Steel Strips Wheels Ltd

NSE:SSWL

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Steel Strips Wheels Limited Q2 FY '25 Post Results Conference Call hosted by SMIFS Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Hiranandani from SMIFS Limited. Thank you. And over to you, sir.

[Amit Hiranandani, analyst]

Thank you, Sejal. Good morning and festive greetings to everyone on this call. On behalf of SMIFS Limited, I welcome you all to Q2 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, Deputy Managing Director; Mr. Naveen Sorot, CFO; 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. Before I hand over the call to the management, I would like to congratulate to Mohan sir, on his promotion to Deputy Managing Director.

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

[Pranav Jain, executive]

Thank you, Amit. Good morning, everyone. Hope everyone is doing well. I hope everyone had an opportunity to go through the financial results and investor presentation, which we have uploaded on the Stock Exchange and on our company website.

During past half year, our revenue stands at INR 2,120 crores as against INR 2,178 crores. EBITDA for H1 FY '25 is at INR 241 crores versus INR 245 crores in H1 last year. Profit after tax stands at INR 96.40 crores versus INR 100 crores in same period last year. Revenue from operations for the current quarter is INR 1,095 crores versus INR 1,134 crores in Q2 of FY '24. EBITDA is at INR 123 crores versus INR 127 crores in the same quarter last year. Profit after tax stands at INR 5,021 crores versus INR 5,153 crores same quarter last year. There is an improvement in EBITDA per wheel for H1 as well as Q2. EBITDA per wheel for H1 stands at INR 256 per wheel and INR 255 per wheel for Q2 FY '25. EBITDA margin has improved to 11.33% versus 11.19% in H1 last year.

For the H1 FY '25, our revenue mix has been 31% for alloy wheel business and balance 69% for steel business. For alloy wheel rim, sale volume increased by 10% in H1 FY '25 as compared with same half year last year. Export volumes have gradually increased this quarter following a decline in the previous quarter due to supply chain disruption, rising global inflation and ongoing conflict in the Middle East and Europe; however, we are now seeing a revival in export activity, and we are optimistic that demand will improve in the coming quarters. Quarter 2 FY '25 export revenue stands at INR 150 crores as against INR 177 crores for Q2 FY '24. Overall exports in Q2 FY '25 include INR 27.65 crores on alloy wheel business. For H1 exports stands at INR 273 crores versus INR 331 crores same period last year.

For the current quarter, overall debt stands at INR 926 crores versus INR 1,047 crores in Q4 FY '24. That's a reduction of around INR 121 crores. Last year, we introduced a new business line, aluminum knuckle. We are pleased to announce that commercialization will begin next quarter, enabling us to start serving our existing customers, including 2 OEMs with whom we have established agreements. Looking forward, we aim to fully launch this business like a fiscal year 2026. We believe this strategic expansion will not only broaden our product portfolio, but also strengthening our market position. This product is specifically targeted at the SUV segment where OEMs have greater pricing power with increasing demand for SUVs due to their comfort. We expect a strong inflow of order in future.

Steel Strips Wheels Limited continue to 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. As the industry continue to advance, we expect our performance to grow in alignment.

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

[Operator]

[Operator Instructions] The first question is from the line of Shridhar from Axis Limited.

[Shridhar Kallani, analyst]

Hearty congratulations, Mohan ji. My first query is on the exports. Just wanted to understand, you all had given an earlier guidance of INR 650 crores to INR 700 crores for the full year. So is it achievable in this year?

[Mohan Joshi, executive]

See, I think INR 650 crores is what we are trying to achieve in this financial year, given the global landscape, which is there. In the first half, I think we have already done INR 275 crores, and we feel that INR 650 crores looks a little tough. It is not unachievable. Given the kind of stretch, which is happening in Europe and U.S. in terms of demands slump down. INR 650 crores looks a little bit tough, but INR 600 crores to INR 650 crore anywhere in between is where we are trying to target.

[Shridhar Kallani, analyst]

Okay. And Europe and U.S., so basically...

