Harsha Engineers International Limited (HARSHA) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Harsha Engineers International Ltd. Q1-FI27 Analyst and Investor Earnings Conference Call. As a reminder, all participant minds will be in the lesson only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. And now in the conference, over to Mr. Vishal Rangwala, CEO of the company. Thank you, and over to you, Mr. Rangwala.

Thank you.

Dear friends, welcome to all for our quarter one FY227 post-result update call. As per the normal practice, TFO Mr. Nolik Dasani will take you at length to our key numbers. However, I'm assuming that most of you would have had a chance to go through the same. At the outset, I'm happy to inform that our quarter 1, 8.27 performance has remained at least satisfactory, line-away genome management plan and expectation, except for some minor aberrations, which I will talk about shortly. As you would have seen on a consolidated basis, we have posted a 25% growth in quarter one and year-over-year basis. This growth is largely due to a consistent, strong top-line growth on around 21% posted by our India engineering business, which comprises This comprises of company HEIL and our only-owned subsidiary company, Harsha Advani. It is also noteworthy to mention that in spite of historically established fact that our last quarter performance is generally the strongest. In Q1, our India engineering business, we have posted a strong 6% growth, even on Q1 over Q1 basis. At the same time, you would have seen that while there is an EBITDA and bad growth in our India engineering business in Q1 on YOY basis, there is some big growth in margin on Q1 over Q1 basis. This is attributable to three specific factors. Firstly, in quarter one of this year, our average raw material costs have gone up by around 8%. And as you are aware, we follow a pass-through mechanism in most of our customers. However, there will be a lag of one or two quarters. Thus, we should be able to pass through this cost, increase in the subsequent quarter. Another factor which has impacted the margin of India engineering business is, you know, foreign exchange loss of around 4 crores, which is due to certain technical accounting reasons. To accept as per English provisions. Foreign currency fluctuations relating to FX cash flow hedges are parked in other comprehensive income till they are realized and settled. The FX losses of around 4 crore is due to this accounting effect of realization of cash flow hedges loss in the current quarter. However, going forward, we do not expect the same to have a material adverse impact on the call. Third specific reason is also an increase in our indirect material costs, like oil, chemical, packing material due to inflatory pressure. As you are aware, a war broke out during first quarter, and we all saw that. So, this has increased our cost in quarter one by approximately three growth, however, the most significant impact is the raw material cost to increase pending pass-through, as explained above, which will be normalized going forward. Now, talking about our specific growth components. I am happy to state that our primary product, which is cages, we are continuing to see good demand traction and offtake, both in India and outside India. In India, this is driven by a good demand for cages from our customers whose offtake has increased, matching with their own growth plants. This includes cases. The demand came in demand for facilities recently set up by our M&C customers in India. Over and above this, we are also seeing a good traction from other major Indian bear influence. We believe this reflects a continued strong growth in the Indian domestic market aided by good industrial demand as well as demand from automobile sector. As part of this also, a part of this also is attributable to increased global demand witnessed by our key bearing customers. We are also seeing a strong traction in export from India. Our export from India in quarter 1, at quarter 27, stood at 139 crores. We have reported almost 22% growth on wire-wide basis and 11% growth on quarter-over-quarter basis. We are also seeing a good growth in Europe, U.S. and all other key markets backed by continued increase in industrial demand in geoglass. Now, talking of our key growth driver, first and foremost, You know, sales of bushing in quarter one stood at around 34 crores, reflecting almost 35% growth year-over-year days. We have clearly... We have a strong visibility on this order at hand, and we have a good pipeline. So, fairly confident of achieving the targeted sales growth of pushing around 30% this year against last year's 127% of the world.

