Action Construction Equipment Limited analyst Q&A

Thank you very much. We will now begin the question and answer session. T he first question is from the line of Garvit Goyal from Nvest Analyst Advisors. Please go ahead.

Good evening sir, Congratulations for good set of numbers. Sir, basically, you have reduced our guidance for FY '25 due to some external factors. But the factors that you have mentioned may result in deferment of demand for few months, but it should accordingly end up with higher demand in second half, considering the positive demand from the industry, which you also mentioned in last quarter con call. So , considering this, why are we giving a very conservative guidance of 15% to 20% for FY '25.

If you notice, we generally give a conservative guideline because for our base to be very clear with respect to what is achievable easily and what can be achieved. So that is why going by our trend, we are seeing 15% to 20%. And I believe we should be able to excee d it, primarily for the reason that, hopefully, the current government will continue again. So , all the focus and impetus on the growth of the country will continue. And secondly, from 1st of January 2025, we have five norms. For construction equipment, they are called CEV V. So, CEV V, CMVR norms will be applicable. So we expect that in the end of quarter two and especially quarter three, there will be a lot of pre -buying for machines, which are moving st raight from BS-III to BS -V. Currently, we have two types of mach ines. One, we are already in BS -IV regime and about -- I would say, about 40% of the company's machines which are in BS-III regime. So all of this is going to BS V and there is going to be a substantial price increase, especially from BS-III to BS-V. So the numbers, there'll be a lot of pre-buying. So we are very hopeful, it will definitely be better than that. But on the safer side, I think the middle end of second quarter is the best time to project the more easily possible growth trajectory.

Understood, sir. And sir, previously mentioned that upcoming loans of some new products like Electric Crane and Aerial Work Platform , so where the company anticipate gaining a first mover advantage in India. So could you please provide an update on the status of these product launches?

Yes, the Electric Crane has been ready with us. Unfortunately, the government regulation -- wherein the regulation would have been formulated for t he registration of this license with Indian RTOs. It got delayed and now it will happen only after elections. We have been trying to meet and I've also met the Ministry of Road Transport and Highways for a number of times on this. So we are very hopeful that this will go through in June now. So hopefully, we will be able to start to sell our Electric Cranes by July onwards, which has been ready with us for quite some time now. The Aerial Work Platforms, more or less everything is in place and the product has productionized. So we expect to start deliver ing this product. Earlier, we are planning to do it beginning of March, but due to some supply chain constraints. But now I think this will start to happen in the month of June with respect to deliveries of our new product Aerial Work Platform. And in the same breadth, I would like to say that we are also working on a new model of next - generation cranes, which we believe can be a game changer. So that we're already working on and within this current financial year, we expect to introduce that. Apart from a Reach Stacker, which is a much bigger version of a forklift, you can say in a way, capacity of 40, 45 tons for container handling. And we are also working on a special model of Backhoe Loaders. As a matter of fact, it is currently under and we expect to launch it sometime in July, August. So this is a very special Backhoe Loader equal wheel, all-wheel steering, which is popular outside the India -- outside the country, and we are especially designed it for the export market. It has no market in India. Similarly, we are very hopeful that in July, August, we'll be able to launch new telehandler, which has been designed again, especially for the export market. It has no market in India. It is again equal-wheel and all-wheel steering and all-wheel drive.

Following up this discussion, basically, last quarter, you mentioned, I think, a product crane that is currently getting imported from China, and we were expecting to launch that product in two to three months. So, what is the status of that?

See those products up to 75 tons capacity, 80 tons capacity, we have been manufacturing for the last 10 years. It is just that in the last 4 years, 5 years the market has increased. The Chinese were able to sell more than us because of their very aggressive pricing. So herein we were expanding our capacity from 4, 5, 6 units a month or let's say, 50, 60 units in a year to 400 units. It has already happened and our capacity is in place now. So this year we will see increased results. So we will be able to if not triple actually double our sales in these bigger cranes within the current year t hat is what we believe. We should from a figure of approximately around 40, 50 units I think we will cross a figure of 100 un its can be much more for this year.

Understood. Sir, and just last question on our margin. So you mentioned last quarter like margin sustainability basically depends upon how the commodity prices will prevail. So looking at the current scenar io where commodity prices are rising so can you help me to understand how do you -- how do you think EBITDA margins to shape up in FY '25 from current levels of 14%?

