Earnings Call Transcript - XNSE:CARRARO 2026-11-06

Operator

Ladies and gentlemen, good day, and welcome to the Karamo India Limited Q2 FY27 Earnings Conference Call. As a reminder, all participant lines will be in 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 the operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance of the company, and it may involve risk and uncertainties that are difficult to predict. I will now hand the conference over to Dr. Balaji Gopal, Managing Director. Thank you, Anuradusa.

Balaji Gopalan, Other

Thank you very much, and a very good evening to everyone. Thank you for joining Gerardo India Limited's Q2 and H1 FY27 earnings conference call. I am joined today by Mr. Davide Grossi, Whole Time Director and CFO, Mr. Sudhendra Manikar, Whole Time Director and COO, Mr. Ashok Rai, Director, Sales and Business Development, other members of our leadership team, and strategic growth advisors, our investor relation advisors. Before we begin, I extend my warm wishes to you and your families for a very happy Diwali. May the festive season bring in prosperity, happiness, and good health to all of us. The first half of FY27 was marked by a challenging global environment, but also by encouraging signs of resilience. The ongoing conflict in West Asia, now in its eighth month, has kept energy and fuel prices elevated while also increasing freight, insurance and input costs, particularly for steel and castings across our supply chain. The global economy has remained more resilient than initially expected, although growth has moderated. Across our export markets, conditions remain mixed. European agriculture continues to be subdued, Turkey remains volatile, and in the U.S., greater clarity on trade arrangements is a positive development, even as customers remain measured in their volume commitments. Closer to home, the Indian market has been relatively stronger. Tractor retail demand has remained healthy, reflecting, encouraging underlying demand. Wholesale volumes have moderated in recent months, influenced by a high base, an uneven monsoon, and the timing of the festive season. Overall, the domestic market continues to offer a more supportive demand environment. Against this backdrop, Carraro India delivered healthy growth in both revenue and absolute earnings. In Q2FY27, revenues from operations grew 19% year-on-year and 28% sequentially to INR 6,965 million. For the first half, revenue increased 15% to INR 12,411 million. Q2 FY27 EBITDA grew 10% year-on-year and 13% over Q1 FY27 to INR 652 million. This is an important outcome, particularly in a quarter when input costs increased faster than their recovery. It reflects the continued focus of our teams on execution, operational efficiency, and delivering consistently for our customers. At the same time, margins reflected the impact of these cost pressures. Due to FY27 EBITDA margins stood at 9.2% compared with 10% a year ago, while gross margin for the first half was also lower than the last year. This was largely driven by the combined increase in sale in steel and casting prices, energy, logistics, and supplier labor costs. Our customer contracts provide for recovery of raw material price movements, typically with a lag. Other cost increases, including energy, freight, and supplier labor, are only partly covered by these mechanisms and require separate customer negotiations. Davide will take you through the financial details of these. Throughout this period, our priorities have remained clear. Maintain reliable customer delivery, pursue cost recoveries, and continue strengthening productivity and localization. These efforts have enabled us to grow EBITDA in absolute terms despite margin pressures, demonstrating the resilience of our operations and providing a solid foundation as we move into the second half of the year. Domestic revenue grew 30% in the first half and now accounts for about 70% of our revenue. Agriculture revenue grew 23% well ahead of domestic tractor industry wholesales, which grew by high single digits over the same period. The driver is the shift from two-wheel drive to four-wheel drive tractors. GST rationalization had brought four-wheel drive prices much closer to pre-GST reform announcements, two-wheel drive levels, and farmers responded very well. Our domestic four-wheel-drive axle volumes continue to grow faster than the overall tractor market. Tractor demand moves in cycles, and the softer wholesale numbers in September and October are a reminder of that. But four-wheel-drive adoption is structural rather than cyclical. We remain confident that penetration will keep rising towards the 35-40% range over the coming years, and we are adding actual capacity to serve it. Export revenue in Q2 was INR 2,106 million, 4% below last year, but 27% higher than Q1 FY27. Last quarter, we said the Q1 FY27 dip was largely a one-off linked to logistics disruption. Recovery has begun, as we expected, but it is not yet complete, and overseas demand remains uneven. Coming to construction equipment, penny boom handlers remain a bright spot. The ramp-up of our new TBH axle range for a major international OEM is progressing as planned along with other export programs as well. In India, the Teleboom Handler market in the first half grew to about 800 machines, opening opportunities with Indian manufacturers and the Indian operations of global OEMs. We now have a couple of Teleboom Handler programs in series production and four to five more at the prototype or field validation stage. This is how we are building our next phase of growth, programs in production today and a pipeline that converts over time. In backhaul loaders, domestic demand has shown encouraging growth in the first half with further activity at the start of the festive season. Backhaul loader driveline exports through Indian OEMs continue to perform well. High horsepower transmissions, R&D, and engineering services. Series production of our customer in Turkey commenced in Q1 FY27. However, the ramp-up is yet to gain momentum, temporarily impacting off-take. A similar trend is being observed in Europe. Higher horsepower programs for domestic OEMs are in field validation. Our teams developed seven prototypes in the first half, and one has moved into production already. Our focus is on converting development work into products our OEMs partners can commercialize, not simply on adding to the count. In engineering services, the e-transmission program with mantra electric. We have received a prototype order for field validation. We secured further assignments in July from a customer in Western India, and discussions with other customers are progressing well. Coming to gears, the gears business showed positive traction in H1 FY27, although performance is expected to remain flat for the full year. This secured bull gear nomination with a large global OEM and ongoing customer development programs are expected to support business improvement over the coming periods. Coming to capacity, localization, and aftermarket, our CAPEX plan is on plan. During H1 FY27, the company incurred capital expenditure of INR $204 million. Construction of the new paint shop building commenced, while a side-drive sub-assembly line and a backlash machine were commissioned to enhance portal axle capacity and increase differential support capacity on the four-wheel drive line. Localization is one of our most direct levers on cost. Raw material localization recovered to about 80% in Q2-FY27 from 74% in Q1-FY27 as supply from local partners normalized. Our target remains 86% to 88%. Thank you. The spare parts business recorded strong growth in H1 FY27. We signed an agreement for our third authorized service center driven by increased penetration of Kararo drivelines, extending our author market reach. I am also pleased to share that Kararo India was recognized among India's most admired export enterprises 2026. It reflects the work of our teams and partners on quality, execution, and customer service. The outlook ahead, we remain cautiously optimistic about the rest of FY27. First-half revenue growth of 15% sits within the target range of 10% to 15% which we indicated, and we expect the full year to remain within that range. Our profitability will be measured, input costs are still rising into the third quarter, and price recoveries trail them by a few months. Our commitment for FY27 is continued growth in absolute EBITDA. We expect margins to improve progressively as recoveries catch up, localization moves towards target, and new capacity lifts utilization. We are encouraged by what our teams achieve in a difficult half. We continue to execute carefully, invest selectively, and stay close to our customers in India and overseas. With that, I hand over to Mr. Davide Grossi to take you through our financial performance. Over to you, Davide. Thank you, Balaji.