Equally encouraging is the stamping sales,

which stood at around 19.41 and 3.83. So, it's showing year-over-year, this is about 31% growth, and we have quite a few products which are either developed or under development, specifically in the category of white goods, things like education comparative components, and so on. As well as railway seal inserts and other sampling, automotive sampling products, which we have been developing over the past few months, which gives us confidence that we could achieve about 30% growth this year as well as the sampling against the sales of about 60 crore we achieved last year by 2016. We are also witnessing a strong demand of tech in the segment of large size case. Though quarter one sales appear to be lower at around 10 crores, we believe that order looks on hand and pipeline in this segment, basis of this, we should achieve a good 50%. So, in spite of, you know, first quarter number and financial year, over last year, we did about 49 crores. Talking of a Japanese customer, our quarter one FY27 sales stood at around 21 crores, showing about 25% year-over-year growth. However, on a full year basis, we expect only a modest 10% growth in sales of 72 crores. Given the fact that entire process of development and conversion is quite slow, but it is reassuringly positive in one sense. Talking of our whole new own subsidiary, Harsha Advantage, although quarter one sales at around 30 crore appears to show only a modest growth of 7% on QoQ wages, we have a good visibility of sales increase progressively coming through every quarter. And, you know, annual sales target is advantageous. It will be the region of about 140 crore plus this year against, you know, 43 crore achieved last year in FY26. So as the scale of operations go up, we expect Advantage to be back positive by the end of the current financial year, FY27. It has reported a loss of about 4 crore in first quarter, FY27. As you might be aware, we have already announced the Capex plan in Advantex for the second phase of expansion, which is for basically expanding the capabilities in the machine, as well as settings and large-size features. Now turning to foreign subsidiaries. First note, talking about Arsha China, things are looking quite stable and satisfactory. We believe that Arsha China should report an overall growth of around 10% in current financial, as against sales of about 120 crore, achieved as 486, with a EBITDA margin in the range of about 12 to 14%. And a decent fat range of around 6%. We have already commenced the implementation of the brownfield expansion project in China after securing required debt funding at a very attractive rate. This expansion is focused on creating capabilities for our steel cages as best as to expand the product portfolio as well as market niche in China. This project should be commissioned by quarter 3 of next financial year, and we should see a full impact from FY 2029 onwards. Lastly, talking about our aberration which I hinted earlier, Harsha Romania continues to be negative territory. Though it has reported a slight growth in the top line, however, part of 1.27, there was a one-time foreign exchange loss of around 2 crore because of the adverse currency movement between the local currency and euro. Still, the operating losses continue, but we are putting strong efforts in improving the product mix by pushing more failures, trying to get faster models, and also reducing the cost. We have also made a strategic change in the top management by bringing in 604. While our endeavour will be to try and see that Russia Romania actually is breaking even, we still feel there could be some losses in the current financial year. However, the combined loss between the two foreign subsidiaries reduced to much lower single digit figures, if not the company part. I will end my presentation with the affirmation that we are confident of continuing to grow strongly in India in the range of higher teams and also achieving a consolidated sales growth of low to medium teams and we expect the bottom line to grow more strongly because of the combined impact of all the positive factors we have noted about. I would like to thank you for your continued confidence and support in Russia, and I wish, I think I will ask Moly to take us through his presentation and the numbers before we talk, take some questions.

Thank you. Thank you, Zalbaid. Hello, everyone, and good afternoon. For the quarter ended June 26, our engineering business at consolidated level has achieved top line of Rs. 421 crore against Rs. 382 crore in the immediate previous quarter and Rs. 349 crore in the same quarter last year. We have achieved consolidated EBITDA for engineering business of Rs. 69.8 crore in the current quarter against Rs. 77 crore in the immediately previous quarter. And 65.3 crore in the last year same quarter. You have witnessed a good demand across all revenue segments while beta margin having an impact on account of the material based pass through as well as exchange rating rate as discussed. In solar business, we have achieved revenue of 36.3 crore and positive beta of 2.82 crore for the current quarter. Overall working capital cycle at consolidated level is around 116 days against 130 days in the previous quarter. The company has incurred a capex of Rs. 37 crore in quarter 1 at consolidated level. For the quarter 1, FI 27, our revenue from boosting was around 34 crore, stamping 19 crore, LASB 10 crore, and Japanese customers 21 crore as already discussed. With this brief on the financial numbers, I request operator to take the Q&A from the participants one by one. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask the question may press star and 1 on their touch-time telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1 to ask a question. First question is from the line of Harun Jain from Daulat Capital. Please go ahead.

Good evening, sir. Congratulations on a very strong growth numbers. So just on this, sir, I wanted to understand how this growth came, like which segment performed so well? Did we see a broad-based, you know, demand recovery in Europe or was it India? How did such great numbers come?

So, it was more broad-based, as I mentioned earlier. We see industrial demand overall strengthening, and as well as European demand also recovering. So, combination of both those, and actually the growth we are seeing across. So, it is very encouraging in that sense.

Okay, and for FY27, what kind of overall growth rate do we see? Will 20% be possible with this momentum?

