Pitti Engineering Limited (PITTIENG) Q2 2027 Earnings Call Transcript

We welcome you all to the Q2 and H1-FI27 Earnings Conference Call of Pity Engineering Ltd. 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 the date of this call. These statements do not guarantee the future performance of the company and may involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the lesson-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Akshay S. Pitti, Managing Director and Chief Executive Officer from Pitti Engineering Limited. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining the Q2H1FY27 Earnings Conference Call of Pitti Engineering Limited. Along with me are members of the senior management team and our investor relations partners from SGA. Our financial results and investor presentation and related doctor disclosures are available on the stock exchanges and on the company's website. I hope you have had the opportunity to go through the same. The global economy continues to face inflationary pressures and supply chain disruptions amid the ongoing conflict in the Middle East. With geopolitical uncertainties likely to persist, we are also witnessing price increases across our raw materials. Despite these challenges, demand remains robust. First, India's investment-led growth and rising demand for value-added engineering solutions continue to provide a favorable long-term outlook for our business. At Pitti Engineering, we have evolved from a manufacture of electrical laminations into a broader engineering solutions company with capabilities across laminations, casting, machining, and other value-added components. This evolution has been driven by our focus on understanding customer needs, expanding our manufacturing capabilities, and building long-term relations with leading global OEMs. Looking ahead, we believe three structural forces are shaping the demand for engineering industry and creating opportunities for us. First, the sustained investment in infrastructure and manufacturing. Ongoing public and private investment in railway, power, and manufacturing is expanding the installed base of rotating electrical equipment. As infrastructure and industrial activity grow, so does the need for motors, generators, and precision-engineered components that go into them. This creates opportunities for us to support customers across a wider range of applications. Second, the growing electrification and digitalization of economy. Driven by AI data centers and infrastructure, the shift towards a more electrified and digital economy is increasing the need for efficient motors, generators, and reliable engineering components as these applications evolve, and customers are looking for products that deliver greater efficiency, precision, and performance. Our expanding capabilities across lamination, casting, and machining positions us to address this broad range of requirements. Third, the consolidation of global sourcing. International OEMs are increasingly looking to work with manufacturing partners that can offer scale, consistent quality, reliable execution, and wide range of capabilities. This creates an opportunity for integrated companies like us to deepen existing customer relationships and increase our share of business and participate in new platforms. Together, these trends provide a favorable long-term Our focus on converting these opportunities into sustainable growth by expanding capacity in a phased manner, strengthening our engineering capabilities, and continuing to deliver on customer expectation. A few months ago, we had announced the first of our major capacity expansion for a greenfield facility in Hyderabad covering the casting and machining. The project was to be commissioned in a phased manner through F530. This investment was backed by strong auto-visibility for marquee customers across high-growth sectors such as data centers, mining, off-highway vehicles, and railways. Building on this, now we are announcing a new capacity expansion in lamination and machining. The objective is to consolidate our lamination operations in Bangalore and progressively increase our sheet metal capacity to 160,000 metric tons per annum and machining capacity to 1.31 million hours by financial year 31. This expansion will strengthen our ability to serve existing customers, pursue new opportunities, and support long-term growth. The total planned capital for this project is 450 crores, comprising approximately 125 crores towards land procurement and the remaining 325 crores towards infrastructure, plant, and equipment. The new greenfield facility will provide a platform for consolidating the Bangalore operations and creating capacity for the next phase of growth. The entire investment will be incurred in a phased manner till FY31 with capital deployments linked to project milestones and capacity requirements. This approach will allow us to align investment with business needs while ensuring that capacity comes on stream in a timely manner. The project will be funded through a combination of internal accruals and debt. Coming to the operational and financial performance, in terms of segment-wise revenue, Due to FY27, traction motor and railway components continue to contribute the highest share of the revenue at 27%. Our generation accounted for 16%, followed by industrial and commercial applications at 12%, mining, oil, and gas at 10%, special purpose motors at 8%, and data centers at 7%. This diversified mix reflects the range of applications we serve and multiple demand drivers supporting our business. Among these segments, data centers have emerged as a strong near-term growth opportunity. As we have highlighted on multiple occasions before, the demand remains robust, driven by significant power requirements of AI-led data center infrastructure. The need for reliable primary and backup power generation. We are seeing strong demand from customers such as Cummins, Marathon, and Nitech in this segment. We are also developing new opportunities with a few additional marquee customers in the same segment. Beyond data centers, we continue to see strong demand visibility across railways, metros, mining, off-highway equipment, and specialized industrial application. In railways, a modernization of North American infrastructure, along with investments in rail networks and mobility solutions, is supporting demand for our products. Similarly, increasing mining activity and demand for off-highway equipment are creating opportunities for our machine components segment. Overall, our diversified end market presence allows us to participate in multiple growth opportunities. On the volumes front, total lamination and assembly volumes for the potter stood at 21,600 tons, a growth of 26% YOY. H1 lamination volumes increased to 41,000 tons, up by 22% compared to H1 F526. Total raw casting and machine components volume for Q2F527 was 3,086 tons, growing by 6%, and 6,554 tons for H1, with a growth of 1.6%. Coming to our financial performance, before discussing the numbers, I would like to highlight that in September 2026, the company merged its two subsidiaries, Pitti Industries Private Limited and Duxin Foundries Private Limited, with the parent entity. with the engineering. Accordingly, the financial results for Q2 and H1 have been reported on standalone basis with previous numbers restated to ensure comparability. For Q2F527, our total income stood at 581 crores compared to Rs 499 crores in Q2F526, registering a growth of 16.3%. For the half-year, revenue grew by approximately 15% to 1110 crores compared to 963 crores in H1 and FY26. Adjusted EBITDA for the quarter stood at 91 crores compared to 80 crores in Q2 and FY26, a growth of 13%. The EBITDA margin stood at 15.8%, impacted by an increase in forex loss, increase in consumable and packing costs, and along with increase in fuel and power costs. Adjusted tax for the quarters would have 36 crores compared to 43 crores in Q2F526. It is important to note that in Q2F526, we had 21 crores of other income from Maharashtra's government for the package team of incentives that we enjoy for our Aurangabad facilities investment. We have decided to defer this claim of incentives in the current year to the next financial year with the objective of maximizing its cash flow. To conclude, we remain focused on strengthening our market positioning and building capacities to support long-term growth. A diversified end market presence and strong customer relations provide a solid foundation for future opportunities. We continue to remain focused on operational efficiency, cost management, and disciplined capital allocation with our ongoing expansion plans. We remain confident in our ability to deliver sustainable growth over the coming years. Thank you. And now we can open the fourth floor for the Q&A session.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Pranay Roop Chatterjee from Beaumont Capital Management. Please go ahead.