Davide Grossi, CFO

Good evening, everyone, and my warm Diwali wishes to all of you. I will take you through our results for Q2 and H1 FY 2027. Starting with Q2, revenue from operations was INR $6,965 million, up 19% year-on-year, and 28% over Q1. Total income rose 19% to INR $7,058 million. By segment, agricultural revenue grew 29% to INR $3,300 million. Construction equipment grew 12% to INR $2,979 million. Others, which include years, spare parts, and engineering services, grew 9% to INR $686 million. By geography, domestic revenue rose 33% to INR 4,859 million. Export revenue was INR 2,106 million, 4% below last year's INR 2,201 million, but 27% higher than Q1. Q2 EBITDA grew 10% year-on-year to INR 652 million and was 13% higher than Q1. EBITDA margin was 9.2% against 10% a year ago. Growth margin for the quarter was 23.3% against 26.4% in Q2 FY26. Profit before tax grew 14% to INR $485 million. Profit after tax grew 11% to INR $351 million, with a budget margin of 5%. While margin is narrowed in the quarter, the margin pressure sits mainly at gross levels, and it has essentially two components. First, commodities, namely steel and calcium. These are indexed in our customer contract, but recovered with a lag of three to six months. Prices kept rising through the first half, FY2027, so recoveries and trade costs over quarter. This is a temporary effect that will be reabsorbed in the next month. Second, inflation of transformation or conversion costs, such as energy, trade, and so on, which rose sharply with the conflict in West Asia. These are not indexed, so we'll cover them through separate commercial negotiations with each customer. which are in progress and have just started to be reflected in our P&L very recently. The positive impact of such negotiation will be more visible in second half FY 2027 and beyond. Now, focusing on first half FY 2027, revenue from operations grew 15% to INR. 12,411 million from INR 10,792 million in H1 2026. Total income grew 16% to INR 12,644 million. Agricultural revenue grew 23% to INR $5,859 million. Construction equipment grew 8% to INR $5,243 million, and others grew 13% to INR $1,309 million. Domestic revenue grew 30% to INR $8,654 million, about 70% of the total. Export revenue was INR $3,758 million against INR $4,113 million last year. Gross profit grew 7% to INR $3,211 million. Gross margin was 25.4% against about 27.5% in H1, FY26. The decline of roughly 200 degrees points is the clearest measure of the cost pressure that we have observed so far. Better absorption of its cost on higher volume upset part of it, and higher other income, including the one-time item, upset a further part. As a result, EBITDA grew 8% to INR $1,232 million, and EBITDA margin was 9.7% against 10.4% last year. Profit before tax grew 12% to INR $905 million, and profit after tax grew 9% to INR $665 million. That margin for the half was 5.3%. Our balance sheet remained strong. Debt to equity was 0.34 times, and cash and cash equivalents were about $955 million. Networking capital was about 40 days, as we kept close control of inventory, collections, and supplier terms while supporting higher volumes. On an annualized basis, return on capital employed was 26.3%, and return on equity was 24.5%. With that, I hand the call back to Balaji for his closing remarks before we open the floor for questions.

Balaji Gopalan, Other

Thank you. Thank you, Davide. Let me summarize before we take your questions. The first half was shaped by a difficult global environment and rising costs, and our margins reflect that. But our domestic business grew strongly. Exports began to recover in Q2. Our priorities for the second half are very clear. We will recover the cost increases we have absorbed, bring localization back towards target, add capacity where demand is proven, and convert our development programs into production. We remain optimistic about the rest of FY27. We expect continued growth with profitability improving gradually as conditions allow. Thank you very much. We will now be happy to take your questions.

Operator

Thank you, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Operator

First question comes from the line of Raghunandan, NL, with Muama Research.

Operator

Please go ahead.

