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Ladies and gentlemen, good day, and welcome to Timken India Q4 FY '23 Results Conference Call.This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note, that this conference is being recorded.I now hand the conference over to Mr. Mukesh Saraf from Avendus Spark. Thank you. And over to you, sir.
Yes. Thank you, Selvin, and good evening. Mukesh Saraf here from Avendus Spark.Appreciate everybody logged in. I'm very pleased to be hosting Mr. Sanjay Koul, Chairman and Managing Director of Timken India and Mr. Avishrant Keshava, CFO and Whole-Time Director of Timken India.We will start with brief opening remarks from Mr. Koul, and then follow it up with the Q&A. Over to you, sir.
Thank you. Mukesh. Thank you, everybody, for joining the call. And as you can see that there has been little bit positive changes and the market is still okay domestically, though, outside India, there are ups and downs, but overall, nothing, which is extraordinary worrisome.And with that, I would answer the questions directly, which should cover most of the points anyways. So, we can go to the question number one first, please?
[Operator Instructions] The first question is from the line of Vimal Gohil from Alchemy Capital Management Private Limited.
Yes, sir. Sanjay sir, firstly, on the mix. Sir, if you could just help us with the mix for FY '23 in terms of railways, auto, distribution, exports and process?
Yes. Sure. So the mix for the whole year YTD '22-'23, rail was at 17% and mobile as we call, mobile we classify anything which is having a wheel and that was 22%. Distribution was 17%, process was 16% and export was 28%. So that was the distribution between our segments for the INR2,802 crores.
Understood, sir. And sir, for my next question is on margins. Just wanted to clarify. We have done much better EBITDA margin. I understand we are coming from transitioning from very, very high raw material costs period to now slightly normalized volumes. But just wanted to understand, in light of the fact that we have done much better margins, how do we see that going forward? And also your outlook on the mix for traded goods, how will that play out?
So if you see the margins have become better than compared to the pre-COVID levels and obviously, our endeavor is that it's a profitable growth. Between pre-COVID and post-COVID, steel prices obviously did their bit and piece of that. So that is there, steel hopefully, we all expected to soften, it softened a bit, but then there is still rumblings that it might go up again. But as you can see in last 3 years, 4 years, 5 years, now we have been relentlessly working on many things and localization, domestication, whether it is raw material or it is MRO and things like that.So the whole idea is to keep on driving cost, quality and delivery. So, those are the basic metrics on which we are running, simple metrics we have to keep on driving the costs. We have to -- obviously, the more we produce better would be the cost and make sure that the deliveries get a premium when you are able to deliver fast. So, that is the endeavor that we remain focused on cost, quality, delivery.Now, steel is always something which is little bit becoming unpredictable. But overall, the industry trends you know better than me on the alloy steel. And then energy costs are also pretty much up if we compare to pre-COVID levels. But then we make sure that our productivity levels are also in pace with that. And as long as the market holds well, even volume leverages are important in this game. But overall, we are pretty much satisfied on the targets, which we are setting for ourselves.
Right. Sir, what would be our content of localization? What portion of our costs are currently localized? Or rather, sorry, if I'm asking you to how much is imported...
Almost all localized. Very special application sometimes we are now using steel from abroad, but we have localized most of the steel grades. Not only localized, we have invested a lot of time, energy and knowledge in steel companies in India. Many people get benefited by that. And then, as you know, that we are importing finished bearings in India, which we don't produce here [ I'm standing ], but at the same time we are exporting as well. So if we are importing against the currency, we are exporting for the currency, so that is a great hedge. And you will see always our distribution -- our exports -- or if you see the trends, our exports have been always more than the distribution. So, we have always gained on the overall gain of the currency, which was part of your earlier question.
Right. And sir, just one last question. Sir, within exports, sir, what would be our exposure to your Class 8 trucks because there seems to be some uncertainty there? And I believe...
We are -- see, certainly, there is uncertainty. But for us, Europe, America, MENA, China even, so we are exporting everywhere as long as our cost, quality, delivery is good. The ups and downs obviously hits us. It's not that we are not prone to it, but we still get a decent chunk. But generally, in export, it is 50-50. Rail versus the CVs is roughly 50-50.
The next question is from the line of Sandeep Tulsiyan from JM Financial.
