Raymond Limited (RAYMOND) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Raymond Limited Q2 and H1 FY27 Earnings Conference Call, hosted by Anand Bratty. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note, this conference is being recorded. I now hand the conference over to Mr. Manish. Thank you and over to you, sir.

Mr. Sanjeev Sharma, Joint MD and CEO, JKM PTL, Mr. Naveen Sharma, CFO, Engineering Business, and Mr. Thaleel Bawa, Group Head Investor Relations. Without taking further time, I would like to now hand over the call to Mr. Gautam Mani. Over to you, Mr. Mani.

Thank you, Manish. Good evening, everyone. Thank you for joining us today for our Q2 and H1 FY27 earnings call. I trust you have had the opportunity to review our financial results and investor presentation. To set the context, the broader macroeconomic environment through the second quarter demonstrated solid domestic resilience. Strong manufacturing activity, healthy GST collections, and active pre-festive channel restocking helped anchor domestic demand. At the same time, the increase in costs in several areas continued to pose challenges. Key commodity and raw material prices, including tool costs, have remained firm at elevated levels, alongside persistent freight and logistics volatility driven by global geopolitical tensions. Disciplined capex execution and flexible supply chains have kept our core operational trajectory steady and on turning to our automotive and industrial components business, the sector saw healthy operational delivery through the second quarter. In the domestic market, demand was supported by steady pre-festive channel restocking across passenger vehicles and premium two-wheelers. On the export front, the momentum shifted from post-restocking replenishment into steady multi-year production schedules. As global Tier 1 OEMs and tier suppliers continue to de-risk cross-border supply chains and consolidate their vendor base, India remains a primary beneficiary. We have seen this reflected in strong customer inquiries and order wins for complex precision machine parts and drivetrain sub-assemblies. Turning to aerospace, the global industry continues to see steady production acceleration with major commercial airframers ramping up monthly build rates against historical order backlogs. As supply chain bottlenecks and speciality alloy availability gradually stabilize, we are experiencing firm production pulls across all flagship platforms. Tier 1 integrators have shifted from holding buffer inventory to steady just-in-time dispatches. This has translated into healthy dispatch volumes across our aeroengine modules, activation systems, and critical structural components. More importantly, shipset value per aircraft continues to expand as our customers entrust us with larger integrated sub-assemblies rather than stand-alone machined parts. With rigorous AS9100 and NADCAP qualifications, high single-source part approval, and substantial switching costs, our aerospace vertical enjoys strong structural modes. This locks in long life cycle program visibility and healthy margin as we move into the second half of the fiscal year. Moving to our consolidated financial performance, Raymond Limited delivered a resilient performance during the second quarter, driven by steady execution across our co-precision engineering and aerospace platforms. For Q2 F527, total income stood at INR 683 crores, registering a growth of 21% year-on-year, with an EBITDA margin of 15.1%. On a cumulative basis, for the first half of F527, total income was 1,311 crores, registering a growth of 17% year-on-year, and EBITDA stood at 203 crores This performance reflects our deliberate transition from standard component manufacturing into high-complexity subsystems and critical precision assemblies. By deepening our technical capabilities and expanding qualified capacity, we are enhancing customer stickiness and securing long-term revenue visibility. In line with our strategy to diversify revenue streams, we officially operationalized our automotive aftermarket business during the quarter. By leveraging our established OEM-grade manufacturing capabilities and tooling infrastructure, this initiative positions us to capture attractive aftermarket margins across critical components at white-label products. Overall, we remain well positioned to maintain the growth trajectory as we expand into new product applications and broaden our geographical footprint. Now, turning to our individual business segments, starting with Aerospace under JK Mining Global Aerospace Limited. The Aerospace and Defense Vertical delivered another quarter of standout performance. Revenue for Q2 F527 stood at a 193 crores INR, up 72% year-on-year, while EBITDA reached INR 29 crores, delivering an EBITDA margin of 21%. For the six-month period, revenue was INR 262 crores, reflecting a 56% growth with an EBITDA margin of 21.1%. During the quarter was underpinned by the commercial ramp-up of our newly commissioned capacities, enabling Higher dispatch volumes across flagship OEM and Tier 1 engine platforms. Operational indicators remain exceptionally healthy, highlighted by active RFQ inflows and expanding program allocations. Moving next to Precision Technology and Auto Components, under JK Miney Precision Technology Ltd., the segment delivered robust revenue growth of 15% year-on-year in Q2 FY27, On a cumulative six-month basis, performance was strong across both top-line and profitability. H1 Fy27 revenue reached INR 915 crores, up 13% year-on-year, while EBITDA grew by 24% to INR 122 crores. This drove a 110 basis points expansion in EBITDA margin to 13.4% up from 12.3% in H1 of Fy26, driven by higher capacity utilization and enriched product mix and enhanced operating leverage. Growth during the quarter was anchored by steady domestic production and sustained export deliveries against long-term OEM schedules. We continue to remain a net debt-free business. Turning to our strategic manufacturing expansion across Andhra Pradesh, our green field facility in Andhra Pradesh is tracking quickly to plan, designed to significantly expand our national We have set up an additional brownfield facility as an interim capacity augmentation initiative, This decision to accelerate ground fuel capacity, in addition, reflects the company's focus on responding swiftly to customer demand while maintaining capital and execution discipline. Thank you once again for your continued interest in Raymond. We are now happy to take your questions.