Raghunandan NL, Analyst — Nomura Research

Thank you, sir, for the opportunity. Wishing the entire management team a very happy Diwali. Sir, domestic revenue growth has been strong at 30% value-wide in H1. Within this, approximately how much will be the cost inflation impact? I am trying to understand the volume growth and value growth.

Davide Grossi, CFO

So, out of the total growth that we have seen so far in the first half, we can say that roughly 2% is the price increment that we could get so far, which is part of this growth. So, clean, it's a 12% to 13% growth year-on-year for the first half.

Raghunandan NL, Analyst — Nomura Research

Noted. Thank you. And the remaining price increase, which are to be received from customers, can you give some color? How is the customer negotiations progressing? Are they constructive? Will Carraro need to absorb some impact?

Balaji Gopalan, Other

Yeah, Raghu, this is Balaji here. When this issue started, it was something new for the industry. So there is no proper thumb rule or a process that was established, but all the customers had agreed in principle that these are pass-through and it will be absorbed by them. But as things started extending beyond what they expected, it started affecting their margins as well. So we have to go to the discussion table. It is not that they are denying it or they are refusing to give it. They are engaging us with a lot of discussions on what is the right amount, and there is no index or reference point that we can put our finger and say this is the amount. So, these discussions are going on. We have been successful with many. There are, I would say, 30-40% still left where negotiations are going on. We would attempt to recover the entire gap that is there, purchase variation with sales variation. But we'll have to see practically how much we close because for an episode like this, we wouldn't want a bad feeling from either side. We are being reasonable. We are sharing all the details with them. We are being transparent. And my team, Ashok and his people are engaging and they are confident of recovering most of it. I will let Ashok speak a few words on this to give you the real feeling.

Ashok Rai, Other

Thank you. Good evening. See, the message is clear that as you asked one word, is it constructive? The answer is constructive. It's a matter of time that how much we recover, but the discussions are going in a very constructive direction.

Davide Grossi, CFO

I think, just to add one element here, I think from Q3, we will already start seeing the initial result of this negotiation.

Raghunandan NL, Analyst — Nomura Research

Thank you. That was helpful. You indicated that the domestic TBH program, the serial production has started for two customers. Can you indicate how has been the start? Can you indicate how much is the revenue in H1, and how do you expect the ramp-up to happen both with the existing customers and the five, six new customers you are looking at adding?

Ashok Rai, Other

Raghu, Ashok here. See, this program, when you say we have started giving the prototype mainly to a couple of customers more around two months ago or three months ago. So, basically, they will give us the results from the FY28 mid-onward and FY29 onward, we expect that they will start giving us on the balance sheet. This is the overall picture. And the one or two customers, they are slowly gaining the traction. Traction means the significant volume is quite low because, as you know, the market size itself is very low. We are talking about something like 800 machines, which were earlier around 300 or 400 machines in the first half. This month, this first half, they have sold almost 800 machines as an overall market. And the OEMs whom we have started supplying, they are entering into now in this segment. Earlier, this market is drawn by one or two OEMs.

Raghunandan NL, Analyst — Nomura Research

Noted, sir. Exports has witnessed a recovery in Q2 versus Q1, a significant recovery of 27%. On a value-wide basis, how do you see H2? Can it be slattish?

Ashok Rai, Other

Raghu, Ashok here again. In case of export, there are many, many variables are there on the table. One is the logistic, which still has not improved. Second is the markets across the world are changing very dynamically. For example, Turkey, which we were expecting in the first quarter, that it should go up and it started showing positive sign, but in Q2 it started showing a decline. Then some market like Algeria or African market, we saw a traction in the agricultural. Then we saw some traction in Latin America that has also gone down in the agricultural segment. And Europe also started showing some negative on the agricultural. So in this changing scenario, different regions are giving different kind of indication and it is changing quarter on quarter. But on a broader side, it should be flattish plus a slightly up on the export side. We are not expecting a dramatic increase on the export side. We are trying to protect the order book based on the customer orders and the regional inflow of the orders from our customers.

Davide Grossi, CFO

Maybe also here I would like to add, if you remember when we commented Good morning, everyone, and welcome to the call. Last quarter results, we wanted to stress that the bad performance of export was a one-off, strictly related to the disruption that was there in the supply chain globally, and the result of that we do is a proof of the fact that we are pretty much back on track. I think we can... Assume and hope that Q2 will be replicated in Q3 and Q4. So overall, we will have a minor growth or overall flat for the year.

Raghunandan NL, Analyst — Nomura Research

That's very helpful. Thank you. I'll fall back to the queue. I have a few more questions, but I'll come back. Thank you so much.

Operator

Thank you. Participants who wish to ask a question may press star and one. The next question comes from the line of Lakshmi Narayan for Tunga Investment. Please go ahead.

Lakshmi Narayanan, Analyst — Tunga Investments

Thank you. I just want to understand, within the agri growth, how much is, if you can just put it by domestic and international, and within domestic, how much is indexed towards four-wheel drive? That would be helpful. And second, on the international market, there has been a mild decline, and on constant currency basis, what has been the decline, and also in the international, we were getting certain orders for, I think, TBH or some of the other products that have been, you know, We got some orders, I believe. We want to understand what is the total scope, and did we get a few more orders subsequently? These are my questions related to the agri space as well as on the CV space, especially for the international markets.

Ashok Rai, Other

Your first question was, with respect to the domestic market, the growth is, in terms of, majority growth is coming from the four-wheel drive axles, actually, because that is what the structure is.

