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

Operator

Ladies and gentlemen, good day and welcome to the Rolex Springs Limited Q2 and H1 FY27 Earnings Conference Call, hosted by Select Capital Private Client Group. 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 the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note, this conference is being recorded. I now hand the conference over to Mr. Dheeraj Shah from Philip Capital Private Client Group. Thank you and over to you, sir.

Dheeraj Shah, Host

Yeah, thank you, Nazneem. A very good morning, everyone. From behalf of Philip Capital Private Client Group, I welcome you to the Q2 and H1 FY27 earning conference call of Rolex Ring Limited. Joining us today from the management, we have Mr. Manish Madhika, Chairman and Managing Director, and Mr. Iren Doshi, Chief Financial Officer of the company. We thank management for allowing us to host the early conference call. I will now hand over the call to Mr. Iren Doshi, sir, for his opening remarks. Following his address, we will open the floor for Q&A. Over to you, Iren sir.

Hiren Doshi, CFO

Very good morning to all of you, and warm welcome to everyone on the calls. Along with me, I have Mr. Manish Madhika, CMD of the company. I would also like to thank Philip Capital for arranging this call, and MSGA is also there with us, our investor relations advisors. I hope you all have all received our investor deck by now. When we spoke in August 26, we told you that the constraint in quarter 1 was execution, not the demand, and that in Q2 would reflect in the true strength of our order book. I am pleased to say that is how it has laid in, played out during the quarter 2 of fiscal 27. Fiscal 27, quarter 2 has been the strongest quarter in the history of the company on revenue side, on margin side, on efficiency and profitability. Coming to the quarter 2, fiscal 27, revenue from the operations came in at Rs 389 crores. Which is up by 43% year-on-year and 28% quarter-on-quarter. These numbers include a one-time benefit of around Rs.18 crores of customs duty, what we paid and accounted as in revenue from the U.S. tariff. Which as we had already indicated on our earlier call that we are going to recognize in revenue. Excluding this revenue, our overall revenue grew about 32% year-on-year in quarter to FY27. The component sales that is consisting of rings and auto component both grew by 32% year-on-year to Rs. 330 crore in this quarter too. Revenue from auto components grew by 68% year-on-year to Rs. 177 crore, while revenue from the bearing rings grew 6% to Rs. 153 crore. Otto components now contribute 54% of our overall sales, compared to 42% in Q2 of previous fiscal. This shift towards higher value precision machine components remains the single biggest driver of our margin profile, and it is only Otto components. As we explained in our earlier call, even in August 26, wherever our products carry more value-added processes, including bearing rings for EV and hybrid applications and other critical rings, we earn similar kind of margins on the both the segments. Looking at the regional mix, exports grew by 55% year-on-year to Rs.167 crores. And now, account for 51% of component sales. Within auto components, exports grew by 89% to Rs.129 crores, while domestic auto components grew by 29% to Rs.48 crores. In bearing rings, our domestic business grew by almost 10%, reaching Rs.115 crore. While bearing ring exports were broadly flat at Rs 38 crore, as industrial demand in Europe remains soft. Here our strategy is to reduce dependency on single or couple of customer group by developing new bearing ring customers overseas, particularly in Europe and US, where we have already strong automotive relationships. And by approaching these plans of our existing customers that we do not yet supply till now. By geography, the U.S. was the standout in this particular quarter. Our U.S. component revenue more than doubled year-on-year to Rs.92 crores as customers who had held back through FY26 returned with the meaningful volume. This includes a key customer whose volume fell by 35-40% in Fiscal 26. As we indicated in August, that business is now back on track with its the Fiscal 25 level. By end user industry, passenger vehicles contribute almost 47% of our component sales in Q2, commercial and heavy vehicles above to 30%, industrial above to 17-19%, And EV hybrid also consisting over there. Coming to the margin side, gross margin for the quarter has sharply increased up by almost 700 business points year on year, reflecting a richer product mix, disciplined raw material management, and the duty refund. EBITDA grew by 72% year-on-year to Rs.94 crores with EBITDA margin at 24.2% up by almost 400 basis points. Profit after tax grew by 68% to Rs.74 crores with pet margin of 19.1% up to 280 basis points. I want to be transparent about the moving parts. Excluding the refund, our EBITDA margin for the quarter would be around 21%. That was delivered in quarter where ocean freights ran nearly three times compared to their normal levels. Fuel gas prices have gone up by 40% and the other consumable costs rose following the escalation of West Asia conflict. Which is why other expense were higher in this particular quarter. Our customer contracts pass through raw material and foreign exchange movements but not freight. So a spike of these kind of sits with us in the first instance. We have absorbed most of this so far and we are in active discussion with our customers, particularly in the US, on sharing of this freight burden. We have done this before when we had a Red Sea impact before three years back. During the last major freight spike, customers reimburse part of the cost, and one customer change its delivery terms for that period. The early response this time has been positive. One more input that ocean freight, we are already observing decline from the month of October 26. And this decline, auto components continue to grow as a share of our mix, we expect operating margins to move back into our guided range of 21-22 percentage. Coming to the first half, compared to the first half of fiscal 26, for the first half, revenue From operations grew by 23% YOY to Rs.694 cross. O2 components grew by 28% to Rs.318 crores, while bearing rings were flat at Rs.271 crores. With the Q1 labor constraint as we indicated earlier, it has offset by a stronger quarter 2. Exports for the half grew by 26% to Rs.296 crores. Gross margin for first half stood at almost 58% up by 680 basis points year-on-year. EBITDA grew by 40% to Rs.163 crore with EBITDA margin of 23.5% up by 280 basis points. Profit after tax grew by 44% to Rs.134 crore with pet margin of 19.4%. On the balance sheet and cash flow side, we remain completely