Adroit Industries (India) Limited (ADROITIND) Q2 2027 Earnings Call Transcript

Good evening, everyone. Welcome to Earnings Conference Call of Adroit Industries Limited for Q2 F527. As a reminder, all participants will be on listen-only mode, and there will be an opportunity to ask the questions followed by presentation. Please note, this call may contain certain forward-looking statements which are completely based upon company's belief, opinions, and expectations as of today. These are statements not a guarantee of company's future performance and involve unforeseen risk and uncertainties. The company also undertakes no obligation to update any forward-looking statement to reflect the developments that occur after the statement is now made. I would now like to hand over the conference to Mr. Swarov Sangla for his opening remarks.

Thank you. Thank you so much. Good evening, everyone. On behalf of Adroit Industries, India Limited, I welcome you to our first earnings conference call following our IPO and listing. Thank you so much for joining us to discuss our performance for the second quarter of FY27, our business priorities, and the next phase in our growth. I would like to begin thanking our shareholders for their trust and support. Our listing marks an important milestone in Android's journey, and we recognize the responsibility that comes with being a publicly listed company. We look forward to building a consistent dialogue with the investment community through transparent communication on our performance, capital allocation, and execution. To brief you, Adroid began its journey in 1966. Over the years, we have developed an integrated manufacturing plant for propeller shafts and torque transmission equipments, serving both automotive and non-automotive applications. Since this is our first interaction with many of you, let me begin by explaining what we do in simple terms. A Droid manufactures propeller shafts and components that transfer rotational power from one part of the vehicle or machine to another part of the same equipment. For example, in a truck, a propeller shaft transfers power from the gearbox to the axle, helping drive the wheels. Our products perform a similar role in construction, mining, firefighting, industrial, defense, locomotive, drilling, and various applications. These parts must transmit power reliably while handling heavy loads and vibration and demanding operational conditions. We manufacture both complete shaft assemblies and individual components, supplying to distributors, tier 1 suppliers, equipment manufacturers across India, and Glocani. Our integrated facility has a capability of forging, precision machining, heat treatment, assembling, balancing, giving us a control over the key processes that determine the product quality and performance. Beyond the financial performance, we made significant progress in expanding our customer base in the last quarter or so. We added about 13 new customers in this quarter. Even, I would also like to mention here that 87.4% of our product sales have been coming from the repeat customers, which reflects the continued performance of our established relationships. Our objective is to grow both through deeper engagement with existing customers and through new customer programs. We have also entered the industrial shaft and defense segments recently. As you all know, there is a lag. It takes a lot of time to enter into any business, and especially propeller shaft because it's a proprietary item. And proprietary items generally take a lot of time for testing and validation at customer end. So, this entry marks basically a new segment opening for Adroit Industries. These opportunities build on our existing capabilities in torque transmission, forging, and precision manufacturing. Hence, capabilities, not only in few industries, but when we talk about steel plants, when we talk about paper plants, we are getting into all those segments where we were not into. And fortunately, in India, there is not much competition and growth in industrial development is at peak. So we are hoping to grow in this segment as well. Further in defense, defense currently represents a very small part of our revenue. However, we intend to develop this business progressively through technical qualification, customer approvals, and reliable execution. Similarly, industrial shops will provide opportunity to extend our engineering capabilities. Now, we talk about geographical sales. So, geographically, our export remains the largest part of our business. In H1, FY27 exports represented close to 82.36% of our revenue, with US accounting to 59.56% of export sales. Our domestic strategy is to expand direct engagement with Indian OEMs and develop opportunities across industrial and defense and other specialized applications. We intend to grow domestic business alongside our export offices, creating a broader revenue base over time. So, as you might be aware that we have two subsidiaries, one in Canada and one in USA. The USA subsidy is fairly new. We registered the company only in April this year. The company has started providing sales, and there is an extreme attraction from various customers, and we are looking forward to making new customer relationships and adding more customers. In fact, I can be confident in saying that our goal to add 200 new customers will be achieved in the next two to three quarters. This is what we are trying to achieve, and this will obviously increase both our bottom lines and top lines. Now, post-IPO, the major fund which the company raised from IPO was to be put in capital expansion. So, capital expansion will create, obviously, capacity, and hence, company will be able to cater to such new customers and growing demands globally, even of our existing customers. So, I am happy to inform all of you that it is on track. Capital expansion is on track. Machinery worth 50 million rupees has already been purchased and commissioned. Further, machinery worth 300 million approximately has already been. Orders have been placed for that. And further intensive negotiations are going on to close another 300 million dollars of capital investment. I am expecting this to be done by November, which is next month. At Pitampur plant, we plan to increase our annual machining and assembly capacity from 900,000 units to 1,800,000 units. We also expect that the additional capacity will come operational in Q4, FY27 to a very large extent. At Devas, annual forging capacity is planned to increase from 3000 tons to 5500 tons with the additional capacity expected to become operational in Q1, FY28. These investments will expand our ability to serve existing customers, support new programs, and broaden our product offerings. Our immediate focus is on equipment delivery, installation commissioning, and production readiness. Following commissioning, we are targeting full ramp-up by Q4-FI28. At that scale, the expanded manufacturing platform could support peak annual revenue of approximately Rs. 2,500 million. Our forward priorities are clear. Execute the expansion on schedule, convert customer additions into recurring business, develop industrial and defense applications, and broaden our geographical and domestical presence. I would now invite our CFO, Shri B.R. Patidarji, to take you through our financial performance for quarter 2 FY27.

