Earnings Call Transcript - XNSE:HARSHA 2026-11-04

Operator

Ladies and gentlemen, good day and welcome to the Harsha Engineers International Limited Conference Call. As a reminder, all participant lines will be in the listen-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. I now hand the conference over to Mr. Vishal Rangwala, CEO of the company. Thank you, and over to you, sir.

Vishal Rangwala, CEO

Hi, good evening to all of you, and welcome to Harsha Engineers Quarter 2 H1 FY2027 Post Result Update Call. As per our normal practice, I will just talk through, you know, how we look at this numbers and, you know, what we, what are our thoughts, and then Mr. Moulik Jasani will take us through the numbers. However, I'm assuming that you would have had a chance to go through the numbers and the presentation. So if I have to summarize our quarter two performance in one sentence, I will say it was a business as usual and largely on track. However, let me touch bases on our key business vertical starting with our India engineering business comprising of, you know, Harsha Engineers International as well as our wholly owned subsidiary Harsha Engineers Advantech. And as you will see from the numbers, we have witnessed a strong top-line growth over 24% in quarter two, with an equally strong 23% in first half on YOI basis. This growth has come more or less from almost all the key verticals, including cages, bushings, as well as stampings. Talking of cages, I'm happy to state that we have witnessed a decent demand traction both from industrial as well as automotive segment in India. Similarly, on the export front, we have witnessed continued strong demand coming largely in industrial segment from key geographies of Europe, US as well as Dan and other countries. Again, as announced earlier, the progress on the new resourcing, outsourcing project that we had announced last year is quite good, and we expect the commercial sales under this project to commence sometime in quarter three and quarter four in the current financial year, and the real visibility will start coming in in quarter four. Although the sales relating to this project will start in a gradual way, at peak level, the sales can reach a run rate of around 75 crore per year. And also we are working on a couple of other resourcing, outsourcing projects from Europe and North America markets. The first project is relatively small, but it is at a fairly advanced stage of development, and we expect the commercial sale to also start somewhere in financial year 27-28. And second project where we have just commenced initial development, and which could start in somewhere financial year 28-29. Again, under the cage category, we have a strong demand visibility for large-sized cages, and we expect a significant ramp-up in sales in this segment in second half of financial year 2027, which will result into an overall annual growth of at least 20% in the current financial year in this segment. Similarly, we have started witnessing a decent growth in sales of cages to our Japan-based customer. And though it's slow, it should definitely pick up speed in coming quarters, which gives us confidence of over, you know, 10 to 15% annual growth in this segment. Lastly, as I said, export from India have remained quite strong. With our H1 exports at around 280 crore against annual export of 480 crore achieved last year. So, talking of now bushings. As I said in the earlier call, I'm confident that we should be able to attain about 30% growth in current financial year in this segment aided by good demand visibility from key windmill gearbox manufacturing companies, and we have also developed newer designs of bushings for these customers. We remain very bullish about this segment going forward with our target annual sales of, you know, annual sales target of within three, four years to hit about 300 crores in some time. Similarly, you know, talking about stamping. We are also seeing a very good traction for our key stem components, which include certain specialized railway seal inserts, AC compressor components, and certain other automotive components, and we have recently introduced a new category in AC air conditioning segment compressor, which is known as accumulator, which is having a very good demand potential. Thus, we are still fairly, we are seeing a fairly confident of, you know, seeing over 30% sales growth in this segment in this current financial year compared to a revenue sales of about 72 crore we achieved in FY26. We believe that new products that we are also in a process of developing this segment, the target annual sales again in this segment should reach about 300 crore over next four years. Just to conclude, I can say that satisfaction, say with satisfaction that our India engineering business is delivering satisfactory performance almost on all fronts. Now, coming to Russia, Romania, we have internally worked out a strategy of downsizing the operations and correspondingly also reducing the operating costs. However, we will continue to focus on increasing the sales of Spanish cages out of our Romania facility. We believe that this will be a good via model via media medium-term strategy where our target is to arrest operating losses incurred in Romania, which we believe we can achieve by end of the current financial year. Therefore, we feel that the next financial year in Romania Thank you. A lower level of sales, but it should still be a relatively positive contribution to profitability is how we are looking at this. Now, talking of China, through quarter to FY27, We are a little soft on sequential basis as compared to quarter one. It has still shown a decent growth on year-on-year basis, and we expect a reasonably strong performance to continue the rest of the year. Though currently EBITDA in China is a single digit, we believe that it should improve going forward given the relatively stable demand scenario in China. Our expansion projects are progressing quite satisfactorily, first the advantage expansion project involving substantial expansion of capacities to manufacture bushings, stampings, as well as large-sized cages is on track. It should commence production in next few quarters. And similarly, you know, China brownfield expansion, where we are creating capacities for manufacturing of steel pages for industrial and auto sector, that should commence production somewhere in quarter three by 2028. To sum it up, I want to reform the previous growth guidance given in the earlier calls that it is to say on a full year basis, FY2027, we should achieve a sales growth in mid to high teens in India, while on consolidated basis, it could be anywhere between 10% to 12%. At the same time, a word of caution. I want to state that historically Q3 tends to be a little soft in terms of demand considering the fact that almost all large international buyers whose accounting year, calendar year, ends in calendar year, so it tends to show a little bit slow. They tend to slow down their purchase a little bit. Thus, above guidance should be considered to be on a full year basis. I would like to thank you all for, you know, continued confidence in Harsha, and I wish you, you know, all the best. With that, I ask Maulik to, you know, take forward the presentation and the numbers.

