Earnings Call Transcript - XNSE:ISGEC 2026-11-05

Operator

Ladies and gentlemen, good day and welcome to ISGEC Heavy Engineering Ltd. Q2 F527 Earnings Conference Call, hosted by ICICI Securities Ltd. As an 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 the conference call, please signal an operator by pressing star then zero on your touch zone phone. Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve the risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Mohit Kumar from ICICI Securities Ltd. Thank you, and over to you, sir.

Speaker 8

Thank you. Good afternoon, everyone. On behalf of ICICI Securities, I welcome you all. Today, we have with us from the management, Mr. Aditya Puri, Managing Director, Mr. Kishore Chaitnani, Joint Managing Director and CFO, and Mr. Sanjay Gulati, Joint Managing Director and Head Manufacturing in ITS. Now, I would like to hand over the floor to the management for the brief opening remarks. Post this, we will open the floor for Q&A. Thank you, and over to you, sir.

Aditya Puri, Other

Good afternoon, everyone, and thank you for joining us today. We appreciate your time and your continued interest in our company, and the trust you place in us as we continue to build the business for the long term. We welcome the opportunity to speak with you, explain our performance and business strategy, and answer your questions. Before I begin, please note that some of the statements we make today may be forward-looking. We are based on our current expectations and are subject to risks and uncertainties, so actual results may differ. K2 and H1 FY 2027 performance. Standalone financial highlights. We delivered strong growth this quarter and in the 6 months. Revenue from operations grew 17% for the quarter and 35% for the sixth month. And the profit report taxed to 39% and 24% expected year-round year. Resilience from operation for the quarter is Rs. 1457 crore and Rs. 3,010 crore for 6 months. Including other income, total income is Rs. 1521 crore for the quarter and Rs. 3106 crore for the 6 months. Order booking for the six months is excellent at Rs. 4,844 crores, and standalone orders in hand as of September 30, 2026 are at an all-time high of Rs. 8,757 crores. Execution is proceeding well in both the industrial projects and manufacturing segments. Export revenue during the quarter is Rs. 172 crores, about 11% of total income, compared to Rs. 90 crores in the same quarter last year. Export revenue during the first half year is Rs.557 crore. We expect exports to remain a significant share of our revenue, though the quarterly share will vary with shipping palliage. Profit before tax for the quarter ended September 2026 with Rs. 154 crores. Up 39% from Rs.111 crore for the quarter in this September 25. These figures include the effect of transactions with our subsidiary companies, dividends received, interest income on loans given to them, foreign exchange improvements on those loans, and the related expected credit loss provision. In our investor presentation uploaded on the stock exchanges today, slide number 19 shows profit from business operations will exclude these subsidiary related items. Accordingly, profit from business operations for the quarter is Rs.124 crores, compared to Rs.90 crores in the quarter ended by 125, and an increase of 38%. For the six-month-ended September 2026, reported profit before tax of Rs. 277 crore is 24% higher than Rs. 223 crore for the six-month-ended September 2025. On a similar basis, considering only the profit from business operations and excluding the impact of transactions with subsidiary companies, The profit from business operations for the 6-month ended September 2026 is Rs. 244 crores, compared to Rs. 169 crores for the 6-month ended September 2025. That is an increase of 44%. On the margin track, manufacturing EBIT margin for the quarter is 13.7%, better than the 12-13% range we guided. Apex margin for the project business is 5.7%, better than the last few years, and close to our target of 6%. The domestic market is strong across all our product lines, and we also have a healthy level of export inquiries from customers in Latin America and Africa. The company's kind of loan fund position improved by Rs.175 crores during the 6 months, and net borrowing fell to Rs.206 crores compared to Rs.381 crores as on 31st March 26th. You know the company is investing about Rs.502 crores to expand capacity for our manufacturing segment. This net borrowing of Rs. 206 crores is after accumulated capital expenditure of Rs. 199 crores to this capital investment, which has been funded from internal accruals. Impact of geopolitical tensions on our business. Current geopolitical dependence has not affected order booking or order execution. However, the cost of some materials is risen because of the ongoing conflicts in the Middle East, and this is having a small adverse effect on profitability. During the quarter, commodity prices, particularly steel, copper, aluminium, and nickel, scored up to 