Earnings Call Transcript - XNSE:UNIPARTS 2026-11-05

Operator

Ladies and gentlemen, good day and welcome to the Uniparts India Limited Q2FY27 Earnings Conference Call. As a reminder, all participants 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 this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kanak Khanna from Earn 10 Young. Thank you, and over to you, sir.

Speaker 4

Thanks, Ikra. Good afternoon, everyone, and welcome to the Q2 F527 Earnings Call of Unipart India Ltd. We have on the call from the management side Mr. Gurudeep Soni, Chairman and Managing Director, Ms. Kanushree Bhagrodiya, Whole-Time Director and Group CEO, and Mr. Kandeep Kaneja, Group CFO, and Mr. Dimanshu Sharma, Head IRN of TNA. We must remind you that the discussions in today's call may include certain overlooking statements and must be therefore viewed in conjunction with the risk that the company may face. I will now hand over the call to Mr. Soni to take you through the financial and business update, subsequent to which we can open the probe of Q&A.

Operator

Thank you and over to you, sir. Sir, you may please proceed.

Gurudeep Soni, Chairman

Good afternoon, everyone, and thank you for joining us for the Unipass Group Earning Call for the second quarter of FY27. As we gear up to celebrate Diwali, Our quarter to FY27 has been the highest... Revenue from operations stood at 379 crores, which is 7% higher year-on-year and 9% higher sequentially. Milestone like this are not the result of one good quarter. We have delivered this in an environment that remains genuinely uncertain. The restoration of this finishing shop at Lugiana facility is on track to be up and running by the end of this calendar year. Lock it. Thank you. Since this backdrop, Unicard sales in the construction segment grew 49% year-on-year. Our traction is gaining new business. It's a key growth. The large agriculture has taken the hardest hit in the farm market. Industry volumes for tractors above 100 horsepower and four-wheel drive tractors are down roughly 17% this year. However, yet our revenue in this segment grew 10% year on year. In fact, this is a segment in which we have demonstrated the rewards of a focused approach. The market down 17%, we have grown. I am entirely from new business and not from the cycle. Unipart Sale Inc. U.S. and Canada, expected to be flagged in Europe. 5% of revenue this quarter against 12.4% in Q1. In absolute terms, the segment grew over 50% year-on-year for us. This is our last call. 25 crore. This is the three-point linker system, the precision machine parts, and...

Kandeep Kaneja, CFO

Ramping up. to the key financial and operational highlights for the quarter ended 30 September 2026. Revenue from operations for Q2 FY27 should have 379 crore, representing 37% year-over-year growth, and broadly in line with the guidance we had shared earlier. For first half of 27, the revenue from operations stood at 726 crores, which was 32% higher against H1 of FY26. EBITDA for the quarter was 89 crores, a strong 38% increase year over year, and broadly flat sequentially. EBITDA margins for Q2 were 23.4%, which were comfortably above the 20% margin we target through the cycle. EBITDA for H1 F527 was 178 crores, which represented 67% of F526 EBITDA. Profit after tax stood at 54 crores, which was 37% higher year-over-year. For H1 F527, the PAD stood at 111 crores, which is about 70% of F526 PAD. We generated about 34 crores of operating cash flow during the quarter. Trailing 12-month EPS stood at 43 rupees 30 paisa, reflecting the sustained improvement in our earnings over the past year. Net working capital stood at 137 days of trading 12 month revenue as of September 30, 2026. We closed the quarter with net cash position of 172 crores after accounting for dividend of 41 crores which was paid in Q2. This underlines the strength of our cash generation and balance sheet. Capital expenditure during the quarter was about 10 crores, which is in line with our investment plans, focus on capability enhancement, productivity improvements, and customer-led growth initiatives. We are looking at capex of around 60 crores to be spent over next year. Most of these are approved and advances have been paid. These investments are backed by the growth that we are seeing. With that, I would like to hand over the call back to the moderator for question and answers.

Operator

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the 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. And in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Diganth Shah from Dam Capital Advisors Limited. Please go ahead.

Diganth Shah, Analyst — Dam Capital Advisors Limited

Hi. Thank you for the opportunity, and congratulations on the good set of numbers. I wanted to understand how is the demand environment in Europe, agri-demand environment, given the Ukraine-Russia war, and there are reports that the agri-exports is not happening because of it, and also higher diesel and gas prices. So, how is the demand shaping up?

Kanushree Bhagrodiya, CEO

Sure. Thank you, Diganth. This is Tanishri Bagrodhia. Diganth, as chairman, also shared in his opening address, after three years of continuous decline in the small ag space, the order books are improving. I think this improvement in the order books comes also because the inventories have been depleted and the replacement cycle has come in. So, even in Europe, we are seeing the small egg segment coming out of the trough and slowly on the path to recovery. In the large egg segment in Europe, we still see that the large egg is muted and it is still not recovered. This recovery is expected in 2017.

