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Ramkrishna Forgings Ltd
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Ladies and gentlemen, good day, and welcome to Q2 FY '23 Earnings Conference Call of Ramkrishna Forgings Limited hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Pratit Vajani from ICICI Securities. Thank you, and over to you.
Thank you, Yashashri. Good afternoon, everyone. Welcome to the Q2 FY '23 Results Conference Call for Ramkrishna Forgings Limited. From the management, we have Mr. Naresh Jalan, Managing Director; Mr. Chaitanya Jalan, Whole-Time Director; Mr. Lalit Khetan, Executive Director and CFO; and Mr. Rajesh Mundhra, Company Secretary and VP Finance.
Now I would like to invite Mr. Lalit Khetan for his opening remarks. Over to you, sir.
Good evening, and a very warm welcome to everyone present on the call and wish you all a very happy Diwali and New Year from the entire Ramkrishna Forgings team. We hope and pray for the safety, health and security of you, and your loved ones.
Along with me, I have Mr. Naresh Jalan, our Managing Director; Mr. Chaitanya Jalan, Whole-Time Director; and Mr. Rajesh Mundhra, our Company Secretary. Hope you all have received our investor presentation by now. For those who have not, you can view them on the stock exchanges and the company website.
I will briefly speak about the business landscape and update on performance in the preceding quarter, following which we will be happy to respond to your queries.
Before delving into the company's performance this quarter, I would like to provide some context in the industry. The Indian auto and auto ancillary have faced numerous headwinds in the last 2, 3 years, from managing emission and safety-related regulatory changes, followed by COVID-19 to semiconductor supply shortages, and the most recent steep commodity inflation, the auto industry has seen it all.
During the COVID period, the China Plus One team gained traction with several OEMs around the world considering and acting on diversifying component sourcing away from China, which began with the United States imposing tariffs and trade barriers for China with Indian OEMs and auto ancillary benefiting from this progress.
Because of India's low manufacturing costs, scale of vehicle production and maturity of its auto ancillary industry, companies like us are gaining from it, as we have the capacity to [ utilize ] demand. Furthermore, the ongoing festive season as well as adequate rainfall across the majority of the country will shape the industry in the coming months.
Infrastructure and real estate are expected to post disinvesting as is e-commerce as well as transportation and logistics, which are critical to the economy. As a result, there is a lot of optimism about the growth and the OEMs are very bullish. Our conversations with customers have been encouraging, which gives us hope for the future.
Our international business and business has sustained traction over the last few quarters with new business order flowing in at a steady pace. A strong order backlog from Europe and United States and a healthy recovery for new truck orders in recent months bodes well for us. And we expect our export revenue to grow by more than 15% in FY '23 as compared to last fiscal year.
I would now like to highlight some business enhancement as we are all aware of our long-awaited acquisition of ACIL, we expect it to be completed this fiscal year if we receive favorable reserves in next 1, 2 months from Supreme Court. Our business to the electric vehicles has shown good traction, and we will form 3% to 4% of overall revenue in near future.
Our Railway business is also has shown a good development, and we are confident that it will contribute more than 4% of our total revenue, which is at present is 2% only.
Coming to our business operation front, our revenue is increased by 32% in Q2 FY '23 over Q2 FY '22 on the back of robust and diverse business. Our EBITDA margins for the quarter were 22.3% and for H1 were 22.2%.
During the quarter, we increased our capacity utilization by 300 basis points to 82% in Q2 FY '23 from 79% in Q2 FY '22, while the sequential improvement was 400 basis points. Such revenue growth and stable margins have been added by improved product mix and easing supply chain constraint despite high commodity prices. We are confident that by improving capacity utilization, we will be able to deliver similar results in the second half of the year, resulting a higher operating leverage and margin expansions.
We have received 5 orders amounting to INR 408.5 crores in the first 6 months of FY '23, and we are confident that we will receive additional orders in the second half of the year due to strong pipeline and positive business visibility. We are making concerted efforts to diversify our product portfolio and geography by introducing value-added products across the board.
