Steel Strips Wheels Ltd
NSE:SSWL
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
190.71
284.15
|
Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Ladies and gentlemen, good day, and welcome to Steel Strips Wheels Limited Q4 FY '24 Earnings Conference Call hosted by SMIFS Limited.
This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. And a disclaimer to this effect has been included in the financial results and investor presentation, which has been shared with you earlier and available on the stock exchange website.
[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.
Thank you. Good afternoon, everyone. On behalf of SMIFS Limited, I welcome you all to Q4 FY '24 Conference Call of Steel Strips Wheels Limited. We are pleased to host the senior management of the company. Today, we have with us Mr. Dheeraj Garg, MD of the company; Mr. Mohan Joshi, Executive 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.
Now I hand the call to the management team. Over to you, sir.
Good afternoon, everyone. I hope everyone is doing really well. I want to start off by sharing some of the highlights of the past financial year's performance. So in terms of turnover, we had our highest value in terms of revenue. So we had INR 4,357 crores. We had our highest EBITDA for the year at INR 481 crores, highest net profit at INR 220 crores and highest sales volume at 19 million-odd, highest commercial vehicle volume at close to 26.67 lakhs, highest alloy wheel volume at close to 3 million.
And some of the other nonrevenue highlights are that we've shifted to a new tax regime where the effective tax rate has come down to 25.17%. Hitherto, it was 34.9%. We've also completed the acquisition of AMW AutoComponents and the plant is fully in our custody and upkeep. We have also done some ESG projects in terms of solar and hybrid, and we've spent up to INR 10 crores, and we've generated -- in fact, we have generated INR 9.5 crores in savings from this project.
Going forward, I would like to sort of have a very open discussion with you on the growth prospects for this year. As you all know that this is an election year and so there is -- we have seen a slight slowdown in the CV industry so far, and this is going to be followed by monsoons.
So last year, we did the highest CV volume. This year, our forecast is ranging from a flat year to somewhat tepid growth. So not much growth in the CV segment we expect in the domestic side. On the aluminum wheel side, we expect about a 10% growth. This is based on our past performance -- past projects that we've been nominated for. So those projects will come into play, and we expect to have a 10% growth in the aluminum wheel domestic wheel business. This is all I'm talking about is domestic.
Then the 2-wheeler industry, we have targeted the electrical vehicle industry and there we are leaders now for wheels and we have a much better value addition on these deals. And this business should grow about 16%. Last year, people had pointed out that our passenger car steel wheel business had declined and we had mentioned that we had given up some projects of Maruti because they were not giving us enough margins. So -- but this year, I'm glad to tell you that we are projecting a 10.6% growth in the steel wheel for passenger cars.
So -- and finally, and the most important thing is our tractor business because we have signed out certain LTAs with some prominent customers, that is going to lead to a 12% growth. I'm assuming that the industry doesn't grow much or rather stays flat. But within the industry pie, our share of business is going to increase. So here, I can say with prominence that our tractor share of business is going to go up this year. And this means about 12% growth in revenue in terms of volume and obviously, value also will follow suit.
We have seen -- so I'm talking mostly now in terms of numbers because numbers are really what matters because raw material prices influence the selling price downward and upward. So I'm keeping my focus only on numbers. On numbers, we are looking at 2 million wheels -- 20 million wheels this year versus 19 million last year.
And -- so that -- and also, let me mention here 1 more thing that the export business that revived last year, we expect this to grow by another 10% this year. And in the export business, we are adding new product lines like off-road vehicle wheels. We found traction in Europe and in America and slowly but surely, we are increasing our sales in the export front in the OTR segment, plus our alloy wheel exports are doing considerably well. I cannot reveal a lot of things in this press conference and this call, but suffice to say that we will do -- this will be a growth area for us going forward in the future.
This concerns, this dialogue -- this monologue of mine concerns only the existing business. But if you recall, we have added another business line last year, and that is going to pay off its revenues this year starting in September, which is aluminum knuckles. We are the first company in India to do that.
It's an import substitute, and we already have signed up with 2 -- last time I spoke to you, we had signed up with just 1 OEM. But now I can tell you that we have signed up with 2 OEMs, and this is mainly going into the SUV segment cars, where the pricing power is much stronger with our OEM and they definitely want to add more features like better maneuverability of the car by introducing aluminum knuckles.
So this in a nutshell explains our past and current year's focus. So I'm very happy to answer questions as it may come about. Over to you.
[Operator Instructions] The first question is from the line of Shridhar Kallani from Axis Securities Limited.
Sir, my first question is with respect to the export side, where we believe that in the current situation, we are facing some issues because of the Red Sea. If you could throw some light on the same.
Okay. So last time when I had spoken to you all, I had mentioned about the Red Sea crisis affecting our shipments in January, February and March also. So more or less, that issue per se hasn't been resolved, but customers have gotten used to it. And so that's why we feel that, that issue will not come in the way so much this year, and we are projecting a 10% increase in exports.
So, I mean, in a way, we are a little bit better off because freight from our competitors in Asia like Thailand or Vietnam has increased much, much more than the freights from India. So we now have some advantage.
Earlier the customers were weary of paying higher freights. Now the customers have now accustomed themselves to higher freight rates now for the moment at least the crisis in the Red Sea goes on. So net-net, if I were to tell you very clearly that this year, there is nothing apparent as a crisis on Red Sea. Customers have adjusted their inventories are -- so there will be other dynamics rather than the Red Sea issue that will come into play.
Okay. And just required some clarification with respect to the nomination order of EUR 8 million that we have received. So we will be competing with how many competitors? And will their be on competitor from China also?
