Ramkrishna Forgings Ltd
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Ramkrishna Forgings Ltd
Earnings Call Analysis
Q1-2024 Analysis
Ramkrishna Forgings Ltd
The acquisition of Multitech is a strategic move expected to contribute an additional revenue of $5 to $6 billion within the first two years. With Multitech's existing gross debt standing at approximately INR 45 crore and an EBITDA margin of approximately 14%, investors can look forward to a strengthened financial profile for the company following the acquisition.
Export performance has surpassed expectations, with significant order conversion bolstering growth. The company anticipates that export incentives, contributing to higher other income this period, are sustainable over the long term, promising continued financial benefits from international operations.
Current margins are projected to be maintained, with aspirations for an upward trajectory of 50 to 100 basis points year-over-year. Additionally, the venture into railway industry implies improved payment terms, potentially reducing debtor days and enhancing working capital cycles.
Confidence is high for achieving and potentially exceeding the previously guided volume growth of 15% to 20%. This growth forecast paints a positive picture for the company's operational scalability and market demand reception.
The company envisions a volume growth rate of 15% to 20% over the next three years. This ambition is backed by continuous capacity augmentation and diversification into new product segments. Over the next two years, margins are expected to improve significantly, with Multitech alone aiming for a 200 to 250 basis points increase in EBITDA margin. Net working capital maintains at around 60 days, demonstrating efficient capital management.
A strategic financial goal has been set to achieve a debt-to-EBITDA ratio of 1:1 by FY '25, indicating disciplined leverage and debt management. The average interest cost on debt is around 8%, reflecting the company's borrowing costs and signifying sound financial stewardship.
The company targets achieving 30% of its business from non-automotive segments, aligning with overall diversification goals. Furthermore, with a robust plan to launch product lines in the passenger, commercial, and electric vehicle segments within the next two years, the company is strategically positioning itself to capitalize on evolving industry dynamics.
The railway segment is expected to contribute 4% to 4.5% in growth this year, which is a testament to the company's diverse operational capabilities. Meanwhile, the wheel plant is projected to achieve EBITDA positivity within two years of operation, with a 5-year payback period for the investment, suggesting significant potential for long-term value creation from this asset.
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Ladies and gentlemen, welcome to the Q1 FY '24 Results Conference Call of Ramkrishna Forgings Limited hosted by Emkay Global Financial Services. [Operator Instructions] Please note this conference call is being recorded.
I now hand the conference over to Mr. Chirag Jain from Emkay Global Financial Services. Thank you, and over to you, sir.
Thank you, Bikram. Good evening, everyone. On behalf of Emkay Global, I would like to welcome you all to this earnings call of Ramkrishna Forgings Limited.
Today, we have with us from the management team, Mr. Naresh Jalan, Managing Director; Mr. Lalit Khetan, Whole Time Director and Chief Financial Officer; Mr. Chaitanya Jalan, Whole Time Director; and Mr. Rajesh Mundhra, Company Secretary and Vice President, Finance.
I shall now hand over the call to Mr. Lalit Khetan for his opening remarks, post which, we will open the floor for the Q&A session. Over to you, sir.
Thank you, Chirag. Dear all, on behalf of Ramkrishna Forgings, I would like to extend a warm welcome to everyone. I have along with me Mr. Naresh Jalan, our Managing Director; Mr. Chaitanya Jalan, Whole Time Director; and Mr. Rajesh Mundhra, our Company Secretary.
The company has worked hard and stayed determined during these ongoing global challenges. We are flexible and successful organization that thrives on challenges, and we'll take advantage opportunities that come our way, such as extending our business, improving productivity and making sure our customers are satisfied.
We have become an important part of the global market, even though the world economy is a little weak right now. The good news is that the things will get better with time. We are committed to gaining more customers and getting ready for the business growth when the market conditions improve. We are also increasing our capacity to support this growth. As a company, we are prepared for the future.
Over the past months, we've achieved significant milestones that have further solidified our position in the industry and profiled us towards greater success. I'm pleased to announce that we have recently incorporated a new company, Titagarh Rail Wheels Limited in correlation with Titagarh Rail Systems Limited. This strategic partnership brings together the expertise and resource of both organizations, paving the way for new opportunities and accelerated growth in the sector.
Our consortium with the [ TWL ] has signed a significant comfort with Ministry of Railway Government of India under Aatma Nirbhar Bharat initiative. This contract entails the supply of 1.54 million forged wheels further solidifying our commitment to supporting the growth and [indiscernible] nation of the Indian railway sector. We take immense pride in contributing to the development of our nation's infrastructure and being a part of this transformative initiative.