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

Congratulations on the great set of results. I just had a few couple questions regarding something that you know, like, we had seen that in the current facility that we have in Bangalore, the maximum revenue potential that we could do in the aerospace segment was, I think, around 600 to 650 CR. And I think we have plans of doing, you know, debottling, that sort of thing to kind of increase that potential. And also, we have now committed that from this Q3 of us, we will have a brownfield capacity in Andhra that will help in the ramping up of revenues from here on. So can you, like, let me know, has there been any kind of upgrade in the facilities and what will be the revenue potential of the new brownfield capacity?

In the past, we did give an indication of 600 to 650 crores, but since then, we have actually added several more machines and other equipments that are necessary. We're looking at a number of closer to 700, and we're still working hard to see if that can go to 750. So, our ultimate goal would be to try and get it to 750, but we would probably end up somewhere between 700 and 750. So, this gives us a little bit more time till Andhra comes up so that

So, the brownfield

capacity that we're initially adding is mainly on the automotive side, because we have lots of orders there as well, and we're also adding machines out there to help training for both automotive and aerospace, because the brownfield facility is located two to three kilometers from our final building. This will help us to understand the region, the area, and give us enough experience before we actually venture into a massive greenfield expansion, as you are all aware of. So, that is the whole idea of the brownfield.

Sure, great. And can you give the bifurcation of the precision tech and auto components segment, like the mix of the three segments in there, like the auto components suppliers and the precision components and the growth rates for the quarter?

Your question is not clear. If you can rephrase it and tell us what exactly you are asking for.

Yeah, in the precision tech and auto components segment, there are three different segments, right? There is our flyer division, there is auto components division, and then precision component division. So, would we have any kind of breakup in those three segments, like what is the growth rate among them?

So, basically, I would look at the segments as two broad segments. So, just to sort of put it in perspective, one is the B2B segment and one is the B2C segment. So, the B2B segment is the combined OE business that we are doing of the traditional Nasik plants that we had, right, from Ring Plus Aqua, which had all the products of ring gears and flex plates Combined with all of the several plants in Bangalore of the erstwhile mining position that has a one-stop-shop capability to make parts across all the other segments including hybrid, electric, clean powertrain, power tools, etc. So that is called the B2B segment, I would say, because it's all OPM business. Then the B2C segment would then comprise of two parts. One is the erstwhile T&H business, which was the tools and hardware business, which was part of the JK files, if you remember, with JK as the brand leader there. And combined to that, we have now added automotive aftermarket, which is also the B2C segment. And that has been recently launched this quarter and is gaining some good ground. So we will see some expansion there as well.

So, can you give the numbers for these two segments and the growth rates, if it's possible?

Yes, so for the quarter, B2B did roughly 350, and B2CD did roughly 120 in the transition technology.

Okay, and what was the growth rate so we can see the past year number?

Roughly, I mean, see, that's the growth rate that you see there. On a YOY basis, this is approximately 15% growth.

Yeah, yeah. And like for B2B specifically, and then B2C?

So B2B was little higher. So B2B was roughly 17-18% was in ugly fees.

Okay, sure, sure. And just two couple last questions. As you said, we have seen that most of the export companies are facing cost pressures due to Okay, inflation and also the freight charges have increased a lot, and most of our products are being exported only, more than 60-70% of the products in aerospace. So, like almost more than 80% are being exported. So, any kind of partnership that you are reaching with your customers to share these costs and not them having to affect the margins a lot?

Yeah, so first of all, we have a complete pass-through on raw materials as our contracts are pass-through. So, you will just get a lag, but that lag is only the time it takes for the implementation of these contracts. So, in a sense, the raw material is a pass-through. However, frames have to be negotiated in some cases, right? You had a lot of tool cost increase, which we are also negotiating now with customers. So, it depends from your customer contract. Each contract contains certain things that you can go back to them. Some contracts you cannot go back to them. Overall, as you can see, in spite of all the cost pressures, the margin has increased significantly because if you remember last year, especially in the precision technology business, we had a 13 crore one-time income from the sale of land, right? So, when you look at it, the EBITDA has actually gone up significantly compared to that, and that's because of strong operating leverage, huge efforts on cost reduction, on efficiencies, in spite of the, you know, headwinds that we were facing. So, overall, the team, I think, has done a good job in, you know, controlling those costs, but also going forward, we will get back some of these costs in terms of customer price increases. Yes.