Yes. I hope you are doing well. First question is pertaining to railways. If you could give us an overview of the entire opportunity? One part is on the wagon orders, the 90,000 wagon orders that you said. Even if you get half of it, it will be a big growth driver over the next 2 years to 3 years.And the second part is on this entire Vande Bharat opportunity. Many companies have been talking that we will supply to Vande Bharat. Everybody says that they went to Vande Bharat. So if you could highlight what is the opportunity that could come to Timken and how should we look at the competition in that space? That's the first question.
Yes. So Sandeep, as you know, on the rail side, I was always saying that the growth is there, slow and steady. Now this pace of growth is becoming faster and faster now as compared to earlierx. More wagons are either getting produced, or the thoughts of putting more rolling stock onto the freights. And then the number of inaugural -- the number of Vande Bharats they want to introduce and then the mass rapid transportation, which is the metro system where they want to build them.And then India is becoming pretty big for electric locomotives. Electrification of the tracks is gathering huge momentum. And diesel locomotives will slowly vanish and electrical will -- [I believe ] more electric locomotives will be built by Alstom and later on by India Railways So, I would say that we are well entrenched. We have very nice depreciated assets. We have very nice supply chains in place dedicated to Timken. And we are producing all varieties of rail bearings in India and supplying to global railways, not only to Indian railways, we are supplying to global railways. So, I'm very much excited that Timken would remain a very strong player in the rail.And if you see -- if I take the COVID of 2020 and '21 out, we did INR300 crores. Before that, we did INR350 crores, this year close to INR480 plus crores. So, rail will remain positive for Timken. It would be tough for anybody to really, really come to this level where we have invested a lot in automation, robotics, plan for each part.Our rail is being produced in world-class facility today. Everybody can do it, but it will take a lot of time and lot of effort to do that. We have developed railway supply chains within 20 miles of our plant. Cost of ring, transportation is down and obviously, we are also concerned about environment. So, these are milk run, no packaging and things like that. So, I'm pretty excited. Rail will remain good for Timken India, and also out of Timken India facility to export as well.And the rail market is gathering pretty decent focus. Now, obviously, next year, there are elections. Those are out of yours and mine control. There could be new government, new change. But if things remain in the same way, I think Indian Railways is going to become a lot better and better and better. The old model of shelling and coaches will vanish, more safe, LHB everywhere and more mass rapid transportation.Now, they are thinking like here, while I'm sitting in Electronic City, I also sit on the Board of the Electronic City, which is a private municipality, one of its kind in India. And we are looking at mini metros within the Electronic City. And that is going to happen like you see the light metro in Gurgaon.So apart from the large metro, you will see these light metros also happening because of the amount of people we have to transport. And we focus on not burning too much diesel, these are all electrified. So, I'm remaining very positive now about railways. And given the depth, what we have created in supply chain too far, now is the time to -- now and next 2 years, 3 years, we will try to leverage that to huge.
I see. That's very elaborative. And second question, Sanjay, is on the margins, we see that, of course, margins in the past, pre-ABC acquisition was around 15% to 17%. We bumped it up in between 22% to 24%, post amalgamating their factories. But this year, we see margins coming down significantly in second half at EBITDA level. They're at 17% to 19% again. And we see your export share has also come down significantly from first half to second half. So going forward, if you could share some thoughts on how this mix will evolve? How you're seeing the demand driving growth, as well as where do you think these margins should go back? Should they go back to that 22% to 24% range? Or these are the new normalized level of margins with odd inflation? Your thoughts on that, please?
So, obviously, the margins are related to mix and some areas are high margin, some areas are low margin. And whenever the mix changes, it impacts the margin. And exports, certainly, as you have seen, exports are little bit slow because of the fact that some of the global markets are down. And if the US market really goes down in the second half, it certainly would have some impact on us, but at the same time we are pushing hard for the other markets, not only Europe, but Africa as well wherever there is a chance to push more. And whether the US market will really go down or not, whether it is only the retail market of US which will go down and it will not go down, you guys have a better sense than me.But certainly, the current demand going down is not the end user demand. It is more like safety stocks going down, people react, especially the Americans react very quickly to any time they (indiscernible). So currently exports -- end customer demand is not going down, but people are cutting down on inventory and safety stocks and things like that. So while I'm not negative about it, I think we will find ways to harness the better price markets, which is our endeavor.And then in India, also the markets where we get better margins, we're pretty much on it. I can't predict the margin, but you will have to see this game, not quarter-by-quarter, you will have to see this across three years, look at 3 years before COVID, look at 3 years after COVID. So that would give you more regression rather than a quarter-to-quarter movement.