[Mohan Joshi, executive]

We have to consider right now, one is the current situation of freight, which has suddenly again gone up and because of the Chinese and the Singaporean disruptions, which has created a little bit of uncertainty. And second thing is, given the situation, which is there in U.S., I feel a lot of uncertainties there with this Trump and Harris coming into picture, people are expecting a lot of turmoil, which is going to be on the policy front. Once Trump comes in and he starts to roll over a lot of those things, which were stopped after he was removed.

So if Trump comes in, it's a good news for India, given that his landscape towards China is fairly very, very volatile. So we expect a very, very good situation for India for coming 5 years given that Trump wins and it's a momentary thing, which is going to be stabilizing towards this Q3, where uncertainty is going to go out. And if Trump wins, it's very, very good for India.

[Shridhar Kallani, analyst]

Okay. And sir, like, generally from other Tier 1, Tier 2 suppliers, they are mentioning that OEMs are in a pain, specifically passenger vehicles. So as we do not cater to OEMs, we cater to aftermarket. So in the Alloy segment, we have seen a considerable increase in your exports, how is the outlook for passenger vehicles?

[Mohan Joshi, executive]

See, from a perspective of total exports, given that the European as well as American markets are down anywhere between 15% to 35% based on which continent are you supplying, given that we were at close to INR 635-odd crores last year. And with that kind of a momentum and all the customer pockets in our hands, we feel that if we are anywhere above INR 600 crores, it's a commendable thing, given the landscape which is happening in the industry. The intent is towards the alloy wheels, which you have rightly mentioned that, that space is growing, and we are already at a decent space. And we feel that for this financial year, a 50% growth on alloy wheel export will be a minimum thing, which is going to be targeted by us.

[Shridhar Kallani, analyst]

Understood. And on the domestic front, so CV demand seems a bit tepid and the momentum was also down in the first half. How do you foresee the second half of FY '25 and FY '26? Anything from the OEM side on their order book or purchase order? Any changes that you see?

[Mohan Joshi, executive]

So the -- for the first half in terms of truck flux, in terms of overall domestic situation, I think the situation was anywhere down between 15% to 16%. I think for the full year, the expectation for the industry is a downgrade of 7-odd percent and H2 will be a better year given that it is historic over the past so many years in terms of the CV cycle to improve in H2, which we have started seeing in the month of September -- sorry, October. And we believe that from November end, the situation should again, do better. And for the full year industry, we're growing at 7%, we are anticipating that there's going to be anywhere between 1% to 2% down in terms of volumes.

The reasons are fairly very loud in the industry. One is obviously elections, where 3, 4 months of election dilemma was there and a lot of spending cuts were done. The second reason is obviously the heavy monsoons across the nation, which are now stabilizing. And I feel H2 is going to be much better than H1 for the industry.

[Shridhar Kallani, analyst]

So like do you expect high single digit or maybe double-digit growth in second half in your segment, like from SSWL side, I wanted to understand.

[Mohan Joshi, executive]

See what I feel is that industry is trying to cap up that number at minimum, say, 7% or so. And for the first half, we have degrown by 16%. We feel that this 16% should end up if the industry grows at minus 7% to maybe minus 1%, minus 2% for SSWL. I can tell you that.

[Shridhar Kallani, analyst]

Understood. Understood. And how is the outlook on the Tractor segment since we have made various TLAs with various OEMs. So what kind of growth for SSWL in the tractor wheels can be expected for the full year?

[Mohan Joshi, executive]

See, the industry was talking about a flattish year this year in terms of Tractor segment. I think the first half has been very good in terms of anticipation of monsoons and good monsoons played out and farm income going up, the minimum wages going up. So all these things have ensured that we are traveling at close to 12% H1 growth for the domestic market. And we feel that as against the last year's share of business of close to 36%, 37%, we will end up this year at 41%, 42%. So irrespective of the industry growth may be at a flat rate, we feel that we are going to hit the highest number of tractor for the financial year, and that growth could be anywhere between 9% to 10% to 11% for the financial year '24 '25.

[Shridhar Kallani, analyst]

Understood. Understood. Any comments, sir, on the...