No, I don't think there is -- I don't know if they consider China in this case or not, but this business was decided based on competition from our European compatriots. So all the players in Europe would have competed for this business.
Okay. And last question is on the CV industry that you have mentioned of flat and tepid CV growth outlook for the current year. If you could just help us understand what the OEMs any guidance have they given to you with respect to the same because I think one of the...
That answer, I can answer very easily. Nobody knows. Not even the OEM knows, not even the buyers, nobody in the industry knows what will happen to the CV industry. But what we can be sure, as I mentioned to you, that we have acquired a bigger market share in tractor industry, we have acquired a bigger market share in car steel wheel industry, a bigger market share in car alloy wheel industry.
And we are assuming that the industry will remain flat, even though when industry will remain 0, we will grow in tractor, we will go in exports, we will grow in passenger car steel wheels. And yes, that's it. So [Technical Difficulty] while I'm making these but we'll go into 2-wheeler industry. We're assuming a 16% increase in 2-wheeler industry, but also we increased market share in this. We are the leaders in the 2-wheeler wheels.
The next question is from the line of [ Suresh Jain ] from [ NB Investments ].
I had few questions. The first one is what is the timeline for the ramping up of the following facilities, one is the AMW which we have acquired, then the -- whatever the aluminum alloy capacities we have increased plus the new product that you mentioned, aluminum knuckles. So when do you expect these 3 things to run up at full capacity? How much time?
Yes, sure. I understand. Thank you for this question. I think it's an important question. So as you know, we have raised our capacity to close to 5 million wheels in alloy. And we are banking on a big growth in exports and also a big growth in the domestic market because the take rate is always increasing for aluminum wheels, barring the setback that we had last year when some of the steel wheels got back into aluminum wheels. But we have more market share.
As we see the new models getting launched, a lot of these wheels, except for Maruti, have our wheels, Maruti which I'm talking about. So we are quite -- that's why we are projecting a 10% growth in alloy wheels domestic. So not only export is going to be separate, but domestic itself will grow 10% for us.
For example, the 5-door Thar is with us, and we're having a lot of hopes on that vehicle launch. So I think in terms of filling up 5 million capacity, although we are projecting only 3 million wheels or 10% higher than last year, against 3 million, 3.3 million wheels, we feel that this is a conservative number.
And if nothing bad happens because of the elections, we can definitely do better. But nailing the final question of when will I sell 5 million wheels, I think next year is going to be very interesting. Next year, you should see us cross 4 million wheels. And this I'm saying not just from domestic market growth or new businesses that will come to us. It's also because of the other activities that we have done outside India that are going to play a role in it.
So the way you have explained now is, in all possibilities, the current capacity should take care of aluminum alloy wheels demand till FY '27. Is that a fair understanding?
More or less, you're absolutely right. But you never know with how things are. Now I will give you another -- no, no, let me add to this. You must have read that we have been nominated by a top OEM and that was Maruti. So it's -- everybody now knows that we have made a breakthrough in Maruti.
Now I cannot say more, but there is a possibility that we build a new factory close to Maruti in Haryana. So that would be based on our relationship as it goes follows the first nomination to another nomination. And then we hope to have a small but important market share in Maruti going forward.
And that would mean that, along with our exports and growing existing customers, Maruti will call for a need to build another capacity expansion. So '26-'27, yes. But we would definitely need to come closer to Maruti. So I'm just giving you a heads-up and all the investor community that we may be coming up with a new factory in Punjab very close to Maruti.
So with Maruti, whatever the pricing issue was there, that was only for the steel wheels whereas, we have got the business for aluminum alloy wheels? That is correct?
Right, right, right. So there also, I would like to -- I forgot to add here something that we have -- so I don't want to digress. First let me answer all your 3 questions, but I have 1 more statement to make after that. So this is regarding Maruti alloy wheel, yes, right now, the business we got is a business that we get into a new changeover in a couple of years or less then a couple -- in about a couple of years from now, and we still have to develop the wheel.
But what we are in discussion with is to get more businesses that are going to be a carryover of the existing wheel that we have nomination for. So that business, if it comes, will be sizable in volume and at attractive price, attractive enough to justify the current performance of the company. So all I can say is that. So I hope I've answered your question about '26-'27 on alloy wheels.
Yes. You've covered the alloy wheels. But what about the other 2, sir, steel wheels and metals?
Yes. So steel wheels, mainly your question was regarding AMW. Now what we have seen is that AMW is basically a big giant sitting out there with a lot of possibilities, but we don't see those possibilities coming into fruition immediately. What we foresee there is that we would use that facility to make OTR wheels, for which we are already seeding the market in Europe and America, and we are getting good traction.
So maybe next financial year, we will start working on a new line of new businesses that concern specific -- very heavy wheels, very big wheels and when that business plan comes closer to our consideration, we will share it with the public -- with the investor community.
And that should -- that you can ring me up on this issue, maybe perhaps around the third quarter -- the second or third quarter conference call, and you would please ask me about this. So I'll be happy to answer.
With regards to knuckles. I think knuckles has been a very exciting journey for us. We should start our revenue growth from September onwards. Revenue coming in from knuckles, perhaps a little bit earlier. And this year, we should be doing close to about, if I'm not mistaken, about INR 35 crores in revenue. And then going forward, we expect this revenue to more than double and then after that, this revenue to go more than 4x.
So I think we are -- I don't want to share a lot of information on this aspect just yet because we are the first mover, and we want to keep that advantage a secret. But all I can say is that the company is very excited and very happy for making that decision to invest in knuckles.