Lakshmi Narayanan, Analyst — Tunga Investments

Just to say, we have done around, if you look at the agri market, agri sales of the first half, how much? How much is international?

Davide Grossi, CFO

So, I'll tell you, the total amount of revenues in H1 for agri-domestic is, wait a second, 4,800 million INR, 480 crores, which is a 34% increment versus 3-0. If we look at export, agriculture, first off, we have 105 crores against the 120 crores of previous year, that's a minus 12% year-on-year.

Lakshmi Narayanan, Analyst — Tunga Investments

And if you just look at the Indian domestic business, which is around 480 million, I think it is a mix of both four-wheel drive and the non-four-wheel. Can you just do that mix?

Balaji Gopalan, Other

No. As we have always said, Carraro is not into two-wheel drive. There is a legacy. 20 years back, we had started to one customer, and that is still continuing, but that is in decimal. It will not even get captured in our revenue. We are focusing only on four-wheel drive.

Lakshmi Narayanan, Analyst — Tunga Investments

Okay, and I think this is very interesting growth, and any idea what has been the four-wheel growth for India in per se? I mean, is it growing at 10 percent, 20 percent? The tractor market has grown 11 percent. I think the tractor market has actually grown in the first start of summer.

Balaji Gopalan, Other

See, in the market research data that comes and what is released by OEMs also, there is still not a very defined separate category where they define the four-wheel drive. But we use our intelligence based on what the customers are doing, and I would say... The unofficial sources that we are, the industry is roughly at around 23%, 24%. It is in that range, but seems like it will move to, say, 27, 28 in the coming months. So there is an off-tech. Capacities are an issue today for all the OEMs. They are not able to feed the dealers with four-wheel drive tractors, and for that reason, you will also see hardly or no reference of four-wheel drive advertisement or marketing that is happening, because they would not be able to meet the demand if it opens up. So, they are waiting for the suppliers to gear up and meet the requirements, and that is when the acceleration will be much faster. But now, to answer your question, the trend, the market is moving towards four-wheel drive. So we are still at around 25% of the market share.

Lakshmi Narayanan, Analyst — Tunga Investments

And just double-click on that, if you look at the four-wheel drive, so how much of that is actually fed by captive? If you just blow up that 23-25%, how much of that is driven by captive and how much is done by non-captives?

Ashok Rai, Other

As I stated now that we don't have at the moment the real research data, but since we speak to many of them, we have collected those data. So when we say that we have almost 60% in the non-captive, 58, 55, as a market share of Carraro, so we believe that 30% would be with the captive, but it's just a guess, it's a calculated guess we can say that. It is not something which is scientifically researched and calculated one.

Lakshmi Narayanan, Analyst — Tunga Investments

Right. There is a moment towards better safety standards or better emission standards in practice. So what kind of potential it would have, because there will be some changes in or there will be some up structure in terms of the revenue you can actually get. How far are we in that journey as a country, and how you can actually capture that? I think another follow-up question I had was on the international order book. So, I mean, these two things.

Ashok Rai, Other

Yeah. Answering on your emission norm question, in this case, no, see, there are emission norms which are going to change somewhere in October. This is supposed to do for 75 horsepower and below 30 horsepower. We are not present in those 25, 30 horsepower, but in 75 horsepower and above, which are mainly in the export market, it is going to add the exposure of the Indian OEMs in a positive way to the export market, Because they can export it to the developed countries with the emission norm, which is Stage 5, which they are building up from 75 horsepower and above. For Terraro, it is good for the Indian industry that the capability to export will go up, and for all the other non-emission countries, they already have the Indians, and the scope of the Indian oilians to export is going to go up, for the higher cost.

Operator

Thank you, sir.

Lakshmi Narayanan, Analyst — Tunga Investments

Lakshmin, I would request you to please come back to the interview. No, no, there is another question which I had, which wasn't answered. It's on the International Order Book.

Balaji Gopalan, Other

The order book for the next six months?

Lakshmi Narayanan, Analyst — Tunga Investments

No, sir, I think there is an outlook for new model or I think a silly boom handler or something, I remember, which we had for a long time. I just want to understand that it starts.

Balaji Gopalan, Other

See, Teleboom handler with the global customer is going as per plan. We had estimated in the beginning 300 crores in three years. We are in the second year now, and it is well as per their plan. We are not having any problems. There is a good pool for it, and whatever numbers are being asked, it is challenging for us to supply considering the disruption in supply. But to answer your question, the plan of the Teleboom handler with that global OEM to reach 300 crore in three years, we are well aligned with that. There is no change in the Teleboom industry market.

Lakshmi Narayanan, Analyst — Tunga Investments

Thank you.

Operator

Yeah. Thank you, sir.

Operator

The next question comes from the line of Priyash Kuthari with Sarticute Fund Management. Please go ahead.

Priyash Kuthari, Analyst — Sarticute Fund Management

Hi, sir. Am I audible? Thank you for the opportunity. Sir, I have two questions. Just wanted to understand that how complex are our products and how difficult would it be for the OEMs to develop and manufacture these in-house?

Operator

Okay, only one question?

Priyash Kuthari, Analyst — Sarticute Fund Management

Yeah, the second one is... Okay, let me finish.