We are, I think, 20% is a very tough stretch. We definitely expect mid to high team numbers in India, and then low teams

for FY27

overall is our general expectation.

Okay, sir. So, year-on-year gross margins have fallen by 150 BIPs. So, this RM increase is happening in which material? Like, is it in steel, brass, polyamide, or is it mostly overheads?

So, the raw material for specifically last quarter, it happened across, you know, material We use BRAF. Copper, zinc, steel, as well as polymer. So, we are seeing that impact visible across all the materials.

But last year, the major focus was on the higher metal prices on the brass front, which is combination of copper and zinc. But yeah, this year starting, we have witnessed that across the board may be part of the impact of the global conditions and scenarios.

Sir, on the foreign front, we grew well this quarter also, but still the margins for the EBITDA margins for the foreign business fell from 1.5% to 0.3% year on year, even though we grew revenues 20%, so why is the operating leverage not coming, and are we able to move from casting to cage, especially in Romania?

So, we are working to do that, increasing more additional cash revenue. At the same time, there was a big impact of raw material prices continuing to increase and actually negating some of the improved, I mean, improving situation on the revenue side.

And as we shall mention in the initial speech, there is an impact in Romania on the exchange rate fluctuations between the Romania local currencies or versus the borrowings material in Europe. So, it's more of an accounting impact considering that majority operation in Romania is also bad by you.

Okay, sir. Thank you. I'll come back and look at you.

Thanks, sir.

Thank you. Participants, you may press star and one to ask a question. Next question is from the land of Amit Anwani from PL Capital. Please go ahead.

Hi, sir. Thank you, and congratulations for the good set of numbers. First question, sir, again, a follow-up on Romania. So you said probably collectively the two subsidiaries will have lower. So what kind of loss we are building in for Romania, that is one. Second, you said there was a 4x impact also this quarter. So even keeping aside the 4x, how was the performance there in terms of volumes? Are we able to move with our objective from moving from semi-finish to the large cages? Are we really on track to improve the subsidiary, or it remains still the status quo?

So, on the overall operation, if we ignore the forex, I think we did not significantly improve. We did have a little bit of improvement. Again, I mentioned in the earlier answer, we also saw an adverse effect of We are increasing the proper prices, and that had some impact on the result. And on, you know, moving towards more cases, we are getting, so we are working towards it. Right now, we don't have a significant number to show for it. However, we are seeing a pipeline. In Romania, improving towards cages. So, that's what it means.

And we have said that the lower single digit, maybe 2, 3, 4 crores, 4 inch mein, combined losses could be there as against 10 crores we did last year.

Okay, but is it like the China will improve further and Romania will deteriorate further, is it? Or what's the...

So both will improve. That means China has lost its run rate will reduce. China is continuously profitable. So offset. Let us see. We have to wait for a couple of quarters. If things improve much better, we may say that they will turn into positive, but it's bitterly. Wait for one, maybe two quarters, and we should be able to give you a much better picture.

Yeah. And now, sir, on the other businesses like bushings, stamp components, you talked about 30 plus percent growth. So, is it the wallet share, new customer, and will this momentum is something which should continue? You have done a KPEX in the past in bushings and stamp components also. So, just wanted to have a color, whether this is… Something which will continue at this rate, and is it a wallet share increase, new business, yeah, that would help.

Yeah, so on the pushing side, it's a conversion which is supporting the growth, and we are not sure how long this will continue, but we expect at least a couple of years. For this conversion effect to continue. Part of it always will be wallet share as well. And then on the stamping side, we are adding a lot of new products, which increases, which is one of the reasons we are seeing growth there. And we have a very strong pipeline of new products coming in or have started but will be matured over next one year also.

Lastly, on the large cages, which the revenue was about 10 crores, and kind of flattish still, we are talking about 30% growth, and I recollect we have been focusing to have a very strong growth from the large cages in the past as well. She just wanted to understand. Is it a particular customer where there has been a delays in offtake? What is the reason for Q1 coming solo and still you're confident of 30%? So what is happening in the last case?

So, in the last five, Q1 was abrasion. Partially driven by the large size capacity at our new facility still struggling, still struggling to, you know, ramp up and respond to the demand. We see that demand is there. And that's why the optimism, in spite of, you know, tough number for Sparta, that we are fairly confident of even 30% plus.

