Rico Auto Industries Limited (RICOAUTO) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Ricoh Auto Industries Limited Q1 and F527 on a conference call. As a reminder, all participants in line 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 touch-tone phone. Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. From the management, we have with us today Mr. Arvind Kapoor, Chairman, CEO and Managing Director, Mr. R.K. Meghlani, Executive Director, Mr. Kaushalindra Verma, Executive Director, Mr. Naveen Saurad, Chief Financial Officer. I now hand the conference over to Mr. Kaushalindra Verma, Executive Director from RICO Auto Industries Limited. Thank you and over to you, sir.

Great. Thank you. Good evening, everyone, and thank you for joining us for the 21.527 earning conference call of Ricoh Auto Industries. I hope that you have had the opportunity to review our financial results and the investor presentation, which is available on the stock exchanges and also on the company's website. I would like to start by giving a brief overview of the company and industry and company performance post which Mr. Naveen will brief you on the operational and financial highlights for the quarter. The global economy continues to remain resilient, although geopolitical developments, commodity price volatility, and changes in the global trade continue to create uncertainty. At the same time, the ongoing restructuring of global supply chains is creating opportunities for manufacturing economies that can offer scale, quality, and localization. Coming to the automotive industry, the environment remains constructive. Q1 FY27 saw strong production momentum, while the industry continues to undergo a structural shift towards the industrialization, electrification, and hybridization, and a greater localization. This continues to create opportunities for Indian component manufacturers, particularly as global OEMs diversify their sourcing and lead to reliable manufacturing partners. Against this backdrop, Ricoh delivered its highest ever quarterly revenue during the Q1 FY27, reflecting continued momentum across our core automotive businesses. Our businesses continue to participate across IC engines, hybrid, and EV platform, with new programs at different stages of development and ramp-up. There are around 55 new programs in launch phase, out of which 28 programs already launched and are in ramp-up phase. These are long-term programs for Toyota, Ford, and BMW, with program life of more than 7 to 8 years. All these programs are highly profitable, and we are single-source suppliers for all these programs. Our focus remains on flawless execution of these programs and progressively scaling them up as per customer ramp-up plan. During the quarter, profitability was impacted by elevated cost pressure, with the raw material price settlement lag being a key factor. We also saw elevated freight costs, particularly air freight. As disruption in global shipping routes due to increase in ocean freight transit time from five weeks to nine weeks, which led to greater resilience on the air shipments to maintain supply continuity. We are actively working and discussing with our customers to pass through some of these costs. Our new plant at Hosur is progressing and as planned, is expected to do the commercial production in September 2026. This facility will support our hybrid and EV-related programs with the key OEMs. Alongside our core automotive business, we continue to develop our presence across adjacent sectors. Our railway and defense business are progressing, supported by increasing localization, infrastructure, investments, and the government focus on circular lines. In railways, RDR4 approvals are progressing and supplies have started. We expected these businesses to develop progressively and add to the diversification of our businesses. Looking ahead, our revenue outlook remains unchanged and we continue to work towards our previously stated target of around Rs. 3000 crores. This year, we are confident we will be surpassing this and will be achieving a revenue more than 3,200 crores in FY2027. While the current cost pressure and the timing of the customer settlements are likely to keep margins under pressure in the near term, our focus continues to remain on improving operating efficiency, progressing the price settlements, and driving the ramp-up of newer programs. We remain confident to exit the current year near to our targeted full-year margins through customer price revisions and continued improvement in operating efficiency. With this, I would like to now hand over to our CFO, Mr. Naveen Sauras, to take you through the financial performance. Thank you.