See, what's also helping us in between is if we'll see our revenue growth while there are cost pressures, but then we are also getting operating leverage as our revenue continue to grow. So, that's also compensating to our increased cost to some extent.

Okay, sure, sure. And like as we started… Sir, sorry to interrupt, sir.

Should you have a follow-up question? Please rejoin the queue.

Sure, sir. I'll join. Thank you so much, Farhan.

Thank you. Next question is from the line of Sahil Karia from White Pine Investment Management, Private Limited. Please go ahead.

Thank you for the opportunity. Sir, could you just give us a color on the automotive aftermarket that you have mentioned, like what is the revenue that we are looking for the entire F527 and for F528, and what could be the margins from that?

Well, you know, rather than giving you numbers, let me give you some flavor. We've obviously entered the market, you know, in August. So, we've entered with a strong list of several part numbers, I think almost 800 different part numbers. So, there is going to be a time for the market to absorb what we are bringing to the table. The fact is that, you know, we are in hardcore manufacturing very critical components, and that gives us a huge edge that we are a manufacturer. We're also using the leverage of our current supply chain as well as white label. So I would say that all efforts are being made to have a good growth rate, obviously, of a smaller base. For sure, also, the aftermarket brings a better margin than the OE business in many cases. And therefore, I think we'll be in a better position to make some comments in the next quarter as we see these markets develop. But initial feedback is that we've got good traction and people are looking at us seriously and as a serious player. So hopefully this makes more traction and this helps our B2C business gain more ground.

Okay, thank you. And the next question was on the Reap Engine program. So, the per ship set value of Raymond's products is somewhere around $35,000, right? So, could you just give us that number, what it was for the current water, and how do we expect the number to grow in the future, like for F527 and then for F528?

So, are you referring to the LEAP engine?

Yeah, yes, sir.

Yeah. So, see, I mean, you have to look at it this way. Like I said last time also, in many parts we have a 35% market share, in other parts we have a 65% market share, and this is a continuously evolving process where our market shares have gone up in some of the areas, and the volume also of the leap has been going up as more and more aircraft are being built, as you are aware from the market. So, there is definitely, if you look at the total value, there is a growth. But if you look at content, content only changes to the extent of the market share, whereas the total growth is a combination of market share as well as the growth of the market.

So, just to follow up on that, so like of the total products that we supply to the LEAP engine, what is the proportion of the products in the 65% market share and the 35% market share?

I mean, I would say that probably 65% market share is about 45% roughly, and the 35% market share would be about the rest with a small content where it's neither 65% nor 35%.

Okay, okay. Thank you so much, sir.

Thank you. Next question is from the line of Bala Subramaniam from Arihant, Captain. Please go ahead.

Good evening, sir. Thank you so much for the opportunity. Sir, on the first question, especially on the defense side, we have one built-to-spec order. So, I just want to understand, how do you understand, especially on the defense side, whether we are willing to pursue Indian defense offset or TOT program? So, I just want to understand, especially on the defense perspective, apart from commercial aerospace side.

Yeah, this is your referring to the one that we have. We can't disclose the name, but yes, we have got an order where we're going to make at a component level and at a sub-assembly level, we're going to make parts for defense. The same will hold good, you know, depending on where the products fit in. If they fit into our JKMini precision technology, we will do it there. If it fits into JKMini global aerospace, then we will do it there. It's more likely that aero and aero parts are done in JKMDL and other kind of defense. These are at a component and at a level. They are not at a product level, and therefore, it's very much a part of our strategy to grow and diversify in this area as well.

Okay, sir. My second question, I think I missed, you mentioned earlier 700, 750 crore, that is related to aerospace and defense revenue, the target?

Yeah, that was specifically on the aerospace and related to the current facility that we had, because the question was, how much can we take it up to? And we said we are going to have somewhere between 700 and 750 crores in the current facility, by which time Andhra Pradesh would be ready for us to continue our growth. That was specifically aerospace.

Okay, so why I'm asking this question, because in Q2, we have grown nearly 72%, almost 139, 140 crore range. If we did 150, 160 crore next quarter or so, so the growth rate is more than 45%, 45% in this financial year. So it's a right to assume on the next FI 28, 29 also at least 40% kind of growth we may expect. Sir, my last question, especially on that, Shipping side, some of the players mentioned some of the shipments have been deferred because of the clearance issues or Middle East or shipping disruptions. I just want to understand, because we are majorly into exports for our products and imports for our materials, so how we have been hedged in terms of supply side? So how we are protected?

Well, you have to plan with a little bit of safety stock so that it has some pressure on your working capital, but in the end, it's a better solution than having to air freight goods at a premium. So, one has to plan, one has to keep in mind that there are global disruptions, and one must plan around that. So, that's how we do it, to make sure that there's minimum disruption at our end, and so far, we have been able to manage to not only keep the growth, also have minimum disruption. Yes, it comes at a cost, and that's what we talked about a little bit earlier, that we've offset a lot of those costs by our operating leverage as well.

