Operator
Ladies and gentlemen, good day and welcome to the Happy Forgings Limited Q2FI27 Earnings Conference Call. 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 guarantee of future performance of the company and it may involve risks and uncertainties that are difficult to predict. As a reminder, our participant clients will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference, please signal for an operator by pressing star followed by zero on your touch-down telephones. Please note that this conference call is being recorded. I now hand the conference over to Mr. Ashish Garg, Managing Director from Happy Forgings Limited. Thank you and over to you, sir.
Good morning, and a very warm welcome to all of you to Happy Forging Limited Quarter 2 FY27 earnings call. With me, I have Mr. Pankaj Margoin, our CFO, and Strategic Growth Advisors, our Investor Relations Inventors. I trust everyone has had the chance to review our financial statements, and the investor presentation was Quarter 2 FY27, which we have filed with the exchanges. Let me start by outlining the key highlights for FAT2 and H1 FI27. At the beginning of the year, we were optimistic about the business outlook for FI27, supported by improving demand conditions across our key end-user segments and good visibility on incremental business opportunities. I am pleased that we have delivered a strong performance during the first half of FI27. Sustaining strong growth while maintaining the quality of our earnings, we have been able to sustain profitability levels at or above those achieved in FI26, despite an increase in raw material prices and other cost pressures. This has enabled us to deliver profitability growth ahead of revenue growth, reflecting the strength of our diversified business portfolio, increasing value addition and our continued focus on operational excellence. For H1 F527, revenue grew by around 30% year-on-year, supported by a 24% increase in finished goods volume, reflecting a positive demand momentum across our key end markets, and realizations grew by around 5% to Rs.260 per case. This growth has translated. to improved profitability with margins remaining healthy and return ratios showing an improvement. ROE increased to 17.1% and ROSI to 19.6% reflecting better operational leverage. Increasing value addition and more efficient utilization of our capital. Growth was also broad based across geographies with domestic and export revenues increased by 30% and 36% respectively. Overall, the first half performance reflects our ability to deliver strong growth while maintaining a healthy balance between volumes and proximity. Moving to our quarterly performance, quarter 2 FY27 was another strong quarter for the company. Our quarterly revenue crossed 500 crore milestone, registering year-on-year growth of approximately 33%. Finished goods volume sales increased by around 25% where realizations improved by roughly 6% to Rs.267 per kg. The improvement in realizations was supported by raw material cost pass-throughs, negotiated price increases to recover higher conversion costs and a favorable product mix. Despite certain cost-related headwinds, our gross, beta and pack margins remained healthy and broadly stable year-on-year with only a margin-moderation sequence. This performance reinforces the resilience of our business model and our ability to sustain growth by maintaining profitability. Now, moving to the segmental performance, commercial vehicle continues to be our largest business segment, contributing 33% of our total revenue in H1 F27, compared to 37% in HY26. The segment registered high-team growth during the period, primarily driven by a strong domestic performance, which grew in the mid-20s, broadly in line with the growth in the MHCV production and sales in India. Demand was supported by sustained infrastructure development, LTE replacement demand, and continued transportation activity. Exports, however, remained subdued, largely due to longer shipment times and resulting in higher sales in transit. Farm equipment was our second largest segment, contributing 30% of our total revenues during H-127, compared to 34% in the corresponding period last year. The segment delivered growth of over 20%, with the domestic business registered high team growth, outperforming the growth in the domestic sector production and sales during the period. Our export business also recorded a robust growth supported by highest sales to some of our key customers, despite a challenging demand environment in key international markets. The industrial segment contributed 16% to our revenue, compared to 13% in HV26, resisting a growth dwell above 50%. Growth was supported by a strong fraction in both domestic and export markets. Looking ahead are investments in heavy forging capabilities combined with growing demand for backup power generators for data centers in the energy sector provide a strong basis for continued growth in this segment. Off-highway contributed 12% to our total revenue in H-127 compared to 10% in H-126, registering a growth of over 50% with both domestic and export markets contributing to this performance. The domestic construction equipment segment witnessed healthy growth during the quarter, supported by healthy project awards, particularly across road, highways, and infrastructure segments. On the export front, demand was supported by continued traction in construction and mining equipment markets. Passenger vehicle contribution has now increased to 9% of our total revenues in H-127 compared to 5% in H-126. This segment revenue almost doubled over the corresponding period last year with contribution coming from both domestic and export markets. Domestic revenues growth was supported by a healthy market demand and an increased wallet share while export revenues growth was supported by execution of export orders secured in earlier periods. We continue to focus on improving the quality of our product mix with an increasing emphasis on higher value-added machining operations. Our machining contribution increased to 90% in H-157 compared to 88% in H-126. On the capacity fund, our installed capacity forging capacity stands at 158,000 metric tons, while our machining capacity stands at 52,000 metric tons. During H1-Fy27, capacity utilizations direct 60% in forcing and 77% in machine. We also strengthened our manufacturing capabilities during the period, commissioning