Thank you, sir. Let me now take you through the performance for the quarter and provide some perspective on the key drivers of profitability. We were the strong revenue growth during Q1 FY27. Conservated revenue stood at 755 CR compared to 543 CR in Q1 FY26, reflecting a growth of around 39 odd percent. EBITDA for the quarter stood at 34.8 CR, translating into an EBITDA margin of 4.6%. FAD stood at a loss of 2.2 CR, compared with a profit of 16.7 CR in the corresponding quarter last year. From a segment perspective, aluminum casting continued to be the principal contributor, accounting for 89% of the consolidated revenue, while the ferrous casting contributed the remaining 11%. Exports accounted for almost 15% of our total revenue during the quarter. While the underlying revenue performance remained robust, profitability during the quarter was impacted by elevated operating costs and certain temporary cost pressure, as already highlighted by KVSA. Other operating expenses were higher by approximately 24 CR, primarily due to air freight and sorting costs, which were around 13 CR in this, along with the inflationary pressures across manpower, power, fuel and gas, tools and consumables. We expect air freight costs to peak in Q2 as inventory levels reach the desired position. Thereafter, the temporary requirement of air shipments is expected to cease. With shipments progressively returning to the normal sea freight cycle from Q3 onwards. Profitability was also impacted by the lag in the raw metal prices settlements. This was particularly relevant for aluminium where the prices increased significantly during the period. The settlement lag resulted in an estimated impact of approximately 10 crores during the quarter. Importantly, these cost prices are not structural in nature. We continue to engage actively with our customers for appropriate price revisions and cost pass-throughs. While the timing of these settlements will vary by customer and program, we expect the benefit to be realized progressively over the coming quarters. At the same time, we are driving productivity, operating efficiency, and cost optimization initiatives across the group to mitigate inflationary pressure and improve execution. Looking ahead, the cessation of temporary air freight, progressive realization of customer price revisions, and cost pass-throughs, together with the benefit from our ongoing efficiency initiatives, are expected to support a progressive improvement in the profitability from Q3 onwards. Our focus, therefore, remains firmly on execution, customer settlements, productivity, and discipline cost management, while continuing to build on the strong revenue momentum and the programs underway. Thank you. Now we are open to the questions.

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

Our first question comes from the line of Darashil Javiri with Crown Capital. Please go ahead.

Hello. Good evening, sir. Thank you so much for taking my question. Hopefully, I'm audible, sir. Yeah, yeah. Hi, sir. So, sir, I just wanted to, you know, ask about the freight cost. Like, I think we said 15% of exports, right? That would roughly turn out to, right? I think we did 100 crores plus 120 crores of exports. So, freight, air freight cost was higher by 10%. That is something that I am trying to reconcile, right? Like, air freight would only be for exports, right? So if exports were such a small amount, then if we had so much air freight, then we would have, all the exports order would be a loss-making order for us, right?

Yeah, I don't...

Our export in this quarter was around 10-12% and this cost is related to that because we need to ship the parts to meet the supply continuity because these are related to the new program launches where we are the single source for the customer. And we had some issues with the quality correlation, where we need to do some certain kind of a correlation in the measurement with the customer and our measuring instrument. So that has basically put some parts around the whole which will be used in the future, but we need to ship parts to maintain the supply continuity.

So it's a reward, the exclusive suppliers, they didn't give us some kind of benefit, like, have we received some kind of, because if you, like, our margins would be what we are losing in F-rate, right? Like, just wanted to understand that, how do we, you know, reconcile ourselves.

This air freight is an exceptional thing, mainly because it's taking almost nine weeks for shipping from India to the US, and earlier we should get the goods there in about five weeks' time. Now we have extra inventory of almost four weeks on a... In the sea, that's almost nine weeks of inventory. In the sea, plus one month of inventory, we are required to maintain there. Now, because this is one, and secondly, there were some issues in our correlation with, as far as the specs are concerned, those have been sorted out. So, this is a temporary phase that we had to go through for the new components that we are shipping overseas. And since the customers are BMW and Toyota, our commitment is to the customer to see that the lines keep on running. And that's the reason we had to resort to air freight. We are negotiating with them. And in fact, one of the customers has agreed to pay us the freight and which would be accounted for as and when we get it. And that's almost 50 percent of water will be already incurred. But we have not taken that into consideration at the moment because that will come over time. And so we are talking to our customers, and this will be done. And this extra time of sea freight that is taking, sea time that is taking, that is impacting our supplies at the moment. See, the capacity that will build up is as per whatever the requirements are. Now, all of a sudden, we have to almost increase our capacity by 25 to 30 percent so that we could make larger shipments to the U.S. and to Europe. And we are doing that, and we are pulling out equipment from wherever possible, so that the deliveries are taking place in time, and the lines of our customers keep on running. And we also built an industry. So, this is a one-time thing that has happened, and we are very bullish about the exports. The margins are much better. The customers are the best customers that one could dream of, and very supportive. And so, one of the customers has already agreed, but others we are trying to convince. Besides this, the price increases because of the inflation of... All the other imports, the prices have gone up, and we've also taken up that with our overseas, as well as our domestic customers, which is under negotiation at the moment. This is over and above the raw material prices that we are talking about.