Diganth Shah, Analyst — Dam Capital Advisors Limited

Okay. Thank you. That's helpful. And another thing on the gross margin front, our gross margins have remained very resilient given the underlying commodity inflation in steel and other commodities is much higher. So what is the thing which is driving this resilience?

Kanushree Bhagrodiya, CEO

So, because our material cost or cost of materials consumed tends to remain in the range of 34 to 37 percent, we have seen a price increase in steel. There's been a rapid increase of prices across the world in steel. We typically tend to, our contracts with customers are that we pass on the raw material increase through to customers. However, this pass happens through a lag. So in this quarter, while our material cost is 34.3%, which is broadly in line with where it should be, it is also seeing some amount of material cost that has still not been passed through to customers, and that will come in as the price settlement happens. But to answer your question, because we don't control the sale prices, our contracts with the customers are that there is a pass-through of these prices to customers.

Diganth Shah, Analyst — Dam Capital Advisors Limited

Okay. And are you...

Operator

Mr. Shah, sorry to interrupt you. Can you please rejoin for a follow-up question?

Operator

Sure.

Operator

Thank you. The next question is from the line of Praveen Jayaraman from Evendus Spark Institutional Equities. Please go ahead.

Speaker 7

Hello, good afternoon. Am I audible?

Operator

Yes, sir.

Speaker 11

Yes, you're audible.

Praveen Jayaraman, Analyst — Vendus Spark Institutional Equities

Yeah, thanks for the opportunity, and congratulations for the good set of numbers. My first question is on the construction side. The segment has been having good year-on-year growth and has been driving our top lane in this period. How structural is the growth from here? We understand the demand drivers around the AI data centers, but can you give directionally on how the segment is shaping up, where the new orders are coming from, and any direction here would be helpful.

Kanushree Bhagrodiya, CEO

Right. So, Praveen, we saw the construction equipment recovery happening in the first quarter. In the U.S. it's driven by AI data center and smart manufacturing recovery, and these are all multi-quarter. As you will see, our growth in the construction segment is higher, and it is higher in the U.S. versus in Europe. Our participation in the Indian construction industry is still limited. So, yes, our growth, we see our growth coming slightly more from the U.S. than coming from the Europe. From the European region, and we are very, very confident that this growth is going to continue for the foreseeable future.

Praveen Jayaraman, Analyst — Vendus Spark Institutional Equities

Right, ma'am. Follow-up on this would be, this increase in growth in construction would be majorly coming from increased wallet share or retail listing customers or new customer additions in this segment?

Kanushree Bhagrodiya, CEO

Thank you. We've won new business with customers as well, and this is also an increased demand. And there is a third... Thank you.

Praveen Jayaraman, Analyst — Vendus Spark Institutional Equities

My second question would be on the other verticals outside 3PA and PLP. So, we have been in fabrication, PTO, and hydraulics, and in the opening remarks, fabrication was again mentioned as the third lever here. With the base revenues which we have there, could we expect higher growth with the existing product we have there, or it could be more like an acquisition-based growth which we could expect from the third?

Kanushree Bhagrodiya, CEO

Yeah, so, Praveen, fabrication is something where for which we actually set up a new facility about... Medium-sized fabrications, as we would call it. This segment has shown a significant amount of growth for us, albeit you're right, it is only about percent. The new business wins, this segment is roughly 12 to 15% of the new business wins that we are getting. And we are working with OEM customers on meaningful revenues to increase our fabricated product supply to them. So this is all organic. And we expect fabrication to become a meaningful contributor within the next 18 to 24 months. Our ambition for this platform to become a full-fledged third platform remains. And the only addition that will come to it from an inorganic side would be any large.

Praveen Jayaraman, Analyst — Vendus Spark Institutional Equities

Thank you. That would be helpful. Can I add one more question or should I join?

Operator

Sir, please rejoin the queue for a follow-up.

Praveen Jayaraman, Analyst — Vendus Spark Institutional Equities

Okay.

Operator

Thank you. The next question is from the line of Bhargav Buddhadev from Ambit Asset Management Company. Please go ahead.

Bhargav Buddhadev, Analyst — HSBC Asset Management Company

Yeah, good afternoon, team, and congratulations on our Kuchnadel members. My first question is that in your presentation, you've written that on the construction equipment demand, especially in the U.S., the demand driver is data center as well as the air-related infra. But post this mid-term elections, do you see some sort of deceleration in terms of capex in this area? And in the event that happens, will it impact our business in the U.S. pertaining to construction equipment?