The Board has also approved acquisition of Multitech Auto Private Limited and its wholly owned subsidiary Mal Metalliks Private Limited. The company has a capacity of to manufacture 21,600 metric tonne per annum machine SG & CI castings and Bar Draw facility of 6000 metric tonne per annum. This acquisition marks a significant step forward in the company's growth strategy and that expanding its product line and fortifying its presence in the passenger vehicle, light commercial vehicle and heavy commercial vehicle segments.
During this quarter, the company has secured a prestigious order of EUR 4.5 million from a prominent European railway passenger coach manufacturer. The achievement highlights the trust and confidence the global industry leaders place in our capabilities and products.
In addition to these, I am delighted to share that our company has commenced commercial production of 13,700 tonnes per annum of R A shaft press line and 10,100 tonnes per the 5-inch upsetter. The significant extension in our production capacity totaling 23,800 tonnes per annum will strengthen our ability to meet the increasing demand for high-quality post components in the automotive industry.
With this addition, our total production capacity now spread 2,10,900 tonne per annum, reaffirming our commitment to delivering excellence to our value. We are also pleased to witness a rise -- I'm sorry, happy to witness a rise in demand for our products and services, resulting in substantial growth in both revenue and profits in Q1 FY '24. We reported revenue of INR 836 crores, approximately representing a year-on-year growth of 28%.
Our EBITDA margin for Q1 FY '24 is 22.5 -- 22.4% expanding by 35 basis points year-on-year. We are confident of sustaining and improving this margin. The net profit after tax was INR 77 crores for Q1 FY '24, which is year-on-year growth of 63%. This is -- it will be added by the lower tax rate also.
As we move forward, we remain committed to innovation, operational excellence and customer satisfaction. We will continue to invest in advanced technology, enhance our manufacturing capabilities and we strengthen our relationship across the industry. With the foundation we have built and the achievements we have accomplished, I am confident that we will continue to excel and high wheel dynamic and competitive market.
Thanks, and thanks for your continued support. That's all from my side.
Should we now open the floor for questions.
Yes.
[Operator Instructions] We take our first question from the line of Mumuksh Mandlesha from Anand Rathi.
Congratulations on the good number, sir, and thanks for giving the opportunity. Can you share the outlook for FY '24 for Ramkrishna. And also what was -- would be the outlook for the India and U.S. CV industry?
And in terms of new orders, what -- how do you see the ramp-up of the new orders? What would be the new orders that will ramp on the next 2 years, sir?
I think, Mr. Jalan not on the call.
Yes. What we see as a market is extremely robust right now within India as well as in North America. And in terms of RKFL, we are extremely confident to exceed growth expectations, which we had set at the end of FY '23 full year results. So we are on track, and we are doing better than what we had guided for.
Got it, sir. And sir, how do you see the ramp-up of this new coal forging capacity? And which products it would get in segment, sir?
The coal forging capacity is going to start generating revenue only next year FY '25. I think in the presentation also we have highlighted that this year that by end, the coal forging facility is going to come up, and next year, we are going to -- we have already received the firm order book for the entire capacity, but the revenues are going to be in place in FY '25.
Any content to share what kind of potential you're seeing from this new capacity?
No. We would not like to put a number to it, but this will be entirely to EV and TVs.
Okay. And sir, can you guide what would be the CapEx expectations for the FY '24 and '25, and also the investments for the acquisition, sir?
Sir, FY '24, we are looking to have a CapEx of around INR 300 crore to INR 350 crore. And the acquisitions still are in the NCLT state. So let it come like JMT Auto and ACIL. As we have already given the guidance on what we would like to invest on that, but we are not commenting on that once -- let it come from NCLT first.
On the Titagarh Rail System and -- sorry, TWL consortium, there, we have a project cost of around INR 1,200 crores to INR 1,400 crores out of that 30% will come from the equity and that has to be contributed over a period 3 years by the each partner. So 1/3 can be contributed each year by the each partner.
Got it, sir. And just on the JMT, as you expect very soon to happen, sir, any data to share on the revenue and profitability of this business, sir?
No, we would like to share the data only when -- after getting NCLT approval. Because I think Indian Legal System, we are -- we do not have any clarity and in terms of time lines. So we have not built any expectation in terms of what business and how much business we can do. We would comment only after we get the complete handover of plant.