debt-free. After completing the buyback of Rs. 180 crore during the first half, we continue to hold about Rs. 260 crore in cash bank balances and with the liquid investments. Operating cash flow for the first half was at Rs. 68 crore. This was lower than the last year because of working capital increase about by Rs 74 crore as inventory and receivables rose up with the step-up sales in quarter two and with longer transit times on our export shipments. We expect a part of this unveiled in the second half as freight lengths are expecting to be normalized. Another factor of what we discussed last time, that is the U.S. tariff, what has impacted? Let me address a question many of you have asked us over the last few quarters that U.S. tariff are no longer impacting our business. Our customers have accepted the current duty structure and order flows from the U.S. have quite normalized. Our U.S. automotive revenues more than doubled year on year in quarter two. And we didn't have rather lose any single customer because of this tariff disruption. As of now, on the duties what we paid earlier, we registered with the U.S. Customs and now accounted the majority of the reference of the duties paid under the earlier tariff regime. As committed, these referrals are being recognized as revenue in this quarter too, which is giving benefit around of Rs.18 crore. It's a one-time item. On our order book, for the coming first second half of fiscal 27, our order book remains strong in the range of rupees 120 to 125 crores per month. Customers who held back through fiscal 26 are placing orders with their confidence again, and the new programs we won last year are now scaling up. With the labor situation fully normalized from the start of the quarter, we were able to convert this order book into output at the pace we had planned. As we said in August, the output we could not deliver in Q1 was deferred, not lost. And Q2 bears that out. As we mentioned earlier, July was the highest monthly revenue in our history, and we sustained that run rate through August and September. We expect H2 fiscal 27 to be stronger than H1 because of these three reasons. First, new programs. One of the two new customer plans begin supply in Q3 and in early Q4 of fiscal 27. And the programs we onboarded over the last year In the last quarter or mid-third quarter of last fiscal are moving from initial volumes towards their peak run rates. Programs those started in the last quarter of fiscal 26 are ramping up through this year, and one of our key customers has given us orders for its new plants as well as an incremental volumes on existing program. Apart from couple of US programs that the OEM still has on hold, the programs in our earlier announced pipeline are coming back, and the new programs we won in fiscal 26 have started supplies. New customer validation in our industry takes 15 to 18 months minimum, and much of that work is now behind us. Secondly, The capacity, we are running at 65% capacity utilization today, and we expect to move towards 70%, 72% by end of this fiscal, within our planned capex of rupees 30 to 40 crores a year. That gives us operating leverage as volumes grow. Our forging and machining facilities are fungible. Across bearing rings and auto components, so we can direct capacity to the programs that offer the right volume, tenure, and right margin. Thirdly, the customer association in Europe, we continue to build on our expanding automotive presence are in discussion with couple of tier 1 suppliers for the commercial vehicle and industrial products. And we are also in discussions with another new customer in the US. And in India, existing bearing customers continue to increase their wallet share in automotive bearing rings. In addition, one of our domestic customer has diversified into industrial bearings, and we have already submitted sample for that business for which we are very much positive. Looking ahead, taken together, the trends what we spoke about in May and August are playing out as we expected. The US has came back, Europe continues to grow on the back of our automotive presence, and our domestic business is steady. With H1 revenue growth of 23%, we remain confident of delivering at our guided revenue growth for fiscal 27. Looking further out, we continue to see fiscal 28 growth moving towards high teens as new programs reach full volumes. On margins, we expect fiscal 28 EBITDA margin to be around 50 to 75 basis points higher than the fiscal 27. We are also building a new growth menu for the medium term and We have received some registrations, initial approvals in the sectors of defense and aerospace, and we expect revenue from this segment over the next 12 to 18 months. We are working with one of the very senior consultants in this area, and our focus is on round and hot forge components that suit our existing facilities. We are seeing inquiries for larger bearing rings used in wind and industrial equipment, which carry better margins than our traditional rings. And we continue to explore inorganically to add value-added processes in India, which is remaining at an early stage as of now, but we have appointed a global agency to help us to evaluate partners. The aim is to bring more value-added processes and the ready OEM access that comes with them to our facilities in India. On capital allocation, the buyback was the first of many steps in returning to value to our shareholders. With a debt-free balance sheet and a strong cash generation, the board will continue to evaluate dividends, further round-off buyback, and other revenues, while preserving the cash what we need for our growth and expansion. Fiscal 26 tasted our resilience. It taught us that no business is immune to external disruption, but a business built on strong fundamentals. If customer relationship and operational discipline can absorb the disruption and come out stronger. First half of fiscal 27 has shown what the business can do when those external pressure is higher volumes, a richer product mix, stronger margin, and a cleaner balance sheet than any point in our history. As I look ahead, I see Rolex rings as a company that is well capitalized, well positioned, and well prepared for the next phase of growth. What sets us apart in our facility, the range of product, what we can make, our precision, our in-house tooling expertise, our years, and the depth of our customer relationships. Our ambition remains unchanged to be the most trusted precision-forging partner for the world's leading barring and automotive OEMs as well as Tier 1, Tier 2 players. We are well on our way. With this, I would like to take a pause. Thank you very much for your patient hearing. I request Philip Capital that we can now open the floor for the Q&A session.

