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Tube Investments of India Ltd
Earnings Call Analysis
Q3-2024 Analysis
Tube Investments of India Ltd
The company's quarterly stand-alone results showcased a notable increase in revenue, reaching INR 1,898 crores, up from INR 1,710 crores in the same period last year, with a slight uptick in Profit Before Tax (PBT) before exceptional items to INR 210 crores from INR 192 crores, and an impressive Return on Invested Capital (ROIC) at an annualized 54%, indicating efficient capital use. Despite the consolidated revenue surge to INR 4,197 crores, a remarkable 15% growth year-over-year, the profit was slightly down to INR 390 crores from INR 418 crores in the previous year. This balanced report card is bolstered by a 14% growth in Profit After Tax (PAT) driven by robust performances from the Engineering and Metal Formed product divisions, alongside strong contributions from subsidiaries CG Power and Shanthi Gears.
The Engineering business segment experienced a 13.7% rise in revenue to INR 1,229 crores with PBIT (Profit Before Interest and Tax) increasing to INR 153 crores from INR 134 crores, reflecting enhanced profitability. Similarly, the Metal Formed business witnessed a 5.7% revenue increment, posting INR 392 crores, and PBIT growth to INR 47 crores from INR 42 crores. However, the Mobility (bicycles) business showed a downturn, with revenues falling to INR 147 crores from INR 174 crores, and flipping from a profit of INR 2 crores to a loss of INR 8 crores. The 'Other Businesses' segment saw a promising 31.9% revenue jump to INR 219 crores and a modest PBIT increase to INR 14 crores. Shanthi Gears, part of the Gears business, maintained steady growth with revenue and profits slightly up at INR 126 crores and INR 24 crores, respectively.
The company is expanding its dealer network while stabilizing the supply chain and improving production ramp-ups and customer interfaces, eyeing growth in southern markets with dealership increases anticipated to boost northern and eastern market presences. There's optimism in the early sales cycle of heavy trucks, marked by an initial larger size order. Further, with two electric vehicle (EV) products already launched and two more planned for release this year, the company is strategically holding off on EV profit guidance, signifying a measured approach to establishing a potentially lucrative yet nascent sphere.
An acquisition, Jayem Auto, now leads the development of a small commercial vehicle, indicating the company's commitment to R&D and focus on expanding its product range, critical to sustaining long-term growth in the automotive sector. With a substantial CapEx of INR 450 crores incurred across businesses and plans for future expenditure, the firm is laying the groundwork for continued innovation and competitive advantage.
Reflective of confidence in its financial strength and commitment to shareholder returns, the company announced an interim dividend of INR 2 per share. Despite the ongoing investments in R&D and expansions, the firm's ability to generate free cash flow remains integral to its strategy for delivering investor value.
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Ladies and gentlemen, good day, and welcome to the Q3 FY '24 Earnings Conference Call of Tube Investments hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anupam Gupta from IIFL Securities Limited. Thank you, and over to you, Mr. Gupta.
Thanks, Michelle, and good morning, everyone, and welcome to the 3Q FY '24 Results Conference Call for Tube Investments of India. From the management, we have Mr. Vellayan Subbiah, Executive Vice-Chairman for TI; Mr. Arun Murugappan, the Chairman for TI; Mr. Mukesh Ahuja, Managing Director; Mr. Meyyappan, Chief Financial Officer; Mr. K. R. Srinivasan, President and Whole-Time Director for the Metal Formed Products business; Mr. Murali, Senior VP for TPI; Mr. U. Rajagopal, Senior VP for the Cycles business; Mr. Govindarajan, CEO for 3xper; Mr. K. K. Paul, President for TI Cycles; and Mr. Anurag Vohra, Chief Operating Officer for the TI Clean Mobility business.
To start off with, I'll hand it over to Mr. Subbiah for the opening remarks, and then we can have the Q&A. Over to you, sir.
Thanks, Anupam. The Board of TI met yesterday and approved the financial results for the quarter ended December 31, 2023. The stand-alone results for the quarter, the revenue was at INR 1,898 crores as against INR 1,710 crores in the same period for previous year. The PBT before exceptional items and tax was at INR 210 crores as against INR 192 crores in the same period previous year. And ROIC annualized was at 54% as against 53% in the same period previous year. Free cash flow for the quarter was at INR 66 crores.
