Rishi Laser Limited (526861) Earnings Call Transcript

Yes. Yes. Thanks, Dhwanil. Yes. I'll -- as far as -- yes, what you talked about the capacity, though we were doing something like INR 60 crores or so from Bommasandra plant, but that was under a lot of strain. And that plant is not really -- that is not the right. It is actually was running at even beyond capacity. That's why it was overcrowded and there were some issues. Customers were also not satisfied that from the angle of safety and from angle of flow of the material, et cetera. So, I would say that the existing Bangalore facility, the old one should -- I mean, we should keep that capacity as something like INR 48 crores to INR 50 crores. About INR 4 crores a month is what it should be able to run in a nice and a proper manner. And the new plant, which is something like 3x bigger than that. If we just directly extrapolate 3x, it comes to about INR 120 crores. But we feel that INR 100 crores is what we are initially thinking in terms of that. But with painting and all that being done in-house, if things move smoothly and orders ramp up, obviously, over a period of time, it could cross that also. So capacity-wise, we can say that between both the Bangalore plants, you're talking in terms of something like INR 150 crores if they are operating at 80% capacity. Now how quickly we reach that, that is the major sort of challenge. So at the Bommasandra plant, as I just mentioned in the previous answer also that we are onboarding customers now. And we feel that we should be able to reach those capacity levels, earlier capacity -- see, now with this movement out from here of CAT business, that business -- that factory would be running at something like 40%, 40% to 50%, 40%, 45% capacity. The balance capacity, we hope to get it filled up within the next year. So that -- and the new factory, both combined should give us a growth of 25% at least in the South as compared to before. South, not including Chennai, but I'm just talking of Bangalore itself. Paint shop, the biggest -- the highest amount -- I mean, two things took a lot of time. One was the signing off on what exactly, what kind of paint shop is required, because this was all being tailor-made to see that not only we do -- we do paint, we set up facilities for existing work being done, but also for the kind of work which may flow in the future. And the future work is, we had to take a little bit broader view, and we are also talking in categories and parts, which currently we are not in those categories at all, a little bit medium fab. Today, our 80% of the business coming from them is all light fab. Now we are -- we want to move into medium fab. So the size and the weight of the parts will be much higher. So the paint shop design and signing off by customer took a little bit time. And the larger amount of time actually after that was unfortunately the government approval, because these paint facilities, once you put -- it is coming in red category under the pollution control laws. And that permission has unfortunately got very -- it was very much delayed. And that's the reason -- and we did not want to place orders for equipment without permission being in place. Because once you order equipment and if they -- if the authorities make you change the design or the layout or anything, then you could get stuck. So we could not order for the equipment till all this happened. But this is all done now. Orders -- entire system orders have been placed. And the -- it will come in two phases. So some of the deliveries of parts and all that have started coming this month itself, and it will come into the factory. And it will be implemented in two phases. First, the smaller size paint shop will be put up where the existing parts, which today we are sending either to old factory to paint or to outside sources, that will be first internalized. And then the larger paint shop, which includes some additional advanced facilities for particular different kind of coatings and those things, those also will get implemented a little later. So, I think now, I don't see much of delays happening on that front. But yes, that has been a major sort of bottleneck in us being able to do more work. As far as domestic work with CAT, even we could outsource some painting, and that was not such a big challenge. But for exports and for the heavy fab or medium fab without paint shop, we'll not be able to really execute. So even some of the bigger items now which are being automated on robots, those painting also those -- we'll get it proven prior to the painting. Once the paint shop is there, yes, we'll have to go through the process of getting the painting part also approved. But again, that should be about 4 weeks. Immediately, as soon as the paint shop is ready, we should be able to start working on that parallelly. So from next year, that's why I said that first quarter of next year, our ramp-up should be quite very, very fast. I don't see -- now most of the challenges are behind us. There were two major ones. One was automation with robots. Second was painting. So robots, of course, everything is in place. Trials have also gone very well. And I was also very happy to see, I mean, so many robots and automation working yesterday on all trial parts and all that. So, delays are now behind us. Now we have to start actually doing commercial production and getting it out actually now. Coming to -- yes, the retail business of Gujarat, which I have been talking for quite some time, that is going to be a complete online kind of buying portal. So that will be -- the customers will be buying cut and bend parts directly by feeding drawings on to the website, getting quotation online and ordering online, everything, the entire transaction will be run on a portal-based kind of thing. And so, this is a very -- I mean, a lot of work went into the software part of it, the back-end processing and how the immediate quotation will come based on drawings and the production planning, inventory, all this. Even our equipment, unfortunately, some of the equipments were delayed there, but the real bottlenecks were more on the software implementation. But we have started trials -- I mean, all these trial orders are being executed by now. And by another 15 days or so, we will come online with full-fledged online portal ordering. So, that also will get on stream. We are also participating in a couple of very big exhibitions now. The next one in December in Gandhinagar and January in Bangalore, where also we will use those platforms to get this ordering platform online. And initially, we have to get some traffic onto the website. But after that, the kind of ease of ordering, the speed with which we will deliver, it will be absolutely a delight for the buyers. So, it's just a question of getting there -- because this is the first time for this kind of product where portal ordering is being done. This is quite common in Europe and United States. But in India, as far as I know, this would be a first of its kind, which we'll be doing. And in the long run, I feel that this is how the business over a period of next 5, 7, 10 years, a lot of business in the country will start moving towards this kind of buying. Because if you would have noticed a lot of different -- in different industries, a lot of start-ups are coming to help people how to order online. In fact, even now there are start-ups which are helping companies, MSME companies to buy even raw material steel instead of directly talking to the steel mill, there will be these portals, which will help you to get your orders streamlined and all that. So this business, the software side was a little challenging, but it's all in place now. Beta testing is also done. Some orders are being executed with known customers. And we'll go fully live in another month's time. In December, we'll be going live. And hopefully, after that, that business should start flowing in.