Oh, okay. Okay. But I just wanted to understand, I think our last call was in June, right? Two months of Q4 would have already been passed. And I think we said we can do 10% plus EBITDA. So we would have known about the situation that's happening, right? Then why would have we still guided for 10%? Like, I think that is something that I think people didn't like. So could you just clarify that what was the issue? Like, did it come later on? We would have known about this, right? It would be going, the war has been going on, the lead time would have increased. So why we gave the guidance of 10% EBITDA when we knew that, you know, there were extra cost, even if we are going to recover, but at that time, it was not stated right. So could you just help us with that, sir?

See, the war started, and we were making shipments from five weeks, they went up to six weeks or seven weeks, and so we were comfortable with the seven-week thing. Then all of a sudden, the time went up to nine weeks, plus one is one week. It goes up to ten weeks sometimes, and it also goes to eight weeks. So, these are things that we did not factor. But having said that, the customers are talking to us, and we are talking to the customers, and we had to take in the books at the moment, because at the moment, we do not have a purchase order for these extra efforts. But when it comes, those will be factored, and that will show us an extra profit in the thing. But that is one. And number two, we had the initial launch issues when we started shipping, and with so much material in the sea, and as the material arrived there, there was some, because it's staying in the sea for a longer period, there were also some rust issues started coming up. And normally in four or five weeks, the components are totally protected. So those started showing up, and so we had to change our packing and everything. But we had to keep the lines running, being a thing of source. So we took this. It was a difficult call, but having the commitment with the customer, we had to make the shipments by it.

Okay, fair enough. So, Anjad, this issue is going to continue in Q2, right? So, we can see similar kind of performance in Q2 in terms of margins.

The margin will be better. And if I removed all this, we are actually in the region of, we've not, like in the month of July, our turnover is around close to 300 crores. And so, by that, we are actually going up to almost what, 32, 3300 crores, 35, close to 3500 crores. But we are playing a stable and we are talking about 3,250 crores when we are turnover by the end of the year. So, we are very excited that we are wrapping up, we are excited that the business is growing, but this is one critical we've had as far as the airfreights are concerned, which will cover up, and in Q2 also there will be some airfreights, and Q3 onwards, of course, we should be back to normal. And we are hoping and wishing for the last almost couple of months now that the war ends and the shipping comes back to normal and the freight rates also come down.

So, just to add to it, I guess one of the queries that you raised is why we not pre-informed the market. So, if you recall, I guess our discussions happened sometime around early June, and major portion of this air freight has happened post that call, so the later portion of June, when the situation escalated. So, that is how it is, but yes, the discussions are continuously carrying on with the customers. I guess the priority was to stabilize the supplies and then start negotiating with the customers and settling whatever area that we can settle with them.

Okay, okay. Fair enough, sir. And sir, just wanted to ask with regards to, you know, railways and defense, right? So, I think we had previously guided like railways could be, you know, 100 crore revenue segment and defense also we are trying to get in. So, what about these segments like development if anything happened in this quarter? So, good guidance for that, sir.

Railways, we submitted our components for inspection and all, so that we get the RDSO approval, and we are in a cycle, it's a cycle, all the two, three months before we get those permissions. We are in that cycle, and there are new components which will also be submitted to the rabies, but indirectly we are already supplying to various customers who are supplying to the rabies. But for the intricate, more profitable components, we want to supply directly and through the rabies, and that's the reason we get to the RD. And on the defense side, like we had mentioned earlier, we are making the shooting ranges, practice ranges. These are computerized ranges in containers. There could be 40-footers, 60-footers, 30-footers for training purposes. And that is going on. I think we are going to supply. What are the numbers?

200 this year.

We will make 200 ranges this year. And besides that, we are also giving consultancy for. Yeah, that is also happening, that's also going parallelly.

Oh, that's really great to know, sir.

See, just to add, there is progress. It is slow, but it is surely there.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. Our next question comes from the line of Sunil Kumar Daga with Sunil Kumar Daga HF. Please go ahead.

Hi, this is Sunil Kumar. My question is with respect to this thing, just in this thing, sir mentioned that there was a 10 crore increase because of freight up and down, but the freight percentage to sales is 67% this time as compared to 53% in the last quarter. If there is only 10%, there is a difference of, I presume, more than 13% in the cost of materials.