Balaji Gopalan, Other

Yes, it suits us also. Yeah, yeah. Thank you. See, it's not a matter of product complexity. Surely, it is an engineered product, a lot of R&D hours go into it, a lot of testing, field validation, and the market fit. These things are very important, okay? What matters here is you are basically looking at make-buy decision by customers. What supports the buy decision is the fact that your time to market is very shortened when you go with a solution provider technology company like Carro because their R&D has to develop it, test it, validate it, and then you are still not sure when you place it in the field. If there is a small glitch and it fails, you have enough competitors to, you know, blow it out of proportion. So they carry that risk. But when they come to a company like Carraro, that already has that experience and it's already probably supplying somewhere else in the world. So we are aware of soil conditions. We know our product. The products are well tested and validated. So it's a quick, quick solution for them to launch it. Now, having said that, usually for any vehicle, you cannot have two different sources of gearbox or transmission, because when it goes for servicing, it's going to be a nightmare, which gearbox, which spare parts is involved. So it is always desirable that when they take us into a project, it continues till the end of that model. So it is many, many years. However, when the volumes increase, they could get into this temptation of getting into their own in-house captive, but they need a complete supply chain development. They need a big team. They need to invest. They need to have space. And in any case, we also innovate the product technology. So it's not really a product that we are offering them. These are differentiated products, suiting to what the customer needs. Otherwise, we will have one gearbox being sold to Mindra, one to Escorts, one to Sonalika and Tafe. These are not identical gearboxes. It looks the same, but the inside gear ratios, the torque, everything is different. So, differentiated product is what we offer to the customer, and that is why there is a tendency to buy and not make it in-house. Reaching a point where after six, seven years, they may parallelly do it and take it captive, but we are technology partners for all the OEMs. So by the time you take this product out from us, the technology patch-up requires another higher technology that they would need. So they would remove this and give us a new project that is there. All in all, in the last 30 years, we have only grown with any customer. We don't have a revenue drop with any customer. That itself shows that our business model of developing the product and co-designing with the customer has helped us till today. And that is how it will go for the future. Have I answered the question?

Priyash Kuthari, Analyst — Sarticute Fund Management

Yes, sir. That was helpful. Thank you. And my second question was that so Mahindra has cut its tractor industry growth guidance from 5% to flat. So how are we looking at this slowdown and how do we plan to sustain growth and what will like be the key drivers?

Balaji Gopalan, Other

See, for us, if we are looking at Mahindra, they are looking at the entire tractor market. They are looking at the entire tractor industry, 1.2 million. What Carraro focuses, and I explained to the gentleman from Tunga, we are into four-wheel drive only. So, the growth and penetration in four-wheel drive is the future for us. And in that four-wheel drive growth, we have approximately a 56-58% non-captive market share. So the future is good. The industry is moving in the direction that Carraro has the product availability. The global market four-wheel drive is above 95-98%. We are at 23-25%. So the runway is very clear. We have the right products and the industry needs the support and technology from Kararu. That is why we are very confident of the growth in future.

Priyash Kuthari, Analyst — Sarticute Fund Management

Okay, sir, I understand. Thank you. That was all for my question.

Balaji Gopalan, Other

Thank you. Thank you, sir.

Operator

The next question comes from the line of Raghman Dandal, NL, with WAMA Research. Please go ahead.

Raghunandan NL, Analyst — Nomura Research

Thank you, sir, for the opportunity again. Sir, going forward, in terms of major orders which are likely to start production either this year or next year, any orders you would like to call out which will add to our performance?

Ashok Rai, Other

Raghu Ashok here. See, there are many projects which are going on. Normally, any project before it comes to series production, we are not authorized to explain and inform to the market. This is the first point. Second point is, this prototype, whatever we have given, based on certain projections from the customer, and we have to validate those assumptions before we announce. But as we said originally from day one that we are targeting toward the 350 to 400 million or 3,500 crore rupiah turnover for Carraro by 2030. By the projects what we had, we are still intact with that guidance.

Balaji Gopalan, Other

No. Even for the immediate next year also, our indication, the data we are getting, there is going to be a growth in our top line. Hopefully, it will be double digit, but somewhere close to double digit for sure. So it's an interesting journey that we are having in front of us. The market is supporting. Our product fit has been established, which is a very big challenge, particularly the four-wheel drive on which we are banking. It's important that the technology we offer is appropriate for the final end customer. Very often there is a gap. And here we are very lucky that there has been no requirement to redesign or modify any of our product solutions. What we have offered and tested in the field has been accepted by the market. So this is a positive way of looking at it.

Ashok Rai, Other

And we maintain our guidance of 12% to 15% CAGR, that we maintain. Yeah, yeah, that we maintain, yeah.

Balaji Gopalan, Other

Actually, for us, Mr. Rahu, the top line is not really a matter of concern. We are not looking back. There has been this setback on our margins because of the war. We never expected that a war could have impact on my localization because I am developing those products here. But then you would have seen the localization drop by 4%, 5% in the last quarter because we were not able to fully develop here. There were supply chain issues. So we had to import those products, air freight, to ensure that customer is not losing out his market. So, what I am trying to say is, Carraro India is very, very positive and optimistic on the top line, and which is very important in the current condition of whether we are able to grow every year 10 to 12 percent, 13 percent continuously. We have the pipeline of prototypes and productionizing, which are going exactly as per our forecast. And we are sure of the top line. And we are confident that when things are normalized, we will pull back all the ropes and ensure that the target or the forecast guidance we had given for EBITDA, that is also achieved. Yes, there will be a little time gap, but we are not losing anything. We will reach the target that we have planned. And the forces, the business environment is giving us that confidence that we are not targeting anything which is unreachable.