Moulik Jasani

Thank you, Vishal Bhai. Hello, everyone, and good afternoon. For the... Quarter ended September 26, engineering business at our consolidated level have achieved top line of 428 crore, against 363 crore in the same quarter last year, and 421 crore in the immediately previous quarter. We have achieved consolidated EBITDA for engineering business of 81.1 crore for the current quarter, against 63 crore in the same quarter last year, and 69.8 crore in the previous quarter. On EBITDA margin, we see a consistent increase for standalone as well as considerate level based on our last few quarters performance. In solar business, we have achieved revenue of 11.9 crore and EBITDA of 0.73 crore in the last quarter. Solar business has still good order level due to PV sales relaxations from government up to December 26. Overall working capital at our consolidated level is around 135 days against 139 days in the same quarter last year and 116 days in our previous quarter. We have incurred capex of 35.6 crore in the last quarter. For the last quarter revenue from bushing was around 42 crores, stamping was around 23 crores and LSB was around 14 crores. Which has grown by 26%, 19%, and 35%, respectively, compared to the previous quarter. While revenue from Japanese customer was around 24 crore, with a growth of 15% against the last quarter. With this brief note on the financial numbers, I hand it over to the operator to take the Q&A from participants. Thank you.

Operator

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone 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. The first question comes from the line of Nisarg with PKD Investment Office. Please go ahead.

Nisarg, Analyst — PKD Investment Office

Am I out of it? Thank you so much, sir, for the opportunity and congratulations on a good set of numbers. The first question would be on the Romania business side. So we have been facing a lot of issues in terms of profitability over there. And now in the next year, we are planning to reach operating profitability, but will it also convert in our net profits as well?

Vishal Rangwala, CEO

Yeah, it will be too premature to say that. We are very positively looking at it, hopeful, working on. Improving the cost structure as well as a few other, you know, improvements, but it depends on variety of factors, but we are fairly confident on creating operating improvements, and then full profitability maybe depend on multiple factors.

Moulik Jasani

We'll keep on updating on quarterly basis.

Nisarg, Analyst — PKD Investment Office

Okay. And, like, what is the journey ahead for Romania if the growth is not coming? So what is our plan and strategy as a business to look at as Romania?

Vishal Rangwala, CEO

We see Romania, we are continuing to grow our cage business there. Having said that, because we are seeing a lot of cost-related challenges, it's very difficult to fully, clearly answer this question. We are evaluating and then we'll update as soon as we have clarity on that.

Nisarg, Analyst — PKD Investment Office

Got it. In terms of China, what is the growth that we are seeing in the next few quarters and the year to come? Like, it was recovering and that was provided. So, like, how are we seeing it now?

Vishal Rangwala, CEO

So, in general, we are seeing a moderate growth for our current portfolio and current business about, you know, 5-7% is what we estimate. However, as and when our new capacity comes online, which brings in new portfolio of products, that will accelerate the... The growth there on the basis of new introduction of new production, new products and so on. We are right now scheduled to bring that capacity online from third quarter FY28. So second or third quarter FY28. So that's when we are hopefully seeing additional growth coming in.

Nisarg, Analyst — PKD Investment Office

Thank you. Thank you so much for answering those questions. I'll get back in the queue.

Speaker 3

Thank you.

Operator

The next question comes from the line of Varun Jain with Daulat Capital. Please go ahead.

Varun Jain, Analyst — Dalat Capital

Yeah. Hi. Good evening, Vishalji, Malik Bhai, Sanjay Bhai. Good evening. So, I have a couple of questions, starting with, sir, for this quarter, very strong gross margins. Uh, 51.7% and, uh, it has increased, uh, versus, uh, all the other companies in this space, all the bearing companies are seeing a margin decline. So, is this because of some, uh, price pass-through we were able to do, or is it because the solar share was low?

Moulik Jasani

Yeah, it is mix of both, uh, Varun. As you rightly mentioned, major reasons are similar weeks of both. There has been some pass-through, because we have seen last six months increase in the brass prices, which is copper and zinc. So some portion of that has already been passed through. As you know, our mechanism is very standard. And definitely this quarter, solar has contributed on a lower end of the overall top line. So we see a better margin at a console level.

Varun Jain, Analyst — Dalat Capital

So, this kind of a margin, especially on the EBITDA level, so we are at, if I take the India Engineering business, it was at 23.7. So, it will stay at this level and maybe increase a little for the coming two quarters.

Moulik Jasani

As we have said, at a blended level, we expect margin to be sustainably 20% plus at a longer horizon rather than a quarterly review. But apparently, it also looks like that we have a better product mix performing at a overall India engineering business. And we see that permanent shift on a little higher side of the margin. It is little early to say what is a fully stable margin. But yes, since last few quarters, we have seen better margin than the blended guidelines we are giving. So, we see that around 22 is more steady-state kind of a margin we should take, Varun.

Varun Jain, Analyst — Dalat Capital

Sir, without other income, what will be the number?

Moulik Jasani

Varun, we do the reported EBITDA margin discussion. Yes, you can do the rest of the calculation.

