Lohia Corp Limited (LCL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Lohia Corp Limited Q1NFI 27 ONI Conference Call hosted by Motila Roswal Financial Services. As a reminder, all participant line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation conclude. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. I now hand the conference over to Mr. Ashish Bhattar from Motila Raswal. Thank you, and over to you, sir.

Yeah, thank you, Danish. Thank you, everyone, for joining us today for Lohia Corp Limited Q1 FY27 on the sponsor's call. We are pleased to host the senior management of the company, represented by Mr. Rajkumar Lohiaji, Chairman and Managing Director, Mr. Gauru Lohiaji, full-time director and chief operating officer, Mr. Anupam Agrawalji, the chief financial officer, and Mr. K.G. Guptaji, advisor to CMD. Without further ado, I request Gaurav Lohiaji to start with your opening remarks, and then we can open the floor for anything. Over to you, Karim.

Good afternoon, everyone. It gives me immense pleasure to welcome you to the first earnings call of Lohia Corp Limited as a listed company. This is a special occasion for us. While becoming a listed company is an important milestone, our fundamental approach to business has not changed. We have always believed in building for the long term, investing in technology, strengthening our manufacturing capabilities, developing our people, and most importantly, remaining close to our customers. As most of you would know that we are the leading global manufacturer of machinery and equipment for technical textile with emphasis on woven fabric and sack production. We offer end-to-end solutions for the woven plastic fabric. Woven plastic finds its use in packaging as well as non-packaging applications. Packaging applications are packaging of cement, chemicals, food drains, fertilizers, shopping bags, and jumbo bags, which are also called FIBCs for bulk quantities. Non-packaging applications include geotextile, ground cover, tarpaulins, roof underlayment, and others. We have manufacturing facilities that transfer in Bangalore in India, and in US and Italy. We have a global customer base, which is served through an extensive sales and distribution network. We have an advanced manufacturing infrastructure and in-house training centers to cater to the needs of our customers for skilled manpower as well as for company's internal manufacturing requirements. We have a strong focus on innovation-led R&D for mechanical design, polymer processing, textile engineering, and automation. Over the years, we have built capabilities across the woven plastics machinery value chain and developed relationships with customers across India and international markets. But manufacturing is ultimately not about machines alone. It is about reliability, productivity, quality, and the value that our equipment creates for the customer over his entire operating life. Our teams continuously work on improving machine speeds, energy efficiency, automation, reliability, and ease of operation. Equally important is our ability to support customers after installation and respond to their evolving requirements. We believe this combination of engineering capability, manufacturing experience, and customer understanding is one of LoER Corp's important strengths. From an operating perspective, our focus remains on doing more with the resources we already have. This means improving productivity, reducing waste, shortening lead times, improving supply chain responsiveness, and making better use of our manufacturing assets. For us, operational excellence is not a one-time performance, it is a continuous process. Increasingly, we are using digital tools to help our teams identify problems earlier, make better decisions, and improve execution. At the same time, we continue to look ahead. Our customers Customers are increasingly looking for machines that provide higher productivity with lower energy consumption, reduced manpower, and greater automation. Sustainability and recycling are also becoming an increasingly important consideration for the plastic industry globally. These changes create opportunities for us to apply the engineering capabilities and customer knowledge that we have developed over many years to new products and solutions. We will pursue these opportunities with the same philosophy with which we have built our existing businesses, patiently, responsibly, and with a clear focus on creating value. Let me briefly touch upon our performance during the quarter before sharing some perspectives on the business. For the quarter, we reported revenue from operations of 503 crores, compared with 315 crores in the corresponding quarter last year, representing a growth of around 60%. Our EBITDA stood at 100 crores with an EBITDA margin of 19.9%, compared with 11.5% in the corresponding year last year. Profit after tax was 66 crores, compared with 17 crores in the same quarter last year. Our order book at the end of the quarter stood at approximately 1,778 crores, providing healthy visibility for the coming quarters. International markets continue to be an important part of our business, contributing approximately 41% of our revenue during the quarter. From an operations perspective, our focus remains firmly on productivity, quality, delivery performance, capacity utilization, and operating efficiency. Innovation continues to be the key driver of our growth strategy. During the quarter, we successfully rolled out new products and developed through enhanced R&D capabilities. These included the multi-layer coating line, COEX 1600, developed for demanding high-value applications in the flexible packaging industry, and our NOVA 6 Plus, our high-speed 6-shuttle circular loom with maximum weft insertion speed of up to 150px per minute. We also introduced one-loop, two-loop FIVC back-cutting machine, a specialized solution for processing tubular and flat woven polypropylene fabric, further strengthening the offering for the FIVC segment. These launches demonstrate our continued focus on innovation, higher productivity, and expanding our addressable markets through new products and applications. We also took important steps during the quarter to further strengthen our customer support capabilities. We established a virtual remote assistance center at Hanpur, enabling our technical teams to connect with customers remotely and provide real-time audio and video guidance. This will help us to respond faster to customer requirements, reduce machine downtime, and enhance the overall customer experience. We believe that our responsibility towards customer extends beyond supplying equipment. The availability of skilled operators is increasingly important for customers to achieve optimal performance from their machines. To address this needs, our training institute, TTRC, Technical Training and Research Center, the Academy for Technical Textiles, introduced a three-month residential training and certification program for block bottom bag machines during the quarter, aimed at developing skilled operators for the industry. For us, customer engagement does not end with the sale of machines. Technology, service, remote assistance, rebuilding, and operator training together allows us to create value for our customers throughout the life cycle of our equipment. What is particularly encouraging from an operations perspective is that the progress during the quarter has not come from any single initiator. It reflects continued efforts across the manufacturing productivity, Our objective is to continue strengthening each of these areas so that we grow. We also enhance the quality, resilience, and sustainability of our growth. Listing has brought a new set of stakeholders into the lawyer of our family. We welcome that responsibility. We are committed to communicating with you transparently, sharing our progress as well as the challenges we encounter along the way. I would like to thank our customers, suppliers, employees, and business partners for their continued confidence in us. To our new shareholders, thank you for your trust. With that, I hand over the phone to the CFO to take you to the financial performance for the quarter.