Operator

Thank you very much. We will now begin 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 will wait for a moment while the question queue assembles. The question is from the line of Varun Jain from Dalat Capital. Please go ahead.

Varun Jain, Analyst — Dalat Capital

Yeah. Hi, sir. Good morning. Starting with a bookkeeping question. So, can you disclose your scrap revenue and export incentives for Q2?

Hiren Doshi, CFO

Scrap revenue for Q2 is 23 crore, and export incentive is 4.2 crore.

Varun Jain, Analyst — Dalat Capital

Okay, and in your segmental reporting, the tariff refund will fit into other revenue, right? It will not be included in the bearing or auto component, if I look at the segmental reporting, right?

Hiren Doshi, CFO

Yes, it would be reported as an other, under the other income, but on the quarterly numbers, what we have displayed, what we have disclosed, it is there on the revenue from the operations on the very first line.

Varun Jain, Analyst — Dalat Capital

Okay. Your gross margin has expanded quite a bit in this quarter, but all the other players in the industry have been reporting gross margin decline due to, you know, pricing pressure in metals and everything. So, why the divergence?

Hiren Doshi, CFO

See, first of all, the gross margins have increased or rather better yield is because of the product mix. The auto component business has gone up significantly. That is one of the reasons. And another good part of our business is that we have 100% pass-through mechanism as far as the commodity or metal price is concerned. So, whatever the commodity prices have been increased in the previous couple of quarters, those are being passed and those are being recovered from the customers.

Varun Jain, Analyst — Dalat Capital

Got it, sir. And now, sir, coming to the auto component export business, so, sir, what is the extent of recovery we are seeing in Haliton? Are we hitting a 2025 CR per month run rate here, and do we expect to cross 500 crore in auto component export revenue in FY27?

Hiren Doshi, CFO

F527 auto components, overall business, definitely we will be crossing, you know, this 550 crore. That is minimum what I'm expecting.

Varun Jain, Analyst — Dalat Capital

Okay, and does this include the Alice and Dana opportunity which we were expecting to, you know, get some business from?

Hiren Doshi, CFO

No, no, it is not included. Let me tell you that in the last fiscal, you know, we had this auto component business revenue was somewhere about, you know, 500 and 5 odd crores. Let me tell you, in this first half, I have already achieved somewhere about 318 crore, and we would be crossing more than 550-575 by end of this fiscal.

Varun Jain, Analyst — Dalat Capital

And then, sir, going forward in FY20 and FY29, how fast do you expect this to grow?

Hiren Doshi, CFO

In auto component segment, at least minimum 20 to 22 percentage year on year.

Varun Jain, Analyst — Dalat Capital

So, isn't it too aggressive? Like, why? What drives this confidence? Where will this additional demand come from?

Hiren Doshi, CFO

See, it is the first of all additional demand, something what we have lost, rather it was not there in last year because of U.S. tariff and anything. Apart from that, the new programs what has been started in the previous fiscal, the couple of new programs which are about to start, and the pick ramp up of these programs will be there in fiscal 28 and 29. So we are very much confident on that part.

Varun Jain, Analyst — Dalat Capital

Sure, sir. And before I fall back in the queue, any color on the defense and aerospace entry which we are expecting over the next 12 months?

Hiren Doshi, CFO

As I told you that if we are very much in a primary stage, it would be difficult to have, you know, a significant number or a considerable number at least in next 12 months. But beyond that, we expect some entry over there. Not in the school, obviously.

Varun Jain, Analyst — Dalat Capital

So what is the application you are supplying to, if you can tell us that?

Hiren Doshi, CFO

So those certain things I think will not be able to discuss over the call. Applications in all, you know, wherever the hot forge components are required, a round job kind of thing that we are able to produce, and those are being used for various sectors in the defense, but in aerospace, certain engine parts, certain other technical transmission parts, what we are able to produce.

Varun Jain, Analyst — Dalat Capital

Sure, sir. I'll fall back in the queue. Thank you.

Operator

Thank you. Next question is from the line of C.A. Garvit Goyal from Seren Alpha. Please go ahead.

C.A. Garvit Goyal, Analyst — Serene Alpha

Hi, I'm Auroban. Yes. Good morning, sir, and congrats for a good rate of numbers. First question is on the order book run rate. The 120 to 125 CR run rate, I think historically also we used to be around this number. So, looking at the current environment, specifically when you are speaking about the auto component business and along with some inquiries coming from the larger size of components, I think from the wind applications, right, that you mentioned in the opening remarks, are you seeing these order book run rate on a quarterly basis to have a huge jump maybe from the upcoming quarter? Can you put some color on that?