Got it, sir. Thank you.

Thank you.

Thank you. Next question is from the line of Keval Shah from Sanctum Wealth PMS. Please go ahead.

Hello. Yeah, so firstly, congratulations for the good set of numbers. Sir, now coming to the aerospace part of the business, so for this quarter, what would be the order pins that we got in this quarter, and what would be the order book looking right? Right. And then secondly, for the aerostructure part of the business, so what can be the scaled margin from this business? I understand the margins can be lower for aerostructure, but what kind of margins are we looking at? And from which quarter will it start contributing to the revenue for us, for the aerostructures?

Direct numbers, but let me tell you that, as I have said last time, you know, we are making almost a new product every day, or you can say five in a week. So, obviously, all of these products keep ramping up and then, therefore, the order position goes up to that extent and that's the reason how we are able to keep the growth. What we are also seeing is that whatever the customers are ordering on us, as soon as you deliver them, they seem to be placing a larger order on us, which means that it can be one of two things, that our competition or whoever has the balance of the market share is not able to deliver, so those customers come back to us. We also believe that the number of aircraft that will be delivered by Boeing and Airbus during this second half would be much higher than the first half. So there is a general market increase and there's also supply chain issues. And I think those suppliers like us that are ready with capacity and we're able to grow and the focus is on execution will be able to grab some of these orders. So they don't really show up as orders, but they end up as orders. And I think that's what shows in the growth. And therefore, to come by that, we have more orders than we had last quarter. And if we can fulfill them and more, we will continue to get more orders. So that's the direction in which we have to look at this business.

Thank you, sir. And on the aero structure side, from which quarter can you expect the revenue conclusion to begin? And what can be the scale of this for at least in the possible future until upper 28?

So, as you see, we've been always doing aerostructures side by side. If you see our percentages, they are only less in percentage, right? So, we will evaluate every business for what it's worth. And like I have mentioned in the past also, we will continuously work to see what combination of business is ideal for us, what ROC is ideal for us. We will target long-term ROCs between 20% and 25%, right? And somewhere in between, we'll have to see how it works out. When you invest a lot in very high precision engine, you end up with higher EBITDAs but lower ROCEs. So, we have to always look at it from a mixed point of view. The idea is how do you grow every day, how do you scale every day, and how do you manage long-term ROCEs to be in a good range. So, it's always going to be a choice we have. Like I mentioned last time, we have a massive pipeline and significant opportunities from where we can choose. And we will continuously choose business based on financial prudence and a combination that will allow us to execute.

Okay, sir. And sir, for the new Andhra plant, which will be coming up, say, in the next four to five quarters, so we would be having most of our work together under one single roof. So what kind of incremental benefits would we get from that? Like, is there any quantifiable numbers that maybe margins by a few percentage points can improve or the working capital would reduce because of having everything under one roof. So can you talk some more light on that, the benefits coming out from that plant?

I think there will be pros and cons, right? In any new plant, it would take a little bit of time to settle down. We would need time to get customer approvals, and that's why we're trying to do these things in parallel. On the other side, because we'll be far more vertically integrated, you're absolutely right. We hope that not only our working capital should come a little bit down, but more importantly, that we'll be exposed to get larger packages and larger businesses and go up the value chain, which will then bring significant business opportunities to us in the right direction. So, I think it's a large strategic move, which we are trying to do, and it will have these pros and cons. So, we'll have to have some patience in the beginning, and then it will start to give us good returns.

Okay, sir. And for the auto business in Europe, so which are the top OEMs that we are supplying to? And also how the current situation is, like Chinese auto OEMs are gaining market share in Europe. So can this be potential risk for us in future? How do you see that situation, sir?

Sanjeev, do you want to take this answer?

It's a risk for the business because numbers are going up, customer RFQs are going up. So, Chinese suppliers, I mean, I feel that you will have enough opportunity and room to grow in Europe, U.S., across the globe.

Okay, fine. Thank you so much. I'll get back in the queue.

Thank you. Next question is from the line of Ajinkya Jada from Chris Portfolio PMS. Please go ahead.

Congratulations, Gautam, sir, and the team for the good setup. My question is regarding the earlier participants' answer to the question. You said we can do 700 per ounce revenue from the aerospace, from the existing Bangalore facility. And so, my question is, how much revenue we can generate from the brownfield interim facility that we have put up in Andhra?