Got it, sir. And just last...
I'm sorry to interrupt. Sir, please come back to the [ press ]. [Operator Instruction]
We'll take a next question from the line of Raghunandhan N from Nuvama Research.
Congratulations on great set of numbers. My first question is on Multitech acquisition. So you had indicated in the presentation that additional revenue of 5 billion to 6 billion can be contributed in the first 2 years. If you can give some color, whether what gives you the confidence for this kind of revenue visibility? And on Multitech, if you can give some more detail how is the existing profitability and debt position?
Yes. Coming to the numbers, if you would like to Multitech there is net -- gross debt of around INR 45 crore as on date. And EBITDA margin is in the range of 14% right now. And the top line for the FY '23 is 300 or plus.
Correct, sir. And any -- what gives that hope or visibility of that improved revenue potential? Any color you can add there?
No, I think Raghunandhan, this casting is going to be complementary to what we have installed in terms of forging capabilities. And I think our entire endeavor to bycasting was with the mindset of -- in the next 2 years to get into a complete assembly, the assembly supplier are when being a component supplier, being -- getting into product platforms and casting -- manufacturing our own casting and assembling it with forging, we are going to enter 2 biggest markets of trailer axle and differentials.
And I think we are extremely confident that within next 1-year, we will be able to start productionizing and we can go into full volumes in next 2 years in those 2 platforms, which are growing market going ahead.
Good to hear that, sir. Wishing you all the best.
My second question, like company had garnered order wins of about 7.7 billion, INR 770 crore in FY '23. Can you roughly indicate how much of new orders will commence in FY '24? Would it add, say, INR 150 crore, INR 200 crore additional revenue, because of the new order?
Almost, I think Raghunandhan, it's going to be 40% of last year's what order wins. I think from second quarter onwards, you start seeing that in revenue as you may have seen some part has already started kicking in the last quarter itself, and that's the reason we have been able to do better exports vis-a-vis year-on-year.
And second, third -- I mean for the next 9 months, we see our exports growing much better than what we had expected because of most of these orders getting into -- getting converted into supplies.
That's wonderful, sir. Last thing on -- just a housekeeping part. Export incentives is on the higher side. Is it likely to sustain? And another housekeeping, other income is on higher side, whether it includes any one-off like ForEx gain?
Yes. other income you have rightly said, it is on the basically loan liability foreign exchange loan, ForEx loan. There is a gain. That's why this other income is on the higher side. So that depends upon the foreign exchange demand. Rest other gains or you can say export incentive, that will be sustainable.
And in terms of foreign exchange, that is only, I think, to the tune of INR 3 crores and not the entire amount. INR 3 crores is only the foreign exchange gain in the...
Other income.
Got it, sir. Just a clarification here, export incentive as a percentage also looks higher. So when you say it is sustainable, if you can throw some light there?
Just -- Raghunandhan, let me go to that slide because...
So generally, if I look at last 2 quarters, export incentive is in the range of INR 6 crore to INR 7 crore per quarter. This quarter it's about INR 13 crore. So is there a change in rate or something like that?
No, Raghunandhan, what you're looking at INR 12 crore number that includes other income of 4 and some -- INR 4 crore something, okay?
Okay. Got it. Thank you so much for clarification. I'll come back in the queue.
[Operator Instruction] We take the next question from the line of [ Garvit Goyal ] from [ Nvest ] Research.
Do you -- am I audible?
Yes, you are audible.
Sir, my question is on the margin side. In the last 3 years, regular decent improvement in our EBITDA margins due to operating leverage. And now we are focusing on warm forgings and as you mentioned in the recent presentation in forging, which is obviously a high-margin thing. Plus you are also saying the JV will give you the similar margin.
So my question is considering all these factors, can we assume the opening percentage will see upward direction from here like this 22% kind of margin will be a base margin for the company going forward?
Yes. These margins which are there is going to be sustained, and we are looking at -- our aspirations are to go into much better margin trajectory, but at least 50 to 100 basis points, you will see, keep on changing year-on-year basis.
And sir, we are entering into the railway part like this new company that we are catering to. So we are planning to cater a railway as an industry going forward. So my question is on the debt realization side, like working capital days, how it will shape up with this kind of projects we are taking?
I think in terms of railways, payment is much better than what we are doing right now. So 98% or 95% of the payment comes within 7 days of receipt of material in the railways. So I don't -- in terms of better days, I think it is much -- going to be much lower than what it is currently being a stand-alone basis in RKFL. In the railway business, the debtors are going to [indiscernible] capital not going to get stucked up in the system in terms of debtors in the long run?