So, it's a good visibility. We have a nice audible pipeline that we can see. That's why.

In the large position. Yeah, of course. And, sir, in the large cases, I understand it's a value-add business also, and we are at probably not a very high base. So, is it that we're trying to add more customers in the large cases or trying to leverage as we probably were trying in Romania also earlier with the same customer? So, what exactly can drive your large case business in the coming quarters?

It's primarily we are trying to grab bigger wallet share where we do have a very low wallet share when it comes to larger size business with our customers. And we are trying to grab more of that. That is what in principle is happening. And that's the driver and makes us feel confident that we can really achieve that.

Understood, sir. Thanks, thanks, and all of you.

Thank you.

Thank you very much. Next question is from the line of way above, Shah, from Equator Securities. Please go ahead.

Yes, on a good set of numbers, I have only one question. So, could you share update on how ongoing Brownfield Capex is trying to and recently announced

HAL page to Capex's prograting and what

would be our Capex guidance for FI 27 and FI 28?

On the China front, our phase 2 capex, we already mentioned in our presentation, it is on the track, and we expect it to go live in the next year Q3 around, and that's where we are on the track, and building construction has already been coming. And it's ongoing. While on our minor plant expansion, current season is, in the current seasons, we have just hold the building construction, but we expect it to start in this month. And that is also on the track. And we expect our third building construction also to be completed by end of this year or maybe the last quarter of this year. And we will also start, we have already started procuring the incremental machinery's orders for the new building sites also.

Civil construction is on hold because of heavy rain. Because, you know, with that weekend, very, very heavy rain, where it's difficult to do construction, but I think now things are normalizing should start very soon.

Sure, sir. And what is your guidance for FI27 and FI28?

We can keep on adding the further guidelines. As of now, our focus is to complete these two major expansions, but we will expect in the range of 50 to 80 crores as a year-over-year capex, but we will give a better guidelines in the coming part.

Thank you, sir. Thank you for answering. I will get back in with you. Yeah. Thanks very much.

Thank you. Next question is from the line of Manish Goyal, from Thinkwise World Managers. Please go ahead.

Yeah, thank you so much, sir. Congratulations on very good set of numbers, sir. Sir, on the guidance for India Engineering, where we are referring to high-teens growth, So, just would like to know how much would be driven by volume growth and price increase and the elected question as to what kind of price increase we will, we have taken all we will take due to this commodity increase. That was the first question. Second question within. India engineering business, if we were to exclude the bushing, stamping, and large cages and Japanese-based customer, so the conventional cages business would... So, can it still grow double digit or probably the number what

I calculated shows that it's probably 6-7% growth only.

So, if you can also give that perspective. So, there was a lot of echo in the call. So, I could not get the Japanese-based customer revenue for the current quarter and the comparative quarter, if you can clarify on that as well. And I'll come back on a couple of more questions. Thank you, sir. Thank you.

Yeah, sir, first question, let me respond to the last question. The Japanese customer in the current quarter was 21 crore. Again, in the last year, same quarter, 16.5 crore.

Okay.

Okay, on your question about the raw material pass-through and the impact of that raw material on our top line, usually, as we know, we have a pass-through figure around 4 months left. And here I will say as we discussed in the call, the last year was a major pathway happened in the class, while still was a raise bump, some impact there. And as we have mentioned in our commentary, this quarter the raw material price increased. So maybe around 40 to 50 percent would be the impact on the effect of that.

Okay. Okay, so that is basically 3-4% roughly we can expect price increase. So the guidance of high-team growth is factoring this price increase as well. That is what I wanted to clarify.

It accounts for it in a little bit way, but not. We are actually trying to focus on value growth, and right now we are not trying to predict the value impact, but there could be some impact of that, as you rightly mentioned.

Okay, okay. And on the trading growth, sir, probably the traditional business what we have, how should we look at the growth for that piece of the business?

So, we see that cage growth in India will continue to sustain on variety of factors. Those factors include You know, our natural growth of Indian economy as well as, you know, outsourcing for supply from India to other countries and so on. Plus, I talked about our customers are already setting up, you know. Plant to export outside India. So, all those factors combined, we are expecting good growth in clean business in India as well.

I think it should match the growth of the bearing industry in India. Plus, whatever extra we take on the outsourcing. But at least 10% and thereabouts are even more actually.

Okay, okay, okay. And sir, what is the CAPEX plan for FY2011 entire year, sir?