Understood. If I have liberty to ask one more question. Just your thoughts on future investments. In the past, you've highlighted defense and aerospace is an area where post your spherical roller bearing plant, you may want to step up investments on that front, if you could give us a roadmap? How should we look at it over a 3-year period, 5-year period, 7-year period? How that should end up in getting the demand? And if you can also share some near-term growth guidance, if you could give us [ to a certain degree ], that would help. That's the last question.
No. We have recently announced our investment for the spherical and CRB. So that is a significant investment. And the endeavor is always to look at how do we keep on growing, how do we -- bearings, all cannot be localized within one country, but if there is a huge win market exploding in India and obviously, the customers want shorter supply chains at stretch. So then at that time, we would be forced to make investments or we might be ahead of the game.The other piece really is that Timken Company globally has a lot of M&As, which are in the area of belts, chain, cufflink, pulleys. And those are exciting areas which we to continuously look at how do we create supply chain out of India. We want to make sure that any investment has the necessary return on investment. So, I would say that while I can't predict what we're going to have to invest tomorrow, we are looking at everything. The good thing is that we are looking at everything and that is because of the fact that there is chance to do more and more out of India, especially when the Timken Company as a major investor in TIL, has a lot of technological companies especially in grease system.Rollon is a fantastic technology company. They have robotics. They have Spinea. They got Lovejoy, Diamond, et cetera, et cetera. And these are the companies which would be needed more and more to get better global supply chain, best cost countries, plus the Indian market certainly would need going forward world-class products. For example, in defense, you need linear motion now a lot more and more and more as compared to the previous generation.So, I think the good news is that we are looking at many, many things, continuously looking at many, many things. And as you know, over the past, we have been careful to invest at the right time, so that we can get a better return on investment. We are looking at many things and we are working to see what are the best investment, but we are not making any current decisions. But as usual, we are always looking at it. And India is a place where growth will come, nothing to do with Timken. In general, engineering growth are bound to come. So any company with certain technology and also who are in the game of investing more and more will keep on doing that.
The next question is from the line of Hardik Doshi from White Whale Partners.
Continuing on the export side, I think a few years ago, the Timken parent had commented that they were looking to get -- maybe reach 50% of revenues from India and the Indian subsidiary coming from export. So just wanted to get maybe a bit of an update on like how are you looking at it? Is there any opportunity from shifting -- a lot of supply chain shifting from China to India? And then so are there any investing plans around that as well?
So, obviously, for the parent company, India is among the best cost manufacturing sources. And the intent is to procure material from countries which are best cost. Now comparing India and China for Timken is little bit tricky. In China, they need large bearings. They make bearings which are 1-meter SRBs, CRBs. In India, we are mostly rail and 0 to 8-inch. Now with the investment, which is coming in the CRB and SRB, that has a very nice potential for exports.So, you will see that exports out of that going -- that plant which we are putting hopefully. That plant will be exporting stuff and also pitching that material to India. And if we have the critical mass, more can be done hopefully on that area depending on how do we carry that momentum. So intent is to source more and more out of India. That intent is clear. We have to increase our product basket which with SRB, CRB, you will see more exports going. And who knows tomorrow we do something else. Then again that would be the case.What we produce in India will be for Indian market and global market both. So that option is an important. And we've been exporting for a long, long time, and we'll continue doing that. And we will make sure that the Indian customers are also taken care. And if that demands -- this critical mass goes up and that demands more investment, so would be the case, which would be judged at that point of time. But directionally, certainly, out of India, we would keep on exporting to [indiscernible] and in that kitty, we are a great source.
Okay. Okay. I know we've announced these CapEx plans on new facility on the cylinder roller bearings. How are we in terms of capacity utilization with regards to tapered roller bearings? And if the demand were to, let's say, pick up on exports, do we have enough capacity to kind of cater to that in India?
See, basically, yes, currently our Jamshedpur plant and Bharuch plant both are running full. Jamshedpur, we are exporting -- some months we are exporting 50%, some months 30%. And in totality, we keep on looking at long-range forecasts and we keep on looking at the demands. If the demands are more and our capacity is less, then, obviously, we'll correct that and use the capacity. At the same time, the parent company would look at global capacities also to leverage that. But we are running currently -- our both the plants are running pretty much full. And our rail is running pretty much full. And the SRB, CRB plant, as we look at the demand and as we look at everything, would be also off to a very nice start.