And sir, you mentioned volume growth of 15% to 20% last quarter. Now you are saying it may exceed, right? So what kind of number we would like to put on?
I am not saying that we will exceed. I am saying we are extremely confident of achieving and bettering that number of what we had guided in the full year call.
Understood, sir. And one last question on the CV industry, like in this particular quarter, in India, India CV industry. Y-on-Y, there is a new good growth of 3%. So how do you see this particular thing, like going forward in this particular year?
I am not basically tracking what industry is growing at. I am tracking what RKFL is growing at, and we are extremely confident to better our overall growth numbers of 15% to 20% volume growth for coming years.
So I get the capacity getting augmented continuously and with the new generation of forging, which is coming in, we will continue to add new segments, new components, which will add growth much better than what industry is doing. So that's the reason we are not dependent much on what percentage the industry is going, but if the industry remains stable, we will be able to do much better than what we have guided for.
So how many years do you see the stability of these growth numbers 15% to 20%?
How many -- I think basically what vision or what plan -- business plan we are working to is for the next 3 years' time.
We take our next question from the line of Dhaval Shah from Girik Capital.
Great set of numbers. A couple of questions. Firstly, sir, on this acquisition, if you could give us more details regarding their -- how are the financial metrics with regards to the asset turn and the working capital? How is it for this set of products?
Secondly, what sort of synergies can we have with this acquisition? So I was just going through the website, so it also mentions Ramkrishna as their client. So -- yes, so I mean if you can tell us the synergy and the 14% EBITDA margins were reported can it be improved further? Yes, these are my first 2 questions.
I think in terms of margin, we are extremely confident in the next 2 years to significantly improve the margins on stand-alone basis in Multitech, I think at least 200 to 250 basis points improvement in next 2 years in terms of margin on a stand-alone basis.
Synergy basically with the acquisition of Casting and with the acquisition of Multitech, now we are almost except the sheet metal, we are -- and tires and engine, we are available across all platforms in any vehicle, which is moving on road.
And with -- like you have seen in the slide that RKFL is one of their customers. So we use their component to make assemblies, some assemblies which we have already started. So now we can aim with this casting to get into much bigger product platforms, which can be highly EPS accretive for RKFL on a stand-alone basis going forward in the next 2 years.
And I think in our presentation, we have already shown 2 different platforms in coming future, which we will be launching within RKFL purview with the support of Multitech's casting. And I think that's going to be a big game changer going forward for RKFL.
Interesting. And what do they do in railways? Is it a larger product segment for them? Or is earlier trailer?
It's a small product segment for them in railways. So we will -- railway requires quite a good amount of castings also. So basically, with this, now we can go to a customer and offer them entire gambit of components or product assemblies, which are required in forgings and castings by a customer to manufacture a vehicle.
Okay. And sir, this company also has a 100% subsidiary. But while mentioning -- you always mentioned stand-alone number of INR 300 crore. And I think the subsidiary also has significant amount of revenue. So what is the size of the subsidiary? And what is that into?
I think this INR 300 crores revenue capture the subsidiary revenue; we have just knocked off enter related party transactions getting the 2 companies. And this is the revenue, which is including outside sales except the related party transaction is INR 300 crores.
Okay. Okay. So in Mal Metalliks is included into it?
Yes. Everything is included consolidated and INR 300 crores with close to 14% margin is the current operational -- and their asset turn is close to 1:3.
1:3 asset turn, and working capital?
Working capital is around 60 days. Net working capital is around 60 days.
Okay. I will come back into queue.
We'll take a next question from the line of Abhishek from Dolat Capital.
Congratulation for the sound set up in very challenging time, sir. Despite a weak and [indiscernible] domestic industry volume, the volume remained strong in this quarter. Is it because of the new business wins -- winning the domestic market?
I think it's Abhishek, both in terms of new order wins as well as new product launches, which we have done over in this quarter. And I think for us, I don't know from where the slowdown or a weak market is right now coming from. We see -- we are going into Q2 with a very strong demand scenario, and we expect the full year to be extremely strong in terms of our own manufacturing is concerned.
As you met the participants, I mean, the OEMs are guiding around 7% to 10% volume growth in the MSCV segment. So most probably that you outperform the industry growth because of the new businesses?
Yes. And we will continue to do that. And I think like I answered the previous call, we stick to our guidance, and we can confidently say that we will be doing better than what we have guided for.
