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Tube Investments of India Ltd
Earnings Call Analysis
Q2-2024 Analysis
Tube Investments of India Ltd
In a challenging period marked by subdued demand in the bicycle segment, the company has impressively managed to secure a 27% increase in Profit After Tax (PAT). This remarkable achievement was largely fueled by strong performances within the engineering and metal form product divisions, highlighting the company's effective diversification and robust operational efficiency.
The company's strategic investments in subsidiaries like CG Power, and Shanti have paid off, as evidenced by significant improvements in both revenue generation and profitability. Additionally, the Return on Invested Capital (ROIC) saw a notable increase to an annualized 67%, up from the previous year's 62%, signaling an efficient and profitable use of capital.
Looking ahead, the company executives have expressed confidence in achieving a revenue growth rate of approximately 12% to 15% over the next 3 to 5 years. This optimistic forecast is built on the company's continuous efforts towards innovation, product development, and engagement in the Electric Vehicle (EV) sector, further demonstrating the company's commitment to adapting and capitalizing on emerging market opportunities.
From a volume perspective, the company reported significant gains, with volume growth landing between 13% to 14% in the engineering division. This underlines the company's ability to increase production and sales in a core business area. Concurrently, the company has effectively boosted its market share, reflecting its strong competitive position and the successful introduction of new products.
Amidst its financial growth, the company plans to strategically allocate an annual cash build-up of INR 700 crores to INR 800 crores. Capital expenditures, particularly in the expansion of the engineering division, are earmarked as a key use of these funds. This is part of a broader strategy aimed at fortifying the company's Tier 1 and Tier 2 opportunities and cementing its focus on business expansion.
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Ladies and gentlemen, good day, and welcome to the Tube Investments Q2 FY '24 Earnings Conference Call hosted by IIFL Securities Limited. And there will be an opportunity to raise questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anupam Gupta from IIFL Securities Limited. Over to you, sir.
Thanks, Andrew, and welcome everyone to Tube Investment's Second Quarter FY '24 Results Conference Call. From the management, we have Mr. Vellayan Subbiah, Executive Vice Carmen at TI; Mr. Arun Murugappan, Chairman at TI; Mr. Mukesh Ahuja, Managing Director; Mr. Meyyappan, Chief Financial Officer; Mr. KR Srinivasan, President and Whole Time Director for Metal Forms Products business; Mr. Murali, President at New Products India; Mr. Rajagopalan, Senior VP at PI Cycle; Mr. N. Govindarajan, CEO for CX Innovent Limited; and Mr. K.K. Paul, President of TI Cycle. To start off, I'll hand it over to Mr. Subbiah for the opening remarks, post which we'll have the question and answers. Over to you, sir.
Anupam, thanks so much, and good morning, everybody. So I'll just go through the results quickly. In terms of standalone results for the quarter, the revenue was at INR 1,970 crores as against INR 1,906 crores in the same quarter -- same period for the previous year.
The PBT before exceptional items and tax was INR 245 crores, as against INR 226 crores in the same period previous year. And the ROIC annualized was at 67% as against 62% in the same period. Free cash flow for the quarter was INR 108 crores. I'll just go through a quick review of the businesses.
In engineering, the revenue was at INR 1,274 compared to INR 1,192 million. and the PBIT was 169 as against 165 in the corresponding quarter. Metal Form was -- revenue was at 400 compared with 371 in the corresponding quarter, and PBIT was INR 53 crores for the quarter compared to INR 48 crores. The mobility business, the revenue for the quarter, this is our basic business, was INR 177 crores compared with INR 226 crores in the corresponding quarter, and the loss was INR 3 crores as against a profit of INR 10 crores. That business is going through a bit of a slump in terms of demand.
Other businesses were at INR 207 crores compared with INR INR 188 crores, and PBIT was 17 compared to 8 in the corresponding quarter of the previous year. In terms of consolidated results, our consolidated revenue for the quarter was INR 4,306 as against INR 3,767 in the corresponding quarter. And the profit before the share of profit of an associate joint venture exceptional items and tax for the quarter was 493 as against 435 in the corresponding quarter of the previous year.