Good afternoon to all of you, sir. I am very much glad to present the financial performance of the company for the quarter ended September 2026, as well as for the half year ended September 2026. In this presentation, I will take you through our key financial highlights, business performance, profitability, and other important financial indicators for the quarter and the first half of the financial year. For quarter two, revenue grabbed 25% sequentially to $426.73 million, supported by new customer addition and new entry in new segment. EBITDA increased 13% quarter-on-quarter to 119.56 million, while profit after tax grew 14% sequentially to 85.47 million, reflecting continuous growth in absolute profitability. For H1, revenue increases 11% year-on-year to 767.87 million, while EBITDA grew 48% to 225.07 million. EBITDA margin expanded to 29.3% from 22% in FY26. Reflecting stronger operating profitability, profit after tax increased by 51% to 160.36 million, with earning per share, approximately 3.58, as compared with 2.37 in the corresponding period of lost year. Going forward, we aim to maintain EBITDA margin at around 30 plus minus 2% supported by discipline, procurement, manufacturing efficiency, and appropriate pricing. Thank you for your support and for joining us first earning call. We now welcome your question, if any.

Okay. Thank you so much for explaining the business and giving the highlights of the performance. I would now request participants to raise their hand and ask the questions. Please note that the questions will be limited to two per participants. First question is from the line of Mr. Naman Desai from Sunrise India Growth Fund. Sir, you can unmute and ask the question.

Hello. Yes, sir. Yes, congratulations to the management, sir, on successful IPO and strong set of numbers for quarter two.

Thank you.

Sir, as we are entering this next phase of growth, it is very encouraging to see how it is expanding into industrial shafts as well as defense. Sir, could you please explain how these opportunities are progressing and when can we start contributing meaningfully to the revenue?

So, you know, in every new approach that we do or every new shaft that we produce, there is a lot of testing which goes in, right? So, and that testing period could be from six months to one year. Now, a lot of our shafts are already under testing. So, some approvals have already come in, some partial approvals have come in because there are multiple testing which happens. So, what I really feel is, as I mentioned earlier, I am expecting to see the revenue of about 250 crores in FY28. So, that is the kind of growth I am looking at and all these mutually, whether it is industrial, whether it is defense or whether it is even automotive, a lot of these shafts are getting approved and all are getting, I am seeing that next FY, most of these shafts which are currently on testing will come in live production and for sales to customers. So, this is, I am very excited for the future next year.

Got it, sir. Thank you. And once again, sir, congratulations for the great set of numbers and the IPO. I will get back in queue, sir.

Thank you so much, sir. Thank you for your trust.

Next question is from the line of Mr. Prabir Adhikari from Fortuner Asset Managers LLP. Sir, you can unmute and ask the question.

Am I audible? Absolutely. Good evening, sir. Sir, I want to understand this propulsion shaft, which will be used for defense of what this will be, how much big, like how much meter of propulsion shafts it will be. And this will be used for which applications you could please help me to understand. Thank you. Can you can you repeat the last line? I want to understand this propulsion shaft use in defense cases. And this is because I heard that as far as my understanding, there are different level of propulsion shaft in terms of how much meter of propulsion shaft are there. So what up to which meter or what is the length of the propulsion shaft you can manufacture?