So, current year, FI27, we already announced in the last investor call. Our major expansion is coming into the by-law, and we expect, and also in China, phase 2, put together, we expect both the major expansion and our regular capes would be in the range of around 180 to 200 years. Two years. In over two, one and a half years, yeah. One and a half to two years.

Sorry, 180 to 200 crores over two years.

This year and next year, so maybe around 70, 50 to 80 this year, remaining next year.

Sure, sir. And, sir, in the annual report, we have mentioned about basically that we continue to strengthen capabilities in areas such as wind energy gearbox. Specialized railway applications, aerospace, and electric mobility solutions. So maybe if you can a bit elaborate and provide us perspective, what are we referring to on this? And second point also within annual report that we see very strong long-term growth by stronger strategic collaborations and carefully evaluating inorganic growth opportunities. So, maybe you can just provide us perspective as to in what context we are seeing this.

So, let me start with, you know, your first point about, you know, wind, rail, and aerospace, yeah. And we are doctors, of course, yeah. So, within wind, we are approaching it with a multiple perspective. Everyone, we are presenting Bushing, and we are working to... I think there is a lot of typing noise. Is it possible to kind of mute that? Right.

Sir, there is a lot of echo from your side. Very difficult to hear, sir.

Yes, looks like some challenges at our end today.

I will mute myself, sir.

Sure. Thank you.

Appreciate that.

Right. So, I was talking about, you know, on the wind side, we are working on bushing and actually next step of bushing, within bushing, we are moving, we are trying to move to a different set of technology and working with our, closely with our customer on variety of upgrades to that. Also, on the case side, we are getting ready to cater to that segment and whatever it pertains in terms of. Size capability in terms of geometrical, dimensional capability. We are working towards that. So that's what is happening in wind. Similarly, on the rail side, we are, you know, working with our primarily either bearing companies or directly to other companies where we are supplying stamping components for the rail industry. In addition to the cages where also we are working to develop more products which can cater to the railway market. So those are the things going on in wind and rail. Similarly, in aerospace defense, we are doing a lot of stamping components which cater to that industry. And we are working with tier 1, tier 2 defense companies in India for those product development. So they are in a very developmental stage where we are making those and it's a portfolio. So once they start, they could bring in a decent set of revenue. Jumping to the inorganic topic you had requested or what you looked at in our annual report, basically we are looking at any opportunity which comes our way which can really enhance our A capability while remaining in that specific space of precision engineering. And we are looking at those as an opportunity if something comes across. But that's not really a mandate. That's not something we are saying that we will go towards that. If right opportunity comes by, we may evaluate and look at it. And that's what we are trying to say.

Sure, and one more thing was mentioned about EV-related products, I think on mobility, we are trying to service that through stamping, sir.

Through a little bit of stamping, but also a whole lot through bearing cages, working with our customers on improving the performance of bearing, whatever can be contributed through cages in terms of clean product, dirt-free product, or high-performance product, and so on.

Thank you so much, sir. Thanks a lot.

Thank you. Thank you. Next question is from the land of Uttam Prohal from BVB Asset Management. Please go ahead.

Yeah, thank you for your question and congratulations for the great set of numbers. My question is on the Advantec side.

So if you could just share what kind of EBITDA mages Advantec did this quarter

and what kind of, because we are planning to close Advantec on that positive, what would be the EBITDA figure for the whole year for Advantec?

Logically, I want to take a little lower EBITDA than our blended EBITDA for India business in this year, considering it is in the ramp-up phase, but we expect it to match our India EBITDA margin from next year onwards. Currently, the last quarter, obviously, because of the major impact we already discussed on the material path to another, it has a 9% EBITDA.

Great. And if I look at our standalone engineering business, it did quite well even after all the pressures from metals and everything. So, if you could just say, like, I think it did a margin of around 24%. So, if you, looking at the price highs we are going to do, can we look at a better margin going forward?

Thank you. I think that 24 is a little high number, and we have shared over past also that because of the lead cycle, you know, some quarters it may appear to be higher, and some quarters it may appear to be too low, and that's what is going on. Yeah, as a normal system, as a normal system.

Great. Thank you, that's so much. Thank you so much.

Thank you. Next question is from the line of Varun Jain, from Dollar Capital. Please, go ahead.