During the quarter, we received approval for a fund raiser via preferential allotment of convertible warrant of INR 94 crores and the majority of which will be used for reduction of debt. We are aiming to our capital allocation policy in order to reduce debt. And our gross debt position as on 30th September '22 is INR 1,319 crores down from INR 1,577 crores as on 31st of March 2022. Our target to become net debt-free company by FY '22 remains indebt. And also, as for the policy on the dividend front, the Board of Directors has declared second interim dividend of INR 50 per equity share -- INR 0.50 per equity share of face value of INR 2 each.
That is from my side. We can now open the floor for question and answer.
[Operator Instructions] We have our first question from the line of T.S. Vijay Sarthy from Anand Rathi.
So we've seen very strong sequential growth in the revenue to the extent of 17% comparing Q1 FY '23 versus Q2. Now out of this, the 11% has been by realization. So we had strong growth. Why did we experience 300 bps margin -- gross margin fall between the same quarters? Could you please help us understand? That's my first question.
And I mean the realizations -- of export realizations would have also been very good. So given this, why margins have fallen sequentially, gross margins?
You're talking about the year-on-year margins, correct?
I'm talking about sequential margins, sir. Q1 FY '23 versus Q2 FY '23?
The Q1 FY '23, if you're looking at consolidated number, it has gone down a little bit. But if you look at standalone, it has gone up.
Yes. I'm referring to the consolidation number.
Yes. Consolidation number is a little bit because there has been on the subsidiary fund. There has been a little bit traction on the profitability on account of performance. And that's also marginal.
If you look at the full year -- half year number is 22.2%, and for the quarter it's 22.3% for the stand-alone. And consolidated number is around -- in the range of 21.5%.
And for the last year, there were no number for the consol strongly. We've got very less performance. And whatever will be the stand-alone performance, that was the consol performance, and that was in the 24% range kind of thing. And that was also on account of higher export because if you remember, Q1 FY '22, that was due to the second wave of COVID and there was very less domestic sales and export percentage was around 60% and that has resulted in the higher margin.
So what -- so what is the steady-state margin that we are looking at, sir? Whatever you spoke about EBITDA margin, if you could highlight that, what is the number that...
Certainly, the current margin levels are here to sustain. We are going to sustain the current margin and endeavor will be to improve upon these margins.
Sure. And the other small question is, again, between sequentially, Q1 FY '23 to Q2 FY '23, the power and fuel costs have come down from 45.8 to 43.3 while the activity has gone up, production activity has gone up, what led to this fall in power because I'm given to understand that the per rate is per unit is fixed. So the activity has gone up, why power cost has come down. What is that we have done? And is it sustainable is the second question.
Sir, MD sir, are you taking this?
This is basically on account of better utilization. If you see sequentially, there has been a significant improvement in utilization and power and fuel costs are directly affected with the better utilization.
As you have, you also said the power cost is fixed. So if in number of hours we utilize the equipment, the better utilization gives us a better yield in terms of efficiency in the cost.
You're referring to the per unit cost, I mean per ton cost, rather, right?
Not per ton cost.
Absolute costs also.
Absolute cost of power vis-a-vis the number of tonnage we produce.
Okay. Does it have a bearing on the kind of press lines that you operate, sir? Or is it to do anything nearly higher utilization?
It is -- the way our press lines are placed and as well as the utilization, both may take part into it.
Okay. Finally, you had mentioned some order book in your initial remarks for the first half, that -- or you did not mention, I don't know. So could you just help us, you said 5 orders -- new orders.
Yes. 5 orders, totaling INR 408 crores in the first 6 months.
We have our next question from the line of Mumuksh Mandlesha from Emkay Global.
And wishing team happy Diwali and New Year. Sir, what led to the 19% volume growth sequentially for the exports market? And if you look at the North America CV basic body were flattish sequentially. So what led to the strong growth, sir, volume growth for exports?
No. Basically, because of past order wins now orders are getting converted into revenue. And we have been able to convert them faster and all those conversions have helped us in getting the growth in exports.
Sir, in the comment you've mentioned China Plus One beneficiary, Ramkrishna been beneficial with it move happening. Sir, can you talk about the opportunity there? And you mentioned some import duty on Chinese inputs from U.S.A. market, just can you share update on that.
I think in terms of import duties, we are not aware of any import duties or I don't think Lalit's opening statement has anything to do with import duties.
China Plus, basically, because of the supply chain and COVID restrictions, lot of supplies, customers are shifting their supply chain from China to other places and one of the biggest beneficiary of that is the Indian industry.