[Mohan Joshi, executive]

Fairly very, very aggressive on this side, that first, we need to stabilize at 41%, 42% in terms of the industry landscape. At the same time, we have been updating that this segment is towards the export side also, where lot of development is underway right now and close to 3 global RFPs are being attended by us to make entry towards 2 large OEMs of Tractor and OTR segments. We believe that the results should be out by December or so. And I believe that in Q4, we will be talking about that.

[Shridhar Kallani, analyst]

Understood. So I believe our EBITDA per wheel, which is like around INR 250 to INR 255, it should push more northwards towards INR 260, if the tractors and CV segment play out well for us?

[Mohan Joshi, executive]

I think Naveen will answer that.

[Naveen Sorot, executive]

So see, that has already started to happen. If you look at H1 current year, we are already at INR 256 and this number is versus INR 251, which was H1 last year. So this number has already started to inch up. Well, I guess, the margins have also, if you look at in terms of percentages, and as the mix gets more towards the heavier wheels, this is expected to move upwards.

[Operator]

The next question is from the line of [ Niraj from NB Capital. ]

[Unknown Analyst]

Congratulations to Mohan sir on your promotion. Sir, my first question is on your knuckles, aluminum knuckles division. I mean is it starting from Q3, right? So what is your outlook for this year? And how you plan to take this business in the coming years? I mean, next 2, 3 years?

[Mohan Joshi, executive]

See, from a business point of view, it has a similar outlook, which is visible to you on alloy wheels, where alloy wheel was having a penetration of maybe 10% odd 5, 7 years back. And today, we are at 40% of the industry because of light-weighting and because of ride quality and various specific features. This is a safety part. And with the pressure, which is coming in from the government in terms of CAFE norms and light-weighting, plus the electric vehicle kind of penetration, we feel that this industry creates an opportunity of an industry size of close to INR 500 crores over next 3, 4 years. And we have a first-mover advantage where the tie-ups with 2 of the OEMs have already been done. Mass production has started from the month of October, and I think it is still at a nascent stage. And Q4 will be when it is going to be at close to 70% of the first phase capacity.

Capacity expansion on the knuckle side is already underway, which will expand by the next financial year, mid to double the capacity of currently 0.25 million to 0.5 million. And the intention is that we try to grow this business across all verticals of the customers as well as on the export side to target this industry as a first-mover advantage. And to give you a benchmark, I think in European side, 70% of the knuckles are on aluminum. So knuckle is one product. There are 2 other products, which are also available along with the assembly of knuckle, which are also aluminum, which is where the next step of forward integration is going to happen from the company, and we'll keep you updated on that.

[Unknown Analyst]

Okay. And sir, any new customers have you added apart from these 2 OEMs in this business or any portfolios?

[Mohan Joshi, executive]

So there are -- RFP negotiations are going on in terms of build-to-print and full service support. And those are expected to be landing up by January or February in terms of the results. But from the existing customers, I think 100% of the business is with us. And incrementally, these customers are fairly very aggressive towards this stance of taking aluminum knuckles into their vehicles because of the pricing of their vehicles and acceptability. And we feel confident that the first phase itself will be full with these 2 customers.

[Unknown Analyst]

Okay. Okay. Sir, my next question is on exports. I mean in the U.S., you were saying trailer industry was down in last quarter. So how is the situation there? And also, you said on SOP were postponed from your OEM customers, so what is the situation on that front?

[Mohan Joshi, executive]

So I don't think so that I said any SOP has been postponed from our side. I think there is globally...

[Unknown Analyst]

Yes, from the customer's side.

[Mohan Joshi, executive]

Globally, there is a slump in terms of demand outlook, that is first. Second is the policy uncertainty, which people are expecting post-results in U.S. Typically, Trump has a habit of putting taxation for putting America first and he has done that in the past by putting very extravagant duties against all the nations where China gets support. And people are anticipating the similar kind of behavior this year also. And given that the lead is there for Trump right now in terms of the situation of opinion polls, we want to wait and watch. And post December, once the clarity is there, then a push of orders will start coming into the Q4. And given that if Trump comes with a large majority, then we feel that next 5 years is going to be extravagant where we expect actions against Vietnam, against Thailand, against Malaysia, against all those nations from where it's a quasi-Chinese, which is supplying to U.S. and Europe. So I think it's a wait of one quarter, and Q4 should be normalcy restored.