Hello. Can you repeat the query?

My query is with respect to purchase as compared to sales. March quarter, it was 55% and this quarter, it is 67%. And similar June quarter, it was 55%. In the phone call just now we had, you said there was a 10% increase because of some rising cost and all. But this 10 crore increase is not reflecting the 13% extra cost which has been shown in the published account for the June.

There are two different questions. I guess you have combined both of them. One is regarding the extra cost on the air freight and the sorting side, which was almost at around 10 crores. That amount compared to the other expensive side and not in the raw materials. And if you look at both the air freight and sorting, I guess 12.8 CR constitute almost 2.2% of the profitability. On the raw metal side, if you look at the way the aluminum has moved up, if you compare Q1 current year versus Q1 last year for a specific grid, the increase is almost 57%. So even if, let's say, these increases are passed on to the customers, you will find that in terms of percentages, the RM as a percentage of sales will move up.

Okay.

No, just to give you some figures, on the aluminum side, it was 230 or 240 piece last year, and they said it was also 345 piece or something. 349. 349.

Triple 2, Q1 last year. Triple 2, Q1 last year.

Triple 2 last year. So that is the increase that is there, and which is to be passed on to the customer, then there's a lag in that. And that's why you see the raw material on the higher side at the moment.

How do you foresee future, Maklum?

Fortunately, this quarter, it is coming down slightly, and we hope that it keeps on sliding down. But we don't know what the U.S. decides to do, if they continue with the war. Again, there could be a spike, but at the moment, there seems to be a relief in that.

We might have done some hedging for the Al-Murian prices and all.

We don't do hedging on the Aluminum's price because it is decided by the customers, and they are the ones who announce the price, and they are the ones who actually negotiate with the various vendors. They announce the price.

And what is the forecast for Q2? Considering the, since we have already crossed 45 days or so,

like I mentioned that in the month of July, we have done almost 300 crores, and we are heading for plus?

840 crores, sir. How much? 840 crores per Q2.

Can you repeat again? Can you repeat again? Yeah, yeah, we will be crossing area of 20 crores per Q2. Mm-hmm. And the total comes to about 3,250 plus. And Q3 will be crossing 850, and then Q4 is about 900.

Sir, that is the revenue number. Thank you.

Suleen, sir, you may please rejoin the Q4.

No, I have not, no, no, I have not closed, I have not just, I have some questions.

Sir, I request you have already asked two questions, two to three questions.

Let him rest, please. Let him off.

Yes, sir, you have shared the projected numbers for Q2, Q3, and Q4. How do you see EBITDA label and FAT labels, considering we are barely plus in this thing?

No, Q2 battling will be better, but Q3 will come back to normal because there would be no premium rates, and we would have settled for the raw materials, and also the price increases that we have demanded for the labor, etc., from the domestic suppliers, as well as our overseas suppliers. So, we have a certain figure which we have not factored at all at the moment, but that's quite a substantial figure which we are taking into consideration. That includes the gas and oils and etc., etc., everything, and also the carbide inserts, etc.

Okay, thanks. Thank you.

But we will surprise you by the end of the year. Despite the efforts which we will get, to some extent, we will claim it from the customer. We will stand by what our commitment is.

Thank you so much, sir. Our next question comes from the line of Saurabh Jain with Sunidh Investment. Please go ahead.

Hello. Yeah, thanks for the opportunity, sir. Just a small clarification before I ask my questions. So, EBITDA margins during the quarter stood around 4.5%, 4.7%, and you say by Q3, assuming the things settle down on the West Asia crisis part. So, we'll come back to a trajectory of around 10%. So, can we expect Q2 to be somewhere in between?

Yes, it will be in between.

Okay. And, sir, my first question is on growth. You have done wonderfully well with 39% growth, and you have actually, you know, increased your guidance from crossing 3,000 to 3,200 or 250 crores for this fiscal. So, just wanted to know how much of this 39% growth has come from high metal prices?

I think it's about 100 or 200 crores in this, which could be because of high metal. The exact picture I can share with you later, but that will be there also.

Sir, in this sort of, if you look at standard for the company, I guess the impact of raw material is almost 100 crores. So, the 581CR that you are looking at, if you net off, and if you, let's say, take the same base as was C1 last year, this number will be somewhere around 481CR.