A quick review of the businesses. Engineering, the revenue for the quarter was at INR 1,229 crores compared to INR 1,081 crores in the corresponding quarter. PBIT for the quarter was INR 153 crores as against INR 134 crores in the corresponding quarter in the previous year. For Metal Formed business, revenue for the quarter was at INR 392 crores compared with INR 371 crores in the corresponding quarter, and PBIT was at INR 47 crores against INR 42 crores in the corresponding quarter.
For the Mobility business, it is our bicycles business, the revenue for the quarter was at INR 147 crores, which was lower than what we had last year INR 174 crores. And we had a loss of INR 8 crores as against a profit of INR 2 crores in the corresponding quarter of the previous year. So that business has been weaker for us.
In terms of the other businesses, the revenue was INR 219 crores compared to INR 166 crores in the corresponding quarter, and PBIT was at INR 14 crores as against INR 12 crores in the previous quarter.
For consolidated results, TI's consolidated revenue was at INR 4,197 crores for the quarter as against INR 3,643 crores in the previous year. The profit for the quarter was at INR 390 crores as against INR 418 crores in the corresponding quarter of the previous year.
CG Power & Industrial Solutions registered a consolidated revenue of INR 1,979 crores as against INR 1,753 crores in the corresponding quarter of the previous year. And PBIT was at INR 264 crores -- for the quarter, it was at INR 264 crores. PBT was at INR 264 crores as against INR 285 crores.
Shanthi Gears, a subsidiary of the company in the Gears business, registered a revenue of INR 126 crores for the quarter as against INR 115 crores in the corresponding and profit was INR 24 crores as against INR 23 crores in the corresponding quarter of the previous year.
Commenting on the results, Mr. MAM Arunachalam, Chairman, TIA, said that TI continued its focus on cost reduction and operational efficiency through Kaizen. Company exhibited strong performance in top line and also on bottom line with a 14% growth in PAT driven by the healthy performance from Engineering and Metal Formed product divisions. Our subsidiary, CG Power and Shanthi Gears continued their strong performance, and TI's Board has declared an interim dividend of INR 2 per share for the financial year 2023, '24.
So I will stop with that, Anupam, and we'll be happy to turn it over to you for questions.
[Operator Instructions] The first question is from the line of [ Rohit from Nvest Analysis Advisory LLP ].
Am I audible?
Yes.
Congrats for a good set of numbers. The question is on basically that EV sales that we are going to make. So we are going to sell some 5% to 10% stake. So can you please put some more clarity on this? What is the transaction? What kind of things is going to happen?
I don't know if I understood the question. You said 5% to 10%? What is the question?
Actually, a sale is happening on our EV business side, right?
Sale of what?
EV business like valuation of $2 billion determined for the EV business stake.
No, no, we've not disclosed any valuation specifically for the EV business in which we've raised funds. Is that your question, kind of what valuation have we raised that in the EV business?
Actually, I came across some news and articles where you're talking about the selling some 5% to 10% stake in our EV business. So that is what I was talking about.
No. So I mean, basically, we have raised funds already in the EV business, right? And I don't know if you're saying that are we going to raise more funds in the EV business, okay? And we may raise funds in the EV business from time to time. But that -- I mean if we raise funds, we will disclose that we've raised funds.
Okay. And can you provide a comprehensive breakdown or explanation for the CapEx incurred by the company this year across the segment?
You want CapEx by segment, is it?
Right.
Do you have that data, Meyyappan? For TI, what is the CapEx? We'll get you that data once we get it. What is...
INR 220 crores we have spent for -- in TI.
INR 220 crores. Do you know how much we spent in engineering after that? So we spent INR 220 crores in TI, off of which INR 160 crores was on our engineering business.
Sir, my next question is on the EV side. So basically, since last 3 to 4 quarters, I think we are reporting losses. So can you give the indicative time line, like how many quarters we can expect the losses to continue in this segment?