CG Power Industrial Solutions subsidiary, in which the company holds a 58.05% stake, registered a consolidated revenue of INR 2,000 crores on during the quarter as against INR 1,675 in the corresponding quarter of the previous year. And PD before exceptional items for the quarter was 303 as against 237 in the corresponding quarter of the previous year.
Shanti Gears, in which the company holds a 70.47% stake, registered a revenue of INR 135 crores for the quarter as against INR 109 crores in the corresponding, and PDT was 30 as against 23 in the corresponding quarter. Commenting on the results, Mr. M.A. Arunachalam, Chairman of TI, said that the company displayed strong performance in a challenging business environment, sustaining growth in profits and profitability.
The bicycle industry continues to suffer from contraction in demand, and our bicycle business continues its cost reduction initiatives and improving operational efficiency through Kaizen. Despite muted performance from the bicycle business, the company registered a 27% growth in PAT with strong performance from engineering and metal form product divisions.
The performance of our subsidiaries, CG Power and Shanti, has also been very encouraging in both strong top line and bottom line growth. And I think broadly, just to give you a sense on revenues, there is also a movement because of lower steel prices compared to the same period last year. So let me stop with that, and I'd be happy to take questions from the audience and as well all the rest of us. Thank you.
We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Jinesh Gandhi from MOFSL.
Congrats on good numbers. Quickly on -- you've indicated about the impact of steel prices and other quality prices impacting revenue growth. So any sense on how volumes would have grown for both engineering and metal phone business?
Yes, Mukesh, you just want to answer that.
Yes, the total volume growth is about 13% to 14% in engineering and [indiscernible].
Sorry, Engineering is 13% and 14% volume growth?
Both [indiscernible] 13% to 14% revenue growth and the volume is [indiscernible].
Okay. So with the businesses. Got it. Got it. And particularly, engineering business, we were seeing some challenges in exports still last quarter. Is -- I mean, is export business now stabilizing, there were some signs of recovery in previous quarter as well. Are you seeing sustenance of those factors? Has exports started to grow or not yet?
Yes, compared to previous quarter, it has grown. And we see that the [indiscernible] is going in to see the improvement in coming quarters.
Okay. When you said previous quarter, on Q basis, exports have grown?
Yes.
And by the way, would it still be lower because last year base was high, so that would have declined still on Y-o-Y basis, right?
Yes.
Okay. Okay. Got it. And lastly, before I fall back in queue, on the electric similar side, we are yet to see material ramp-up in our supplies. We are still doing about 200 units a month. Any sense on how do we see this ramping up, where we are in terms of -- I mean, what are the challenges today given that we broadly are in 3 states as things stand? Is it production side issue or we are just waiting for proper feedback from the ground before we start ramping up our production? Can you throw more light on that, please?
Paul, would you like to answer and I can kind of...
Yes. I think on the electric 3-wheeler side, month-on-month, we are improving our volumes. This month also, we will be better than the previous month. Cumulatively, we are actually doubling up the volume each month. That's what's happening now. There are challenges in the supply chains that we are valuing now. And the order book that we currently have is for 1.5 month, and we are expanding our network. So all in all, we should be doing better and better in the coming quarters.
Okay. Okay. And we are still in 3 states, right? You have to expand beyond the 3, 7 states?
No, we have now actually expanded in our dealership openings in [indiscernible]. And I think close what we are opening. We have started some suppliers to Northera. So gradually, we are expanding at North India, we should be at about -- we should have a dealer strength of around [indiscernible] against the current quarter.
Sorry, against current? You said it's 40?
[indiscernible] 42 numbers.
[Operator Instructions] The next question is from the line of Rushabh from RBS Investment Managers.
I just wanted to understand, as per your estimates what could be the adoption levels for EVI as a percentage of industry across the 3-wheelers HCV and tractors say at the end of 3 years from now?