Kanushree Bhagrodiya, CEO

Hi, Bhargav, and thank you for the question. Bhargav, as I was mentioning earlier, right, that fund that is coming from data center, AI, smart manufacturing, these are all multi-year long contracts, right? And given that they are multi-year long contracts, The visibility into these is significantly high. There are very low chances that, you know, such contracts get cancelled. Now, what we are also, just wanted to also let you know that while we are seeing this, this is only in the US. In Europe, we are seeing the growth, which is completely driven differently, right? Because Europe needs to invest in infrastructure, Europe needs to invest in energy transition. And as Chairman also mentioned in his opening remarks, the non-commercial construction in Europe seems to be taking off. So that's the second pillar, right?

Operator

And ultimately for our construction,

Kanushree Bhagrodiya, CEO

equipment is where we are also beginning to supply from Mexico. So that also adds to the growth that will come now for our...

Bhargav Buddhadev, Analyst — HSBC Asset Management Company

Understood. My second question is that obviously we have a fairly healthy balance sheet and a very good cash position. Are we looking to accelerate in terms of acquisition? I believe we are trying some acquisition in Europe on the hydraulic side, maybe in India

Speaker 16

on the fabrication side.

Bhargav Buddhadev, Analyst — HSBC Asset Management Company

So when can we sort of see some aggression in terms of an acquisition? Because obviously, subsequent to that, your revenue growth in fabrication can really see a bump out.

Kanushree Bhagrodiya, CEO

So, Bhargav Management continues to spend very actively time, effort. and resources in evaluating acquisition opportunities. You know, in the recent times, we've come close to two acquisition opportunities that we've walked away from. At this particular point in time, also we are evaluating about half a dozen acquisition opportunities of varied shapes and sizes. So this remains a focus area for us. Having said that, we are very, very judicious in the way we evaluate and acquisitions of acquisition has to be strategic, has to be value-add for our customers, has to be value-accretive for all stakeholders. We are also very clear to an acquisition which is a deep turnaround acquisition. So, keeping all this in mind, as soon as there is... Something that we feel, you know, that investors should know of, we will come to you. On the fabrication piece, like I said, our current fabrication facility, discussion with customer, new business will give us the confidence that in the next 18 to 24 months, organically, also, fabrication will be a meaningful third platform. Inorganic acquisitions of large fab will only be a top-up to that.

Bhargav Buddhadev, Analyst — HSBC Asset Management Company

Thank you. Thank you very much and all the very good.

Kanushree Bhagrodiya, CEO

Thank you.

Operator

Thank you. The next question is from the line of Vinay Lakhera from Ratnaraya capital. Please go ahead.

Speaker 7

Yeah, hi. Am I audible?

Operator

Yes.

Vinay Lakhera, Analyst — Ratnaraya Capital

I just wanted to know your views regarding the new joint FTC and USG inquiry, like in US. So what would be the impact on these customers and on the company, like any views on that?

Kanushree Bhagrodiya, CEO

Sorry, could you repeat the question again? Yeah, so there have been a recent...

Vinay Lakhera, Analyst — Ratnaraya Capital

Hello, can you hear me now?

Kanushree Bhagrodiya, CEO

Yeah, this is better.

Vinay Lakhera, Analyst — Ratnaraya Capital

Yeah, so my question was on the joint inquiry by FTC and USDA on the agriculture equipment companies in the U.S. So, just want to know your views on the impact on the customers, and if there are any impacts on the company as well, just in terms of quantifying the impact, or maybe just the views on that.

Kanushree Bhagrodiya, CEO

So, number one, we don't speculate on any political or policy ongoing that happens. All I can tell you is that our relationship... Our demand with customers and our order books with customers remain very, very healthy. We are not seeing any impact on either their demand or their orders. Like Chairman mentioned in his opening remarks, the world's largest construction equipment manufacturer has declared that they are running on the highest ever historic backlogs that they have. Which is the case for the top three construction equipment manufacturers in the U.S. So I think we don't see any impact, and we will not speculate on what potentially could be.

Vinay Lakhera, Analyst — Ratnaraya Capital

Okay, got it. And historically, has it ever led to any consequences on the operations in general? I mean, like, in the history of these operations.

Kanushree Bhagrodiya, CEO

What has impacted our operations is the industry cycle, the new business wins that we have, and how our customer relationships have spanned out. And I think going forward, that's what's going to continue impacting our business as well.

Speaker 7

Thanks a lot, Ma.

Operator

Thank you. The next question is from the line of Sunil Jain from Nirmal Bank Securities, Private Limited. Please go ahead.