Okay. Sir, two small questions, follow-up. So one, sir, for this year, FY '26, I think should we assume 10%, 12% kind of a growth given that most of the ramp-up will happen from Q1 next year? That is one. And second, sir, for Pune, if we need to serve the aftermarket parts of Caterpillar, to a significant extent, do we need a paint shop and are we doing something about that?

Yes. Good. Good. Yes, very good question. Yes, absolutely. We need a paint shop, and that also -- and Ganesh, has the paint shop that permission come in at Pune -- for Pune?

The permission -- the first permission that is CFE, consent for establishment, has come. We haven't placed order for equipment as in yet.

Right, right. So yes, so to answer your question, yes, we will need painting facilities, and we have to put it up. If we want to ramp up that business properly, we'll also need a painting facility. And that is going to be the major thing which we have to get in-house. Because today, sending it out for painting customer is -- there is a lot of, sort of, resistance about that. We have to send it to our -- maybe the Bangalore plant sometimes and then export it from there or get it back here. There are a lot of other bottlenecks. So yes, for aftermarket, that is going to be important. And so these permissions come in two stages. One is permission to allow you to set the paint shop. And second is after you set it up, their approval for you to run it, so that there is no pollution and all that. So, the facilities are all being put up, which are going to be compliant only. We are getting it from proper sources and suppliers. Yes, that will have to be done to ramp up that business. Then there, again, as I said, if we can do -- not if -- but we must also have to invest a little bit in automation so that we have -- we can do much more volume with high variety without having too many more people in the system. So, both these things will have to be done very -- and then that should be able -- that business should be. That is -- the aftermarket business, the advantage is the margins are higher, because volumes are low. And second is, that business is not cyclical really, because there's a huge population of the machines in the market. So unlike the main business of the earthmoving industry, which is very, very cyclical. So -- and they are very deep cycles. And this aftermarket business is very steady, because that goes on irrespective of what the main business is. So that's how we are -- so we'll have to address that.

Yes. Sir, that FY '26, should we look at 10% of ramp-up...

Yes, Yes. I think, it should be -- yes, a little -- it will be over 10%. And with only this -- maybe the third quarter slightly dip in margins, but fourth quarter onwards, again, margin also should be back on stream. So yes, we can see that much growth. And as I mentioned, because the steel prices in the current year are lower than last year, so to that extent, your sales reflect slightly lower -- even though the volume is higher, the sale, rupee value is, it's a deflated value actually. So, that is -- probably that is also the reason maybe the margin also looks slightly better because the sale -- if it was at the old selling prices of higher steel, the sales would have been higher actually.

[Operator Instructions] Next, we have [ Mr. Rahul Singhania. ]

Sir, the Bangalore facility will be fully ramped up in 3 years according to the projection. So, how can we make sure that volume demand will match the additional capacity, especially as you mentioned, when construction machinery demand is cyclical?

Right. Yes, anything else?

Yes, sir, one more thing I wanted to ask that, we have diversification across six plants and 70-odd welders or so. But this has not yet translated into market leadership or a significantly larger revenue base. So, what has changed now to accelerate trajectory?