10% fluctuation, though they have come down slightly in October. Shipping in logistics for exports and imports has seen delays, reduced availability of shipping containers, and sharply higher trade rates and surcharges. The good news is that there has been no significant supply disruption. Most of the increased costs are expected to be absorbed through normal contingency provisions. Consolidated financial highlights. Consolidated orders in hand as on September 30, 2026 is Rs. 10,273 crores. This is an all-time high record for us. Total income for the quarter ended September 2026 is Rs. 1860 crores, about 10% higher than Rs. 1696 crores for the quarter ended September 2025. Total income for the six months ended September 2026 is Rs. 3,853 crores, but 25% higher than Rs. 3,071 crores for the six months ended September 2025. Revenue was higher during the quarter for ISJEC standalone and ISJEC Hitachi Rosal, but much lower for Taraswiti sugar milk. And this is R.C. Rosen is doing well, with higher revenues and good orders in hand of Rs. 1161 crores. Sanctuary Sugar Mills has lower gain-availability partners, resulting in lower production. Accordingly, they are getting lower sales quotas, and therefore revenues are lower. Sanctuary Sugar Mills is taking several steps to improve gain-availability in the season. Consolidated profit before tax for the quarter ended September 2026 is Rs. 102 crore, 100% higher than the Rs. 61 crore restated for the quarter ended September 2025. The consolidated profit before tax for the 6 months ended September 2026 of Rs. 155 crore is 62% higher than Rs. 96 crore restated for the 6 months ended September 2025. Reported consolidated profit figure for the quarter and six months ended September 2025, having restated since the accounting of the Philippines business was shifted from the earlier classifications as assets held for sale and discontinued operations to continued operations, to continuing operations. Let me now explain why consolidated profit before tax is lower than the standalone profit before tax. The key reason for the reduction in the consolidation profit before tax compared to the standalone CETI is the loss from the ethanol plant in the Philippines. As you know, the ethanol plant started commercial production for the current sugarcane season on 17 December 2025, using sugarcane as seed stock and concluded sugarcane crushing on 20th April 2026. Thereafter, the plant has been operating on molasses as seed stock. The plant has been running at about 65-70% capacity, and ethanol sales are going smoothly. Within the 6 months, the segment incurred a loss of Rs. 164 crores, including interest. Most of this loss relates to interest depreciation and product loss. The segment also reported an EDITA loss during the 6 months, which would have been largely recovered if the balanced stock of about 3 million litres of ethanol had been sold during the quarter. The plant is presently under regular seasonal repair and maintenance and will restart when the new shulukane season starts in December 2026. Under consolidated basis, net borrowing is reduced by rupees 320 crores during the 6 months to rupees 156 crores as on 39, 2026, from 476 crores on 31st March 2026. I will now talk about the ongoing expansion of capacity at our manufacturing plant. As informed, we are investing to add manufacturing capacity across most of our manufacturing product lines. This includes stresses in machine building and the new plant is coming up at Bartoli in Haryana. The new facility to manufacture skids and modules coming up in our SE-jet at Dehaj in Gujarat, and the investment in capacity expansion in machining facilities at both our casting side sheets, the tube and piping shop at Satangrath, and the standard mechanical stresses factory at Parthas. All these are running largely on schedule, and some of the new production facilities will be progressively completed this year. We are expecting the additional production to contribute to this year's manufacturing segment revenue. FY 2027 Outlook Standalone Looking ahead on a standalone basis, we expect the FY 2027 revenue to grow by about 15% to 17%. Margin in the manufacturing business should stay in the range of 12-13%, and in the project business should improve to around 6% by the end of the year. Looking ahead, the inquiry process in order booking outlook remains strong in both the domestic and export markets. The weaker Indian rupee is supporting our competitiveness in export markets. We recognize that the broader environment may continue to present both uncertainties and opportunities. We are taking steps to mitigate the risks and convert the opportunities into tangible benefits. To sum up, first, Sandro's profit grew strongly on better margins in both segments. Second, our order book is at an over-time high, which gives us good visibility. Third, our banning sheet is stronger, with net borrowings nearly half in six months. Thank you again for joining us. Let us now begin with the question and answer session.