Good afternoon, investors, and thank you for joining us on Roya Corp Limited's first earning call following our listening. I will take you through the key financial highlights for this quarter. During the quarter, our revenue from operations stood at 503 crores, compared with 315 crores in the corresponding quarter last year, representing a growth of 60% Y on Y. The performance during the quarter was driven by both domestic as well as international markets and the execution of our order book across key product categories. Our domestic business contributed approximately 59% of the revenue, while exports contributed approximately 41%. Our EBITDA for the quarter was 100 crores compared with 36 crores in the corresponding quarter last year, registering a Y-on-Y growth of 276%. EBITDA margin stood at 19.9% compared with 11.5% in the same period last year. The movement in margins were primarily attributable to higher Our profit after tax stood at 66 crores representing a pat margin of 13%. Our order book for machines as of the end of the quarter stood at approximately 1780 crores, up 30% since March 26 and up 195% since June 25. These are backed by advances from customers to the tune of approximately 20%. The order book continues to provide reasonable visibility for execution over the coming quarters. Let me now address the area that remains particularly important to us, the working capital and cash generation. Our net working capital cycle at the end of the quarter stood at approximately 81 days compared with 84 days at the end of the previous financial year without adjusting for advances from customers. Our focus remains on managing inventory, receivables, and customer advances in a manner that supports growth. We will continue to invest selectively in areas that strengthen the long-term competitiveness of Loya Corp. These include product development, automation, digitalization, manufacturing productivity, and our emerging recycling and monofilament solutions. Our approach towards these investments will remain measured. We intend to fund growth while maintaining the financial discipline and balance sheet strength that have characterized the company over the years. The company continues to be a net debt negative company. As a newly listed company, we also recognize the importance of providing investors with consistent and transparent communication. We look forward to building that engagement with this investor community over the coming quarters. Thank you. We can now open the floor for questions.

Thank you so much. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone 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'll wait for a moment while the question queue assembles. First question comes from the line of Kiryan with Table 3. Please go ahead.