And it is not alone RKFL, it is across the board, Pan India and across all segments. Indian manufacturing sector is getting legs up due to this shifting.
Right, sir. Just on -- any update on ACIL. Can you just share what kind of opportunities you see for that business and...
I think it is very, very -- until we get the company, it is very difficult to say about the opportunities. Once we get the company, we will appraise the investors on the opportunities.
But as a management, when we have bidded for the company, we are very confident of getting new customers, new sectors and maintaining a good top line and bottom line from the assets over there.
We have our next question from the line of Varun Basrur from Julius Baer Wealth Advisors.
I hope I'm audible.
Yes, you are audible.
Yes, so I have 2 questions. First question is, if I look at the other expenses on a quarter-on-quarter basis, between quarter 1, '23 and quarter 2 '23, there's been a jump. Any commentary there? Are there any one-off items in these other expenses? Sir, second question is -- sorry, sir, you want to answer?
Please carry on.
Right, right. And while there was very positive commentary which you gave, especially on your export order book, and new businesses flowing in. Just want to understand in Europe, has there been any deferments on the existing new programs or on the existing order book? I'm done with my questions.
Yes. So let me address your question on other expenses. Basically, other expenses jump is due to the increasing export expenses because the export ocean freight, which that was in the Q1 last year. And now you're looking at certainly there, that's why the gap, though it is coming down, but last year, it was quite steep and it has increased over the quarters. And that level we have not gone back to those levels right now. That's why there is gap and slowly, it will go down.
And on the -- I think Europe and this order, Naresh Ji will come to -- will answer it.
I think we are not seeing any cancellations or deferment from our European OEMs.
Okay. Can I ask one more question? Yes, sir, I just want to ask one more question. So I'm just going through the CapEx guidance and there's some press lines which have been added. Just what is the incremental CapEx in tonnage that has been added in the press line or that will be added in the press lines?
I think 56,000 tons roughly. We don't have the exact calculation.
Yes, sir, 56,000 tons will be added.
Will be added.
Over and above 117,000 tons.
187,000 tons.
Total capacity, 187,000 plus 56,000.
Okay. And this is all added in press, which is 117,000 tons?
Yes, Yes. It will be added in the press. Whereas in absent -- rest is of press line.
[Operator Instructions] We have our next question from the line of Sunny Gosar from M.K. Ventures.
And congratulations on a strong set of numbers. My first question is getting the freight cost. So you mentioned in one of the previous responses that freight costs have started coming down. And when we -- basically, if you can help us understand what's the freight cost as a percentage of the revenue? And how much benefit can come in the coming quarters due to the decline in your freight costs?
Sunny, the freight cost as a percentage of revenue, you can look at it, it should be in the range of around 15% to 16% right now in terms of export revenue, okay? Because they should be linked to export revenue. And it was -- if you look at earlier it was more than 20% and now it has come down to 15% to 16% level. And it is certainly -- it was to go down further.
Any ballpark number in terms of how much further it can go down?
No. It's very difficult to predict. It's really difficult to predict.
Sure. Sure. My second question is on the debt number. So as of March '20 number, which was about, say, INR 1,570 crores odd. [indiscernible] There was some factoring component of about INR 150 crores. So in the current gross debt number of September '22, is there any factoring number or...
Yes. Yes. It is there. The factoring number. So net debt has gone down by INR 110 crore in H1 FY '23. So the net debt as on 31st March '22 was INR 1,336 crore. And currently, it is INR 1,225 crores.
Okay. So your reported gross debt of about, I think, INR 1,380 crores has about -- such that reported gross debt is about INR 1,320 crores, I think.
Yes.
So there is INR [ 690 ] crores of factoring.
Yes, yes. Correct. That's the TATA Motor bill discount basically.
Perfect. Perfect. And my third question is basically, if you look at RK Forging historically, it has always been classified as an MHCV ancillary. So if you can help us understand with the new orders in EV and LCV and passenger vehicles. So out of the 80% automotive revenue, what would be broadly the mix between, say, your MHCV, which includes India and North America classes? And your other automotive, which will include LCV, passenger vehicles, Class 5 trucks in maybe North America.