Operator

Thank you very much, though. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking your questions. Ladies and gentlemen, we will wait for a moment while the questions you assemble. The first question is from the line of Manish Goyal from Thinkwise Weld Managers, LLP. Please go ahead.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Thank you so much. Sir, very hearty congratulations on strong performance and excellent cash flows and historical high order book cropping 10,000. Very heartening to see that, sir. Sir, I have a few questions. First, just on the last comments on the guidance, what you said of 15% growth for standalone. Sir, if we look at our first six months performance. The incremental growth what we have achieved already indicates, already we have achieved your 15% growth and assuming that second half is not too much. Sir, again, digital guidance is on the conservative side. That is what my first question was. Sir, second question is on the consolidated numbers. Sir, we have seen the depreciation decline from 70 crores to 37 crores. So, I believe it is pertaining to caveat biofuel because in past call, we have mentioned that we may see decline in depreciation. So, if you can just indicate us how much depreciation one could factor for entire for caveat biofuel as compared to last year. And caveat biofuel, again, we have seen that you did allude that there were challenges on operations. But this PBIT loss of 60 crores, how should we see quarterly loss of 60 crores at PBIT level, how should we see going forward in Q3 and Q4? Sir, on Hitachi daily, the organ book seems to be quite strong. We are guided for 10% revenue growth in F527, but we are probably seeing some weakness on the margin front in the first half. So, maybe if you can provide clarity on the outlook for Vita GJD for FI 25, both on top line and margin front. And last question, sir, on the standalone, coming back to standalone, the other income continues to be high. So, like, how much is interest from caviar, biofuel, and any other items, like forex gain, because I understand that large part of forex gain, export institutions use are captured in other operating income. So, what is leading to such high other income, as seen in last year as well, and we are seeing in the current cost up also. And what could be the number for FF27? Thank you so much.

Kishore Chaknani, CFO

Thank you, Manishji. I think we could really appreciate your detailed analysis of the results. On the guidance, 15 to 17 percent. Now, if you noticed last year, the first half and second half. So, last year, first half revenue was 2200 crores. Second half revenue was 3000 crores. So this year, the first half has already done 3000 crores.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Right, sir.

Kishore Chaknani, CFO

And the second, and if I am staying at 15 to 17 percent, then the second half is in 3200, 3300 crores.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Right.

Kishore Chaknani, CFO

So there is a small growth in the second half, but the base was already higher. Yes, sir. So, I hope I have been able to explain that. Obviously, we have booked very large orders. I suppose you mentioned 4,400 plus rows of orders in the first half. These orders, execution, revenue from these orders will start coming in, but most of the revenue will come in the following year. To say it in round numbers. From scale of run rate of 6200 crores per year, this will be going to about 6200 crores per year, kind of run rate based on present, what we can see today, based on orders in hand. So the second is on CBPI, so the depreciation method I think came from, because that is what we evaluated, what is the right thing to do, we got an external Here also to look at the deposition, the life of the machinery. So the deposition charge during the quarter is 8 crores. For the next two quarters also we expect the deposition to be 8 crores each quarter. So you ask for a cumulative number, I don't have it readily in front of me, but I'm sure we can add it up and arrive at that.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Sorry, to interrupt you, for the quarter, the depreciation is only 8 crores for carrier biopsy.