So can you explain that what can be the growth rate in domestic versus export in FY '24?
Can you repeat your question?
Sir, what would be the growth rate in domestic versus export in FY'24? Or what can be the mix?
We basically -- mix should be on the same 60-40 or 60% to 38% here and there, but we continue to look at 60-40 domestic and exports market. And both the sectors are doing extremely well for us. So we continue to do that right now.
And you have mentioned that total CapEx would be around 300 billion to 350 billion in FY '24. This is including the CapEx for this railway projects.
No, no. What we have said INR 300 crores, INR 350 crores is for CapEx, what the RKFL is doing, whatever the investment that will be separate.
Okay. And so most probably that you will go for the equity dilutions because of this, because there will be...
No, there is no question of any equity dilution. We see operational cash to be deployed prudently into the system to basically augment capacity, create new investments and create new opportunities. But there is no equity valuation even in thought process in coming days, coming months or the coming year.
We take the next question from the line of Mitul Shah from DAM Capital.
Congratulations on a very strong performance, and thank you for opportunity.
Sir first question is on raw material side, as raw material already started pulling up. But when we look at your raw material per tonne basis, there is an increase of 3% on a sequential basis, 3.3%. So can you explain this?
And on the production side also similarly, when we look at your production number versus your sales volume, there is a huge difference. For example, there were segmental, the volume number is 38,000, which is more or less flat compared to last quarter. But the production is significantly down from 48,000 to 44,000. So can you clarify these 2 things, sir.
So in terms of production, I think first, 7 to 10 days in the month of April, we take no annual maintenance of most of our presses as well as you are aware that due to extreme heat during month of April and May until mid of June, ultimately, labor fatigue or this heat, there was a production disruption or slowdown in terms of production is concerned.
So I think 42,000 outcomes, which we have achieved is extremely good as per our achievement, we can say. And in terms of sales, I think that the floating inventory is always there and that's -- we are trying to debottleneck so that whatever we produce, we can 100% sell.
And in terms of RN prices, we don't -- I don't know from where you've got the 3% number of raw material cooling -- raw material prices dropping. Yes, when we see the television or the news shows, yes, we see that steel prices have gone down, but we are determined, we are basically buying steel at customer-directed suppliers and cost. So basically, we have not seen any decline in alloy steel market till now. And if and when it comes, you will automatically see the reflection in our balance sheet also as the steel price decline.
Sir your price has gone up that is what I'm clarifying that price is focused [indiscernible]?
See, basically the price still has gone up on -- because of alloys, nickel, moly, whatever we use, they are basically alloy element pricing, which may have increased at that period of time.
Understood. Sir my second question on a long-term basis. When we earlier highlighted 2 -- sorry, sir, when we highlighted for non-auto segment contribution to reach to 30% overall in the next 2 years. But now this acquisition, again, entirely from the auto side. So further, it will reduce our non-auto contribution below 20% or maybe close to 12%, 15%. So what would be a road map or strategy going forward?
I think the road map in terms of getting into 30% non-auto business is intact and we will be able to achieve that on a stand-alone basis of RKFL. In terms of acquisition or investment, which we have made into this, this is basically getting into new platforms and new businesses or product lines rather than being a component supplier.
So do you need to look at both the things in a separate way in terms of RKFL who are only -- today, one of the leading players in making forgings and components, we are targeting to get into non-auto, auto and we will achieve this figure of 30 to 70 mix, but additional Multitech will give us also a bigger volumes in terms of reaching the product line category, which we were never at.
So we will be able to get into the B2C market of making our own products and branding that at RKFLs brand name and selling this into the market.
Lastly, sir, out of all this ACIL, JMT as well as this recent Multitech, any of these companies has any meaningful loan auto contribution at present or in a shorter period, can we do some ramp up there for non-auto side?
[ ACIL ] has a very meaningful non-auto presence, but we will be able to comment only when JMT comes in. Multitech has only 5% to 7% non-auto segment. So -- but opportunities of supplying castings to railways and other off-highway and other applications are huge.
And probably the management bandwidth of the company we have acquired was not that big to go into those markets with our own expertise in market, obviously, we will be targeting that market. And I think overall, I can -- we are very confident that we will be able to stick to our guidance for 70, 30 non-auto and auto business.
We take your next question from the line of Andrey Purushottam from Cogito Advisors.