Hello, good afternoon, sir. Am I audible? Yes, I am audible. My first question was obviously on the margins. You mentioned three things. FX, packing and consumable inflation and fuel and power cost inflation. Thank you.

4.61 crores.

And what was it in the last quarter, like Q1FY27?

Q1FY27, just hold on. I don't have that number over here. I think our partners can get that across to you for next year.

Sure. Just to be sure, this is recorded in other expenses, which is above EBITDA?

Yes. Got it.

And, okay, fine. This is something I would expect would be sort of one-off in nature. Coming to the other costs, right, how do you see those evolving? Obviously, crude has not come down at all. On fuel, packing and consumables, and also the raw material inflation, any sense on if you're able to pass on and hence good margins recover to the 16%, 17% range?

I would say that the fuel and power cost is going to be passed on from January onwards. Typically, during the year, we don't, you know, go into the consumable level because the very small percentage of overall cost, this is a unique situation where due to global supply chain issues and the oil prices due to Middle East have remained consistently So, like I would say that by quarter 4, you should see that coming back because those are annually readjusted. The steel price inflation is quarterly passed through. So, those we are able to pass through as per normal contract terms. Understood.

My last question is on the casting volumes actually dropped quarter and quarter. And this quarter, I think your capacities also came in around August. First, we had a guidance of about, if I recall, around 16,000, 17,000 tons for the year. Are you still on track to meet that guidance? Because that will mean substantial pickup in the second half.

The line that you see at 6,054 tons for the half year, these are casting machine components going as pure vanilla machine components. To do the combination vis-a-vis the overall sales, You also have to add the other machine components going into the lamination assemblies.

Okay.

Which is just about the total lamination and assembly quantity, which is 2,185 tons.

Sorry, 2,024 tons. Got it. So, your 17,000 number is after you add both of these, the target for effort.

Yes.

Okay. And if you could just confirm one number for me, what is the incentive per year you would realize from Maharashtra, because I think I was slightly confused. There was two different terms, nine-year and seven-year. So, basically, whatever term is agreed or finalized, what would be the incentive per year you will actually be able to book from next year, not the cap?

So, we are eligible to receive up to 400 crores of the incentive. If we take it over seven years, the eligibility would come to 57 crores. If we take it over nine years, it would come to 44 crores. However, having said that, based on the local Maharashtra sales, we don't estimate that we will be able to recover more than 40 crores per annum, irrespective of the eligibility, at least in the near term. Okay.

But that's still the bulk of the cap, right? It's a reasonable part of the cap.

Yeah, yeah. It's a good chunk of the capitals, which is why we are trying to work and increase the recovery period to 9 years instead of 7 years. So that we can maximize the recovery. And obviously, as time progresses, we will be able to recover more than 40 per year also.

Great, sir. Thanks a lot and all the best. Thank you.

Thank you. The next question is from the line of Mohit Jain from DR Choksi, Sons of Private Limited. Please go ahead.