Varun Jain, Analyst — Dalat Capital

Okay, okay, sir. No issues. And so, secondly, sir, I think a lot of the bearing companies have been very aggressive on the capex. So, SKF is doing, you know, close to 500 SKF India, 500 CR, SKF Industrial 800, and then Timken has done in Bharuch 700 crore or so in SRB, CRB. So, are we capturing 100% share for cages for all these companies as of now?

Vishal Rangwala, CEO

Yeah, we believe that we are capturing a very large share of that incremental business, and we are seeing good traction in the market. For that, I don't have an official or exact number, what share, and things like that.

Moulik Jasani

Maybe just to put it that knowing our relationship with customers, we are not going to lose our market. It will end up.

Varun Jain, Analyst — Dalat Capital

Sure. And sir, for these also, like for these higher values, say CRB, SRB, industrial bearings, so the CAGE is just 5% of the TAM or is it a higher number? So if it's a revenue potential of 700 crore, so what is the CAGE TAM? Is it 35 crore, 5% or is it higher for those?

Vishal Rangwala, CEO

Yeah, so I think it is difficult to fully answer properly that question, but we still estimate it will be around 5%. There is some increases and decreases depending on a product size and things like that, but in general, you can still take it as fine.

Varun Jain, Analyst — Dalat Capital

Yeah. Got it, sir. And so, secondly, on stamping, so, stamping has registered a very healthy growth. So, will you reach the, earlier we guided that we'll reach the 150 to 200 annual revenue run rate by in basically 3-4 years. Now, it appears we can reach that in FY28 next financial year itself. So, is that possible? And what percentage of stamping sales is due to this new accumulator product?

Moulik Jasani

We will not give the breakdown further on the stamping as of now, Varun, considering that we just entered this business and we want to cover the larger scale later on. But yes, I believe that and we can add here, but I believe that we will definitely preponder some of the achievements on the stamping front, considering the current volume what we have. Exit timeline, whether it will be FI28 and or H1 of FI29, we will know later and we will update you further. But yes, we know that there is a truth.

Varun Jain, Analyst — Dalat Capital

Sure, sure, sir. And sir, just last, solar business, what is the FY27 and FY28 revenue guidance?

Moulik Jasani

Similar what we have given in the range of 150 to 200 crore. But yes, this is a more cyclical business and governed by the government norms, both import as well as subsidy. So that we have to be watchful.

Varun Jain, Analyst — Dalat Capital

Sure, I'll come back and thank you.

Operator

Thank you. The next question comes from the line of Harishit Patel with Equius Securities. Please go ahead.

Harshit Patel, Analyst — Equirus Securities

Thank you very much for the opportunity and congratulations on a great quarter. My first question is our first half revenues are up about 21% YOY and the India engineering revenues are up more than 22% YOY ahead of the low to mid teams and mid to high teams growth that you had guided during the last quarter and what you guided today as well. So, this would imply a very soft second half. Is this what we are saying or there could be a material upside to our guidance based on the product pipeline, projects, visibility that you have, and you are just being a bit conservative on the guidance, correct? Some color on this will be helpful.

Vishal Rangwala, CEO

Yeah, Harshit, basically, if you look at, you know, our last year, third quarter and fourth quarter, they were, you know, already started showing sign of, you know, good growth. And considering that, you know, we are saying that relatively, we have to be cautious of the relative to last year number. And we, right now, we see a pretty decent growth, but then obviously there are certain headwinds and challenges as a market, a bearing market, and as well as, you know, what we face. So we are a little bit, you know, conservative, cautious as well.

Speaker 3

So, Arshad, just to add, I don't think there is anything negative implied here. What Vishal and the whole team believe that we should be, you know, little conservative considering the fact that in the past, you know, and for example, on an overall basis, China is little soft, but it will grow not exactly in the same proportion as India. And the biggest challenge is Romania. So, you know, we have some specific plans for Romania, which we will unfold over a period of next maybe one quarter or so. But we have hinted about some downsizing. And that is where on an overall basis, we don't think that we should be able to... So Harsha, India will 100% grow at a higher rate. Harsha, Romania will actually be on the negative side. So, we are saying that on a consolidated basis, that is what Vishal has guided, and India will definitely grow stronger. We are not implying anything negative on the India scale.

Harshit Patel, Analyst — Equirus Securities

Perfectly understood, sir. Sir, my second question on what you just mentioned on the Romania downsizing, could you help us understand what this downsizing would involve in terms of the capacity, headcount, any possible one-off cost?

Speaker 3

Harshit, let's work on this. We will announce it at an appropriate time.

Moulik Jasani

Just to share it here, focus is to ensure that we arrest the losses. And whatever action requires for that, we will do it, either with customer or within the organization.

Speaker 3

And as we shall say clearly, we want to increase the sale of KGs, and we want to reduce the losses. So, naturally, whatever is loss-making, we have to make sure that it doesn't... So, but yeah, we are working on it. Maybe next quarter, we should be able to give you more concrete announcement on this.

Moulik Jasani

And just clarifying here, when Vishalva is giving guidelines, it is without adjusting the metal movement. So maybe that growth is also visible in your H over H comparison.