This is Sangeeta Purushottam, Andrey's partner. Sir, I just wanted to ask you about your plans to reduce debt to 0, which is what you had guided earlier by I think, '25 or '26. And in the presentation, I noticed that the guidance now is that your -- you plan to bring it down to 1:1 debt-to-EBITDA, so are you now willing to make with higher levels of debt, has the thinking changed a little there? Could you just elaborate, please .
Ma'am, I think you are going to going backdated when we were raising equity, we had thought at the -- 1-year back when we were in around for a QIP, we were at that period of time, we were looking at raising equity and paying off the debt and being a net debt zero company.
But with the operations doing extremely well since last 6 to 7 quarters when -- with the free cash flow which we have in system, we want to grow the business rather than diluting equity. And that's the reason our presentation states and we have been repeatedly since last several quarters in our call also has said, the company targets by FY '25 end to be debt-to-EBITDA 1:1.
So we are not looking at higher debt. Basically, we are looking at a lower debt. We used to -- that have more than 1:3x [ 1:2.8:3 ] as debt EBITDA. We are looking to -- we have already got debt-to-EBITDA, 1:1.55 and we are looking at the next couple of quarters or say 6 quarters from now and 7 quarters from now to get the debt-to-EBITDA 1:1. So obviously, we are looking at debt reductions with the growth we have also in mind.
Right. Right. Okay, sir. No, because I remember asking the same question actually about 3 or 4 quarters ago, I think. And at that time, you had said that your internal cash flows would be sufficient to pay down debt and your target was to bring it down to 0. Back now, I'm assuming that you're willing to just reinvest back in the business and you're comfortable with keeping some debt on the books, right? That's what...
Ma'am, 4 quarters or 5 quarters that you are quoting, we exactly have said that, but we have said that we will not then reinvest money into the company. We will generate enough cash to pay back the debt. And still, if you see, if we are generating that kind of cash and if we do not augment fresh capacity and we keep the growth stable as where it is now, obviously, we will have enough money to pay off the debt. But I think we would rather want to grow the company, grow the balance sheet rather than being debt 0 company.
Right. Right. Okay. And in terms of your average interest cost, what would it be right now?
It's around 8% ma'am. 8% per annum.
Okay. And is that likely to remain the same or any chances of it coming down?
Interest rate has picked out, so it will not go up from here as we see there may be marginal corrections going forward maybe in the next 2, 3 quarters.
Okay. And there any rating changes expected? Or...
Rating was changed in the month of February.
Okay.
I think revision now after 3 or 1 or 2 more quarters.
[Operator Instructions] We take the next question from line of Darshil Jhaveri from Crown Capital.
And congratulation on a great set of results. Sir, I think most of my questions have been answered. So I do have a few basic questions. So are -- acquisitions being consolidated by what time or when will the acquisition be through of Multitech?
Multitech acquisition, SG has already been signed today. The change of equity and handover of the organization is going to happen by month end. So we can expect at least 8 months of consolidation in this year.
Q2 will have revenue of Multitech or what we can expect, right?
Yes.
Okay. Okay. That's great. And [indiscernible] any risk that you see -- that SMB roadblocks are below part to growth? Any risks that you could, see?
I am extremely optimistic and with the market performing so well for us, I don't see any risk unless there is a sudden change in the government or policies of the government. Ultimately, we are all going to get affected. But unless global situation remains what it is today, we don't see any risk to it.
Okay, that's great to hear, sir. And just on the new JV with railway [indiscernible], so how would the time line work? Like how would we allocate capital or what -- where will we start our production? Could you just give some rough...
I think, Lalit has already given the figure that we will be funding this project, 30% equity and 70% debt. Out of the 30%, the 50% contribution we will need to bring that in next 3 years' time, and we are looking at to start production by FY -- calendar year '26 mid -- we hope to start the production, our first batch for approval.
Great sir. That answers all the questions. All the best for future.
We take our next question from the line of Simal from Negen Capital Services.
So the expansion into the warm forging capabilities looks promising. Can you provide me more insights into the product mix along with that the customer segments that are targeted for this new capability? And when we'll undertake treating optimal utilization, if that might also for.
The warm forging facility, which we have augmented is catering to basically differential parts -- differential gears parts only. And the main segments right now, we have already started bulk supplies to commercial vehicles. We have already started submitting samples in the tractor industry and also in the PV industry.
So we look at targeting all the 3 industries, and I think we are right now at almost around 25% utilization in this capacity. And I think by the fourth quarter of this year, we should be around 50%. And next year, we are looking at to run it in a full volume.