Hiren Doshi, CFO

Yes, the order book what I mentioned is, you know, it's Rs. 120 to 125 crore. That is what they are for next, you know, few months. And as far as the windmill and other bigger size of components, as I mentioned that we need a good amount of time in the development, in the testing and all these things. So, in the coming quarters, not during this fiscal, but in fiscal 28, we are expecting some good numbers for these kind of components, which are mainly there into bearing ring segment and other industrial segments. But the auto components, what we have already developed, and the ramp-up, as I was mentioning, it will be started. So, these 125 crore monthly order book, if you ask me, in fiscal 28, what we envisage is maybe increased by at least, you know, 5 to 7% month on month.

C.A. Garvit Goyal, Analyst — Serene Alpha

From which geographies these inquiries are coming, specifically for this wind application, the larger size of building?

Hiren Doshi, CFO

Sorry, I didn't get your question.

C.A. Garvit Goyal, Analyst — Serene Alpha

From which geography are you seeing these inquiries coming? Is it domestic or is it from international geography? Or larger hearing? From domestic market.

Hiren Doshi, CFO

Yes, sir. Domestic market.

C.A. Garvit Goyal, Analyst — Serene Alpha

OK, from the domestic market itself. And secondly, how Europe is doing as a geography for us? How are you seeing the things happening there in terms of the demand and how we should expect the inquiries from Europe in the coming quarters and execution in the coming quarters?

Hiren Doshi, CFO

See, Europe was a concern prior to fiscal 26, and we had a good return in Europe, and we came back to somewhere about 23%, 24% of contribution from the Europe side on our overall business, and majority of the new orders, what we won, what programs have been started, those are from Europe, and now those orders are being ramped up, and even the good inquiries are there from the European sector for auto components, And we are exploring from our side to develop a bedding link customers, as I was mentioning, for the industrial components and automotive applications. So, in totality, Europe, a gradual, but... The firm or substantial, with the substance, we are expecting a growth curve.

C.A. Garvit Goyal, Analyst — Serene Alpha

Understood. So, just one last question looking at the conversations I listened to and the answers I got from you. What I am understanding is the demand environment is pretty good now as compared to fast. And we are entering into the new product as well and trying to get new customers on board it. So, looking at all these things, I think we will be going at the 15%, the number that you have given in the past. Can we expect... from 20 and onwards, maybe on the 25 to 30% kind of number. Can we expect Rolus things to grow?

Hiren Doshi, CFO

See, we do have that potential. As I was mentioning, there are a couple of reasons for our growth because of our sound order book, the forecast or the dispatch schedules given by the customers that would be there in the future. And with the couple of new customers, what we are talking for the business, which are supposed to be started in 28 or maybe in 29. So we can definitely achieve or rather able to manage 25, 30 percent growth. And it is... It's not something surprising that if this continuation of this trend, subject to not to have any disturbances of geopolitical and other economical factors from the overseas market, maybe we will be having quite better number, even higher teen or even more than that, more than 22%, 23% growth, definitely we can expect in fiscal 29.

C.A. Garvit Goyal, Analyst — Serene Alpha

Understood, sir. Understood. That's helpful. I'll join back with you, sir. Thank you very much.

Operator

Thank you. Next question is from the line of Mihir Vora from Equirus Securities. Please go ahead.

Mihir Vora, Analyst — Equirus Securities

Hi, thank you for taking my question and congrats on a good set of numbers. So, even when I see our numbers, even when I take out the tariff number, we broadly have done around a 370 odd kind of a revenue. And within that, our product revenues are around 110 crore per month. So, did you rightly point out that we may be looking at 120 to 125 crore per month in the second half? And are we seeing that kind of attraction in October as such?

Hiren Doshi, CFO

Yes, we had the same traction in the October 26th. It is there. And we are expecting this number 120 or something month on month in the second half of this fiscal.

Mihir Vora, Analyst — Equirus Securities

And this will be the product revenue, right? Excluding the scrap and exporting. Thank you.

Hiren Doshi, CFO

Yes.

Mihir Vora, Analyst — Equirus Securities

Okay. And just one thing here, like in terms of tariff refund, we have approximately seen a 24 crore tariff refund till now. Any other, like more, can you just throw some light on any additional amount which is spending going ahead?

Hiren Doshi, CFO

No, precisely, I'll tell you that it's not 24 crore. It is somewhere about 21 crore what the US tariff refund accounted. Marginal, very marginal amount is yet to receive.

Mihir Vora, Analyst — Equirus Securities

Okay, but not major like an 18 crore kind of figure. No, no. Okay, so we have broadly done past that. Okay. And secondly, sir, in terms of bearing industry, now based on our discussions with the customers, do we expect some kind of recovery in the bearing industry overall in the next one year or two year time frame? How are you seeing the market access right now?