Right. So, as far as capacity, how to see that capacity gets utilized, actually, the commodity cycle is turning up. And so worldwide, there is a very good expected demand for mining equipments and all these things. So, that is the reason customers are very optimistic. Our customers are quite optimistic about demand in India also. I'm not very sure how that is going to pan out, because India, the last decades the experience has been that it's always been up and down, up and down. It has not been very consistent actually. Demand has been definitely gone up, but it goes up for a year or 2 years. And then again, there is a lull when you change the cycle from BS IV to BS V and some transitioning happens and all these things. So Indian demand is going to depend quite a lot on the government spending on infra, on roads, and all these things. So if that continues the way it has happened in the last 2 years, then I think domestic demand should continue. But my feeling is that for us to be able to fill up our capacities at Bangalore, we'll definitely have to get a good amount of orders from outside India. It's only then -- only domestic market will -- I don't see us being able to fill up that factory with domestic demand. So, we'll have to start working more and more with -- one is, of course, with Caterpillar, who is our #1 customer, and we are already supplying directly also to their plants in the U.S. And earlier, we started with one plant. Now we have three different plants where we supply to. And so, that is the main anchor customer, but they will definitely have to look at other customers as well to be able to fill up that. So that is going to be very critical for us. But there, my confidence stems from the level that earlier we were hampered because of infrastructure within the company, the space and other things. Now that we have a good amount of infrastructure plus a high level of automation that we are doing, our capabilities, if we are able to work with Caterpillar, which is the #1 company in its space in the whole world. And that has raised the company's capabilities to a very different level. So that is the reason it gives me a little confidence that we should be able to work with other customers as well, and fill this capacity. So I mean, bottom line is that we will need business from overseas to be able to fill up this capacity. I don't think domestic demand will be enough to take up this much additional business. That was about capacity and cyclical. Sorry, I missed out your second question, Rahul. Can you please repeat that?

Yes, yes. So our diversification has not yet translated into market leadership or a larger revenue base.

Right, right. True. It's very accurate. Actually, what has happened is that we had a leadership position in the industry from 2003 to 2012, we had a very, very good position in the industry. But after we ran through -- after we ran into a lot of problems, because of overcapacity and financial issues, et cetera. So, we were sort of not in the market in various areas. And so, after we have come back in -- which has happened very recently over the last 3 years, is when we are again trying to regain our space in the market. And now by design, we are not going in for a very high turnover kind of businesses. So we are looking at more and more a little bit challenging jobs where it takes a little bit more time, but you get better realizations and those jobs are also more sticky. So this could involve -- when we come to welding now, for example, we were earlier mostly about 90% plus work was all carbon steel. Now we are doing more work with stainless steel. We are also starting to work with aluminum in the EV space. And we recently have started talking to L&T for working -- welding with Inconel materials also. So, we are doing -- on the welding side, two things. One is automation. Second, so we want to automate more and more welding so we can get better quality and repeatability. Second is that we also have now some consultants in place who are helping us to get into a little bit more challenging areas of welding, and improve. So, our position is improving year-by-year. But yes, we will not be -- our turnovers are not -- I mean, we will not be in a space where we will ramp up even in the yellow goods to something like INR 300 crores, INR 400 crores, which also is an opportunity, which is being addressed actually by some of the other players in the industry. But that is not -- I mean, that boat has sailed actually as far as we are concerned. So, we are not doing many of the parts like buckets and some of the low value-added parts in the earthmoving industry. But as against that, we recently also added one customer in Pune, an American company, which is making some road-making equipment, which required -- sorry, it's a German company, which for the first time, they are making those components outside of Germany, because those machines were being made for India. And now our first part for that equipment is also being sent to Germany for trials. And if that gets approved, we'll export the same part to Germany as well. So, these are the kind of projects on which we are trying to focus much more. So those things generate turnover -- annual turnovers of anywhere between INR 3 crores to INR 5 crores, but they are very, very sticky in terms of continuous business. And once the original challenge of getting the quality and all those things approved, they give you much better margins, and they are much more sticky. So, that is the kind of path we want to follow. And I think that is working out okay. One more area which we were -- we used to be very, very strong was in the metros and that place again, where we had vacated. We are again trying to sort of strengthen our position there. As of today, we are doing very small amount of work in that space of metros and railways. But now, we want to try and work a little harder to see whether we can get some new, sort of, items from there, which are a little complicated to produce and make. And -- so that's the area -- another new area which we are working on. So, we are trying to go in a little different manner. And that is definitely going to work. One another good development is that Europe has now become very, very expensive to manufacture anything. So, they are all struggling to find ways to get out of there and get stuff made outside, either to transfer the whole manufacturing or to source components. So, that is where a very large opportunity. It's not easy to get it done, but there is a very big opportunity there, which we have to, sort of, become a little bit more aggressive in addressing, and that should be -- help us to, sort of, give us a good business at good margins also.

