Steel Strips Wheels Ltd

NSE:SSWL

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Steel Strips Wheels Limited Q1 FY '25 Earnings Conference Call hosted by SMIFS Limited. [Operator Instructions] I will hand the conference over to Mr. Amit Hiranandani from SMIFS Limited. Thank you, and over to you, sir.

[Amit Hiranandani, analyst]

Thank you, Neha. Good morning, everyone. On behalf of SMIFS Limited, I welcome you all to Q1 FY '25 Conference Call of Steel Strips Wheels Limited. We are pleased to host the senior management of the company. Today, we have with us Mr. Mohan Joshi, Executive Director; Mr. Naveen Sorot, CFO; Mr. Aditya Dixit, President of Exports Division; and Mr. Pranav Jain, DGM Finance. We will start the call with initial commentary from the management, and then we will open the floor for Q&A.

Now I hand over the call to the management team. Over to you, sir.

[Pranav Jain, executive]

[Audio Gap]

INR 1,025 crores versus 1,044 crores in Q1 of FY '24. EBITDA is at INR 118 crores versus INR 117 crores same quarter last year. Profit after tax stands at INR 46.20 crores, which remains largely in line with previous quarters, despite increase in finance cost and depreciation.

EBITDA per wheel for Q1 stands at INR 257 versus INR 253 in Q1 last year and INR 256 in Q4 last year. For the quarter gone by, our revenue mix has been 29% for alloy wheel ring and balance 71% for steel wheel ring business.

For alloy wheel, sales volume increased by 1% year-on-year to 7.25 lakh wheel rings. For steel wheel rings, sales volumes remained flat year-on-year at 38.67 lakh wheel rings.

Coming to export front, quarter 1 FY '25 export revenue stands at INR 123 crores as against 154 crores for Q1 FY '24. Overall, export includes INR 15 crores on alloy wheel business. For current quarter, overall debt stands at INR 965 crores versus INR 1,047 crores in Q4 FY '24. Thus, a reduction of approximately INR 82 crores.

During the past quarter, our revenue in domestic markets are in line with the industry across segment, except 2- to 3-wheeler and tractor, wherein we have outperformed the market. However, in export volumes declined due to multiple reasons, including supply chain disruption and rising global inflation.

Through all of this, we expect our exports to improve moving forward, and we maintain our guidance of exports to be around INR 675 crores to INR 700 crores. Looking forward, industry reports predict that the automotive industry will grow at a moderate pace due to the release of pent-up demand and the impact of high base effect.

Going forward for FY '25, we expect 6% to 7% growth in steel wheel domestically. In 2-wheeler industry, we have focused on electric vehicle sector where we are now leaders in these, providing significant value addition. This business is expected to grow by about 15% to 17% in FY '25.

As mentioned earlier, we had concerns on the PV business as margins were lower than expected, but those concerns are getting resolved, and we expect a 7% to 10% growth this year in this segment. Last year, we achieved our highest CV volume. This year, we expect flat or marginal growth in line with the expectation of CV industry.

In tractor business, we have secured long-term agreements with prominent customers which should result in a much higher growth of over 10% for FY '25. We expect our market share to increase over time in this segment. In aluminum wheels, we are expecting a growth of 12% to 15% with major growth coming from exports.

Last year, we introduced a new business line, aluminum knuckles. This will start generating additional revenue from Q3 onwards. This product is primarily for the SUV segment where OEM has stronger pricing power and are keen to enhance vehicle features like better vulnerability.

Going ahead, the automotive sector is poised due to continuous upward trajectory, benefiting from both domestic demand recovery and favorable export conditions along with positive monsoon forecast and the festive season as potential growth drivers. We are determined and steadfast on utilizing every available resource to its optimum level for reaping the best output.

Steel Strips Wheels Limited continue to remain laser focused on the road ahead and are committed to leveraging every opportunity to drive innovation, deepen our customer relationships and solidify our position as a leader in the market.

With this, we are now open for the -- open the floor for the question and answers. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Kunal Sharma from SP Capital Financing Limited.

[Kunal Sharma, analyst]

So I have a couple of questions. First, I just wanted to ask you about the market share front. In our PV market share we have like -- market share has gone drastically to 37% sequentially. So can you please throw some light on what is the reason behind it?

[Unknown Executive]

So on the PV side -- on the alloy side of the business, I think the market share has remained very, very stable the PV side. On the steel side, there are certain decisions that we took on some of the customers where the margin and the valuation by those products because there were very age-old products and have been clearing that in every conference call that we left out those businesses 1.5 years back.

So from 42%, 43%, we -- from almost 47%, we tripped down to 42% and currently we are at 37%, 38%. And we are fairly very comfortable with this 37%, 38%. We will do this business profitably. And wherever there is the competition, if somebody wants to do that business at those prices, we are more than happy. Because we'll create that space for exports. We will create that space for some other products.

But on PV side, minimum margin expectation from the customer is now building up. Some of the discussions with the customers is already underway. We feel that margin correction in some of the customers' profile will be done within this financial year. And wherever it is not happening, we are going to leave those businesses.

[Kunal Sharma, analyst]

Okay. So going forward, we are going to be maintaining the market share of 37% to 38%, is it?