And finally, that you have raised a very pertinent point that the pricing of steel wheels was very, very tough, especially if you look at our competitors' balance sheet and our balance sheet on a pass cars, CVs. So I can inform you and I have been talking about this in the last 1 year or so or even less than that, that we are on the verge of a breakthrough with an important OEM who's 1 of the biggest and in fact, a couple of OEMs rather, to get a price correction that had mired us in low margins for the last 2 decades almost. So that good news I can share with the community again while I'm speaking to you.
Sir, this AMW has, if I'm right, I think, 50 or 70 lakh capacity, so now you are saying that you want to add a new line in FY '26 for a bigger size one...
And we want to use that equipment that's already there, we want to...
No, what I was trying to ask is whatever the current capacity we have, so how much time to utilize that, that is what the question is.
No, so the point is it may never be fully utilized forever. And -- but what we are doing is we are adding capacity in Jamshedpur, for example. We are adding a new CV capacity of almost 400,000 wheels. That is coming from equipment that was lying in AMW.
You see, we are not letting the equipment idle. We are just moving that equipment to other parts of our locations where they're already producing in-mass. So we don't want to create a new cost center just because there's equipment lying there. We want to utilize it most efficiently.
Okay. Fair enough, sir. That is very helpful. Sir, my second question is regarding as and when we -- see, aluminum alloy wheels is one of the fast-growing segments and you're also exploring export markets also. So I know you said another 2 years after, that only you will be thinking of expanding the capacity. I just wanted a clarity on assuming that you want to double the capacity at Mehsana, how much can be the CapEx there? And how much time it will take to...
No, no, no, I didn't say we want to double the capacity. I said we will want to...
I'm just saying as and when you want to increase the capacity, let's say from the current 5 million...
It's already increased to 5 million wheels, that's what I said.
I know, sir. So let's say, post that, how much time it would take -- since it is a brownfield, how much time would it take to increase the capacity?
It's already increased, my friend.
No, sir, I know. From 5 million, I'm saying 2 years down the line...
No, no, we will not -- as I told you, we will build new capacity in Punjab now.
Okay. Okay. That is clear. Sir, my next question is regarding the debt part. See, we are at INR 1,000-odd crores now. So now we were under the impression that there would not be much CapEx in the next 2, 3 years or so. But now you're saying maybe for Maruti, you would like to put up a plant somewhere in Punjab near to their factory.
So the question is, again, with increase in sales, you will have an increase in working capital requirement also plus this CapEx also. So what is the management outlook, what do they like -- will this debt come down in the next 2 to 3 years? Or will it remain in the current level only?
I think on the debt side, I think Mr. Naveen could answer this question better so that he gives full clarity to the entire community. Just hold on.
Yes.
Yes. See, on the overall debt side, if you look at the debt that we have as on March '24 is INR 1,048 crores, which is a mix of long term and short term, long term of almost INR 487 crores and short term of INR 561 crores. And this is a jump of almost INR 400 crores, which is predominately for us to fund the CapEx, which is there on the table.
The existing business is almost INR 380 crores, which we have already shared with the market, which will be incurring this year, covering multiple facets, alloy wheels expansion, the knuckles, then the renewal energy that we are working with and then the couple of flow forming equipment that we did beside the general CapEx that we do.
And along with that, we also acquired AMW, wherein the order book is almost INR 140 crores, which raised the total CapEx for the last year to almost INR 520 crores, which was funded by a mix of accruals as well as debt. So accrual which was generated last year was almost INR 220 crores. So INR 220 crores to fund that INR 520 and the balance was in the form of term loans.
So what we have done is we have funded all our long-term requirements via long-term funds, with nil prepayment conditions, so that if the conditions allow subsequently in terms of liquidity, we will intend to prepay. So as we guided last time, the debt that you were seeing as on March '24 is the peak debt in our books and subsequently, it should taper down.
So if you look at the repayments which are scheduled for next 3 years are almost INR 105-odd crores annually. Along with that, there is a decent accrual, which will keep on accruing in our books. So like INR 220 crores last year, this number will also improve with the improvement in the volumes as indicated.
And in terms of overall CapEx, which was there on the table at least for next year was in the range of INR 225-odd crores which can be funded entirely from the accruals and nothing needs to be borrowed from the outside market. So on an overall basis, whatever CapEx which is there on the table as of now will be funded from accruals. Besides that, there'll be INR 105 crores of repayment which we will do, which will cut down on the debt side.
That's what was my question. Now you said very clearly the CapEx plan for FY...
Sorry to interrupt. Suresh, I request you to come back for a follow-up question. The next question is from the line of Omkar Aurora from Eraya Capital.
Congratulations on a good set of results. So thank you for providing us the in-depth information about what kind of numbers you are planning to do next year. Can you also provide us some guidance on the overall sales that you expect on the company level and the EBITDA growth that you're expecting over the next year? Also, when it comes to EBITDA growth, are you expecting the margins to stay stagnant or go down since the alloy business is not growing at -- is growing at -- expected to grow at the same pace as the steel wheel business? So is there any pressure on the margins that might come or do you expect them to go up or stay flat?
Okay. That's a good question. So let me roll back to what I had said earlier. So last year, we had projected that we would improve our margins per wheel. So we are talking only per wheel. So percentage-wise, kindly do not bring into discussion because it gets distorted from the change in raw material prices, which affects the selling price because our raw material prices are a pass-through.
So -- but in terms of last year, what happened was that we had to -- we got some competition from Vietnam and from Thailand temporarily and which got sort of nulled and then again, it came back. So we had to drop our prices close to 5% to 6% in terms of our export prices.