Harshit Patel, Analyst — Equirus Securities

Yes, absolutely, understood. Just a small follow-up on this metal price degree. So, whatever inflation we have faced until today, has this been entirely passed on or there is still some component left that we will see probably third quarter and fourth quarter and that could possibly continue our growth margin expansion? I am asking this because the growth margins were at a pretty solid level, even whatever pass-through that has already happened. So what I am trying to understand is that, is there any need left to this further pass-through, or we are broadly covered as we speak?

Moulik Jasani

So, it is a pretty ongoing thing. But yes, we see the very high spikes in the last 4-5 months. Now, if the metal price is settled, then we see a major pass-through is done. But if metal price continues to move either one side up or down, it will have a further impact of the same. So, effectively, I can't give answer to it is done 100% because it's a very much ongoing thing and different customer has a different timeline. So, definitely, we see if the metal price will settle, this margin will either improve or will remain at the same rate. But further change, we shall make an idea.

Vishal Rangwala, CEO

So, also, I think we are seeing a pressure on inflatory pressure on the cost side also for the portion which is not passed through, a lot of indirect and so on. That's something we are trying to work through and mitigate. So, that also remains an ongoing challenge for us.

Harshit Patel, Analyst — Equirus Securities

Understood. Thank you very much for answering my questions and all the very best. I'll come back in. Thank you.

Operator

The next question comes from the line of Prasanjit Paul with 129 Wealth Fund. Please go ahead.

Prasanjit Paul, Analyst — 129 Wealth Fund

Thank you for the opportunity. Good afternoon, everyone. So, my question is in H1, as we can see, very strong consolidated growth of around 20%. So, how much growth you can contribute or the realization growth and how much is with the actual volume growth? And whenever like raw material price settled down, so can we expect any kind of degrowth or if you talk about the purely volume perspective, what kind of volume growth you are planning for the FY28 or in the second half of FY27?

Vishal Rangwala, CEO

Yeah, so we are in general planning on a global basis about, you know, 12 to 15 percent volume growth is what we are working towards. And then I think how the metal price and pass through and all that work will have an impact on the value.

Prasanjit Paul, Analyst — 129 Wealth Fund

Okay, so in the H1 or in the quarter that we have already in the results, so if I'm talking about the past growth, how much you can think that's the realization lead growth out of this 25% growth in H1, how much is realization lead or price increase lead growth?

Vishal Rangwala, CEO

Our approximate estimate is that about 4-5% of it would be linked to a material pass-through related thing, and the rest of it is real volume growth.

Prasanjit Paul, Analyst — 129 Wealth Fund

Okay, and sir, in the last call, you have mentioned that with the existing capacity, we can reach around 2,500 to 3,000 kind of revenue. Any long-term vision that in how many years we can reach there and then we need further major capacity addition or like do you expect in FY28 no major capacity addition, only days reduction is the priority. If you share some long-term vision.

Vishal Rangwala, CEO

So, I think from a long-term point of view, we have shared that we see about 2,500 to 3,000 crore revenue, a combination of existing capacity as well as, you know, new greenfield investment and expansion we are working on, and some of it already done, and some of it we are working on. Out of existing capacity, the numbers we have shared, you know, these are peak, peak numbers, meaning that every sub-segment of our... If product line has a demand which is matching with the capacity, then that kind of number can be achieved. So, really difficult to say that, you know, how we will, whether that will happen or not exactly like that. So, again, we don't go into that details, and what we share is that, yeah, even though that's the capacity, we'll never hit the 100% number on each of those sub-segments, and then we need to look at overall situation.

Prasanjit Paul, Analyst — 129 Wealth Fund

Okay, and lastly, do you have any debt reduction plan or do you need major borrowing in the next year, FY28?

Moulik Jasani

So we do not, as of now, assuming incremental borrowings in F528, what we have already taken is for our Advantec expansion plans and our China phase 2 expansion plan, which we have already announced in our previous calls.

Speaker 3

And we are very comfortable at the current debt level, so there is no real debt reduction plan per se, the way perhaps what you are hinting at, because it is backed by either lower interest rate or backed by the government subsidy.

Prasanjit Paul, Analyst — 129 Wealth Fund

Okay, thanks a lot. That's all from my side.

Operator

The next question comes from the line of Sanmat Jain with Kamaya Kya Wealth Management. Please go ahead.

Sanmat Jain, Analyst — Kamayaka Wealth Management

Yeah, I'm an audible.

Speaker 3

Yes, yes.

Sanmat Jain, Analyst — Kamayaka Wealth Management

Hello. Yeah. So, I just have one question, sir. So, given the current bearing supply shortages in the U.S., are our top global customers shifting more of their U.S.-bound cage production to Harsha? And how much is this statement contributing to our current order book?

Vishal Rangwala, CEO

I'm trying to use this. So... I think we work on a very long-term supply situation, and then we are continuing to see U.S. growth in our portfolio. I'm not able to fully answer, you know, because I'm one step down from Bering. If there is any challenges on Bering supply chain, I can assure... On one part, that it's not because of cages and we are able to, we are aggressively addressing any demand challenges or opportunities coming our way. Long term, we expect that U.S. will continue to grow and we are seeing good traction and we are working closely with our customer in U.S. to Meet any of the opportunity or requirement.

Operator

Okay.

Sanmat Jain, Analyst — Kamayaka Wealth Management

Okay. Thank you, sir.

Operator

The next question comes from the line of Kowstow with Paul Asset. Please go ahead.