[Unknown Executive]

So minimum this 37%, 38% will be maintained. And slowly and steadily, the margin profile correction is underway. It will take a little bit of time, but we are fairly confident this market share will maintain.

[Kunal Sharma, analyst]

Okay. Another question on the export end. Could you please throw some more light on the export as the growth has deteriorated because of this geopolitical [indiscernible] those things. So what has been the issue? Is there a price-related issue? And when can we expect the growth will be bounced back?

[Unknown Executive]

So our export head, which is Aditya is going to take that question. Aditya, please.

[Aditya Dixit, executive]

Yes. So as my colleague earlier explained, in the opening statements, we are definitely going to see a recovery in the coming 3 quarters as against what has happened in the first quarter. The reasons are pretty much clear. One is the headwinds due to the freights and the availability of the overall logistical support that is required in terms of container investor availabilities.

Also the fact that, yes, there has been a slowdown in the U.S. market, which we now expect to have a recovery towards -- in the Q2, Q3 and Q4 of this year. So this is also coupled with the fact that the U.S. market is also dependent or is -- dependent on the seasonality of the overall product requirements.

So the Q1 is typically low because the industry has got inventories in place already. But as the inventories get depleted in the first quarter of this season, you will see a recovery starting in Q2, Q3 definitely for exports.

[Kunal Sharma, analyst]

Okay. Sir, on the follow-up, Aditya, I just wanted to check, sir, in the upcoming election over there in U.S. So that can be another issue, right? So we can't -- how can we expect that the growth can rebound in the export end?

[Aditya Dixit, executive]

Yes. So one aspect is definitely the elections, the overall sentiment in the market. But this unclarity in the market in terms of the geopolitical situation, it has been not very recent. I mean, whichever government comes in, it's -- the sentiment is definitely anti-China.

So the suppliers, especially outside that geography, will still see a strong pull from that market, especially as in India. So I do see -- yes, so whichever way the elections go, I do not see it as a dampener to our requirements in the U.S. market.

[Kunal Sharma, analyst]

Okay. And the last one question from my side. Could you please throw some light on our optionality business that -- what's the progress on the OTR side? And where are we standing right now?

[Unknown Executive]

Yes. So that is one segment where we are making gradual progress. It is not as rapid and the volumes are not high as they happen to be in the trailer market or the PV kind of market. So we are currently focusing on the products, which we can produce from our existing production lines.

And yes, there are several areas where we have entered into. There is an irrigation market where we have entered into, there is trailer market that we have entered, we have also entered into compact tractor segment. So there are definitely 3 or 4 new business areas that we have entered in the last 12 months, which itself is an achievement, because getting an entry -- it's a mix of OEM as well as what you call the trailer market.

So we are new to the market, but we saw very, very encouraging feedback from that segment, and they were very interested in getting deals from India. Because this market typically is not serviced by a lot of players from the Indian side. There are a lot of players outside India. But yes, it was encouraging to know the keenness with which the customers are following up with us.

[Operator]

[Operator Instructions] The next question is from the line of Omkar Arora from Eraya Capital.

[Omkar Arora, analyst]

Congratulations on a good set of results.

[Operator]

I request you to use the handset, please.

[Omkar Arora, analyst]

Congratulations on a good set of results. I just wanted to inquire about the current status of capacity expansion, particularly on the AMW front.

[Unknown Executive]

From AMW, I think the asset is with us. And as we updated last time that the capacity addition of our CV plant, which is in Jamshedpur is already underway. And equipments are being shifted from AMW to take the capacity from 1.5 lakh, 1.6 lakh per month to close to 2 lakh, 210,000 numbers per month.

And this capacity will be added by, I think, Q3 end for utilization for Q4 of this financial year, where the CV domestic demand-supply scenario is very, very tight. So this relaxation will come towards Q4.

[Omkar Arora, analyst]

So since the demand scenario is becoming kind of grim right now, do you think the capacity expansion that has happened for a few years from here, it could cause some stress on your balance sheet?

[Unknown Executive]

No. I think let's not see CV from month to month. I'm fairly confident that the infrastructure demand, which is in the country, along with the compliance rules which are coming from the government in terms of banning the vehicles beyond a certain period of time will make sure that the demand will take care of 4% to 7% kind of a growth rate.

And with that kind of a base, along with the focus on increasing the product offering to the customers, along with the export territories, we are fairly confident that the capacity will be utilized to the tune of 85% to 90%.

[Omkar Arora, analyst]

On the alloy wheel expansion front, how is the progress going, as we've been running on full capacity for quite some time.

[Unknown Executive]

Yes. So I think currently, as we updated last time, we were at 3 lakhs per month, which is 3.6 lakhs. And I think that very soon, we are going to be moving towards 3.3 lakhs, 3.4 lakhs per month. And towards the financial year-end, the plant will be at close to 4 lakhs per month, which is 5 million capacity, against which this year's full year projections are estimated between 3.4 million to 3.5 million wheels. Next year, it's going to be between 3.7 million to 3.8 million wheels. So we are in line with the demand/supply scenario there also.

[Operator]

The next question is from the line of Rohit from Samatva Investments.