I think it's very difficult to make predictions, and we don't want to be in that business either. We obviously -- I think the broad data that most people have seen is kind of on the overall global predictions twice they've already been revised upward in terms of EV adoption. And we continue to be very bullish about potential in India.
But obviously, we don't want to kind of predict any specific numbers. We're obviously overall very bullish on the levels of adoption that we think are going to happen in the [indiscernible].
And sir, secondly, just a clarification. We understand that the new business is in the TI2 buckets would have a 40% to 50% success rate. And so would this success rate be sufficient so that the company on an overall basis achieved the, say, 20% plus profit got over the decades.
Yes, definitely. I mean I think that definitely, I mean I think the success will be a bit higher than that. But definitely, even with that success rate, we will hit the profit [indiscernible].
Okay. And just the last question from my side. Any potential sector or any target company in the Tier 3 bucket since it's been almost 3 years since we worked at CG now. Is it just taking it as anything?
No. As we've said, we continue to monitor different targets. But right now, valuations and most things are very high. And we've been very clear that we don't want to overpay or even kind of pay for any assets that are kind of -- that are not -- we would prefer third quartile assets, basically, right? And so we don't see too many assets in a reasonable valuation range right now for TI3.
And just last question from my side. So since you're expanding in the out of Southern markets right now, any specific strategy that we have to pursue differently getting out to the certain market since we have a certain advantage there on the, say, brand building or distribution side or the strategy is the same across markets?
I'm really sorry to interrupt here. Could you just hold on to your question for a moment because the Chairman, Mr. Arun Murugappan, has been disconnected. Ladies and gentlemen, please turn the line while I get the Chairman connected.
But anyway, we can continue, I think -- hello, can you hear me, Roshan?
Yes, yes, yes.
Yes. So I think as far as you're asking for 3-wheelers, we're taking a different strategy. Is that your question?
Yes, 3-wheelers and truckers, general basis for both.
For EV in general, right?
Yes, yes, yes.
So Paul, do you want to just take care and answer?
Ladies and gentlemen, I've got Mr. Arun Murugappan, the Chairman, connected. You may please continue.
By and large, overall branding strategy, et cetera, will remain quite consistent in the way that we are building the brand. But in terms of tactically how many dealers to have where to have, that would be different for different sides.
For the tractor, we -- the first launch will be with [indiscernible]. So you look at the split end markets that account for large shares of that range, and therefore, launch to the production goes those markets. So that's how it would pan out as we move forward.
[Operator Instructions] The next question is from the line of Sundar from Aveda Spark.
My first question is for Mr. Mukesh. So 1 variation here is that we've grown at about 13%, 14% in terms of volume while the underlying category go specifically 2-wheelers and 3-wheelers [indiscernible] being to this number. So what are the best of this outperformance in terms of volume growth for us?
I agree with you that 2-wheeler is not growing. But if you see passenger vehicles has done pretty good as well as commercial vehicle industry and the steel also has a pretty good strong growth, as well as our focus on non-auto segment as well as exports as related to this growth of cutting growth.
Sir, would you be comfortable in quantifying the export percentage, sir?
As of now, it is hovering around 14%, 15%.
Okay. But this would be very similar to what we have in FY '23, the 14% to 15%?
In domestic market, what I said in non-auto as well as commercial vehicle were pretty strong. So that's why a growth percentage of export is highly [indiscernible].
And anything to add on the railway segment, sir?
Railway is yet to pick up. We are also working on our capability building things. And we see coming quarters, we should be able to do better in railways.
One other bookkeeping question in terms of steel price past. You indicated a couple of quarters aside for another 2 quarters. Is that complete price pass-through?
Come again?
Steel price part user. Should we assume that the complete price pass through standard is over?
We don't normally, let's say, like [indiscernible] that we don't predict what is going to happen into the price. But we have an arrangement with our OEMs and the customers on back whether it increase or decrease scenario, we are able to state with our customers accordingly.