[Unknown Analyst]

Okay. Sir, my next question is, you have entered the OTR segment, right? So any update? I mean, can you give us an overview that segment? And how is the business going there?

[Mohan Joshi, executive]

So from the OTR side on the domestic side, we are -- anyways we are at close to 65% odd share of business. There are 3 large customers where the development is happening. These developments are close to 1.5 to 2 years of gestation period wherein we have already invested 1 year. And mass supplies of certain customers have already started from our mother plant, which is in Dappar. The real results will start trickling in, in terms of Q1 of next financial year, when close to 17 SKUs will see the light of testing and road certification and everything.

And I believe that this is a very profitable business. It's not a very large volume business. It's a very profitable business. And given that you have very large supplies, which is available and as an industry, it has a potential to build up a INR 200 crores, INR 300 crores kind of a business for us is where the thought is that we are going to be hinting towards entering into this segment.

[Unknown Analyst]

Sir, also, in one of your calls, you said there is a lot of dumping from Vietnam and Thailand players in the export market. So -- because of which you need to bring down your prices, which had impacted your margins. So any -- I mean, is this dumping still happening, I mean, in the export markets?

[Mohan Joshi, executive]

So that segment is already impacted and I think that in every conference call, we are telling close to INR 2 crores to INR 3 crores of value addition is being lost to match the prices and try to see how we should not lose the business from the existing customers given this kind of a situation, which is already underway right now. The good thing, which is happening is that the steel prices are falling. So it gives you a little bit of cushion on the exports to further fight with these nations and some of the supply stoppages have happened from a few of the nations, but not entirely. We feel the real action will start happening from January, February. When the executive orders will start coming in, if Trump comes in. It has a longer haul kind of a play versus the small, small price correction, which we are trying to do.

[Unknown Analyst]

Okay. Sir, updates on your CapEx guidance, I mean, for FY '25 and '26 and where can -- where will be utilizing this?

[Mohan Joshi, executive]

Can you repeat the question once again please?

[Unknown Analyst]

Sir, your CapEx guidance for FY '25 and the next year FY '26?

[Naveen Sorot, executive]

As the start of the year, we have guided for almost a CapEx spend of INR 225 crores. I guess based on what we have spent in H1, the amount that we'll be spending on CapEx will be lower than what we have guided for. I guess it will be under INR 200 crores. And then the entire thing, as we have conveyed to the market earlier as well that entire funding will be via internal accruals. There will be no addition of external debt, which will be taken in our books. And in fact, we have accelerated our borrowing repayments.

As Pranav highlighted that we have almost paid off INR 120 crores of debt in H1. Another INR 100 crores is expected in H2. So INR 926 crores is the total debt, which is there on the books as on September end. This number should go down to almost INR 825 crores by the time we end this year. And then in the next 2 years, we expect to reach almost INR 300 crores, which includes the repayments as well as some accelerated repayments that we'll do based on accruals.

[Operator]

[Operator Instructions] The next question is from the line of Amit Hiranandani from SMIFS Limited.

[Amit Hiranandani, analyst]

Sir, on the aluminum knuckle casting, please help us, what are our internal targets in terms of achieving the top line and margins for the next 3 years, please?

[Mohan Joshi, executive]

For the current financial year, I believe that we are starting with some 3,000 numbers from the October month. And for the financial year, '24-'25, I believe that close to INR 15 crores worth of business will start coming in terms of this financial year. And for next financial year, which is the visibility that the customer is trying to give right now. We expect this number to be between INR 75 crore to INR 80 crores for financial year '25-'26. And next to next year, which is the capacity expansion, which is already going on right now, where visibility is fairly strong in terms of the new businesses, we believe that the business is going to be anywhere between INR 115 crores to INR 120 crores.

[Amit Hiranandani, analyst]

Sir, I'll just repeat in FY '25 H2, you will achieve INR 15 crores. Is it right?