[Rohit Suresh, analyst]

So my first question is on the export market per se. So if you look at the Chinese EV, some of the large players, they've been very aggressive in terms of their penetration in U.S. in terms of Europe. So do you see that as a threat in terms of electric vehicles, penetrating the export market which may lead to a slight decline in the demand for alloy wheel right now?

[Unknown Executive]

Aditya, can you take this please?

[Aditya Dixit, executive]

No Mohan, I mean, was this with perspective of what China has done in the U.S. and Europe market in terms of their EV?

[Rohit Suresh, analyst]

So my question is, if we look the largest player today in the EV sector is from China. In terms of their expansion, they've been very aggressive. And if you're catering to the non-Chinese market, in addition, if there's going to be a penetration of EVs, do you see some risk to our alloy business, which we are just -- it has just started to pick up right now?

[Aditya Dixit, executive]

No, I don't think. Because the pie is so large, the conventional automakers, I don't see anybody of them having less aggressive plans than what the Chinese are doing. Yes, the Chinese are entering. But if you see the U.S. is already putting in duties on them, as far as China vehicles coming into the U.S. market.

We also expect similar situation in Europe because at the end of the day, there are so many people working in these American or the European OEMs that nobody is going to make them struggle so much in their own markets. And we per se are very, very strategically placed with all these American and the European OEMs.

European OEMs for sure, because we have had a very encouraging story with them in India. And that's how we have created a pedestal where we are now stepping up on and getting their businesses outside India. So I don't foresee China creating that much of impact so that our exports are going to get affected by this dynamic.

[Rohit Suresh, analyst]

Okay. Just an additional question. So are we doing anything on the EV front right now on the 4-wheeler parts, both in India as well as for the export market?

[Aditya Dixit, executive]

Mohan, do you want to take that?

[Mohan Joshi, executive]

See, for the current space, I think alloy wheel is where the penetration is going to increase given that EV is an expensive proposition. So obviously, penetration of alloy wheel is going to be a primary thing, which is what we are trying to do currently.

On the other side, as we said that the knuckles business is already underway, and we feel the current penetration of aluminum knuckle is fairly very low, and it's a sunrise industry going forward. The way that aluminum wheels has propagated, we are fairly confident that alloy knuckles will see the similar trend over the next 4 or 5 years.

And I think that opportunity for us, alloy wheel makers to convert steel knuckles to alloy knuckles will be to the tune of INR 2,000-odd crores, and we are a part of that. So these two opportunities, which is where we are working. On the steel wheel business, we are already working on the 2-wheeler side. So that's where we are having a leadership position, and we are fairly happy with this kind of a penetration into this segment.

[Rohit Suresh, analyst]

Sir, actually, I was asking, are we into the EV part? Are we selling alloy wheels to any of the EV players in India or the export bucket? I wanted just clarity on that.

[Mohan Joshi, executive]

So in EVs alloy wheel is -- wheel isn't EV agnostic kind of a product. So all EVs will 100% have EV. So Tata Nexon EV is what we are supplying. We are supplying to the Mahindra EVs also. So wheel does not have a distinction. So if we are supplying to Mahindra the EV wheel, then steel -- the normalized engine as well as EV, we both are supplying there.

[Operator]

The next question is from the line of Chirag Shah from White Pine Investment Management.

[Chirag Shah, analyst]

Sir, I have a fairly different question. When I look at your past interactions, the post result call, we tend to be very positive on the outlook, and somehow those outlook doesn't turn out and every quarter, we have to keep on lowering our expectations.

So how should one look at your current outlook that you had shared? Yes, I understand everything is not in your control. It's also a function of how demand dynamics are, but it can't change suddenly every quarter on the downward side. In fact, if I go back to even AMW acquisition, when it was being done, we were under impression that it could ramp up sooner than later, especially the way -- now it seems to be taking more time in getting accreditation, customer approval, et cetera, et cetera, and also using the plant, either refurbishment or shifting of machineries, et cetera.

So can you -- how do you internalize your forecasting or your budgeting so that the downward residuals don't really happen. So that is the first part of my question. I'll come to the next part.

[Mohan Joshi, executive]

Chirag, so I'll tell you, there is no change in the volume forecast of the company. There is no change over the past 1 year, maybe past 6 months, past 3 months. So first, let me clarify that very, very clearly. So if we were targeting 20 million for this financial year, we are targeting 20 million for this financial year.

There is -- segment-wise some small here and there can happen as CV goes from plus 5 to minus 3 or something. That can always happen. But I think for the full year, in terms of volume growth, we are 100% confident. What we have committed for 20 million, we will hit that 20 million.

Second question is that the top line tends to change because of the raw materials, which is not in our control, it is market-driven. And steel prices have gone down by almost INR 10, INR 12, which is on a base of INR 70, INR 65, is close to 15-odd percent. So this is also not in my control, and we have to be a pass on and turnover will move around accordingly.

The third part is AMW. I think AMW came to our lab in the month of, I think, March 2023. '23, right? I think March '23 -- March '24. I'm sorry, March '24, And the plan was very clearly indicated that it will take 6 months of repairs in the plant to make it to functional.

So there are two strategies of the business, whether we run the plant at 10% capacity and run operational loss, that is one side. The second strategy is to pick up the machine and add up the capacity in any of the plants which needs the capacity, and a very fraction of CapEx will be done and it will turn your asset towards 10x, 15x, 20x asset turn.