Standalone. On a console basis, so, are you seeing 100 crores of the impact due to metal prices, higher metal prices, so around 650 odd crores?

Sir, this is on a standalone number, so you can increase at 100 crores by another 10-15 crores to give you a consul number.

Okay, fine, fine. And sir, what would be your TPX items for FI 27 and 28?

Okay. We, at the moment, the projects, 54 projects that are in hand, we are making investments there, but we are also curbing the investments. But having said that, after this, I think for one year, we are going to invest only wherever absolutely necessary, and otherwise we would like to stabilize and... We will be able to run all the assets to full capacity, and once we stabilize them, thereafter, we will look at some larger projects. But it's only the small expansions of capacity increases to our domestic customers and our overseas customers. That is what we will do at the moment. But newer projects, after these 54 projects are over, we will first stabilize and then make the investments.

Sir, if you can, you know, just quantify for FI27 and FI28, it would be really helpful, including your maintenance, KPEX, and all, whatever the user can do.

No, we will share with you.

Okay. And my last question is on, in the presentation, you have just published slide number 30 about the digital transformative initiatives. Can you please provide some more color? What kind of investments are we planning here? You have, you know, put several points on the side and what areas are we going to invest and how it is likely to play out in terms of profitability and all?

See, what is, of course, we are learning more and more about AI, and our people are getting engaged in that, and we're looking at how AI can be used for improving the productivity. And we have started using it for designing and also for...

Okay.

A lot of information and also trying to improve our manufacturing capability and ability and productivity on the machining line. We are also adopting it for designing of dyes, etc. And that's a nascent state, but we are in the process of doing that. And we are also connecting all the equipment so that the monitoring can be done very effectively and the machines can be utilized very efficiently. We have already done this on a couple of lines. Those are very successful and we are further trying to improve that. And then we will replicate that across the board for all the lines with the information available readily to us for every line. And also the losses. And with this, the advantage we get is that productively improves, we'll be able to control the losses or loss of time, etc. very well.

Yes, sir. That's all from my side. Wish you all the best. Thank you.

Thank you. Our next question comes from the line of Hiten Buricha with Sequent Investments. Please go ahead.

Yeah, thank you for the opportunity. So, my first question is on the railway and the defence. So, have railway or defence contributed anything in Q&A?

Yeah, it's going to be regular.

If you can share the number, because last quarter, I think you mentioned it was roughly around 4 or 5 crores.

Yeah, we will share the number. Good night for the weekend.

Till then, if you give the number, should I ask my second question?

Yeah, please carry on.

Yeah, yeah. So, so, so the second question is on the guidance you mentioned, we are still looking at 3200, 3300 kind of top line with improving margin trend. So, assuming if you want to, if you want to achieve 10% margin for only RFI 27, so is it, you are mentioning our margin will be better than 10, 11, 12, 11, 12% in H2, which will eventually lead us to like 8, 9% margin in clear.

So, the 54 projects that KB mentioned that we are launching, on the process of launching, 28 have been launched and others have been launched. Those are definitely better margins and those are with the current prices of raw materials. And so, the margins are also calculated accordingly. Much better margins and those are the volume which are actually going up. And we've also done a lot of saving as far as the machining is concerned. There is a cost reduction that has happened. We've worked a lot on rejections, and we've tried to also, that is also adding to the kitties. And the margins are definitely going to improve. And our target, we had mentioned last year that our target should be around 12%. We will be achieving the 12% target. But unfortunately, this air freight came in because our commitment to the customers, And being a single source, we did not want to let the customers down, and so this expense came, but we will honestly try to claim whatever we can, even though about, I think 9 to 10 crores, there is a certain percentage that has been agreed by the customer, but then there's a sorting cost of the rust and other components that have happened in the US, that we are trying to see how we can reclaim from the customer, or at least reuse the components by, By cleaning them up and all that, that's not enough to take care.

Yeah, that is well taken, sir. But what I'm asking is to achieve a 10% margin for the full year FY27. Eventually, you will have to do like 12-13% margin for the rest of the quarter. Okay, okay. So we are confident on that point.

Yeah, we are fairly confident of what is happening. Unless something else happens in Iran or something, then it won't be in our control. But whatever is happening now, if this continues, I think we are fairly confident. Because fortunately, the Indian market is also growing.