Yes, sir. So, coming to the solar EPC business, So, sir, why is there so much volatility? So, like, year on year, the business is up 120%, but quarter on quarter, it is down 65%. So, 36, yeah. So, what is the FI 27 outlook of revenue and margins? And what is the, like, nature of this business quarter on quarter?

Yeah, so solar

is a very project-based business with a fourth quarter. Usually it's linked to the benefit, financial benefit and so on. So depreciation benefit. So we tend to see a very high fourth quarter and usually post that first quarter is lower. Having said that, you know, we did have a pretty decent first quarter relative to last year. And on the revenue side, you know, again, we are looking at odd 200 odd crore revenue in this segment. And depending on opportunity develops, it can change a little bit. And a margin sustenance on similar about I believe 7-8 percent EBITDA. So that's the general idea of the solar EPC. And it's again an EPC business. So what we do there is primarily build solar installation or solar projects. And as I mentioned, it's a very project-driven business. We don't manufacture anything. We design and install those solar plants.

Got it, sir. And, sir, on the China bit, so China plant was earlier stated to start by FY28, right? And now if we are planning Q3 FY28, so then the revenue will really flow in from FY29. So FY28 also China growth will be very low, right? And what was the China revenue and EBITDA for this quarter?

I think we continue to remain given the consolidated number for subsidiaries as of now, and we have already given the total losses for that,

okay? And sir, on the APEX part, was it earlier FI28 and now it was delayed?

Sorry, I'm losing your audio. Can you repeat the answer once again?

Our instance, when we mention commissioning of F528 is about operationalizing of our new site, our new building. So they want you starting from that period.

Okay, okay. And sir, on the Japan-based customer, I think this quarter we have seen high growth from 16 to close to 21. So then why are we guiding this 10% for F527? So do we see a downtick in the upcoming quarters and why so?

Question of Daunte, if you see last year, from Japan-based customers, we did about 72 crores. We believe that the same run rate can continue. It will go up to in the range of about 80 crores or there above. There's no down. See, Japan will have very slow. Lot of orders, I mean, lot of projects are under discussion. But we really don't want to because all other street fronts are growing very aggressively. Japan is a lagarde in terms of growth. But it is still a growth and it will continue to be positive.

And sir, Harsha, can you give us some sense of what is the pecking order in terms of your customers like SKF, Sheffler, Timken, NBC, who are the largest, who are like lower, and what is the customer concentration, like top five, top ten, and this is only for the India standalone business, of course.

India standalone, okay.

So, I think for us, all these names you mentioned are our top customers. They have a significant share of business, which is mainly Timken, Schaeffler, SKF, NBC, ZF, Flender. So these are our, you know, major customers, including, you know, I think I... I forgot to mention the compressor component, customer ID, and few others. So, again, we are supplying to this customer from India, since you asked about India, to multiple of their facilities, and, you know, Even though you can say that my top 10 customers remain almost 80% of our revenue.

Spread over more than 80 plants worldwide. And Varun, actually in India, I would say not being very modest, we have almost 80-90% wallet share with almost all major customers.

Yes, sir, I know. I have kind of visited a couple of plants, and they told me that close to 95-97% was actually from Harsha's cages. So, that's very good. But just to kind of double-click on this, so the top customer will be like 15-20% of revenue for you, and will that be Tinkin?

So, that's range-bound, depending on their growth and their seasonality. So, more or less, you can say, my top four customers keep changing their rent.

Okay, got it. And just a last question, sir. You, I think MD, sir, mentioned that, you know, you're working on something which you call the next step of technology in the bushings. So, bushings, we thought for wind gearboxes were the next step of technology from bearings. So, then what is next to bushings?

More precise and more accurate for the next generation of gearbox. So, as we have explained, the boosings are getting replaced or may be used for the different size of the gearboxes. So, they keep on improvising, including the methods and accuracy both.

Okay, sir. Okay, thank you, and all the best. Thank you.

Thank you. Next question is from the line of Saakit Kapoor from Kapoor & Company. Please go ahead.

Yeah. Namaskar, Rishabh Jee. Namaskar. Thank you for this opportunity. Well, I was late to join the call. So, if you could just reiterate for the sake of the reputation also, what is our path for profitability for the Romanian unit, first of all? And the second point was, we did EBITDA margin closer to 16% for the first quarter, so with the capacity augmentation and the improvement in volume that we envisage, what should the likelihood in the bank EBITDA we should be for the year as a whole, if any number you can share?