Yeah, thank you so much for the opportunity, sir, and many congratulations on the listing and a very good start to the call. Thank you for that, and I wish you all the best. So a couple of questions from my side, given this is the first call and this is my first interaction with the company. If you could just help us understand how the business works in terms of detail. In FI24, our order book was about 7.69 crores. Then we grew 10% of our order book to 8.30 crores. Then in FI26, we were at 1.358, and now we are probably at around 1.800 crores, right, as of the end of quarter. So, I mean, there's been a very, very steep jump in the order book. Why did this happen? Is it a peak of an upcycle, or is this very planned in terms of customer segments or products? Just trying to understand and figure out where we are, sir, in terms of steep order book jump and obviously the resultant revenue jump. It would be very helpful for us to understand the industry structure and your company strategy for growing this order book.

So, gentlemen, after the COVID cycle, there was a slump in investment, which is now seeing an uptick for the last two, three years. From 24, as you rightly pointed out, from 24, it has grown steeply. But as we understand from our customer fraternity, that there is substantial usage of the end products that our machine produce, which is growing applications all around. For example, the machines just not cater to the packaging needs of the industry. It also caters, it has started steeply catering to the non-packaging industry and where we are seeing growth in the applications that our machines serve. This is one big reason. Apart from that, since our products, the end products of our machines do not fall under single-use plastics category and with the government's impetus on coming heavily on single-use plastic or banning of single-use plastics, More and more applications are emerging, which our machines can cater. So what we understand from our loyal customer base over the years is that they are expanding meaningfully, and which is why you can see the growth in the order book built up. And we do not see a peaking of this order in the near future. There will be a while before, you know, kinds of, because KPEX always happens in cycles. So, but we believe that this is not the, you know, peak. Peak is still to go, achieve, achieve, achieve.

Got it, sir. Got it. Very helpful, sir. Thank you so much for that. Second question, sir, is in the latest order book that we have, around 1,800 crore as of end of June, only 30% is exports, remaining is domestic. In the past two, three years, I mean, given the revenue fall that we see, which is 40%, 50%, 40%, 45% of exports, are you seeing a much stronger growth in the domestic sector, and therefore domestic capex, and therefore this order book jump, or do you see that exports is going to make a comeback and we'll again have a 40%, 50% export order book given we are market leaders?

So, you are right. Currently, the order book is driven by more investment that is coming in the domestic markets. But we definitely believe that the exports will make a comeback. And if you look at our past numbers, you would see that our exports have raised from 45 to 55% of our revenue. So, we believe that exports would stabilize at around 50% of our revenue and order book going forward.

Got it, sir. The last question, if you may squeeze in. Sir, our, again, this is probably more financial question. We've reached about 20% EBITDA margin from 8.4% in FI24. Just wanted to check if there is any one-time within the EBITDA margins or is this EBITDA margin will sustain and continue to improve? How do you look through this year and generally going forward for us to model things?

So, to answer your question, pre-COVID, we have always had this between 15% to 20% kind of an EBITDA margin. In COVID years, it was lesser, but we are seeing regaining that EBITDA margin going forward, and we have actually achieved it in quarter 1 and also quarter 4 of last year. So, we believe that this is going to be the new normal for us.

So, we can at least continue to assess. It will be 20% at least, and from there, if it improves, it improves, because of operating levels. Yeah, yeah. Got it. Thank you. Thank you so much, and join back in the queue.

Thank you. Our next question comes from the line of Viraj with Enigma Small Opportunities Fund. Please go ahead.

Yeah, hello, sir. Congratulations for the listing and great set of results. Sir, given that our currency has depreciated significantly against all other currencies, and considering that Starlinger is our main competitor in export market, how do you see the pricing helping us gain market share, especially in the export market, given that our export revenue share has considerably come down in the last couple of years?

You can see the share.

So, what I meant was that given our currency has depreciated recently in the last 4-5 months, do you see that as an opportunity which makes you more competitive vis-a-vis Starlinger, especially in Southeast markets, Southeast Asian markets?