Kishore Chaknani, CFO

That's right. That's right.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

For quarter three also, we are expecting 8 crores.

Kishore Chaknani, CFO

For the three and quarter four, we are expecting 8 crores each. It will be 8 crores, 9 crores, but that order is 9 crores.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Okay, no, so sorry to interrupt, sir, but so last year the number was 175 crores, which had some previous year depreciation also.

Kishore Chaknani, CFO

We had a catch-up depreciation for more than a year's time. It was for one and a half year's time. I don't have that number in front of me, but I can tell you what is going to happen in the future. Okay. Right, okay. Now, in terms of the 60 crore loss, That loss also takes into account, the position it takes into account large for its situation. So how is the third and fourth quarter going to look like? Third quarter, we have, Mr. Puri mentioned, we have a large stock to sell that has some profit because it's valued at cost and it will sell at a higher price. So there is profit in that 3 million litres of ethanol that's in stock. Real production based on sugarcane will start in December, and so the next quarter may be a little weak, but the fourth quarter, for us, the fourth quarter, January to March, is going to be almost close to 90%. I'm hoping 90% kind of capacity is fresh. So that quarter should be looking good. Now in terms of, I'll come to the expectantization. So, your question was, how does the year look for them? So, you wanted the year or you wanted to know the six months?

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Both, maybe next for second half and for the full year.

Kishore Chaknani, CFO

I'll tell you about the full year. The performance will be almost similar to what it was last year. So they have good class orders. The order book is more of export now than of statistic. Recent orders, recent order booking was, give me a second, I'm just trying to find the page, it has the numbers. So, they are expecting their turnover to be higher by about 7-8% compared to last year, and profit to be also higher, maybe about 5-7% compared to last year. Their order book is very good at 1161th Road, which is already mentioned in its opening remarks. They have built large orders and subsequently they seem to be looking at a lot of export orders. So out of this 1161 crores of order books, about 800 crores are export orders. During this 6 months, orders of 678 crores total. The closing order book is, the closing order book as of 30th September is 1161, and this includes 800 crores of export options. Lastly, I'll come to your question on other income. So, other income, actually, if you would have noticed, again, Mr. Kohli alluded to it on slide 19 in our presentation we have uploaded today. We have given a breakup of What are the impacts because of transactions with subsidiary companies. Now, the transactions with subsidiary companies have three parts. One is the dividend received from subsidiaries. So, this quarter we received dividend from Sarasati Sugar Mills. We also received dividend from Israe Khitarki Joshi. The second is the interest income. From loans given to ISVIC investment Singapore and to CBPI and the forest situation. On the other side, there is a finance cost because you may have noticed that we had borrowed funds from banks in India, ECB loans, to online to CBPI. And also, we have accounted for an expected credit loss of 17 crores. So, this is all given on slide 19 of the presentation we have uploaded today.

Manish Goyal, Analyst — Thinkwise Wealth Managers LLP

Thank you. Thank you so much, sir. I wish you all a very happy year, sir.

Sandeep Deid, Analyst — Individual Investor

Thank you so much. Thank you. Thank you.

Operator

Thank you. The next question is from the line of Digant Haria from Green Edgewell. Please go ahead.

Digant Haria, Analyst — Green Edge World

Yeah. Thank you for taking my question. Sir, congratulations on the good performance. My question is to Mr. Puri. Sir, like two years back, you know, we started this whole journey of taking short, you know, short life cycle orders and, you know, not getting into orders with a lot of civil contracts. And now, today, we are seeing that we have reached a margin of around five and a half, you know, percent in the project business as well. And that's when commodities are so volatile. So I just wanted to, you know, understand from you that, you know, should we take this as normal going ahead? Thank you.