Kowstow, Analyst — Paul Asset

Thank you for the opportunity. Can I answer them? Yes, yes. First of all, congrats on the numbers. Most of my questions are already answered, so I'll add a follow-up question on Romania. Post-downsizing, what are the expected annual revenue and EBITDA run rates for H2 this year and cuts by 28? And will there be any restructuring charges or a one-time loss?

Speaker 3

So I'll tell you, as I... Reply to a previous question. We are in the process of working all the nitty-gritties and details. Please give us one more quarter, and we will come with all the specific answers. Followed by the disclosure also.

Kowstow, Analyst — Paul Asset

Okay. I just wanted to understand if Nainia can be a bit positive in the last quarter of this year.

Vishal Rangwala, CEO

We are working towards that, but we can't say for sure right now. It's a little too early. There is a lot of challenges in front of us.

Kowstow, Analyst — Paul Asset

Okay, that's understandable. Thank you. I'll get back to the team. Thank you.

Operator

The next question comes from the line of Aditya with Old Bridge Mutual Fund. Please go ahead.

Aditya, Analyst — Old Bridge Mutual Fund

Thank you for the opportunity and congratulations on a good side. Sir, my question is on the KPEX side. So, in quarter one, we hired for almost 50 to 80 crores KPEX for full year. This is, in H1, we have already done 73 crores on a consolidated level, and I guess 9 crores at a standalone level. So, what is the expected KPEX now for FY27? And if you also give us, if you also can give us a split for how much this Capex is going to go for Advantech and China.

Moulik Jasani

So, Aditya, maybe there is some misreading or maybe misinterpretation. The capex for India itself is around 110 crore for next one, one and a half year. We have announced in the beginning of the year, which is mainly contributed to our advantage next phase expansion. And we have announced around China capex of around 100 crore. Again, that will take around a year and a half to complete. So, 18 months capex, we already announced size of around 220 crore, out of which as you rightly said, first half is around 70 crore plus. In balance, we see that we are actually accelerating our CapEx plan, both India and China, and we see that maybe instead of 18 months, we will be able to complete that within around 12 to 15 months, case-to-case basis, and we will continue this CapEx till the time of 15 months, maybe you can say up to June 27 is our expectations to complete of these both CapEx sites. Uh, maybe the goal I will get take little longer time because of the customer approvals and trials requirement, but he has kept expanding will be done by that time.

Aditya, Analyst — Old Bridge Mutual Fund

Okay. Okay. Thank you. Thank you for the clarification there. Uh, one last question from my side, what should be the maintenance Apex for, uh, Harsha standalone business in that take this every year, uh, Harsha is a console level.

Moulik Jasani

I will say, uh, around, uh, 25 to 30 crore at a console level because we also need some of the operational or maintenance capex at China-Romania side too.

Aditya, Analyst — Old Bridge Mutual Fund

Thank you. That's it for me, sir. Thank you.

Operator

The next question comes from the line of Jason Soans with IDBI Capital. Please go ahead.

Jason Soans, Analyst — IDBI Capital

Yes, sir. Thank you for taking my question. Congrats on a good set of results. I just wanted to know if possible, would it be possible, you know, FI26, you know, our engineering business, Consolidated, it's a turnover of around 1,440 odd crores. So, would it be possible to break it down into steel cages, brass cages, bushings, polyamide cages, and sand components on an annually basis? Just wanted to have a rough sense of what proportion comes from this segment.

Moulik Jasani

No, Jason, we are already giving you a good break-up of stamping, boosting, and LSB, which is our growth drivers, which you have to assume are part of our other cages. We will not be able to break-up. We have already given a guideline that industry has pick-up, and industry pick-up is contributing both larger size of the steel bases as well as the brass business. This is the guidelines we have already said.

Speaker 3

Again, in the past, we have shared what is broadly the industrial side of it, what is the automotive. Again, as a thumb proof, most of the industrial is brass but not necessarily so. Now, a lot of steel, large-sized steel cages are also going into industry. It will become too much of a complication, frankly.

Jason Soans, Analyst — IDBI Capital

Okay, okay. Have you missed the growth expected in the stampings business? I mean, expected growth for FY27. Could you repeat that if possible?

Moulik Jasani

So, we just said that we have accelerated the growth numbers for stamping, and we see that the acceleration will continue. Our original guidelines was around 30% plus, and we see some acceleration happens in last part, and we expect it to continue acceleration business. We have not given any revised guidelines so far.

Jason Soans, Analyst — IDBI Capital

Okay, okay, okay, sure. And I mean, when you look at the console minus standalone, which is basically the subsidiary, now I understand it is foreign, the foreign subsidiaries plus the, plus Advantech. So, the number here comes around, you know, a loss of around 1.23 million or 12 crores odd. So, I mean, so understand H2 will be positive for Advantech, and then you are trying to minimize the losses in Romania. So, can we expect a positive, you have mentioned one line in the presentation, but can we expect a mildly positive or mildly negative number by end of FY27?

Moulik Jasani

Put together all three, we expect it to be positive, including Advantech, Chalna and Romania.

Jason Soans, Analyst — IDBI Capital

Okay, okay.

Operator

The next question comes from the line of Web of Shah with Equally Securities. Please go ahead.