You see, in Southeast Asian market, our main competition comes from Chinese, mainly. And that currency also appreciates as it is rupee. And in the more developed market, which is coming more closely from starting there. Of course, the depreciation in rupee helps us in negotiations. And helps only if we have to give a higher discount with the order.

Sure, sir. And my last question is regarding the order book. You told the quarter-ending order book as of June, but I'm assuming the strength of order book continues, and given that most of our execution happens in six to nine months of receiving orders, is it fair to assume that most of the orders will be executed this year? So, if I just add the two, we are looking at closer to 2150 to 2200 crore revenue for this year.

It should be like that.

And given that first quarter was the lowest, I mean, generally first quarter for us is the leanest margin going forward. If we have that scale, then margins can only improve from first quarter going forward. Is that a fair understanding, sir?

In this world, which is so changing fast, wars are happening everywhere. The long-term impact of the movement of raw material or the parts, and China is also very strong player, what they supply and what they don't supply. All this will play a role in deciding the marches. One thing is fine, that everything remains safe, that better revenues, better management will be higher. But who knows that, you know, how the things will move tomorrow. So, we are committed to a price, but we are not committed to the price. We are not so strong, large company that will book, let's say, Dushan Steel or Tata Steel or something for one year.

Sure, sure. Thank you. Thank you so much, sir, and best of luck.

Thank you. Thank you very much.

Thank you. Our next question comes from the line of Harshit Patel with Aquarius Securities Private Limited. Please go ahead.

Thank you very much for the opportunity, and congratulations on a great quarter, sir. Sir, my first question is on our orders pipeline. If you can throw some light on what kind of inquiry pipeline we are witnessing right now in both domestic as well as export markets, and how much of this pipeline we will be able to convert into confirmed orders in the balanced part of the year? That would be my first question.

So, Harshit Ji, currently the order pipeline thing is not, you know, currently handy with me, but what we have seen in the past, inquiry pipeline, inquiry pipeline, so you see, how we get orders from the customers are, we are already a market leader in India and a respected name globally, so, I mean, people generally know us, the existing customers know us, as far as the customers which are entering this business for the first time, So their approach is generally to meet us at exhibitions where we participate throughout the globe and understand our offerings and then kind of express their interest on the investment. So those numbers are there, currently not handy with me, but what we have seen is that we have seen a conversion rate of approximately 10 to 15% of the inquiries that we have. It varies from time to time, but generally speaking, 10 to 15% of the inquiries that we have, they get converted into executable orders backed by advance. And within a period of, let's say, 2-3 years, because investment decisions take a bit of time. So, exhibition is one way of getting the inquiries. Website inquiries are also another way. And then our sales team approaches the different geographies and reaches out to customers where they get inquiries. So, I mean, you can consider 10 to 15 percent as a conversion rate. The number is not handy with me right now. Maybe you can drop me an email on the given email ID and we'll respond to that.

So, understood, sir. Second question is on our margins. Our margins have been very resilient in a difficult quarter, wherein most capital goods companies have seen some sort of pressure because of the commodity inflation. How have we managed this kind of resilient performance? Is it that we took significant prices and we were able to pass it on to the end customers? Or that some sort of backward integration initiatives helping us? Or maybe the product mix was better than the usual? What factors do this kind of resilient margin performance for us in this particular quarter?

So, there is a two-pronged approach here. One is that constantly revisiting our sales prices so that whatever new orders we get, they are at the most recent input material prices. We keep on revisiting our prices. So, that is the strategy number one that we adopt. Number two is that we enter into short-term and medium-term contracts with suppliers to be able to procure material at prices, which are favorable to us. And the third thing is that we keep on tweaking our discounts, discount structure, which helps us kind of maintain our margins. So, these three, two, three strategies have been helpful in, you know, keeping our EBITDA margins at the levels that you see today.

Understood. With a small follow-up on this, given that the domestic share in our outstanding order booth is much higher than the exposed share rise now, I would assume that in the balance part of FY27, the share of domestic revenues will be substantially higher than that of exposed. Would this create some sort of pressure on our margins in the balance part of the year? Or we are well covered because we already know at what prices we have booked the order. And therefore, you are guiding at this 20 odd kind of percentage level. That is my last question.

