decision.
The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks.
We firstly have with us Mr. Vikram Mohan, Managing Director; Mr. P.M. Ganesh, Chief Executive Officer and Executive Director; Mr. Siddharth Manoharan, Chief Strategy Officer; and Mr. Priyadarsi -- I'm sorry, and Ms. Vidya, who is the Chief Financial Officer.
Without any further delay, I hand over the call now to Mr. Vikram Mohan for his opening remarks. Thank you, and over to you, sir.
Thank you, Anuj, for the introduction, and a very good afternoon to our investors participating in this call today.
We apologize for the slight delay in starting the call because of some technical issues, and thank you for your patience. I'd like to once again introduce my colleagues on the call today. We have with us our colleague Ganesh, who's our CEO and Executive Director and Member of the Board.
We have Siddharth Manoharan, who's our Director, Strategy and Head of Special Projects and [ Vidya Venkatachalam ], our Financial Controller. Our CFO, could not make the call today as he has had a bereavement in the immediate family and is busy with the ceremony.
I do hope all of you have had an opportunity to look at the presentation that has already been uploaded. I will go straight into some of the key parts of the presentation, which I would like to dwell upon. Some of the key partnerships that we have entered into in the last few months has been with the growth our company that we face in the silicon valley, which is going to help us strengthen our presence in the driver information system and telematics by offering end-to-end solutions and helping us grow our software preference in the driver information systems base.
We have recently entered into an agreement with power sales -- BMS power sales as part of the startup group based in Europe. This is a new product that will help us increase our play in the EV portfolio of products in the coming years.
For those of you who are not familiar with what BMS is, a BMS is eventually going to play the role of an engine in a vehicle -- in an EV because the fuel is provided by the battery. The battery management system, which is hardware plus software put together, will command and control the vehicle.
We have also created a center of excellence with PSG College of Technology, institution of repute and rank among the top engineering institutions in the country to develop high-efficiency micro motors and robotics and artificial intelligence to bolster our manufacturing engineering capabilities as well as to help with our actuation and fluid control systems vertical of the company.
We have also partnered with Candera CGI studio, which will help us improve our HMI solutions. Because as our driver information still are getting more digital, we need to have better human mission interface between the vehicle and the driver. And our partnership with Candera will help us go that way.
So as I've mentioned earlier in my earnings call, we are working towards becoming more of a technology-driven company and a technology company to -- in the automotive industry rather than a component manufacturing company. And all of these partnerships that we have entered into so far are helping move us in that direction.
Having said so, we continue to invest nearly 4.7% of our sales on both product and process technology, and about 60% of our white collar cost continues to be spent on product and process technology, which will help us -- help keep up ahead of our competition in terms of offering technological solutions and not just products or components to our customers.
Some of the key highlights where winning the Suzuki Motorcycle Vendor of the Year Award which was received by our Assistant Director in June.
Cutting to the financials, which are most of you would be interested in. We have, at a consolidated level, reduced our borrowing significantly to INR 65 crores compared to the same time last year. As of 30th June our excluding ECLGS borrowing, the long-term borrowing trends by INR 65 crores. And as a management team, we are badly confident of extinguishing this and bringing it to 0 in the next few months.
We've had a healthy EBITDA and healthy EBITDA margin. EBITDA margin, of course, could have been higher if not for the supply chain constraints that we have been facing on account of the IC shortages. We continue to buy IC at premium prices and also by paying expediting fees.
Part of these costs are offset and compensated by our customers and part of the costs are being absorbed by the company, which has resulted in an EBITDA margin of only 11.8% on a stand-alone basis and 13.06% on a consolidated basis. These problems will continue to operate for another 2 to 3 quarters as per experts opinion and supply chains come back to normal and demand come back to normal, until which the EBITDA improvement, what the team is working on is going to be a little difficult.
Our revenue from operations on a quarter-to-quarter comparison between quarter 1 FY '22 and quarter 1 FY '23 has seen a 41.61% increase. This is also on account of quarter 1 in FY '22, having the second wave of COVID and resulting in partial lockdowns at that point in time.
Our cash profit for the period has increased again on a quarter-on-quarter comparison between FY '22 and FY '23 by 48.63%. Profit before tax has increased substantially and so has profit after tax.