Hi, sir. Good afternoon. Thank you for giving me this opportunity. Sir, on the EBITDA margin, mostly the first participant asked the question, but my question is more of a follow-up. You said this 100-bis decrease was mainly due to fuel and power cost, consumable, and raw material. I'm seeing gross margin was impacted 60-bis. So I'm thinking that raw material would be 60-bis, and other fuel power would be around 40-bis. You also mentioned that fuel power and forex also. And forex is right. You also mentioned that, so probably you are saying that this 40-bit improvement can be seen from January onward, but the 60-bit raw material inflation can be seen from this quarter itself. Can you just clarify?

The raw material inflation is not actually impacting in that way. The gross margin reduction is not a factor of the increase in raw material cost alone.

Okay.

It's the inflation. Even if you pass it on to the customer, the margin as a percentage would go down. See, my selling price would adjust from 110 to say, 100 to 110. The cost increases by 10 rupees. But the cost also would go up by 10 rupees. So the percentage margin would look lower, even if you are passing it on. So there would be a possibility to recover it.

So if the inflation is here to stay, let's say, for the next three, four, six months, So, it is very hard for us to get the margin levels to 17% or you are confident to be there?

See, if the steel price increase by another, say, Rs. 10,000, I am just giving as an illustration, we will pass that on to the customer. With the increase in selling price, the customer won't give you a margin on the inflation. So, the margins may go lower. The absolute margin will not go down.

Okay. And got it. And my second question is on the working capital. Can you just clarify this trade payables increase to 470 crores from 236? This has positively impacted our cash flow this semi-annual. So, is it here to sustain? Can you just clarify on this?

Yeah, it is here to sustain. We will be looking to work more on the trade payable side rather than, you know, leverage our cash positions to buy materials going forward. As we are going into a CapEx cycle over the next four years.

And Akshay sir, lastly on the Capex side, so this newly announced 450 goal Capex, which you bifurcated between 125 and 325, Lion 125 and InfraSection 325. Can you just give the split between how will it be funded? I'm pretty sure it must be from internal and debt. So can you just provide a clarification, not clarification, but a touch on this?

I think this CapEx is going to be a very long-term implementation. So apart from the 125 crores, which will be spent for the land acquisition and the building, the remaining is going to be linked to the increase in requirement from the customers. And therefore, you know, quarter on quarter will be adding capacity. This 450 will be spent approximately in a split, something like 150 crores in the first year, which would be FY28, and then towards FY29, 30, and 31, the remaining amounts. Again, linked to what the requirement and demand from the market is coming. I believe that over those years, we should be able to fund it entirely with the internal accruals. However, we have put a point out there that we are going to fund it through a mix of both.

All right, all right.

It should be funded entirely from internal accruals, if that clarifies.

Till FY31.

Yeah. Okay.

Thank you very much, Akshay, sir. All the best. Thank you.

Thank you. The next question is from the line of Mayank Chaturvedi from HSBC India Limited. Please go ahead.

Yeah, hi, Akshay. Thanks for the opportunity. On the CAPEX side, the integration, so would that entail and be integrated into Bangalore, right? No, no. So, see, in Bangalore, the lamination part of it.

No, so Aurangabad will continue to have lamination going forward. I think even when the full CAPEX is implemented, I believe Aurangabad will be our largest lamination The idea to integrate is that in Bangalore, when we acquired Bagadia Fetra Industries, they were operating two units, income passing around 80,000 square feet of factory built-up ADRs, and subsequent to that, we had expanded into two additional lease facilities owing to the increase in demand from our customers in that region. What we are seeing going forward is that there's additional growth coming in Bangalore, and we would have to again go and leave more facilities. The idea is that now that we have significant lamination manufacturing presence in Bangalore, to consolidate not only the existing lease facilities, but also what we will grow into future into a single location. If I were to give a background, I think between now and when the Bangalore facility will come up, we will actually have to go to a fifth and a sixth lease facility before we can move into our own facility. So the idea is that we don't want to have this manufacturing distributed across six, seven sites. It's quite inefficient. Economies of scale don't come in and your overhead costs go up.

I think if that is to be done, then if Aurangabad is to be shifted to Bangalore, then there will be a disruption in operations for some time on the lamination side of it, but that's not going to happen.

No, no. So the increase in capacity is not only in Bangalore. From 108,000 to 160,000, we are not saying that 52,000 will be the increase in Bangalore. This will be an increase including Aurangabad.

Okay.

The 325 crores is going towards a capacity increase, and the 125 crores is going towards consolidating the Bangor factories into a single location.

Got it, got it, got it. And, I mean, we have not discussed it, but…

We have not discussed it to bring it in-house, but we are exploring to get it outsourced to start with and getting to that segment slowly. If we see enough demand coming and margin profile being strong enough, then we could consider bringing it in-house.