Sunil Jain, Analyst — Nirmal Bang Securities Private Limited

Yeah, thanks for taking my question. So, if you see the other expenses, it has moved up. So, was there any...

Kanushree Bhagrodiya, CEO

Sorry, can I ask you to repeat because your voice is not clear, sir.

Sunil Jain, Analyst — Nirmal Bang Securities Private Limited

Clear now? My question relates to other expenses which has moved up. Can you spell out what could be the reason? Is this the freight cost which has increased and related to that whether the increase in the freight cost also you can pass it on to the customer or no?

Kandeep Kaneja, CFO

Yeah, so this is Handeep. So yes, you're right. The primary reason is the freight cost. And we will pass this to the customers. There is usually a quarter lakh in that. So, next quarter, you should see a recovery coming.

Sunil Jain, Analyst — Nirmal Bang Securities Private Limited

Okay. And the second question relates to the construction sector. So, that is doing exceedingly well right now. You had shown very good growth in that. So, typically, if you see the historical, how could be the cycle play out now when the interest rate has already started increasing?

Kanushree Bhagrodiya, CEO

So if I understand this correctly, your question is how will the interest rates impact the construction segment, right? Yeah, I think we don't expect a material impact. A 25 to 50 basis point move does not really change the equipment economics when the fundamental drivers of the industry are improving, right? And the construction demand that comes up really comes up and rests on multi-year programs. So whether it is infrastructure, whether it is manufacturing, whether it's data centers, whether it is, you know, real estate construction, these are multi-year projects. And once the fundamentals start to come in, there is less sensitivity to rates.

Sunil Jain, Analyst — Nirmal Bang Securities Private Limited

And generally, how long is the cycle? These are all cyclical and we had seen, if we go through last 15 years, multiple cycle has happened in 3-4 years. So, will there be, is this, we can say, running towards more of a higher end of the cycle or still there is enough room available?

Kanushree Bhagrodiya, CEO

The typical cycles tend to be from four to six years. What we are seeing right now in the construction equipment industry is a recovery that started in first quarter of this calendar, or Q4 of last calendar. And I think we have enough visibility for the cycle to be increasing in the near two to three years. And I think this is also what our customers are seeing. Also remember we are talking about the... In the construction equipment sector, the company also services customers in the small ag and the large ag. In the small ag, we are seeing green shoots of recovery right now. So that recovery still has to be factored in. And the large ag, which is still in the truck, that recovery is still going to come. So I think from our perspective, we see growth for the foreseeable future.

Sunil Jain, Analyst — Nirmal Bang Securities Private Limited

Okay, great. Sorry to interrupt you, Mr. Dean.

Operator

There's a long queue. Please rejoin for a follow-up question.

Sunil Jain, Analyst — Nirmal Bang Securities Private Limited

Fine, thank you.

Operator

Thank you. A reminder to all the participants, you are requested to restrict your question to two per participant. Should you have a follow-up question, please rejoin the queue. The next question is from the line of Avantika Jhawar from Banyan Tree LLP. Please go ahead.

Speaker 11

Yeah, hello. You mentioned, spoke about your M&A acquisition strategy briefly. Could you explain a little bit more on which geographies you're looking to acquire? What kind of white space are you looking to bridge to an acquisition?

Kanushree Bhagrodiya, CEO

Sure. We have been well-defined. We are broadly looking at three product platforms, if I could call it for acquisition. One is the hydraulic vertical, the second is the power take-off vertical, and the third is the large fabrication vertical. These three verticals are verticals that will help us, you know, horizontally work across system boundaries with our customers and increase our wallet share. In this segment... We are open to... Keeping in mind that hydraulic technology and PTO technology is potentially more prevalent outside of India than within India, and large part economically is not going to make sense from an acquisition outside of India, so that's going to be predominantly an India-focused acquisition.

Speaker 11

Understood. That's very clear. The second question was around, so your revenue and your margins have met the guidance and exceeded it as well. Do you have an updated guidance of financial year 27 and 28 for revenue and margin?

Kanushree Bhagrodiya, CEO

2% in FY27 first half, and we expect quarter 3, which is seasonally, to be in line with quarter 1 FY27. That is on the revenue side. Having said that, let's also see that the second half of FY26, we grew 32% year-on-year as the recovery in the construction industry started to come So, second half of FY27, the growth will be slightly lower in percentage terms, even as the absolute revenue keeps rising. So, taking both together, we expect FY27 revenue to be 24% higher than FY26.

Speaker 11

Understood. And on margins?