See, obviously, if the commodity prices are increasing you see they are wit hin range 2%, 3%, 5%, 7% up down that is easily manageable, b ut obviously like in the year FY '22 or -- I mean FY '23, sorry the U kraine war or just before that t hen it was mayhem. So those types of scenarios are very difficult to immediately manage, but generally we are able to pass on any commodity increase with the leg of 2 months, 3 months for our customers. In any case, we take our annual pricing. We're still looking at all the actions that we take to control our pricing -- our selling prices, I think the 16% plus scenario is hopefully here to stay. And with our revenue further increasing in this year there is only scope of further improving our margins.

Understood sir. Thank you very much sir and all the best for the future.

Thank you. The next question is from the line of Jaspreet Waliya from Clock Wine. Please go ahead.

Sir in the last couple of calls you have been mentioning of the changes you're doing in th e material handling business. So if you could just tell us what changes have been done and what do you think would be the impact of those changes in the coming years? Would you be able to drive higher growth in this business in the coming 2 years, 3 years?

Yes. We are very sure that the rat e of growth in the material handling segment is about INR180 crores, INR190 crores for us, it will be faster than what it has been in the last 1 year or 2 years a nd primarily it was inefficiencies within the system of the company a nd we worked all across within the segment with respect to our plant manufacturing and upgradation and now things are on line with respect to, I would say, the quantity of production as well as further improve quality and performance of the machine. And going forward from first of January onwards with the new BSV regime, we also plan to introduce a totally new range of material handling machines especially forklifts which will be even better upgraded to meet international level of performance as well as styling. So that is also in the pipeline to happen in January next year. So everything is on track and we are very hopeful that this year we'll grow faster than what we've been doing. It has been growing, but at a s lower pace. So hopefully we might even exceed 20% growth this year in that category.

Got it, sir. Sir, as of now what part of the forklift market in India are you able to address a nd the products that you are going to introduce going forward, would they increase the addressable market size?

See, currently we are doing forklifts up to 12 -ton capacity which we're manufacturing in India. And obviously there is also a niche market about 20%, 25% of the market which is addressed by forklifts imported into India from premium brands like Toyota o r even Hyundai or Volvo. So it will also give us access to the premium segment with our upgraded machines a nd our intention is to sell the upgraded machine not only in the premium segment, but even in the regular segment to gain the market share.

Got it, sir. Sir, in the last call, you mentioned that you're talking to a big brand for manufacturing a particular product in India for the Indian market as well as for the world, so what is the status of that initiative, sir?

It is in very advanced stages. More or less everything is true. It is just that we have an NDA so really can't disclose. There is some further, I would say, a technical -- it's not really a technical problem, but it's something in the interest of the joint vent ure that we'll be delaying this formation of the joint venture of announcement by maybe another two quarters, three quarters which I really can't disclose to you. But it is in the interest of the joint venture and the overall sustenance and profitability of the venture.

Got it. So you also alluded to some -- making some large announcement in the crane market, which would have an implication on the -- on your business in cranes, so has there been any progress on that front?

See, in cranes we are leaders. Pick and carry cranes, tower cranes and now trying to become big in the bigger segment cranes that is 60 tons, 70 ton s and bigger where the Chinese have taken over the market in India a nd we have set up and expanded our capacity. So that is only news in place, b ut yes in saying this definitely something -- some big things are lined up in defence sector because l ast year about 2.5% of our revenue came from defence at about approximately INR68 crores. And in the opening of this year we had pending orders worth about INR65 crores and in the next -- over the next 2 months, 3 months we are expecting some really big orders from the defence which I also mentioned in my opening address. So they could be variable in the tune of INR400 crores to INR700 crores, maybe slightly more. So maybe this year can be the game changing year for us with respect to contribution of defence with respect to our company.

So, I think you were referring to some acquisition in the crane segment?

I was referring to what?

Some acquisition opportunity in the crane segment.

Yes. Things are going on. They are in the liquid state. As soon as they solidify and something is up for obviously we are a listed company so it will be informed, but...

That will be outside India or in India?