Sir, I mean, just a follow-up on that, I mean if our plants for tapered roller bearing is running pretty much full, why are we focusing on CapEx on SRB, CRB, which are new markets? Shouldn't we be kind of expanding this capacity, given railway, given its potential, et cetera?
Yes. So SRB, CRB is not a new market. We are importing and selling in India. And now we're manufacturing in India and selling in India and also export, given the fact that India will offer a great supply chain, a great cost advantage and also top quality. And then, obviously, we want to risk mitigate. If we just concentrate on one 0 to 8-inch, the truck market goes down or off-highways goes down, then you are down and out.So, we want to make sure that we cater to the fragmented markets. We want to cater to rail. We want to cater to the trucks, to the tractors, off-highway. We want to cater to the stationary machinery. And also there are some markets, which are more commoditized. There are some markets where you can get more value and that is why we want to concentrate on CRB, SRB. And at the same time, if we need -- currently, we don't see the need to expand 0 to 8-inch. If we feel the need to expand it, and there is a business case, 100%, we'll do that.
Okay. Great. One last question. In terms of this new CapEx in the new plant, are we on track? When will the capacity come on board for us?
Yes. As we speak, we have already done the foundation laying ceremony. We have the approvals from the local government to start the construction. The machine ordering across most -- almost all the equipment is coming from a very developed state-of-the-art countries on the machine tools. So they are all placed. Money is flowing to them.So, we are on track and hopefully, we remain on track. Just building the 4 walls is the one part of it. It is important part. But getting all the assets at the right time, running them off and creating the back-end supply chain, so we've got teams working currently on all teams sitting here, teams sitting in Bharuch. So, they are all working on that. So, we should be hopeful to deliver the inauguration in time and hopefully, we invite you guys as well for the inauguration.
Okay. When would that be?
So, that would be somewhere close to end of next year.
Okay.
Who wants to go to Bharuch in May? We have to choose a colder month.
The next question is from the line of Mahesh from LIC Mutual Funds.
Sir, my questions have been answered.
We shall take the next question. The next question is from the line of Shirom Kapur from Prabhudas Lilladher.
I just wanted to understand -- you mentioned that you are almost completely localized in your steel raw material performance. But in terms of the various bearing components like your cages and steels and those various bearings components, what is your localization that is there and what's your outlook on that?
Yes. So, yes -- so the raw material, which is steel for the inners and outers of Jamshedpur and Bharuch, that is all localized in India. Rail application, almost all steel localized in India and there are certain alloy grades, which are continuously working to localize and then we continuously work on material sciences. So, we work with the IITs and work with these companies to start on this, whether it is green steel or better steel. So, that is one part of it, but they're all localized.So coming to your question on cages, we are on the 0 to 8-inch. And in rail, we are almost localized. There would be some high-speed rail where we are importing, but the effort is already on to localized. Harsha is one of the major cage guys for the industry in India. And so cages are localized. Rollers is -- we have -- some of you did go to Jamshedpur recently and they had a chance to look at our roller localization. So, we are by and large localized on most of the components which was not the case some years back.
Understood. And in terms of your outsourcing of -- so a lot of the bearing companies, globally including Timken make a lot of the components in-house, right, for bearings. But what would be your level of outsourcing that and focusing purely on the value addition in bearings? How much, if you could quantify that for us?
Same as the bearing industry, steel is always outsourced, forging is outsourced, green turning is outsourced. Heat treat is a combination. Timken has been one of the pioneering companies, which was the first to develop the local cages in India, which others followed later. And we were one of the first companies which started state-of-art sourcing of heat treatment extraction. So we obviously -- the application in engineering product technology, intricate grinding and those aspects of assembly, design remains always in-house. But steel making, forging, turning and wherever we have the combination of heat treat, we have those in place.And we are little bit ahead of this game in supply chain than the rest of the gang in India. And what is core to us remains inside and rest most of it is outsourced. And generally, we have great relationship, for example, cages, as I said, we were the pioneers to start with this particular company. And then, obviously, on forging, et cetera, technologies have changed, robotics have stepped in, all our suppliers are using those technologies and they're also one step ahead in the game in terms of using solar farms to bring their costs down and things like that. So, we are pretty much balanced on this, balanced and risk mitigated on the supply chain.