Kanushree Bhagrodiya, CEO

I won't guide to an EBITDA number, but I think the first half of this year shows the strength of our structure. Q2 delivered 23.4% EBITDA margins despite the raw material in West Asia inflation. Also, even at the equity market for most of June in September, we had lower treasury income. Also, in quarter two, we had warehousing sales of 53% against the 56% in quarter one. So, I think the first half has shown that, you know, structurally, we remain very, very strong. We are very comfortably placed to deliver the 20% margins over a cycle, and I think we will continue to deliver that.

Operator

Understood. Thank you so much. Thank you. The next question is from the line of Dheeraj Kumar Reddy from Alpha Square. Please go ahead.

Speaker 16

Yeah, thanks a lot for the opportunities, and congrats on a great set of numbers. Now, I just have a couple of questions. First, I think fairly you demonstrated how FY27 will look like, but I wanted to understand what will be the drivers of growth for FY28. How should one see the fabrication unit shaping up for us, and if you can give us some color in terms of how the overall growth that we can look like, including drivers, I mean.

Kanushree Bhagrodiya, CEO

The drivers for us on the growth side, let's go segment by segment, right? I think in the construction space, we are very, very well positioned. You heard Chairman's opening remarks, the industry group, but in mid-teens, we delivered a 49% year-on-year growth. We continue to win new business in this segment. In fact, 70% of our new business awards are either in the construction or in the large ag space. So one of the key drivers for us will be the construction industry, and this is just the market recovery plus the new business wins that we have. The second driver for us is going to be the small ag segment. The small ag, we started seeing order books come back. And we are seeing green shoots of recovery. India has done well in the first half. We do see that maybe the second half in India is not going to be as high growth as the first half is, but the rest of the world, green shoots are coming through. We have a dominant market. In the large ad segment, where the industry has de-grown 17%, we continue to win new business. We've won a very large business in Europe last year. We've just won a new order in the U.S. In August, our U.S. patent for the lower link hook actually came through, which is also something that will only add value to us winning new business in the large ag segment. So this segment will continue to grow for us, and as this segment comes out of its trough, the market growth will only add to it. The growth driver of our growth is going to be our fabrication segment. And over here, like I said, 12 to 15% of our new business awards are in the fabrication segment. And this is where, again, we are putting in a lot of effort with OEMs in discussing how we can service their needs from the small and medium fat facility that we have in Lugiana. So these are going to be our growth drivers going forward.

Speaker 16

And today, if we see fabrication is probably less than 2% of the overall revenues, but do you think it will land at, say, 18% by FY28 or FY29? Is that how one can see this? And also, in addition to this, my next question will be, because we have sufficient cash on the balance sheet, should we expect a dividend, or is there something material which the company is looking out to do in the next 6 to 12? Because this is more from a capital allocation strategy, how, like, in the medium term. And the company is really looking is what we wanted to understand.

Kanushree Bhagrodiya, CEO

In the next 18 to 24 months, definitely has the ability to be a meaningful third platform, which, yes, in the high single digits

Operator

is not 10% of revenue share.

Kanushree Bhagrodiya, CEO

So, yes, I think that's the effort and the endeavor that the teams are making. That is also how we are expanding our capabilities in that particular facility that we have. On the question that you've asked on the cash that we have, the company remains completely committed to our inorganic ambitions, and we continue to evaluate it, or evaluate, like I was saying, more than six dozen opportunities. So the first use of, sorry, half a dozen, half a dozen opportunities. And so the first priority of the use of cash would be towards an acquisition, but as you know, in an M&A, until we don't sign the dotted line, nothing is final. Again, we will not make an acquisition only for the sake of making an acquisition. Sandeep also mentioned that we are looking at CapEx right now, which is about 4% of our revenue because there is growth that is coming through. And keeping the organic and the inorganic needs in mind, if we are unable to make an acquisition, the board will take the most appropriate call for the growth of the company, for the shareholders, and for all the stakeholders.

Speaker 16

Thanks, thanks a lot. I'll just join the team.

Operator

Thank you. The next question is from the line of Sachin Gupta from Trinity Capital. Please go ahead. We lost the connection for Sachin Gupta. We'll move to the next participant. The next question is from the line of Nikhil Upadhyay from Simple. Please go ahead.

Nikhil Upadhyay, Analyst — Simple

Hello. Good afternoon. I'm Ali Ben.

Operator

Yes, sir. Thank you, sir.

Nikhil Upadhyay, Analyst — Simple

Yeah, I have two sets of questions. One is on the gross margin, one clarification. So, every quarter we have this 4x impact in the gross margin. Is there anything in this quarter?

Kanushree Bhagrodiya, CEO

So, Nikhil, this quarter, if you see, the currency is actually not done much. So, the impact is very, very minimal.