Yeah, yeah, your assumption is right. During the year, domestic revenue would have a larger share in the total revenue. But we have reasons to believe that our margins will not take a ride because of that. We will be sufficiently covered with our plannings, whatever we have planned, yeah.

Understood, sir. Thank you very much for answering my question in all the very best.

Thank you, Arshiji.

Thank you. Our next question comes from the line of Akshay Satijaog with Alfa Invesco. Please go ahead.

Thank you so much for the opportunity and congratulations on the listing front. So first, I actually wanted to understand what could be our peak capacity utilization that we can achieve in each of the, for each of the machines like tape exclusions, circular looms and winders?

Yes, something like around 80-85%.

Okay, and what gives you the confidence that will be, and what gives you the confidence and by when are you targeting, like, to achieve something, some that kind of a number?

So, our capacities that we have should take us to about 2,400, 2,500 pro turnover with some balancing of machines in there. Okay.

Also, sir, I believe roughly average sales realization for a take winder would be 3 crores and looms would be 10, 11 lakhs and then the winders would be somewhere around 50,000. So, if you could also highlight how are the margins for each of this product? Would it be similar range or?

So, see, you have to appreciate the product, if you are able to look at the investor tech that we circulated last night. So, you would appreciate that for different applications, different types of machines are required, number one. Number two, and these machines, based on the application, these machines, the configuration of these machines can change from one project to the other project. So, even if you were to, you know, somebody were to order, let's say, one kind of a machine, our gross margins are more or less similar. It is not different from product to product, but we generally look at the project order as a whole, rather than as a product level. So, for example, a customer who's putting up a plant for cement bag manufacturing, he would order something like one tape line, 250 odd winders, and around 40 odd looms. And this can happen in phases. So, he can put in the first phase, let's say, 20 looms, and then in the next phase, put another 20 looms. And depending upon his capacity, he can put one such configuration or maybe multiple such configurations. So, now we have to look at gross margins as a project as a whole, rather than at a product level.

Okay. Okay. And on the follow-up of the similar ones, so say if we set up one tape per end, so basically if we set up a project, what sort of service revenue can we expect starting next year onwards, say on a 100 rupees set up?

So, assuming one were to, let's say, make a, establish a plant of, let's say, 100 crore rupees, just to give you an example, we believe that around 2 to 3%, 3% approximately, would be our revenue from the parts that we would require after, you know, commissioning every year. These are consumable parts.

And that would be required for, can we say, 5 years, 7 years?

No, so the life of the machine, these are much more than that. So I would believe that because he would require on as a perpetual basis.

Okay. Okay. And these, I assume these service business might have better margins. So if you could just quantify for products.

Sorry, sir, please, please go ahead.

If you could just quantify the difference between products and service margins.

So, if you, with service, I assume you are meaning spare parts. Spare parts which are used to be a spare, yeah. So, the spare parts margins, gross margins are 2-3% higher than the machinery market, machinery business.

Okay. Okay. And so how long would it take approximately for us to say today, you set up an exhibition, you receive an order for 100 crore worth of machines. How long does it take us to place the order for the bill of materials, receive it, all the machining and all that we do, assembling it, and then how long does it take to finish the project?

So, currently, we are quoting between six to nine months as our execution period for a new order that comes in today, right? And depending upon, you know, the machineries, there could be some machinery which have been developed, let's say, 20 years back, where our manufacturing setup is attuned to deliver in shorter times, but maybe there are some new products in the overall offering which have been developed recently. There is some complexity involved in manufacturing, there the execution cycle would be a bit higher. But on an average, you can assume that six to nine months is a fair execution period for the order today.

Okay. Okay. And my final question, what percentage of revenues we would be receiving now from packaging machinery versus, if you could highlight the other segments as well for us?

So, okay. So, we have recently, you know, taken steps to enter into recycling machinery business. So, which is a small segment currently, which constitutes

a smaller constituent of the total revenue.