a new forging press in H1-Fy27 and an additional hammer in H2-Fy27. Our strategic investments are progressing as planned. The 650 crore capital expenditure on ultra-heavy component manufacturing is doing as per the schedule timelines. This facility, with our 20 megawatt captive soldat or other, is expected to be completed and commence operations in a quarter-four of FY28. In parallel, we are actively engaged with several OEMs for heavy components data center and gas engine applications. And as well as the wind programs, which are continually in discussion. These discussions are progressing well, and we expect them to translate into orders in early FY28. Further, considering the strong demand visibility, LD order books, and existing capacity utilizations, even nearing their peak, our board has approved an additional capital expenditure of 500 crores. This investment will be funded through a combination of debt and internal improvements, and will be implemented in a phased manner across F528 and F529. The proposed investment will primarily focus on our expanding machining capabilities while supplementing our existing forging capabilities enabling us to cater to growing requirements of our customers. These investments will mainly support growth opportunities across passenger vehicle, industrials, and export-related commercial vehicle sector. Combined together, the investment is in heavy components and newly approved CAPEX. These plans involve an additional 59,000 metric tons of forging capacity and 34,000 tons of machining capacity, leading to a total capacity of around 2,17,000 tons in forging and 116,000 tons in machining in the next two to two and a half years period. We believe that the plant capacity additions along are ongoing strategic investments while further strengthening our manufacturing capabilities. And position us to capitalize on emerging opportunities while supporting our long-term growth ambitions. Looking ahead, we remain optimistic about the demand environment and our growth prospects. Improving industry demand and the ramp-up of recently secured business provide confidence in our volume growth trajectory. Supported by our healthy order book, we remain well positioned to meet our fully evolving growth guidance. While Higher raw material prices and increased shipment cost may exert some near-term pressure on margins. We expect that our gross margin and EBITDA per kg matrix will continue to trend upwards supported by a favorable product list, higher value addition, and continued operational efficiencies. Only a profitability margin matrix may remain at levels roughly similar to F26. With that, I would like to invite Mr. Hanfaj Kumar Goyal, our CFO, to take through the detailed financial performance of the quarter.
Thank you, Ashish. Good morning, everyone. Let me take you through the key financials and operational highlights for Q2 and H1 of 0.27. First on revenue. Revenue from operation stood at 501 growth for Q2 of 0.27 and at 950 growth for H1 of 0.27. Resisting a strong year-on-year growth of 32.7% and 291, 9% with respect. I am pleased to share that our revenue performance reflects both strong operational momentum and the strategic execution of our diversification strategy across key industrial verticals and customer accounts. Looking at the number, our Q2 revenue growth was backed by strong dual engines, a 24.8% expansion in volumes and 6.3% increase in solutions. For the first half overall, this momentum carried through, with H1 volumes growing by 24% and a license spending by 4.8%. Our revenue growth is increasingly supported by broader industry diversification and lower customer concentration, with a growing contribution from customers beyond our top-time customers. Turning to perfect profitability and margins, For Q2FY27, gross profits reached 305 crore, delivering a robust year-on-year growth of 33.8%, with gross margins expanding 52 basis points to 60.8%. Abyta for the quarters stood at 153 crore, up to 32.2% YUI, maintaining healthy and stable Abyta margins at 30.6%. Our profit after tax came in at 98 crore, marking an impressive 32.8% value by growth. Pat margin holding steady at 19.5%. On a cumulative basis for H1FY27, our performance was equally compelling. Gross profit grew 36.5% YOY to 577 crore with gross margin expanding by 161 basis point to 60.8%. Abita rose 35.5% YOY to 294 crore expanding abita margin by 127 basis point to 30.9%. Finally, profit after tax for the first half expanded 35.8% YOY to 189.0, with paid margins broadening by 86.6% to 19.9%. Overall, these numbers demonstrate both operating leverage and disciplined cost management as we feel. Moving on to our balance sheet, cash flows and capital allocation, our financial position remains exceptionally strong, providing us with immensely flexibility to fund ongoing growth. During H1FI27, we incurred a total expenditure of approximately 378 crores, funded prudently through a combination of internal accruals, available liquidity, and targeted debts. Notably, over the last two and a half years, we have almost doubled our growth flow, and this base will continue to expand with our current growth projects. On the cash flow front, operating cash flow for H1 stood at 124 crore around. This temporary impact was primarily driven by working capital investment, especially higher receivables aligned with the top-line expansions, alongside 35 crore in strategic advance payments to raw material suppliers. We expect working capital movements to normalize over the full year, yielding significantly stronger cash flow conversions. Crucially, our balance sheet leverage remains extremely low. Our total outside liability to total net worth ratio stands at just 0.21, leaving ample hand room to support working capital requirements via internal force or low cost lines. Overall balance sheet health metrics remain best in class. Net equity stands at a conservative 0.08. Rousy came in at 19.6%, while Rousy on operational assets excluding cash, capital work in progress, and capital advances took comfortably well above 25%. Finally, with cash and liquid reserves of approximately 350 crore, we have a strong buffer to evaluate ongoing and future capex with a minimal reliance on external borrowings. That's all from my side. Thank you. With that, we are ready to commence the Q&A session. I will turn it back to the moderator to invite the first question. Thank you very much.