Aditya Puri, Other

So, we are continuously trying to improve margins, but in the short term, our strategy does remain the same. We are not going to take very long-duration projects. We are not going to take projects where it will form a very significant or a major part of the total order value. And we are trying and are being successful in taking projects which have some technology element linked to it. So, it's not, you know, it's to move away from large-scale, sort of, take a variety sort of projects to projects which are more technology-oriented, which have a shorter cycle time, and, yeah.

Digant Haria, Analyst — Green Edge World

Yeah, okay, okay. And second thing is that in the order book, we have crossed 10,000 pros. Sorry, can I go ahead? Yeah, yeah, sure. Yeah, sorry, but in the order book, we have crossed 10,000 crores, and I see that, you know, the products division is now 38% of the order book. We have never been so high. We have generally been in the 25-28%, you know, kind of range for products, but now we are at 38%, and that too, before we really, you know, all our capex, you know, three capex programs comes on stream. So, you know, what do you, you know, what is leading to such strong order book, which areas are we getting these orders, and, you know, just, will we be able to execute those on time? So, these were my three questions on the products division.

Aditya Puri, Other

So, the first question is? 38% is consolidated.

Kishore Chaknani, CFO

I mean, what you are seeing is that 38% is consolidated.

Aditya Puri, Other

Okay. Okay. Okay.

Kishore Chaknani, CFO

Okay. Yep.

Digant Haria, Analyst — Green Edge World

Yeah.

Kishore Chaknani, CFO

So, that includes for ISREC Heavy Engineering as well as ISREC Itakizosa. And we just talked a few minutes ago about ISREC Itakizosa not being good. And on the expansion, the expansions are happening in certain orders are being taken in anticipation of the expansions being completed and the expansions are now beyond schedule. So as of now, we don't see any significant delays in our commitment to the customers. So they will be executing, they will be executed on time. And these orders are coming from a wide range of industries. They're coming from the automobile industry. They're coming from oil and gas, petrochemical, some small amount, some small orders from cement, some small orders from steel. They're coming from a wide range of industries.

Digant Haria, Analyst — Green Edge World

Okay, okay, okay, I see. And then, Mr. Chetwani, like, you know, maybe two or three calls back, sir. You, you know, we were discussing that this products division over, say, next two, three years can reach a revenue of 3,500 crores and all these capexes that fully utilized. Does that number still hold?

Kishore Chaknani, CFO

That number certainly holds, sir.

Digant Haria, Analyst — Green Edge World

Okay, okay, okay.

Kishore Chaknani, CFO

So, because this 500 crores expansion that is in, ongoing. That its impact in terms of revenue, it can, we expect it to lead to 1200 crores of additional revenue. Only some of that revenue will start coming into this year, very small amount, less than 100 crores. But the major part will start coming in from next year and the following year. So, this is an edition of 1200.

Digant Haria, Analyst — Green Edge World

Yeah, okay. Edition of 1200 crores can happen. And we are already at 2700 crores plus of revenue. So, maybe 4000 crores would be a better number.

Kishore Chaknani, CFO

Yes, on a consolidated basis aside.

Digant Haria, Analyst — Green Edge World

Yeah, okay. Okay. And then last question is on this Saraswati sugar mills that see after a long time we are seeing that sugar is becoming a profitable business because sugar prices have been quite firm. And then unfortunately we had lower yields in the captive area where we are. So this year will also not be good for us in terms of volume but realization we will still get all the benefit which other sugar companies are getting. Is it right?

Aditya Puri, Other

Yeah, that's true. That's very true. We will, in terms of realisation, get the benefits, yes. Okay, okay. And there will be less diversion to ethanol also this year, right, because of the... Yes, because the government has banned manufacture of ethanol from B-heavy and from juice, from syrup.

Digant Haria, Analyst — Green Edge World

Yeah, right, right, right, right.

Digant Haria, Analyst — Green Edge World

Perfect. Okay, those were my three questions. Thank you so much, and, you know, I wish you all the best. You know, for shareholders, it's been a long wait, but I think that wait is coming to an end, and, you know, we are seeing good days. Thank you so much. Thank you.