Thanks for giving such detailed answer, sir. This gives a very clear picture of the company. I wish you best of luck for the future.

[Operator Instructions] Next, we have [ Mr. Dipen Shah. ]

Harshad bhai, a good set of numbers given the circumstances. I am actually seeing the company -- I started seeing the company recently, and I had a couple of basic questions. Just wanted to understand, sir, is there a concept of an order book kind of a thing in our business? If yes, what could be the order book like? The second question is that, what is the longevity of a particular contract in the sense that whenever a contract comes through, does it take 1 month, 3 months or slightly longer? So that could give us some idea about the visibility which you have for the business? And the third question is that, during the current quarter, did you have any impact of the tariff issues? And if the tariffs were to go down, would that be a source of some better margins in the next quarter or in the quarters after that?

Yes. Thanks very much, Dipen. So see, in our case, order book -- so there are two types. Our major business is, you can say, is kind of supply to OEMs. So it is -- most of it is repetitive business. So, once you have some articles which you have started supplying, then you will continue to supply those items. And your business will depend on the volumes of your customers. So if his sales go up, your volumes will go up. And the other way is that, maybe your share in the business, because most of the customers want more than one vendor. So typically, for any article, there would be two or sometimes even three vendors supplying. So if your quality, delivery performance, et cetera, is better than the other parties, you can get a more share of business. So the two ways to look at it is one is your share of business from the customer. Second is those -- so order book as such, we don't have a value order book. But typically, for each customer, we have an idea that, okay, this customer, if he runs at a certain -- I mean, if their run rate is, let's say, for example, INR 50 lakhs a month is what they are picking up. If their volume ramps up by 10%, that INR 50 lakh could go to INR 55 lakhs or whatever or if it goes down, it could go down to INR 40 lakhs. So this -- and within the year, there will be some ups and downs of months, because these being all parts of capital goods, it is a little bit lumpy also sometimes. It is not like automobile where every year, every month, so many cars are going to be produced, some motorcycles are going to be produced. So of course, in earthmoving equipment, there is a little bit more regularity. But in other types of equipments, which are going to OEM, which could be for companies, any other engineering company, Sulzer or windmill companies or so many other companies. So, it is always going to be dependent on their volumes. Business is very sticky in this industry, because it is too much of a pain for a customer to change his supplier. Because they have to go through a lot of headaches. So, unless you really go up with the company on quality or on some other parameter, by and large, customers tend to stick with you. To get into the company is a little difficult. But once you get in and you are smoothly delivering to your customer, they do tend to, sort of, stick around with you. It is -- somebody cannot just come and say that, oh, I will give you this, I have a new factory or I have better facilities or I'll give you 10% cheaper. A buyer is not going to -- he may use that as a stick to try to pressure you into price reduction, but he's not likely to sort of move away from you. So, business is fairly sticky in the industry, which is a good thing. And because there are other things also. Because these are all tailor-made items, you have to invest a little bit in tooling, fixturing, certain process require some specific tools for that particular order. So, once you invest in that, many times the customer pays you extra for that investment. So, he also wants you to sort of continue to work on that. So after you get in, it is quite good. The other part, which is quite interesting actually is, you talked about how the business increases or longevity. Actually, what happens is that, as and when customer wants some new -- either the design changes or some new model comes in, so he has a chance -- they will give the drawing. Obviously, he would prefer to give the new parts to an existing supplier, who's satisfying him the best, where he has the most confidence that this is the guy who can, sort of, give me this. But there, the challenge comes that how quickly you can develop the first article. So, once you get the drawing from the RFQ stage to the first article production, then to get it approved and then a small batch is sent, that gets approved and then you come into commercial supplies. So, your speed