We are actually open for inorganic growth in the country and outside country also. We have a couple of targets in mind within the country and obviously which is work in progress. And outside the country we want to acquire a smaller company with a good product which we have in mind. I can't say any more than that. We have already located some companies. And so that - they can help us swing mo re faster into the export markets. So that we can start doing white labelling for our own company outside India and also moved some of the specific export products to that compa ny apart from their own products which are manufactured in their country.

The next question is from the line of Ankur Jain from Future Investment Private Limited. We can't hear you. Hello?

I think we can go to the next question and maybe he can come back in the queue.

The next question is from the line of Aman Soni from Nvest Analytics Advisory.

Sir, we were supposed to get some crane license for export. So, what is the update on that?

Yes, sir.

I don't think there's any such requirements. In India, we follow BIS standards. And obviously, the countries wherein we are exporting to, we make sure that we are meeting the regulations of that country. But there is no requirement for any specific export licenses.

Particularly about the newer crane products that we are targeting into the export market. So, are we noting any requirement to getting the export license for those products that we are looking for?

There is no need of an y export license apart from maybe some export benefits that we get, if you're talking about those licenses, then obviously -- Luthra sir, what are the different -- we get some benefit on exporting, right, 1% or 2%?

But I don't think there is any requirement of any license for exporting. This is a freely exportable product. As regards export incentives, definitely, these all products are covered in that export authenticity. So, once we start exporting, we will get the export benefit automatically. So, there is no requirement for any export

There's no requirement as such for any export license from the country. And we take adequate care, whichever country we are supplying the machines to whether cranes or any other machine, to make sure that we meet their homologation requirements. And as a matter of fact, we -- over the last 3, 4 years, we've evolved special left-hand and right cranes also for some of the Middle East and African markets.

The next question is from the line of Garvit Goyal from Nvest Analyst Advisors.

My question is answered. Thank you very much.

The next question is from the line of Rajeev M from Raj Investments.

First of all, I would like to congratulate on the very g ood set of results. I have a couple of questions. First question is, I see a rise in interest expenditure. So any specific reason for that if you compare it with the previous quarter or the Y-o-Y comparison?

I think primarily it is more to d o with the interest rate being higher in the last year, but I think Mr. Luthra will be a better person to take that question.

Yes, there are 2 reasons for increasing interest expenditure. One is the increase in the average cost of borrowing b ecause you must be aware that RBI has been giving the rates steadily for last 1.5 years, that is 1 factor. Second thing, we have gone aggressively on discounting of supporting our vendors, especially MSME vendors and which payment terms have been brought in faster, not at free of cost , but definitely, we are getting discounts on the payments. So, we are leveraging the alpha between the cost and the disco unt for that. So that is why the interest cost is slightly higher.

It will be in the similar range because the practice is still continuing, and we are trying to further leverage our financial stand to get a mor e discount from a vendor by gaining the advanced payments and supporting them to maintain our supply chain issues.

So we are benefiting in terms of the discount channel?

Yes, that's right.

Okay. Another thing is, Mr. Agarwal, you had mentioned about the election effect. So I would like to know, if we compare the month of April and May, so has it been materially impacted in terms of the work because of the election? Or how is it lying going forward means for the first 2 months?

That is only what happens . First 2 months have definitely been slightly muted as compared to the momentum that was there till March. And what we have also noticed in the past is during the election month, those 2, 3 months, the mark et, let's say, the buyers, even if they have requirements of work, they just go on to wait and watch more -- parts of the market. So that is what we are experiencing. I'm sure 4th June onwards things should come back to normalcy.

Okay. So the imp act will be for the first 2 months and then maybe the demand would again come back for those who have built it up?

Sure, because there is no material change aspects, which has happened. And we are also very confident that on a year-on-year basis, we should be doing reasonably well even in the current quarter.

And the final question is any update on the Ghana part, which was stuck up, I think, because of some funding from the World Bank or something. So any update on that?

Yes, Ghana has not bottomed through so far. We were very hopeful that was the commitment which we were getting from Government of Ghana. Current situation is that there has been some default from Government of Ghana with respect to certain credit line s given by Exim Bank. And this project was supposed to be funded by Exim Bank. So that default or the dispute between the Governm ent of Ghana and Exim Bank has not been resolved. And Ghana is about to get some IMF release package with -- on the basis of w hich they are going to fulfil their requirements with Exim Bank. So, right now, it is in a status quo type of scenario that even we do not know whether it will happen in 1 month, one quarter, or 2 quarters. But the order on us very much stands. And but even we are not getting any clarity that when it will get solved within this quarter and next quarter. So that is the current situation.