On a consolidated basis, again, the numbers are similarly significantly higher. Our EBITDA for the first quarter on a stand-alone basis stands at 11.8%. And our total borrowings, including working capital is at INR 138 crores, of which INR 65 crores are long-term borrowings.
We have further reduced these long-term borrowings by about INR 40 crores in July. So our long-term borrowings as of today stands at INR 25 crores. And the management team is very confident of extinguishing the same in the next few months with cash generated from operations. On a consolidated basis, we have generated an EBITDA of about 13%, and borrowings continue to be on a similar note. We don't have any borrowings at any of our subsidiaries. All of our subsidiaries are cash accruing.
Some of the recent product launches have been the TFT cluster for the iqube, which has been a runaway success for TVS, iqube launched model by TVS Ronin and some industrial export products. And for the first TATA Motors, EV commercial vehicle, we have been selected to be the supplier as well.
Thank you very much, and we'll be happy to entertain any questions. A humble request in order to allow everyone a chance to have their questions, we would request participants to take one question at a time. And once their question is over to join the question queue if they have further questions. Thank you very much.
[Operator Instructions] The first question is from the line of Jinesh Shah from Kongu Commodities.
I just had a couple of questions regarding our order book and our utilization levels.
Mr. Jinesh, I will answer your question. This is Ganesh here. Jinesh, actually, what we do is the capacity is created based on the customer requirement.
How we generally work is on a 2-year horizon in terms of capacity planning. So what customer gives us is the indication for -- on a rolling basis for 24 months. Based on that capacity is planned. Capacity is based on the final assembly operations.
It's what we do. In terms of backward integration, Pricol is a very largely backward integrated company. Depending on certain fluctuations in demand, if the demand is going to be high during the festival season, then we can contract it outside to our suppliers.
Okay. Understood. And regarding our order book?
See, it is difficult to say what is the order book as such because OEM doesn't work that day. It is always on a rolling schedule that whatever they give it to you.
So there is generally a 1-year month-on-month requirement on a rolling basis for the month-on-month period for our material planning. That is how the OEM works. So there is nothing called as a specific order book position. But as we speak, the demand has been quite robust. And you can see the results in Q1, we have done more than INR 430 crores.
I'd like to further supplement what my colleague Ganesh has said. I hope I'm audible now Mr. Shah. We have a very healthy order pipeline and a healthy pipeline of new products, which have been confirmed as LOI from our customers, which will have start-up production in various time frames over the next couple of quarters.
So in terms of a new product pipeline and confirmed LOIs from customers, we have a very healthy pipeline. The headwinds that we are facing in the industry, which is the supply chain headwind and logistics headwind will continue to hamper our optimal output, not just of us and OEMs.
I believe we will be producing 10% less than what the demand is as was seen in quarter 1 though the demand is higher purely because of these segments faced by our ultimate customers, which is our OEMs as well as assets. And these headwinds are expected to ease off in between 6 to 9 months per industry experts.
Sir, if I would also like to understand the recent partnerships that we've got with BMS and Sibros. When can we expect products in partnership with them to come into production? And how -- can you just throw some more light on these partnerships?
With regard to the growth, the first set of joint products will be ready this month. And for next month, we start the roadshow with the customer. With a customer who we might not like to name but a very large OEM, we have already got an LOI, which will go into production in about 12 months' time.
But the real power of this partnership and in terms of specific numbers, it will start firing on all cylinders in about 24 months. With regard to BMS power phase, the first visits to the customers will start taking place now. And the real benefit of this partnership and this is a very, very mission-critical product. Like I said, it's going to be the heart of the automobile or the EV vehicle.
So the first revenue will not be expected before 24 to 30 months coming out of this partnership. The center of excellence launched with BSG, and we have one more center of excellence with another engineering institution of repute in the annual which will be announced shortly. These are to only bolster our development capabilities, both on product and process.
[Operator Instructions] The next question is from the line of Vipul Kumar Anopchand Shah from Sumangal Investments.
And congratulations for a good set of numbers. Sir, my question is what percentage of our turnover comes from driver information and Connected Vehicle Solutions segment and actuation control and fluid management systems.
65% of our turnover comes from driver information system, 50% to 55% based on the product mix and about 30% from the actuation and fluid control systems. Ganesh, correct me if I'm wrong.
Yes, Vikram, I think that is the right number.