Vivek Shah, Analyst — Equirus Securities

Yeah, thank you very much for the opportunity. My first question is on the stamping side. So, could you elaborate more on the products which are currently under development, particularly for the aerospace and defense segment? I mean, what are their specific applications and the end platforms of the systems where these components would be used? And additionally, how should we think about the overall opportunity and the expected commercialization timeline?

Vishal Rangwala, CEO

I will not be able to share specific application or current development things we are working on. Right now, in general, I would say that it is not a very large opportunity for us. It's small. Relatively, in the context of our stamping product portfolio, it's relatively small. And it has... We have a decent potential, but right now, our directionally, it is not very large.

Speaker 3

Specifically on the aerospace and defense, your specific question.

Vivek Shah, Analyst — Equirus Securities

That was primarily on the aerospace and defense camping side, the commercial timeline and the overall opportunity.

Vishal Rangwala, CEO

Yeah, right now, you can say that without going into specific, this right now for us opportunity is relatively small in the context of stamping. I would say about 20, 30, and then we are still working for a further opportunity when it comes to aerospace and defense. And however, our opportunity on the stamping side, where we are working on other components, that is a fairly, you know, large and then aerospace and defense, we are right now working to expand that. So we are also trying to understand the market and what are real opportunities for components, which we have already made and what is in the pipeline in DevOps.

Vivek Shah, Analyst — Equirus Securities

So, second question is on, so, Timken has undertaken a significant impact for their new Baruch facility for localization of SRB and CRB, and which is currently ramping up. So, how are you seeing the demand arising from this particular area, and to what extent is this expected increase in our business, and it is also affected into our revenue guidance?

Vishal Rangwala, CEO

Yeah, it is all factored. We are seeing positive demand coming from that, and it is all factored into our guidance. I won't be able to go specific, but we think we are very, I mean, seeing a positive impact of that for sure.

Vivek Shah, Analyst — Equirus Securities

Understood. Thank you very much for answering my question. I will get back in the queue.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Thank you.

Operator

The next question comes from the line of Manish Goyal with Thinkwise Wealth Managers LLP. Please go ahead.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Yeah, thank you so much. Sir, first question on maybe if you can clarify further on the… Subsidy level, like earlier, we had said that Ghashtra Ervantek will be 5 positive in FY27, so already in first of year, we have seen 7 or 2 crore losses versus last year, some 2 crore losses. So how should we look at FY27 numbers like we were expecting revenues of 140 crores. So, if you can give numbers for Advantech, what is the potential? Number one. Number two, what will be the kind of investments if we take only Advantech, which will happen, say, maybe once we complete this expansion by June 27th, and how much borrowing is allocated towards Advantech? I just want to know what would be the peak interest and depreciation from this 100% subsidiary, and what would be the overseas...

Moulik Jasani

Thank you, Manish. Let me try to answer the maximum possible. On Advantech front, we are on track for our revenue guidelines of 140 crore or even a little higher for the year. But at the same time, we see that because of our further expansion plan, we have incremental expenses started incurring there, including operational expenses for our future growth. And as you rightly mentioned, there is a full-fledged of interest and depreciation also started kicking in for our first phase expansion, which is already completed. We expect, as we have said, S2 will be the profit positive. contributing positively on our overall advantage front. While going forward, my capex, once we complete this phase 2 expansion and the new building expansion plan, we expect capex of around 350 CR plus at an overall advantage level, out of which building and infrastructure would be around 100 crore plus spent. And I see that total capex loan we will take is around 250 CR in advantage. Balance will be the capital funding from the HUSTA Engineers International.

Speaker 3

So just to clarify, I think, what, Malit Bhai, you want to say is that by H2 we will be profit positive. Maybe on a bullier basis that may not be enough to completely absorb the loss of 7 crores of the first half. There could be still some minor negative reporting, but let's see. We'll wait and watch.

Moulik Jasani

Right. And for the quarter 2, foreign subsidiaries put together, our loss is 1.7 crore. And on quarterly basis, we do not give the subsidiary-wise numbers. Definitely, you will have it for the year once we complete.

Speaker 3

Yeah, but we have said it will be... It is improving. Yeah, it is improving and it could be a low single-digit number at the end of the year. At the foreign subsidiaries level. So, significantly later than what has been happening in the previous year.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Okay, so losses will be much lower, say maybe what it was 10-11 crore would be lower than that. And Advantec, okay, so can you just what will be your peak interest and depreciation in Advantec, maybe in FI 28, just to get a perspective.

Moulik Jasani

The situation will keep on increasing. For FY28, I can say that it will be 28 to 27.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Both numbers are good, sir.

Moulik Jasani

Okay, so there is around 7.5 to 8 crore as of now put together numbers, sir, and we see that it can increase up to max 10 crore once we have a full-plage expense. Interest plus depreciation together.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Okay, both put together. This is quarterly, I would say, right?

Moulik Jasani

Yes, absolutely.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

And my next question, sir, is on the initial comments. Mr. Rangwala mentioned about insourcing and resourcing projects and one project is expected to start contributing from Q4. So was it pertaining to the KG's project, one contract which we had announced last year and which is probably going into production in Q4 and maybe if you can give some more insight like what kind of potential opportunity is coming up.