So, our 80-85% revenue would be coming from the machinery of the plastic woven industry that we serve. And around 10 to 12% would be coming from the spares parts. And the balance, 5-6% would be coming from these new initiatives that we have taken. But we believe that going forward, this will form a substantial, I mean, material part of the revenue offerings.

Okay. So the recycling one would be pet recycling or?

So we are offering only polyolefin recycling currently. And yeah, I have a request that you can more explain about it.

So we are not in polyester recycling as of now. Okay. We have aspirations of entering that segment in times to come. But as of today, we are only in polyolequine recycling segment.

And sir, if you could also highlight what access and categories we can get into. And, like, say, without putting in a lot of capital, just by taking some part of the equipment.

So, let's say, in the recycling machine segment, we are looking at expanding into other adjacencies, such as the shedding and granulating lines. And from an overall perspective, so Plastic Machinery segment is something that we can keep evaluating of looking at opportunities in this space.

Okay. That's it for my sake. Thank you so much.

Thank you. Our next question comes from the line of Sheyansh Talisara with Aquantis Wealth Advisors. Please go ahead. Yes, you may please go ahead with your question.

Most of my questions have been answered, even though I just wanted to understand, was there the last year's export number was a little muted because of the tariffs impact or the understanding is that the export numbers were lower because of the tariff scenario out there? And what would be the margin differential in domestic versus exports in terms of that machinery save that you guys do?

Okay, so last year numbers are not muted because of the tariff thing, because we do not sell machineries to the USA directly. In fact, our customers produce the fabric and that gets exported to these countries, America and Europe in particular, but our machinery directly goes to countries which are the developing world. So when we say we export to 100 countries They are not the Americas and the Europes or maybe the Australia and the Japans. They are mostly the countries which are developing, where labor is available and where I would say the demand for packaging is more. These developed world, they generally import the fabric or the bags from these developing countries. So, this is one part of the question. So, tariff does not affect us directly in a way. But, what was your second question?

What is the margin differential?

Yeah. So, we are, generally our prices in exports on an average, it will vary from geography to geography. But on an average, our prices, sales prices are 12 to 15% higher than domestic market.

12-15% higher in terms of pricing.

In terms of sales pricing. Marges would be lesser because of the fact that in exports there are contracts are CIF where we have to take care of the export freight as well as the agency commission in case there is an agent involved in the middle. Otherwise, the pricing as far as the pricing is concerned, it would be between 10-10% higher.

Okay, so then, when you say you'd be maintaining that 20% sort of operating margin, with the increased exports that you guys are talking about, how does that play out? You're talking about that operating leverage will play a big factor in this, or how should one understand?

So, operating leverage will definitely play out a big factor. But in a year in which exports is healthier than domestic, this EBITDA number would definitely inch up. But we do not give any guidance on the EBITDA number going forward. We currently are maintaining that. We internally target 20% as our EBITDA number.

Got it, fair enough. And any outlooks in terms of top-line growth that you guys give out, at least for, if not for, like a broader range, maybe for this year and next year, maybe F27, F28, a broader range would be helpful.

So we expect to grow in the range of 20 to 25%. We believe that the amount of applications that are including for our products, that would be a fair estimate to take.

Fair enough. And just the last one, the current utilization of capacity, you said, was around 50%. Did I get it right?

No, no. It is around, currently around 75%.

Around 75% and we have a limit to go around 85%.

Yeah, yeah, yeah.

Got it. Got it. Fair enough. Thank you. Thanks. Good luck to you guys.

Thank you.

Our next question comes from the line of Shivam Gupta with Trinitra Asset Managers. Please go ahead.

My most of the questions are covered. I just wanted to know, how are you seeing competition from Chinese at this moment? Are you having to become more aggressive on pricing or are customers still willing to pay a premium for technology and quality?

Can you repeat your question, please?

I want to know, how are you seeing competition from Chinese players at this moment? Are you having to become more aggressive on pricing or are customers still willing to pay a premium for technology and quality?