So that sort of kicker did sort of dampen our export margins. And also then, we also had some issues in the first quarter where we had to pay extra freights for the deals that we had already contracted with the customers, the OEM customers, for example. So that was a dampener to our business.
But if -- now there are 2 things for this financial year, again, kindly have a note on that. One is that our growth this year is coming mainly from value-added products. Again, let me remind everybody listening to this, please remember this, tractor business is going to grow by 10% to 12%. Aluminum wheel business is going to grow by 10% to 12%. And so these 2 businesses -- and export is going to grow by 10%.
So these 3 businesses on their own will add to the absolute per wheel margin. So the 258 margin that you see in the PPT will get enhanced. I don't know by -- I don't want to put a figure and then start discussing why that has come or why have we seen not done as well as you projected. But given the fact that all these 3 businesses are better in terms of margins, compared to a steel wheels business, which is the main business in terms of volume, we expect that these 3 things will pull up the margins to a little higher extent.
Secondly, and most importantly, as I mentioned earlier, 10 minutes ago, that we have been able to come close to understanding with a couple of OEMs to correct the prices that were depressed for the last 2 decades. So that's the historic thing. I had mentioned this in my last conference call also with other people also, that has actually happened now.
So once I get a final confirmation, we are very close to clinching the whole discussion. Once that happens, you will see the impact of that itself in the first quarter. So because that will be backdated from 1st of April. So I don't want to comment on that.
But yes, to your question, margins per wheel will increase -- should increase because, again, let me summarize. The 3 businesses that are growing this year are alloy wheels, exports and tractor, all these 3 businesses have a better EBITDA per wheel compared to the alloy wheels.
Secondly, the price correction in the bread and butter business for pass car steel wheels is seeing a turnaround. And this has come about because we have acquired AMW. People realize that there is no competition and that the prices are really depressed, and they have agreed to substantially correct our prices, and that would lead to better margins per wheel. And you will see that in the first quarter. So please in the conference call next quarter, you please ask me this question.
Sure, sir. So what is your EBITDA per wheel as of right now, what kind of numbers do you see on that front by next year?
Again, as I said, I don't want to comment on the numbers because last year, we did comment on the numbers. We were hopeful to get better numbers but we managed to get similar numbers like the previous year. But the point is that this year, I have real things in my head. I don't think that there's going to be another Red Sea crisis that will cause me to lose money on the freight.
There won't be competition per se, but more or less we know who our competition is from Asia. And so we think that those issues will not come as they came last year. Plus the most important thing is that we have a price correction on our main bread and butter business. 80% or 70% of our business will see some kind of -- or a large part of the 70%, 80% business will see price correction on the positive side.
Okay. So you -- so 258 was the number last year, so definitely, you will see a much better number than 258.
So we've seen the news that...
253 was the number last year. I think I've been just corrected, 253 was the number last year, yes.
So we have recently heard in the news that Uno Minda is also adding -- planning to add capacity on the alloys wheels front over the next 3 years, which is I think around 5 million wheels or something. So what is it about us that will differentiate us from them in terms of -- can you just throw some light on the moat that we have and how we are planning to improve on...
I cannot comment on what they are doing. They must have their own strategy. All I can comment is that I have an order book in front of me that is extending up till 2027, I see the numbers, I see the possibility of expanding my market beyond India, and that's where I'm focused on.
The next question is from the line of Aejas Lakhani from Unifi Capital.
Could you just call out that from the 3.7 million units that you have exported, how much was steel and how much was alloy this year?
I think that's a good question. I don't know if we have released this number to anybody. But I can just say that the rate of growth is pretty good for both the businesses, and I would like to keep it at that. But it's a brilliant question you asked. I'm not denying this. And it's a very incisive question, but I don't want to reveal my cards to my competition.
Fair point. Sir, the other thing I wanted to learn was, I think you alluded to this earlier that in pricing, you had competition because of which your pricing was lower by 5%. But what is very unclear to me is that if you take the revenues from export, which you have done this year, which is INR 630 crores and divide that by the volume, the realization per unit is much significantly lower than what you had done last year on a lower base and that's a little perplexing because your alloy wheel contribution would have maybe been there as a part of revenues this year, which was probably lower the year prior. So I don't understand the realization...
So there are 2 things to it. So there is a raw material price correction, which was substantially. In '22-'23, the raw material prices went up tremendously. So those get corrected in the following year. And on top of that steel price correction, we discounted our goods by 5% to 6%, as I mentioned. So -- and I will still have to look at the -- I don't know -- let me -- give me half a second, let me check the numbers for last year. One second please.
Okay. So I hear your question very well. Now I get it. So if you look at the product mix for '22-'23 and '23-'24, there has been a big jump in the sale of car wheels. And car wheels, obviously, are not priced at the same level as truck wheels.
So our truck wheel sales have been flat in '23-'24 versus '22-'23, but the car wheel sales have jumped higher. So you're right to point out that the price from an average price realization of INR 1,900 has come down to INR 1,700, but it is also -- it is 90% -- 80% because of the change in product mix of -- and you would have seen that our exports have doubled or more than doubled in this period that we are discussing.
Got it. So sir, at an EBITDA level, there would have been an improvement, but we don't know of that number today, correct?
So -- see, percentage-wise, again, I don't want to go into percentages. As I said per unit wheel, obviously, is more than the average that we get generally even on car wheels. So it's a pretty good scenario for us.
Got it. Sir, the other thing is that could you just comment a little bit about the knuckle casting. See, is there -- I know you've called out a number of INR 35 crores, but is the realizations and EBITDA in that business significantly higher than alloy wheels? To what extent can you call that out today?