So sir, this actuation control and fluid management system mostly will be in IC engine, right?
Yes, it is in IC engine, but we are focusing more on the off-road vehicle, construction equipment, heavy-duty engines, which are not going to be disrupted by EV vehicles and exports.
We do have a portfolio of about INR 130 crores, which are to the 2-wheeler IC engines in the fluid management system, which over the next 5 to 7 years will fade out. But the new product growth for the other segments in that vertical is far outweighs the loss of this business.
And sir, can you comment on the margin for the 2 segments? They are same or they are different?
On a normal basis, the margin for the driver information system is higher and for the activation and fluid control systems is lower on a normal basis. But for the past 1 year, the situation has been slightly reverse. Because one of the key raw materials for the driver information systems is ICs and electronic components, which are seeing massive shortages.
So we are paying premium prices to get raw material as well as premium freight and expediting fees. So today, the case has slightly ticked. But on a normalized basis, the margins in the DIS segment are higher than the road control systems, which is a little more [indiscernible].
And sir, lastly, what percentage of our turnover comes from 2-wheeler and what percentage comes from 4 wheelers and other vehicles?
I will let my colleague, Ganesh answer that question. Ganesh, over to you.
Vipul, about 65% of our total revenue comes from the 2-wheel front. About 25% of our revenue comes from the ORV and the tractor segment. And the remaining comes from the personal passenger vehicle segment.
So 20% is from tractor and which other segments do you said, sir?
Off-road vehicles, commercial vehicles and tractors.
I'll just repeat, Vipul, if I'm not audible. 65% comes from the 2-wheel front. 15% comes from the commercial vehicle, about 10% comes from the tractor and the ORV segment, and the remaining comes from the personal.
[Operator Instructions] The next question is a follow-up from the line of Vipul Kumar Anopchand Shah from Sumangal Investments.
So sir, can you comment on the CapEx required for your recent partnerships, what is the scalability? And -- I mean what type of margin we can fit from these products competitive intensity then it will be really very helpful, sir.
Mr. Vipul, this is Vikram Mohan speaking. We have estimated CapEx of about INR 350 crores to INR 400 crores over the next 24 to 30 months in order to meet our FY '26 goals or Vision 2025, as we call it within the company, which will take care of all our new product launches and alliances.
In terms of margins, we believe normalized margins for our business for this family of products should be between 14% and 14.5% EBITDA at against the 11.5% that we are seeing today. This erosion in EBITDA will continue to be there for another year for at least 9 months before it improves and as the new technology products also kick in the margins improve. So that answers your question in terms of CapEx, anticipated CapEx and also in terms of growth and in terms of margins.
Some of the common effect products like 2-wheeler oil pumps and the lower margin product as they keep going out of our portfolio and the more high-technology products like the PFT clusters where they start replacing the mechanical clusters, the margins are going to also go up, which is why I said when the supply chain pressures ease and normalized supply demand in electronic components. And as we keep moving up the technology curve along with our customers, our margins will normalize at around 14% to 14.5%.
So regarding this battery management system tie-up. So what exactly we'll be supplying? We'll be supplying battery pack or we'll be supplying components, means I'm little confused. So please clarify, sir.
Mentioned what is a BMS, a BMS is not battery. BMS is not a charger. But it is a piece of hardware and software, which manages the entire vehicle propulsion system, right? So it is hardware plus software put together, which sits on top of the battery, the charger, the motor, the drive, et cetera, which manages all of these systems and helps to the propulsion of the vehicle.
So it's basically hardware plus software put together, which will sit and manage the vehicle propulsion.
So the BMS we'll be selling to 2 wheelers, 4 wheelers or we'll be selling to all vehicle manufacturers. And what type of content per vehicle we can expect from.
With the 2-wheeler segment, but this will cut across all vehicle segments of BMS.
So in BMS, sir, what type of content per vehicle we can expect from this business once it becomes fully operational?
We will be able to give you those figures a little bit later in the day because we still start to work on the product along with BMS, power sales. Yes.
Okay. So it looks very promising. Sir, I would like at your opportune time, your company looks very interesting to me. I would like to meet you. So whom should I contact because I have a lot of questions, which cannot be asked over call. So whom should I contact?
Please do get in touch with our Head of Corporate Communications, who is also on this call, Mr. Siddharth Manoharan, who's also our Head of Strategy and projects, and he will be able to facilitate in-person meeting at a mutually convenient date with the leadership team.