of reaction right from the time the first drawing comes to you till you are able to do that, that is the sort of trick to be more successful. And that involves having a proper team, a design engineering team in your company. And that has been traditionally a big challenge for everybody in the industry, because you need people who understand all these 3D drawings and then you unfold it, you do some engineering work with that. We have done a very -- I mean, a good amount of work in the last 1.5, 2 years. We invested in very high-end softwares, and we are still continuing to invest more in software, which will help us to do all this first part of the work quite a lot. So that, of course, is hardly ever discussed as a CapEx or whatever, but that back office work is very, very critical to get it successful for you to get -- deliver the first article properly. That -- and the second part is the human resource, the quality of people who are working, your equipments are all very high end. They are all automatic, CNC, et cetera. But the person who is running that equipment also should have some, sort of, knowledge about what he is doing. And that is another very challenging aspect of the business. So, we have been working very hard on that front over the last maybe 18 months and continue to do so. So two ways. One is investing in software, training people on that. And at least, I think, we would have spent close to INR 1 crore on this, on the various software licenses at different plants. And second part is on the human capital side, we have now a full-fledged training center in the company where we train our staff, a training officer at a fairly senior level, his full time there to train and upgrade the quality of staff, so that they are able to do the work properly and get it out. Because though it may look that there are -- these are automatic -- highly automatic machines, you just have to press a button and things happen. But since ours is not a repetitive high-volume business, every time you are doing something different, some -- even small changes are made in drawings, it requires some kind of work to be done on the shop floor and all that. So, we are investing quite a lot on the back-end side of the business. And that is the harder part of the -- but the easier part is to put up the machines and put up a factory. But the people, area, and the software, that was proving to be more challenging, but we have done a good significant work. And that has also definitely helped in improving our volumes. Because now our time from which you receive an inquiry to the time you are able to give a quote or to be able to give the first article, that has been shortened. And customer is looking to reduce that cycle time even further because even just yesterday in my meeting at Volvo, the Head of purchase, he told that only that, in India, we are giving you 8 weeks to do this, whereas in other countries -- in China, we get it done in 2 weeks. So, why can't you all bring it down to 4 weeks? And he was absolutely right in demanding this. So, I think those challenges we have to address and that will improve customer satisfaction to a great extent. And then the business will flow more. And there also, we are on track, especially a very good amount of good work has been done at Pune facilities on this front. And that is what is giving better sort of response to the -- especially the foreign customers are much more demanding. Because typically, in India, we are over busy doing things, and we don't quickly respond. We don't give the -- even the quotation sometimes takes 7 days to give, because so much of drawings have to be read. So that, there we are investing in automation, software, all these things. So that part is also helping to, sort of, improve the pipeline of -- the more RFQs you are able to handle, the more business you'll be able to do. So that part, we have worked quite a lot on that. And it's giving very good result. Coming to tariff, actually, tariff has not impacted us in any way directly. It means, any orders which were in place have not been affected. But additional business which was being targeted is slightly. I mean, again, there are all the engineering side work, approvals, all that is going on. But the business is not likely -- I mean, business may get hampered if the tariff is not reduced. So we are -- we -- tariff reduction is going to be a little important for us also going forward. But most -- all the indications I'm getting from overseas as well as in India is that, this will happen very, very quickly, I mean, in a very short period of time. And you would have seen that even Reliance has just announced that they'll stop using any Russian oil for the refinery. So, India is taking all the steps to see that the great Donald is very satisfied and he reduces the tariff on India. So that is -- that's about tariffs, Dipen.