Nikhil Upadhyay, Analyst — Simple

Sure. So, then a subsequent question is that if you look at over the last 16 quarters, our gross margin profile has moved from a range of 60 to 65 to now, sustainably between 65 to 67. And there have been quarters where we've gone beyond 68, 69 as well. But considering this range shift which has happened, would you say is it the next change towards more construction equipment which is driving this or is it largely driven by the model mix of whether we are selling through India or selling through our delivery channel warehouses and USO, which would be a larger contributor here?

Kanushree Bhagrodiya, CEO

So, Nikhil,

Speaker 11

our gross margin typically tends to be in the range of 63% to 66%.

Kanushree Bhagrodiya, CEO

There have been outlier quarters, as you have seen, where some of the performance or the higher gross margin has also been impacted by currency. All right. I think it's also fair to say that product mix does play a role, but you're absolutely right that a larger role is played by the delivery channel mix that we have. Our warehousing sales is our highest margin product. The next is our direct export and locally made, locally sold is our lowest margin product. So quarters where we have a higher warehousing sales, we will see better cost margin.

Nikhil Upadhyay, Analyst — Simple

Sure. Last question. See, one very interesting point is on the large egg, which I think Sir also mentioned and we mentioned in the presentation. I wanted to understand, now, if you look at two years back, in terms of the new order wings, what was the share of large egg and how is that share today in terms of new order wings?

Kanushree Bhagrodiya, CEO

So, Nikhil, any new order that comes in large ad has to go through a very rigorous

Operator

cycle of validation and then field testing,

Kanushree Bhagrodiya, CEO

because in the large ad space, the three-point linkage system that is used requires to carry and allow the functionality of much heavier equipment. So the validation and the testing cycles are longer, and they can last from anywhere from 18 to 36 months. We started putting in a lot of effort about two to three years ago in large ag to win business over here, and that is why today you are seeing that roughly about 35% of our new business awards are towards the large ag segment.

Nikhil Upadhyay, Analyst — Simple

Okay. Sure, and one last on the X. Sorry to interrupt you, Mr. Afanthar.

Operator

Sure, thank you. The next question is from the line of Senthil Kumar from Joinery Capital Services Limited. Please go ahead.

Speaker 7

Thanks, thanks for the opportunity. My question on working capital, which has increased over the last six months. Could you explain the key factors driving the increase, particularly the rights and receivables?

Kanushree Bhagrodiya, CEO

So, Samuel, I'll ask Sandeep to take this.

Kandeep Kaneja, CFO

Yeah, so you see a rise in receivables are basically coming from two wheels, right? One is the overall revenue size has gone up. So, that has led to the receivables going up. Plus, we had one or two customers in the U.S. market which... Well, there were some payment delays. One we have already streamlined, and the other one would most likely get streamlined by November. So, but the bigger impact is coming from the increased revenue and some payment delays from the two OEM partners. One is resolved, one is going to get resolved in November.

Kanushree Bhagrodiya, CEO

And these are not payment disputes, just to be clear, Kendall. These are... These are what I would basically call technical issues at the end of the customer that they themselves are very cognizant and are working through. But if you see our working capital days is at 137 days at the end of September quarter versus 136 days which was at the end of March.

Kandeep Kaneja, CFO

Yeah, so we are stable there.

Speaker 7

Okay. So what kind of working capital days we can expect for this 520,000?

Kandeep Kaneja, CFO

So we expect to remain around 136, 140 days because of the delivery models that we have. So as you would have read, we do sales from warehouse. So we have. Since it's exported, market two months of inventory on C and two months in the warehouse, so that's where our working capital gets blocked. Other than that, we manage the receivers and the payables well to offset each other. So inventory is something that is linked to the way we do the business.

Kanushree Bhagrodiya, CEO

What is this working capital is factored into our inventory and our inventory costs with the customers?

Speaker 7

Thank you. Thanks for the information.

Operator

Thank you. The next question is from the line of Resham Jain from VVD Asset Managers. Please go ahead.

Speaker 7

Yeah, hi. Congratulations on a good set of numbers. So, I have two questions. The first one is, with respect to your inventory, if I see your inventory from March levels has gone up by 5% while now we are tracking close to 30% growth, y-on-y. So, should one assume that within the working capital bank which you have provided just now? The requirement of inventory has come down a little bit compared to what you have seen. I am talking about absolute inventory. It has not increased in line with your revenue.