No, I mean, we are not giving any guidance on when the losses will stem in EV because we're launching new products there. And that's our business, that's why we've raised money specifically into that business so that we don't have to fund it further from TI, right? And it is a business which will take a while to establish. And so we are focused on establishing that business. We've got 2 products out and 2 more product platforms will be added this year.
Understood, sir. And sir, on the medical business side, so how do you see the potential, particularly in this segment for next 2 to 3 years? Like, what are the tailwinds happening in the sector? Or what are our own strategy to capitalize on those tailwinds?
Yes, I think it's better. And I request the moderator also to suggest that each person gets to ask 2 questions per round, right, because we can't have multiple questions all from the same person. So my guidance is just come back. Why don't you come back in the queue after the other questions.
I would request Mr. Rohit to please rejoin the queue for follow-up questions. [Operator Instructions] The next question is from the line of Anupam Gupta from IIFL Securities.
So for the EV business, you said that 2 launches obviously happened. Very recently, we saw your -- for the 3-wheeler business, you saw -- we saw your TV ad being launched, I think on the net, we saw that. If you can maybe talk about that a bit later how the journey has been. There were some supply chain issues which you had referred to last call. So how that progress is happening? And what sort of progress we should see in terms of launches in the northern part of the country as well?
Yes. So Paul, do you want to talk to that, and then I'll add.
I think we retain some progress on that vertical. We are actually now in the process of expanding our dealer network across other geographies, that's the first point. Supply chain stabilization has occurred and further work in progress is there. Production ramp-up is happening and we're able to establish newer and newer milestones for ourselves. Customer interface issues are getting improved day by day. That's where we are at this journey in terms of the product, geography that first task that we will be having now in terms of this. And the newer product offerings that Mr. Vellayan referred to would follow in a periodic fashion given the plan that we had. That's what we have at the moment.
Sure, sir.
And specifically, Anupam, so on the 3-wheeler front, we've had good response in the South, right? In the southern markets, we launched in 4 states. We've had good response there. So now we started moving into the north because the north and the east are where the major markets are. So we started adding dealerships there. So I think this quarter, we will start the process of adding the dealerships. We should start seeing traction from that next quarter. So this quarter, basically, we will see growth in the southern markets and an initial seeding in the northern market. And then next quarter, we should see some growth in North and East as well in addition to South.
So I think at the end of this quarter, we'll end up with about 75 dealerships across the country. We're at about 40 at the end of last quarter. And the product, like the supply chain issues we're addressing as we go along. So for the most part, a lot of them will be addressed this quarter and I think they'll be fully addressed by the end of next quarter.
The -- because initially, we did have some challenges with chargers, supplies and reliability of the chargers in the market. But now most of that is getting addressed. So I'm actually fairly encouraged by the 3-wheeler performance, right? So I think that performance has continued to pick up fairly well.
The -- on the heavy truck side, basically, we just started. So usually, what we're seeing as the sales cycle for the heavy truck is that basically, the customers first want to trial the truck. Then they buy a small number of trucks, like 2 to 5, and then they start buying in larger quantities.
So we've had one customer order of a larger size now, which is good. So delivery should start this quarter. And then -- so I definitely think the traction is going to pick up on that product as well.
So it's still early days, but some of the accounts we've got on that product are very solid accounts that have a lot of potential. So I do -- I'm fairly optimistic that, that will start growing as well.
And then on the other 2 products, like we said, we're in the process of normally getting the tractor in the small commercial vehicle. So both of those products should hit market later this year. We're estimating around August, September time frame.
Understand, sir. Sir, second question was on the Medical business, both CDMO and Lotus numbers which we saw. So Lotus number if we specifically see in this quarter, there was both a Q-on-Q decline as well as -- it was a loss at debit level. So maybe some color on why that happened. And in terms of, let's say, next 1 year or over the next 2, 3 years, over the medium term, how do you look to scale up the Lotus Surgical business?
Yes, Anupam, thanks for the question. Like Lotus, we are basically investing into the future. A lot of investment is going towards building the sales team as well as Europe getting some certifications so that our exports can be enhanced. So this business just we took over, and we are investing into future. So in future, you will see pickup. And some quarters we surely need to invest for the future and definitely a strategy going forward.