It is still in the pipeline, or it's stuck up as of now?

As of now it is stuck up, but one thing which I can tell you is that because, obviously, we do not want to go ahead or do anything without our payments being secured, so that will be very foolish because this line of credit, our security was coming from Exim Bank for all our payments although we have signed agreements with EXIM Bank, but the disbursements are not happening because of the default of Government of Ghana. So everything has gone into a limbo as of now. So maybe in the next one or two quarters, if improved or as soon as their IMF thin g goes through, something will happen. But yes, on the brighter side, whenever, let's say, over the next 3 months, 6 months, we are not in a position to answer now. But whenever this happens, we will stand at a slight advant age because the commodity cycle, you know the way it was 1 or 2 years, has turned in our favour. So our additional setting of the plant and supplies -- our margin profile will become even better as and when it happens.

And this year, sales was close to INR900 crores. So when do you expect to touch the one four- figure mark in which quarter on the lighter note? What's your expectation?

My mind would tell me quarter 3, but we would love it if it happens in qu arter 2, which I don't think it will happen, but -- and also monsoons are there, but you never know. Right now, the markets are like stock markets, anything can happen.

But hopefully everything going well, Q3 we'll be able to touch the INR1,000 crores?

I think we should come in close vicinity or should be in a position to touch. I see no reason why it should not happen. In any case, first of our any year is about 45%. Second half is 55%, H1 versus H2. And the range is 40%, 45% going up to 60%, 65%. 40%, 45% in the first half, 60%, 65% in the second half. So I'm sure we should be somewhere there in the second half.

But off late, we are doing very good even in the monsoon quarter, which was observed last year. So you never know, keeping fingers crossed.

That's what I said, you never know because what is happening, what I feel is because of this election quarter, there would be pent-up demand. So you never know that second quarter might also turn out to be even better than our expectations.

Yes, yes, because the demand for the April and May maybe postponed to the second quarter.

Yes. So I mean all possibilities are there. But due such time it converts into Action, really can't say much.

Well, Action is known for action. So hopefully, it would happen maybe Q2 or Q3.

Yes. We are also taking out a way to how at least August onwards things can start improving fast because the C EV -- BS V transition, so we will make all the customers aware by July or August that they are going to have a cost impact of 12% to 15% from January onwards. I'm sure things will look up. We have been managing to do it. We'll manage to do it again. The scenario is supporting us so I see no reason.

Sir, the first question is on the margin front. If we look at this year, the expansion, which you have seen sold 300 basis points at EBITDA lev el. Almost half has come from gross margin expansion and the half has come from operating leverage broadly. So within -- so within, let's say, if we look at the gross margin part, how much would you attribute to, let's say, better pricing environment because of the strong demand, how much could be, let's say, a better mix between the products since you are gradually upgrading your product portfolio as well. So if you can just give a picture there. And within that as well, how do you see that changing in the next couple of years in terms of, let's say, if it is strong demand, how do you see that in the next couple of years in your pricing ability?

I think, Anupam, you've really asked a very hard question. And that was detail with respect to product mix or with respect to our pricing vis -a-vis operating leverage and obviously commodity pricing, I think to put the exact percentage, I have not seen that data so far. But maybe Vyom or Luthra Sahab, if we have any light on that?

So the major impact has come because of the two factors. One is the volume increase and the shift towards the higher or new generation conveniently higher tonnage cranes. That is the 1 which has contributed.

We can -- because of our operatin g leverage and let's say, customers shifting towards product mix, towards higher tonnage, our margins are slightly better. But I showed some part exactly, not able to quantify right now. We can calculate that and get back to you. It also come from commodity, which definitely happened a little bit in the quarter 4.

And definitely, there was some advantage of the price also, and which I think was numbers...

Like I said, Anupam, I think we don't have an exact answer as of now. We c an work on it and get back.

Sure. That I understand, number is fine. But let's say, in your sense when you are actually selling the product to the customers, has your pricing power improved or that is not the right inference one should make?