So as I said, it's a very exciting time for us. I will not want to comment on EBITDA numbers. All I can say is that we are in a good -- we are on a good wicket and we are driving well and it's a new-age business. So smart people will understand what I mean by these 3 things. It's a new-age business.
Got it, sir. Sir, could you just tell me a little bit about -- because you mentioned that this is an import substitution sort of product, how did you -- how long did it take -- where did you acquire this technology from...
Again, I don't want to comment on this. I don't know want to -- but it has been a joint collaboration with the OEM. The OEM has supported us, and we've done the work and we have a very tight relationship with Mahindra, for example. And there's a lot of trust, a lot of transparency and a lot of value that we bring to each other. So that has resulted in this happening.
And after Mahindra, then obviously, we've got other customers. and we should leave it at that. And I think over a couple of years, next couple of years when the sales really go up, the market will get mature and people will understand what -- where we're coming from. And I think that is something that you all need to keep a good close eye on.
Noted, sir. Sir, is there a possibility that an OEM can work with another auto anc manufacturer to come up with anything on knuckle casting in say, in the next, say, 1, 1.5 years because there's a development time associated as well? So is that kind of a possibility? Does that exist? Or...
Yes, that's what we are living proof of. That's why we started talking about this last year. And this year, we will start delivering mass production components to them. This is how collaboration is done.
Yes, my question, sir, is that is it possible that another OEM could be in discussion with another auto anc person or do we see...
Yes, let's see. Yes, let's see. Let's see what happens. I don't know. I don't know. I really don't know. This is predominantly an SUV thing and Mahindra is #1 SUV. And once they've tied up with us, they will not go to another vendor to develop the same thing because this requires a lot of hard work and IP that we both developed jointly. So it's not so easy.
I got it, sir. Got it. So is there any exclusivity that binds you only to them? Or...
No, there's none. There's none.
Okay. Got it, sir. Sir, could you just also provide an outlook of how the steel side of the business -- steel side will do in FY '24 at a consol level because you have too many segments and it's very difficult to...
On a consolidated level, on steel, I don't have the weighted average number with me. Let me repeat myself, 10% growth in the bread and butter business, which is steel wheels for pass cars. So that's about 70%, 80% of my volume. Yes, so if I'm saying that, that's going to grow by 10%, then that should give you a flavor as to how sturdy or steady the business will be.
The next question is from the line of [ Sumit ] from Niveshaay Investment Advisors.
Can you please provide the breakup of other income?
Come again?
Can you repeat again, please?
Can you please provide us the breakup of other income?
Other income is a mix of, one, profit on sale of assets, then the interest income on FDI, and I think these 2 are the predominant item there.
The next question is from the line of Chirag Shah from White Pine Investment Management Private Limited.
I have a few questions, actually. One, when I look at the steel wheel volumes since F '19, there's actually a decline for us in domestic market. So can you just give a broad color? How do we -- is it that the tonnage per wheel has gone up and hence number of units have gone down? Or is it the industry dynamic is driving this? Or have you lost some market share? How to look at that?
So I'm not able to fully understand what you're asking, but I think my CFO does understand, he will answer this question.
So Chirag, what exactly you're comparing, you're comparing the steel wheel volumes...
Yes, if I look at the breakup that you shared, your steel wheel volume in F '19 were 14.1 million, domestic volumes, okay? And today, it is 12.5 million. So there is a drop over in volumes.
But then, Chirag, you also need to consider the transition which has happened from steel to alloy. So if you are comparing, let's say, the domestic business for us, you need to also include the alloy wheel number. So the year that you quoted, that is '18-'19, wherein the number was almost 141 lakhs in terms of steel wheel volumes, there, the alloy was almost 1.94 lakhs.
If you look at FY '24 for us, the steel, as you rightly quoted, was 125.55 lakhs. But along with that, there was an alloy wheel domestic sale of around 28 lakhs. So you need to look at it in toto where you're comparing these volumes as far as domestic market is concerned.
Fair point. This is helpful. The second question is, if I look at the alloy wheel, especially the export aspiration, okay, there seems to be some dampening happening because we were hopeful of taking it to 500,000 in March '25 and our aspiration was to be 3 million exports by March '30.
It seems that -- so is there a delay of projects from the OEMs who are supposed to offtake? Or if you can just comment on that, how should we look at that?
So Chirag, as far as the aspirations are concerned, we will keep the aspirations high. But then again, our numbers are directly reflection of how the industry has panned out. So if you look at so even for current year, as we have quoted that we are targeting 20 million in terms of overall volumes and we are targeting roughly 4 million in export, so these are the aspirations that we are trying to cap considering how the market situations are.
But then see, these situations are very dynamic. You never know how the export market pan out going forward. So let's say if things pan out in our favor, the numbers can go even higher than what we are projecting. So it's a dynamic world, the number will keep on changing. The numbers that we have quoted today are based on the reflection that we have today of the market.
Okay. So what I was trying to understand, is there a delay if -- because if your end customer delays, okay, you can't help it, right? You have to push it back by a year or whatever period the offtake gets delayed from your end customers, especially when you're making an entry into a new model. So is that the primary reason? Is that the way to look at it?
No. So Chirag, if you look at, so as far as we are concerned, none of our projects got delayed. So we are bang on timeline that we were following. So we were at, let's say, for alloy wheel expense, and we were to 3.6 million by March '24, we are already there. And by Q2 of this year, we'll be at 4.8 million and this is what exactly that we have planned for.
Similarly, for knuckle, we are at the capacity that we have started with. So none of our projects are getting delayed because of any customer delay. Is that the growth projections for, let's say, a year down the line or 2 years down the line is entirely dependent on how the market spans out...