The package we have already given in our investor's presentation, the net loss of China and Romania put together as 3 crores. And that's what we have disclosed. We have not disclosed individual numbers for Romania and China so far. And on the EBITDA margin, as we have explained in commentary also, current margin has some impact on the material pass-through. If we expect that metal price will be settled down or remain stable, then we expect even the EBITDA margin to be improved and to match the last EBITDA margin percentage, which was 18.7.

The last point will come against this.

Okay, EBITDA is about 18 that was expected against 16 that we have reported.

Yeah, provided the metal price will be stabilized.

Okay. And then for the Romanian unit and the Chinese part, turning profitable or break even, the path which we are going to glide, how long will it take? And I think so, a lot of code correction was in the process, especially for the Romanian unit, which you elaborated, I think, so one year ago also. So, where are we, especially in the restructuring of the Romanian part and in the product part also, there were some very close, very strong set of changes you were envisaging earlier. So, correct me there. Where are we there and the part, especially how does this unit start setting and add to the top line and bottom line, especially the bottom line?

The strategy, Romania will gradually, our target is to diminish their losses.

So as Vishal explained in his speech, we have already now revamped the top team. We have put a new CEO.

There is a strategy to increase the sale of KGs from around 20-25% to maybe 30-35%. Still, the problem is fixed over rates are high, and unless the key customer who is buying semi-finished castings reaches the previous level, break-even becomes difficult. That is my challenge in Romania. China is continuously profitable. China, for the last few quarters, we have seen a steady growth. So, profitability will range from 12% to 14% EBITDA, even less with more. So what we have guided is that the combined loss at the end of the year, assuming that Romania will gradually taper, it could be maybe in the range of maybe 2-3 crores, let us see. But as we progress, as we see the new team becoming more effective, maybe we can guide you for a better number, but at this point in time, let us take it as this year, minor loss, hopefully next year, some profit.

Okay, and a point on the capex that we are doing brownfield one and especially for Advantex, sir, how is the order pipeline looking and how are we going to ramp up the facility going ahead? So, some more color you could share, sir.

So, Saketji, in our ongoing businesses, we are building up the capacity and we are confident to win the new customer's orders. And on the boosting and everything, we just responded in the last speaker that we are working on the next level of advanced boosting also and that's where we are building up the capacity. And last but not least on the stamping front, we are exploring the new products which meet our precision requirement.

Right, sir. When we read our invite, what we call, we also have Mr. Sanjay Mahugrath as a strategic advisor. So, if we could be explaining exactly what is the role as a strategic advisor in the business aspect or what has been inserted to him and just a basic understanding if that could be the case.

So, Sanjay Bhai is a practicing chartered accountant, and he has supported and continued to support HRSA in all major strategic decisions, including he was part of all the greenfield expansion as well as brownfield acquisition, and he participates and supports the management and other team members on the various strategic decisions.

Okay, so he would also be the one who would be guiding UPIFER money for shareholder value creation also. That has been lacking also for a very long time. So we hope that this would be the time, I think, to the inspection point for the company going ahead. I hope Mr. Sanjay would also throw some light on how he or what steps he would be taking or advising the Ethereum Management NTSR for value creation for us also. That was a small point, sir. Just thought of sharing.

I've been involved with Kharsha for last 30 years and will continue to do so. Don't worry. I'm always there.

Okay, sir. All the best to the team, sir. Thank you.

Thank you very much. Next question is from land of Jason Soans from IDBI Capital. Please go ahead.

Yes, sir. Thank you so much for taking my question. Sir, just wanted to know, I mean, you know, in terms of the West Asia crisis and everything. So, if I just look at your India standalone margin for only engineering, that was 24.4% in FI26. Now, you did mention a band of 22 to 24%, which is probably lower from the last year. So is it probably you're assuming that the RM presses etc is volatile. Is that the reason probably you have lowered the margin? Just for some clarification on that.

And also, we need to spend on our ramp-up call.

Sorry to interrupt you. There's a slight echo. Jason, can you mute your line from your side, please?

Thank you.

Thank you. Sir, please go ahead.

Yeah, thank you. And thank you. We expect the margin. To remain similar, but there is a price increase, metal price increase, which will reduce the percentage. So, we expect that absolute value increase will continue, but definitely percentage will reduce because the material pass-through will enhance the sales price recovery, as we have discussed in one of the previous questions from one of the participants, and that's why we have given that little lower guidelines. And at the same time, additionally, we will also continue to spend on our Vila site expansion and the ramp-up cost. So these two factors will impact that.