Raghunandan NL, Analyst — Nomura Research

Well noted, sir. Two clarifications here for the comments that you made. Number one is, like, for instance, last year, at 526, our growth was driven more by exports compared to domestic, and this year, domestic is driving the growth for us. Going forward to next year, would you still expect that domestic will outperform exports?

Balaji Gopalan, Other

Yes. You have seen our pitch when we spoke about the stability of our business. We said we are into agriculture and construction, and we are also into export of ag and construction. Now, when one goes down, we are able to offset it from the other. So, in this case also, we lost on the export because the market was not very convenient to grow. But at the same time, we didn't come with an excuse saying that our revenues have dropped because our export has been lost. No, because export also is not lost to anybody. It is just a supply chain issue and a demand issue. So, no project or no customer has been lost. It is all safe over there. Bye. Our team took that additional effort and went to customers and made sure that we are more than covering the loss or the, I would say, the setback that we have received in export. Looking at next year, we are confident, that is why I said the top-line growth of 10-12% still remains. However, the ratio of earlier 33, 77, 35... 65, 35, that could change for the interim, which is good because we are still Catching up on our top line with a setback in our export, which is not a lost opportunity, it will come back to us. So it will further enhance my top line when the export comes back to 32-33%. But next year, we are anticipating, we are not very sure that my local market demand will go beyond what my export will pull. So, it's a good thing, and we are very confident of handling this situation in this way.

Raghunandan NL, Analyst — Nomura Research

Noted, sir. And on the engineering services side, last year we had a 10 crore revenue. This year, how much revenue would you expect to book that?

Davide Grossi, CFO

Okay.

Balaji Gopalan, Other

See, when we talk of engineering service, it is a, I would say, it's like a sweetener that is there in the dish that is in front. We got a very good response last year because that was a project and it belonged to electrification and we were one of the most competent in India to support the electrification of tractors because we have the global experience. Now, having said that, we were expecting other OEMs also to kind of reach out and get into that area. Looking at the current situation, it is not opening up to the extent that we were looking at, and now we are more working with our regular customers, trying to co-design with them, rather than set up an engineering center which will be an independent revenue stream. That looked reasonable at that point in time. But if you call it a mid-course correction, yes, it could be a mid-course correction. But we don't want to build big hopes on engineering services as a revenue stream as of now. When the market opens up and there is a demand, we are ready to provide those services. But as of now, we would like to get into co-designing, working with them, winning the projects, trying to get some tooling and some engineering expenses covered for the testing and everything, but not purely as a revenue stream. So there is a, I would say, a slight mid-course correction that we are doing to this.

Raghunandan NL, Analyst — Nomura Research

Noted, sir. Thank you so much. And on the margin, I'm sorry to interrupt, Raghunandan, sir.

Operator

I would please request you to come back in the queue.

Raghunandan NL, Analyst — Nomura Research

I'll come back. I'll come back in the queue. Thank you. Thank you so much, sir.

Operator

The next question comes from the line of HR with Quantum AMC. Please go ahead.

HR, Analyst — Quantum AMC

Yeah, thank you for the opportunity. A couple of questions. Firstly, on the telephone handle side. So early in F527 or F526 late, we had those numbers for TBH exports close to 200 crores, 250, and 300 for F527, 28, and 29. So, I mean, are we on track for that? And what is the H1 numbers for TBH export sales? That is one. Second, on the margin guidance, so we had given close to 11% EBITDA, including other income. So we're close to 9.8, 9.9 for the half year. So what is it for H2? And the top line growth for F27? Those are my questions.

Operator

Okay, now, we'll chop the elephant now.

Ashok Rai, Other

Regarding the export of TBH, what we said, that we'll be touching around 300 crores in three years or something. We are on track at the moment. If you ask me, if you ask us regarding that what kind of value we'll have in FY28-29 for this one, we maintain at it could be around 300 crore for the export of this customer. In addition, we'll have the other customers also coming on board. And there was some, that was the question on TBH. Am I right or anything? I missed it.

HR, Analyst — Quantum AMC

Yes, so FY27, what is the number that you are looking at for TBH exports?

Ashok Rai, Other

It will be, see, when we talk about three, three and a half years about this one, so we have already reached almost 55-60% of this, in this year itself.

HR, Analyst — Quantum AMC

So close.

Ashok Rai, Other

So balance 35-40%. Yes, yes, something like this. Not the exact one, but it is very near to it.

HR, Analyst — Quantum AMC

Okay, and FI28 would be 300, and so would be 29, or somewhat more than that, correct?

Ashok Rai, Other

We are expecting around it should touch 300, with the kind of growth, I mean, Sajit.

HR, Analyst — Quantum AMC

Okay. Yeah, so the margins and the top-line growth, those questions.

Balaji Gopalan, Other

See, margin is something we are also kind of puzzled, and it is a gray area. We will come to that. But as I said, our revenue growth is something that we are very, very confident about, and we are looking at from the current this year, if we touch around 2,500 crore, next year, we will look at a double-digit growth as well. At least a 10% growth is the feeler that is coming to us. It's still a bit early. There is still a lot of uncertainty, but in spite of all that, the numbers that are coming to us from our customers takes us to a plus 10% over what we will close this year. And this year, we are intending to close. Close to 2500 crore. Okay. So this is as far as our revenue is concerned, which we are very confident to speak and that is why I spoke that first. Coming to EBITDA, it is a situation where it's anybody's guess. I had given this forecast and the guidance in my last interactions, where I said it could be anywhere between 11, 11.1, 11.2, 11.3. I remember this specific dialogue, and I said it depends on the runway that we have when the war ends and we are able to close our ear. Now, that was three months ago, and we were hoping that the war will be resolved soon. But it's November now, and nothing has happened. And that is why, precisely why our EBITDAs are getting hit dramatically. Okay? Now, once the situation eases, we lift our head and we will get back to what was the guidance given in the past. But having said all that, you shouldn't feel I'm going round and round and not coming at a number. My Realistic guidance will be, we will touch a double digit, so it will be 10 or 10 plus. I don't know when the war will end. It all depends on that. We are confident that we should achieve a double digit at least for this year closure. Have I answered your question?