Oh, okay. So, generally, sir, propeller shafts are, to the best of what I understand, propeller shaft, of course, length matters, but that does not qualify the shaft in defense or anything. There is a torque-taking capability which really decides what the shaft is. So, based on the application, so like you can see the picture on the screen, there is a tanker and there is also a truck which supports the army. So, we manufacture some parts for the tanker already. We have contracts from a couple defense companies already and also for the truck shafts. Now, as you can see there, a long shaft, we can go up to three meters based on our capabilities at the moment. However, generally, the three meter shaft is not used in military. As you can see in the truck, there are two shafts there. So generally, because the trucks are longer, and there is a movement, when there is a truck movement, tire movement happening, the chassis goes up and down, and hence the shaft should also go up and down. So, there is a moment the shaft is divided into multiple pieces, how you can see two-piece shaft here. So, there could be a three-piece or a four-piece shaft also. So, it depends on the application and we can go up to three meters. As far as Newton meter is concerned, we can go today with our capability up to 47,000 Newton meters as of now.

And another two questions I have, like, you said that a lot of propulsion shafts are under research that will come in place in the next two years. Can you throw some light about those type of shaft use cases? And number two is like, I want to understand the competitive landscape here. Who are the existing companies in India? Are there any, what is the competition right now?

So, about our research. See, research is going on. Research is continuously going on many new developments. However, a lot of shafts are going under testing. So, those are getting tested not only in automotive, but in defense sector also. A lot of shafts are already on the field. And the companies who have given us orders, they are testing our shaft on the field. So, there is a six-month testing for defense type of companies which is very rigorous because the defense vehicles go in different terrains and difficult terrains. So, that's how the research is going on. Some industrial shafts we should be launching in next financial year. So, a lot of design and development is happening for that. A lot of new equipment is, has been purchased and new orders have been given for the production of those kinds of shafts as well. So new equipment will bring in a newer, higher, higher talk category of shafts within our portfolio. So this is what we are targeting. Second question Good morning, everyone, and welcome to the call. So, for us, we have already developed a lot of those shafts, because they are not in India, they are only in special high-torque requirements, which is already made. So, we are already getting into those. If we talk about our global competition, We have a company in India, a Cummins, a company called Erwin Meritorg, that is a competition, a Neapco, a American company, that is a competition. So I say global level, because our market is a global market, we are already exporting to 35 countries till Q2. In fact, in current quarter, we are looking at expanding in more countries. So, more global approach is happening. So, all those new models which are globally made, which India imports because of the technology, we already have that technology and we are already exporting. So, we are targeting those customers to buy directly from us. Okay, sir?

Okay, sir. I'll come back in the queue. Sure.

Next question is from the line of Mr. Vignesh Ayer from Sequent Investments. So please unmute and ask that question.

Hello, I'm audible.

Absolutely, sir.

Hi, thank you. My question is more on the, you know, networking capital cycle. Just wanted to understand what is a steady state networking capital days that we should see for Your business.

Okay. Any other questions?

So, yeah, obviously in line with the same question. So, if we are doing a peak revenue of 250 crores or we, you know, start achieving a quarterly run rate of reaching that 250 crores revenue in future, what would be the total working capital that we might require, you know, to fund that kind of growth?

Right, sir. So, it's a great question. So, as you know, we have the second largest range in the world, okay, in terms of propeller shaft. We produce close to 5,250 plus different parts which are globally required, and most of it is our sales. So, consider a scenario a customer who is sitting in US who wants 300 different part numbers, right? And there could be a scenario where he wants multiple parts to be shipped on one invoice. So, we have to either stock some items, so our inventory levels go up, or parts are on the sea where there is a shipment time which is huge. So, this is one scenario where the cycle is a little higher. Now, other than this, it is also important to note that having large number of SKUs help us generate a lot of additional margin because there are certain products that only Adroit makes in the world or only maybe two, three companies in the world makes. In that regard, you see the bottom lines, the improvement in bottom lines, which is quite significant. And that is one result where we stock inventory. Second, what is important to know is we are a completely integrated plant. So there is steel inventory in various forms at various stages. So, in terms of raw material, in terms of various stages of forging, various stages of heat treatment, various stages of machining, balancing, packing on the sea and in the stock. So, everything adds up. But if we don't do this, if we are a completely OEM-based company, where the number of SQs are very, very less, so the company's bottom lines will not be healthy. So it looks like a demerit to have a larger working capital cycle, but at the end of the day, it is what is required to really grow the company and also to grow the bottom lines. Because there are certain items which would come probably 200 pieces in a year, but ultimately they will fetch us a margin of say 50%. So yes, all these things are a balancing act. And now what we have done is we have started stocking products in Canada and US, where company gets additional PAT margins. Okay, where we have a team in US, where we have a team in Canada now. And the product that we are selling today at, say, X percentage of margin, we kind of sell that product at a much higher margin. It could be 1.5x, it could be 1.7x by stocking in US. So adding a little bit of additional working capital, it helps to grow the bottom line of the company, which is very important for every shareholder in the company. So, our working capital is, including the inventory is around 248-249 days. And with the Indian market, where if we grow the Indian OEM business, which is our target, so Indian OEMs pay us in 45 to 60 days. So, the ratio itself will balance even if we grow because the Indian market is very, very robust and the kind of investment we are doing for a few Indian OEMs, for example, BML is a good client and they are also in military and mining. Volvo is a great customer. So these customers have already requested us to increase our production lines, which are completely dedicated to them, where the fund flow is about 45 to 60 days. So I would expect that the working capital cycle will probably be, it will improve in the coming years, but it should remain between 200 to 230 days in future. As we increase number of customers in the current quarter and the next quarter, we will see a difference, we will see a greater difference in this, in improvement.