Yes, I was more referring to offtake and not your capacity. So lastly...
So let's say, if you look at alloy wheel expansion that we did, so once you do and conclude the expansion, you need to showcase those capacity is available at your end to the customer before the customers are willing to flow directly. So you need to be up and ready with the capacities in hand. And for the spare capacities in hand just to get the customer confidence on your side that there are capacities with you which as spare capacities, and you will be able to cater to whatever the demand and subsequent requirements will come up from customer side.
Sir, lastly, any comment if you have on the flow form...
Sorry to interrupt you, I request you to come back for a follow-up question. The next question is from the line of Rohit from Samatva Investments.
So my first question is on, you highlighted last financial year, we faced some competition from Vietnam and Thailand. So could you just highlight what's their capacity right now? And how big a threat they are to us, especially for the European and the U.S. market?
Yes. Capacities are immense because they're owned by Chinese owners. So -- and they are part of big groups. But I think there is constantly some kind of investigation going on against those companies supply to America and also to Europe.
So going forward, we feel that, that will really not suffice because the European Union is moving against anti-circumvention that is Chinese companies set up factory outside China, and they supply them cheap raw material that they were already getting in their previous avatar. So that investigations will continue to happen. And we don't see a big threat from them. And they're also very careful in terms of quoting prices to compete abroad.
And lastly, their freight costs are sometimes noncompetitive because freight from Vietnam and Thailand right now are double the freight from India to Europe compared to Thailand to Europe. So we have a big trade advantage and this should persist. So you're right, it's something that we need to be focused, vigilant all the time, and I'm glad that you've asked this question.
And I would ask you to keep asking me this question every meeting because this is an important question. But beyond that, I cannot say at the moment anything that we will continue to grow our market. We have grown our markets, we are #1 in America for this caravan steel wheel business and we continue to lock in that leadership for this year also.
Sir, just for clarification. So these competitors in Vietnam and Thailand, so are they more towards the CV side or are they towards the passenger vehicle side?
They're in both, CV as well as PV.
Got it. Sir, my second question is [Technical Difficulty].
Your voice is cracking up, I think, from your mobile phone.
Sorry to interrupt you. I request you to use the handset, please?
Am I audible? Is it better now?
Yes.
Yes, sir.
Just -- so we have done around 19 million wheels. So I just wanted the segment-wise split for passenger vehicles [Technical Difficulty].
Yes. Again, the passenger segment-wise breakup of 19 million wheels, I wouldn't want to -- that SGA can share with you because I don't have the numbers, but I'm sure the investment arm will do that.
Yes. Okay. Just 1 last question I had, just a clarification. There's an exceptional item this quarter, so what is that...
Sorry to interrupt you, sir. I request you to come back for a follow-up question.
Just 1 last question. I just have this last question. Just on the exceptional item, if you could just give me some clarification what is this for?
So on the exceptional item that you are looking at in the consolidated sheet is predominantly the write-back of the liabilities which are there in the books of AMW. So what has happened like so there were some operational creditors and other liabilities which are there in the book. Now our liabilities to pay will be governed by the resolution plan, which got approved by the NCLT. So if there is a difference between the liabilities which are there in the books versus what is being approved, the differential is getting write-back. So that's the exceptional gain that you are looking at in consolidated sheet.
[Operator Instructions] The next question is from the line of Aditya Sen from RoboCapital.
Sir, is it possible for you to share the realization of alloy and steel wheels?
You mean selling price per wheel?
Yes, right.
From SGA -- SGA would have all that information. It can be served to whoever asks them.
All right. I'll take it from them.
The next question is from the line of [ Sandeep Dikshit ] from RJV Advisors Private Limited.
Just a couple of questions. Number 1 is, you had indicated a revenue guidance of about INR 5,000 crores in FY '25. Are we still sticking with that guidance or changing it?
So more or less, we are saying that we will grow by 10% this year on the top line. So that would come out to a number of INR 4,800 crores, around that number. So yes, I think if there is no election uncertainty and raw material prices being quite okay and interest rates coming down, one can expect that the domestic industry will also do well.
So if -- I'm assuming a 0% growth in CV industry. Now if the CV industry does well, if it grows by 5%, that in itself can add a good substantial revenue chunk to us. And similarly, if we are assuming a 0% growth in car industry, then again, if there is a growth there, we can see -- we can flirt with the INR 5,000 crore number.
Okay. Just a follow-up. You had indicated that AMW will start contributing about INR 20 crores per month revenue. So is this INR 4,800 crores excluding that or including the AMW?
I mean there is no revenue being estimated from AMW right now because we are -- as I said, we are increasing our revenue by increasing capacity in Jamshedpur, where we have a new brownfield expansion in Jamshedpur that should get over by June and that will give us a capacity of close to 0.5 million wheels.
So 0.5 million wheels itself is -- with INR 4,000 is about INR 20 crores-odd per month, which is about INR 250 crores a year. So that's the kind of revenue that rather than doing it in Jamshedpur or -- in Bhuj, we are doing it in Jamshedpur. This brings more economies of scale, and we don't have to open up a big account on our big assets and run it very sporadically or at a lower rate.
So this answers your first question about INR 260 crores revenue coming from AMW. It's actually coming from Jamshedpur, because we've taken that equipment line to Jamshedpur.
Right. So -- and in fact, you've indicated that, that will be about INR 20 crores per month. Is it operational or yet to be operational?
As I said, June, it will get operationalized. That additional capacity will get operationalized in June.
Okay. My second question is on your per wheel EBITDA margin, last year, you said that about INR 256 per wheel. What was it in 4Q?