Understood. That's very helpful. And just a couple of bookkeeping questions. Could you provide the split in revenues for region-wise across India, U.S.A. and rest of the world as you typically do in the Annual Report?
No. We don't break it up like that. But the exports, which we call intercompany, this year was INR798 crores, process was INR445 crores, distribution was INR470-ish crores, mobile was INR608 crores and rail was INR481 crores, INR482 crores. So that is the general breakup. But we don't give the breakup region-wise. We have not been doing that.
Okay. So the previous breakup you gave was for FY '23, right, not for Q4?
That's right. '22 to '23. Yes.
The next question is from the line of Alok Ranjan from 360 ONE AMC.
Yes. Sir, just one question from my side. How is our portfolio positioned towards wind segment? There are expectations of increased bidding scenario on the wind side by renewal and the implementation as an increase. That's what we have seen that around 10 gigawatt of bidding will be there. I understand that the market has not done well post the peak that was there in 2008'-'2009. But now since we are hearing in terms of the increased intensity, how is our portfolio positioned on that side? And how is the offering different in onshore versus offshore, sir, if you can comment on that, please?
So, there was a little bit of voice break. But if I could understand your question, it's about the more windmills being installed in India. And whether it is offshore or onshore, windmill does not change. What changes is that, whether it is a gearbox-driven windmill or it is a direct drive. So that is the general difference. So direct drive will have a master bearing on the direct shaft which will be pretty big. And if it is gearbox-driven, then it will have multiple bearings because it will be stage 1, stage 2, stage 3 like that. So India per se, if you see in the Indian market of wind, there was always sub-megawatt.We had 250-kilowatt, 500-kilowatt kind of stuff. Now India is waking up to the fact that we might use more offshore because the wind tunnel onshore is not pretty strong. So offshore wind is pretty -- especially in the Bay of Bengal side, it is very, very strong. And also, if you've got a lot of windmills outside, it is great for security of the nation as well as [ tanks ], et cetera, et cetera. So that is there, but currently, the wind market for bearing companies in India is actually the gearbox which are getting exported out, so that is more important currently.And as India starts installing more and more windmills, in India, that would be obviously an added advantage. So, Timken Company globally and including TI does not make wind bearings. But we have one other company in India called Kerry, which makes wind bearings in Chennai, which we sell to Timken India and they in turn sell it to the customers. And we are selling it globally. And we import wind bearings also from our other locations in Romania and also that is TIL imports from Romania and China and sells to the wind customers who make the gearboxes.So, I would -- if you ask me next couple of years, it would be more gearboxes made in India getting exported, which is going to be more important for the bearing companies. And I would say that in next 2 years to 3 years' time, India would start installing more offshore and we have heard the news and seen this. But it needs lot of background work to do. I would say 2 years to 3 years, it would start putting more offshore.Onshore, there will be some, but it won't be much. It would be more offshore because it is augmenting, if you see the Kachchh-Gujarat belt, if they put more offshore, it will help a lot of national security as well. So, that is being seen in combination. I would say that give it 2 years, 3 years, it would gather momentum, though, we see a lot is being in the discussion, but I would still say 2 years to 3 years. But at the same time, gearboxes for windmills made in India by many multinational is going to increase a lot, which is China Plus One and cost and delivery out of these plants in India. And it's a tough game.Cost is important. So, people will design strong design, because warranty costs are very, very high. You cannot afford warranty cost. So, Timken is lucky to have the right design for the gearboxes and also the direct drive. And we have been doing very well in the wind in last 2 years, 3 years and intend to keep on doing well. So, I would say the market is growing. It is becoming an important market in India and it will only grow, both in terms of export of gearboxes out of India. And as India gets its act together and starts doing the installation offshore. Onshore, to my experience or my knowledge would be slow. It will be offshore, which will be a game changer.
The next question is from the line of [ Devang Shah ] from Asit C. Mehta Investment Interrmediates Ltd.
Sir, my first question that -- will you be able to share us your current order book?
You want what details of order book?
Sir, railways or -- that way you are saying value wise. Can you be able to share that?
That was our sales in the past year. So current data if I give you would be bad for business. So, I can only say that we are running pretty full and the order book is pretty full. I won't be able to give you the breakup of the order book.Avishrant, do you want to give the breakup of the order book and lose your job?