Operator
Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may enter star followed by one on their touchstone telephones. If you wish to remove yourself from the question queue, you may enter star followed by two. Participants are requested to please use only their handsets while asking a question. We will wait for a moment while the question queue assembles. The first question is from the line of Krishna Kansara from Boring AMC. Please go ahead. Yeah, hi. Am I audible? Yes, ma'am.
Yeah. So, firstly, many congratulations to the entire team on continued execution. My first question is on CAPEX. You know, it is truly amazing that we have announced yet another CAPEX program while we are on track to commission the heavy forging facility by this financial year end. My question is on the new plant, the CAPEX of 500 crores. I'm sure that you have certain commitments and visibility from clients, which has led you to announce this CAPEX. And you rightly mentioned also that industrials and PD are the two areas which are driving the decision. But it would be helpful if you can help us understand the demand bifurcation within industrials. Does data centers remain the key focus area even for the new CAPEX program, or are there other sub-segments as well which are driving the demand? Also, what percentage of our current order book and inquiry pipeline is tilted towards exports? If you can quantify, that would be helpful. This is my first question. Thank you.
So, this 500 crores of capex, which is planned now, is largely for the machining facility, largely for the machining facility. 70% of the capex will be run towards the machining facility. Land, we have already acquired almost six months back. So there is no investment on the land. It is simply on the capexes, on the pieces of machining facility, and 30% of the total capex we have also on the forging side of the facility, largely on the small press lines, where the demand is very strong, and there is already, we are running at a peak level utilization right now. We look at our machining capacity utilization levels, they were already peaked out at 50% in last quarter, which is expected to touch close to 90% by Q4, and it is very important to have this capacity in hand with the type of order books we have in hand and in forward, this machining approach is relatively very important for the programs which are already running and for the development which is already happening. And it's largely, this side of the demand is for the medium series gen sets, medium series gen sets, commercial vehicle exports, and passenger vehicle requirements. So, I hope I'm able to answer your question.
Sure. And what about the percentage of the order book and pipeline, which is from exports?
So, right now, we have roughly 50% of the order books that we have in hand is from the export sector. We have also gained almost 95 crores of orders in last quarter, and that is for exports to Asian region, largely for the exports to Asian region. So, the overall, if you see it is upwards of 50% that we have from exports.
Okay, understood. And next, I have two questions on the 4,000 ton press line that we commissioned in the previous quarter. Firstly, I wanted to confirm if this line was built dedicatedly for a North American TV customer. And secondly, how much revenue did this line generate for us, particularly in this quarter? Also, are there any such dedicated lines for customers which are coming up in the near future?
So, you're right that this line was commissioned for a North American client for PV application and for which we have started ramping up in Q1 and Q2. But as most of the sales are on DAP basis, a large part of the sales in this quarter has gone into sale in transit, which has started from third quarter. And roughly around 80 to 100 crores of sales is projected from this facility. We also have more orders in hand, starting from end of EPEC 27 and EPEC 28, which is for the North American PB program, for which the capacity addition is planned in this EPEC of 500 kHz.
Operator
Thank you so much, sir, and all the best. Thank you. The next question is from the line of Vivek Kumar from ICICI Securities. Please go ahead.
Thank you. Good morning, sir. Congratulations to you and the team for a good set of results, and my best wishes for coming quarters. My first question has been answered. So, if you could highlight the nature of order wins for the data center power backup segment, you know, in terms of, you know, we have had this news coming on things changing in U.S. Does that change anything for us? What is the percentage of confirmed orders or how the engagement is likely to be panned out? That's all.
Thank you, Rick. Yes, out of the 650 crores capex, this 500 crores of capex is towards the heavy sector, high horsepower, out of which some 300 crores is on the hammer line, which is completely fungible line, which can be used for any component forging from 300 kgs to 300. We have already secured orders of roughly 300 crores, which is for the large data center application, for which customer has already invested, and there is a clear visibility up to 2033, as customer has also invested on the plant. At the same time, there is almost 1000 crores of new orders which are in discussion. We aim to close nearly 500 crores of orders by this financial year for which these customers are waiting for us to demonstrate our capability. And our equipments have already arrived and the cold trials will probably start in January and February. And we expect to close close to 500 crores of orders on this. And this is not only for the entire businesses, not only for the data center application. This is also on the existing business of the mid-series gen sets, the heavy ones, you know, the 19 up to 19 to 60 liter, which is also there, which is an established market for which there is already very strong demand is already there, which goes into various applications. So, that is on a new market for players, and plus, there is also the Indian OEMs, the global OEMs in India, they are also expanding their engine capabilities within India. So, the facilities that we are setting up will also pay to do that.