I think around about the same INR 250 plus/minus we have been operating at. So INR 255 has become INR 253. That's what I'm trying to say.
That was for the full year or fourth quarter?
It was for full year, right? INR 255 is fourth quarter, sorry. INR 255 is fourth quarter, INR 253 was the full year.
The next follow-up question is from the line of Suresh Jain from NB investments.
Before getting back on the debt issue, I had 2 smaller questions. Sir, one is, are we the cheapest cost manufacturer of aluminum alloy wheels? And with the introduction of this flow form technology for this product, if there is any improvement we could achieve?
Yes. So you're right to say that India has the lowest cost of manufacturing base in the whole world. So we are no exception to that. With regards to the flow form wheel, that wheel technology makes the wheel lighter.
As a result, you get a weight saving on the cars, which is very important for electric cars now. And so it's an ad hoc feature that is part of ESG, is part of electrical vehicle manufacturing. So you can call it in many ways that use less raw materials, less natural resources, and that helps the planet as well as it also add surge to the EV car because you get better mileage from the battery.
Sir, secondly, I had read that we had planned to enter into casting of the steel for the automotive industry. If that is still on or we have, as of now, hold it back?
Come again, I didn't get that quite right, the new what?
Casting of the steel...
For the?
Are we getting into steel casting?
No, no, no. We never said that.
This was never in the plan?
I don't think I remember saying that we're getting into steel casting at all.
Okay. Fair enough. Sir, the last 1 is about the debt part. To the CFO, sir, thanks for all the info which you had given. So what my worry was the debt what we have on the books as on March '24, INR 1,048 crores, so we are generating enough cash flow, but again, there is a lot of CapEx have been planned, and there is also an annual payment which you have mentioned. So the increase in sales again will require more working capital.
So my question was, going ahead, this debt level of INR 1,050 crores or whatever is there, it will remain at the same level or it may go further up? Is that understanding is correct or not?
So there are 2 parts to it. So if you look at the overall debt levels, I guess, we indicated last time as well that the net debt that you are seeing as on March '24 will be the peak debt that will be there in our books. And going forward, there will be 2 things that will happen.
One, the natural repayment which are there on the table, which is almost INR 105-odd crores for the next 3 years. So this in any case will definitely happen. Second, as and when we get opportunities, based on liquidity that we have in hand to prepay, we'll prepay. So for next year, if you look at, let's say, if you repeat the performance that we did in FY '24, you will have an accrual post interest, post tax, post dividend and post repayment of almost INR 200-odd crores, it will be good enough to serve whatever CapEx that we plan to do for next year.
I guess we are planning somewhere around INR 225-odd crores, so that can be mitigated fully by accrual and there will be a reduction of almost INR 100 crores in the term debt. Next to next year, if there is nothing substantial which is on the table in terms of CapEx, the entire accruals can be used to prepay the liabilities. So as far as debt is concerned, we believe that the debt which is the March '24 will be the peak.
The next question is from the line of Pulkit Singhal from Dalmus Capital Management.
My first question is on the domestic alloy wheel growth. We've had a growth of just 10% in FY '24 and you're guiding to another 10% in FY '25. And the SUV growth has been quite substantial last year than the year before. I'm just trying to understand, is it that we are losing market share, and that is why the growth is coming down in domestic alloy wheels within your customers or is it just a function of you not being present in Maruti and Toyota?
[Technical Difficulty] directly pointed out that it is a function of the couple of big OEMs wherein we are not there in terms of serving. Otherwise, in terms of wherever existing businesses that we are serving, the market share is intact, in fact, it is growing. Now with our entry with the biggest OEM which is there, I guess this business should further improve.
Pulkit, your point is well taken because the larger amount of the growth has come in from Maruti because Maruti has taken up a larger share of SUV and has grown from that segment itself. They are struggling on the smaller and mid-segment cars, and they have taken up the due course of growth and a little bit of market share back from the market because now there's an SUV and I feel there is also a concern, which I think we have shared for the industry in many calls, wherein there are 3 types of wheels, which is steel wheel, which is another one is high vent hole wheel and third one is the alloy wheel.
So there are OEMs, all of them who are trying to understand the cost impact where the sales are not happening. So if you optimize the feature, a little bit of alloy wheel concentration has moved from alloy to high vent hole where the cost of per wheel reduces from INR 4,000, INR 4,500 to maybe INR 1,500. So this is cost optimization that a lot of OEMs are trying to optimize.
And I see it really has resulted in an industry-wide penetration of 36%, 37%. It started from maybe 30% last year and on a little bit percentage, last 7, 8 months, this 37% is stagnant at 37%. And we are visualizing that how this 37% will move towards 38%, 39%. We have had interactions with many OEMs, where they are all projecting that this 37% will not immediately go to 50%, but they see this 50% happening over the next 3 to 4 years.
Understood. Understood. And when is Maruti expected to take volumes? Is it this year, next year?
All the design concept is already underway right now. The Japan testing is already underway, will be underway over the next 4 to 5 months. The feature which we are expecting right now is that the refresh of each model will now come to us.
Right now, we've got only 1 model. But over next 1 year, close to 7 refreshes are upcoming and all of them are going to be coming to all the 3 vendors now. And I feel it's a journey which has started. So I'm not thinking of any revenue in this financial year. In next financial year, the revenue will start falling in.
Revenue potential from this first RFQ is round about close to INR 45 crores to INR 50 crores. And potentially, Maruti is indicating that they are anticipating close to 40% of alloy penetration over the next 4 years from currently 29%, 30%. And over the next 2, 3 years, I hope that we will be able to grab a minimum 20%, 25% market share in Maruti.