Correct, correct, correct.

And one on the follow-up of that 54 new project, if you can share some color on that, what exactly are we doing with our new customers?

These products are with the custom global OEMs like Toyota, BMW, and Ford. Ultimately, our components will get to deliver to these components. These are long-term programs, as I mentioned in my opening remarks, with a program like for around 7 to 8 years. And as Amrishar mentioned, these are the programs which are on the recent cost structure and having a very high profitability.

Okay, okay. So, approval and everything is already done for this component, sir, right?

Say again.

Sir, approval has been already...

We have for 28 programs, which have already gone into the SOP, for that all customer approval and everything is in place. Only that we will start the start.

Like in Hussur, we will be adding more components. That project starts in September, October onwards. We start the production there. Those will be the new launches. That will happen there. And then there are launches taking place in Chennai. There are launches taking place here in North India as well. Sanjay, you want to add something?

So, these programs, what we were mentioning already, are in the ramp-up phase, most of the programs, and the new ones that are going to start, 3D, Bawal, and Hosur.

So, those will start in September of 21st and slowly ramp-up. Some are going to start in February, March next year, and they start ramping up a couple of months later. So, we are in that cycle.

Okay, okay. And so, these components are for eyes as well as TV, right?

For the Hussur facility, these are mainly for the hybrid and for the EVs. In the northern part of Australia, these are mostly for the ice also.

Ice, EV also, and hybrid also. Yeah. So, it's a mix of hybrid, ice, and EVs.

Okay, understood. Oh, please. Okay, okay, sir. Sir, and that number you were supposed to give, sir, a revenue from... I understand.

My defense ties on leave today, sir. The nominee is sitting at a seat.

Understood. No worries, sir. I take it off.

I think it's a region of about 5 to 7 crores, but I'll give you the exact question.

Thank you, sir. Our next question comes from the line of Bajan and Bafna with Suniti Securities. Please, go ahead.

Congratulations for good top-ten growth. Of course, the adjusted margins are much better than what optically it looks like on the reported numbers. So, sir, you know, my questions are little going to be more strategic in nature. If you see last five years, your top line has gone up almost 600 crores from 1900 crores to 2500 crores broadly from 2022 to 2026. And in that period, we have done a capex of almost 1000 crores on an average of 200 crores per year. So, now you guided that, you know, why it took us almost five years, you know, where we did a capex of 1000 crores, where we could not able to grow the top line, even, you know, the one time of capex that we did. So, now, you know. What is changing in the company? We have seen multiple changes, you know, not only on the top-line growth side, but on the margin guidance and on this 3x top-line growth that you're talking about by 2030, then board-level changes, then, you know, a lot of process optimization and back-to-back, you know, SAP implementation, then talking to customers for price increases. So, can you just say what is something which is changing in the company right now, you know, maybe after a lull of five years, you know, where we are now giving a significant growth guidance for next four or five years. So, if you could just outline the broader strategy of the management, you know, while making those changes on each and every front. So, if you could just touch base on the broader roadmap on that will be really helpful, sir.

So, just to give you, I'll give you a very broad picture as to what is happening. I'd like to mention, of course, the vote has changed and everything is happening. We started focusing on the high-tonage parts. High-tonage part means for the aluminum die-casting, we started focusing on machines which are above 1,000 tons. So, going up to 1,400 tons, 1,700 tons, 2,000 tons, 2,700 tons die-casting machines. Those are expensive equipment. And, like, to give you an example, 2,700 tons machine, the basic machine landed cost is about 25 crores, and it's another 10 to 15 crores is the infrastructure around it that is to be built up. So we have about 7-8 of those machines now. Now, these machines, when they come in, each die can cost you about 8-8 corrodes for those die-casting machines. So it's a process of making the dies, of setting up the plant, and also starting the production, and setting up the equipment and machinery, and setting up the infrastructure for that. So, and the projects we have taken up are long-term projects, unlike some of the projects were awarded to us almost a year and a half or two years back, and which are coming to production now. The Hussur facility, the project was given to us last year, and now the facility is coming to production. So, these are the projects which the OEMs take up long-term, but they want a very early commitment where the investment also starts taking place. And the testing and the running of the equipment by the local OEMs is done much before the time the production comes in, we come into production. And so the investment actually takes place and does zero turnover that actually happens. It's only the sample making that we do. But now, all those are coming into focus. The other thing we've done is the performance of the productivity on the equipment. We've managed to improve the productivity of equipment. We've been able to pull out a lot of CNC machines and redeploy them into newer projects and the other investments which are taking place now. So we are minimizing the investment but focusing primarily on the turnover which is happening here and also focusing on the bottom line. Now, with this, the die casting capacity is also better utilized now, and our iron capacity also will be better utilized. So that is also going to have a major impact. You will see this impact this year and next year also.