And coming to the EBIT level, maybe this amortization of whatever intangible assets we have paid it as per IndusLaw, we have to amortize over a period of time. That's why you're able to see that negative, but which will be continuing for quarter-to-quarter. It is accounting policy.
So the business is generating free cash, Anupam, it's just that -- it's only because of the amortization issue that is showing -- you're seeing a negative EBIT there.
Understand. And CDMO, if I understand right, you were supposed to, I think, commissioned by the end of March. Is that on track for the tax benefits which you had initially thought about? And is that on track for that?
So Govind, will give a quick update on CDMO.
Yes. So the lab has been commissioned as far as building before March the [ Kilo ] lab already we got the concern to establish and next week we'll be applying for the consent to operate. By the time I think we'll be ready with the facility as soon as that is made available. We are already -- we have already developed a couple of products to go into that facility to do that commercialization in terms of the semi commercialization from the [ Kilo ] lab.
[Operator Instructions] The next question is from the line of [ Vipul Kumar Shah from Sumangal Investments ].
So what type of CapEx we'll be incurring for all this electric 3-wheeler, this truck and -- yes.
Yes. So we -- total -- right now, the total capital employed in the businesses are -- right now, yes, the total capital just a like have -- why don't you answer it? What are the total capital employed in the businesses? And how much are we going to incur over the next year?
Yes. This is Meyyappan here. We have incurred a CapEx of almost around INR 450 crores so far in the business, all businesses put together in TICMPL as well as its subsidiaries so far.
Would you repeat the figure, sir?
No, no, I'll tell you what, just give us a couple of minutes, we'll just check and get back to you. Okay. We'll get that number for you. Do you have any other questions?
No, sir. Thank you.
Okay. Just give us -- we'll get the total capital employed and the future CapEx for you. Just give us...
For all 3 electrical products.
All platforms.
Yes. For all platforms, yes, we'll give you the answer for all 4 platforms. Just give us...
During call also -- during call only or should I write?
During call, we'll give it to you. We'll give it to you. One second. Do you have it? Okay. Yes, we'll give it you in the call.
[Operator Instructions] The next question is from the line of Nishit Jalan from Axis Capital.
My question is on EV...
I'm sorry to interrupt. Mr. Jalan may we request to kindly use your handset, please, to ask the question?
Hello. Am I audible now?
Yes, sir, please proceed.
My question was on EVs, we are launching that we have launched this 3-wheeler and tractors, and we are looking to launch -- sorry, 3-wheeler and trucks are looking great just wanted to understand what kind of capabilities have you built in-house in terms of R&D or in terms of designing critical EV components, right? Let's say, I've got a battery pack or a motor or a motor controller. So just wanted to -- just trying to figure out what is the exact work? And what kind of value proposition are we offering to customers so from that perspective?
So -- yes, I think it's a good question. So currently, we have about 250 people in R&D, okay? And that is for the product development. But you're also asking a good question in terms of what's happening in terms of motor, motor controllers and kind of the actual component level development.
So the way we're looking at this is that version 1.0 of most of the products are going out with components that are basically already available in the market today. What we're then doing is beginning to separate out a team that is focused on more R&D for Version 2.0, which is when then we will start kind of getting a more -- an EV component architecture and an EV architecture overall. That is more proprietary to what we are doing, right?
So actually, basically, we're bringing to separate out our R&D teams. So we have one set of R&D focused on the current product and on vehicle integration and one set of R&D focused on what the next generation will look like. Because currently to take products to market, if you have to develop all of the components from scratch, it will take way too long.
So basically, at the first level, the motors, all of them are being -- some of them have been custom-made for us, but they are being bought from third parties, some motor, some control units, the BMSs, the vehicles control units and all of that.
We're also beginning to set up battery packing capability so that we're able to pack here, though we will still continue to impose the sales.
So Vellayan, just one follow-up here. So if we fast forward 3 years, right, if you can share some strategy as to what kind of R&D strength people you would be needing? And what would be your focus area? Because as you rightly said back, all components no company can design or manufacture themselves. So what is it that you would want to do differently or basically want to focus on a proprietary basis, so that our vehicle gives a much better performance compared to that of the peers or other models available in the market.