So, I don't want to mix the issues, and maybe Sanjeev can answer that. So, the brownfield facility in Andhra will be more on the precision technology side, whereas the 700 crores we're talking about is on the aerospace side. For the aerospace side in the brownfield, we're going to have several machines that will be used for training people in both the precision technology side and the aerospace side, right? So, are you interested to understand the precision technology and how it will grow in the brownfield? And then Sanjeev can give you a background. If you're interested to know that the aerospace facility, will it go to the brownfield? It will not go to the brownfield. Only training will be done in the brownfield and we will continue to grow the business in the current facility till we have to go to Andhra because getting customer approval and those processes we cannot do on a temporary basis. So, it has to be a permanent basis.

So, from growing from 600 to 700 CR in the Bangalore existing facility, are we adding any machines to achieve that jump in the revenue or we are increasing the efficiency? What changes do we have done in the facility?

So, it's a combination of everything, right? We are continuously adding machines. We're continuously creating more space. We're changing layouts. We're putting mesonite floors where required, a reduction done. We are improving the OE of the plants. So, it's a complete combination of several, several small things that come together to ultimately add up.

Got it. Got it. Yeah. My second question is regarding you said like we are aiming to add one part a day. So, in H1, how many parts we have added and how much cost was incurred for this development?

Yes, so, I mean, roughly 4% is the number that goes in development. So, you look at, you know, our revenue. If we really look our margins or our EBITDA margins without that R&D cost, we can easily add approximately 4%. But as Mr. Mairi said that we keep on developing one part every day. So, we have taken a call to write it off in the P&L. Hence, you see the numbers the way you see it. The number comes to approximately 4%. A little bit here and there have we caught.

Got it. Last question from mine, like we have spoken in the past about the inorganic acquisition that we are planning to do. So, any progress made in that direction, if you can tell?

So, I mean, like we said last time also, we are in continuous process, and we will continue the process till we find the right one, and once we find the right one, you will all come to know about it. So, the efforts will always be on, and it is our intention to pursue them.

Thank you. Thank you for answering my questions. Thank you so much.

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

Hello. Hi, and congratulations on good set of numbers. My question is basically on our Andhra expansion. What is a normal timeline, you know, when it comes to approval of the product by our customers? What is the general timeline post-starting of the commercial aspect of the product?

So, are you referring to automotive? Are you referring to aerospace? Are you referring in general to both?

No, aerospace basically, but in general, I would also like to know what is the approval.

Okay. I'll give you something on aerospace, and I would want Sanjeev to give you a more accurate feedback on the precision. So, in terms of aerospace, normally, customer approval could take anywhere between three months to six months. So, we have a complete plan in advance of how we're going to do this so that we close the gap as much as possible. So there will be a set of parts that we already make for these customers, which we would actually transit to the other side to make it faster because we already know how to make them. So we will focus just on plant approval and not on part approval, and that would speed up our transition process. So we have a complete transition team working customer-wise on how we're going to address with each customer and what ramp-ups will take place in Anza on priority. So, all those plans are being worked out to make sure that we do not lose any opportunity while growing or shifting or expanding in Andhra.

Yeah, in automotive, it will take about three months to eight to nine months, depending upon the validation required for the part. So, in a brownfield facility, we have already initiated this activity. And in greenfield, it will be replicated. So, we should start our production in brownfield in this year itself. And Greenfield should start next year itself.

Okay. And so could you share, you know, for this phase or the block of the Greenfield facility that is going to come, you know, start in this current year, that is. So what is the total amount spent on that specific block or, you know, phase, if you could share that amount?

No, I mean, are you talking about what is spent so far? Are you talking about what we are going to spend by the time we launch? I didn't get your question properly.

So basically, the phase that is going to start commercial production in December, I mean, end of this current year, what is the amount that we have already spent on that phase or the block that is going to come into the production?

So, we will start our green field next year, December. Are you talking about the brown field that we are starting? The major or mega factory in Andhra, that's starting in December 27th. Right, right, right.

That is the specialty I'm talking about.

By the time the factories start, roughly 400 CR will be the investment. Our total commitment remains 1,000 crore between aero and auto, spread over a period of 5 years, and by the time factories start, we shall be spending close to 400. And depending upon how the RF2 sector really takes place, it can increase or decrease.

But that's a ballpark number that we feel at this point. Right. Got it. Yeah. That's the number I needed. Thank you.

Thank you. Next question is from the line of Sanjeev from Antique. Please go ahead.

Yes, sir. Congratulations, sir.

Sanjee, sorry, we can't hear you.

Is it better now? Yes, yes. Okay, sir, my question was regarding the capital allocation. So we have a very good bank balance right now, and plus we are raising funds. So how would we, at the same time, we have some debt also at the gross level. So, how do you plan to spend the overall capital raising over the next 2-3 years, and how will the debt look like by the end of FY29?

So, to answer to your first question, see the liquidity is at the holdco level, whereas debt is in the operating company. As for the, in the share warrants, what we are going to use, as we have clearly specified that the amount will be used for specific purpose of inorganic growth perspective. So, this is a war chest which we have created, and since we are looking at various opportunities, when the right opportunity comes, the amount will get deployed accordingly. Okay.