So it has definitely improved. We also improved our prices by 2%, 3% on first of January. And the total effect would have started coming in the month of March on the deliveries. So pricing power is very much with us. But to be very frank with you, at the EBITDA levels, at which we are, our intention in the current year is not to focus mainly on further expanding the margins. I'm sure it will happen automatically with operating usage. But our focus in the current year is to increase our market share in pain, which has been stagnant. And last year, primarily due to - - because our capacity -- additional capacity, especially for Pick-n-Carry cranes only came into play December end. Now with capacities in hand, I think we are looking more towards numbers then expanding margin, which will happen automatically. The number of cranes increasing. So our fixed cost getting distributed.

Understood. That's helpful sir. Second question is on the future capex, which may come in. So we obviously now are well covered for cranes and material handling. I think construction equipment, you have reached about 70% or 75%% sort of utilization if actually the number right now...

Probably we're at about 55% to 60% in construction equipment right now.

So capacity is 1,500, right? And we did you -- that you did 1,100 something approximately total...

But I'm talking about the current utilization. I mean , this is not the last year's utilization. It is top of last year, then obviously, I think about 1,150 -- what is the total number of construction equipment?

The last year, the total construction equipment numbers were around 1,156.

So last year, it was close to 63%, 64%. Currently, it is at 55%, 60%. So what I'll do, I'll quickly elaborate all the 4. In cranes, currently, we are working at about 75%. We can produce, let's say, close to about 1,100 cranes in a month of different types put together . Total capacity -- annual capacity is 13,200. And we are working on it to take this capacity beyond 18,000. And this will happen within this year, hopefully by Q3. This is work in progress, on which we'll be spending about INR70 crores, INR80 crores in this year. Material handling, earlier our capacity was 1,800, which is no w 2,700 units. And last year, we did about 1,500, 1,600 units. So there, again, we have enough space for the current year. Construction equipment, our capacity is 1,800, and we did 1,1 50. So we feel we are comfortable there. And our plan for construction equipment with minor capex with respect to our fabrication capacity and assembly capacity. This can easily increase 50% further from here or maybe slightly more at a very short notice 2, 3 months. So Construction Equipment, I feel we are -- we are covered. And as and when we feel that we are touching peak capacity about 150 units per month, we will immediately start to work on expanding this, which is possible in 3 months, as I told you. And in Agri, in any case, we are working at less than 50% -- about 35%, 40%. So there is no issue there.

Understood. And all of this is happening at the same 3 locations which you have? There's no additional location that you plan for?

One main location is about 100 acres complex, where most of the activity is happening. And our current revenue capability is about INR4,500 crores with all the expanded facilities currently. So -- and we did close to INR2,911 crores last year op erating revenue. We have capacity to go up to INR4,500 crores which is available to us already. And by the end of quarter 3, I believe this will be announced close to INR5,500 crores of revenue.

Okay. Understand. And sir, just 1 last question . So obviously, exports is a big focus and you talked about some white labelling which you are wanting to do and possibly some acquisitions which you want to boost your exports. So the question is why is inorganic required, why can't it be done in -house with you? So is there any technical requirement or a market reach related requirement which forces you to do an acquisition? Or is there something else?

I'll take this question in 2 ways. First is current white labelling. We are doing for an A merican company. I think we discussed last time also in our conference call, and also for a Turkish company for backhoe, as well as tractors . with American company for backhoe . And the second part of your question was -- acquisition. All said and done. A product going out of let's say, American or a European continent to South America, South Africa or Middle East, there is a better price and perception. So that is what we want to capitalize on. Our intention is to spend maybe up to INR100 crores, INR200 crores. We have identified some targets and take over that company. They are already doing a good job in their own products at about 10%, 12% EBITDA level. So that continues whatever we are doing. Some of the specific export models and products we white l abel for this company. And use the brand name to send out to different parts of the world through their network, before further we expand it. So we believe that the time to penetrate into different markets with the European or American brand -- for the brand. And the possibility of margins being expanded is much more if we use the strategy. And these products, obviously, which we are a white label, most of everything will be produced in India. So it is Indian cost and selling price becomes European or Amer ican which is much higher than anything. So we say we have a lot of advantage. Apart from that, this particular company will take over. So obviously, at a component level or even some machine model level, the same can also be done in India and send there. So the cost itself for this company will reduce. It will either help this company to further increase their margins or we'll be able to sell more because of being more competitive.