So, I will answer your second question first. We get premium over China. And all elements of business is a part of the service. As far as the competition, you are saying, China is a reality of competition. It is done everywhere. Not everywhere, but many, many cases. China is a reality which we all have to accept. And they have been a reality for a long time. In India, they are struggling to do anything. The service is their weakness. And the knowledge So, your

voice is very low. Can you be a little loud, please?

Have you done with your question? Yeah, I have one more question.

Can you just be a little loud? Your voice is very low.

Till now, till then, take other questions. I will join back again.

No problem. Thank you. Our next question comes from the line of Rishi Maheshwari with AXA Capital. Please go ahead.

Hi, sir. Thanks so much and great luck for the performance. I wish to ask one question, which is regarding the performance despite the industry growth that you're catering to. So, from what I gather, you're in catering to the cement industry, the textile, the technical textile industry, the FIBC, and some of the rural areas. Now, I wish to understand, you know, when we study about these industries, whether it's the FIBC, whether it's technical textiles, some of the listed players have not grown at all within this industry. Neither the capex has actually grown within the last two, three years. However, your growth has been consistent and I would say fairly higher versus the industry growth. On top of that, your order book still continues to grow phenomenally. So help us understand this bridge. I know that you've spoken a little about their product extension that has helped you grow. But if you can delve a little deeper into this so that I'll be able to understand the sustainability of your growth going ahead as well.

So when you say that, why are we more consistent customers? Because we are working with technology, and they are the user of technology. So, once the technology is available, then it is management and the pocket and, you know, the competition becomes big if there is no technical barrier. In our case, it is a technical barrier. But in the customer's case, it is not a technical barrier. So, the competition is higher. This is the end user industry. It will always remain higher. And we are not selling to cement. We are selling bags to the customer, our customers who supply bags to the cement. And cement is an important sector, but it is, let's say, it does not have the same dominance in the uses, replications as...

You create this as, you know, the machines that the existing industry-wide is being used are slightly rudimentary, and they are being replaced by technologically advanced machines which Loya is supplying to them. Is that how you would like to place it?

No, I would not say that. I would not say that. There is always an advancement over years. That's a very technical job. Making a bag is not that. So, I think it relates to the complete technology.

Sir, I have some understanding of it. Perhaps I'll get clearer understanding if I get to eat it by myself. Thank you so much for this. All the best.

Thank you. Our next question comes from the line of Arvind Arora with a square capital. Please go ahead.

Hello. Congratulations, sir, on good set of numbers. My question is more on the R&D spend that we are doing, which is roughly at 3% the last year. So first, what is our plan for the current year, the 527 and for next year? And what exactly we are doing, sir? And is there any product that we are expecting to launch, which could be our like zero product or something like that?

So, our R&D spend, like you mentioned, is around 3%. That continues to be our average going forward as well. We are working on some technologies that can be hero products in times to come, but that's confidential R&D development that is happening. It is on automation lines, etc.

Okay, so this 3% will be consistent?

IoT products also are, we are keeping on improving our IoT offerings from our R&D stable as well.

Okay, understood.

So this 3% would be consistently, we will maintain this or we can increase this spend like considering if you are expecting anything, any opportunity in the market right now?

So, we assume that 3% will be our going forward average.

Okay. Okay. Understood. Fair enough. And also the next part is like you mentioned, we are at 50-55% utilization. Okay. Considering the order book and everything, like we would be, I think, we'll be achieving 80% in the current year itself. So, what's our CapEx plan, sir, for in the current year or the next year, what we are planning or do we have any, like, bottleneck that we can do, like?

So, sir, first I will get this statistic right. We are currently operating at around 70-72% of capacity. And what we earlier said is that we can reach up to an ideal capacity of around 85%, right? Right? So, I mean, having said this, there is always some balancing needs based on the product nature of products that we have to manufacture for our customers. And depending on, see, the manufacturing capacity is very fungible in nature across product lines. Every component that is manufactured in-house has to be, let's say, machine, sheet metal shop, electronic shop. We all have all these shops in-house. So, the capacity is very fungible across the product line, number one. And number two, we have a large vendor base. So, components can be easily made in-house as well as made by the vendor community that we have developed over the years. So, having said that, what I believe is that we keep on balancing some equipment, some machinery. We keep on doing some maintenance capex every year. But as we mentioned earlier, that the current capacities are good to take us to a revenue of around 2,400 to 1,500. And beyond that, we would require some major CAPEX, which we believe is yet to, you know, we have yet not started any plans around that. And we are a very light CAPEX. We are very light on CAPEX. As far as if you look at our asset turnover issues, you would see that we turn our assets in the range of 3 to 4. So, for every 500 crore rupee turnover going forward after we achieve 2500, we would require a CAPEX of around 80 to 90 or 100 crores. So, it is there in the horizon, but not immediately.