Sunny, I think in terms of MHCV, we are no more an MHCV supplier. MHCV as a basket is only 50% of our automotive volume. Balance 50% of my automotive volume comes from Class 8 LCV. Every vehicle, which is below 9 tons basically. It includes all varieties.
Right. And going forward, will this mix further improve away from MHCV or is this business mix will broadly remain like it?
No. We have -- like for North America, we have entered the off-highway segment also, tractor trailer segment. These are going to add on into in terms of new varieties, which are going to come in near future?
Right. So basically, MHCV dependence will go down further?
Yes.
We have our next question from the line of Abhishek Jain from Dolat Capital.
Congrats for a strong set of numbers, sir. Sir, currently, rising energy cost in Europe is a big challenge. Are any shift of business from Europe to India? And will it benefit to the Indian [ forging ] Company for export in the U.S. and Europe?
I think I cannot comment on the other forging companies. In terms of RKFL is concerned, like I have said in my earlier questions, we are not witnessing any cancellations or deferment in terms of our new order wins and order book. We are experiencing new order intake in a steady manner. And I think one of the major contributors to it is the energy prices, which prevail right now in Europe and U.S. both.
So you want to say that you are getting benefit of increasing energy costs in Europe. That's why the business is coming to the Indian companies?
That is one of the factors.
Okay. Fine. And sir, during this quarter, we have seen a sharp jump in the realization front around 11% quarter-on-quarter growth. Despite the sharp fall in the steel prices around 25% to 30%. So what is the reason for the increase in the realization? And how do we see impact of the realization because of the fall in steel cost in the coming quarters?
Okay. In terms of realization, I think it is purely -- there is a part play of raw material pricing as well as part play mainly due to change in product mix and new order geographies and new order book coming into play in terms of getting into revenue.
In terms of future steel prices right now are extremely volatile and extremely difficult to comment how this is going to shape up in the future. But if steel price decreases from here, the similar will, in similar quantum, the realization also may change.
So why there is no impact on your realization front despite the fall in the steel prices. And if I say that the product mix as well, there's not a significant improvement on the baseline utilizations. So in that case...
No. I think you -- in terms of utilization never speaks of the product mix, utilization speaks of the tonnage being used. Product mix is purely what -- as a company, we know what product mix we are changing.
Okay. So you want to say that the products like the heavy products like axle and all they have gone up...
No. I would not like to comment on that. Basically, company has done better product mix. That's the reason realizations have gone up. And partly due to raw material prices, this has been there. Raw material price decreased...
There was no decrease in raw material prices for us during the quarter.
Yes.
Because see, first H1, there no decrease in raw material price, what we have witnessed last year and still we are using.
Okay. And sir, as you mentioned that you are going to acquire the ACIL in the coming months. So just wanted -- what is the cost of the ACIL acquisitions and how much incremental revenue is mixed on that?
In terms of -- I think we have already appraised the investors, I think regularly basis is around INR 110 crores, which we will need to spend to acquire the assets. And in terms of revenue right now, it is extremely difficult to say in the current environment, what is going to be the revenue. It is after we get the acquisition completed, we obviously will inform all our investor community on exactly the status and what is the revenue expected out of that.
And it is the machining capacity only, no?
Yes, it's a machining capacity.
And 2-wheelers and tractors?
2-wheeler, tractors.
Okay. And so what is your CapEx guidance? You have already done around INR 1.7 billion in the first half. You are going to acquire the ACIL and it will get around INR 1.1 billion. So for FY '23, what is your CapEx guidance?
See, for FY '23, we have not considered ACIL so far. If ACIL comes, then we will decide on that. And that will be in the SPV. And for RKFL stand-alone, we are looking to spend another INR 100 crore in FY '23 whatever we have spent so far apart from that.
And you are just adding the capacity of around 56,000. So most probably all CapEx would be completed in this year or...
It will spill over to the next financial year also, okay? Okay. Entire capacity will be not completed in this financial year.
So for this 56,000, what CapEx is required?
I don't have the exact number. I think another INR 150 crores, INR 160 crores will give us this 56,000 ton capacity. Whatever -- we already spent the money on this CapEx and another INR 150 crores, INR 160 crores will give us this capacity, another [ 56,000 ].
Okay. And my last question on this, what is the outlook for the North America traffic for the next 2 quarters, sir?