The next question is from the line of Vishal [ Sanjevani ] from Motilal Oswal.
Sir, my question was regarding the CapEx and you mentioned that you are going for a CapEx of INR 350 crores to INR 400 crores over the next 3 years. As a company has been shortlisted in the PIS scheme -- shortlisted in the PLI scheme that is offered by the government. Is the entire CapEx is classified as PLI CapEx? Or how does it work out?
I will request my colleague, our Director of Strategy and Head of projects, Siddharth to take that question because he handles that function.
Thank you. Vishal, as part of the PLI application, yes, we have been approved, and the INR 300 crores of CapEx, what our managing data mentioned will be staged over the years and depending on the product maturity as well.
And many of these products have already applied as part of the PLI application will be qualifying for the PLI scheme. And -- but we will not be able to quantify the exact values as we stand.
Okay. And sir, we have been doing a PAT on gross basis of around 2%. So will we continue to do a PAT of 2%? Or will we be increasing our PAT on a sequential year-on-year basis?
We will be increasing because historically, we had a high amount of borrowings to have reduced our interest cost was high, which has now reduced with long-term borrowings now reaching near 0 over the next couple of months, it will improve.
Even between Q1 of FY '22 to Q1 of FY '23, as you see in the presentation, there is been a significant increase. And to draw your attention too is free cash flow and cash from operations, we have also seen a significant increase. And almost all of the CapEx that has been planned will be funded from internal approvals with next to no external borrowings for the same.
The next question is from the line of Amit Mehta from Sunidhi Securities.
And the congratulations for the good set of numbers. You mentioned that you have a term loan of INR 65 crores and working capital going up INR 74 crores on a consolidated basis. You also report the cash balance during the half yearly numbers. So can I know what is the cash balance, so we know what is the net debt in the books.
Mr. Mehta, actually, as we stand today, as I mentioned earlier, the term loan is not INR 65 crores, because we have retired term loans for the month of July also. It stands at INR 25 crores.
Now it's INR 25 crores?
Yes, it is INR 25 crores as of today because we have further retired term loans. The cash balances on the books, I don't have the figure a today. I will request my colleague, Vidya, who's on the call to answer that question.
Yes. So as far as a cash balance in books on a consolidated level, it will be net of long-term borrowings will be nil. We'll be having a positive cash reserve on a consolidated basis. But as regards to our working capital, we are having working capital borrowings to run the show. So that will be around INR 70 crores.
Okay. So can I assume that your net debt is only INR 70 crores, net of cash?
Yes, yes. Short term, including working capital borrowing.
Okay. And regarding the CapEx, you mentioned that you plan to spend about INR 350 crores to INR 400 crores for the new products. So that will take about 2 years in a phased manner. So how much revenue this CapEx can generate approximately?
We currently have a capacity of about INR 2,200 crores for bearing product mixes, it could come as low as INR 2,000 crores, it could go as high as INR 2,400 crores based on the product mix, which is our current capacity.
If we invest the INR 350 crores to INR 400 crores give or take, that will put us closer to a capacity of INR 3,500 crores.
INR 3,500 crores.
INR 3,500 crores to INR 3,600 crores capacity and INR 3,500 crores.
Okay. So currently, though you have a capacity to do about INR 2,200 crores of the revenue. But still -- we are still in INR 1,800 crore kind of a range. So when do we see that we can go to the optimal level of capacity from our existing capacity available.
When possibly a war in -- I'm just joking, but when possibly a war in Ukraine is over and things are normal in Taiwan. Actually, like I mentioned earlier, the demand is higher than what we are able to supply. We are losing at least about 10% production every month, which means our OEMs are also losing that production.
So the demand actually that is there today, the current run rate of demand is closer to about INR 155 crores, INR 170 crores, whereas we are producing only about INR 150 crores there. So we can reach our capacity when certain normalcy comes back, improve supply chain, which is going to take between 6 to 9 months.
And that is why we are now planning for the new wave of CapEx in order to enable our new product launches and enhancing capacities for all the new businesses that we have won, which are going to go into production in FY '24 and FY '25.
Okay. We have read that the availability of the chips has little bit improved. The problem was severe 6 months back, but now there is little ease of the availability of this chips. So is that true or...