Kanushree Bhagrodiya, CEO

Your realization that absolute inventory has increased lower than the top-line growth. But that's also because we have been managing our inventory levels well. We've been managing our delivery PPMs with our customers also very well. Our delivery PPMs with customers across the board are 95+. So I think there is a lot of concerted effort which is going on across the organization to ensure we do not overstock and we are at the right levels of inventory. And I think as far as our working capital is concerned, as Sandeep was mentioning, we manage our receivables and payables to offset one another. So we're, you know, our endeavor is to remain in that 135 to 140 days of working capital.

Speaker 7

Okay. The second question is, given that last almost four quarters less now, we have already given that second half, you could see 17-18% kind of growth, implied growth, based on 24% growth number for full year. Next year, how should one think, because the base is quite high, and the overall... Some of the segments might do well, but what is your own kind of internal target which you're working with in terms of growth next year, 28?

Kanushree Bhagrodiya, CEO

So, Risham, our business model is designed such that over cycles, we land up delivering with teams growth year and year. FY26 and FY27 are our highest growth year because the recovery is just starting. Again, I'm just going to repeat that, you know, the construction segment recovery is in full swing. Small ag, the green shoots are there, the large ag still has to come in. Plus, on top of this, we've been winning quarter of quarter, we've been telling you, trading 12 months. New business wins are 225 crore. So, I think we're very confident of delivering, you know, on an average, like we say, over a cycle of mid-teams crore in that.

Speaker 7

Okay, perfect. Thank you. Thank you so much and all the best.

Operator

Thank you. The next question is from the line of Somal Shah from Paris Investments. Please go ahead.

Somal Shah, Analyst — Paris Investments

Yeah, hi. Thanks for the opportunity. So, basically, in the previous calls, we used to mention second half to be better than the first half. And looking at our order backlogs and, you know, construction side also doing well, do we still hold on to those targets or are we revising it?

Kanushree Bhagrodiya, CEO

The formula that remains second half is better for us than first half. It's just that your growth percentage in second half FY27 will be lower than the first half because the base of FY26 second half was higher.

Bhargav Buddhadev, Analyst — HSBC Asset Management Company

Correct, correct.

Somal Shah, Analyst — Paris Investments

But you also mentioned to one of the participants that Q3 will be in line with Q2 or Q1, you said?

Kanushree Bhagrodiya, CEO

Q1, because Q3, Q3, seasonally, is typically our lowest quarter. Here on here, if you look at our numbers. Q3 is seasonally our lowest quarter. If you look at what happens in the Indian Ag industry, it is also the snow season for overseas. It's also holiday season. This is post-Diwali. In India, it is Christmas time for the Western world. So this is typically seasonally the lowest quarter for us.

Somal Shah, Analyst — Paris Investments

Okay. So it would be more than the Q1?

Kanushree Bhagrodiya, CEO

It's broadly in line with Q1.

Somal Shah, Analyst — Paris Investments

Okay. Okay. And in terms of our Mexico business, so as we mentioned, our first customer dispatches have started. So how do we see this side of business contributing overall, if we can have your views?

Kanushree Bhagrodiya, CEO

So the Mexico business will be single-digit revenue, single-digit million-dollar revenue. This year, and we are working with three customers over there. We are starting with one customer. The other two customers, you know, we need to get ramp up with, and they are waiting to ramp up their own requirements. So as that happens, and as with the current customer, we ramp up this business, so this revenue will go up.

Somal Shah, Analyst — Paris Investments

Okay. Okay. That's it from my side. Thank you, and all the best.

Operator

Thank you. The next question is from the line of Mansa Jain from SGFO Family Office. Please go ahead.

Speaker 7

I think my question is answered, so I think I'll rejoin it later. Thank you.

Operator

Thank you. The next question is from the line of Shubham Vatra from Ambit Asset Management Company. Please go ahead.

Shubham Vatra, Analyst — HSBC Asset Management Company

Hi, team. Thanks for taking my question, and congratulations on a very strong set of numbers. I am in continuation with a couple of other participants' questions. So, largely, post the mid-term elections, there is a lot of say as to AI capex in the US slowing down. So, I just wanted to understand since our multiple times we have mentioned that a large chunk of our construction equipment demand is coming from that, how is it correlated or what kind of deceleration can we see? And also in terms of the long-term contracts that you highlighted, could these get delayed or could these see cancellations also from customers if you could give a better sense as to actually what is happening on ground?

Kanushree Bhagrodiya, CEO

So Shubham, like I was saying, when construction of a data center or a factory, premises, all of these start, these are multi-year contracts. This is not a multi-year contract for us, but this is a multi-year contract for our customers. And these contracts are signed, capital is committed up front, right? So these contracts may have delays that are associated, but typically they don't see any cancellation. We are not seeing any slowdown in our order books. We continue to see healthy growth. We also continue to see healthy growth in the European construction equipment market. And I think it's already understood that, you know, the... The investment that is being done by AI, that is being done by the private sector into AI and data center is what is driving this growth.