Great. Great, sir. Perfect. Thank you for that, and good luck, sir, for future. Thank you.
Operator
Thank you. The next question is... This is Ramdala Sangli from Monarch Networks Capital. Please go ahead.
Hi, sir. Good morning, and many congratulations to the whole team for a very excellent performance. The only question I had was, how do you see the domestic factor demand evolving over the next few quarters from the kind of production schedules you're seeing from your customers? While some of the large OEMs have been very cautious in their guidance, I just wanted to understand how can this affect our revenues from the domestic market and the kind of diversification we have done over the last few years, we should be able to offset, if any, weakness from the other segments. Yes, sure. Thank you.
So, on the domestic farm equipment sector, we have gained substantial market share this year from 42% to almost 46%. And even though, you know, the market looks nearly, you know, it can say that it's down for over the last year, you know, probably November and December months look a little weak. But in terms of the overall positions that we have on the public open side and with the new orders in hand and the new market share claims, all the lines are fully ramped up and running. In fact, there is a capacity shortage even on that side. So, there is, we are not seeing, we are not expecting any, you know, tip in the revenue because of some slight issues in the company. We are not seeing.
Sure. Thank you. Thank you so much. Yes. Yes. Thank you so much, and wishing you a very happy giveaway to the whole team. Thank you.
Operator
The next question is from the line of Mihir Vora from Equius Securities. Please go ahead.
Yeah, hi. Thanks for taking my questions and season's greetings to the management. So, sir, my question was regarding when I was going through the presentation. So, I think on the slide 9, we have mentioned that the planned edition, including the heavy forging hammer, is to be commissioned in FY28. But if I recollect previously, you were saying this was supposed to be commissioned by fourth quarter. So, has anything changed here which has caused some kind of delay? Can you throw some color on it?
No, it was the equipment has arrived in FY27. The full trials on the forging lines are planned in quarter four. However, the sample submissions will happen in FY28. So, the revenues we have factored in is only from third and fourth quarter in FY28. And this is the same, you know, since beginning. There are no changes in fact that are waiting. Yes.
All right. And apart from that, so the 300 crore order, which we are saying we've already got for this line. So is it the annual order or is it spread across some years?
No, no, this is 300 crores per annum.
And it will be roughly till 2033 is what we have signed off. So you can just multiply and see.
Sure. And apart from that, we also indicated that we are seeing a good interest in terms of orders here. Just one question that if we see a good traction in terms of increasing orders, I think this line can only do a 1, 1.3 times asset turns. Post that, we have to get into a capex. So, how fast can we add the lines here?
So, basically, you know, if you look at the capacity for the hammer line. We have almost 2000 tons of capacity and the realization goes up to 800 rupees a kg if you have to sell as a machine, which is an opportunity size of almost 1600 crores, 1600 to 1800 crores per annum. And for that, you know, based on the demand and commitments, you know, the investments can be done once the machining line utilization will be picked out. And roughly, we can do the sampling based on the two machining lines that we are adding, which are committed by the customer. At the same time, customers are also willing to invest on the machining lines along with us. So, we can ramp up as we see it as a large backlog of orders. And also, on the domestic side, we see a lot of manufacturing probably will happen within India, and the decision for that is happening. And if that happens, then purely this facility, you know, will go to the domestic department.
So it's a 1,600 crore opportunity you talked about not regarding only the 600 crore capex which we have did, right? It is something which additional will also be required.
I'm saying from the capacity stand, if we are looking at a complete asset term, that is the kind of the potential based on the capacity we have. But it is not only this, we have working on towards the oil and gas railways and other defense requirements. So, and within industrials, this is only one area, but we have other areas as well. So, capacity will be there to cater to other sectors as well. And it's probably a very large sector that can be catered. Because anything beyond 300 kgs will be forced on this.
Okay. Okay, sir. Got it. That's all from my side. Happy to be here to you all. Thank you.
Operator
Thank you. Next question is from the line of Joseph George from IIFL. Please go ahead.
Thank you. So my question is on the margin guidance, when you mentioned that you expect FI27 margins to be similar to that of FI26. Now, if you look at 1H, we are clocking much better margins compared to last year. And to, you know, end the year similar to FI26 means that we are seeing some moderation in margins. Now, what I want to understand, first of all, is that understanding correct? Point number two, or question number two is, when you are guiding to, you know, deceleration in margins, is it because of The numerator-denominator effect wherein the revenues of the ASP is inflated because of pass-through and you can't get, you know, profit margin on that pass-through, or is it because there is pressure on profitability because of higher costs, which you might be able to recover, you know, going forward when consumers pass on that price hike?