So, sir, I know I can remember the older days when you were the king of that area, and now maybe in the last 4-5 years, maybe 10 years, where you have done good capex also, but, you know, you have lost that glory that Ricoh was enjoying maybe 10 years back, and a lot of other auto ancillary companies who were, you know, much smaller than you have grown sizably, much stronger and bigger, you know, in last odd 10 years. So probably I would say it's a lost decade for RICO, but of course we have brought up the capabilities and now we have done 100,000 crore capex. So what sort of number, you know, that you can achieve, we have already guided, but my only submission there is that without capex, you know, with the 1,000 crore capex that we did in last five years, what sort of top line is achievable by us with, you know, minimal maintenance capex we can go ahead with, you know, to achieve this 7,500 crore top line guidance that we have given for 2030.

See, there would always be maintenance capacity still already there, but we can keep a figure of about 4,000 crores in the setups that we already have at the moment. There would be investments in the ties, especially for any new component companies, there are special ties which I made. And those investments take place, we normally try to claim that money from the customer up front, but in some cases like Marufi and all, they don't claim up front, they do it in the peace price. But with the other customers, we do request them to pay us up front. So we try to minimize whatever, but we can touch a figure about 4000 crores plus.

Okay, without any significant effects.

Without significant, I would say without taking up a major project.

Okay, okay, got it. And, sir, broadly, you know, if we try to judge the impact of aluminum prices, which is there, you know, which has gone up 57% for some grades that you have talked about, so, you know, that is something which is an unknown. We don't know that how it will behave maybe this year or next year. So when you are giving this 3,250 crore sort of guidance for this financial year, what is the aluminium price that is under the assumption so that at least we can correlate, you know, in the future that how that movement is happening and where the numbers are going to behave?

In fact, the raw material, I can give you the exact value, but I think it should be in the region of about 200-250 crores.

Okay, no, Ben, I'm trying to say that this $3,300, which is the aluminum price right now, so when we are giving this guidance of 3,250 crore of top line for this year, what is the aluminum price that we have made an assumption, which probably we can correlate. The ruling price in MCX, you know, is around $3,300. Good morning, everyone. 3,300.

3,000?

320 will be the kilo. 102,000, yeah. Okay, okay. Got it, sir. And all the very best, sir, for the coming quarters, and I hope that we deliver what we are getting to the market. Yeah.

Thank you.

Thank you.

Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Next question comes from the line of Zella Karati, an individual investor of Nish. Go ahead.

Hello. Hello. Am I on this?

Yes, you may please. Yes, you are.

In the last phone call, Arvind sir said about the CNC machines that you will be selling in the market. So, if you could give an idea about that, like what's the spare capacity and do we have customers on board?

Yeah, we have already started delivering, and that is expanding, and the process is on. We have actually sold more than we are making, so that's the situation at the moment, and we have not factored that as far as the total revenue is concerned.

Hey, what's up? A spare capacity, if you could give a number, because we have 3000 capacity that we are using for captive consumption, right?

I didn't understand your question. 3000 is not the capacity that are the machining centers we are having. But if you talk about the capacity in terms of the numbers, this year we are planning around 100 machines. That is the plan. But the 3,000 is the number of machines which we are currently having in our... 3,000 number of machines we use for

production purposes in our plants is over 3,000 machines. But these are the new CNC machines that we are selling to earlier we used to make it only for ourselves. Now we started selling to customers outside.

Okay. So, what kind of revenue or margins are we expecting from this?

Margins are definitely better in the machine course side, and we have not included that revenue in the current 3,250 guidance that we have given. The railways, it will be add-on, and also this will be add-on.

So, do we project any major revenue? Like, we are projecting major revenue coming from railways and defense. Do we see this as a major segment of revenue, CNC machines?