Vishal Rangwala, CEO

So, I think, as I mentioned in my speech, yes, that's the one we had announced earlier, which is kicking in. We are expecting realization to start in the third quarter and should normalize by fourth quarter. And at... From a potential point of view, this would have shared that about 70-75 crore annual revenue is the potential for this. At the peak. Yeah, at the peak of this project. And then right now we are working on opportunities of, you know, resourcing or outsourcing work about another 75 crore. 100 crore in different phases, which may come online next year to subsequent year and so on. And these are right now specifically our cage-related opportunities.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

And this is not the large cages one, because what I understand, there was a large cage, is it the same one, the large cages contract? Okay, large cages. And you also had announced one call in the bushing also, where we were expecting ramp-up to start in the second half of this year. So maybe if you can throw more perspective on that, number one. Number two, probably in some of this MNC call, we probably heard that for larger size wind turbines beyond, say, 5 megawatt or maybe, say, 8 or 10 megawatt. Over there, the requirement will be more of specialized bearing and require relatively more developed cages, and the bushings may not be required. So, if you can throw some more clarity on this as well. Thank you.

Vishal Rangwala, CEO

So, um, uh, On the bushing, I think that what we had announced, the one contract, we were expecting second half commercialization to begin. Right now, we are still hopeful that that will happen. We think it's a little bit delayed in terms of ramp-up. But it will still happen. And related to, you know, large windmill market, yes. We see that there are bushing opportunities within that, we see that as a continued opportunity, as I said, it's not about 100% replacing bearings, it is only limited application, these bushings are used, so I think our customers are right that they would have a lot of these opportunities on the bearing side. But at the same time, we see that bushing has to play its own role, reference to large windmill, and we are already supplier to actually a 16 megawatt windmill application, we are supplying bushings in that. So we don't see that as a concern, and as the rollout of bushing happens, it will grow.

Operator

The next question comes from the line of Prolin Nandu with Edelweiss Public Alternatives. Please go ahead.

Pranav Nandu, Analyst — Adelweiss Public Alternatives

Hi, team. Thank you for taking my question. I just have one question on the China business. You mentioned that the growth is slightly on the lower side and the margins are also on the single digit. Now, historically, if I look at your top line growth, it has been anywhere in the range of, you know, 8% to 10% and margins are also in double digit. So when you mentioned that you expect some improvement going forward, is this improvement going to be limited or it will only come when the new capacity comes or do you see an improvement in sales as well as margin without or before the new capacity kicks in?

Vishal Rangwala, CEO

So, we expect, I mean, the growth to continue in China, even though there, I mean, we mentioned that it is, in terms of growth, it has a little bit softened vis-a-vis previous quarter and last year. We expect, however, still growth to continue with, you know, difficult to fully, you know, clearly define exact number. Bigger, bigger jump on growth. Will come when the new capacity comes online. Otherwise, it will remain for current financial year as well as early part of next financial year in that single digit range is what in general we expect.

Pranav Nandu, Analyst — Adelweiss Public Alternatives

Okay. Okay. Okay. Thank you so much. That's it from my friend.

Operator

The next question comes from the line of Jason Sones with IDBI Capital. Please go ahead.

Jason Soans, Analyst — IDBI Capital

Yeah, thanks for taking my question again, sir. My line got disconnected. Sir, now I'm repeating this question, I understand. But sir, actually, again, you know, in earlier parts of India, I looked to it. So there is a 21% growth in the first half. But would you say right for a constant revenue guidance of 10-12% that really points to a, I mean, marked slowdown in second half. So sir, just some clarity on why this should be because you started the year really well, going on really well. So what is?

Speaker 3

So, I want to repeat, we are not hinting anything that you are trying to understand. What we are trying to say is that there are two elements. One is the quantitative part and the second is the inflation. Okay. And then the third angle is Romania. So, this year there has been a... Fairly strong increase in overall metal prices, and Vishal and Maulik both have explained that in quantitative terms... We are talking of 12 to 15 percent crore. It will definitely, it could translate, given the continued inflation, it can translate into a little higher, definitely higher number as a combined value. Having said that, please understand, we have also announced that we are looking at downsizing Romania. We don't know how and when exactly we are able to do it, but probably by Q3, we will be very clear that what are the nuances of the downsizing. So Romania's contribution... Can come down quite a bit. So overall, please understand, India engineering, we are gung-ho, we are very clear that there should be no issue. And therefore, from that angle, please look at it as a little more conservative guidance. That's all.

Jason Soans, Analyst — IDBI Capital

Sure, sir. Thanks for that. That was all from me. Thank you so much.

Operator

The next question comes from the line of Varun Jain with Dollard Capital. Please go ahead.

Varun Jain, Analyst — Dalat Capital

Yes, sir. Most of my questions have been taken up. So, just a couple of follow-ups. So, in Q2, FY27, for the foreign business, we just saw 1% growth. So, considering the price rise, we saw volume degrowth in Romania plus China, right?

Moulik Jasani

So, basically, I will say differently, Varun, we see a good growth in India, and which as a percentage term shows a lower growth in export, but yes, absolute value, there is a growth in export also.

Varun Jain, Analyst — Dalat Capital

So, there was a growth.

Moulik Jasani

Yeah.

Varun Jain, Analyst — Dalat Capital

So, but sir, there is only 1% overall revenue increase, so then did we like shrink, like the prices went down for the export, realization went down?

Moulik Jasani

No, because China has a little slow quarter. As we said. Otherwise, we see that the numbers are good.