[Operator Instructions] We believe there are no further questions from anyone. I would like to hand over the call to Mr. Rajnish for the Q&A box.

Yes. So we have a few questions in the chat box. We'll go one by one, sir. So we have a couple of questions from Mr. Girish. What is your order book currently? What steps are we taking to boost exports? And do we see any big exports market? What is the biggest market in exports? Second question from Mr. Girish is, could you elaborate about the journey of automation and how it would add to a top line and bottom line? Harshad, sir, over to you.

Yes. So, as I mentioned earlier, order book is -- I mean, suppose -- I mean, say, today, our current monthly run rate is something like INR 13 crores. So visibility is anywhere -- I mean, around INR 14 crores, INR 15 crores is the kind of monthly, sort of, call-offs, which come from the companies. And then, some of them towards the end of the month, say, oh, we don't want it this month, you go into the next month, et cetera. So, for us to have higher turnover, that's the number that we have to increase. And so, more orders coming into pipeline partly from existing customers and partly from new customers. We have been a little bit weak in adding more new customers. That has been a slight area of concern over the last few years. But now I think this year, we have added more new customers and many of them have a very good business going forward. Some of these customers are existing. They are doing that work in-house and they want to outsource it now. Because they feel that this is not their core area of strength and expertise. So they are moving it out. These involve some special kinds of welding and other things. So those kind of things are helping us to get more orders into the order pipeline funnel. Exports, I would say that the highest potential for exports, in my opinion, would be Europe. Because Europe has become extremely, extremely costly. And they are really struggling now to sort of produce things there. And of course, many factories are shutting down also because of high costs. So it is Europe where I feel -- of course, this cuts both ways because if those factories become unviable, the customer's factory and closes down, to that extent, that business is gone, that customer is no longer alive and either Chinese have eaten up the business or some other country has. But to the extent customers who are sort of carrying on they are all looking to sort of outsource. Highest, I would put it, Western Europe has -- is very, sort of, keen to look at. But we have inquiries coming from all over the world, including Australia and United States as well. And some of these companies also are setting up buying offices in India. And they typically start off with castings, forgings and all that, which are -- which India is already fairly strong and well placed. And then, they come on to the fabricated items. Because fabrication items, the proving time and the amount of work that is involved is much more. And so, they typically come in a little bit -- come into the orders a little later. But that is happening as we speak. And it should continue to increase according to me. But it has been a little longer journey there also than what we expected. But it's moving on the right track. Automation is an area which has been -- is very, very dear to me. And we -- I mean, absolutely are on an attack mode and ahead of the curve in the sense that because -- I personally feel that, if we focus too much on immediate ROI that till I prove that automation is going to be cheaper than doing it manually, what happens is that you sometimes are not able to give the kind of quality, repeatability or timely delivery, because of problems of human resource. So, my thinking and strategy is that you should automate right away as fast as possible and ensure that your quality and delivery is good so that business will flow. It is the other way around. If you automate, you'll be able to get more business rather than thinking that if I get more business, I will automate. In my opinion, it's the other way around. And that is, I think, that is where, India, I mean, as a nation, we are -- what I am finding is that people have been a little bit slow in going for automation. As I had discussed earlier also, we have started this automation division about maybe a year ago, 9 months. And last 3, 4 months, we are getting good traction. We have started selling now robots and cobots fairly regularly. Every month, we have some orders now coming in, and we are seeing a good amount of traction. Next year, I expect even automation business to pick up. And hopefully, if the way I see trends moving, we could even be doing about INR 10 crores of even sales of automation products to other companies. And in-house, of course, whatever -- wherever automation is possible on welding and on surface finishing, other areas, we are installing robots. Every month, one or two robots are being installed. So, my hope is that, a large part of our welding, we will move towards on the automation side. And that is -- it has taken a little bit time initially, but now it is moving very, very fast. So I mean, we have now -- our new Bangalore plant is really state-of-the-art in that. It's state-of-the-art, of course, is a cliche, but I would still like to say that in this case, it is true. So yes, automation within the company is moving very fast. And we also are looking to make it as a good new vertical of business even for outsiders. So, I think that's about automation.

Okay. Hope, Girish ji, your question has been answered. Next question we have from Mr. Pranav Mishra. Steel fabrication is a working capital-heavy business. Could you quantify any increase in inventory days and receivables days post expansion? How tight is liquidity currently? Second question, you highlight presence across industries like railways, T&D, construction, et cetera, but which one segment is still driving majority of the growth? What happens if infra railway orders slow down? Third question, Tube segment's entry is recent. What is incremental margin profile versus legacy sheet metal? When will this contribute more than 10% of revenues and how we see in upcoming future? Harshad sir, over to you.