Yes. So I think the -- it's a good question. See, actually, the proprietary components effectively, what has differentiated here is going to be -- it's going to vary by segment, right? So if you take a 3-wheeler, what you're going to differentiate is very different from a tractor versus a heavy truck versus a small commercial vehicle, right? But basically, what we're looking at is for each segment where we think the key differentiators are going to be.
Definitely, in the long term, motors are going to be a very significant differentiator. And that is a capability that we will have to have and develop motors and motor control units. But beyond that, we're also fairly clear that we will not get into batteries at a cell level. We will continue to buy from outside at the cell level. Packing insight, I do think is going to become necessary over time. And therefore, the BMS capabilities also from a software management perspective will likely look at coming in-house over time.
In terms of actual control units in the vehicles, telematics definitely is something that's going to get standardized, and we don't see a whole lot of proprietary need there in terms of the hardware. On the software side, telematics will require some proprietary development, which we have already assembled a team to start doing today.
And then in terms of the other control units in the vehicle, they're going to be specific to this vehicle. There's some vehicles that are going to be more transmission intensive. You will require some proprietary capability there. But otherwise, if it doesn't, then it is going to be more third party. So I would say that that's going to -- so as the vehicles start evolving for the next generation, we're going to start taking first, 1 or 2 key components and then take it forward from there.
The next question is from the line of Jinesh Gandhi from AMBIT Capital.
Sandhya, we can -- before Jinesh's question, let's just give you the details on the capital.
Sure.
Yes. This is Meyyappan here. This is regarding the question on the capital employed and the CapEx spent and to be spent entity TI Clean Mobility. If you see our results, we have mentioned the capital employed of INR 17 crores as a capital employed as on 31st of December 2023. This is because of the CCPS, which arise in the business. Actually, if you consider that, then it will be something like INR 1,767 crores is the capital employed in all the business put together in TICMPL. And with respect to the another question on the CapEx spend so far, we have spent around INR 300 crores so far, that is till this year and it will be INR 300 crores. And next year, we are planning to do almost around INR 460 crores for next financial year for all business put together in TICMPL.
Mr. Gandhi, you can proceed with your question now.
Just to clarify, you said capital employed in the clean mobility business is INR 1,067 crore?
INR 1,760 crores.
INR 1,760 crores. Got it. Okay. My question pertains to the export side of the business for the stand-alone entity. How are we seeing trends there? Is export back to normal so far? And incrementally, are you seeing any headwinds either from the [ rates ] issue or otherwise?
Yes, export is back to normal, but however, will be little bit headwinds on this logistics issue, which according to us, it is a very, very temporary phenomenon. But in terms of customer offtake in terms of OEM product development, it is that normal and that we see as a growth area going forward for the TII.
Okay. So exports now in stand-alone would be, what, about 17%, 18% of revenues or still a little lower?
It will be 15%.
15% to look at. Secondly, on the railway business in the metal form side. So we were seeing some signs of tendering up playing out in previous quarter. Have those actually now started to come up? After COVID, it was quite muted. Is that segment also normalizing?
Yes, tenders are coming back to the business, but we see one phenomena here maybe the -- a little bit -- it is getting more competitive industry, and we have to wait and watch going forward, how we are going to do it and then we have to take steps how to do some cost cutting inside or do the development where margins are more. But tenders are back. Margins seems to be under pressure in the short term. We will take appropriate call depending on how it goes for us.
Okay. And yesterday's announcement of government of modernizing 40,000 bogies to Vande Bharat standard that will be adding to the existing opportunity or that may not be material for us?
That will be a silver lining like what -- that we have to see 2 or 3 quarters going forward. In this 40,000 wagons gets implementation, there will be a big demand and maybe it will be straightaway adding to our top line.
[Operator Instructions] The next question is from the line of Raj Shah from Marcellus Investment Managers.
My question was, as Vellayan mentioned about the R&D approach that you guys are taking. The question was we recently acquired an entity called Jayem Auto. So it's a automotive R&D company that is what probably [indiscernible]. So I just want to know how this acquired entity will help us in the R&D effort that we are undertaking?