And, sir, if you could also share the company's vision regarding the name change recently.

So, for the name change, basically, since now Raymond Limited, as you are aware, you know, after de-merger, mainly has these two businesses, which is Engineering, Aerospace, and AutoComponent. We felt that from a Raymond perspective, the name should get changed so that it signifies it because, you know, for a general public, Raymond otherwise remains as a suiting from a name perspective. So we wanted that clarity to come and that was the idea. That was the reason for doing this name change.

And also we have added the defense. So on the defense side, have we been able to kind of outline the overall plans and where do you want to take the company in that segment?

See, defense was always part of the plan because at a component level, it was anyway going to be done together. So there's clarity that, you know, these two companies will do the component at a subsystem level. The rest of the plans are strategically being worked out, and clear intention is that, you know, defense is always going to be part of these two companies. It was always part of and it will continue to be part of, so it just brings more clarity.

Sir, lastly, typically our aerospace business margins in the fourth quarter have been much better than the first three quarters. So, do you think that trend will continue in this

Well, generally, the fourth quarter has a higher sales, so your operating leverage to that extent, you know, kind of increases, and therefore it appears to be the same, but, you know, in the end, if you continue to keep growth and continue to keep efficiencies, you know, and use the operating leverage, it will be correct. In some cases, like now, in this case, we grew 72%, but then to grow 72%, you had to spend a lot more on R&D, and therefore, the percentage point went slightly less because you wrote off a lot more than you would normally write off. So, there's a little bit of a double-edged sword here that when you grow very fast, because we write off R&D, it can have a small impact, but long term, the growth trajectory and efficiencies will always catch up. You know, so it's just a question of timing, it's a question of how much R&D work you did in that quarter, how much scaling you did, how much improvements you could achieve, how much operating leverage you could achieve. So, it's always a combination of factors, but in general, when you increase your turnover, it's expected that obviously you would get, but beyond a point, it also, you have to write it off.

Okay, sir, thanks for answering my questions and all the best.

Thank you so much.

Thank you. Next question is from the line of Sagar Shetty from Veldibaya. Please go ahead.

Sorry, I'm not. Just be louder, please. Thank you.

Yeah, so my first question was around, if we grow at the current pace, so the aerospace industry would hit 750 crores by mid F by 28, and that would be before the antra facility contributes. So, is this assumption right that, you know, we should expect that the aerospace growth should, you know, slightly moderate to high 20s or 30s, so that we don't fully utilize the 750 crores, and once the andhra plant is active, we are fully utilizing, or, you know, is that understanding right?

No, I think you've got your numbers a little mixed because even if we grow high, you know, high 20s, beat it by the end of FY28, so maybe it's what we are committing. So, we would still have enough capacity at the current facility before Andhra comes in.

Okay, that's fine. And so, I just wanted to know, in the previous phone call, you had mentioned the asset terms of the aerospace and the auto businesses. This is approximately 2 and 2.5, right? And we are investing approximately 1 crore in, like, dividing 1 crore among people. So, that is implying, like, you know, peak revenue estimate of 1,000 crore of each revenue segment. So, is that range right? And, like, how many years, like, do you expect this to happen after commissioning?

Well, typically, you know, you don't scale immediately. It's a, you first get the sample approved. Then you start with the market share, which is smaller. Then you do a good job. Then you increase the market share. So it's a process. And then depending on the mix of machines that you would use, depending on the level of vertical integration, you know, there's too many ifs and buts. It's not like a line which you set up and, you know, you straight away know you'll do this much, right? It's discrete manufacturing. It's low volume, high mix. Combinations change. Market conditions change. So you have to be geared up to have an execution plan And it's extremely flexible where you can manage the ups and the downs of your customers and at the same time manage your growth. So, you know, it's very simple to say and try to equate it, but it's not that simple when you work towards it.

Okay. Yeah, I got it. And so one more question. Like in slide 22, you say that nozzle guide rain capacity is doubling from 8,000 to 16,000 units a year. And I guess this was missing in the previous PBTs. So, would you, like, help us with the guideline and, like, timeline and revenue potential of the same?

So, basically, the machines have all arrived. Now, it will take about 45 days, for instance, for the machines to run. Then you'll slowly ramp them up. So, I would expect this quarter to be settling down, and then from the last quarter, the revenue would then start to reflect in the last quarter.

Okay. Okay. And so can you also, like, you know, this was tied to LEAP 1A, right? So what is your content taking LEAP 1B?

No, this is 1A and 1B. We do both.

It's for both. Okay, okay.

It's for both. It's total LEAP.

Total LEAP. Okay.

That's it for me.

Thank you so much.

Thank you so much.

Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touchtone telephone. Next question is from the line of Prince Goenka from Narnolia. Please go ahead.

Hi, thanks for taking my question. My question is, what challenges we are currently facing in tools and hardware business, and what is the growth outlook for going forward?