[Mohan Joshi, executive]

Yes.

[Amit Hiranandani, analyst]

And '26 -- '25 to '26, INR 30 crore you said?

[Mohan Joshi, executive]

INR 65 crores to INR 70 crores.

[Amit Hiranandani, analyst]

INR 65 crores to INR 70 crores, and then INR 115 crores.

[Mohan Joshi, executive]

INR 115 to INR 120 crores. And by the time, we are going to be coming into this, I think, there are 7 RFPs, which are under discussion where customer is asking for a mega factory to be put up for close to 1 million or 1.5 million kind of capacity, which will start in terms of the discussion into next financial year, first quarter. Once this is there, then obviously, the scale is going to be very different in terms of the expectations.

[Amit Hiranandani, analyst]

Right. And sir, in terms of margin, how is the traction over there? How much is the internal target?

[Mohan Joshi, executive]

The margin profile is fairly good in this business, but given this quarter's situation because these are smaller orders, which are coming in. And let us try to average out in terms of October, November, December, and we'll try to give you the highlight in the conference call. The first margin, I think from a margin point of view, double-digit margins, that is not a problem. And it is margin accretive for the company also. But please give us this quarter's performance to be taken up into our hands.

[Amit Hiranandani, analyst]

Sure. And sir, we were actually earlier planning to enter into more new products with castings and et cetera. So have we finalized anything on that front?

[Mohan Joshi, executive]

So as I said, there are 2 more products, which are part of this knuckle, which is the lower control arm and the upper control arm, which is already under discussion. It's just that it's a safety product, customer cannot go all out, right? So the discussions are going on with the engineering and the kitty value will continue to increase because process remains the same. It is the addition of machines that you can do and then potentially you can improve your kit value to close to INR 11,000 from currently INR 2,200, INR 2,300 or maybe INR 2,500.

[Amit Hiranandani, analyst]

Sure. Nice. And sir, on the AMW side, we have adopted a very good strategy of moving our equipments to existing SSWL plants for better utilization. So what is the progress on that front?

[Mohan Joshi, executive]

From the AMW side, I think, we updated that by this financial year end, the capacity expansion of Jamshedpur will be over and we'll be adding up close to 40,000, 45,000 wheels in Jamshedpur to take it up to close to 200,000, 205,000 numbers on a monthly basis. And it will also add economies of scale and, obviously, will help improve the EBITDA profile for the business, given that the economies of scale will help that. And we feel that this year is a consolidation year for PV. And from a nasty point of view, the industry has the capability to grow at 5% to 7% every year, given the CapEx requirement of the country and if it's being done by the company, but the timing of the same is going to be adopted by the organization to finish it by the financial year end and take the advantage of that.

Apart from that, I think we have also mentioned in the balance sheet that additional debottlenecking of the organization is happening in terms of adding up the capacity of testing, adding the capacity of toolmaking, adding the capacity the line balancing in other plants, which is in Chennai is already happening. And along with that, in Dappar is already happening. All these activities will start from financial year '25, '26 in terms of start-up production. And this is the best use that we can do to AMW as we speak to help improve the quality as well as the top line of the organization.

[Amit Hiranandani, analyst]

Right. Sir, on the exports front, so we had a talk that basically we're trying to enter into new geographies and want to add more customers and et cetera. So any progress on this front please?

[Mohan Joshi, executive]

As I said, I think from a tractor and AG OTR kind of a business, which is, say, India business is 50% of the market, and it's a favorable margin kind of a business and export is fairly very lucrative. But with exports, you have a very large kind of range, which you need to develop, which is already underway for past 1 year, and we expect that this exercise is going to continue in terms of expansion of the lines as well as expansion of the product portfolio. The fruits of the same is already visible in terms of some orders coming into our city in this segment from the export side.

The real visibility will start coming into quarter 1 of '25, '26 in terms of order backlog increasing. And this is a continuous exercise to pick up a 5%, 10%, 15% kind of a margin -- sorry, share of business into this export market, which is fairly lucrative from the margin point of view as well as from a business highlight point of view of global OEMs.