Right, sir. Sir, there is no question, you know, on that part as such. I understand, I mean, having so many SKUs would require more inventory to be kept at different level. And I don't doubt it. I mean, there are a lot of aerospace companies also who have 200 plus days of it. But just the understanding I wanted was from in order to say hit a peak revenue of 250 crores, we might require, you know, X number of X amount of money in terms of working capital. And would that mean that next year, probably we might need another round of fundraise, you know, to balance our debt to equity. So I was thinking more from that perspective, rather than why the, you know, working up a bit of days is higher.

I agree. I know what you're saying. But I believe we should be able to manage by not raising funds.

Perfect. Perfect. Thank you. Thank you. That's all for my side.

Thank you.

Okay. So, next is the question from the line of Prithvi Bhatt from Abacus Investment Managers.

Hello, sir. Am I audible?

Yes, Prithvi Ji.

Sir, firstly, congratulations on a great set of numbers. My first question is regarding the revenue breakup segment-wise. So, can you give us the current breakup between finished propeller shaft assemblies and the top transmission components and what do we think this split is going to be going forward? Along with this, can you also give us some margin numbers based on these two business segments as well?

One second. So, generally, you know, propeller shaft and propeller shaft components, both are hand in hand because propeller shaft components come together and they make a propeller shaft, right? So, components only have to be assembled and balanced to make a propeller shaft. So, I would say that in total, approximately 64%, 65% is the component business and rest is the propeller shaft business. Going forward, I would expect it to grow in a similar way with a delta of about 5%. And in terms of your second question about margins, propeller shafts give us a little bit more margin Because there is a value addition to the components that we do. Now, when you do any value addition, the margins that propeller shafts fetch us is probably additional to 5 to 10% on the components. So, this is what we are trying to do. In future, there is one component, there are in fact two components that a droid currently One is the tubing and one is the universal joint. So, tubing will remain to be something that we will keep on procuring. However, universal joints, we are actively engaged in procuring the technology to make universal joints in house. So once we do this, which, which is my target to finish by the end of this November, once we do this, our margins will further increase in terms of propeller shaft business. Yes.

Okay, sir. Thank you so much for that. One more question. In terms of our order book, can you just give us a breakdown on our current order book numbers and the split between, let's say, export numbers and Indian customers, as well as between these two business segments?

So, current order book is about 68 to 70 crore rupees, and the split is about 78% is exports, order book, and 22% is domestic in that.

Okay, sir. Thank you so much. All the best for the future.

Thank you, Prichuji. Thank you for your trust and investing in us. No problem. Thank you.

Next question is from the line of Mr. Sahil Shinde. From VIA Research.

Sir, firstly, congratulations on delivering strong profitability this quarter. Thank you, sir. Sir, my question is, Adroit has built a presence across 35 countries. Which international markets offer the strongest opportunities for your next phase of growth? And how are you approaching customer acquisition there?