This Maharashtra incentive that we're deferring to next year, can you provide some context to it, why we would not want it this year?

So, see, right now, our sales support a recovery of roughly about 35 to 36 crores per annum. When we had initially applied for this scheme, we were expecting to receive a nine-year recovery period. The investment that was eligible for incentive claim was 400 crores. So, that worked out to about 44 crores per year. Now, typically, as you ramp up your capacity and sales, this 36 recovery potential per annum would have increased. So we were quite comfortable, you know, claiming this. However, the approval and sanction that we got was for seven years. So that meant that, you know, we had to recover 57 crores a year. So we are trying to work with the government to get this back to nine years so that we can recover a larger portion of the investment. And anyway, by deferring it by a year, I'm pretty confident, like I said, by next year, we should be running at a rate of about 40 crores recovery per year. So, you know, that increased sales would help us recover more, even if we don't end up getting the nine-year claim period from the comment.

Okay. Okay. So, you won't be able to recover any in FF27, but to recover the whole amount, you have to defer it, and then you'll start recovering again from FF28?

Yes.

Got it. And any new KPEGs that you're putting up?

In Bangalore? No. In Bangalore, there won't be any incentive available.

All right. All right.

Land at a consensual rate. I think that would be the only support that you would get.

Okay, sure. Thanks.

Thank you. The next question is from the line of Pratik Jain from Solidity Tree Investment Manager. Please go ahead.

Hey, Akshay, thanks for the opportunity. Akshay, I have three questions. First is, you know, looking at the next three years with the visibility you have today, what kind of growth do you think is achievable? And if it's possible, can you break it down a little granularly?

So, see, if you thought of by FY3031 when this whole capex is done, and obviously this capex is extremely modular in nature, assuming that it's at full utilization by FY31, we should be having a revenue potential of approximately 3,800 crores as a company, of which around 850 odd crores would come from machine components, plain vanilla machine components, and the remaining would come from the lamination part of the business.

And, I mean, what will be the levers for, you know, for people to spread this capacity out?

So, see, apart from the land and building of 125 crores in Bangalore, we are not committing to expend anything today. As we keep getting orders, see, we have got strong visibility and focus from customers. We are developing the products for them. But obviously, these things take time to pick up in the end markets. Our idea is to, you know, announce this CAPEX, get the approvals in place, and only expend the money as we see the demand coming in from the customer. The lead time on the equipment is barely six to eight months, so we can be, you know, very tactical in deployment of this capacity.

Got it, got it. And, I mean, this was one of my questions also, given you mentioned that it is modular. Are we confident that, you know, if we get the demand, given a lot of these new CAPEX will be coming launching by FY30, if, you know, if there is a pre-demand jump before FY30, you know, the CAPEX won't be a bottleneck here for growth.

So then we'll have to dip into probably debt. See, like I said, when someone asked me about the funding structure, the reason that we have put debt and internal accruals is that we don't want to get tied down. And if, like you rightly said, the demand comes ahead of our expectation, then that flexibility is available to us. And similarly, we are not going to restrict ourselves just because our facility in Bangalore is not available. We are already operating in three lease premises apart from the one fully owned facility for lamination in Bangalore. And till our facility comes up, we are not averse to taking more facilities on lease, implementing the capex, securing the business, and then reshifting it back to a single location.

And lastly, on margins, you know, if I take a slightly longer term view, right, I mean, you guys are doing more of a machining value-added products, right? So margins should structurally improve here. I mean, can you give me some sense around, like, if you sweat this 3,800 crores capacity, right, by FY31, what will be the steady-step margins of the business?

See, on a blended basis, you should be looking, I mean, talking of current raw material prices. When I say current quarter 2 raw material price levels, steel prices are obviously increasing and decreasing every quarter. But if you take a Q2 price level, your sustainable blended margin should be in the vicinity of 17 plus per centimeter.

But has you moved to FI 31 with more value added mix? Shouldn't it be to the range of 18 plus? Yes. I mean, I don't want to get involved in this quarterly fluctuations because it will eventually get passed on to the customers. But if that is a normal term view, on a steady set basis, can it be 18%?

Again, it depends on the mix of the machine component to lamination. Obviously, we are penciling in a higher growth in lamination as well. We are suggesting that lamination would do closer to 2,000 plus crore revenue on a standalone basis. So that would bring the overall blended margin profile lower. Thank you. With this mix.

Very much, Klee. Thanks, Akshar. Thank you.

Thank you. The next question is from the line of Vivek Ganguly from TGS Asset Management Company. Please go ahead.

Thank you. My first question is on the CAPEX. So, the new CAPEX that the planned CAPEX that he'll have announced is over and above the earlier CAPEX that he'll have announced, or is this inclusive of that?