So, thank you, Joseph. I think, Joseph, the visibility that we have for H1 will also continue for H2, despite of increase in the raw material prices. Raw material prices are a complete pass-through for us. The absolute EBITDA per kg, despite of the cost pressures, have improved the QC, which is an important point to be seen, and that is how we see, despite of all the pressures, EBITDA per kg has improved. And going forward, we see that, you know, it will be kind of maintained in X2 as well. And if raw material prices go beyond the certain range, probably, but beta per kg for us will still continue to improve. That is what I can say. And we also have the solar line probably starting in Q4, which will start adding almost one and a half percent to our beta. And we expect this to be fully commissioned by Q4 of this year. And we'll start contributing meaningfully from Q1 of next year.
Understood. That's clear. The second thing I wanted to touch upon was this heavy engines, data centers, etc. What I want to understand is how much of the CAPEX that you incur until now or your plannings in the next couple of years is dedicated to these heavy machinery or data center kind of applications. And against that, CAPEX, how much revenue is, you know, potentially generatable.
So roughly, as of now, 250 crores of machining lines are planned on the heavy data center application, which are completely sold out. Against which we have 300 crores of orders, and the capex on the forging line is fully fungible. We can forge any components on that. Communitive capex on both forging and machining, forging is a fungible line, is 500 crores. And balance 150 crores is for the heavy axle shaft and wind programs, which we have already started now.
So, the total is about 650 crores?
Out of 650 crores, 150 crores is towards wind and North American tractor products, which is altogether a different line. We call it as a vertical upsetter line, and 500, out of 500 crores, 300 crores, roughly 300 crores is towards the porging line. Which is a highly fungible line from 300 kg to 3 tons, we can do. And then there are machining lines which are dedicated for which customer has also invested. And we have already secured orders.
Okay. And again, yeah, so broadly, we are talking about, say, 50, sorry, 500 crores of investment for this line of business, right? Broadly. Understood. And on this CAPEX, what is the typical asset turn that you can generate with optimum utilization?
You can go up to 1.3x. So, we will be giving some more investments on the machining side. Probably this investment will be on an investment of, say, close to 750, 800 crores. We can go beyond.
Sorry, I did not catch the last line. And also, this 500 crores is not, see, this 300 crores of forging line, we can forge any component on it. Traditionally, if you see these lines everywhere globally, they are there, can forge anything on it. So it's not only products related to, you know, data center application. The shafts that we are working on, we are also working on the energy needs, right? Energy requirements are going up. So, there are gas engine products are also there. There are oil and gas products, which are also there, and there are wind sector products, which are there. So, it's a fungible line. The machining lines are kind of a dedicated lines, for which we also have investments from our customers.
Understood. Thank you. That's all I have.
Operator
Thank you. The next question is from the line of Varinder Bansal from Umkara Capital. Please go ahead.
Thank you so much, Mr. Greetings. I think a lot of questions have been answered. But quickly, on the farm equipments and tractors, you said you're confident that any snowdown will not be there compared to what OEMs have been saying. Is that right, from my understanding?
It's not going to impact us, Varinderji, much, because out of 30% of the farm equipment business that we do, roughly around 4-5% comes from indirect exports. So, balance is towards 23-24%, and we have also market share gain. So, we are not seeing any impact of that currently on our order books or on the production demand, on the demand side.
Okay. Second question, sir. A lot of people are worried now with this, you know, in actions happening in the US that the CapEx on the data centers may come down. Again, I hear you that you already have secured order book and the client has already invested in it. Since that is our next phase of growth, you know, we have been doing CapEx. Do you see any concerns over there at all?
Not at all. There is a very strong requirement. The 500 crores of order books that we are seeing to be closed by this financial year is a very small number. And in fact, there are substantial numbers that we will be seeing on the DC side because right now, if you talk about the facilities, there's hardly any facilities available worldwide to manufacture such products of this size. And, you know, Indian markets are also expecting, you know, this manufacturing to go up within India. And for that, they need a source within India as well, which, you know, CapEx probably, you know, is in the right direction. I don't see there is any issue at all. Because cumulatively, even at a thousand crores order book, we are just talking about 5% of the total market size, which is fairly, very small.
Sir, if I have to see the next three, four years, you know, with your vision, you know, where do you see this piece alone can go? You know, like, we are doing roughly 1750, 1760 kilos of sales right now. Am I right that this is the kind of number which can get added from this capex, what you have been doing in the next three, four years?