So we have done the exact same thing that probably it will take INR 12 crores to INR 15 crores in terms of investments for shifting of the machines from this plant to that plant. And we will run Jamshedpur at 90% utilization, lowering and improving our economies of scale, and hence improving the margins rather than, I produce 40,000 in AMW, which has a capacity of close to 5 lakhs a month, run all plant and run operational loss.

So I think that due credit should be given to the organization to make choices of making maximum of share wealth of the shareholders, right? So we've taken a decision, and we are fairly confident that this CapEx will increase the top line of the CV business of close to INR 200 crores to INR 250 crores at a fraction of spend of, I think, INR 12 crores to INR 15 crores.

And it is not in my hand. I feel that industry has given a hint of minus 5%. But I have a hint that the infrastructure spend will continue to grow. It will continue to increase, and we should see a flattish growth for us in terms of volumes if the industry grows by minus 5%. If the industry grows by a little better, we are going to be outperforming the industry anyways.

[Chirag Shah, analyst]

The second question was on exports. Now if I look at last 5 quarters, steel volumes have actually gone down from a peak of 1 million to 0.7 million, and even alloy exports have not really picked up the way we were hoping. So for us, you have indicated some of the reasons, but when I look at bottom-up, some of these were looking to make inroads in certain customers, and because of which we were reasonably optimistic on that. So is there a postponement of product launch from their side or your -- SOP from their side or the more demand -- macro dynamics, which is driving this?

[Aditya Dixit, executive]

Mohan, should I take it?

[Mohan Joshi, executive]

Yes. Aditya, please carry on.

[Aditya Dixit, executive]

So there are both aspects to it. One is definitely the demand has come down for some of the steel wheel requirements, and that's purely, purely market dynamics. As I said, the trailer industry in the U.S. market is still at around 35% to 40% down. But yes, we do see the forthcoming quarters as we take care of whatever downfall we have seen in Q4 of last year and Q1 of this year.

Now we do see that a part of recovery happening in the coming 3 quarters. And yes, as far as aluminum wheels are concerned, there has been a postponement in the SOPs of certain OEM programs. And it's nowhere a case that we have lost any share of business or any business per se. It is purely the customer has changed a few of their SOP dates.

[Chirag Shah, analyst]

If you can just help us recollect, assume that SOP now starts whatever time line that the customer has indicated, what is the ramp-up in alloy wheels that we can see from current levels, whenever that SOP starts. If you can disclose when the SOP starts, it would be great. If you can't, fair point, but then what is the jump that we can see in the alloy wheel exports if the SOP is on schedule?

[Aditya Dixit, executive]

I'll tell you, one is that in terms of the overall exports for the total year, we still see ourselves in the region of INR 675 crores to INR 700 crores kind of a number. If you are clearly referring to the aluminum wheels -- so we would still say that we are going to at least double the aluminum wheels what we had done in the last year. So we see, yes, a fair amount of growth in that area. And we are definitely on track.

[Chirag Shah, analyst]

And would you like to indicate when the SOP is starting?

[Aditya Dixit, executive]

No, I would like to avoid giving any specifics on that.

[Chirag Shah, analyst]

And just one last question if I can squeeze in. The EBITDA per wheel, if I look at it, because that is the metric with we as an outsider are aware not based on tonnage. EBITDA per wheel, how should we look at it? Because it has been stagnating. I understand there has been cost issues on freight rates and various other things. But from here on, how should we look at it?

Because earlier, the expectation was if the mix improves, it should reach closer to INR 300 per wheel over a period of time. So is there a postponement in that aspiration from current INR 250-odd levels plus/minus? So how should we look at EBITDA per wheel as a metric? And what will drive it? Is it pure revenue or there are certain cost leverages? And when do you expect them to play out?

[Unknown Executive]

So Chirag, on your earlier questions, one is on the projections that we have given, I guess, what Mohan has clarified that we have already remained in line with what we have projected for. So even when we look at exports, I guess Pranav has given in his starting statement that for the full year, we are still maintaining our guidance that we have given at the start of this year, that we'll be doing closer to INR 675 crores to INR 700 crores. And we are sticking to it irrespective of what has happened in Q1.

In fact, when we have budgeted our numbers for current year, Q1 was already forecasted at a lower number. So we are in and around the Q1 projection that we had for us internally. So there are ramp-up, as Aditya has indicated that there will be a ramp-up, which you will see in Q2, Q3 and Q4, wherein this number should see a substantial growth versus what we are seeing today.

On the EBITDA per wheel, so if you look at, I guess, Pranav in his opening statement has quoted a number of INR 257, which if you probably look at the last 4 or 5 quarters is one of the best EBITDA per wheel, which we have received.

And as we have indicated that once the mix tends to move towards alloys and move towards exports, this is expected to move up. So whether it will reach INR 300 or not, I guess at least it will take some time. It will not immediately as will move from INR 260-odd levels to INR 300-odd levels. But yes, the trajectory should be an upward trajectory.

[Chirag Shah, analyst]

So over a period of 3 years, we can assume that this is a possibility, right, INR 250, INR 260 range and moving closer to...