Operator

Thank you. A reminder to all the participants, you can press star and want to ask questions. The next question is from the line of Rabindranath Nayak from Nirmal Bank Institutional Equities. Please go ahead.

Sandeep Deid, Analyst — Individual Investor

Hello. I'm audible, sir.

Operator

Yes, sir.

Ravindranath Nayak, Analyst — Nirmal Bang Institutional Equities

Yes, sir. Thank you for the opportunity, sir. Sir, congratulations to the good state of numbers. Sir, regarding this standalone business in the product business, so is it possible to give a product-wide breakup on how much it is from pressures and boilers and heat exchangers, sir, in terms of percentage?

Kishore Chaknani, CFO

No, we do not give out product-wise numbers. Firstly, it also varies year to year, from quarter to quarter. So, using any quarter as a reference doesn't actually make sense. It depends on which...

Ravindranath Nayak, Analyst — Nirmal Bang Institutional Equities

No, no, I am not talking about quarters. In a yearly basis, how to do it?

Kishore Chaknani, CFO

So, we are not giving out product-wise numbers, please.

Ravindranath Nayak, Analyst — Nirmal Bang Institutional Equities

Okay, okay. Okay, sir, regarding the Philippine operations, we have reduced the depreciation. You can say every quarter we will be doing A-scores of depreciation only, right?

Kishore Chaknani, CFO

Something like that, A to 9 close, yes.

Ravindranath Nayak, Analyst — Nirmal Bang Institutional Equities

Okay. And actually, if you see the sales has gone down from 59 crores to 56 crores, you said there are some unsold inventory in this. So, what would be the guidance for this year, you know, considering the current realization of this now? For if at all, we will do, you think that in the second half, we will be 90% utilization. So, what would be the guidance for FY27 for this business?

Kishore Chaknani, CFO

Pardon me, let me correct that. I did not say second half 90% utilization. I said the third quarter, the ongoing quarter, October to December. The season will start again in December when the sugarcane starts. That's when the disruption will restart. In the January to March quarter, we expect to do a 90% kind of trade ratio, we hope to do, because that is when the shuriken will be available also and molasses will also be available again. Okay. So, I don't think clear the situation to give out the guidance. The number is, deposition is clear, interest is clear, forest situation is not clear, but we do hope to be having some small amounts of positive EBITDA.

Ravindranath Nayak, Analyst — Nirmal Bang Institutional Equities

Okay. Okay. Okay. And sir, this year, this quarter, third quarter would be, we will be going around, say, 70 to 75 percent utilization, or it is, how much it will be?

Kishore Chaknani, CFO

No, at the moment, the plant is, is undergoing seasonal maintenance, and, and, and, and, feedstock will be again available from December.

Ravindranath Nayak, Analyst — Nirmal Bang Institutional Equities

Okay, okay, okay. So, the third quarter will be, you know, up to some extent, a similar kind of second quarter situation, right? Yes, you can say that. Okay. Okay. Okay. Okay. And sir, you mentioned that, you know, the interest income from the subsidiary, from this Philippine subsidiary, it would be in the range of 42 crores in this quarter from the, from the stand-alone.

Kishore Chaknani, CFO

Sir, we have put it in the, on the set, in the record 2019 on the presentation we have uploaded today.

Sandeep Deid, Analyst — Individual Investor

Okay, sir. Okay, sir. Thank you. Thank you.

Operator

Thank you. The next question is from the line of Sandeep Deid, an individual investor. Please go ahead.

Sandeep Deid, Analyst — Individual Investor

Good afternoon, sir, and congratulations on a very good set of numbers. Question more on the Forex fluctuation loss in the Philippines unit. How much was the amount? 41 crores please.

Kishore Chaknani, CFO

41 crores. Oh, yeah. So, that is 60 crores, 41 crores for due to taxation.