[Amit Hiranandani, analyst]

So presently, sir, exports is a little bit weaker due to macro concerns. So are we taking any kind of pricing actions to revise some demand over there?

[Mohan Joshi, executive]

So pricing action is always a continuous process. I think the intent is to not lose the margin profile completely, but keep the customer into focus where we understand their problems in terms of inventory, in terms of freight and everything. So best of the pricing is being given to them without giving too much on the margin front. Yes, some margin will be eroded, but ensuring that we try to maintain that INR 600 crores plus kind of momentum and try to wait for the good times to come in when this industry will turn around. And once you turn around, the same customers will help you to move to INR 700 crores to INR 800 crores. The other side, which we are trying to do is on the alloy side, which is where the problem is not there.

So currently, as I said, that 50% kind of a growth is visible in this financial year with the backlog of the orders that we are having. There's a large long-term agreement that we are trying to work out. And this workout is based on our delivery performance to these customers. And we believe that something good will be heard in Q4 of this financial year in terms of this long-term agreement. And ensuring that next year, another 50% kind of a growth on this export front on alloy wheel is 100% guaranteed. Two of the OEM businesses will start in, I think, Q4 or Q -- Q3 end or Q4 first month. And this will ensure that at least 0.5 million kind of a pace is visible into exports, creating at INR 200 crores, INR 250 crores kind of business from the export itself.

[Amit Hiranandani, analyst]

Right. Sir, digging more on the export side, so I wanted to understand more is it a challenge of inventory or the demand itself is lower there?

[Mohan Joshi, executive]

No, sir, you see across the globe right now as we speak, in terms of the volumes, the volumes are down between -- anywhere between, say, 15% to 35% based on which customer is this. And out of that, which customer are you hinting in terms of the offtake. So there are a lot of challenges, which are coming in from the policy front, as I said, that you don't know whether you import something from China too much and China -- Trump says, okay, all the transit, which is there, I put 250% duty. He has the habit of doing that. He's random. So people do not want to take that chance.

People are saying, okay, let us liquidate our inventory. Let us keep the minimum pipelines running so that the OEM lines are running. Suddenly, once you start getting reflection by the -- I think January 1 week will be the result, I think. So by December end, I think you will get the idea that how the wave is going and how the action needs to be taken by the corporates. So nobody wants to take a chance that there is a 2.5, 3 months kind of an inventory, which is in transit and he says, okay, I put a 200% duty on that. The guys will go for a toss, right? So we believe that by December end, the policy actions will start converting into deliveries and the improvement on the export side for replenishment of the dried up inventory will start.

[Amit Hiranandani, analyst]

Right. Sir, our cash flows are getting better, like improvement is happening. So what is the outlook for prepaying the debt because our CapEx is not very high in the coming years. So any chance to prepay the debt further?

[Naveen Sorot, executive]

So Amit, I guess that is what exactly what we highlighted that if you -- even if you look at H1, we have prepaid some of the debt whereas the total repayment stood at INR 120 crores. And for the balance H2, we are also expecting another INR 100 crores. So from INR 1,047 crores, this number will probably be INR 826 crores by the time we end this year. And for the next 2 years, we are expecting to pay almost INR 300 crores of debt, which will include some prepayments as well. Otherwise, the normal repayment schedule is almost INR 180-odd crores. Over and above this, we'll be seeing almost INR 120 crores. And then based on if there is any further improvement in the cash accruals based on businesses, those will also be taken care of.

[Amit Hiranandani, analyst]

And this is very nice to hear, sir. And sir, I just missed on the CapEx. If you can break down the CapEx between where we are going to spend that INR 225 crores?

[Naveen Sorot, executive]

So as I highlighted, Amit, this year, I guess we'll be spending lower than INR 225 crores that we have highlighted at the start of the year. There have been some renegotiations, which have happened on the project costing front as well. So we expect this year the amount will be lower than INR 200 crores in terms of overall CapEx that we'll do. Key area remains one, the aluminum expansion that we were doing; second, the knuckle, flow from equipments and this balance payment towards solar panel installations. So those are the key CapEx items that we had for current year. So the overall CapEx will be in and around INR 200 crores, so it will be lower than what we have anticipated.