We are targeting to launch several new products, and about 50% we have already launched in the last three months. So, we are expecting on an average growth in double digit only.

About it. That's all for my question.

Thank you. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. Next question is from the line of Pritam from Beldi Vaya. Please go ahead.

Yeah, congratulations on good set of numbers. I want to understand more about the order book and RFQ. So, contractually binding purchase orders, like, can you quantify for next 24 and 36 months? Also, during this long-term agreements, how we are protecting against any possibilities of OEM program delays or, let's say, bill direct deductions? Are there any such mechanisms in the contracts?

So, typically, I mean, in aerospace, are you referring to aerospace or to automotive?

Aerospace.

Yeah. So, typically, in aerospace, your order positions, like I said a little bit earlier, keep increasing. And even the backlogs keep increasing, you know. So, you will also monitor and see. If you study the two OEMs and the aircraft deliveries that they have done for the first six months And what they're going to do for the next six months. You will see that big difference. Second half of the year, there's a lot more planes that get delivered. And they're basically waiting for engines to get delivered. So in a way, we do expect always that the volumes would sort of go up. So the order position is not a very simple thing to say because your schedules can change on a daily basis or a weekly basis. But in general, you have the market share, right? So for instance, if your market share is 35%, but then the market itself, the number of planes itself go up or the OEMs start increasing it, then your order increases. So it's a factor of more than one thing, but I think the trend is in the right direction. The market share is also increasing and the number of parts in the market are increasing. So that is the most important thing to take into consideration and your order position changes every day almost.

And about the wind rates on like multi-mill or new complex structures versus the older engine components, how your pipeline is currently shutting up? Is it more towards the commercial aviation sector or towards defense or specific ecosystems, etc.?

So I think we have a mixed trend out there. You know, we are getting more and more mixture of aerostructure, engines, defense, localization, make in India. So there's a lot of mixture out there. And we are making our choices based on what would be the best financial implications for the company. And the important thing is that because we have large RFQs, we are able to make a choice of what we want to do and ensure that our numbers are in the right direction. And that's what we've achieved so far. If you've seen in the last three, four quarters, we have consistently made improvements, moved in the right direction. We've combined it with a growth as well as a bottom line.

And about the Andhra facility, basically, what is typically the lead time would be from first article inspections to the BPAP approvals and how we are budgeting the cash burn during that period? So, what is basically the provisions for that?

I don't know if you heard it a while ago. I explained that we have massive project management going on between our customers and ourselves to compress the time that it takes to approve the new facility. So typically, we would move existing parts that we've already made into the new facility first so that the focus is completely on approving the facility rather than the part. This will help us to squeeze the time it takes for normal approvals. And we're going to simultaneously do this with five or six customers that we believe will be the first drivers of growth in Andhra Pradesh. So it's very strategically being managed. We're already in touch with the customers now, which is almost a year in advance. And we're working closely with them to make sure that this will happen. It is in their interest also that the growth continues and they, in fact, would like to have more strategic arrangements with us. So, we find a very positive inclination for the customers to work with us on approving the new facility.

Great. Fantastic. And, sir, any utilization golfer for that client where you would break even anything like that?

See, our business is modular, basically. So, we actually bring machines just immediately before, you know, a couple of months before when the dispatches are expected. So, we can actually get customer approval even on 10 machines and then bring another 10 and then keep on going. So, basically, it's not like that, you know, it's not like a large thing where you really take months to get the break-even. There will be certain pre-operative expenses, but, I mean, that's not going to change the profitability trajectory for us. Also, see, you know, so there is no point of cash burn or, you know, waiting for a large break-even, etc.

Thank you. Next question is from the line of Rahul Rao from Athletico Analytics Services, LLP. Please go ahead.

Hi, Grasso and everybody on the call. We work with materials such as in Conan and Titanium. I believe most of it is imported. Have you seen an increasing trend of Indian press getting qualified for these materials?

Yeah, so I think a very good question. The trend has started, although it will take some more time, but there are certain approvals that have already been received by Indian suppliers. So we are working very closely with most of the suppliers. Fortunately for us, we have leverage to discuss with these suppliers because they've dealt with us on the automotive side where we have high volumes. And just like, you know, when we started aerospace 22 years ago, we developed the ecosystem with automotive suppliers that came into aerospace. I think the same thing is happening in raw materials. There are large mills that have improved their capabilities, and all of them want to get into the aerospace now. And therefore, it provides a great, you know, opportunity. And the grades are not restricted to just in coral and titanium. You have high nickel alloys, you have stainless steel, etc., also which form part of the hard machining. So, yes, this is going to be, I would say, a two to three-year process for some, but some of them have already started. The upside is that as the Indian suppliers start to get raw material at competitive prices and we have access to them, two things will happen. Our working capital will get better, which is a very big thing in aerospace since the working capital is very large. B, the prices will become more competitive. So, overall, we will see India being much more competitive as a country in the aerospace business, and we will also see as an industry working capital getting much better utilized. So, I think it's a very big plus, and we will see it unfold in the next two to three years.