[Unknown Executive]

Again, it depends on what kind of mix that we are doing, what kind of product that we are serving. So yes. So ideally, trajectory should be upwards. So whether it will be INR 280 or INR 300, I guess that is to be seen?

[Operator]

The next question is from the line of Nirav Shah from SSWL.

[Nirav Shah, analyst]

I just want to ask, did you get any new business of any aluminum knuckles from India?

[Mohan Joshi, executive]

I think as we have discussed that knuckles business will start towards the Q3 of this financial year, and there are two large nominations, which have already been given from 2 marquee customers of our alloy wheels. And this is -- for one customer is closed import substitution. For second, it is local development, and the full service support.

And there are 3, 4 more knuckles proposals which are going on in terms of development, which is from export as well as some domestic markets. And we are fairly very, very confident on this business of becoming like an alloy wheel business the way that it is happening.

[Nirav Shah, analyst]

I think knuckles will be the turning point of your company?

[Mohan Joshi, executive]

So I think we have already turned the corner from INR 100 crores EBITDA to INR 500 crores EBITDA, now to get to the next league where you move from this INR 500 crores to INR 700 crores EBITDA is where this kind of a business will obviously help. And we are fully committed towards it.

[Nirav Shah, analyst]

Since you are the only one player, so definitely it will be.

[Mohan Joshi, executive]

Our first mover advantage will definitely help. We are confident on that.

[Operator]

The next question is from the line of Bhavesh Jain from DW Investment Advisers.

[Bhavesh Jain, analyst]

So if I just look at the macro picture, like our -- we are focusing more on the alloy wheel penetration. And if I look at the last quarter, we mentioned that there is high vent wheels, which OEMs are preferring. So can you throw some light on like what is the penetration of high vent wheels and alloy wheels and the steel wheels? And like how is the picture shaping out?

[Mohan Joshi, executive]

So when you talk about steel and alloy -- first, we'll talk about the bifurcation of steel and alloy. I think 36%, 37%, 38% is alloy wheels, balance is steel wheels. So within the steel wheels, I think the penetration, which is 67%, 65%. I think very minute scale of high vent wheel has started taking up. So current juncture is close to 10%.

And we feel that it's not a very easy game to change from alloy to high vent and customer will expect that I will take it because obviously, he's paying money to it. These are cost saving proposals coming from the customers. And the intention will be to fix mid-trims, which is the mid models of the cars, not on alloy wheels, but on high vent wheels, which is there also we are there.

And on the lower trims, which is the base model, based as 1, we will have steel wheels. And on the higher model, which is top 3 or 4 categories of the model, we'll have alloy wheels. So within this year, we expected that the alloy wheel penetration will move from, say, at 36%, 37% to maybe 39%, 40%, which has not happened in this financial year because of the cost pressures or maybe the OEMs are not able to sell those cars in that numbers. And they are trying to have different kind of a foundation towards pleasing customers.

But we are fairly confident with the industry moving towards heavier vehicles, sturdier vehicles and stylish vehicles, alloy wheel penetration will continue to move up towards 45% to 50%. The largest alloy wheel carmaker, which is Maruti was at close to 20% of penetration and has already reached 33%, 34%. They are also indicating towards the movement towards 50%.

So alloy wheel will definitely move up in terms of penetration and steel wheel is where the fight between steel and the high vent wheel is going to be there. So we feel that over a medium term, this penetration will cap around 15% of the steel wheel side.

[Operator]

[Operator Instructions] The next question is from the line of Aejas Lakhani from Unifi Capital.

[Aejas Lakhani, analyst]

My question is more near term for FY '25. Could you give some color directionally on how the EBITDA per unit should shape up. Because you've just said, right, that knuckle casting will start, which is better from a margin perspective. And also juxtapose to that is the fact that you said that ramp-up will take time towards 5 million.

So I'm just trying to understand in the context of knuckle casting starting and the ramp-up taking a little more time than anticipated. How EBITDA per unit or per wheel should be for FY '25?

[Pranav Jain, executive]

Yes, so on the EBITDA per wheel side, so what we have done in Q1 is INR 257. So we expect Aejas for the entire year will be somewhere between INR 255 to INR 260. On the knuckle part, yes, knuckle will have a better margin profile.

But if you look at the current year, as Mohan pointed out as we'll be starting with knuckles, in current year, we expected to sell almost 140,000 knuckles. In terms of revenue, this translates to almost INR 30-odd crores. So its contribution to the bottom line at least for current year will be much lower. Next year, this number is expected to get doubled. And then we'll take it from there.

As Mohan indicated in his initial query that he answered that there is a definite amount of traction which is there in the market. We have already covered a couple of OEMs and there are gradual interest which is coming up from other OEMs as well. In fact, there'll be an opportunity overseas as well where we can probably export these knuckles.

So based on how the market shape up, we will probably look at adding further capacity. So for current year, I guess, the EBITDA benchmark on a per wheel basis should over between INR 255 to INR 260.

[Aejas Lakhani, analyst]

Got it. That's very clear. And when you call out the EBITDA per unit at INR 255 to INR 260, do you factor in the knuckle casting? Or is that excluding the knuckle casting?