[Amit Hiranandani, analyst]

Right. And sir, lastly, on the alloy wheel side, so how is the traction in the domestic alloy wheels ? Because we have in between seen some pickup in the styled wheels as well. So what kind of growth one can assume for the midterm? And any kind of new model additions we have done in the H1?

[Mohan Joshi, executive]

So Amit, I think, from an industry point of view, the industry has been very stable at close to 36%, 37% for the past 12 to 15 months. And from the month of August, September, the industry has picked up and has gone to 41%, 42% of alloy wheel penetration. Is this permanent? Is this something, which is sustainable? We'll come to know that post-festive season, maybe in the month of November and December, we'll come to know that. But to answer your question on the style wheel, there is definitely a hit, which has come in from the style wheel. But over past 3 months, the style wheel penetration has started dropping. And people have started moving from this style wheel to alloy wheel because the customer may be questioning that I'm paying that money and you are not giving me that alloy wheel.

And given the kind of inventory situation, I think OEMs have also pushed this alloy wheel to all across the customers. So we feel that alloy wheel industry, given that the industry grows at, say, 5% to 6% in terms of the passenger production -- passenger vehicle production, we feel that the industry has fairly a capability of growing at 10% to 11%, 12%. Within that, we are maintaining a 32%, 33% kind of share of business across the board. Maruti is going to be expecting -- Maruti is expected to be starting the mass -- giving the mass production instruction by Q4 end in terms of the visibility because the vehicle is under testing under various durability testing. And we also believe that Maruti is going to be increasingly -- given the kind of supply constraint, which is they are having from the existing 2 suppliers, will add more RFQs towards us going into Q3, Q4 and Q1 of next financial year in terms of balancing the act.

So from alloy wheel side, I don't see any problems coming in, in terms of the demand outlook. As I said, that domestically, we are fairly very, very confident of hitting close to 3.6 million to 3.8 million to 4 million in terms of the demand outlook. 0.5 million is expected very, very clearly from exports. So first 4.8 million should not have any problem to be sold out. The other factory is that -- factor is that we need to add debottlenecking exercises within the existing capacity, where we have some ideation to increase the existing capacity of 4.8 million to 5.4 million, which will come into action in next financial year, where the line will be seen. And post that, there is a hint, which is coming from the OEMs to put up a dedicated plant in the North, which we are trying to work out, and let's see how it works out.

[Operator]

The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

[Madhur Rathi, analyst]

Sir, I think few quarters back, we had mentioned that we were doing some kind of pricing discussion with big OEMs for price increase and that would reflect in our margins. So how is -- what is the status of that?

[Mohan Joshi, executive]

Are you talking about the price correction from the customers that we were talking about?

[Madhur Rathi, analyst]

Yes, sir. So you are in discussion with some kind of OEM, you have mentioned that in next 2 to 3 quarters, there will be definite type -- on that.

[Mohan Joshi, executive]

Yes. So that price correction has been agreed with the OEM. And I feel that you will see that correction coming into action in terms of the Q4 end in terms of pricing and margin improvements. And these are exercises, which are going on with multiple customers at multiple phases. And all these excesses are on routine asset in terms of putting up into action. And we feel that by Q4, some of the fatal effect of this margin improvement will be seen into the financials.

[Madhur Rathi, analyst]

And sir, this margin improvement would be a substantial margin improvement or just like a portion of margins...

[Mohan Joshi, executive]

What typically happens I'll tell you. I'll tell you, there could be a margin improvement of, say, annual impact of INR 15 crores, INR 20 crores, INR 10 crores, INR 25 crores. That is one impact. The other factor, which we are trying to do is the repricing of the contracts, which is now the new RFQs are coming in and the repricing will take its time in terms of the RFQs coming into the system and you quoting it higher and trying to rebalance it, it's a 1, 1.5 year kind of a process. But it is very, very clear that margin improvement has to be there, wherein the push on the customer will be maintained. And yes, this year has been one of the years where steel prices have dropped. So every quarter, there is a drop in steel price and there is an inventory-based loss, which is coming and sitting into the P&L.