Hiren Doshi, CFO

So you must have seen that in bearing ring, in domestic business, if you just see in Q1, I had a revenue of 86 crore, which has gone up to 115 crore in Q2. So overall, if you compare even the first half of this year for first half of previous year, I have a growth of 10%. In spite of Having some reduction in one customer group, still I'll be having a growth of 10 odd percentage in the domestic bearing ring business, which means that with other customers I am growing, with other customers they are giving me more components, and I'm trying to add new bearing ring customers in domestic, and also we are trying the same thing for the overseas market, where we expect that down the line six months, we would be having some better number in the export bearing ring too.

Mihir Vora, Analyst — Equirus Securities

Right, right, right. All right. And then lastly, when I'm just adding up the numbers on your PPT, the bearing revenue, auto component, and the scrap incentive and tariff refund, I think there's some bit of difference which I am getting. I'm getting a number of around 375 odd crores versus 389. So, like, can you just again give the breakup in terms of domestic export bearings and domestic and export auto component numbers?

Hiren Doshi, CFO

See domestic bearing ring for the Q2 it is 115 crore. Domestic auto component it is 48 crore. Bearing ring exports it is 38 crore. Auto component exports it is 129 crore. These are the component numbers.

Mihir Vora, Analyst — Equirus Securities

Right, this is 330 crores total.

Hiren Doshi, CFO

Yes. And then your scrap of? Scrap of 23 crore. Okay. Exporting incentives of 4.4 crore. Okay. Again, this U.S. duty refund accounted is somewhere about 18 crore. Okay. And... 15 odd crore, the duty reimbursement, what we got from our customers.

Mihir Vora, Analyst — Equirus Securities

Okay, so this is the additional amount of duty reimbursement.

Hiren Doshi, CFO

Yes, and this duty reimbursement would be there in the coming quarters also.

Mihir Vora, Analyst — Equirus Securities

So, but will this reverse going ahead because now we are getting the duty refund as well on the other side, the tariff refund?

Hiren Doshi, CFO

No, see, as of now, from last November 25 onwards, there is a duty of 25%, which is not being refunded now onwards. And what we are paying to the customs by the clearance of the goods, and we keep into warehousing, whenever my customer is lifting, they are going to pay back that 25% to me. So when I'm receiving that 25% from my customer, it is being accounted as a revenue. And when I expend it, it is to be charged in my P&L. Let me tell you one thing that in this quarter too, there is a custom duty of almost... 10 odd crore rupees, which is being paid, which has been paid by me, but yet to recover from customer. I'm talking only for the Q2. Okay, got it. That would be coming subsequently.

Mihir Vora, Analyst — Equirus Securities

Sure. Okay, sir. Okay, that's all from my take.

Hiten, Analyst — Sequent Investments

Thank you, Irindya.

Operator

Thank you. Next question is from the line of Vinit from Toro Wealth Managers. Please go ahead.

Speaker 8

Thank you so much, sir, for the opportunity. And just confirming with the question of previous participants, I guess I didn't hear it properly. The monthly revenue rendered that you are guiding is 120 crores, right, for the second half?

Hiren Doshi, CFO

For the second half, it is 120 crores, yes.

Speaker 8

Understood, sir. And, sir, is it like in quarter three and if when we go to the quarter four, can we see an improvement in that as well? These things are improving.

Hiren Doshi, CFO

Yes, quarter four would be better even with compared to quarter three. As I told you that a couple of customers or other programs will be started in end of Q3 and in beginning of Q4.

Speaker 8

Understood, sir. And, sir, about sustainable margins, excluding the tariff income, tariff refund, what is the margin that you are writing for, for this year and next year?

Hiren Doshi, CFO

See, in spite of having these kind of, you know, incremental cost, this ocean freight, you know, it has increased by threefold or almost three times. In spite of having those things adverse and even the other inflationary, this thing, I am able to manage my margin at the rate what we had in previous quarters, which is somewhere about approximately 21%. And if now the things are further, you know, ocean freight, we observe that it is going to be declined or rather it is on the declining phase. I expect to have some kind of incremental margin in the second half and definitely there in the next fiscal, maybe by 50 to 75 basis points conservatively.

Speaker 8

I understood, sir. And, sir, if you can give us a number about what's the total freight cost that we are incurring, let's say, every quarter, just to have a context.

Hiren Doshi, CFO

Say, for example, let me tell you, in fiscal, or rather first half of 26, you know, we spend somewhere about 10 crore rupees for Ocean Freight in the first half of Fiscal 26. Now, for Fiscal 27, these first half, April 26 to September 26, we paid more than 25 crore rupees.

Speaker 8

Okay, I know that gives a good view about the freight expenses. Thank you so much, sir. All the best for the coming orders. Right.

Operator

Thank you. Next question is from the line of Salil Desai, from Marsalis Investment Managers. Please go ahead.

Salil Desai, Analyst — Marsalis Investment Managers

Thank you. Good morning, Hiran Bai. So, one question I had was, and I'm still not very sure, and if you can explain again, it would be very helpful. Uh, what is the difference in the growth rate between bearing rings and Auto count in the export market. So one is growing at 89%, whereas bearing rings is growing just about 600%. So what exactly is this difference due to?