[Pranav Jain, executive]

See knuckle in any case will not be a major contributor to the bottom line. So it will not make much of a difference. So -- because this is purely EBITDA per wheel, we will not cover knuckle in this.

[Aejas Lakhani, analyst]

Okay. And on the AMW side, is it that you -- I think last quarter, you even called out that you're moving the machinery and -- so I just wanted to understand that is it taking slightly longer than anticipated to kick off all of this? And then when should we expect a ramp up -- or rather commissioning of all those facilities of AMW for which we've paid, yes?

[Pranav Jain, executive]

See, as indicated in our last call. So the endeavor is to utilize those assets which are there [indiscernible] irrespective, where exactly they are located. And currently, looking at the size of that facility, we're in almost 7 million to 8 million in terms of capacity, I guess, it will not be prudent to run those capacities without first attaining a minimum order book size.

So what we have done is, in fact, we have already started shifting those equipments to our plants in Jamshedpur and Chennai, and those are getting commissioned. I guess few of those equipments will need some repair as well. And as Mohan indicated maybe by Q3, we should be up and ready with those brownfield capacities getting added in our Jamshedpur, and we'll start utilizing them immediately.

And on a long-term basis, I guess we are already working on garnering further orders in both for the domestic as well as for the export side. And alternate set of businesses are also being explored, which includes your OTR and agri wheels.

[Aejas Lakhani, analyst]

Got it. And because of the incremental debt that has been taken to finance this, the run rate that in finance cost that we have seen for this quarter is that how we should sort of forecast FY '25? Or will this sort of ramp-up or increase?

[Pranav Jain, executive]

No. So it should actually come down. So if you look at in our starting commentary where we have quoted our overall debt. So in FY '24 Q4 end, we were almost at INR 1,050 crores in terms of the overall book debt, which is there. The same number for Q1 and is hovering at around INR 965-odd crores.

So there is already a reduction of INR 82 crores, INR 83 crores, which is already seen. We expect that yes, Q1, we have seen a financial cost hovering at around INR 31-odd crores. I guess for the full year, it should be somewhere between INR 105 crores to INR 110-odd crores.

[Operator]

The next question is from the line of Vivek Tulsyan from Newmark Capital.

[Vivek Tulsyan, analyst]

My question is on the export front and more a longer-term trajectory. So if you look at last 3, 4 years, our growth in exports have been quite impressive. But now that we have excess capacity both in steel and alloy as we have commissioned our new plant.

I'm just trying to understand what is the hindrance to ramping up the exports business in a big way? Is it that from a cost perspective, India is not as competitive as China or some of the other markets where wheels are getting supplied from? Or is it that customers take time to impanel you as a supplier and that is something that is taking time?

[Mohan Joshi, executive]

Yes. So I think what world has seen in the last 4, 5 years, I don't think anybody saw it post World War II. I mean pandemic, followed by the crisis in Ukraine and Russia. And these are such big, what do you call speed breakers in the overall economic growth of any region per se.

So we -- if we put ourselves in the shoes of OEM customers, for them to make their procurement strategy. Also, they try to buy a little more time, ramping up new suppliers away from their domestic regions. So if I'm sitting in Europe and if there is suddenly a war and when the costs are going up, the freight is going up. I take a little time instead of going all in a very, very expeditious way to introduce the supplier into their domain, which is away from them.

So we have seen this happening that the ramp-up is taking time because of these big changes in the overall geopolitical situation across the globe. So I would factor those reasons as the real reasons why we are not seeing a very, very fast ramp-up in our export segment.

But having said that, the way India is poised in terms of relations with U.S. and Europe, I am very, very confident that exports will continue to contribute in much larger ratio in the coming years. So it will continue to grow. The only thing is that all these large factors that are happening around us, they do put some dampeners.

[Vivek Tulsyan, analyst]

From a cost competitive perspective, how would you position us versus the global suppliers?

[Mohan Joshi, executive]

We are definitely amongst the most competitive suppliers today. I mean if you talk about the manpower costs, even in Southeast Asia and countries like Vietnam and Thailand, forget about [Technical Difficulty] but even these countries are reeling under high manpower cost of situation.

Forget about what's happening in the developed economies. I'm not even talking about them. But even if you talk about Southeast Asia or even if you talk about Mexico, the manpower costs are too high. The inflation is too high. Turkey, you see what's happening to Turkey. I mean Europe is buying a lot of their commodity products from Turkey, but if you ask any European buyer today from the OEM perspective, they do not want to rely so much on Turkey because of how they are poised politically.

I mean so -- they are trying to survive Turkey, as a nation is just because their local currency has depreciated against the euro so much. But if you see the inflation, the spiral through which that country has gone in the last 36 months, nobody wants to build a long strategy on that country.

So considering all these factors, India -- forget about these odd freight increases that happen, they stay there for 3, 4 months, but they go back. But largely speaking, we are pretty much stable nation in terms of our deliverables. So we are very, very optimistic considering that capability of our nation that we have.

[Vivek Tulsyan, analyst]

My next question is on the consolidated versus stand-alone numbers. So there is a INR 5 crore difference in the PAT between consol and stand-alone. Would it be fair to say that this is largely attributable to AMW, and this will continue till we commercialize production at AMW?