So, Burinderji, it's not only this particular capex. If you see that, you know, there is a capex which is happening around, because the industry is a very large field. Not everything comes from data centers today. There is a very large engine family between 19 litre to 60 litre, which is getting manufactured in India, for which 500, 600 crores of business is already there. And that is also growing because of the energy needs. That is also there for which we are in discussions, and we are expecting to close. So, similarly, if you see, then the passenger vehicle application, we are continuously growing. The growth has been very strong for us, and similarly, you know, there is a package which is planned in that vertical as well. On the export side, when called as industrials for heavy machinery, for op-iv application as well, we are seeing a 50% growth, you know, in each one. That's also an area which is doing really well for us, and we will be putting in investments in that area as well. So, cumulatively, all these areas, you know, will contribute meaningfully, and yes, along with the DC business, along with the machining lines that we are planning for data-centric business, You are right that, you know, we will be looking at doubling ourselves.
So, all the initiatives put together can give a visibility of the current sales getting added in the next 3-4 years? Yes, you're right. My last question, sir. Sorry, you were saying something, sir. No, no, please go on. Sir, I'm sorry to ask this question, but, you know, I think the supply side, the stake, the small dilution what the promoters have to do is still pending, right? I believe that I think you have one month or one and a half month right now. It creates a supply overhang of the stock as well. Any updates if you can share on that?
Sir, it will comply as per the requirements. So, we are clear that, you know, that will be done within the timeframes.
Okay, sir. All the best, and thank you so much, okay, for consistent performance.
Operator
Thank you. The next question is from the line of Aniket Mathre from JM Financial. Please go ahead.
Hi, sir. Good morning. Thank you for the opportunity. Sir, just one quick question on the, sorry for hopping again on the 650 crores KPIX, but as I understand, you have indicated a 300 crores order win. Could you tell us what is the total order win from the 650 crores KPIX? And I said 300 crores is only from the data center, right? You are doing other applications as well. So what is the total order win so far?
So, Aniket, I will just divide it again. First of all, there's 650 crores. Out of that, 150 crores is on the vertical upsetting line, which has nothing to do with any farm, you know, data center. That's on farm equipment, you know, North American farm equipment requirements, which are typically 518 HP and wind cleanings. Yeah, for which, you know, customers like Bonfiglioli, Lieber, and all these customers are there, for which we are already catering, and this is the complete range that we will be offering to them. So, this is already booked here, saying 150, Chris? Yes, yes, yes, this is already booked for which developers call has already started, the line has already started in terms of the development and activities. Then, this, out of the, for the 500 crores, 300 crores is towards the heavy hammer line. Every hammer line can produce anything, which is having a capacity of almost 2,000 tons per month, which can come from, you know, the large engines, you know, we can have anything going for oil and gas, we can have wind application, we can have marine application, for which we are already in discussion with our customers, and also large mining trucks on our, and there is further 200 crores of machining capex. For which, you know, it's for the data center application, for the heavy engines, for which we are working with our customer, for which we have secured orders, roughly 300 crores of secured orders we have, and in that machining line, and for which development has already been started, and the contract is up to 2033. And there is also enrichment by the customer, and we are looking at increased numbers from them, and the visibility is very clear.
Understood. And of this forging line, which is fungible, that's also booked?
So the forging line, which is fungible, on that, you know, we are in discussion, as I've mentioned, that by March, we'll have orders of 500 crores. And already customers are waiting for the installations to happen. Installation has just begun. And by Jan, we are looking at cold trials. By March, we are looking at hot trials on this one.
Very clear. Got it. And of the 650 crores, how much is invested already? Okay, and the bulk of the balance will be invested this year and next year?
Next year? 50 crores this year probably?
Some portion will go in, marginal portion will go in the next year, and in the next year, plus even the final machine will be invested.
Okay, so probably this year will be around 50 crores and balance in the next year.
Okay, so around $250,000 will be next year.
Sure. And for this new 500 crores KPEX, based on your expectation, how much debt would you need to raise to fund it?
Anikiji, we are already being very good into that relatively strong enough. So considering just matching the demand on suppliers' money. And we have already been the president going for the 650 crore, so we propose there is 300 crore of the debt, which we will be raising from the banks against this 500 crore of expansion. Of course, we still, we also expect there will be still cash liquidity into the balance sheet at the year and last.
Fair enough. So, at best, 300 crores you will need to raise for funding this.
That will be need based, which is keep us sanctioned, and we require time of opening the, you know, but looking into the cash, it was probably, if you look at end of financial year, the end of next financial year, probably the numbers will look very similar to what we have now.
So, since it will be stretching over a period of, you can say, one and a half or two years, So, there will be a product decision mix. We will be taking either by way of using internal accruals, liquidating our hands in the balance sheet, and then that. So, 300 is the optimum sanction, you can say, but maybe actual utilization can be lower.