Sandeep Deid, Analyst — Individual Investor

That's right.

Kishore Chaknani, CFO

Okay. And now with rupee appreciating against the dollar, you think parts it can get reversed in 2-3. So, you are a better judge of what the dollar rupee is going to do and what the dollar Philippine Tiso is going to do. Sir, you mean that, okay, thank you. What you are saying, we are also hoping for that. Okay. Second, sir, how much is the interest expense in the Philippines every quarter or every year? Which is the income for the standalone entity? I think that is the figures I have in front of me. So, the interest income for this quarter was 18 crore days. Got it. For the 6 months for 38 crores. Okay. And lastly, if the Philippines unit works at 80 to 90% capacity utilization, can it break even at the orbital level? It certainly does. At that capacity utilization, yes, it will. Point is, there should be enough to retain available in spite of LNU and in spite of everything else. For that capacity, we are hoping January to March, like I said, January to March, we are hoping to do well. Okay, thanks. Last thing, on the sugar chain in Punjab, how is this crisis season looking like? Do we have enough supply of sugar chain just now?

Aditya Puri, Other

We are located in Saryana, sir. Yeah, I'm Haryana, and the sugar seed supply is not enough for the season. It's looking like that we will get marginally more cane than what we got last season.

Sandeep Deid, Analyst — Individual Investor

Okay. Thank you. Thank you. That is also my pleasure.

Operator

Thank you. The next question is from the line of Bhatran Bhatna from Sunidhi Securities. Please go ahead.

Bhatran Bhatna, Analyst — Sunidhi Securities

Congratulations for a good set of numbers, sir. So, just would like to understand on the CAPEX part, we have almost talked about more than 500 crores for the CAPEX and different segments. So, are we topping up this CAPEX because as the demand is pretty robust in the system and we are also getting out on the domestic demand and also the international orders also. So, are we topping up this capex for next maybe two odd years and then are we seeing what sort of revenue potential this capex can, you know, we can envisage maybe by FY29.

Aditya Puri, Other

So, we've already said that this particular CAPEX program will yield incremental revenues of above $100,000.

Bhatran Bhatna, Analyst — Sunidhi Securities

Yeah, so sir, are we further topping it up, this capex or 500 crores that we come up?

Aditya Puri, Other

We are evaluating capex all the time, and there is a good possibility that we might capex up, but we have not firmed up in these news yet.

Bhatran Bhatna, Analyst — Sunidhi Securities

Okay, and this 500 crores, can this materialize by FY29 or it will stress to FY30?

Kishore Chaknani, CFO

FY29, it will. FY29, it will be there. It will come.

Bhatran Bhatna, Analyst — Sunidhi Securities

Okay, and sir, this 300 crore or that will come from product, will it get the similar sort of EBIT margins of 13-14% which we are generating right now?

Aditya Puri, Other

I think we have said in the call that we will sort of maintain 12-13%.

Bhatran Bhatna, Analyst — Sunidhi Securities

Okay, got it, got it. And sir, just, I'm sorry if I'm repetitive, if you could just broadly see the demand environment, you know, spanning across new sectors also, how do you see, because I think boilers and oil is pretty rubbish demand right now, but apart from that, what all segments where you are seeing good surge in terms of demand and how, you know, we are trying to cater to that difference.

Aditya Puri, Other

So, taking the export and domestic markets together, we have robust demand in almost all our product lines or project lines. So, we are seeing robust demand coming from everywhere. So, we believe that we have improved our market share and our products are doing well and they are well appreciated in the market. And therefore, we are seeing a good demand and we are optimistic with the demand which could be the same way.

Bhatran Bhatna, Analyst — Sunidhi Securities

Okay. Got it. Answer just on the last question. The current base of, let's say, close to 300 sort of product is flying. With the existing capacity, what revenue potential we can achieve at the optimum utilization, apart from the fact that it could affect the case that we are entailing right now?