Okay. So, I would still see US as very strong, and South America is very strong. South America minus Brazil. Okay. So, in US, as I mentioned earlier, we have a wholly owned subsidiary, which just started, and we keep stocks in US, in the city called Memphis, which is the greatest distribution point in US. We have a team in US who are probably 30 years experienced in the driveline business. They are very well-known names in the industry. So what we've done is we've hired experts who are very well-known names and they are being our representatives, Kelly J, brand ambassadors, Kelly J. If the word goes from them, a customer starts looking at us very seriously. And very honestly, I have started seeing this in the current last three months or two months time. I have started seeing a great growth. 30 new customer acquisitions golete till quarter 2. But I think when we come back to the quarter 3 investor call, I will have a better number. So we are looking at acquiring customers in countries like US, in countries like Canada, Colombia, Ecuador, Peru, Chile, even Venezuela for that matter. Some Central American countries like Mexico, Nicaragua, Honduras, Panama, all these countries are extremely strong and on absolute focus on adroit right now. So this is what we plan to do very rigorously for the next two quarters. And hopefully in the next financial year, based on our performance in these countries with our new subsidiary, we will look at either opening another warehouse in South America and also look at European countries. I'm happy to add a little bit here that all the products that European countries need, that technology only Adroit has in India. And only four or five manufacturers are there globally who have that technology. So that technology is already procured. That was pre-IPO. Seeding of product has been done. Product acceptance has come from many, many customers across various European countries. Now it is about scaling up and adding more customers in Europe. That is for the next FYI.

Got it, sir. Thank you, sir, and all the best.

Okay, thank you, sir.

The next question is from the line of Mr. Prakshal Jain from Exeom Research. Sir, please unmute and ask the question.

Hi, sir. Congratulations on your listing and good performance. I just had to ask one question, sir, regarding the capacity right now. Can you help us understand the kind of capacity currently that we have in both of our plants? As you also mentioned that we are looking to go into expansion mode coming up maybe next year or so. Can you just help us understand what is the kind of capacity utilization currently as of today?

Right. So, sir, at our forging plant, current capacity utilization is about 93-94%. And we are expending from 3,000 tons to 5,500 tons. Equipment orders have already been released in total for the Devas unit because that becomes our back end. However, for the Pitampur unit, we have added about, we are doubling the capacity. Currently, the plant is running at 81% capacity. We should be doubling the capacity, as I mentioned in Q4, for the Pitampur plant. And hopefully, there will be some gain expected in the top line and bottom line using that capability. Because some fixed costs will go down. So, further, I expect that profitability should improve.

Got it, sir. Sir, just one more question regarding this one. So, when we talk about this utilization, from my understanding is that the revenue that we have reached right now may be important to, what is the scope are we looking at to complete at this year? Because if we see the utilization, I don't think there is a lot of scope left for the room, basically left for expansion, because we are full in capacity. So what kind of growth are we looking at for this year? And maybe next year, I think you mentioned about, say, the growth of revenue when everything comes in online. But what about this year, sir? What are we looking at? Because we are full of capacity.

I will be very happy if we can cross 180 crores because the new capacity will only come in in quarter four, right? So last year, last financial year, we closed at about 142 crores. So doing close to 180 crores will be a good achievement based on current capacity constraints that we have. Yes, that should be a great work, I think, by the company with the same capacity.

Sir, looking at that, maybe if we share 30% of our revenue growth, maybe we'll be doing from last year to this year approximately. What are your long-term visions about the growth plan? So how are we looking at in terms of percentage? Are we going to maintain this This kind of momentum that we have right now? Yes, sir. Yes.

Yeah, so we intend, we have a vision to take this company to a top line of close to 47,500 crores by FY31. That is a mid, I would not say long term, but a mid term vision. And of course, we have a bigger vision going forward. So, I would not like to tell you bigger numbers right now, but I want to first achieve every year. I want to take every year as an year to perform. So, that is how I would deal it as. And we would like to grow the company because there is so much scope, so much scope to take it forward.

Okay, got it. Thank you so much. It was good knowing your visit. Thank you.

Thank you, sir.

Thank you, everyone. Swarabji, if you can give any closing remarks.

Yeah, sure. Thank you. Thank you, everyone, for joining this first call. Your participation was very, very important. And it, you know, it keeps us on track. And it also helps us to tell you really what is going on inside the company. Also, we are thankful for your support and for your investments if you've done in the company. So, really, really thankful and grateful for your contribution. And we, as a team, will work extremely hard to come up to your expectations. Thank you so much.

Okay. Thank you, everyone, for joining the call. Thank you, everybody. Thank you. If anybody has any questions, you can reach out to us at Moonwalk Capital. The details are mentioned at the PPT. Thank you, everyone. Thank you, everyone for joining the call.