So every quarter, INR 5 crores, INR 7 crores get lost because prices have dropped INR 4, 1 quarter. Then next quarter, another INR 4. The next quarter, another INR 4. So it's a downward hill, which is a part of the business. But given the fact that this is not going to be always like that, and the INR 15 crores, INR 20 crores that we have lost in terms of inventory in this financial year will stabilize and will be visible into the balance sheet coming into financial year '25, '26. But as I said, across the board, margin improvement is where the work is going on from the raw material point of view, from a yield point of view, from a pricing and repricing point of view and from a contract negotiation for the existing deal also. So visibility of the same will be visible from Q4 of financial year '24-'25.

[Madhur Rathi, analyst]

Okay. So sir we can expect a 100, 200 basis point increase in FY '25 towards this repricing as well as internal efficiencies as well as the additional...

[Mohan Joshi, executive]

I don't think so 100, 200 basis points is the right expectation. I think we are at close to 11.5 odd something that we are trying to run around right now. But at a scale that we are trying to work out in the next financial year, we expect 15, 20, 25, maybe 50 basis point improvement in this. That is what the intent is. Because see everywhere pricing is not going to be the challenge, right? When you have CVs as good and [indiscernible] as good, you cannot reprice with them. But yes, PV is a problem, which has been a problem for many, many years. So if it impacts you and gives you a commendable amount of margin movement, it is set right for not 1 year, but for lag, right?

[Madhur Rathi, analyst]

Yes. this 0.5 -- 50 basis point improvement will be purely from all these internal efficiencies and any increase in the commercial vehicle segment or the OTR segment will be over and above this improvement in the margin?

[Mohan Joshi, executive]

So economies of scale benefit will definitely play its course. So I think it is second year that we are at around that INR 4,500-odd crores kind of a margin where we are trying to push the volumes to cross 20 million and alloy to a newer height, the AG OTR to be on a newer height. So all these economies of scale benefits will be definitely additional.

[Madhur Rathi, analyst]

Sir, just a final question. Sir, we had a guidance of around INR 4,800 crores for this year as well as some kind of margin improvement if the commercial vehicle or alloy or export segment improve, but it doesn't look like the CV or the export segment will have a lot of jump for this year. So what kind of revenue and margin can we expect? Because even our October numbers are kind of flat. So on that front?

[Mohan Joshi, executive]

So I think Naveen will answer that in terms of the top line and the bottom line guidance because there are -- it is not so simple because raw material is dropping. So Naveen will explain you better.

[Naveen Sorot, executive]

So if you look at in terms of EBITDA -- both in terms of EBITDA per wheel as well as percentage, both the indicators have improved. If you look at H1 EBITDA per wheel stands at INR 256 versus INR 251, which was there in H1 last year. In fact, for the entire last year, the EBITDA per wheel stood at INR 253. So there is already an improvement, which is there visible in the EBITDA per wheel.

Second, even in terms of percentages, though percentage can give you a misnormal picture based on steel reduction scenario, but still for the sake of the percentages, which are there, it is 11.33% versus 11.19%, which was there in H1 last year. So there is already an improvement, which is there in the EBITDA percentage as well. We believe that we'll maintain these percentages even going forward even for H2, and this number should improve further based on the mix tilting more towards alloy and exports. But to probably give guidance in terms of exact percentage, I guess, will be tough.

[Madhur Rathi, analyst]

So this is on the similar lines of H1. And on the revenue front, sir, can we expect this to at least cross the INR 4,500 crores mark for this year?

[Naveen Sorot, executive]

So if you look at H1, we have done almost INR 2,127 crores. INR 4,300 crores, INR 4,400 crores is what we are eyeing.

[Operator]

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

[Omkar Arora, analyst]

Last quarter, you had guided for around INR 2 crores.

[Operator]

Sorry to interrupt you, sir. I would request you to please use your handset. Mr. Omkar? Due to no response from the current participant, we'll move on to the next participant. [Operator Instructions]

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

[Pranav Jain, executive]

Yes. Thank you, everyone, for joining the call.

[Operator]

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