Aditya Puri, Other

So, I think it was just spoken about that other consolidated bases may be about 4,000 crocs.

Bhatran Bhatna, Analyst — Sunidhi Securities

By or by 29? Okay. Got it. Got it. Thank you very much and all the very best. All the very best.

Operator

Thank you. A reminder to all participants, you can press star and want to ask questions. The next question is from the line of Diganth Haria from Green Edge World. Please go ahead.

Digant Haria, Analyst — Green Edge World

Yeah, I thank for the opportunity again. Just, you know, question this time is on the order that we have won, like, you know, the product division does not have price variation clause. Those are all fixed price orders across India and all the foreign subsidies. Is that right? Yes, that's right. Most of them, yes. Okay, okay. And then, sir, in this case, like, you know, how have we done our raw material planning? Because, you know, I see that, you know, in the last 12 months where there's been a lot of volatility, we have still, you know, held our margins quite well. So, we have changed something about the way we win our orders or plan our raw material. Can you just explain us that?

Aditya Puri, Other

You know, we work on a number of ways to improve our efficiencies. So, there are lots of factors which contribute towards the better margin. So, I will not be able to disclose what we have done on the pertinence front.

Kishore Chaknani, CFO

But let me say in general, you know, how we manage our risks. So, you are talking about the material cost. So, our material cost is typically in the manufactured product, depending on which product it is. It is about 55%, between 50 and 60%. Now, when we go out and bid to customers, we typically always have back-to-back offers discussed with most of our suppliers. We have back-to-back offers for raw materials, we have rate contracts for certain items. So, when we actually bid for an order, we usually know what each item is going to be costing us, and we still keep some contingencies. So, that's typically our risk management system. It's not that blind, it's not that on assumptions. It's largely with counterparties, we have some kind of an understanding arrangement or backup based on which we book our orders.

Digant Haria, Analyst — Green Edge World

No, agreed. You know, that explanation, I agree. But then, you know, after Ukraine war, like, you know, in 2022, we had a period of one to two years where, you know, our margins really took a hit because of the commodity inflation, but this time it has not. So, I was just trying to look at what, you know, what difference is there this time. That's all I was trying to talk about.

Kishore Chaknani, CFO

I think Mr. Puri said we keep on improving ourselves all the time.

Digant Haria, Analyst — Green Edge World

Right, right, right. Okay, okay, okay. And in the project business, is there price variation clause in our orders or like those are also case by case, you know, different.

Aditya Puri, Other

Case by case, there are not too many orders that have price variation clauses. Okay, okay, okay, okay, I see. I see.

Digant Haria, Analyst — Green Edge World

And this whole short cycle orders, you know, so it has helped us in navigating the commodity volatility better or is it more to do with we get our cash flow on time and hence our margins are better? Like, you know, what can you summarize as the crux of this shift from long to short sales like orders in the project business? Like, where has it helped us the most?

Aditya Puri, Other

So, first of all, it reduces the uncertainty because the time period is short. Secondly, cash flows are better. And thirdly, the risk of the customer having liquidity problems is also reduced because of the shorter duration. And he's putting his project to work, and his cash flows are also improving if the project is of a shorter duration. So, basically, these are the reasons. And we said that we're going for more technology-oriented projects, so that means that we're differentiating ourselves from a lot of other people who are in competition.

Digant Haria, Analyst — Green Edge World

You got it, sir. You got it. All right, sir. All the best. I hope to see Izhek as a, you know, hugely flash-positive company the way we were in 2014 to 2018 days. So, all the best.

Operator

Thank you. A reminder to all the participants, you can test all Anwan to ask questions. That was the last question for today. I now hand the conference over to the management for closing comments.

Aditya Puri, Other

Thank you all for joining us today, and stay safe, stay well, and we'll meet you again next quarter. Thank you.

Operator

Thank you, sir. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.