Yes, we cannot give -- these are all internal data, so we cannot give.
Okay. Okay. But, sir, in the last con call also you have mentioned, the same way you are saying you will able to maintain the same run rate as far as your revenue growth is concerned in the coming 2 years, 3 years. That can I understand from your current order book?
I can say like this that currently the demand forecast is pretty healthy. So when I talked that, that is for next couple of quarters. Now you are saying that next 2 years, 3 years, then you will have to look at India, you will have to look at GDP. And then you will have to see Timken India Limited as a company, are we growing -- outgrowing the market and then you can take the call. But personally, I would say that India GDP between 6% and 7% would remain there for next 2 years, 3 years. We are going to -- we have delivered double-digit CAGR and we intend to do that and keep on doing more than the market growth. So if that helps your analysis because that is what I would say.
Okay. And sir, second question. Whenever -- as you are saying, you may have orders, as you are saying, but in your order book, you have a price escalation clause also, sir? Because volatility, raw material price, how the business works in this particular area, that I wanted to understand, to just protect yourself from a raw material price any kind of escalation.
Yes. So there are different kinds of businesses. When you're dealing with OE, we have metal escalation clauses. So that is very much in place. In distribution, we always work on increasing the prices as the commodity prices or other prices go up. But there are some businesses which are tender-based. So on tender-based businesses, you cannot change -- you can get clauses on currency but you cannot get clauses much on the material changes. So there you will, as a business, will have to kind of predict and forecast and both. But largely, in last 2 years, 3 years because of the volatility of the metal market, so those clauses more or less is in place. So steel guys have those clauses with, say, the OE truck builders and track builders generally have it with their suppliers, are now still after [ ending ] clauses, India is always a battle to get it all in place, that's why the clauses. But yes, generally, we'll have clauses with almost all the companies. But you know the Indian buying, he will still weep and sleep and then weep further and then give.
Yes, sir.
This you should not record. It's just for your understanding.
Yes, sir.
The next question is from the line of Vimal Gohil from Alchemy Capital Management Private Limited.
Yes, sir. Just wanted to know what are your CapEx plans in absolute terms for FY '24? How much would be greenfield? And what is going for the new plants or the CRB new plants, if you could just give us a split?
So for the greenfield, which is the CRB, SRB plant, we had announced a CapEx of -- Avishrant, what was the exact amount? INR600 crores, I think we announced that.
INR600 crores over a period of next 2 years.
Over 2 years. So you can take that INR300 crores each year or maybe INR400 crores, INR200 crores. So INR600 crores is for the greenfield CRB, SRB. Other than that, the normal enhancement in our current plant in Jamshedpur, which we would keep on doing, which is not a great sum. So that keeps on going 5%, 10%. Generally, that is happening. But this INR600 crores over 2 year is the major CapEx for us this year and next year.
Sure, sir. And sir, you mentioned that both the plants are -- existing plants are running at full capacity. Sir, would that be some sort of a hindrance in terms of targeting the double-digit growth that we're talking about, especially when you're looking at very good opportunities within something like a railways, M&HCV is also doing well? So do you see capacity as some sort of a hindrance or you will be able to manage it?
No, we can -- like the plant, which we purchased in Bharuch, the old ABC plant, there's lot of technology investments which we are doing continuously in that, so that the productivity comes up. We are doing lot of process automation. So it is becoming a different plant by the day. And then there is lot of insource, outsource combination work and things like that. So, I don't see an immediate need to kind of -- it won't be a deterrent. And if we see this as a deterrent to growth and it makes a great case to [ invest ]. So, we are still not at that point. We want to leverage each asset and each investment to the hilt and post that to the direct question of no hindrance.
So, sir, do you add more shifts to the production? Or how exactly will growth come when you are running at full capacity? Do you add more shifts for...
There are many ways. At the end of the day, you need to produce more number of pieces. And there are many ways to do that. I think it will take a lot of time to explain that. There are many ways to do in the existing capacity. You yourselves said using more shifts, using more drill. Then also there are many things which can be done, say, for example, if you had to say grind 500 microns, how do you grind the first 300 microns on a [ site ] asset and then on the lean the 200. So, there are many ways to increase and we continuously keep on doing that. And when that flex point comes for new inner spends or augmenting more lines, then we do that. And certainly in this era when there is lot of automation happening, that itself is helping because of productivity.
The next question is from the line of Sandeep from JM Financial.