No, over and above. The CapEx announced earlier was 290 crores. The current CapEx announced is 450. And the cumulative CapEx for the two announcements is 740.

740. And of this, about 350, which is going to be much more modular, depending on how the orders come through.

Okay, so if you want to look at it in that manner, I would say out of the 740, 250 to 260 would be kind of a committed capex, because in Hyderabad also, we are doing the land and building, which is of a similar scale and value. The remaining is modular.

Right, got it. So approximately, then you will end up, if this entire thing goes through as planned, about 150 odd crores every year.

So see, with the 290 crores, the Hyderabad land and building in current year is also going to be there. So the first year will be something like 300 or 250 to 300. And thereafter, it will be, you know, 100, 125, 150. It's all going to depend on what demand comes in and how quickly it comes in.

Right. So, this $250,000 to $300,000 for land and building, what is the schedule for this? How much of that will be incurred this year and how much the next year?

I think if you take the start date as 1st of July, I would say that in 18 months, you should see more than 90% of it being expended.

18 months. Okay, that's all from me. I'll again come back into the queue.

Thank you. The next question is from the line of Bala Subramanian from Arihan Capital Markets Ltd. Please go ahead.

Good afternoon, sir. Thank you so much for the opportunity. Sir, the volume of byproducts and scrap, it's almost increased to more than 60% this quarter. Sir, is the result of increased production activity or we are seeing higher scrap generation due to new manufacturing process or lower yields in the initial ramp-up phases? How do you understand, sir?

See, there are a couple of things. There's a higher production, obviously being half-year end, we were not able to dispatch many of the products. So, there is a little bit of an overhang from last quarter in terms of inventory of finished goods, which will get liquidated in this quarter. Apart from that, if you see the high-value-added SMBs volume has significantly jumped in this quarter, and that also yields into a lower utilization of the side slits. So, if we are not able to use those side slits, we prefer to liquidate them.

Okay, sir. Sir, I think that presentation is about a strong flexibility from market customers like Caterpillar, Synapse Mobility, etc. If you look at 3-4 years back, our 50-60% of business came from the top 5 customers. How did which change currently?

So, I would say that even if you look forward, I would say the major revenue will still come from the top 5, top 7 customers because when we do the grouping, we would take the beneficial ownership level. So, for example, if you are going to do business with Progress Rail, we would still consider that as a Caterpillar-owned entity and therefore quantify it there in terms of customer concentration risk. Similarly, if you talk of Siemens Mobility, we would say that Siemens Gamesa and all of these companies are also Siemens-owned and therefore we would regroup it there.

Okay, sir. Awesome. Last question. Data Center Week has seen a double increase in contribution in this quarter. How do you look at the emerging sectors, and what kind of mix we can expect over the next three to five years?

I would say we are looking at it cautiously optimistic on data center. The good part is that I would say not all of our data center business is linked to AI. There's also linked to regular data centers. So we see sustained growth coming from that segment. However, I would not look at it, you know, increasing more than probably 9% of the overall revenue as a segment. We see that other segments like mining and special purpose motors, PowerGen in general, will also grow and overall mix should remain, you know, similar. Got it, sir. Thank you.

Thank you. The next question is from the line of Rahul Kumar from Vicaria Fund. Please go ahead.

Yeah, hi. Conversations on a strong quarter. Can you, in light of the strong volumes in this quarter and in the previous quarter as well, do you want to revise the FY27 volume numbers and FY28? Okay.

F527, I think we'll still hold on to the upgraded guidance given last quarter. Execution will be a challenge. Quarter 3 is always a little bit of a challenge considering the holiday season in India and Europe. We have Dashwira, Diwali, then Christmas for our European and American clients. However, quarter 4, I think we should see a strong volume growth. For FY28, yes, definitely with this capex coming in and modularly expanding our capacity from quarter two of FY28, we should see again a stronger volume growth.

And the second question, I think, Arday used to give the split of the machine components and the raw costings. So, can you give the same for this quarter as well?

Just give me a minute. Can you just pull that out? Yeah, so machine component is about 1,700 tons, and raw casting is about 1,000 tons.

Okay. So, the reason why I was asking was, if I look, you know, the percentage obviously gets deflated because of the steel prices, but if you look at the console EBITDA per ton figure as well, I think that's seen a 10% decline over the Q1 quarter. I'm not sure it's 100% explained by the, you know, the cost increase. So, is there anything else in terms of product mix or something which is led to this?

It's called EBITDA per time.

Yeah. I mean, the denominator is the lamination volume, obviously.

You see, that would not be the right way to look at the company. So, that's why we have stopped giving that metric. If you see the volume in quarter two, the loose lamination and low-value added assemblies are almost 15,500 tons. And therefore, you know, that business is obviously a lower EBITDA margin. Right. So that change between the, you know, segments and the percentage of machining revenue will not actually give you a right metric. EBITDA per ton, you cannot take lamination as a tonnage.