Okay. How much would -- how much do you expect them to contribute to the revenue growth and the margins in the near-term?
I think more than revenue, we are looking at margins from this. And I think in terms of tonnage, I think it is very difficult to say because the warm forging is -- because the market we are taking from CVs to passenger vehicle, so there is a different tonnage all -- and it is all about number of pieces we can sell, and we are looking at basically extremely high margins from this. So that I think will start showing in our balance sheet from third and fourth quarter of this year.
All right. And wish you getting success and growth in the future.
We take our next question from the line of Chirag from White Pine.
And sir, congratulations for good set of numbers and a very good presentation, sir. I have actually 3 questions. First, a slightly broader one on the management bandwidth. How are you looking to address? Because when I look at your presentation over the last 4 years, you have entered into many new products, added new segments and one of the acquisition happens, further more additional segments will happen. So between traditional business and new businesses, how are you managing your people strength? And what are you doing...
Every business comes with people only. And I think RKFL is a thoroughly professional run company with the entire leadership being within the organization, which handles each and every segment and every portfolio independently. So obviously, every platform is manned by a leadership team. So I don't think there is any people challenge. I think people are there in the business, and they are growing as the business grows.
And sir, if you have to look at from a 5-year perspective, between this traditional forging business that we have, plus when I say traditional the press business that we had run including the cold and one forging from that plus the railway and the non-auto thing. So how should we look at the broader picture of -- or what you aspire to have it over a 5-year view between all these 4, 5 pieces that we have. And I'm excluding the -- the acquisitions that are yet to happen?
Chirag, we are looking at growing in terms of 15% to 20% volume year-on-year continuously for next 3 to 4 years' time. The visibility and landscape we have created for ourselves, we are very confident to have 15% to 20% volume growth. And for this, I think in terms of capital, in terms of equipment, in terms of people, I think we are on it and we are completely laid out road map to achieve those targets.
Sir -- okay. Sir, last question, so just a clarification on this cold and warm forging. So these 25,000 tonnes that you have mentioned in the presentation is the additional capacity, right? We already had some cold forging capacity up and running?
No, we did not -- we have 0 cold forging capability right now. We have warm forging capability right now. We are installing a cold forging capability for which we have already received complete sold-out order for 7 years, which we'll start operations from FY '25 first quarter.
Okay, sir. Sir, 1 last question is against PV. And -- see, on this differential business, at the differential business that we're referring to is more of a differential axle side of the business or it will be differential assemblies for passenger vehicle differential gear assemblies for...
We are looking for differential not only for passenger vehicle, we are looking for commercial vehicle, we are looking for even electric vehicles. All the 3 segments, we are going to have our own product line in next 2 years' time.
Sir why I was asking is traditionally in the highest category differential assembly business is done in-house. And in EVs clear....
With the coming days, everybody is offloading everything outside and want to have only assemblies.
So even in [indiscernible] you are expecting this change and I presume this is more domestic driven for next 12, 18 months or it's -- okay.
Both export and domestic driven it will be.
[Operator Instructions] We take a next question from the line of Koushik Mohan from Ashika Stock Broking.
Congratulations for the good set of numbers. I have a very specific question in the Q1 in your presentation that you have mentioned that railways have increased their revenue contribution, it comes out to be 3.2%. With the visibility of wheel segment division and some more divisions of railway segment. What do you think -- as a total revenue, what can be the percentage of this segment can be?
I think railway should be doing anything between 4% to 4.5% in this year on a full year basis.
Okay. Sir, my second question is on the -- what kind of margins that you have in the wheel segment with our new business?
I think it is too early for me to comment on the wheel business. We will go with the tide, and I think let us first establish the plant. We are still negotiating for the equipment. We are still negotiating for the every detailing is going on. So it is right now not prudent for me to comment on profitability of the plant.
But I can only tell you that this plant in 2 years of operation will be EBITDA positive and I think we are looking at a 5-year payback for the entire investment we made from the wheel plants.
Okay. And the last 1 final question, sir I just wanted to understand what kind of volume growth that you're expecting for the full year basis from today?
Like -- can you repeat your question, please?
What kind of volume growth that we are expecting for the year?
I think we are looking at, at least 15% to 20% minimum volume growth this year from our current operations.
Okay. Okay. This is the minimum side, right, sir?
Yes.
We'll take a question from the line of Priyum Daga from VT Capital.