Yes. Sir, I had a couple of follow-up questions. First is on the wind market. The commentary that we had been hearing from some of the players is due to the entire Russia-Ukraine crisis and sanctions, there is a big dip in the number of wind gearbox supplies, which is kind of impacting the demand for all the bearing companies here in India. So if you could share some of the thoughts on that and give some more clarity exactly what are these sanctions and how are they impacting demand in near-term?
Sorry, if you could repeat. You said that because of the Russia-Ukraine war, there was less utilization of gearboxes?
Yes, yes. So the demand is down and some part of it is also pertaining to the sanctions on some of the companies. So, we are seeing your peer group companies reporting a big decline in the wind energy bearing supplies where they are doing to the companies overall. So how has that played for Timken?
Yes. Got it. So, here I'm Timken India Limited. For example, if there is a European company in Europe which has to produce gearboxes in Europe and his steel was coming out of Belarus or Ukraine, then, obviously, they are impacted. But for Timken India Limited and our peer group looking at the Indian market, Ukraine war, obviously, there would be some impacts. But to the gearbox market out of India, I personally have not seen that.Now, Ukraine was not a big market for wind market or gearboxes. Definitely, steel was coming out of Ukraine. Steel was coming out of Belarus. Steel was coming out of Russia, but alternate steel supply chains have been energized. So, there may be some companies might feeling the impact differently. Timken is not -- Timken Company even globally have great supply chains which are risk mitigated. They have gone to the primary to secondary supply chains. For India, for Timken India Limited, no, I don't see the impact.
Got it. Understood. And second question was on this ABC Bearings Bharuch plant that we had acquired. You have done a lot of visits at that plant over the years. In the past, you mentioned some agri-related portfolio have shifted here. [Indiscernible] exports had jumped up or [ in fact had moved up to this plant ]. Sir, if you could walk us through where we are in that entire capacity industry? It was INR160 crores, INR170 crores top line company when you had acquired, how you have scaled up? How the product profile has changed? And what is the export domestic from the plant now? If you can just give me a brief walk through that would be really helpful.
Yes. So when we acquired the plant in August 2018, it was only producing one, that was ABC design. And then it took us some more than a year to invest and get it more than a year actually to get it to Timken Circle R levels and then we had to obviously, introduce a new design because ABC fundamentally design was inferior to the grand scheme of things. It was a Japanese design. So, we have currently implemented all the changes and we are currently in the process of further enhancing those capabilities.And we are producing Timken Circle R out of that plant and it is getting exported. It is getting exported to America and to Europe as well. And at the same time, the old ABC brand we are still making and we are giving it to the customers who were buying it before. But we are not enhancing that much. We are enhancing more Timken Circular R. Currently, we are at 50-50 some month, 40-60 some month, 45-55. So 50-50 is Circle R, and that's Circular R which is being produced is exported and used in India also to our customers in India and 50% is being produced at the ABC and that goes also to the old customers of ABC. So, we are roughly at 50-50-ish.
Understood. And last question is on some of the indigenization that you have spoken about in the past regarding some of the child parts that you were outsourcing or buying out. But you had enhanced the capacity to do some of these child parts internally, which will bring about cost efficiency. So if you can just elaborate a bit more on that?
Yes. So as we said earlier that cages are indigenized a lot into India, whether it is rail cages or double extent cone or DSO that is done. The child parts majorly, which are the rollers, we have mostly localized it. It can't be 100% because of the volumes and the costs. But majorly, those expansions have been done and some of you guys had the chance to go to Jamshedpur earlier. They would have seen those expansions there. So, we are more or less expanded on those child parts. And on cages, forgings, turning, we have now very nice 25, 30 year old supply chain in place.
The next question is from the line of Dewang Shah from Asit C. Mehta Investment Interrmediates Ltd.
Sir, one thing that we are seeing that there is a rise in other income in this particular financial year if we compare with a normal practice you have. So can you just say what it is related to, and it is something for this year only?
Yes. This other income is one-off. This is the investment, which we had done in Jamshedpur. So this was the government incentive, that is the other income majorly. But I will ask Mr. Avishrant, our CFO, to add more light to it.
Yes. Exactly, you are right. And if you see in our September quarter, we had also given a note on our results in the financials that this other income is pertaining to the government incentive, which we have received this year.
Okay. So this is related to this year and this is your incentive?