No. Actually, if you ask me, even yesterday at a board meeting my CEO and I were telling a director, probably, we are at the worst at this point in time. Q2 is possibly going to be the worst quarter for chip availability for the automotive industry.
Chip availability has improved for the nonautomotive segment like the computers and telecommunication industry. But I think the automotive industry, it has reached its peak at this point in time.
In fact, we are literally running on 1 shift or 2 shifts raw material and availability of chip.
This is Vidya here. Let me clarify the borrowing position again. See, at a consolidated basis, we are currently long-term debt-free now. Because we have cash reserves which, can nullify the current long-term debt, what we have as on 31st of July in the consolidated level.
And with regard to working capital, as you're aware, our repo rates are increasing. So we are exploring ways not to utilize our borrowing. Instead of borrowing, we are exploring ways to go for some factoring or discounting facilities with the customers. So thereby, we are planning to reduce our borrowings -- short-term borrowings also. Hope It is clear now.
So this working capital loan of INR 74 crores, which is a drawn limit, correct?
No. The drawn limit will be around INR 25 crores now since the repo rates are going higher. We are just going in for some working capital demand loan at a very low competitive rate. Whereas the working capital funding assets, including our acting facility with the customers and discounting facility with the customers will be around INR 70 crores.
So in the financial asset, we'll be showing only around INR 20 crores to INR 25 crores as working capital borrowings. Whereas the working capital funding will be around INR 70 crores. Yes.
Okay. So when we say the company plans to become a debt-free so probably the next quarter, you will have a term loan debt fee. And the working capital will -- loan will fluctuate depending on the volume of the business. Is that assessment correct?
I always maintain that by March 2023, we will be long-term debt free.
Sir you will be before that.
Pardon me.
You will be before that now because now as we speak, you are only INR 25 crores term loan.
No, no, no. So just hold on. In my earlier earnings call, I had promised that as a team, we are working towards the goal of becoming long-term debt free by March 2023. So we are ahead with our cash generation.
I'm telling you, you will be much before that. Yes.
Yes. On a net debt basis, with cash balances, we are already on a consolidated basis, we have no long-term debt. But the INR 25 crores debt, which you will -- which is there in the books also will get retired in the next couple of months.
Yes. Yes. Okay. Okay. And madam, what is the interest currently, what we are paying on our working capital loan?
Yes. For working capital borrowings assets, we have -- we are at 6.25 percentage, but you might have seen there is another repo rate increase today. So we need to wait and see how it may increase.
As far as the other working capital funding per se, it is around 7 percentage now. And we also have 1 AC&GS loan, that is at around 8 percentage. That is also towards the working capital.
The next question is from the line of [indiscernible] from JMP Capital.
I have 2 questions. One is that we have a research technology center at Coimbatore.
We are unable to hear you. Can I request you to be a little louder, please, sir.
No, sure. Do you have a -- can you hear me now well?
Yes.
Yes. We have a research center at Coimbatore where around 300 engineers are working and we are spending almost 5% of our revenue size. So I just wanted to understand from you, how this research center is contributing toward operational material efficiency as well as how this research center will contribute to expand our presence in field other than 2 and 3 wheelers.
Let me just correct you on that. It is our engineering and technology center for product and process development and the exact number of people working there are 380 people out of a total white collar strength of 850 people.
Out of our total white collar compensation, about 60% is used for both product and process development. A lot of our new business wins with Tata Motors or TVS or Bajaj or Hero Motors has been because of the efficiency of this technology center. Any of our Indian peers who are dependent on foreign partners for technology or MNC companies that are dependent on their own company technology centers, we are able to do it very prudently.
That is why our market share is at a high. And we are not restricted only to 2 wheelers. We also have in commercial basis an 80% market share. And we have now started entering the personal passenger vehicle segment also with the business with Tata Motor business with [indiscernible] et cetera.
Yes. I got you, sir. My point was that we have 65% content of our revenue is coming from 2-wheelers. And then the rest, we are there in all the segments but 10%, 10% and odd, we are there. So it's a long-term planning. I mean do you think that going forward, this 10% presence can be double in next 5 years?
Can I do that?
I mean, my point is that now the like if we are there in EV as 10%, which is approximately INR 150 crores. So these kinds of presence in 4-wheeler EV tractor and off-road vehicle can be double in next 5 years?