Understood. That is pretty clear. And just one last question, if I may, sir. On the transition the BS V from January '25, so in all the transition basically, especially for the engines part of it, in- house you have achieved that level of emission Right? Or is it still pending -- how will you source that new engine?

We use some in-house engines, but primarily -- for construction equipment, I'm talking about. But primarily construction equipment and cranes, I mean, all type of equipment. But we buy engines or use engines right from Simpsons, which is a A malgamation Group company, to Kirloskar, to Mahindra, to Cummins, to Tata Motors, Ashok Leyland, Volvo, Eicher, maybe one or two names I might have missed out so obviously, the engine wherein we use from these manufacturers because they are already even currently fulfilling a BS VI, so it's not an issue. And our BS V engine, currently, we had upgraded our own engines to BS IV, which was more to do with tractors. And it is work in progress as of now. So hopefully, by quarter 3, we should have our own BS V engines as well.

Anupam, Vyom this side. I would like to answer to your first question, wherein you had asked for the breakup of the incremental EBITDA levels of approximately 500 basis points. So see, we have been saying that with the increased capacity utilization, every INR500-odd crores of revenue at around 75 basis points to our bottom line 75 to 100. Owing to that, we can see incremental EBITDA levels of around 125 to 150 basis points because of increased capacity utilizations. Commodity and cost controls results in another 150 -odd basis points, and the balance is because of the market price increases and the better product mix that we have been able to deliver to the customers.

Thank you. The next question is from the line of M ehul Mehta from Nuvama PCG. Please go ahead.

Congrats on great set of numbers. Can you please update in terms of market share at the end of the year in Backhoe Loaders? Where do we stand? Sorab Agarwal; See, unfortunately, we do not have right now the exact number of machines till March end. But hypothetically, putting it, it would be more or less correct. I think it would be somewhere close to 2.6%, 2.7%. I think 2.6% to 2.7%, something like this, maybe 10 basis points on the upside only.

And, the final question in terms of narrow down of pricing gap compared to our leader market share in backhoe loaders? How would we have narrowed down over the year?

Sir, you will have to repeat your question. I couldn't figure out what you're trying to ask.

Our leader, in order, how would we have narrowed price gap? Like how would we have like over the year?

But see, there's a reasonable price gap between the market leader and us. And we have currently no intention of narrowing the price gap because we want to increase our numbers. And that is a model we have been following for the last one year because at the current price -- because about 80% of the Backhoe Loaders are sold in the retail segment or the h iring segment, which is run it on a monthly or a yearly basis. So at the prices of our -- let's say, the main market leader -- prices that they are selling. So the viability of a rental c ompany or a small or a small hirer is becoming very difficult in cur rent stage. Whereas at our pricing level, there's a liability to the product on running it on rental or a monthly or a yearly basis. So I think currently, we are comfortable with our pricing. Last year, we were also able to expand our margin to more than 12% in the backhoe loader segment. And going forward with further increase in numbers, I'm sure this will expand further. I think we are competitively placed as of now, and we are not trying to narrow down the market.

Yes, sorry for this. I'm done. Thanks for your explanation. Thank you.

Hi, sir. So, you've spoken about all the segments. If you could just spea k about the agriculture side. So basically, the agri equipment side for FY '25, how do you see this segment , going through, and also, if you could break it down in terms of tractors separate and for farm equipment separate and in the terms of the harvester sides separate. So what is the outlook for FY'25, if I ask from your point of view?

We are again looking at 15% to 20% growth on revenue basis. And last year, again, we had planned for that, and we were quite confident, but unfortunately, it did slow down quite a lot in the -- in quarter 4, March quarter. And we also had some announced inventory management with respect to our dealers carrying the number of tractors and all that. So on account of that, we did not r each out 15%, 20% mark, but had to stop at 12% growth. But we are hopeful this year, we'll cover up. And we are also focusing quite a lot here with our bigger horsepower tractor models for the export market. And our recently evolved 20, 25 horsepower smaller model, which is very popular, outside India for smaller applications and off-grid applications. So we are hopeful that we will do a 15%, 20%. Obviously, we would love to do it faster than that, but somehow, we've not been able to do it. So I really don 't want to commit or say anything. And with respect to the -- second part of the question was with respect to Harvester and...