All right. And just 1 other point that I want to throw to Mr. [indiscernible] other from a larger scheme of things, specifically on the HCV segment. Because there were a few news articles that had mentioned that there was an order book of about INR 1,000 crores on the HCV segment, which is was about a couple of years ago. So what sale happened on the HCV segment would you be comfortable in quantifying in terms of our revenues performance at and the performance at HCV. Any color there, sir?
Yes. So the ACV, so just to give you perspective, the -- and the order book that you're talking about was kind of when they were predominantly being pitched in an OpEx mode, right, basically being sold in an OpEx mode. Whereas we have moved it to a construct where we have a strong preference to sell them and are only selling them right now in a CapEx mode, right, which basically somebody pays for the entire asset upfront.
We have -- so the process -- and the second thing we've done is kind of spent a lot of time reengineering the product as well. We have started shipping the product the last quarter. And volumes are kind of -- have just started ramping up. So basically, it will take at least a couple of quarters before first customers want to trial the product. So in a CapEx mode, the sales cycle tends to be longer because first half, customers want to trial the product, then they buy 1 or 2 of them. And when they start working well for them is when they start scaling up their buy. And so we basically changed both the sales process and the product there, and it's just starting to ramp up in the new structure.
Just a continuation to like interestingly, the last segment report, you had mentioned that it would be also exploring the other models. But have we finalized that's going to be open on the CapEx model?
Yes. We -- initially, we're going to sell them in the CapEx model. That is correct.
Right. And 1 last question from my side is that on the EV, obviously, there is another pending investment in doing about another INR 1,000 crores by March of 2024. Any progress that you would like to share on that answer?
Sorry, you said?
On the PIC NPL side, we review for about another INR 1,000 crores of investment by the March 2024. As an external investor is what you're targeting on that overall?
Process -- when the process of a raise in that segment. So we are going in the middle of a raising process.
A bit cheeky here, but is that going to be valuations? How was it looking from the previous round of increases?
So what we're -- so we -- obviously, we can't comment on something that's in process. But at that point, we indicated how we would go about it, and we are not there from that. We're sleeping the same approach we've indicated there.
The next question is from the line of Vipul Kumar Shah from Sumangal Investment.
So can you comment on the progress of our EV tractor and this EV heavy-duty truck? So what is the progress? What is the sales volume? And what type of CapEx we are looking for these 2 divisions?
So I just talked about the EV heavy-duty truck. So I don't think I have to repeat that. I just kind of answered the question on the heavy duty truck.
On the tractor, we have said and we continue to maintain that we'll basically get it home homologate in the first quarter next year. And then basically, it will start selling. Yes, so homologate in the first calendar quarter, and then we'll start selling it in the first fiscal quarter. So January, February, March is when we will submit the first model, which is a 27-horsepower equivalent for homologation. And then it will go into start of production in April, May, June.
And so directionally, if for a few quarters, we will see EBITDA losses increasing as the sales volume increases in all 3 EV products, sir?
Yes, that is correct.
That is correct. Okay, okay.
Okay. For standalone or consolidated, obviously, that doesn't come in the standalone numbers. It's part of the consolidated.
Yes, consolidated, obviously, yes. Okay. And sir, we are investing in...
[indiscernible] on EBITDA losses. The -- yes, so we don't think that they will increase significantly. They're kind of more or less steady state, and we maintain them as steady state of where we're at.
So because once we have the -- and so with more and more the plant build-outs done, right? So basically, most of the plant build-outs are done with the exception of the small commercial vehicle. So once the plant build-outs are done, the product should be more or less steady state in terms of kind of where our EBITDA loss is at.
So this quarter's EBITDA losses should be taken as a baseline?
This quarter is...
Yes, it is around INR 52 crores, if I remember correctly, for EV products.
Yes. So I mean, if you leave CapEx and some of the other things out of it, obviously, which won't kind of on the EBITDA, directionally, I believe that's correct, yes.
And sir, lastly, we are investing in so many initiatives, from CMO to EVs. And so don't you think even if all initiatives succeed, TI will be a holding company and generally market gives a substantial discount of 50% to 70% to the holding company. So your thoughts, please, on this particular aspect of regarding valuation of TI?