HR, Analyst — Quantum AMC

Yeah, absolutely. And just one last question. You've mentioned already the H1 numbers for Domestic Agree and Export Agree. Could you give the same for the construction vehicles?

Balaji Gopalan, Other

Yeah, sure. Just one second.

Davide Grossi, CFO

I'll start from the export. So H1 2027 is 197, 198 crores. Versus the 228 of last year, and domestic construction, first up, 2027 is 327 crores versus the 256 of last year.

HR, Analyst — Quantum AMC

Got it, fine. Thank you.

Operator

Thank you. Thank you. The next question comes from the line of Ashwini with 3P Investment. Please go ahead.

Ashwini, Analyst — 3P Investment

Good evening, Ashwini. I had two questions. One was in the last year's annual report, if I go to the other expenses, there are two items. One is corporate services charges, which is close to 27 crores. And then there are legal and professional fees which are close to 25 crores. So, this total adds to around 51, 52 crores. So, what exactly are these, and what kind of, what does it contain? That's one. And second, are you today, are any of your customers constrained by any particular? Let's say bottleneck to go to the four-wheel drives basically. Is there any constraint with the customers which you have? And how do they come over it? These are the two questions.

Balaji Gopalan, Other

Okay. Obviously, going to the easier question, as far as constraints on movement or transition to four-wheel drive, that is really not a constraint, because generically, you can correct me if I'm wrong, the gearbox that we give, He's compatible with four-wheel drive. So, it already has a built-in capability of four-wheel drive. What changes is largely the front axle for which the drive has to be set. Okay. So, there is a little bit of intervention from the OEM because they need to have the connecting shaft or the rod that is propeller or whatever we call it, which will connect it to the front axle. Other than that, there is no constraint that they have. The market picks up, they will immediately transition from two-wheel drive to four-wheel drive. From their end, there is no big change that is expected. Ashok, you can elaborate.

Ashok Rai, Other

And the second point is, as the four-wheel drive conversion is happening from two-wheel drive, they are also working on the new models. And when the new models, as soon as the testing and validation is done, so they are also giving us those numbers. And the good part is that the OEMs whom we are working, they are already projecting us the future numbers, and they are also blocking the capacity with us. So, that is not a constraint. Rather, they are giving us a future visibility for which we are already doing the expansion. So, we are removing the future constraint by expanding it.

Balaji Gopalan, Other

If I have to put it the other way, the constraint for the OEM could be the supply from suppliers like us. If we are able to supply, they are able to sell. Understood. And there was one more question on the corporate charges, legal fees, David.

Davide Grossi, CFO

Yeah, so when we talk about corporate services, we mostly include certain central expenses that we have at corporate level for some centralized functions which are allocated to the different groups. And when we talk about professional teams, we include all the typical consultancies and And so on. One item which probably caught your attention, which is included in this ad, is... Our R&D expenditure, which is what has increased over the year. I'll give you a little bit of a background. You might know that Carraro India used to pay... And royalties to the headquarters for, again, know-how, for exploitation of know-how of the IP they were sitting in the headquarters. Before the IPO, Colorado India has purchased this IP, and now Colorado India has to invest and spend money to maintain and develop new projects. So, this is a cost that has gradually increased in the last 18 months. We have reached pretty much the, let's say, natural level of this cost, so I do not expect this to grow any further in the future.

Ashwini, Analyst — 3P Investment

Fantastic. Thank you, and festival greetings to everyone in West Fishes. Thank you. Thank you.

Balaji Gopalan, Other

Thank you, sir.

Operator

Thank you. We have a follow-up from Lakshmi Narayan. Please go ahead.

Lakshmi Narayanan, Analyst — Tunga Investments

Two questions. When you look at the four-wheel in which you actually supply to the customer, does the customer actually use it only for four-wheel or he can, I mean, the customer can also put it in a two-wheel drive tractor. Is it possible that they may buy an over-checked equipment from you and they can actually fit it in a two-wheel drive? Does it happen? That's my first question. Second is that if you look at the various companies which are actually doing, you know, on a capital way, the product, have you, you know, benchmarked your cost as well as their landed cost and your landed cost? And have you kind of, you know, re-engineered yourself to be cost competitive so that even the captive may find it lucrative and more efficient as well as more innovative. I mean, there's more engineering that is going exclusively for that in your, you know, within your scheme of things. So is it that is also you have done and where do you stand in thought?

Balaji Gopalan, Other

Okay. The first point, if I understood properly, you have asked, can a customer buy a four-wheel drive axle and use it in two-wheel drive? Is it right?

Lakshmi Narayanan, Analyst — Tunga Investments

Yes, sir.