Yes. So you're right, working capital cycle is -- could be an area of concern in our kind of business, because you buy raw material on cash immediate payment and you sell on credit anywhere between 45 to 90 days. But our working capital is, I would say, the best in the entire industry. And you will not find a company with such a low working capital fund deployment in the entire industry. And I think this has more happened due to the -- when we passed through a very severe finance crunch, we started -- I mean, by design, we could not do business wherever the working capital blockage was more, where either the credit was more and stuff like that. So automatically, the whole way of addressing the business became that our working capital cycle should be very small. And that is why even with a business of about INR 150 crores, we have a working capital CC limit of just about INR 3 crores, INR 4 crores, which typically for any other company would be anywhere between INR 20 crores, INR 25 crores. So we discount -- we get our sales converted to revenue by customer discounting the bills in their facility or our inventory management also is very, very tight, because we -- the flow through the factory, our WIP, the speed of movement of the material in the factory is, again, the best-in-class in the entire industry. So, working capital management, I think our CFO or CEO, Mr. Ganesh Agrawal, has done an absolute miracle for the company, and that is -- could be one of the area of strength. As far as concentration of business is concerned, today, more than 50% of the business, I would say, maybe close to 60% of the business is coming from yellow goods sector, which is by yellow goods, we mean earthmoving, mining, road making equipment, construction, machinery and that whole sector. So yes, we are overexposed to that particular area. And if there is a major sort of slump in infrastructure spending, definitely, that could impact business. But just now, I would say that virtually most of our customers are on a growth mode. So, they are not seeing any slowdown in the immediate near future. So I don't think -- I think it's a good thing to be in that area of business. And everybody is in quite an optimistic mode just now. So hopefully, that should be -- that should sort of -- that is not a risk in the short term according to me. As far as tube business is concerned, unfortunately, we are -- we have, sort of, been struggling to get the right breakthroughs. We are -- it's a very small business as of today, and we are only, sort of, supplying a very high-end, very small quantity batches of these products to the existing customers in the yellow goods space. But that doesn't generate enough revenue. We have to be in a more commoditized kind of tubular product businesses also, which will be coming from the automotive industry or the furniture and the consumer goods kind of space, where we are still working to get the right breakthrough. But there, if you see -- if you're following the steel consumption, the fastest-growing segment in the steel area is in the tube section. So, tube production in the country is growing much, much faster than the overall steel production. So all those tubes, unfortunately, a large part of the tubes are being exported without being processed. So, my optimism of that business was stemming from the macro picture, but we have yet to, sort of, -- we have all the technology in place, a very high-end, kind of, processing machines, but we have not yet made a right breakthrough in that area. I'm quite optimistic that in coming year, that breakthrough, it can happen any time now. But we have to make that breakthrough and make it happen, which would then be able to take it to 10% as you mentioned, when would it be, if after we get one breakthrough, I would feel that we can scale it up fairly quickly. That should not be much of a problem. But the right breakthroughs are not yet in place. So that's about the tube business.

Hope Pranav ji, your question has been answered. Next, we have Mr. Jayesh Shah. We have a couple of questions from him. The new Bangalore plant requires INR 15 crore CapEx and is expected to add INR 100 crores over 4 years. What are the current utilization levels? And by when do you expect the facility to become EBITDA processed one giving the initial profitability? Second question, you mentioned enhancing export capabilities. So what percent of revenue currently comes from exports? And why has this not scaled meaningfully despite multi-location presence? Harshad sir, over to you.

Yes. Yes. Regarding new facility, I think we've already addressed it from various angles of what is the business potential, et cetera, in the earlier question. So mainly, it is with regard to exports. Ganesh, can you, sort of, give some feel of the numbers of export current numbers and how that would move?

Export number to?

Yes. Export, yes.

No, no. Export from entire company, we are talking about?

Yes, I would think so, yes. Yes, entire company, yes.

Yes, sir.

Yes. It's moving in the right direction, and there's a lot of potential talking to three, four new customers as of now. So I think that business is going in the right direction, and I see a lot of potential in that sector going forward.

Yes. Yes. So, from current number to -- I mean, what could be the -- I mean, from current number, where to where, what could be -- I think that would possibly be what Jayesh was trying to ask.

Sir, if you -- I mean, to answer this question, in Q2, we did INR 6 crores of this thing, export. Yes. So, maybe we can extrapolate that in that. And if these three, four customers who we are talking to right now, those customers, that business materializes, then I think there would be 20%, 25%, 30% jump in that, minimum.

Yes. So in export, I will only add one more thing that many of these companies are talking very, very large business. So initially, they may, sort of, start with just maybe a small $100,000 kind of thing. But they are giving indications that if some of these things fall in place, it could be a very large business. And some of these items that we are looking at are from very different industries, which we have not worked with in the past also. So those are the kind of inquiries which are coming. And what we've now done is that earlier, we were trying to restrict the kind of jobs we were looking at. But now we have broadened the portfolio. So for example, even if there are certain parts of those projects, which are not outside our scope, we are trying to look at it that how can we sort of outsource some of the things or we can collaborate with some other companies in India and then source it and then supply to the customer. So, we are also broadening our way of looking at the export business as a whole, and that is what is helping us to get a more broader, sort of, range of inquiries, which we have to. And that is, again, a little lumpy business. So if some of these click, it could be a fairly big -- I mean, a single customer could be talking in terms of anywhere between INR 10 crores to INR 20 crores of business. That's the kind of business that can flow from even a single customer.