Shubham Vatra, Analyst — HSBC Asset Management Company

Got it, got it. So, largely, we don't expect any significant change in our delivery schedules with the customers.

Kanushree Bhagrodiya, CEO

Because we are not seeing any change in our delivery schedules. In fact, if you see, the largest construction enforcement manufacturer in the world has just announced a $20 billion investment in North America in a new manufacturing facility catering to the U.S. markets only. And I think that actually indicates the strength of the demand and the recovery of the construction cycle.

Shubham Vatra, Analyst — HSBC Asset Management Company

Got it, got it. And secondly, on the Mexico warehouse that is coming up, so we expect to do single digit million dollar revenue in the next six months of this year, right? H2F by 27. And in Q2, we have not, Q2 numbers don't capture any revenue share from that, correct?

Kanushree Bhagrodiya, CEO

No, we have only started dispatches in November.

Shubham Vatra, Analyst — HSBC Asset Management Company

Oh, got it, got it. Okay, thank you. That's a lot. That's awesome.

Operator

Thank you. The next question is from the line of Ashitosh Tiwari from Aquarius Securities. Please go ahead.

Ashutosh Tiwari, Analyst — Aquarius

Congressman, good numbers. Just on agriculture side, at the peak in FY23, we had done revenue of almost like 970 crores. And last year, we had done 717 crores. And you also have own orders from large-degree side, new orders and all. So when we go to, again, probably next two-three years down the line, our revenues will be much higher than what we did in 23, right?

Kanushree Bhagrodiya, CEO

So, I think, Ashutosh, if you are looking at our business, right, I think you also are seeing that our business is built for de-risking and diversification, and as we've been growing in the last sort of eight quarters, we've also been seeing that growth is coming from different segments, construction and large ads. So, we continue to grow with different customers and different product lines with the idea that we will maintain this de-risking and our growth should be there across product platforms with 3-Point Linkage, PMP, and now we are also investing in growing fabrication and this is both in the ad and the construction cycle.

Speaker 11

So, in the absolute terms,

Kanushree Bhagrodiya, CEO

the 3-Point Linkage product platform will grow as the ad cycle recovers and our new businesses ramp up. But whether 3PL is, you know, will be higher or lower percentage of our revenue at the next peak, that will depend on how fast, you know, the PMP and the fabrication segments also grow around the time.

Ashutosh Tiwari, Analyst — Aquarius

No, no, and I'm not talking about percentage of the revenue. I'm talking absolute amount I'm talking about, that it will go back to higher than absolute amount, right, because you've got new orders from.

Speaker 11

It's the same thing on the, you know, typically it should because we are already,

Kanushree Bhagrodiya, CEO

we are already growing faster than we were at our last peak in FY23, right?

Ashutosh Tiwari, Analyst — Aquarius

Yeah, yeah.

Kanushree Bhagrodiya, CEO

I think what I'm trying to explain to you is that the growth in any one segment is not dependent on that segment alone. It's also dependent on how we are growing in the other two segments.

Ashutosh Tiwari, Analyst — Aquarius

Yeah, yeah. So, I mean, so that's one. And on the construction side, in terms of the order that you have got recently or in last one year, will that lead to, let's say, turn rate increasing over next one year in the construction side?

Kanushree Bhagrodiya, CEO

New order wins that we get are what we tell you is a trailing 12 month figure, right? And that is the estimated annual value at peak of a new business. So it's more like an SIP where it is what we add every 12 months and not really just the size of the business. So every 12 months, every win adds to the revenue on the top of the previous wins from the trial period. And each win then takes two to three years to reach its peak, after which it grows in line with the business. Now, these wins can ramp up earlier or faster depending on customer product adoption and market demand. So, I hope that gives you a color on how we are seeing new wins add to the revenue.

Operator

Thank you. Ladies and gentlemen, we'll take this as a last question for today. I would now like to hand the conference over to the management for closing comments. Over to you.

Gurudeep Soni, Chairman

Thanks a lot, everyone. To conclude, this cycle is testing the entire industry, and we are using it to become a stronger company. We have improved our cost structure. Build a more resilient supply chain for our customers, and deepen our partnerships with them. We are now well positioned to grow in the focus areas we have identified. And as mentioned, as farm demand in North America and Europe recovers, as our new business wins ramp-up, we expect to be well-placed to benefit from both. With this, I would like to thank you. for their continued trustful support. I would like to wish everybody a very happy Diwali. Thank you.

Operator

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