Hiren Doshi, CFO

See, this difference is because of we are exploring customers for the auto components, auto components which carries better value added processes, better volumes, margins are better. So, and the main program what we want, you know, the certain plants of our existing customer which were not at all there in before year back. So, now they are on the board and they have multi-locational plant across the US, Europe, Mexico, Canada. So, we are getting, you know, those plant into our system. That is the main range. And in bearing ring, particularly in the, our exports was there in Europe, where in majority of those things are for the industrial application bearing rings. So now we are trying to get the new automotive bearing rings, bearing manufacturers in Europe and US both. But the demand on the bearing ring side, it is... Slightly, you know, less compared to the auto components what we have. And auto components, we have a wide range of the auto components. When a particular customer, if they, you know, allowed or they approved me, they always try to get more and more components because of my supply chain, my better quality, my high precision level.

Salil Desai, Analyst — Marsalis Investment Managers

Right, but would it be fair to think that if, let's say, you're pursuing automotive to varying customers also. But given that both the automotive components and automotive bearings would have the same underlying industry, the growth incrementally should be better. Is that a fair assumption?

Hiren Doshi, CFO

Yes, definitely. In automotive bearing rings, also we expect better. And that is why in domestic bearing ring, I am grew by rather more than 10%. That is why. Right, right.

Salil Desai, Analyst — Marsalis Investment Managers

Right. And just to end this, you're saying that partly your growth differential is because you're deliberately targeting more auto-comp? At the same time, industrial demand in Europe is also weak.

Hiren Doshi, CFO

Not 100%, not 100% that we are deliberately targeting only auto components. Even I am very much inclined to have a bearing ring customer who are there into EV, hybrid, and those things. And even in a normal eyes kind of automotive market, I am happy to supply that. And we are incrementally getting that thing.

Salil Desai, Analyst — Marsalis Investment Managers

Okay, so the focus is better margin products rather than just what category they belong to, right?

Hiren Doshi, CFO

Better margin and the products which are suitable to my, you know, forging lines, my capacity, what has been installed, and where we have some spare capacity.

Salil Desai, Analyst — Marsalis Investment Managers

Understood. Great. Thank you very much, sir.

Operator

Thank you. Next question is from the line of Prana from Rare Enterprises. Please go ahead.

Prana, Analyst — Rare Enterprises

Thank you, sir. I just have one question. Sir, in past, we have seen that bearing industry in India has grown at a certain level, and we have lagged, and I think that now the time is coming because I see many companies opening plants here, and U.S. also has tariffs on N-1 products coming from China, then also they consider it Chinese. So, I see some news here and there where Chinese companies are shifting production share or plants from China to India, and that's why I feel that now you can have higher growth than Indian bearing industry. Am I right in this or this is too speculative?

Hiren Doshi, CFO

Sir, I would like to end those partially. Definitely, we are also facing, you know, some kind of positive as far as the, you know, the range of the bearing rings, what my existing customers are into. They are also expanding into different range, bigger size of rings, and they are expanding their capacity for producing more bearings domestically, which earlier they might have imported from their principals or from China. So, only the constraint is here for the higher size of bedding is the availability of raw material. But apart from that, we are getting same kind of, you know, this feeling that domestic bedding manufacturers who are into automotive and in versatile other industries, they are expanding and they are growing in the current range of the product.

Prana, Analyst — Rare Enterprises

Right. So, we can assume that we can now match Indian bearing industry growth or surpass it for the next five years?

Hiren Doshi, CFO

So, next five years, it would be a bit long period to tell you, but definitely we will be trying our best to get the current run rate of the bearing industry, what we have, that kind of growth, what we expect in our bearing ring business.

Prana, Analyst — Rare Enterprises

Thanks a lot, sir. Thanks a lot, and congratulations on our great sector. Thank you.

Operator

Thank you. Next question is from the line of Hiten from Sequent Investments. Please go ahead.

Hiten, Analyst — Sequent Investments

Yeah. Hello. Good morning, sir. Hello, everyone. Yes. So my question is on the auto components business. So you have guided around 550 or 575 crore odd revenue in FI 27 from this business. But we have already did roughly around 340 odd crores in the first half. So we are targeting something around 250, 220, 250 crores in H2. So are we being conservative or so this growth should be more in H2?

Hiren Doshi, CFO

You are talking for the overall auto-component business or export only?

Hiten, Analyst — Sequent Investments

Overall, sir.

Hiren Doshi, CFO

I think we need 177 crore in HQ2, right? Yes, so my Q first half number is almost 318 crore, which I expect to close maybe somewhere about 600, 625 crores.

Hiten, Analyst — Sequent Investments

I'm sorry, but sir, I think you guided roughly around 570 odd crores, right? In the earlier.

Hiren Doshi, CFO

See, in auto components, overall business, you know, domestic business, domestic auto components is a bit fluctuating because here in domestic, I have very few players who are rather sourcing the components and where I'll be able to serve. So their demand is a bit fluctuating here and there. On that part, considering those things, I would like to be at somewhere about 575 to 600 odd crores.