Okay. Okay. But actually, if you just see the value-added products share as well, you know, that share also is sort of flat. It hasn't deteriorated. The machine component percentage also has actually increased. Right?

So, how should I put it? When we say high-value-added assemblies and low-value-added assemblies, within the high-value-added assemblies, like I mentioned in the past, There's no metric to say that one ton of high-value-added assembly will give you X EBITDA. It is a very wide bank because it's a very wide bank on the amount of value-add you do and therefore the margin that you earn. And secondly, also if you see, while we discussed the EBITDA is down because of the inflationary pressures, you'll also see that the manpower cost is significantly higher on a QOQ basis. And that is mainly because the new capacity that has come in, we have, you know, get up our manpower side to take care of the increase in capacity while it is not giving its full effect yet. So, you know, from quarter four, you should see that margin for the gaining.

Thank you. The next question is from the line of Kanan Travedi from Groot Felipi, Wealth Private Limited. Please go ahead.

Hi, thank you for the opportunity. So, firstly, I wanted to ask, are we still on track to our previous quarter guidance of 370 crores for the full year?

Yes, I think we are pretty much on track. If you look at the current quarter and simply extrapolate this, we should be getting there.

And my second question was on the exports front. So, if I see from FY23 to FY26, there is a bit reduction as a percentage of our total revenue. Now, this may be more because we are more on the domestic front in recent years, but how do you see this standing out in next, let's say, three to four years?

I think overall exports will remain stable or slightly downward as a percentage of overall sales. As a standalone number, exports will grow and they will grow significantly, but the domestic business is going to grow faster than the direct export business.

Okay, so can you provide some color like what's the various reasons for the same?

See, the direct export opportunity would be limited to the business that we can do to sell the product as components to the customer. What is the trend that we are seeing is that most of our customers also have a manufacturing presence in India. And rather than importing components and doing the manufacturing in, say, Europe or US, they would be happier to make the product in India. So we cannot actually, you know, how to put it, quantify what are our deemed exports or what portion of the revenue that we supply to our domestic clients eventually gets exported. So that actually misrepresents the overall potential of our products which are eventually getting exported, if that makes sense.

That's it, Krameshid. Thank you. Yeah.

Thank you. The next question is from the line of Saksham Tyagi from Desville Audio Advisory. Please go ahead.

Hello, am I audible?

Yes, sir, you're audible.

Okay, sir. Thanks for your opportunity, sir. So, my first question is, in first quarter, you outlined an ongoing 290 crore Hyderabad expansion and also mentioned a potential 400 crore Bangalore CAPEX for FY28 and FY29, right? And in quarter two, the board has already approved a new 450 crore KPEX phase through the FY31 to expand the sheet metal capacity, right? So how does this 450 crore project fit into the earlier KPEX timeline, and how will it be funded given the total borrowings currently stand at 640 crores?

So if you look at it, what I had given in a conversation the last investor called 400, the board has just approved 50 instead of 400. So, it is exactly what we discussed in the last call. In terms of timeline, it's going to be done by SY31. And like I already mentioned in the previous query, if I take the entire 740, 290 plus 450, roughly about 260 crores would be the committed CAPEX in terms of land building infrastructure. Apart from that, everything else is modular. So, if the business materializes faster than our expectation, we would have to dip into debt. Otherwise, we believe that we should be able to support this capex from internal approvals through this period.

Okay, understood. And my second question is related to the previous phone call. Like, you revised the FY27 lamination volume target from 78,000 tons to 82,000 tons, implying approximately around 70-18% growth for the year, right? And given that quarter 1 lamination and assembly volumes were around 19,200 tons, so could you update us on the volume achieved in quarter 2 and the cumulative first-hour performance? Like, what quarterly run rate will be required in H2 to achieve the 82,000 tons target? Like, are you still confident about meeting that target?

Yeah, if you see, X1 numbers is about 40,889 tons. So, if I just double this, you're at 82,000 tons. If you take quarter 4, it's going to be similar to quarter 2, maybe slightly stronger than quarter 2. Quarter 3 volumes might dip a little bit on lamination owing to the festivals.

Okay, so the target can still be measured this year? Yeah, 82,000, 82,000 plus 1,000 tons for the year. Okay, sir. Okay. Thank you.

Thank you. The next question is from the line of Abhijit Madhra from INOIS Alpha Investment Management. Please go ahead.

Yeah. Hi. Am I audible?

Yes, sir. Audible.

Yeah. Thanks. Thanks for taking my question. Just to sort of get, you know, an understanding right. So, your volume for total plastics and machine components is around 3,000 times. Now, if I look at the capacity for casting, it's around 24,600 tons, and the utilization is 52%, right?

You know, casting's volume for the quarter.