We will not be able to answer specifically to what is going to be the outlook as we can only say that whatever we hear right now from our customers across North American geography across all our portfolios, we have maintained the same statement that we are running a healthy order book, and we will -- we sustained to continuously grow on the geographies.
[Operator Instructions] We have our next question from the line of Mitul Shah from Reliance Securities.
Wishing Happy Diwali and Happy New Year to everyone. Sir, first question, again, on average selling price only, the realization has improved. Sir, can you elaborate something on this product mix change, maybe just by 1 or 2 examples. Does it mean increasing more machining within a product or a complete change of design or maybe tonnage wise, how you will define better product mix?
It's mostly changed from -- some products have changed from machining to assemblies and some products from forging to machining. And some -- we have because of current order book, we have been able to utilize better the press, getting more higher tonnage into the same presses. All 3 have been sectors contributing to higher realization.
Kind of subassembly type of model we started...
Subassembly and assemblies, both.
Okay. Okay. Second question, sir, this quarter geography-wise mix, how was this North America, Europe? We have given half yearly in presentation. Can you just briefly third quarterly for the quarter.
This is almost similar to that. We have not given financial but it's almost near to what we have done in the half year, same in the third quarter also.
No major change?
No major change.
And sir, outlook on Europe side?
I think outlook is steady, and we will keep on growing.
And sir, one thing is that as you highlighted that because of the better supply, particularly in the export geographies, our production volume as well as production level of MHCVs in those areas have increased. So it must be to some extent, backlog of past few months where the semiconductor and other component supply were the issue. So probably even next 1 quarter, we can see similar bump up type of tick. But after that, it may normalize. So what is your judgment that after 1 or 2 quarter? Or it may be from next quarter onwards, it should normalize?
I don't think there is anything in terms of normalization of pent-up demand. We are seeing a steady demand. And with new order wins, I think our basket is filled up to the extent we require in terms of keeping on with the -- our predicted growth of 20% CAGR.
Okay. And lastly, on this realization, you highlighted that it is all product mix. There is no change in the raw material side, right, sir?
Raw material, there is no decrease, there is no decrease in raw material...
No decrease, yes. There is no change. So going forward, probably, it would be slightly correction as and we earlier highlighted also, it is a pass-through type of thing. So it would be reflected in Q3? Or still there would be some lag effect and may come entirely in Q4?
See, it is -- every quarter raw material size increases or decreases. So if the trend continues or decrease, every quarter, you'll see decrease and if it stops after 1 quarter, you will not see after 1 quarter.
We have our next question from the line of Shashank Kanodia from ICICI Securities.
So just wanted to understand on the CapEx part. So we are operating at roughly 65% utilization as of first half, right? So what's the pressing need for us to do a good amount of CapEx at this point of time? And will it be adhering to a broader capital strategy bearing we intend to spend up to 30% to 40% of cash profit for CapEx?
I think, first of all, we are not augmenting the same capacity, which we already have. We are creating new capacity in new generation press lines with new technologies and specifically, going into cold and warm forging. And in terms of -- overall, if you see our capacity utilization is close to 82%. So we will need to augment -- and these are all time taking capacity additions. This do not happen overnight. It takes its own time to first plan, put and stabilize the capacity. So company as a whole is planning way ahead of time so that when capacities are required, we have those.
Okay. And sir, so we have outlined a capital allocation strategy a couple of quarters back. So will this CapEx, they're into that allocation strategy? Or is it diverting from that front?
No. It is -- we have already committed to it and in our presentation also, you can see. Any CapEx which will happen, will happen from free cash flow generated by the company during the year. And we'll surely adhere to those plans of debt reduction and allocating balance capital for dividend and CapEx.
Okay. Okay. So sir, what -- okay. So sir, so what kind of debt reduction we can expect for this year, FY '23?
I think we have already had a net debt reduction of close to INR 120 crores, and company wishes to repay another INR 100 crores of debt by year-end.
Okay. And the target for being net debt free is by which fiscal year for us?
2025.
2025.
We have our next question from the line of CA Garvit Goel from Invest Research.
Hello. Am I audible sir?
Can you speak louder, please.
Am I audible?
Yes, you're audible.