Varun Jain, Analyst — Dalat Capital

Okay, sure. And overall, like, China was last year at 120 CR, FY26, close to that. So this year, we'll do, like, 150 CR?

Moulik Jasani

Or, no. Because it is INR currency, INR growth is also coming from the exchange rate impact, but on the volume terms, we see that as we have given the guidelines around single digit growth on the volume terms as of now in China.

Speaker 3

So Varun, if I have to just add to what Malik said, if you look at two YOY basis second quarter, there is a growth of almost 15% in exports. So, 123 going up to 140. And on H1 to H1, it's again about 17-18%. So, export growth out of India continues. Overall, because of the China and Romania combined, you feel that there is flat.

Varun Jain, Analyst — Dalat Capital

Got it, sir. And, sir, you said 150 crore of capex is left for the next 15 months or so. So, out of this 150, how much is, of 150 which is left, how much is China and how much is Advantex?

Moulik Jasani

I don't have it handy. Put together, both are 220, but yeah, I don't have it handy as of now.

Varun Jain, Analyst — Dalat Capital

Okay, and since we were planning that we'll front load the capex, so assuming it comes by June 27 only, so then FY28 will get a benefit of this capex, right? China will come on. So what will be the, like, China growth in that case?

Moulik Jasani

But commercialization, again, we'll take the similar timelines which we have given Varun here, because we will have approval timelines from the customers. So, although the capex will be done, the commercialization will be done around at the end of H1 only.

Varun Jain, Analyst — Dalat Capital

Okay, so basically the China capex will come into play mainly for FY29, not for FY28, right?

Moulik Jasani

H2. H2 it will come into the play. Not in H2. Sure. In H2 it will come into the play and we will give better guidelines nearer the year-end and completion.

Speaker 3

Got it, sir.

Varun Jain, Analyst — Dalat Capital

And, sir, you said in the last couple of quarters, you've already always said that Japan growth, you're expecting just 10%, but if I see H1, Japan growth was 28% in Japanese customers. So, like, has something changed, some product acceptance, what is it?

Vishal Rangwala, CEO

Yeah, we are seeing better, you know, product, as I've mentioned in the past that some of our projects were delayed. They are coming online, and that is improving this percentage, relative percentage. So, that is in general what is going on, plus our customers, you know, when we include that, I think they are also growing in U.S. These customers, when we say Japan, that also includes if we are supplying them in U.S. That all those geographies are also improving and that has the impact of that.

Operator

Okay, sir, sure.

Varun Jain, Analyst — Dalat Capital

And this is one thing I forgot to ask. So for this China and Advantage CapEx, what are the asset terms? It is standard 1 to 1.28 asset terms or is it higher for the Advantage CapEx?

Moulik Jasani

In both the scenario, if we remove the immovables, it will be better than 2. If we remove the immovable, because both the plant have a immovable spend. We have already covered this in our previous call.

Speaker 3

So the basic infra capex is common for, say, next few years. So if you look at the incremental specific capex for each of these projects on productive assets like, you know, the civil plus the plant machinery, etc. Relating to that capex, about 2x is what you can expect.

Varun Jain, Analyst — Dalat Capital

Sure, sir, sure. And just one last one. So, on stamping, sir, what are the margins we are getting, especially on this accumulator product since it's growing so fast, is it? How much lower is it from the core cages margin?

Moulik Jasani

Why don't we don't say that? You are aware.

Varun Jain, Analyst — Dalat Capital

Okay, okay. So, no issues. So, thank you and all the very best. Thank you. Thank you.

Operator

The next question comes from the line of Saket Kapoor with Kapoor Company. Please go ahead.

Varun Jain, Analyst — Dalat Capital

Yes, sir. Namaskar, sir. I hope I'm audible. Yes, sir. Yes, sir. Just taking into account the Q1Q growth in the EBITDA margin, I think so, there is impact of also that of RM also benefit that flows into or is it the product mix that has given a consolidated gain of from 15.9 to 18.6, the growth in EBITDA margin?

Moulik Jasani

So, Saketji, it is both, and top onto that not only both, I will say operational efficiency also has contributed, and at an overall level, the solar contribution is lower for the month, including on the cost side as well as the revenue side. So, all these core factors have added there, as a primary factors, I will say, has added there for the EBITDA growth.

Varun Jain, Analyst — Dalat Capital

Okay, sir, taking into account H2, I joined a bit late, so may be repetitive. What should be the ballpark, the margin trajectory for us?

Moulik Jasani

At the India level, we expect it to continue in around 22%. For the EBITDA margin profile, and at a console level, for engineering business also, we expect it to remain in the range of around 17 to 18 percent.

Varun Jain, Analyst — Dalat Capital

Okay, so this console number of what we exhibited, 18.6 whole goods for the next half also?

Moulik Jasani

As of now, yes, subject to the metal price movements and other things which we have already discussed.

Varun Jain, Analyst — Dalat Capital

Thank you.

Operator

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Vishal Rangwala for the closing remarks.

Vishal Rangwala, CEO

Right. Great. Thank you very much. Appreciate all of you, you know, staying so late to attend this call. And thank you very much for your participation.

Speaker 3

And happy Diwali from all of us and to everyone.

Operator

Thank you, sir. Ladies and gentlemen, on behalf of Harsha Engineers International Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.