Yes. So we've discussed this idea on kind of capital structure before. So what we have said is that, first, let's kind of the businesses grow, right? So I mean there are 2 things, right, which is one is we are first more focus more on business growth than in valuation.
So first, we want to focus on getting the business growth story right, and then we'll think about capital structure after that. But I don't think it makes sense to optimize or lease our capital structure because, first, we have to be focused a bit on business growth.
[Operator Instructions] The next question is from the line of Abhishek Ghosh from DSP.
Sir, my first question is for the Engineering division. Now that's a division that used to be earlier, very heavy on 2-wheelers. And as an industry, we have seen that growth in underlying 2-wheelers has been fairly muted. So given the diversification that you have done in terms of exports, on auto and other things, what is the growth rate that 1 should assume on a sustainable basis from this division, given the diversification that you have set any thoughts?
So we are able in the last call, we can assume a growth rate of going [indiscernible] for 3 to 5 year about 12% to 15% in increase.
Okay. Are there any scope of market share gains here? Or does that still exist? Or have we kind of -- our market shares are fairly elevated here? Any thoughts?
No, no, we are continuously working on that. Even this quarter also, there are some gain in shares, which is reflecting in the total volume growth. So wherever the opportunities are there for the new product development and EV participation, we're doing pretty well participate in that, and we continue to on investment.
Okay. Okay. So we've also seen healthy margin improvement in the current quarter. Is that because of mix? Or is it because of operating leverage or the cost initiatives? And any thoughts on the same?
So it's a combination of 3, 4 things, like we indicated earlier, we are working on the Kaizen initiatives, which is we're adding to the operating efficiency also product mix, the continued focus and participating new initiatives like light weighting, which is margins and exports focus on which is where margins are much better. So it's a combination of 3 potting. It's not 1 lever is giving them that we are focused on.
Okay. Okay. That's very helpful. Sir, just coming to the Metal Form division. You spoke about railways still hasn't kind of picked up, but there are some tenders which are supposed to be ordered out. Any update on that? And how should one look at the outlook on that? Because railways, overall, we are seeing an improvement in the overall CapEx cycle. So how should we look at this aspect?
So like your observation is right. Railway has released tenders and now we are participating on those tenders. In coming quarters, we see that railway revenue should fall.
Okay. Okay. And have we added any new client as far as the doorframe part of the business is concerned, any new client addition that has been done in that?
Kalyan will take this.
Yes. As far as to frame is concerned, we are likely to participate in the Western region project at Hilli. So we'll be actively participating in the nation.
Okay. Okay. That's helpful. And just about on the EV part of it, you mentioned about some supply change challenges. Has that got resolved? What are the learnings, how we are implementing. Some thoughts there will be helpful.
I think -- this is Paul here. I think it is getting resolved, we are working very closely with the concern vendor to get the PCB. So our central quality, R&D and the business is they're all working together along with the vendor. You see that the PCB is now and we are making substantial progress. The cost what was there in the first quarter versus the cost at the end of second quarter in terms of the material cost this continues, and we have a clear road map to get there because we have individual contribution targets for the different products. And we are working on a very focused manner now in terms of where that organized.
Okay. Okay. So you don't think that can be a constraint for the ramp-up of the monthly volumes that you are doing. Do you think that should get resolved over a period of next couple of quarters given the kind of work that you're doing within there?
Month volumes also, we have adjusted to that. That's #1. Number two, have told you at least that we are ramping up now, we are able to ramp up the volume section on in terms of this. That gives us the confidence that we will overcome this challenge in relation to the plan that we are making. That's number one. Looking on from these numbers we are working proactively on the track or lot for the variance that we talked about that we'll be launching, so that we -- at the launch time, we are having matched the cost to the sales. That's my answer to you.
Sir, just 1 last question from my side is, if you look at your broad cash flow, you're generating almost about INR 300 crores, INR 400 crores of cash flow in the first half. So broadly annual cash build-up of INR 700 crores to INR 800 crores. How should one look at the allocation there in terms of CapEx and any other things? If you can just broadly articulate that, that would be helpful.