Around INR7 crores to INR7.5 crores was the amount. So if you remove that, then it will be almost at par with the previous years. Only volume of export and other things increasing, the other income pertaining to exports also goes up.
That is related to currency?
No, no, no. See, the other income is basically like [ BBK and RO ] basically. So if my export volume goes up, those will also go up. So everything is normal except but [indiscernible] of 3% what we were getting. It has come down to 1%. So now it is going exactly the same way for last almost 17 months, 18 months. But other than that, everything is normal except Jharkhand incentive, which was [ INR2.5 crores ]. It was additional in current year.
Okay. And one more thing. Generally, we have seen that you have a certain portion of the investment that generally -- I believe that you are investing from your cash. So, I'm asking what is the practice of the company generally? If you don't want to keep our cash and certain portion is generally you are investing, how it is going to be a forward also? If I am not wrong, correct me. Pardon? We've seen a...
So the general strategic direction is that we want to leverage the cash for more growth. And if you see some investments of the cash is always short-term. The major focus is this cash is going to be utilized for more growth. So the intent is not to earn interest. Interest is to invest it. So these are always in short-term 3 months kind of stuff, so that whenever we need anything for investment, as you know, we are debt free and we generate cash and we invest and that is the general direction. So the treasury always would like to keep -- if the cash is there, they would like to invest in short-term. But the whole idea is the money should be invested for growth.Avishrant, you can add more points?
Yes. Whatever they are investing, they are investing because all this money will be required for the CapEx in the current year as well as next year. The additional money whatever we are having, we are investing in the short term, mostly in the liquid funds and with the -- just to split our risks we are also putting it in the FDs with the bank. So, we're not looking for the returns. Rather we are looking more for the safety and security of those cash balance.
We can take the last question, if any.
Yes. The last question is from the line of Mukesh Saraf.
Yes. I just had a couple of questions. Sir, firstly, on the market shares in the domestic business; railway, CVs, et cetera, could you give some sense? Starting with railways because there we keep hearing about a lot of competition. So any directional sense or numbers you can give on the market share in FY '23?
Competition, not only in rail, we have competition everywhere. So there is nothing unique in competition. In our truck business, we have competition. In our distribution, we have competition. In process, we have competition. Competition is not new. So, our whole strategy is to keep on winning and to keep on winning you need elements of costs, you need elements of design and you need elements of speed to the market and you need other. So competition is not only in rail. They are everywhere. So, this is going to be like that globally and India, where our intent is to keep on winning in the markets.
Sir, any sense on market share you can give, sir, say, on railways or CVs? Now where they stand right now, probably how it was, say, couple of years back and how it's now?
Railways, we are the market leaders on tapers and others are market leaders are SRB, CRB. And when we start producing gear, then we -- on commercials -- on commercial vehicle different opinions. Certainly, Timken is market leader on tapers. On wheel, we are not market leaders. But if you want exact percentage, I don't have it off my mind. I can get back to you.
Sure, sir. That's okay. And second question, sir, I mean, in terms of the revenues that we have done this quarter, INR800 odd crores. Should we assume that most of the raw material impacts, any of the contracts, all of them that had to be kind of pass-through renewals, et cetera, all that has been done now and this is like a stable kind of revenues?
So what I would say is that on passing the costs, it has to now become -- India has to become like Europe and America. It would be our regular affair to pass on any costs so that our margin would get eroded. The industry is tilting towards that. Not only alloy, energy cost, et cetera and all plugged into it. So this year endeavor will be on -- while we have got price pass on because of cost escalation, but this gain will be now not a one-time gain. It will be a continuous gain. And the industry also understands it, and that is why you see also the end consumer prices also starts going up. And yes, as I said, the order book for next couple of quarter looks pretty healthy and we are pretty much well entrenched on all trends currently.
Right. So basically, there is nothing pending in terms of pass-throughs? They've all come through is what you are saying.
Nothing major. But...
Sure. Sure, sir. That's about it, sir, from my side. Thank you. Now, Selvin, I think we can close the call here.
Thank you.
That we are at 5, so thank you, everybody. As usual, we learn a lot from these questions. So thanks a lot. Thanks, Mukesh, for setting it up for us. Thank you very much.
Thanks. Thanks, everyone.
Thank you. On behalf of Avendus Spark, that concludes this conference. Thank you for joining us and you may now disconnect your lines.
Thank you.