Sure. Thanks, sir. So 22 to 24% saves the guidance for the India engineering business. Sure. So my next question, sir, just pertains to one more thing I just wanted to ask you in terms of West Asia prices. So do you see, I mean, of course, it is still not over, but you know, it's kind of like a, again, a very hanging kind of situation. So do you see RM prices getting normalized going ahead? What is the outlook on that?

No idea. As of now, no idea. We expect it to be settled down. Soon.

Sure. And, sir, again, for revenue growth, just wanted your expectations for the Romanian and Chinese subsidiaries. What kind of revenue growth are you expecting for FY27?

I think we have already answered. For the subsidiaries, we are expecting double digits and no team. Double digits around no team. No, no. So I will clarify here.

Romania and China together will be less than 10 percent. Russia and India will be more than 15 percent. So on an average between 12 to 15 percent.

Okay, sure, sure. And, sir, just finally wanted to ask you, what is the, I mean, of course, Baila Capex is being done, and then the China Capex also will come on stream in Q3, FI28. So, sir, just what is the visibility for the demand from both these entities? We spoke in the last call that, you know, you need to have a local entity in China for manufacturing. That is very helpful. So, just also, just wanted to know what is the visibility of demand for the Vaila capex and the China capex separately, if you could mention, throw some color on it.

Yeah, we feel fairly confident on all our investment done in Vaila, and we are seeing traction on all the product lines we are working on in Vaila. Specifically, if we talk about large size cages or stamping components, as well as bushing. So we see a good visibility and demand coming up for our customer for those products. And that's why we are continuing to invest since we announced last quarter, second phase of expansion in Viola. On China, again, there is good expectation and traction by being local. China being a very good market or very large market for bearings, and we see an opportunity for our quality of cages to get traction. And so we have a good outlook on both those fronts. China, while we started much earlier, so that we are expecting that to ramp up in next couple of years, whereas China will take at least till towards the second, third quarter, FY28 to start production and ramp up in 29 hours.

So, and just for final clarification, sir, for Bhaila, you said that the target, revenue target is 140 crores for 27. Is that right? Yes. Yeah. Okay. Okay. Thank you so much for answering my questions. Thank you.

Thank you. Reminder to all the participants, you may press star and one to ask a question. Next question is from Lainov Resham Jain from VVD Asset Managers. Please go ahead.

Yeah, hi. Good evening.

First of all, congratulations on a good set of members. So I have two specific questions. So one is on Bhaila Ramper, given that you have also launched your piece too. So, from a ramp-up perspective, how do you see ramp-up for phase one and phase two? So, yeah, I think you rightly mentioned that we are starting, we started phase two because Thank you. Some of the products in phase two are a little different, even though they are stamping, but, you know, phase two is also in terms of we are seeing what we invested will get filled up in next, you know, one year or less than one year, and then we need to anyway expand further. So, that's what it is catering to. I don't have a, you know, specific number vis-a-vis phase one and phase two, but in past, we have shared that, you know, by law, we are expecting that it should. Give revenue by third year roughly about 300 to 400 crores. So that's what we are targeting coming out of Ryla combined phase of this. Okay, understood. And the other related question is given that most of the incremental growth is either coming from India and specifically Paila where you have higher valued products and China which is more brownfield. And Romania where your loss to profit is going to happen. So, is it fair to assume that your EBITDA growth will be much higher than revenue and also your PAC will be much higher than EBITDA because the Advantech is a lower tax entity. Is this a fair assumption? PAC growth higher than EBITDA, EBITDA growth higher than revenue for next 2-3 years.

I think you are right, at least for this year it will be very, very remarkable because quarter over quarter Advantech

losses will dramatically reduce.

Hopefully if Romania also starts coming around, it can definitely be higher. But let's confine ourselves to this year.

Okay. Understood, sir. Thank you so much and all the rest. Thank you very much.

Thank you very much. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Vishal Danwala for closing comments.

Great. So, after a long call, thank you very much, everyone, for attending this call. And I hope you have a very good evening.

And they are always available for any clarification. Thank you. Thank you. Thank you.

Thank you very much. On behalf of Harsha Engineers International Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.