Hope Jayesh ji, your question has been answered. Next, we have Mr. Anshul Jain. You are now entering a scale-up phase with automation, new segments and export ambition. Do we have the right professional leadership layer, Chief Operating Officer, business heads to accelerate the growth? Over 3 decades, the company has been led largely by the same leadership team. What is the formal succession plan to ensure continuity, fresh strategic thinking and institutionalization of growth beyond founder-driven execution? Third question, with defense, renewables and export supply chain shift accelerating, which new industries vertical example, aerospace, defense fabrication, turbine structures are in serious qualification pipeline today? And what revenue do we expect from them by FY '28? Harshad sir, over to you.

Yes. So yes, very good question. This is the biggest area of challenge for the company. And for generally also, for all companies and general industry and also, obviously, for us. And post our downturn, we sort of downsized in a big way. And at that time, we restructured the organization. And now after that, we have, again, after some time, come back into growth mode. And so, even with our new Bangalore plant, that has proved to be a very big challenge also and also contributed to some of the delays and all that. Because we could not get the head of that plant in place, in time. And then we got a very good person. Unfortunately, he got a very good assignment overseas and he left, and then we've got another person. So, senior level people getting right and getting them in place is very, very critical to our success, especially for the kind -- for the type of organization that we are running. Because what we do is that, each location is run by a business head who is responsible for -- he is a profit center and he's responsible for the P&L of that location. And therefore, getting that person right and stable is quite critical. And some quite -- some of our senior staff have either retired or left us in the last 8 or 10 years. And some replacements have worked out, some have not. And that is an area we are still working on even as we speak. And we have to do some work there. As far as founder-driven strategy is concerned, see, we are today at a stage where -- my role in the company is not really much in running the company as much as in looking at the future direction of the company. So, I am mainly involved more in strategy and in technology and in trying to, sort of, decide the path on which we are going. And that's why we have focused so much more on automation, on robotics. Because robotics is an area -- a business of the future, in my opinion. And that's the area that I am, sort of, concentrating on. Otherwise, we have a reasonably, I would say, quite a strong senior management team in place, but that is to be more strengthened. Our HR function as a whole is not yet up to the market. It's quite weak. And specifically on manufacturing side, we are quite strong. But design development also, we are still sort of working in place. So organization definitely needs to be strengthened. And at the senior level, some more people have to be -- have to come in. And then, I mean, it is -- it can -- it will be in place for the kind of size of the company and what we are planning, I think, that should be in place. The replacement, obviously, for the founder is a bit of a challenge. And I mean, that's something that we have not yet clearly addressed. But I mean, that's a role that will have to be played by somebody else in the future. But that is not yet 100% clear what it is. But the management team is by and large in place, and it is being strengthened. But yes, that is an area where we -- there is a gap, and that gap needs to be worked on. That is my -- again, my personal area of focus is that, to see that, that is strengthened, because that is what is going to drive the business. So from marketing area, marketing angle and some of the other sort of leadership challenges. But fortunately, now most of our business heads are in place. Some more addition has to be done, and that should be okay, at least in the -- over the short run of 3 years according to me.

All right, sir. So, we have last question from [ Mr. Saunak Mayani. ] Why is promoter holding so low? Any plans of increasing holding?

Yes. So, we had -- during our very aggressive growth phase during 2003 to 2010, we had two preferential allotments which were made. And at that time, management had not participated, and that's what had brought -- to start with itself, the holding was not -- has not been very large. But because of those two dilutions, the holding has come down to this level. And that's -- it has remained sort of constant at this level. And I mean, I have not been -- I mean, we have not increased that holding and neither I see any short term, any possibility for that. We recently had a small preferential allotment as well. But their promoters have also taken equivalent amount to their current holding. So, the stake is likely to remain this level. I don't see in very short -- I mean, in the near term, our ability to, sort of, increase stake beyond this level. And this is a historic, sort of, I won't say problem, but a situation, let me put it. And that's what it is.

Thank you, sir. There are no further questions from anyone. I would like the management to give the concluding remarks.

Well, this was a very long and I hope fruitful. It lasted much more. And I'm really happy that some of you all have taken so much time to try and understand what the company is doing. I would urge some of you, if you all have time to -- some time visit our new facilities and see in reality what is being done there. It will be quite interesting and exciting. So I'll invite you all to -- if interested to please be in touch and visit the plant and get a feel of a ground reality of the business. That will really -- I would feel your confidence in the business and the company would drastically go up once you visit our facilities. So, thanks once again for taking the time out and talking to me.

Thank you for joining Rishi Laser Q2 FY '26 Conference Call hosted by ConfideLeap Partners. Participants may sign off.