We understand. We are continuing to grow. EVs are continuing to grow. In 2-wheeler, we are the world's second largest in the area. In off-road vehicles, commercial vehicles, we are among the world's top 5. So we will continue to maintain that leadership position.
In passenger vehicle, we are growing, but we will not be among the top 3 in India for strategic reason. Because -- for example, the European carmakers tend to work with European suppliers like [indiscernible] and the Japanese carmakers will compete with people like -- will have suppliers like [ Nikon Seki or Denso ] because they launched the same platform in about 20 factories in about 9 different countries.
It is impossible for Pricol being an Indian company to supply across so many factories in so many countries. So we are focusing on such car makers where we can have a tactical advantage. So our focus will remain on these product verticals.
Our focus will remain on 2-wheelers, off-road vehicle and commercial vehicle segments and tactical customers in the passenger vehicle segment -- personal passenger vehicle 4-wheeler segment.
Next question is from the line of Ravindra Goel from ICICI Securities.
There's some clarification. So back in quarter, so maybe like if you don't disclose your partnership with Sibros. At that time, you said that the CapEx you're planning was somewhere around INR 600 crores, and funding for the same was then to be the equity and debt combination of both.
So I just wanted a clarification on the current INR 350 crores CapEx you are like taking like is it part of the sale or there has been a change of plan, if you can please clarify this, right?
Mr. Goel, your voice was very, very garbled, we couldn't make out 75% of what you said. Can you repeat a little louder and slower, please?
Mr. Goel, if you are on speaker, can you please come on the handset mode and ask your question. Yes, go ahead sir.
Is it better now?
If you can speak a bit louder, I think it should be better. Go ahead. We will let you know how it's done.
Sir, I want a clarification, like back in quarter 3, when you disclosed about your technical tie-up with Sibros Technology. So at that time, you said your CapEx plan would be somewhere around INR 600 crores that would be funded through a mix of getting equity. So I just wanted an update or any clarification whether there has been any change of plan with respect to the same.
There has been no change of plan Mr. Goel. The INR 350 crores to INR 400 crores is on our stand-alone or Pricol stand-alone. We are working on 2 joint ventures, which and that funding then that will also entail a investment.
But we are now still discussing what is going to be the partnership, what is going to be the investment? What is going to be the contribution by the joint venture partner. We are now talking about INR 350 crores to INR 400 crores in the next 24 to 30 months, which will be spent by Pricol outside of these joint ventures that are being -- because that is still not concretized. Am I clear, Mr. Goel? Maybe we can move on to the next question, ma'am.
The next question is from the line of Vipul Kumar Anopchand Shah from Sumangal Investments.
Sir, we are already manufacturing driver information systems. So what value this Sibros partnership will add. So can you elaborate?
I request you to go into the presentation and read a little bit more about what the Sibros part is because it is very clearly mentioned in the investor presentation and then since you've asked for a personal meeting, my team can explain more clearly because I don't want to get this into technologies.
Yes, there are -- yes, 4 or 5 lines have been written. So -- but still, I could not understand that's why I asked the question. Anyway, if you want, I can take it offline also, sir.
Yes. Because it's good to get into -- heavily into technology. Basically, we are in hardware, they're in software. And the power of both are coming to get us to deliver a better position. One way to answer in one line.
[Operator Instructions] The next question is from the line of [indiscernible] from Mount Intra Finance.
So would it be possible for you to give some light on the kind of order book which you have currently?
I think this was answered, ma'am, by my CEO and Executive Director. But like we said, we are capable of producing about INR 2,200 crores of business right now, and we are a little suboptimal right now.
And we are creating capacity to go to about INR 3,500 crores over the next 2.5 years. And this is based on future LOI and pipeline that has been indicated by our customers. With regard to the order book, the CEO had answered the question earlier, how the pipelines work and how order books work in the automotive industry.
As there are no further questions from the participants. I now hand the conference over to the management for closing comments.
May I request our Director of Strategy to close this conference call, please.
Thank you. On behalf of the management, we would like to thank all the investors and analysts who joined in today's call. We look forward to connect with you in the future. And any queries, if you have, please reach out to us directly or through our Investor Relations partner, Valorem Advisors, for any clarifications. Thank you once again for joining the call today.
Thank you. On behalf of Pricol Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.