Okay. And the second question is on exports. I mean, after a very good initial spurt, which took us to INR 800-odd crores of revenues in FY '22, now we are close to INR 630 crores, it has come down, although we jumped quite a bit last year. But the conversation also is more about 10%, 12% growth only.
I mean, the export market is quite huge, and I thought there was a lot more optimism in terms of growth with exports, whether it be alloys or steel or whatever. But why is there that a certain level of optimism is lower now, I mean 10% growth from an export market perspective is much lower. What would you think and...
So I think your point is valid. The larger growth perspective from the aluminum side is fairly very large, and we feel that this percentage is going to be much higher. We are a little bit concerned on the steel wheel side right now because the degrowth which is happening in terms of the economic cycle on the business is not predictable.
What we anticipate right now is that, as the MD of the company said, we have dropped the prices and give the benefits to sustain the margin due to the volumes to the tune of 4% to 5%, we do not want to just give away everything. And there has to be a sense that this has to be done, and that is not only price. So right now, engineering is also coming to picture.
On the steel wheel side because that's a very nascent kind of a market, and it doesn't grow at 5%, 10% kind of, okay? Alloy wheel 100% there is a very large amount of growth which is anticipated. We will try to update you over the next maybe 2 quarters or 2.5 quarters, where long-term agreements will be coming into play into the aluminum alloy wheel side on aftermarket as well as on OEMs.
And that is where there's going to be a weighting the higher run rate on the export side from a potential market which is very large. So I think we are targeting around about INR 700 crores, INR 720 crores in terms of total number that we are anticipating in the financial year, which has an upside from the industry perspective with growth.
Understood. Just a quick bookkeeping question. Is there any tax benefit we will get from AMW acquisition going ahead?
I think Naveen is working on that because a lot of OEMs are -- OEM ancillaries are working on the similar principle. So there is an angle of tax benefit, which is from the accrued losses which comes in. And please give us this quarter's time where we are talking to consultants of taxation, and Naveen can give you a little bit of clarity on that objective.
So Pulkit, AMW do have some carryforward losses in the form of depreciation. So that is still being evaluated. So once we get a hang on the kind of benefit that we can drive, I guess we'll share it with the market.
The next question is from the line of Shashank Kanodia from ICICI Securities.
Just wanted to check your thoughts on the employee cost. So in last 2 years, we have increased our turnover roughly 25%, but our employee cost is up roughly 60%, 65%. As companies usually gain scale, we see that percentage to sales coming down. But for us, it's been increasing from 6% to 7% to 8.2% now. So does that concern you by any chance?
Can you please repeat the last part of the question?
Sir, does that concern you, the rising employee cost from 6% to 8% now?
So I think with the industry in terms of overall perspective, I think we are around about 7%, 8% kind of a number. We are growing in a phase where we anticipate the current assets to contribute close to INR 6,500 crores in terms of revenue. There is certain bit of expense which we are trying to do for future growth. So this is a normal course of action where we do not want to compromise on engineering and the demand which are being generated from export customers.
So there's a lot of input which has been put up there. The optimization cycle is already underway, and it's a part of the process. The intent is that we want to control [Technical Difficulty] and do not want to concentrate only that to improve profitability. I think there are ways to improve profitability in terms of high gross margins and sales. That's the focus is that we need to hit INR 4,800 crores. These numbers will look smaller in terms of percentages going forward.
So sir, now going forward, 10% to 12% kind of nominal growth rate should we assume for the employee cost? Or...
I think we are trying to reduce that 10% to 12% kind of a number. We are trying to optimize that number by the way that [Audio Gap]. So I feel this 10% to 12% kind of a growth number will definitely contained.
Okay. Secondly, sir, just wanted to check in your adjustment for the exceptional item. So in a normal scenario, your PAT minus your dividend gets added to your net worth. But in this case, there seems to be some adjustment wherein your net worth seems to be less than this figure. So any adjustments we have done of this exceptional item adding towards our net worth?
Naveen?
So exceptional item is forming part of P&L, which again is getting added to the net worth. In that exceptional items, roughly there are 2 parts to it. One is there is a benefit that you are driving from the write-back of liabilities. Second, there is a hit that you are taking in the form of write-down of current assets which are there in the books.
So the net effect is what is visible as exceptional item, which in terms from part of P&L which in turn is getting added to the overall profit. So the net worth is getting improved by the number which is added there in P&L as far as consolidated books are concerned.
All right. So sir, your net worth is showing increase of just INR 300-odd crores, right, whereas PAT for the year, including the exceptional item is roughly INR 675 crores, so there seems to be some other adjustments also which you are done to [indiscernible].
Yes, there's another part to it which is write-back of the equity which was there in the book. So those equity has got extinguished. So those are directly part of the results. What is there in the write-back of liability is through P&L. So what you are seeing in the net worth is the net effect of what is extinguished from the reserves in terms of share capital and what is brought in, in the reserve via P&L movement of these write-backs.
Ladies and gentlemen, we'll take this as the last question. I would now like to hand the conference over to the management for closing comments.
So thanks a lot to everyone for giving us an opportunity to express ourselves for the annual results and share our thoughts about the business. I think there will be questions which are pertaining to AMW and its consolidated impact on the balance sheet as well as P&L. Anybody who has that question can definitely contact SGA or Amit who have a detailed call on this aspect. And I wish that we can connect more and probably see our business cycle which is starting for the new business verticals as directed by the MD for knuckles business and more plant visits can be arranged to understand the business better one-on-one. And thanks a lot for giving us this opportunity once again.
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.