And out of this 2,198, you know, 1,059 would have, you know, gone into other machine components, you know, which is essentially going through lamination and assembly. The rest would be a mix of your raw castings and, you know, your machine components. If this is the breakdown, broadly, if this is the breakdown.

Yeah, so about thousand or tons, like I said, is raw castings, and the remaining would be machine castings, and 300 tons of machine castings going into assemblies, right? Right. Now, when we talk of capacity utilization, historically, in the past, the foundry used to give its own utilization. So, we need to probably work a little bit on that metric because we are taking the sales and, you know, defining the utilization. If you see the casting that is going into machining, there will be an input-output ratio. In machining, we are basically shaving off the metal to get the finished dimensions. And typically, about 30 to 40% of the weight is reduced in the machining or from the raw casting level. So, if you kind of equate it to a production of casting, that would be closer to 4,900 tons of casting produced. The utilization is calculated on a scale basis historically, so we didn't want to change that metric for comparative purposes.

Okay. And the machining hours are also given. You use the utilization and divide it by total processing, then that's, you know, there's a number of within us that ran to get the output required. Yeah, but then this, you know, for example, in this quarter, you have run it for 1,72,000 hours, probably, or 1,72,000 hours. So, against that, against that, whatever would have gone into your machine crafting and machine components put together, the machine crafting is going into land machine assembly, because that's the figure of what we are doing. Actually, like machine components, you have to divide by that to get the hours of, you know, machine crafting for this.

One can say that about 6 hours per ton of machine output is utilized, Because the 1,000 tons of other machine components going into assembly plus 2,000 tons of machine components in total, 3,000 tons of machining was done, and 172,000 hours were utilized to get that machining done.

Understood. So you think the value added for the quarter is around 54 hours per ton, that's the 6 hours per ton, roughly.

Good afternoon, sir. Thank you for the opportunity. So, two questions. One is, you know, the traction, you know, sales, particularly the traction motor sales, it is, you know, it is one of the largest business contributor. It is declining. So, what is the outlook there? That is one question. And the second question regarding the realization, you know, our overall realization has almost reached around 2 lakh rupees per ton, but, you know, in a consolidated basis. But if you see the EBITDA per ton, it is one of the lowest in the last 6 to 7 quarters, EBITDA per ton. I understand it is not a right measure, but how to look at this, you know, in coming periods. And secondly, you mentioned about the scrap. You know, there is a significant increase in scrap. So, previous participants had asked this question. And if you see the realization of scrap is also one of the lowest. So, how to see these things, you know, in a fatality basis? Can you please guide on this? The second question and the first question regarding the traction motor. Thank you.

On the traction motor share of overall revenue, I would say that earlier, the overall reliance on traction motor as a segment was very high and our focus was very high there. Obviously, we are seeing a good demand coming from other segments like data center and mining off-highway, special purpose, wind power, etc. So, if you look at it on an absolute number, the traction motor has not really been at an alarming rate. Out of 580 crores of revenue, about 27% is about 156 crores for traction, motor, and railway-related components. If you see last year, it's about 32%. So, on an absolute number, it is still, I would say, solid segment for us. The other segments are going faster. Now, coming to the Imbitta pattern, like you rightly said, that is not the right way to look at it. But if I can provide some guidance and color, unfortunately, I cannot. Because if you look at the lamination business, and if you're only doing lamination, an EBITDA for 10 could have been a metric where you can, you know, blend everything and measure the business. But the minute you get into machining, it becomes slightly different. On the EBITDA being lower for the overall output in this quarter, definitely there are two contributing factors. One is your Forex loss, which I have mentioned, which is booked in the other expense. And the second is your employee cost. It is significantly higher because we are gearing up for the higher level of operations and the capacities that we are commissioning. So, those will get spread over a larger base going forward. That's just the way it is going to be in the initial period as we set ourselves up to grow.

Okay, okay, okay. And regarding this other income, so with this around 70 crores of the approval for the Maharashtra incentive is already done or it is still in the process? Sorry, 70 crores? No, no. The receivables from the Maharashtra government, it is already received or it is in the process?

No, it is in the process for disbursement.

Okay, okay. So, that will help us with CAPEX going ahead. Is it correct?

It will help us definitely, but we are not linking that to our CAPEX plans per se. It will help in managing the overall debt level.

Okay, sir. Thank you. And all the best, sir. Thank you.

Thank you. The next question is from the line of Lavia Bardotta from Zenflow Finance. Please go ahead.

Hello. Thank you for giving me the opportunity. My only question was, like, which sector in the next two to three years do you see, like, growing the fastest in your business model?

In terms of fastest growth, over three years, it's very difficult to predict, but given the current outlook, I would say mining of highway for the next two years looks very, very robust. PowerGen overall should also, from its current level, grow the fastest.

Okay, and what about data centers?