Yes, sir. So I just wanted to know, one, if we could provide the breakup in terms of the total -- you've given the total v olumes. But for Harvester separately, if I can get the volumes? And what is the sense with respect to the farm mechanization. Are we seeing farm mechanization taking place? Or how -- or is it slow? So what is the outlook going forward?

I think the mechanization part is definitely happening and happening at a good speed. And that is happening not only in farm, all across to be very frank with you. And for the breakup part of it, I think Vyom you can answer. And also one more thing that I'd lik e to inform that we were doing small implementing rotavators, which we have discontinued in the middle of the year because we realize that was really not much revenue accretive or it was more of a burden than this thing. So we've discontinued the rotavators part. I think Vyom you can elaborate it.

So, tractor numbers for the last financial year stands at around 2,462 and harvesters is 137. Now the balance number was a little bit of rotavators that we did in the last year in the first half but as already explained, because of the low ticket and low -profit nature of that business, in principally, the management decided that we would like to come out of these small ticket implements business. And focus more on the larger tractors and the smaller g arden tractors of 22, 25 horsepower. So, this was the breakup in year.

And if I could just add, so apart from harvesters, as you spoke about rotavators, you've exited. Do you all plan to introduce any further products in this farm mechanization spac e since you said that this is a segment which is seeing good traction? Vyom Agarwal Yes. So, definitely, we had 1 b ig harvester, which was a ACT60 model. And then we ha ve now started developing ultra -lightweight combines because in the paddy fields, these lightweight combines are gaining more popularity in the Indian market as well. And we see that there is a market gap which can be fulfilled by us. So now we have 3 models in Harvester. One is the normal Harvester, then we have Ultra and then we have Ultra Plus combined. So we are now going into the lightweight category of the Harvester.

And we have started to deliver it, right, Vyom? Vyom Agarwal Yes. Sir.

We've started delivering.

Right, sir. Thank you so much, sir.

Thank you. The next question is from the line of Suhrid Deorah from Paladin Capital. Please go ahead.

Hi, sir. Congrats on continuous strong performance. I had a question regarding calendar year 2025 with this transition to the BS5. So two points. One is that I would imagine that there will be a lot of pre -buying and you also talked about Q2, Q3 being strong because of this pre - buying. So in effect, you are basically pulling forward demand from next year as a result of this. So is it not fair to expect that the volume next year will generally be not as exciting in terms of growth?

I don't think so. It never happens like that. We've seen a lot of pre-buying but that will be in 40% of the number of equipment we do. The balance, 60%, we don't expect any much pre - buying because transition from BS4 to BS5 , the price gap would be maybe 2% to 5%. It is to be more in the 40% segment. And especially, I would say they're in the return or smaller focus category and the Pick-n-Carry cranes, the Hydra type. So I don't foresee that.

You’re saying 60% of products will not be affected?

Yes, because another thing is because I'm sure we'll be short on deliveries in quarter 3 because as it is, the demand scenario starts to increase September onwards, September and onwards. So it will be coupled with th is prebuying. So maybe there'll be a lo t of order booking, a lot of things happening, whatever best we can deliver will be happening. But post that also, genuine requirements are not delayed. It is just that something will get preponed. I don't think it will affect as such.

You said BS IV to BS V, the price effect is 2% to 3%, which is 40% of your product portfolio?

2% to 5%.

And 60% of your product portfolio is BS III to BS V?

Okay, 12% to 15% . Got it. And the other question was, you were mentioning in the last quarter's call about a potential tie -up with a foreign company for white labelling or some sort of partnership in India. Is there any update on that, that you would like to share?

It is also work in progress and things are going in the right direction. But we have -- in the meantime, in the last, I think, in three quarters, we have started white labelling, like I mentioned earlier also, for one American company and one Turkish company. That has already initiated in the last two quarters. And there are some more opportunities, even bigger than these ones, which are currently under negotiation.

So the white labelling is you manufacture on your exports under their brands. Is there any other -- are you exploring other partnerships for the Indian market also?