Hiten, Analyst — Sequent Investments

600 odd crores. Okay. Yes. And, sir, what kind of growth we are expecting in the bearing segment, sir?

Hiren Doshi, CFO

Same, almost 8 to 10 odd percentage.

Hiten, Analyst — Sequent Investments

10 odd percentage, which we have did roughly 540 crores on last year, right? Yes, yes. Okay, okay. And just to conclude, our growth will be largely coming from the export market in both the segments. As we also mentioned, the Europe market is recovering in the...

Hiren Doshi, CFO

From export, I am expecting much of the portion, more than 75% portion from the auto components, and in domestic, much of the portion is from bearing rings.

Hiten, Analyst — Sequent Investments

Understood, sir. Yeah. Okay, sir. I'll get backhand with you. Thank you.

Operator

Thank you. Next question is from the line of Kishore Kumar from Unify Capital. Please go ahead.

Kishore Kumar, Analyst — Unify Capital

Yes, sir. Good morning, sir. Contracts on the great set of numbers. Sir, I just have a couple of queries on the answers that you have given to the previous participants. Sir, you mentioned 15, sorry, 10 crore or 15 crore of duty refund. Apart from the tariff reform, this is coming from our customers and we expect that to continue in Q3 as well. What is the quantum that we expect in Q3?

Hiren Doshi, CFO

See, I told you the same number, it would be continued into Q3, Q4, because it is linked with the lifting of the component from my warehouse. So, customers are going to lift the same kind of number on which 25% duty is being reimbursed by the customer.

Kishore Kumar, Analyst — Unify Capital

So, this is the value that we paid last year and we are getting it this year recovered from our customers? Is that correct or it's a difference?

Hiren Doshi, CFO

No, it's not exactly the last year. It is the supply is what I'm continuously making and, you know, say the goods which are lying at the warehouse at the time of lifting up there, wherever those invoices are being due and with that they are paying me on a monthly basis this duty reimbursement.

Kishore Kumar, Analyst — Unify Capital

So, okay, this is actually a recurring one, which can sustain in the coming quarters as well. It's actually a regular part of this is okay. Yes, yes, yes. Got it, sir. Got it. So, second question is on the domestic bearing segment growth. So, I understand that Q1, you had an impact because of the labor constraints, but Q2, if I compare it with the domestic bearing companies, the large ones, inventories, all have done 20% more growth. You did mention about one group's revenue coming down, but what actually explains the relative sluggishness in our performance vis-a-vis the bearing company's performance?

Hiren Doshi, CFO

See, in the first quarter of fiscal 27, my bearing revenue for domestic was 86 crore, and it has touched 115 crore in Q2. So, I do have more than, you know, this thing, 25% growth over there in the domestic bearing range for this particular Q2.

Kishore Kumar, Analyst — Unify Capital

On your basis?

Hiren Doshi, CFO

First, if you compare on a six-month number, I have a growth of 10 odd percentage, because the first quarter was low in this year, that's why.

Kishore Kumar, Analyst — Unify Capital

Understood, sir. But if I compile it on year-on-year basis, Q2 last year was actually 100 plus rows, now we have done 115 rows. I'm trying to understand if there is any way that can explain actually the difference in the bearing company's growth versus our growth in the domestic bearing segment.

Hiren Doshi, CFO

See, not immediately. I told you even the earlier response also, not immediately, but down the line next fiscal, we will be having that thing. If you, you know, if you compare my annualized number, what we had in previous fiscal and what we are going to have in this fiscal, it would be somewhere about 10 odd percentage growth.

Kishore Kumar, Analyst — Unify Capital

Got it, sir. Understood. That's it, my friend. Thank you.

Operator

Thank you. Next question is from the line of H. Shah from Quantum AMC. Please go ahead.

Speaker 8

Yeah, thank you for the opportunity. Just two questions from my side. Firstly, domestic auto components, where have we seen the growth from? Because if I just see the last three years, FI24, FI26. Annual basis, we've been in the range of 170 odd crews and haven't grown there. And this particular quarter you've mentioned, I think we've grown 29 odd percent. So if you could just give some idea from where it's coming, any new customers onboarded, that would be great.

Hiren Doshi, CFO

See, I told just now that in domestic auto components, the market is a bit fluctuating or rather on the strong way, the overall customer's production plan. What we had in this Q2, that is 48 crore domestic auto components compared to 44 crore in the last quarter, that is first quarter. But on the annualized basis, if you see last fiscal, I had a revenue of somewhere about 170 crore for the auto components, which in this first half only, I have reached at 93 crore. So in domestic auto components, I'm expecting somewhere about 10, in between 12 to. 10 to 12 percent rather growth. So that we are, you know, the products what we are producing, the transmission parts and the semi-finish components what we are producing. We are supplying to a limited customer over here. A couple of OEM orders what our customer got, and, you know, in turn, we got that orders, but those are not materially came on the, you know, at the OEM level, the design fluctuation, the design change, and their output. Let me tell you, for the EV kind of vehicles in the domestic OEM, what we got the order, but the way it was expected, it has not came on the floor, and that is why the number is not that. Thank you.