Yes. So Raj, actually, Jayem is leading the development of the small commercial vehicle. So currently, we are developing the first product there, which is a 3.5 ton small commercial vehicle. And that is being driven out of the Jayem facility. And they -- we will develop 3 products on the small commercial vehicle platform, and all of them will be driven Jayem initially. So that's what they're working on. So that will -- I mean that will keep them focused on that effort for this year, at least. And then they will get involved also and more integrated with our broader R&D efforts.
Okay. Okay. Got it. And another question was as per our original strategy, we have ballpark the figure of INR 300 crores per platform. So based on various platforms that we have undertaken i.e. [ MXCV, LCV ex factors ]. So I just want to know -- get a picture where incremental CapEx would be required us to, I would say, to meet that INR 300 crore figure just to get a broad idea.
So your question, how are we going to meet that figure? Or is your question...
My question is in which platforms incremental CapEx is going to happen. CapEx as an investment is going to.
Beyond INR 300 crores?
[indiscernible].
Yes. So if you see what's happening, right? The first is like now the 3-wheeler, the 3-wheeler, both the factories built in that product. The 2 main areas we have is kind of good for our products going research and development and products and the factory build-out, right? The -- and -- so for 3-wheeler, for the first product, which is the [ L5M ], that's complete. The factory buildout for all the products on that platform is complete. But there is still some more R&D required and therefore, some more tooling also required on the 2 other products, the [indiscernible].
On the second platform, which is a heavy commercial vehicle, the first version of the factory is built out. And again, the first product is out and we're developing a next set of products. So again, there's spend that's required on R&D prototyping and getting those other products homologated into market. And then once those products are out, we will also need to spend on expanding the factory.
On the small commercial vehicle, we will be incurring tooling for the cabin and the factory build-out costs over this quarter and next. And tractor, the factory is 85% built out, but that will also require some more costs around homologation and factory build-out over the next 3 quarters.
We'll take the next question from the line of [ Rohit from Nvest Analysis Advisory LLP ].
As the current participant is not answering, we'll move on to the next question, which is from the line of [ Saif Sourav Gujar from ICICI Prudential AMC ].
My first question is on the large diameter cues you had been talking about. Any update on that? Any wins on that front and what investment we are doing on that?
So that plant is doing pretty well. And like we shared in the previous calls, we are investing into that business. CapEx is halfway through, and it is expected to complete by maybe second quarter of coming year. And trials around whatever CapEx you completed, already trials are going on, and we are in the process of getting our product approved by the customers. That's the current status of that project.
Okay. And just how is the competitive landscape in that side of the business? Because other people are also talking about investing in this business, they see money on the table. So how is that evolving?
You are right. Maybe let's say we are going in the next phase of this investment where most of the material what we are expanding is getting currently imported and there's a good headroom available for the export market. So this CapEx is for capability development rather than only capacity enhancement, and we have taken care of that as well.
No, but the others investing or other investment...
Yes, it will be. But they are existing around the existing capability.
Okay. So if they come onboard, they will still be behind us in terms of...
The overall project continuation.
Okay. I have one more question, but I'll fall back in queue.
I think if you have one more you can ask us, not a problem.
Okay. So just on the capacity side, on the stand-alone business, talking about particularly engineering and the metal form business so we made decent returns here and the reason being in our plants are very depreciated. But for the incremental growth we are looking from what you have been mentioning, what type of investment would be required? And what assets turns normally incrementally we should see from this business?
So as I said earlier -- next year is also about INR 350 crores. And we are getting into new geographies within India, and we are investing into the newer capabilities with those CapEx what we have planned for existing business in metal formed as well as using business both.
So what I mean is what is the current capacity utilization for these 2 divisions on the stand-alone books, engineering and metal?
Like I said, philosophy of the company, we take calls on future expansion when we are running close to around 80% to 85%. So current utilization is around 85%. And we are building capacities for future because we see this year itself will come closer to 95% or so. And by the time, CapEx also has a cycle time of around 12 to 15 months' time. So we follow this curve and closely monitor this.
We'll take the next question from the line of Abhishek from DSP.