Got it, sir. And just one final question on the outlook. I got your outlook for tractors, but if you could also help us understand how are you seeing CV domestic and CV exports and also industrials outlook for you, both domestic and exports?
Yes, total growth looks very strong as of now for all the verticals. Talk about the GV. Domestic looks very strong. Also, you know, on the industrial side, we've been growing very rapidly. There's very strong order books over there. And the continuity will be there in terms of that businesses as well because there are recent order wins in terms of the tank shaft businesses for Japan, Japanese market, as well as for the Asian region for which, you know, we've been supplying even on the domestic side. The model mix is there. So, on the industrial side, also, the growth looks strong. On the PV side, we have programs which are ramping up well, and the consumptions will start from Q3 onwards. So, on the PV side, as well, the programs are strong. And also, the domestic PV, we have entered two new programs, which will be starting in Q4 and Q2 of next financial year. So, PV also looks strong.
Got it. Just one final thing, sir. Are you seeing any headwinds in the tractor exports segment for you?
We have already started doing some components, already started, which we started two years back for the European markets. Plus, the indirect exports that we do on this sector is also strong. It's also improving, I can see.
Fair enough, sir. Okay. Thank you. All the best, and wishing you all a very happy day. Thank you.
Operator
The next question is from the line of Jinesh Gandhi from Oakland Capital. Please go ahead. Jinesh, your line is unmuted.
Yeah, am audible? Yes, Jinesh. Yeah, hi. A couple of questions from my side. First, when you talk of Factor's 46% market share now, is it full reflection of the order wins which we have had with one of the large OEMs, or this 46% will injure further as we fully ramp up that program?
It has just started coming in, Janesh, in the last two, three months, whereas we were not having the full market share for that. Now we have kind of full, you know, market share for that. We can, you know, it's up to us to ramp up completely on that program.
We started wrapping up two months back. Yes.
Right, right, right. Okay. Got it. Second question pertains to the large hammer where we have a good visibility on the business front. Given the opportunities which are opening up on the heavy forging side, any sense on what would be the timeline if we had to add more hammers going ahead on the heavy forging side? Is it considerably longer than normal forging a press line?
Yes, Sinesh, on the heavy forging side, I don't think we'll be needing capacity for the next 4-5 years, because if you look at a capacity of the 2000 tons that we are adding, it's a very large business that we are talking about. And we started investing on this two years back. It will be like a premium kind of a business with a very high gross margin. And so at a moment, we will be needing more of machining lines. As we go ahead and we develop more and more products on the machining side, we'll be needing more machining capacities. And lastly, the lead time for the machining capacity is nearly one year, so we can do sampling from our existing lines and we can ramp up from the new lines. This normally we do even on existing vehicles.
And last question pertains more so from Capex intensity perspective. So again, again, the opportunities which are opening up across business segments, both in India and overseas, should one expect acceleration in Capex over next five years versus what we did over the last five years? Thank you. Particularly because a large part of the opportunities would be on, would lead to mix improvement and also lead to higher set terms. So how should one think of CAPEX for next four or five years? Like we just announced, founded core CAPEX, which is to get to the growth that is coming up. So how should one think from next five year perspective?
Jinesh, definitely on the bigger base, when we are looking at a bigger growth, you know, definitely the capital also looks bigger in terms of size if you compare with last five years. But definitely the work that the company has done in the last couple of years will pay off because there is a lot of new customers, if you see, that we have added. And these customers have a large potential. So the developmental process is over and we just have to ramp up on the businesses. Then, in that case, our assets are not idle. We can very fast, very quickly, you know, utilize those assets. And, you know, if we are investing and we are able to utilize those assets, it's the best case scenario that probably can happen in our industry. So, definitely, the capex intensity will be there, but at the same time, the growth prospect that we are looking at is also strong.
Sure, sure. No, obviously, I'm thinking from growth index perspective only, I mean, opportunities are emerging across segments. So, the percentage of sales, it should be slightly higher than what we have seen in the last four, five years, where also we had a good amount of...
The base is bigger. We are looking at, say, adding 500 crores of top plus one year. That's the case, and we'll start adding 150 crores of the beta, then definitely capex intensity will be bigger than what we have done in the last few years.
Got it. Got it. Great. Thanks and all the best and happy Diwali to the team. Thank you.
Operator
Thank you. Next question is from the line of Arjun Khanna from Kotec Mutual Fund. Please go ahead.
Sure. Thank you for taking my question, and congratulations on a good set of numbers. Sir, the first question is on the exports bit. We were building up a strong export profile, so could you talk a little bit on the business development activities on the automotive side, MHCV, et cetera, where we have gained on the Indian side? How are we doing on the export side? Especially in U.S., while Europe, we have had very strong inroads.