Balaji Gopalan, Other

Yeah. No, that is a big no because logically or rationally, it doesn't make sense at all because you don't need such a heavy engineered axle. Usually, a two-wheel drive axle is a fabricated axle. You use sheet metal, you form the sheet metal, and you make a free-hanging axle because there is no drive in it, there are no gears in it. The part numbers going into it would be no more than 15, 20, 25 part numbers, but when you talk of a four-wheel drive axle, it is a casting. It is the same material in which you make your gearbox, and in that casting, we would have at least... 130 part numbers going into it. So imagine two-wheel drive with 25 part numbers, that is with 125 part numbers. This is sheet metal, that is casting. So there are two different things altogether. Nobody would use it because even the cost will not justify for it. Because the cost of a two-wheel drive and a four-wheel drive is not a difference of 10% or 20%. It is significantly higher, and it is a technology in itself. So you wouldn't want to do anything like that. So I hope I have answered that part of it. Yes. The second question was pertaining to the cost competitiveness. Yes, cost competitiveness. Now, we don't sell catalog products. Okay. When you sell a catalog product, that is when you have to benchmark and you have to be worried. We work on the co-designing principle. So, they give their duty cycle and we work a solution around it. We are not offering a product. We are offering a solution. And when we do that co-designing, obviously the customer also knows what is the cost. It's not a Coca-Cola formula that we are selling. We are selling a normal... I would say not even an automotive off-highway product which is casting. One can strip down, he can easily evaluate it, process costs are known, raw material costs are known. So cost estimation becomes very, very elementary part of the entire exercise and that is where we are competitive because we offer a technology solution which goes beyond the differential cost between internal and external. It reaches a point where money is not the deciding factor. It is time to market, ability to capture the market before your competitor. When you launch your first models, there should be zero field failure. These drive it rather than 10% cheaper if you build it in-house. So, I hope you've got the perspective in which I have answered your question.

Lakshmi Narayanan, Analyst — Tunga Investments

Yeah, yeah. So, I mean, I think we have a great proposition. So, is it difficult to convert the people who are being captive to agree to buy from you because you are on the, you know, on the highest level of, you know, innovation, productivity, and research, right? Thank you.

Balaji Gopalan, Other

Yeah. That is our endeavor. I will ask Ashok because he is the one who is going and attempting all this. So he can explain, share his experience. Ashok. Okay.

Ashok Rai, Other

This question has been asked earlier also to us. So our answer has always been, if they want, they can. But will they do? The answer is at the moment no. Because we are providing, as Dr. Balaji said, that it is not only the current product, we are a technology partner to them, and we give the solution for the next step also. This is the first. So, and plus, once the product is tested, validated. And it is already proven, and it is very difficult to disturb. That is the second point. Third point is, we are providing, based on the various regions, different type of access to the customer. So, we are able to provide the different dupy cycle solution to the customer. So, that flexibility they have. So, it's not about they can make it. It is all about what solution we provide and how proactively we work to serve their solution. For example, the market is asking capacity today. So, we are proactively working to build the capacity for the industry. So, all these multiple actions and multiple, what we call, moat of Carraro, technical moat of Carraro is helping us to keep the business relationship and keep growing the business with them.

Balaji Gopalan, Other

Sir, end of the day, it is not the 10% saving they will look at. They will look at the technology intervention that they will get by associating with a company like Carraro. So, the technology is what defines make or buy. And quick time to market and the reliability of that technology. These are three things that we have experienced as OEM's tendency to choose, make or buy.

Lakshmi Narayanan, Analyst — Tunga Investments

Thank you for your detailed experience.

Operator

Thank you. A follow-up question from the line of Ragunandan NL. Please go ahead.

Raghunandan NL, Analyst — Nomura Research

Thank you, sir. Just a last question from my end. On Capex, in first half of the year, it was 20 crores. How do you see the Capex for full year FI 27 and 28? Okay, so...

Davide Grossi, CFO

The first half was actually lower than what we have budgeted for a number of reasons which are not listed here, but we expect the second half to be more capital-intensive, definitely more capital-intensive than the first half. There are a number of projects related to our expansion, as we announced already, that have been started. Talking about roughly 100-plus crore of capex for FY27, we will have a similar amount for sure in FY2028. I'm not sure. Whether we would be able in FY27 to spend all this money, maybe 70-80%, there might be a carryover to 2028, but the bulk number should remain this one. Of course, 2028, we have not approved yet a plan, we have not approved yet a budget, so I'm giving you just an indication, but those are the numbers that we are considering.

Raghunandan NL, Analyst — Nomura Research

No, sir. Thank you very much. That's all from my side. Wishing a very, very happy Diwali once more to the entire team.

Balaji Gopalan, Other

Thank you, Raghu. Wish you all so happy Diwali. We are thinking that anybody who has more than four questions should invite us to Bombay for a meal and have a face-to-face discussion. Otherwise, there is no fun in answering remotely. It will give us an opportunity to see each other and understand each other. So, more than four questions, lunch in Mumbai. That is the condition for us.

Operator

Yes, sir. We are done with questions. You can go ahead with the closing comments.

Balaji Gopalan, Other

Thank you, everyone, for your participation and your questions. It was quite elaborate, and we hope we have answered all your questions to your satisfaction. We have been always trying to be transparent and share all the information. We appreciate your continued interest in Kararo, India. If we were unable to answer any of your questions today, please reach out to strategic growth advisors, our investor relation advisors, and we will be glad to respond. Once again, I wish you all and your families a very, very happy Diwali. Thank you, and have a great evening. Thank you.

Operator

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