But, sir, how much time will it take, like, say, for example, today, if you think, like, for CapEx, okay, so how much time will it take to go live, like?

Five to six months.

Okay, okay. So, maximum five to six months, we can expand our capacity, correct?

So, land we have here in Kanpur, adjacent to our current operations, it's only the shed and the equipment that is required. So, depending upon delivery schedules of the supplier, it can be made available.

Understood. And is there any kind of benefit through regulations in India where to, like, save ourselves from China, Chinese competition, any regulation like BIS or anything like which can benefit us going forward?

No, not really. I mean, other than the fact that Chinese and the European players have to pay custom duty to bring that equipment to India.

Okay.

I mean, the customers have to pay. So, the landed cost becomes higher. To that extent, we remain competitive. But other than that, I don't see any other BIS or other, any other thing which favors us.

Okay, understood. But then, the custom duty and everything, they can take the benefit like the credit and everything. So, apart from this custom duty, there is no other regulatory like restriction which is helping us, correct?

No, no, not really.

Okay, understood.

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

Thank you. Next question comes from the line of Prince Chaudhary with ThinkVealth. Please go ahead.

Yeah, hi. Thanks for the opportunity. Sir, I want to understand the, whatever the current order book they have, like 1778 crores, or whatever the pipeline which they foresee for upcoming years. So, whether the demand is coming from the capacity expansion of the, you know, technical textile players, or whether the demand is coming from the replacement cycle kind of thing. Can you explain that?

Yeah, so the majority of the demand is coming from the existing players. You are right. Some amount of replacement keeps on happening every year. Currently, I would believe that the order book would have around between 3 to 5% coming from the placement cycles, but majority is coming from the new expansion that our customers are building.

Okay, and do you see the trend to continue like 3-4% from the replacement and majority will come from the new capacity expansion of the clear for those clear?

No, so going forward, we believe that this replacement thing would tend to increase from what we are here today.

Okay, and what is the opportunity size that you see for the replacement?

So, see, in India, we have had a large market share, and we have been operating since the last 40 years. So, since the machine life is almost like between 20 years and 25 years, depending upon how well it is maintained, so we see that higher replacement cycle is going forward. I would not be able to put a number to that currently, but yes, there is an opportunity there. And in the international markets also, we have been exporting in the last, we started exporting somewhere around 21-22, sorry, 2002 and 2003 onwards. So it has been almost like 25 years. So there is a replacement cycle also happening for people who want to replace old Taiwanese and Chinese machines, which are operating throughout the globe. So we see opportunities there also. But putting a number to it would be difficult, right? Okay.

Understood. And in terms of pricing, how competitive we are with other domestic players or Chinese players?

So, I mean, as far as our offerings are concerned, we are, we demand, we command, let's say, 15 to 20% higher prices than Chinese currently.

Sorry, 15 to 20% higher than Chinese? Okay, sir. Okay, understood. Thank you for answering all the questions.

Thank you so much, sir. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Anupam Agarwal, CFO, for closing comments. Thank you. Anupam Agarwal, CFO, for closing comments. Thank you.

Anupam Agarwal, CFO, for closing comments. Thank you, Anupam Agarwal, CFO, for closing comments. Thank you, investors, for your time today on the call. We look forward to opportunities to engage with you in future. And thanks one month again for joining this call. Thank you so much.

Thank you so much, sir. Ladies and gentlemen, on behalf of Mutlal Oswal Financial Services, that concludes today's call. Thank you for joining us, and you may now disconnect your lines. Thank you.