Data centers, again, if you talk of a longer-term view, like I said, we are cautiously optimistic. Potentially, it can grow very, very fast, even faster than the others. In the short term, longer term, again, like I said, it's better to wait and watch.

Potential to grow is there. Okay, thank you so much.

Thank you. The next question is from the line of Pranay Roov Chatterjee from Bowman Capital Management. Please go ahead.

Hello, sir. Am I audible? Yes. My question is, I'm actually slightly confused how to tie the two guidance numbers you gave, which is 17,000 tons of castings and 82,000 tons of lamination with slide 6, which gives the detailed sales better by volume. So, Q2F527, I see total laminations is 20612, 20612, and then you have other machine components going in of about 1059, and you get 21671. So, the 82,000 ton number is as against which one of this, 20612 or 21671?

It's against the 21671.

Okay.

So, just to give you some context, sorry to interrupt you. In the past, we never gave the breakup of other machine components going to lamination assemblies. So, there was a disconnect among people as to what was the lamination and what other stuff that is going into the weight of the product. So, that's why we started giving this line as a separate thing so that people can clearly understand the quantum of lamination going for sale.

Perfect, understood. So, we broke it up into this. Got it, understood. Now, when you say 17,000 tons of castings, you are not going to adjust the 3086 castings and machine components, right? You are also adding in the 1059, which is going into lamination. So, total would be around 4,100 in Q2.

No, so what we are doing is the 3,086, the number, like I said, right? About left thousand was the raw casting. Now, the remaining is machine casting, which is getting sold, not related to lamination.

Right?

Okay. Now, when we machine these castings, you have a scrap that is generated from those castings. The raw casting obviously goes as the finished product, when we are selling it as raw. And the remaining gets machined, 2000 tons. So, that portion, if I equate it to a casting output, someone had asked a question as to how do you tie this to your capacity, I was explaining over there that 17,000 tons of casting was produced or the casting will be produced and then sold either as machine or as raw. I hope I am able to clarify or if you are following.

So, I'll probably go back and read the transcript again, but in case it is easy to answer, when you say you will sell 17,000 tons of casting in the year, is there a number on this table against which it is comparable?

No, you'll have to actually put a utilization factor. Like I said, in the past, we have just given the raw casting sold and the machine casting sold. 17,000 tons will be the casting produced to make those sales. So, if you take the 1059, some part of those machine components are castings which are produced in our own company. The remaining 2,000 tons of machine components are produced in our company. So, if I take those machine castings, either going into the lamination assembly or as machine components, and add the raw casting, that gives a utilization of what? 17,000 tons of castings.

Okay, let me then ask this question in a more simplified manner. At today's prices, in Q2 prices, if you were to achieve these targets, what would be your revenue for FY27?

For which number? For 82,000 and the sales of machine components and castings?

You do 82,000 and you sell 17,000 tons of castings.

It would be about 2350 to 2400 crores. At Q2 F5 prices, at Q2 F5 27 prices, right? Correct. That would be closer to 23, not 2350 to 2400. That would be based on Q3 pricing.

Okay, so basis Q3 pricing, 23.50 to 24.00 is what you're saying? Got it. And how much CAPEX do you foresee for the rest of the year, FY27, across all the programs? I think we did 250 crores in H1.

We didn't do 250 crores in H1. We capitalized 100 crores in H1, but that was already pre-spent, a large chunk of it. In terms of expenditure, I think about 90 crores is expended in H1 in terms of cash flow. So, if you see the other non-current assets, that is predominantly the capital advances given in the balance sheet. In addition to that, maybe about 40 or 50 crores of land would have been purchased.

Got it. Got it.

So, 140 crores would have been the cash outflow on CapEx.

Understood. So, if I can skip in one last question. Again, I'm coming back to the same casting thing. Against the 17,000 ton number, which I will figure out what it is, how much was the number in H1 against the 17,000 target for FI27?

I need to pull that out. I don't, like I said, it's not there on the table here. So, I'll have to get that number out. I think for the next call, we'll try to simplify this and give the production number. Earlier, what used to happen is that if you gave the production number, people would not be able to understand if that much is produced, why so little is sold? I think it's oversimplified in one way to put it. So we'll probably try to get the production numbers in play. And like I said, the capacity utilization, unfortunately, in the past, before the foundry was merged in, we never gave the utilization of foundry. We only gave the utilization of our machining. So, there are some issues in that as well. So, we'll try and clean this one up.

Good, sir. Okay, so thanks a lot. Thank you. Thank you.

Thank you. Due to time constraints, we take this as the last question. I now hand the conference over to the management for closing comments.

Thank you, everyone, for your time and joining us today. We appreciate your continued interest and support. As we move into FY27, our focus remains on disciplined execution, improving working capital, completing ongoing capex, and scaling machine components, strengthening our position as an integrated engineering partner for our customers across India and global markets. Thank you once again, and goodbye.

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