I think we've talked about this a bit in the past, which is like, like we have announced the expansion for engineering, and that will come into the cash flows and kind of the uses of cash this year.
See, broadly, we're going to use it for -- right now, it's getting used more for TI1 and TI2 opportunities. And that's the focus right now. And we -- and which opportunities we targeted at is going to be based on where we see the best return options. And strategically the sectors we want to be in as we take a longer-term horizon to it, right?
And I think that this is fundamental to what I would call this reshaping of TI, where we said we want to diversify away from being an auto supplier. So I think that as you're asking for specifically where will we deploy that cash, I think will vary. We have a list of pipeline opportunities that we have as potential areas where we want to deploy the cash and we constantly keep evaluating based on the best options, which are both driven the financial returns and strategic movement in terms of where we want to move the company in the future.
Okay. So would it be fair to assume that TI1, 2 will broadly consume about INR 300 crores, INR 400 crores of annual CapEx. Would that be a fair assumption?
It could be -- I mean, between -- yes, it could be even more.
Okay. Okay. And sir, one of the areas you had mentioned where we're seeing a lot of traction in terms of the overall electronics manufacturing or the mobile-related the mobile-related value addition, it progress because we are hearing a lot of these localization happening, a lot of the development there. So any thoughts on that, sir?
Yes. We continue to focus on it. The -- but we will continue to explore and are identifying what we think will be the right first step to take in that segment. And when we're ready, we'll basically talk about [indiscernible] once we have.
[Operator Instructions] The next question is from the line of Mr. Anupam Gupta from IIFL.
Yes. So firstly, if you can talk about the [indiscernible]. Any update on that in terms of ramp-up of what's happening from the client side?
Yes. Anupam, we've got product approval from the first customer. And now we're still in midst of discussions with them in terms of what volumes they can take and pricing. And once we have that timeline, we'll start manufacturing.
If you look at this possibly in terms of the existing capacity which you have and possible customer additions beyond the first one also, what sort of, let's say, if you look at 2, 3-year horizon, what sort of contribution can this business have to TI?
No. Is it -- I mean if it scales, what we said was kind of what we had built was a fairly low CapEx investment at that point in time. So if it starts scaling, we will have to invest more in it. So that's why I don't want to comment on it first till we have a successful customer. So I don't want to get into any of that. We first show customer success and product success.
Okay. I understand. And sir, on your other initiatives that you had taken earlier, so the truck body building or the TMP. Any thought of -- so since those are not scaling, I assume, based on whatever we understand, what is the [indiscernible] those businesses? And how do you pick up all on what to do with those?
Yes. So definitely, what we will do is -- those businesses, we will evaluate my sense is by the end of this year, we will have kind of a final answer on what we're going to do with them. We will come back to that.
Okay. Fine. And if you can talk a bit more about the Lotus and the CDMO businesses. So CDMO, I understand you are in the process setting of the plant. But I understand you will be also talking to the customers, so if you can just give us some picture on what's happening on CDMO and then also on the plan for Lotus?
Sure. Mukesh and Dinesh also on the call. So CDMO, I'll let Gohil give you a quick update. And is Dinesh also on the call? If not in case one of us can give an update on notice. So first maybe Gohil, you can just give a quick update on where we are on CDMO.
Sure. I think the first, the lab is getting ready. And in fact, we have applied for the consent to operate and should accrue in the next week or so like our weaker Maxim 10 days, 10 working days, and then we should be able to commission the lab.
The objective was to first start the FTE business, already the customer meetings are on. I think we are speaking of business element focus are in the market. And we also paid for a 25-acre plot in [indiscernible], and we have got the confirmation later and we are waiting for development letter. And finally engineering consultants and once the allotment sectors, we'll be ready to move in with the project pay and start the construction. So that's the plan as of now.
Okay. And any specific -- so you said, but any specific niches that you are targeting? Or how do you look at beyond once you start the plant?