[Mohan Joshi, executive]

Yes. So they are two aspects to it. One is the depreciation of AMW asset, I guess this amount is almost INR 3 crores, INR 3.5 crores. And the second is the day-to-day expenses, the routine expenses that we are incurring in AMW.

[Operator]

The next question is from the line of Chirag Shah from White Pine Investment Management Private Limited.

[Chirag Shah, analyst]

Sir, two questions. Firstly, sir, if you can just give a recap on AMW capacities that we have, effective capacity for the next 2 years, because I think that they had tractor or off-highway tire capacity also. So if you can just give you a broad indication what commercial vehicles, you indicated the plant that you have shifted 4 lakhs units a month. So one -- that is first. If you can just give a broad indication of the segment rate capacity of AMW, which could be effectively used over the next 2 years?

[Mohan Joshi, executive]

So the capacity is between 5 million to 6 million, wherein one of the lines, which is the tube type line can produce close to 0.5 million, which is now getting shifted towards Jamshedpur. And we have tubeless line, which is going to be at close to 0.5 million again. And that is not used because we have Chennai plant, and we are going to be sufficing that as soon as this comes to us a level where we are going to be at 80%. Obviously, this will come into act, and we will start to utilize that.

The other side is tractor capacity, which is at close to 0.5 million again, which is -- Dappar plant is at close to 0.91 million kind of number for tractors. We are at close to 85% utilized factor there. And some of the debottlenecking is already happening in Dappar from these machines to increase the capacity of the Dappar plant.

And then we have -- apart from this 1.5 million, then we have 2 carlines, which are available close to 1.8 million, 2 million roundabout. So this is where the breakup of this 5.5 million is coming from.

The carlines, which we anticipate with the industry growing at between 5% to 6%, will come into some of the utilization in financial year '25, '26. I think right now, Chennai is fully balanced at close to 85%, 90% utilized. Dappar is at close to 85%-odd, Jamshedpur, in the current month, it is not there, but for the full year, I think it is utilized to the tune of 85%-odd. Chennai is at -- that plant is at close to 65%, 70%.

And next financial year because of the volume growth, we anticipate some of the workings to be starting in AMW as well. So whether we do it in AMW or we do it in our existing plants by debottlenecking, that will be the choice based on the financial performance of the plant post operations.

[Chirag Shah, analyst]

And sir, just a clarification -- so we already had some customers at AMW, right, even in the export market?

[Mohan Joshi, executive]

No. So for AMW, we do not have any customers there. We have customers which are for SSW, right? And we do not have any AMW customers there. They were serving because the plant is shut for many, many years now. So those customers have already been taken up by Aditya's team in terms of SSWL to increase the market share as Aditya has in the sight in terms of our future strategy towards OTR, this plant will be utilized where the team is already working.

[Chirag Shah, analyst]

Just a follow-up on the earlier question, the opportunities to India, the export opportunity. Just to understand it slightly better, why is it taking time for product like wheel -- or the casting product like wheel, because in auto ancillary, we have seen this shift happening even in some of the other industries, we are seeing shift happening because of anti-China plus cost increase in Europe plus geopolitical issues that you highlighted. It appears in the wheel space, it is taking a bit longer time. Is it that the wheel industry from India is a bit late to enter in this, or customer focus has not yet come on this? And when do you expect the tipping point to happen?

[Mohan Joshi, executive]

I think I'll take the first chance and then I'll talk -- I'll ask Aditya to take it up. I think wheels is a very sensitive subject. It is a Maru A safety product. In the entire car, this wheel chassis assembly is the more sensitive, so do not take it just for the namesake, [Foreign Language] why wheels is not able to do it. It's a very sensitive decision to move one continent to other continent because it's a safety product.

And at the same time, the validation of a vendor, the sustainability of the vendor and certification and ground certification takes time because the vehicle has to run certain amounts of thousands of kilometers to ensure that it needs to be changed from China to India, it takes a bit of time. I think it is commendable that Aditya's team has taken up close to INR 250-odd crores to close to INR 700 crores worth of exports in a market where globally, they grew at 1%, 1.5% with COVID taking down them -- taking them down by 25%, 30%. So it's a commendable amount of improvement in exports.

And -- it has its own pace. As I stated in my many calls that the alloy wheel market is a 350 million wheel market. India should target 10 million, 15 million over the next 5 years. Can SSWL supply 1 million, 2 million, 3 million in the next 5 years is where the vision of the company is. So we are at 5 million. We will not stop at 5 million. We will go to 10 million. Out of that 10 million, yes, something will be domestic, majority will be export, because that's where the playing ground is.

In that export, yes, there are challenges of geopolitics. There are challenges of duties. There is challenge of demographics. There is challenge of social unrest in those countries. So those challenges, I think Aditya and his team is taking are of. And anything that I've missed Aditya, you can please add.

[Aditya Dixit, executive]

No, I think Mohan, you covered everything.

[Chirag Shah, analyst]

Because some of the other -- in the auto ancillary also, some of the other critical components have seen a reasonable offtake from India. So I was coming from that perspective. And when do you see the tipping point? My more important question is, are we 2 years away? Are we 3 years away in your best guess or best estimate? I understand these are all estimates or guesstimates or in that sense. But where are we in that validation/approval process that 2 years out could be the real tipping point for India has the place for [indiscernible].