Yes. Yes, sir. So my question is from the cash flow working capital management side. I was basically going through your historical numbers. And I found that in last 3 years, that is 2020, '21 and '22 there has been a significant increase in the percentage of inventory to your total revenues. So can you please explain the reasons and how inventory management or basically the working capital management is going to shape up in the next 1 to 2 years, sir?
Last 3 years, if you see the prices of steel and other goods have also considerably gone up. So if you're only seeing on the valuation part, yes, there has been an increase. In terms of tonnage, there has been a decrease. And if you see the sequential growth of the company year-on-year, there is substantial growth. And I don't think inventory is -- you really calculate inventory has gone up as much as the growth.
And going forward also, company emphasizes or feels to preserve cash rather than inventory. So we are already working on inventory reduction, and this is going to happen over next quarters.
Okay. Understood sir. And sir, basically, that 56,000 new capacity addition. You mentioned in the presentation that your CapEx for half year, '23 is already INR 153 Cr. So this INR 153 Cr is the entirely on that capacity? Or is it for any other...
Entirely on that capacity.
And this INR 100 Cr you are mentioning, which will be in the half -- second half, that will also be for that capacity?
Yes.
Okay. Understood. And then next year also, you're mentioning INR 150 Cr.
I think, Lalit has -- no, no, Lalit has said, overall, we feel that another INR 150 crores of CapEx will be required to complete this 56,000 tons of CapEx. Out of this INR 153 crores have already been spent and another INR 150 crores will be required.
Okay. Understood. Understood. And what is your guidance for the top line by the end of financial year '25?
No, I think we have said that we look and our company -- as well our desire is to continue with the growth path which we are in, and we look at 20% CAGR growth continuously.
Okay. And EBITDA margins, any guidance was between [indiscernible] 22%.
We will be able to sustain these margins and company looks to improve its internal parameters and improve on the margins.
We have our next question from the line of Darshil Pandya from Finterest Capital.
Actually, my both of the questions were [ answered ] Shashank and -- I had the same question for CapEx and inventory level, both of them are answered. Thank you so much. No more questions.
We have our next question from the line of Abhishek Jain from Dolat Capital.
Sir, you were talking about your 20% CAGR growth for the next 2 years. For FY '23, what is your volume growth target?
See, Abhishek, we have already sold around 62,000 tons in the first half, and we are looking at around 68,000 so 130,000 still be ours target for FY '23.
And what would be the mix -- export versus domestic, likely?
That's right. The range is 42% on the side of exports, rest is domestic.
And sir, in this further -- in last 2 quarters, production was slightly higher than the sales. And as the transit time is now going down for the export. So are you looking for some destocking in the coming days?
Not got you, Abhishek. Can you repeat?
Sir, as a production in the last 2 quarters, that was slightly higher than the sales. And transit time is also going down for the export as you mentioned. So are you looking for some destocking in your export market?
No. See, it was only -- there is the function of demand from the customers and whatever the consumption is happening. So it depends upon the entirely the demand -- supply-demand scenario. And we are not looking at the -- we are feeling that demand will be more and the export will improve from here quarter-on-quarter.
So generally, how much inventory do you maintain for the export market or how many days?
No, we don't maintain the inventories. We have inventory in Europe a little bit, and that's in the range of 50 to 64, and, a little bit in the U.S. So that is [ 30 to 44 ]. So that's the inventory we are maintaining in overseas market.
Okay. And sir, how much the foreign rate in the balance sheet and how much ForEx losses this quarter?
We have gained about INR 12 crore of net foreign exchange on this quarter, that's -- that is considering the loss on account of debt on the -- restatement of debt on the ForEx. But we have the debt also in the euro where we are gaining also. So it's a mix of the entire thing. Our net gain is INR 12 crore for the quarter, considering all foreign exchange assets.
Okay. And sir, what was the LCV contributions in this quarter in first half FY '23 in total?
No, we have not -- we don't have a breakup of that, roughly, but LCV should be close to around 6% to 6.5%.
Sir, my last question is related with this non-auto segment, what is your plan to ramp up -- ramp up your business. Already contribution has increased around 19%. So what is your target...
We have to continuously grow. I think we looked -- we are looking at making basically non-auto segment at 25%. So I think our endeavor is to continuously improve on that till we achieve a 25% level in terms of our non-auto business.