Sir, just in terms of we are beginning to see a healthy recovery as far as 2-wheeler is concerned, so how should one look at the engineering part of the division? Because you have very fair high market shares there. And should operating leverage and your cost efficiencies show up in the margin? This was my question on the engineering part of the business.
Surely, that is our attempt like 2-wheeler business is reviving it. But ultimately, like we have also over a period of time done the durable diversification between PV, HCV and 2-wheeler and the 3-wheeler that part of it. And 2-wheeler business, because there our majority of the turnover comes to. If it is going to give a good growth cycle, surely our top line as well as bottom line should go up very far.
Okay. And in terms of both door frame and the engineering mitigation, any major new client addition that you have done may not be in 2-wheeler because there, you already have higher market shares. But in the PV, any major client addition that you have done, which can increase the revenue growth from here on?
Like [ Gear ] and team are trying to participate, Hyundai is going to come in the West -- in the Gujarat plant, and may be already submitting samples. But obviously, it will take about another year or so from now, but that will be a customer acquisition in the PV market going forward in the rest for the door frame business.
The next question is from the line of [ Rohit from Nvest Analysis Advisory LLP ].
Am I audible?
Yes, sir, please proceed.
Sir, continuing with my previous question only, like in the medical business. So basically, I want to understand the kind of tailwinds that are going on currently in the sector and how we are going to capitalize on them.
Like you're already aware in particularly medical health sector, even the government is also focusing in our product capital consumption in the country is pretty less as compared to even medium developed countries. And most of this medical and even in the CDMO side is mostly imported. And we are attempting that to do that import substitution as well as when the domestic market itself is going to grow in terms of health consumption per capita that we want to participate. That's why our first move was in the sutures business, which we are trying to do whatever is getting used in the entire operating theaters in terms of mesh, in terms of suture, in terms of staplers. We are slowly expanding into that all categories of the OT as well as -- on the CDMO side, which is our 3xper, Govind, you would you like to say -- respond on that?
Yes. So as far as the 3xper is concerned, I mean there are recent clear observations that I think there are more traction towards India for biologics, but that will also help the small molecules because we are currently not in biologics. But I think that above [indiscernible] is also expected on the small molecule. So we expect that to benefit as far in the medium to long term.
Understood, sir. And sir, just for a clarification, like you mentioned raising of the fund for TIC Mobility. So are we done with the raising of the fund? Or are we still looking toward raising it?
So we will -- so, again, right, we will raise this -- I mean -- yes. So I don't think we're necessarily done with the raising of the funds. We will raise one more round of funds. We've said that before, and we'll continue to be in the process of raising one more round of rounds.
So can you tell me like what will be the source? So like, will it be the equity or the debt?
Equity. In some cases, it comes in as [ CCPS ], but -- so -- but it's -- yes, so it will either way [ CCPS ] or equity.
Amount is INR 1,000 crores, right?
Yes, we've talked in that range, yes.
[Operator Instructions] We'll take the next question from the line of Anupam Gupta from IIFL Securities.
Can you give some picture on cycles? Obviously, there is a weakness on the sales side, and I think that is driving your losses. But how do you look at this for the next, let's say, near term? Any actions we can take to extend the losses?
So Anupam, thanks for the question. You are right. That business is going weak for us, but we have taken action for -- to diversify that business in terms of participating exports. As you are aware, exports takes a little bit time for customer approval and we have to go through that process. But we are going to enhance our exports, and we are also giving focus on other accessories business like spares and the fitness part of it. We are working on that. And cost reduction initiatives are also being taken. So hopefully this business will start showing positive momentum. It's a question of 1 or 2 quarters.
Sure. And sir, one question on sequential margins. So if you look at every segment in the business, will you see the power side because you know the reasons there. But every segment, if you see Q-on-Q, there is a compression in margins, whether it's engineering, metal form, even Shanthi Gears. So any specific reason that you saw in the -- what drove this or that should reverse? Or how do you look at the margin trajectory there?
Anupam, you see always Q3 after festival seasons are over and even exports customers also will go through the seasonality factor. Models also start getting changed in December. So you will see year-on-year this trend will be there. And so it's this quarter phenomena, and we should be back to the original margins. As a year, all in all, we don't see any drop in margin will happen for stand-alone business as well as Shanthi Gears as well as CG Power.