So my question was regarding the new acquisition [indiscernible] Multitech that you mentioned. So we -- so the company did the turnover of around INR 300 crores in FY '23, and we are paying around INR 205 crores for relatively equity. So my question was regarding why the promoter is going to sell the company at a prices is of around 0.7x. I mean that's quite cheap. So what is the thought process behind the promoter of that company selling to us?
I think you should go and ask the promoters of that company. How can I tell you what is there in the mind of the promoter of that company? And why selling at that price. How can I comment on that? We are -- we know that we have done a good deal. But obviously, I cannot say what is running through the promoter's mind and why he is selling it at that -- this price.
I can only tell you that I have bought a good asset at a good price, and it is going to be value accretive for me and my investors in RKFL, but I cannot comment on why -- and why -- what makes the promoter of Multitech sell the company.
Right. Right. The other value is quite effective hence the question, but yes, that was my question.
We'll take a next question from the line of Chirag from White Pine.
Sir, I had a question on one of the acquisitions that you indicated [ trial ] and it seems to be more on the motor and controllers. Sir, any thought process why you are looking at that space because that seems to be a crowded space in general?
No, no, I am not looking at that space. I am looking at -- to be a consolidator at EV. Motor controllers, differential and e-axle, these are the complete platforms in the next 2 years. Rationale behind buying, so we have already given in our earnings call previously. Basically, it is only a starting or steppingstone into a bigger platform of supplying complete differential e-axle and motor controllers.
So we are not looking at just motor controller in an isolated form. This is one of the platforms we have entered to make us bigger space in EV to supply this entire set of platforms, which makes our overall exposure into EV in a bigger way.
And again, the focus of this entity would be more domestic at least in the initial 3, 5 years?
Yes, initially, for 3 years, it is domestic.
And one last question, if I can. So journey from component to assembly, are there any changes in the business model, the way you operate the customer, and the approval process is how much time, if you can elevate on that? Because it have a significant impact on your positioning with that particular OEM where you're able to make this journey?
I think whatever platforms we are entering, it's a non-OEM business of -- the trailer axle is a non-OEM business. Differential, we are working with OEM to supply them the differential assembly. We are not looking at being a competitor to the OEM, we are looking to work with the OEM to get into a bigger platform stage.
Because they must be doing that, right, like already somebody...
OEMs are not manufacturing tailer...
Answering the assembly -- we may be acquiring via assembly model already, right?
No, tailer axle is a B2C business done independently with the people who make tailer bodies.
Okay. Okay. Sir, that is a wide space available like nobody is focusing right now. So that's how you are looking to...
That's not an OEM business. That's a B2C business, and we are -- and highly profitable business, we are wanting to enter in a big way in the B2C business.
And when do you think all the pieces will fall in place for you as...
We are looking to get approvals for this or, say, there is a system of approval of the axle. We expect by March approval to be in place and next year to start hitting the markets with our own production, but full volume will take at least 2 years' time before we reach peak volumes in this.
And this will be more domestic driven?
Yes, it's mostly domestic driven.
Domestic driven. Okay. Yes, sir, you're saying something, sorry.
So basically, this is -- basically what I wanted to say that this is a business -- non-OEM business, a B2C business and it's a brand play. And I think we are extremely confident that the brand RKFL or brand Ramkrishna is doing extremely well right now in the commercial vehicle industry. So we will be able to garner at least 15% to 20% market share in next 2 to 3 years.
We take our next question from the line of [ Garvit Goyal ] from [ Nvest Research ].
Sir, just a clarification kind of like we did PAT of 70 in this quarter. So are we able -- or are we confident to maintain this run rate going in the next 3 quarters?
I'm not able to understand your question, please.
I was talking about the run rate of PAT, like we did INR 78 Cr in this quarter. So can we maintain at least this run rate in the next 3 quarters?
No, I think our PAT rate, Lalit can comment on it exactly.
So coming to the -- I think you're asking about the PAT run rate. So PAT run rate is certainly going to improve from here on because we have given a guidance on the volume growth. So when there will be a volume growth certainly there will be improvement in overall EBITDA and PBT margin, and it will have an impact on the PAT itself. So it's not going to remain here, I think it will improve from here on.
Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would now like to hand the conference back over to the management for closing comments. Over to you, gentlemen.
Thank you. We take this opportunity to thank everyone for joining the call. We wish all a very happy weekend. And we hope that we have been able to address all your queries. For any further information or assistance, you can get in touch with us or our Investor Relation advisers. Thank you very much for joining the call.
Thank you very much, sir. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. Thanks for joining with us, and you may now disconnect your lines.