So what is your current order book in the Railway segment? And what is your revenue target for FY '23 in the railway?
Railway order book is approximately around INR 100 crores plus. And we are looking at doubling the railway orders in the order book in this year. And I think we are looking at close to around INR 200 crores, INR 250 crores in FY '24 in terms of our railway sales.
We have our next question from the line of Mitul Shah from Reliance Securities.
Sir, 2, 3 clarification. This 56,000 tons new capacity coming. And you said it will be fully operational by next year. So I believe that it will be operational in a phased manner. So what could be the likely capacity by end of current financial year, initial first phase?
I think 50% of the capacity will be ready by March 2023 and balance 50% by September 2023.
And as you highlighted, it's a specific purpose type of capacity. So based on existing order, can you just give broader indication...
No. I think it is very early I think. Obviously, we'll wait for another quarter before we give guidance on that. We would like to capacity shape -- to shape up before we start giving guidance on that.
But we must be having a few orders related to that capacity?
We already have development orders in hand. But in terms of -- if you want exactly what is going to be the volume and revenue and profitability, it is very early for us to comment on that.
Okay. Sir, secondly, on the MHCV side, in earlier remark, you highlighted that MHCV contribution has now come down to 50% of auto -- automobile segment. So that is 80%, 50% you would want to say that only 40% of the revenue is MHCV right now?
Yes.
And does this include Class 8 truck or it is only domestic MHCV you are talking?
I am talking about entire MHCV.
Okay. So 60% is all known MHCV, LCV, PV and non-auto everything?
We are not into PV in any way. We are into LCV. Any vehicle from 9 ton and below I'm talking about.
[Operator Instructions] We have our next question from the line of Vignesh Iyer from Sequent Investments.
I've got 2 questions on my side. One is what is our total order book as on September end? And second is how much are we spending on 4 megawatts of solar, the power plant we -- for solar power?
In terms of order book, it is very difficult to -- because we work with OEMs who work on 3-month schedule or a month schedule. So order book, it is very difficult to define what is the order book right now.
And in terms of 4-megawatt power -- solar power plant, we are looking at spending somewhere around INR 12 crores to INR 12.5 crores right now to install this 4-megawatt power plant.
Okay. And this is including -- this INR 12.5 crores is part of the INR 100 crores you intend to spend? Or is it over and above that?
Part and parcel of the overall CapEx spending plan of the company.
Okay. Okay. And what was the first 6 months order we have received, total?
I think first 6 months is reflected in the top line we have achieved because basically, we don't have an order book as such -- basically -- working with railways, yes, we have an order book of close to INR 100 crores. But we work with PSUs, we have order. But when we work with auto OEMs, there is no order book as such, which basically depends on the vehicle plan they've produced and that's on monthly basis or a 3-month basis.
We have our next question from the line of Dhruv from Edelweiss.
Am I audible?
Yes, you are audible.
Sir, could you please give me the margin bifurcation for all your business segments like ring rolling margins and maybe forging in press margins, if that's possible?
No, that's not possible. We don't work on individual plants. We cannot give you margins.
Okay. So also, I just wanted to ask you. Currently, we are at 65% capacity transition for your press business. And we are adding 56,000 tons of capacity there. But why are we not looking at capacity expansion in ring rolling and forging segments where we are at 100-plus utilization?
Basically, like I said that, it is new capacity with new technology and new components. We -- add capacity is basically in need base with the discussions with the customer. So we don't feel the need of right now, adding any capacities in ring rolling or other places as far as customer indication in terms of future demand.
[Operator Instructions] We have a question from the line of Shaukat Ali from Monarch Networth Capital Limited.
Sir, a small question from my side. How the effective tax rate is going to fare for the entire year FY '23? Am I audible?
Can you repeat your question?
How effective tax rate will fare from here? Effective tax rate.
Effective tax rate, Lalit.
Effective tax rate, sorry. Yes. Effective tax rate is in the range of around -- I think we will move to around -- in the range of 22% to 24% for the full year.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management team for closing comments. Over to you, sir.
Thank you. We take this opportunity to thank everyone who have joined our call. We hope we have been able to answer all the queries that have been addressed. For further information, you can get in touch with us or Strategy Growth Advisor, investment relationship advisors. Thank you very much. And have a good, pleasant evening. Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.