Operator

Thank you. Next question is from the line of Dheeraj from InCred Equities. Please go ahead.

Dheeraj, Analyst — InCred Equities

Hello, sir, and many congratulations on a great set of numbers. I just had a couple questions regarding that. Can you like break up what was the volume growth and revenue growth, volume growth and value growth this quarter? And also, What was our, you know, manufacturing, like what was our sales volume and what utilization we are working at? So, you know, that kind of gives us our productivity.

Hiren Doshi, CFO

See, volume growth compared to the previous quarter, that is first quarter, and comparing to the second quarter, the volume growth is almost 18%, 1.8%.

Dheeraj, Analyst — InCred Equities

Okay.

Hiren Doshi, CFO

In terms of my volume group, and... What was your later part of the tuition?

Dheeraj, Analyst — InCred Equities

Okay, and what utilization we are working at right now?

Hiren Doshi, CFO

We are at somewhere about 65% utilization.

Dheeraj, Analyst — InCred Equities

Okay, and we are very confident to kind of reach 70% of that number by your end, right?

Hiren Doshi, CFO

Yes, yes. 65%, but if you ask me for a particular last couple of months, I have already reached the level of 68, 67, 68 percentage. But considering the first quarter, for the first half, it was somewhere about 65.

Dheeraj, Analyst — InCred Equities

Okay, sure, sir. And, like, this quarter, as you saw that, you know, gross margins have been much better, even if we kind of remove the... You know, the numbers that are, like the export incentive that we have gotten, the refund that we have gotten, we have still performed much better from our historical 50% kind of gross margin. So can you give some kind of guidance like going forward as, you know, we are expecting most of our growth coming from the export and auto component segment only where the margins are again higher. So the mixed shift is going to be towards that side only. So what can we... You know, a normalised kind of gross margin going forward, as the raw material is not going to affect us anyway.

Hiren Doshi, CFO

See, raw material is not going to affect the anyway, but there is some kind of time length between the actual pricing and when the customers are going to, you know, change the sale price or realization. So that kind of small impact would be there. On a normalized way, or rather what we are expecting, the gross margin in the range of, you know, 49% to 53%. Now, in particular, Q2, as I had a good amount of growth in the auto components business, and where the margins are much on a higher side, or yield is quite better, that's why it has showed up. But broadly, in the range of sales, if I'll be having a sales mix of, say, 50-50% bearing ring and auto components, then I would be having 50% kind of margin minimum.

Dheeraj, Analyst — InCred Equities

Okay, okay, great, sir. And what is the current scenario regarding exports? Like, you know, last quarter there were a lot of, not just the cost of the freight, ocean freight, but also there were higher costs regarding the containers and availability of all of that. Has the situation improved from, like, the last quarter, or how is it actually?

Hiren Doshi, CFO

Yes, it has quite improved. Now, there is no issue as far as the availability of containers are concerned. And even, as I was mentioning, that ocean freight has also started declining, and that is from the last month. And we will be having that positive.

Dheeraj, Analyst — InCred Equities

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

Operator

Thank you. Next question is from the line of Sanjay from Ilara Capital. Please go ahead.

Sanjay, Analyst — Ilara Capital

Yeah, thank you for giving me this opportunity. I would like to request you the market share currently we are having in both the bearings and the auto components vertical which we have.

Hiren Doshi, CFO

See, globally, bearing ring is a very vast or rather quite big market, and I am there into a particular range of the product. Again, we are there into the bearing rings which are produced through a forging route. So, it would not be possible for me to tell you the overall global market share as far as the bearing ring and even for the auto components because we are also not there in the entire range of auto components. Right, we are mainly there into transmission and chassis components and so on. But if you ask me, in a domestic business, in my forging ring activity, and in my addressable segment, where I'll be able to have the range of, say, 50mm to 1000mm diameter, there I'll be having somewhere about in between 30 to 35% market share.

Sanjay, Analyst — Ilara Capital

Oh, okay, okay. This is great, sir. And can I, I mean, just ask you that whatever business we're doing in This Is For Steel business, are we planning to go ahead in some other verticals in aluminum alloy or anything else? I mean, if I may ask on this.

Hiren Doshi, CFO

We don't have any such plan for the recent future as of now, because there is a good amount of opportunity in our existing one, and we do have spare capacity over here. So, our main concentration is to utilization of our existing capacity, and we are getting good responses or new opportunities in our existing alloy steel forging business.

Sanjay, Analyst — Ilara Capital

Okay, okay. Thank you so much for this, sir. I will come in the queue. Thank you so much.

Operator

Thank you. That was the last question for today. I now hand the conference over to Mr. Hiren Doshi, sir, for closing comments.

Hiren Doshi, CFO

Would like to thank you everyone for joining us, and I hope we have been able to answer all your queries. We look forward to such interactions in the future. In case you require any further details, you may contact us or to SGA, our investor relations partners. Once again, I thank you, Philip Capital, for managing the call, and also thankful to all the participants for spending your time and listening quite patiently. Thank you very much.

Operator

Thank you very much. On behalf of Philip Capital Private Client Group, that concludes this conference. Thank you for joining us and you may now disconnect your lines.