[Operator]

Sorry to interrupt you, sir. I request you to come back for a follow up.

[Mohan Joshi, executive]

No, I'll answer that. No problem. So as a company and a sensible shareholders' representative, I think it is very important for me to give a vision to the shareholders that we are at close to INR 4,000 crores, INR 4,500-odd crores. And we aspire to the $1 billion revenue at INR 8,500-odd crores, INR 8,000 crores in next coming 5 years.

In that journey, export will play a very pivotal role because that's where the unseen market is. We are doing just INR 700 crores. Can we do INR 500 crores more? Can we do INR 1,000 crores more is where company is working in terms of the product development, which is on alloy, on steel, on trucks, on OTRs. At the same time, knuckle is another product, which is going to add INR 500 crores, INR 700 crores, INR 800 crores is where the thought is.

So broadly, we are inclined towards that kind of a number over the coming 5 years, which is going to be coming organically from the domestic market, inorganically from the export market, and some of the cannibalization, which is going to be happening from China plus 1 philosophy. So these three factors will run around. And I think with the auto ancillary volume business, I think indicated to be down by 2% to 5% this financial year. I think we'll be confident to take a volume growth as well as value growth for financial year '24, '25 is where my stand for the organization is.

[Chirag Shah, analyst]

No. Fair point, sir. Because your capabilities in India is far ahead than your peer set. That's why I was asking this over the tipping point. Definitely your capabilities are far better than you peer set at least in India.

[Mohan Joshi, executive]

So it will take maybe 2 years for us to pace up whatever effort that the team is making right now and the results will be visible.

[Operator]

The next question is from the line of Shashank Kanodia from ICICI Securities.

[Shashank Kanodia, analyst]

I just wanted to check, what will be your CapEx guidance for this year and next year roughly?

[Mohan Joshi, executive]

Can you please repeat it?

[Shashank Kanodia, analyst]

Sir, what will be your CapEx as in the capital expenditure guidance for this year and next year?

[Mohan Joshi, executive]

Total CapEx expenditure for this year will be around INR 210 crores to INR 220 crores, which includes knuckles and alloy wheel expansion, with balance amount of spending.

[Shashank Kanodia, analyst]

Okay. And sir, next year could be tapered off, right? I think the large part of CapEx will complete this year, so, next year should...

[Mohan Joshi, executive]

Yes, March last CapEx will be completed within this year. And for next year, I don't think so we are doing some of the major CapEx, only except knuckles, where if we want to increase the capacity, yes, we can add on capacity by doing some CapEx in knuckles.

[Shashank Kanodia, analyst]

So next year, we can expect something in the range of INR 15 crores, INR 20-odd crores, right?

[Mohan Joshi, executive]

See, there is nothing significant which is there on table as of now for next year. I guess the knuckles might require some changes if there is an incremental demand coming in because the kind of traction that we are seeing. But on an overall basis, I guess we are not seeing any CapEx of more than INR 70 crores, INR 80-odd crores, including the replacement and the balancing equipments.

[Shashank Kanodia, analyst]

Right, sir. Sir, secondly, on the debt side. So as you've been highlighting before also, so the peak debt is behind us, right? So now it's going to be double digit before us for the next couple of years, right?

[Mohan Joshi, executive]

Yes. So the INR 1,050 crores that we saw last year will be the fee, and then now will be on the reduction part.

[Shashank Kanodia, analyst]

Understood, sir. And sir, in your initial remarks, you mentioned that the steel business is expected to grow 6% to 7% this year, and the aluminum business 12% to 15%, right? So blended basis, we could expect something like 19% kind of a top line growth for us this year?

[Mohan Joshi, executive]

No. So in terms of volume, I guess, the overall growth would be hovering around 5% to 7-odd percent. And in terms of number, I guess, it would be somewhere around 20 million. In this 20 million, the export is expected to be around 4.2 million, 4.3 million.

[Shashank Kanodia, analyst]

Understood. And sir, responding to our previous participants, you mentioned that the key levers of growth will be organic, domestic and inorganic exports. But inorganic you mentioned -- are we indicating some kind of acquisitions or something of that sort? Or is just rising exports, normal exports.

[Mohan Joshi, executive]

So it will be normal exports. There is no acquisition which is there on the table as of now. On the export front, I guess the number will be around 4 million, I guess 3.7 million is what we did last year. So this year this should be 4 million.

[Operator]

Ladies and gentlemen, we will take this as the last question. I would now like to hand the conference over to the management for closing comments.

[Mohan Joshi, executive]

So thanks a lot for having us present ourselves and giving us an opportunity to explain the quarter. We are -- as we have stated earlier that company is committed towards improving the margin profile, improving the customer profile and improving the product profile. We are fairly committed.

And we feel that the effort that the company has done over the past 2 years in terms of NPD will start yielding results from this financial year-end and will be fairly visible in '25, '26. And the CapEx that we have done over the past 3, 4 years, we'll try to show its relevance to shareholders in financial year '25, '26.

And once again, I thank all the participants for giving us this opportunity. Thanks a lot.

[Operator]

Thank you. On behalf of SMIFS Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.