So the strategy here is to ensure that we would be doing both the contract manufacturing as well as a certain percentage of the business will also do certain APIs. And we are also introducing certain divisor differentiation by introducing platform technologies. We already tied up with a player on a continuous process for pharmaceutical products, and we've also like signed an MOE for engine biocatalyst and an unlimited process.
So these platforms would be utilized for both positioning ourselves and getting contract manufacturing as well as we would pick up certain traditional APAs and make it more cost of using these platforms. to go to the market, so that's the plan. And those product development would start as soon as the land or the permits are up in and we are starting the land.
Okay, okay. And just 1 lastly on CDMO. What sort of employee base you have created at this point of time?
The lab would house around 120 to 130 people [indiscernible] being sure we are having around 15, 16 people who have been already on board. And on the last is commissioned as the business bonuses will be increasing those still as the lab is concerned. The plant has made progress with the construction will increase in Mancos as we move towards the commissioning aspect.
From coming to lots, as you are aware, we said in the earlier call, as acquiring these businesses, we can increase the share of business in Indian markets followed by we'll be concentrating on the export markets. And the division team are fully focused on how we can improve more penetration on the supplying to more rising homes to the penetrations of more geography in India that we're on and large quarter was pretty good.
We've grown almost close to 30% plus last some last quarter. And this work will continue. And we are also thinking to do some backward integration to increase the operating margins going further, just let answer.
And we've also seen an improvement already in operating margins, both in operating margins and in revenue.
Q-o-Q, it doesn't visible -- it's not visible in the numbers, special, because if you look at the numbers, it's actually Q-on-Q, the revenues appear to be flat if I take the May 10 sort of acquisition date and margins are actually looking on Q-on-Q. So that's why the -- what's happening there and what's the plan?
Because it's 2 months only in the quarter [indiscernible].
Yes. So that's why. So once you adjust for that, it appears to be flat. That's what the thing was. But that's fine. Just 1 last question on Pelotas. Will you need to do CapEx there again for expanding capacity to cater to the market which you are talking about?
We're doing. [indiscernible], do you want to do more?
No, go ahead, please.
So for doing current volume and the market penetration, we don't need any CapEx. But however, we want to take care of the total supply chain in that we'll be doing some CapEx in the core.
Okay. Right. And sir, just 1 question on the Cycles business. So this obviously is struggling given the weak demand domestically. And earlier, you had talked about the export ability if you are able to get your cost down. So what's the progress on the cycle business at this point of time? And how will you -- so I understand the cash positive business. But still, what's the call on a, say, longer-term basis?
So our focus basically that whole business now needs to get reoriented right, kind of the only -- the scalable solution for that business in the long term is for India to become an alternative export hub, right?
And I think that there's legs for that, given that China plus 1 is now kind of beginning to play out and people have, a lot of people appear to have antidumping duties with China or basically want to curb the amount they import from China. So that requires a whole turnaround in positioning, which we're focused on. But again, it's going to be a journey that takes time because we have to get -- we have to start ramping up on the export side and it's not going to happen overnight, but it's a journey we are focused on. So let us go through that process first.
Okay. Okay. And sir, just 1 question. You just wanted to Abhishek's question for electronics that you are looking at various opportunities there. But -- so what will be the model we are looking to do? Will it be, let's say, a more manufacturing base where you are looking for technology-based acquisitions?
So once we've got is finalized, we'll share it with you. I mean, I think kind of we're evaluating, obviously, right now. I don't want to comment on it. Once we finalize, we'll share it with you.
[Operator Instructions] So ladies and gentlemen, as there are no further questions from the participants, I would now hand the conference over to the management for the closing comments. Over to you, sir.
Yes. No, I think from our perspective, we continue to be focused on the -- both in the 4 financial metrics in the core business and on these TI2 efforts and ensuring that they are driven to success. And we continue to be very bullish, both on what will the initial green shoots we're beginning to see on the EV side and on some of the new growth businesses, and so we're very encouraged and bullish overall. So I think that's it from my side. .
On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.
Thank you. Thank you all.