Sure, sir. And just one last question. On the electronic side of it, any progress that we have seen beyond -- so in the acquisition which you had done, what's the focus there? Any further acquisitions which you should expect there near term? Or how do you look at that?
So Anupam, we are working on that. As of now, we like we shared in the previous calls, it was a baby step in to participate the journey. But however, we are looking into more opportunities and we'll update based on the progress.
We'll take the next question from the line of Raj Shah from Marcellus Investment Managers.
So my question was if we take CF or cash flow from operations for the stand-alone entity, F '23, it was around INR 625 crores. If this year, we expect it to be INR 700 crores, INR 750 crores, so I just want to know how stand-alone cash flows should be declared? You have already announced around INR 200 crores, INR 220 crores of engineering [indiscernible] CapEx. That is this 3x per investment that will be done. So I just want to get an idea about annual deployment of stand-alone cash flows.
So as we shared in the previous calls, the company at stand-alone basis will generate a free cash flow of around INR 650 crores. But however, we are in the CapEx cycle, like we are doing investment in the engineering as well as metal formed business, as well as we are doing the investment in our subsidiaries also. So we'll see that. Maybe, let's say, we are monitoring as a net debt level, and we closely monitor that. And our investments will not go beyond 2x free cash flow, which is about INR 650 crores. So we closely monitor that and take care of things.
So just to add on to what Mukesh said, so basically, we currently have net debt in the order of about INR 200 crores, right? So obviously, the first part will go towards paying that down. And the -- then what we see is investments. So the core business -- if the core business takes about INR 300 crores, then investments in some of these other businesses as they grow, such as 3xper or on the CDMO -- sorry, on the medical business could be uses of funds, right, kind of other areas. It could be the uses of funds for the rest.
The next question is from the line of Jinesh Gandhi from AMBIT Capital.
Any update on the optic lens business, I mean, that business has not -- you're seeing much -- still beyond the pilot scale. So how are we thinking about that?
Yes. So I'd say that we've had a real challenge in that business, getting the product approvals from the customers we're working with. So we're still focused. What we're learning is it's quite a technical product and quite -- so that we're still working with experts to basically get the products approved there. It's definitely been much slower than we wanted to, Jinesh.
Okay. And second question on the fund raise on the EV business side, which you indicated. So will we really need funds in the foreseeable future given the recent fund raise and the total cash which we have on books for that business? So would this fund raise be in the near future? Or how do you think about this?
Yes, we're in the process. Yes, it can be in the near future, yes.
Okay. But do we really -- does that business will need that kind of cash given the investments which we're planning? Already, we are having a reasonable amount of cash on the books due to the recent round that way...
That's a business where we don't want to be blindsided. See, in all businesses and all the competitors in that business are all fairly strong competitors, right? So there, we need to make sure that we are basically able to compete on the front foot in all of those 4 businesses we get into. So we want to be conservative there and raise enough cash, so we don't end up in a situation where we have to be conservative for whatever reason or be extremely defensive for whatever reason to conserve cash.
Got it. So it's more of having a war chest in place in case that's needed. Understood.
Yes.
The next question is from the line of [ Vipul Kumar Shah from Sumangal Investments ].
Sir, any update on TMT Bar business?
So we continue to do that business because it is a trading business. And as -- and our focus remains in the South, and it will continue.
So is it scaling up to our expectations?
Yes, maybe we are maybe careful in that business. We don't want to get into a situation where cash becomes a problem. So depending on, we are dealing with basically all project orders, and we want to be focused there rather than getting into retail segment. So we are moderating not to scale up too much. And -- but as it's trading, it will continue in our portfolio.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks. Over to you, sir.
I think a lot of the questions were around the clean mobility business. So like we said, we're quite optimistic there on the 2 platforms that we've launched. And so that's on that front. On the core business, engineering, metal formed continue to do well. And we do see that opportunity as the environment basically begins to pick up going into the next financial year. So overall, we're quite bullish going into the next financial year. Thank you.
Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.