Sure. Thank you, Arjun. So on the export side, we already have good order wins from North American region and, you know, the PV programs that, you know, and the industrial programs for the small portable gen sets are all for the North American market, which is going well on time. The PV program also that we have won, we have already started supplying, but that's on the DDP terms, which is in transit right now, will start contributing from third quarter, and it's also coming up from our new line, and we have a full visibility on that business as well. Besides this, there are further programs that we have developed for North American region, so you will see a region contributing, you know, meaningfully from third quarter onwards in terms of our enemies.
I'm sorry, what about the MSC side, sir?
On the MHCV side is, you know, we have some programs which are already in, you know, trial phase and testing phase for which we have secured some 80 crores of business out of this 950 crores order books plus some 100 crores we have gained in last quarter. Out of that, if you see some 80 crores are towards the North American CV programs, which is for the new global development for one large engine manufacturer which we are doing now. So that's also coming up well right now. And we have some programs which are running within India, which where the companies are setting up the transmissions plants within India, that's also coming up well, which is largely for the European market on the CV side.
Sure. Sir, the second question is just on the settlements that we do with our OEMs, given the volatility in raw material prices that we have actually seen across India, heightened labor costs, other consumables, etc., moving up. So, has the settlement done for the entire amount, or is it till now just the normal pass-through which you are getting for key commodities?
So, commodity pass-through, you know, see, even despite of all the, you know, cost increases, you look at our beta per kg as an improvement on that. And the cost increases, 80% of the cost increases have been passed through. But, you know, if you look at, you know, last quarter, there has been a substantial increase in the, you know, ocean freights, particularly, and not everything is kind of paid off. Which is kind of softening now, but the ocean parades were at its peak in last quarter, so our selling costs in the case of exports have nearly doubled in the last quarter. But on the domestic side, almost 80% of the OEMs have already paid off the increase.
So just to understand, because while we run very efficient labor operations, so there would be across India substantial pressure on labor costs. So essentially, does that mean that our product would become even more competitive versus other players in the market?
Well, if that is the case, then probably you can say that, you know, we'll be more competitive than others if we are able to maintain these margins and others are facing margin pressure. You can think in that manner, but yes, definitely, you know, you can say that we are better placed amongst the peers in terms of this.
Sure. And in terms of our renewable energy, is there any other further plans, and how do we should see the benefits of that, Roland?
This is the Renewable Energy Program, which is nearly for... 33 megawatt, 30 megawatt BC plus another three and a half megawatt is on track, and we expect, you know, some generations to happen in Q4, and next year, Q1 probably will start seeing the full generation from that point. And we are looking at almost 30 crores of power-saving on account of this plant. This is our first ground-mounted solar project. So once it is fully commissioned and running, we can decide on more as our power collaboration and requirements are also going on.
Sure. So in some states, there have been some changes to rules regarding wheeling, etc. Is there any incremental change in regulations impacting us?
Not really, Arjun, because this is a full CapEx, you know, project for us. So once the CapEx is done, whatever power is generated is kind of a saving for us.
And almost 90% of the CapEx on this project is already done. So as Pankaj mentioned, the, you know, 19.6% ROC that we have generated on the assets, including the CWIP. And if we exclude all the CWA, APF, you know, assets, we have probably related to 25% in this product.
Sure. Perfect. Thank you, and wishing you all the best. Thank you.
Operator
Thank you. We'll take the last question from the line of Rondak Mehta from ICICI Securities. Please go ahead.
Thank you for your opportunity. Congratulations, team, for a good set of numbers. All my questions have been answered. Just one question. So one of our recently added TV customer in the domestic market has acquired a European TV company, and they are now looking at supply chain synergies. If you can please share if we are engaging with them for the new business, or are we already supplying them? And because this could be a very large opportunity for us. Yeah, that would be.
Sir Anak, thanks. Yes, they have started looking at, and the main purpose for the CV company to buy that asset outside India was the cost professionalization and using the current base, the supply base. They have started suggesting and the discussions are ongoing, but as of now, immediately, the HRFQ processes have started, but immediately, the business of all probably will not happen. It's going to take some time. That is what I think about it. Yes, definitely, from the perspective of for them to buy this company, the main thing is for rationalization, but it will happen in the near future.
Okay, perfect. So, this could be more of a medium-term opportunity for the next three years, five years.
Yeah, next, you know, two to three years, yes.
All right. Thank you. Thank you, sir.
Operator
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Thank you. To conclude, we are confident that our investments in innovation capacity and customer partnerships will drive sustained growth and value creation. With this, I would like to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with strategic growth advisors, our investor relations advisors. I would like to end by wishing everyone a very happy Diwali and a prosperous New Year. Thank you and have a very nice day. I would like to give this opportunity to wish all the analysts, investors, a very happy journey and a prosperous new year. Thank you once again.
Operator
Thank you very much, sir. On behalf of Happy Forgings Limited, that concludes this conference call. Thank you all for joining and you may now disconnect your lines. Thank you.