Yes. There is -- today, everybody wants to come to India. And if they're not selling in India or if they are selling, they still want to partner with somebody to be able to produce the right cost to take it out of India. If you practically look around in our space, whichever Indian comp anies over there in the last 10, 15 years being taken over by foreign brands or multinationals, even Tata Hitachi is now more Hitachi than Tata or L&T Komatsu is more Komatsu than L&T or JCB long back has taken over Scot ’s equity or L&T Case now becoming t otally CASE Construction, plus, plus, plus. Any small, big company outside India, if they are looking for development of their products or white labelling any one of our existing products, if they come to India, perhaps we are one of the only options. So a lot of things are happening on multiple fronts, and I'm sure we'll keep on adding value to our export portfolio.

The next question is from the line of Dhvij Patel from Finterest Capital.

Congratulations on a great set of numbers.

Thank you.

Sir, I just wanted to understand, since we are foraying into the defence as well...

Could you speak a bit louder please?

So I was saying, as we are foraying into defence as well, so can yo u shed some light on what orders we are expecting? And how much we expect it to contribute to the top line?

For the defence business, right?

Yes. Just for the defence business, for FY'25.

Yes. See, I'll start with last year. Last year, we executed a business worth approximately INR68 crores, which is approximately 2.5% of our total revenue. But this year, we started with orders and order backlog of INR65 crores. So definitely, our defence business is going to be much more than what we did last year. So, I think it easily -- we started with INR65 crores, it will easily cross INR80 crores, INR100 crores, maybe more. But simultaneously, let's say, certain specific requirements or bids which were being pursued in the last one to two years. So we are expecting two, three very big orders, one of them being our biggest ever from defence. And these combined orders can be to the tune of INR400 crores to INR700 crores. So we expect to receive these orders over the next maybe 2 months, 3 months max, maybe even earlier than that. So that could change the contribution of defence drastically. We were targeting 5%. So we will easily exceed that, hopefully, in this year if these orders go through firstly. And then our pipeline for future is nice because again, these big orders are again repetitive type of purchases. But out of this INR400 crores to INR700 crores, all of it will not be executed in this year. So maybe about INR50 crores to INR100 crores we might be able to catch in this year and the balance will take it down to next year, but still already INR65 crores in hand, another INR30 crores, INR40 crores, INR50 crores will come and let's say these bigger orders were able to execute INR1,500 crores . S o we can actually do INR100 crores to INR200 crores worth of defence business in this year. If I just calculate the percentage it m ight go beyond 5% in the revenue contribution.

Yes. So I was asking is because, for example, let's say, we conservatively figure out that monsoon might not be that great for us. So do you think defence might carry our order book during those crucial months?

Your voice is actually a little less, and I could not figure out, monsoon and whatnot?

So I was saying, let's say, we are being conservative and monsoon is muted for us -- the monsoon months, they’re muted. So do you expect defence to carry our order book for those months?

See, because if we get this order over the next two months to start execution for one of the orders can start, yes. It can play a role in quarter 3, if you get it in the nex t one or two months, one of the orders. But the other order will require actually three months of preparation before we can start execution because of certain components and different set of components with respective supply chain. But I don't expect quart er 2 to be muted even with or without defence, because I believe that there will be enough pent -up demand from quarter 1. So I don't expect quarter 2 to be muted. That's my gut feel. Rather I feel 4 June onwards, things will go back to track.

Ladies and gentlemen, due to the time constraint, we will take this as the last question for the day. I now hand the conference over to the management for closing comments. Over to you, sir.

Thank you. I think last year was one of our best yea rs with respect to our largest maximum revenue, record profits, and even with respect to margin profile, we've been able to do a good job. And going forward, we'll be working very hard to maintain and obviously also focus on increasing our market share as well as margin profile in the right mix to be able to further increase our revenue and maintain our growth profile. And we are currently further working on adding new products like we discussed during our meeting, like Reach Stackers and rough terrain crane, we have introduced special models for export market for backhoe and telehandlers. So we'll not only be adding new products, we will also be adding new geographies internationally within the current year so that our export drive into a larger number of countries continues. And we are hopeful that we will be able to double our revenues over the next three years, and we'll be targeting that. And in saying this, I would also like to say that -- we are also targeting a 3x over five years. So from the current levels going up to a 3x level over the next five years is what we're targeting at. And hopefully, the election results will be positive for the country, and the growth momentum will continue. Thank you.

Thank you. O n behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you, everybody.

Thank you, all.