Great. You said you work with most players in India. Would it be the likes of Midani, PTC, Sunflag? Are you comfortable naming any other ones on the call?

I have a few more, but I don't think I should be naming them like this. But there are a couple of others as well that we are working with. But yeah, I think the Indian companies are stepping up, and we will see good results from all of them. For us, it's great because it adds value to our business model, brings down our cost, makes us more competitive. So it's great for us to have Indian suppliers get qualified.

All the best, and thank you. Thank you so much.

Thank you. Next question is from the line of Chirag Jain from Spark Capital. Please go ahead.

Hi, sir. First of all, congrats on a good set of numbers. I just have one repetitive question regarding the order book. Sir, if you can quantify the order book in terms of how much the order book position has as of Q2 apart from this hour.

Sir, I would say we had already declared an order book earlier. It's incrementally higher than it is before. Like I said, it grows for us on a daily basis. It depends on the schedule at that point in time. It depends on whether some more parts have got a market share. So, in general, you know, we don't keep calculating it, but the trend is in the right direction because that's how you're seeing the growth. So, I don't think order book is an issue. Like I've always mentioned, I said the orders are large. What is important is can you execute. So, I think in our industry, the ones who can execute, do a good job with the quality and the quantity and deliver OTIF, which is on-time delivery in full, those will be successful companies. I think the orders are very large, including backdoor order.

Yes, sir, definitely. It's just that we as an investor, it helps us to gauge whether the company is in good visibility going forward also. Like every quarter, the order will help us to know the company better. One more question.

Just to give you an edge on order, you have to understand that, you know, the large OEMs have order backlogs of excess of 12 years, and when you have market share and you have long-term contracts, normally they go on till end of life. That's because everybody doesn't sign an end-of-life contract with you up front. So, therefore, if you start looking at really an order book, like for instance, if we started 10 years ago with, let's say, you know, on the leap, and we had, let's say, 5-year contracts, we've already delivered for, let's say, 10 years, and we'll probably deliver for another 15 years. So, it's a misnomer. What is important is to understand that you are on the platform. These platforms have long life. You have a good market share on these platforms, and then the market is growing because it has a huge backlog. And that's how for the aerospace industry as an analyst, you should look at it. That's my two cents.

Definitely, sir. Just one more thing. Like, we have tech product written commissioning by one quarter. Anything to look on that? Anything to critique us?

We have not deferred anything by one quarter. We are always going to do it in the third quarter of FI 28, so nothing is postponed. Where did you read anything else?

I think, sir, last quarter, it was mentioned mid-2027, but the mid-calendar, therefore, it was not.

No, might be a confusion of financial year or calendar year. It was always December.

Okay, okay. So, the third quarter, just to clarify, was always the third quarter of the financial year.

Understood. Okay, that's it.

Thank you.

Thank you. Next question is from the line of Anup from Equity Intelligence India Private Limited. Please go ahead. Mr. Anup, you are not audible. Sure. Next question is from the line of Keval Shah from Sanctum Wealth PMS. Please go ahead.

Thank you for the opportunity. So, sir, in terms of new additional incremental opportunities from new segments, so are we looking at, say, medical components? Is there any near future business possibility from these segments? Like in last quarter, we received a certification for these medical components. Also, do our products also have a potential business opportunity from something like gas turbine also where they can be used? So, just if you could throw some more light on the incremental segments, if there's any opportunity, and if you're looking at it. Thank you.

Yeah, so this constitutes what you call, you know, edge and adjacencies, and it's very much part of our master plan. Obviously, we don't declare numbers now because we're in the nation stages. So, like you said, in medical, we're still doing samples for certain European customers to make sure that our back end is very secure. And, you know, in a business like this, your quality, the theme, the projects is all met. So we would maybe, you know, six months from now come out with some plans. Till then we would like to perfect what we want to say or do. You're absolutely right. There's opportunities in the gas turbine. It's on, again, sitting as an adjacency and on the edge of what we do. So all the areas that sit on adjacency and edge are being explored in every manner possible. And the most important there is to then again put them in our funnel to see which business we should have as a question of choice, you know, where are the margins better, where is the ROC better, you know, is it great to have this mix of customers. So for sure, there are many of these which are being explored as we speak.

Thank you so much.

Thank you. As that was the last question, I now hand the concerns over to Mr. Gautam for closing comments.

Thank you very much, and I very much appreciate everybody recognizing the fact that it was a good quarter, and thank you so much for your support, and look forward to the next quarter. And happy Diwali to everybody, as I think we'll meet after Diwali. So enjoy the festive season.

Thank you. Thank you, sir. On behalf of Anand Rathi, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.