It should become a major revenue, but now, see, this is the first year we are doing it. So, we are also testing the market and we are also getting feedback for our equipment. Earlier, we were using it internally, but now... Since we have customers outside, we are getting feedbacks, and we are also upgrading whatever the expectation of the customer is, and we are trying to see their expectations.

Okay. And...

But our target is to sell 100 machines this year.

Okay. Any approach number that we are getting? Some sort of number, if you could give?

Revenue.

That will be helpful. On the cost which I wrote on the revenue side for the CNC machine.

About between 35 to 40 crores.

Okay. And we have also, there is a land which is for sale. So, do we have customers and where will the money go for that land, the property in Haridwar? There is an asset, 10 crores asset, two-acre land.

One and one and two.

Total payment will receive by 30th of December.

By 30th of December, we will get a complete payment on that.

Okay. So we will be getting 10 crores. That will be used for debt repayment. What are we going to use that for?

More useful work and whatever repayment of money.

Fantastic. Thank you.

Thank you.

A next question comes from the line of Darishil Javiri with Crown Capital. Please go ahead.

Hi, sir. Thank you so much for letting me ask the question again. Sir, just one more question in terms of land only. So, we have another landmine culture, right? What are our plans with that, sir?

See, we are talking to people, and there is an active discussion taking place, but we cannot say anything before things are actually done. So, maybe we'll give you the news sooner than later.

Okay, okay, that's really great to know, sir. And just out of this, sir, our hedging policy, like, because there's so much fluctuation in aluminium prices, do we, you know, plan to get, like, at least do some future hedge, so at least the cash flow that we are, you know, you know, giving in that, so at least some part can be saved.

What are your thoughts on that, sir?

So, commodity is not something that we are banking on. So, our endeavor will be whatever price that we are paying to purchase our raw materials should get passed on to the customer. So, what we are working on, not exactly hedging, but to cut down on any kind of lag that we currently have. So, last time we discussed that almost 75% of the customers are already converted to real-time experiments. I guess the 25% are still to be onboarded. So, we are working on it. So once that is done, we will probably eliminate the lag impact that we are reporting a week quarter.

Thank you. Darshal, have you done with the question? Dershal, can you hear us?

Yeah, I'm saying if the follow-up I can ask for this question then.

Yeah.

Hello. Yes, you may. Yeah, just the 75% is the value of the revenue or the number of customers because we had like a significant, you know, aluminum. I just wanted to ask about that.

Sir, if you look at for a standalone number, the lag impact for the quarter is only 3.3 CR. You will recall the last quarter the number was quite big. I guess that is because 75% of the customer's value has already converted. I guess we are working on the balance. So when that is done, I guess there is no separate hedging that will be required for us to do.

Okay, that's great. That's just a matter. All the best, sir. Thank you.

Thank you. As there are no further questions from the participant, I now hand the conference over to the management for the closing remarks. Thank you, and over to UT.

So, this quarter has been tough mainly because of the air freight and the sorting costs that we have to incur. But we are very confident of what is happening. Like I mentioned about the month of July, the revenue has gone up and gone up much further than whatever. We declared the last quarter, and by the end of the year, we will be crossing 3,250 crores in any case, and the profitability also, you will see the change there, and whatever costs, mainly the air freight costs, we are trying to recover maximum from our customers. Whatever we can, we will do that. Besides that, there are other costs which we've patterned, which we've already filed a claim, and we are fairly confident that those will also start coming. In fact, some of the costs have just started coming, and we have talked to each and every customer, and by next quarter, I think we'll be able to tell you as to how many have already agreed to whatever requests we have made. This is primarily all the oil gas, all the imported materials like carbides, etc., etc., and also the general inflation that is taken, and the labor cost which went up, which is coming to Haryana, they jacked up almost 40%. That was a major impact. And so there are those discussions that are going on, and we are confident that in this quarter we should be able to settle most of them. The time, there will be, it will take us a little longer time with our overseas customers to convince them that because of... The inflation, there is the vapor cost and the gas and the petrol cost or the oil cost have gone up, and we are on it, and we have already made requests with them, and hopefully that will also get settled. Thank you so much, and we assure you that we'll do better the next time, and this portals also will be challenging primarily because of the efforts, but the next quarter onwards, you'll be very happy to see the result.

Thank you so much sir. Ladies and gentlemen, on behalf of Ricoh Auto Industries Limited, that concludes today's conference. Thank you for joining us and you may now disconnect your lines.