Jupiter Wagons Ltd (JWL) Q1 FY23 Earnings Concall Transcript

Jupiter Wagons Ltd (NSE:JWL) Q1 FY23 Earnings Concall dated Aug. 17, 2022

Corporate Participants:

Jigar Kamdar — Vice President

Vivek Lohia — Managing Director

Sanjiv Keshri — Chief Financial Officer

Analysts:

Tushar Raghatate — Kamayakya Wealth Management Private Limited — Analyst

Ramesh Chheda — Spark Capital — Analyst

Anurag Jain — Aart Ventures — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Jupiter Wagons Limited Q1 FY ’23 Earnings Conference Call, hosted by Systematix Institutional Equities. [Operator Instructions]

I now hand the conference over to Mr. Jigar Kamdar from Systematix Institutional Equities. Thank you, and over to you, sir.

Jigar Kamdar — Vice President

Yeah. Thank you, Renju. Good evening, everyone. On behalf of Systematix Institutional Equities, I welcome you all for the Q1 FY ’23 earnings conference call of Jupiter Wagons Limited. From Jupiter Wagons management, we have Mr. Vivek Lohia, Managing Director; and Mr. Sanjiv Keshri, Chief Financial Officer.

Now I request Mr. Vivek Lohia to give the opening remarks post which we will start the Q&A session. Over to you, Mr. Vivek Lohia.

Vivek Lohia — Managing Director

Thank you, Mr. Jigar for your introduction. Good evening, everybody and I would like to thank you for being a part of the investor call of Jupiter Wagons Limited. I would like to start the session by mentioning that we are today in a historical era when it comes to the entire logistics business in India and especially the railway business. I think with the vision of our Prime Minister and the Railway Ministry, today the growth which we are seeing in the railway sector is unprecedented and historic and Jupiter Wagons being one of the forefront industries in the railway sector, we are in the cusp of showing historical growth numbers to our investors and taking the vision of the company forward in the next decade.

As we all aware that recently Jupiter Wagons and CEBBCO both completed their merger and the company was listed in the stock exchange in the name of Jupiter Wagons Limited. This created a synergy in the operations of both the companies as it consolidated the business under one roof and in terms of both our financial strength as well as the infrastructure strength, we could utilize it in a consolidated manner. Jupiter is today serving the railway sector in multiple ways, we are one of the leading manufacturers of railway wagons, high-speed bogies, couplers, draft gears and cast manganese, steel crossings. Further, under erstwhile CEBBCO, we were one of the leading suppliers of load bodies to the leading OEMs of commercial vehicles in India and also the leading manufacturers of ISO containers in the country.

Recently Jupiter bagged a historical order from Indian Railways and the private sector, currently our order book is close to INR4,700 crores of which INR4,000 crores is made up of railway wagons, the container business is about INR60 odd crores and the order for design, fabrication and supply of flatbed trailers and [Indecipherable] which is a new product which we have recently launched in INR6,830 lakhs.

Again, the company has diversified into various sectors, we have done our tie-up with the leading manufacturer of brake systems in Europe, DAKO-CZ and we have already got approval for supply of railway brake systems for coaches and by the end of this year, we are expecting the clearance from Indian Railways for manufacturing of brake systems for the freight wagons which are going to be supplied by Jupiter Wagons. This again gives us an edge over our peers as Jupiter becomes one of the most integrated manufacturers of railway wagon and it gives us both a sizeable backward integration which again is something which cannot be matched by our peers.

Further, we have also entered into a JV with a company called KOVIS to manufacture brake disc for the Indian Railways for which we have already got the approvals and also this unit will be used for exporting both brake discs and other castings to the European market, already Jupiter has bagged — the JV has bagged the order of 8,000 lakhs this year and we expect the business to strengthen in the coming years.

Very recently, Jupiter along with his partner Talleres Alegria has got the order from Indian Railways to manufacture weldable CMS crossings, which is again one of a historical order which is for close to 4,000 sets of crossings valued at 12,700 lakhs approximately. This is again — these crossings again transform railways from currently trains which are running at 120 kilometers can run at more than 200 kilometers because by supplying these weldable crossings, we are welding the crossings to the rails directly and taking out the fresh plates, so that the tracks are much more smoother and the trains can run in high speed, which is in line with all tracks which — and the latest technology which is used in the European and the American market.

Last quarter, our revenue was INR295 crores and we did EBITDA of close to INR30 crores, which was a jump over our performance for the same quarter last year.

I would now give the line to Mr. Sanjiv Keshri, our CFO who will elaborate on the financial results. Thank you.

Sanjiv Keshri — Chief Financial Officer

Thank you, Vivekji. Good evening to all. This year revenue for the Q1 stands around INR295 crores against which our EBITDA margin is 10.25% which comes to around INR30.27 crores and the profit before tax is 6.71% which is around INR19.82 crores. This year, there is no cash outflow as the company has brought further losses from the erstwhile CEBBCO, we charge the deferred tax of around INR6.41 crores which the tax is coming around 33%. The net profit after the comprehensive income is around INR13.74 crores, which is around INR3 crores higher than the Q1 ’21, last year — Q1 ’21 is around INR10.71 crores profit margin. Mr. Vivek has already told you that our good numbers of order book.

If you have any questions on these financials, we’ll be happy to give the reply.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from the line of Tushar from Kamayakya Wealth Management. Please go ahead.

Tushar Raghatate — Kamayakya Wealth Management Private Limited — Analyst

Yeah. Good evening, sir and thank you for the opportunity. Sir, my first question is on the OEM front, so what is the outlook for the OEM like the course in this business and going forward how do you see this OEM business, how it can look going two to three years down the line?

Vivek Lohia — Managing Director

Yeah, good evening, Tushar. So on the OEM side, since Q1 ’21, the number — we did a business of 730 vehicles, which this — last quarter we did a business of 2,033 vehicles. So what my belief is that again if the country continues to grow at about 7% to 8% and with the infrastructure mobilization which is happening, I expect and then the thrust of the government to bring the logistics cost down. So we expect more and more new varieties of vehicles being introduced and for higher payloads, so overall we expect the business to — for the growth in this business to be very robust and continue over the next two years.

Tushar Raghatate — Kamayakya Wealth Management Private Limited — Analyst

Fair enough. Sir, second question is on the JVs, so the brake disc with KOVIS and also the brake systems with DAKO and the railway crossing so what would be the market size and our shares in all three businesses?

Vivek Lohia — Managing Director

So on the brake systems, first is our joint venture with DAKO, so this year railway wants to buy about close to 6,000 LHB coaches they want to manufacture, so in one LHB coach, brake system costs approximately INR22 lakhs, so the market size is about 6,000 into about close to 1,200 closes the market size for the LHB brake systems.

Now on the freight side given the order books which the industry has got, railway expects supplies of at least 30,000 wagons in the coming 12 months and again each brake system is roughly about INR1.5 lakh. So again it’s about close to INR3,500 crores, so overall put together the brake business itself, the market size is about INR5,000 crores.

Tushar Raghatate — Kamayakya Wealth Management Private Limited — Analyst

Fair enough. Sir, my last question, so I presumed —

Vivek Lohia — Managing Director

And also on the brake disc — now this is for the brake system, again brake disc similarly the market — the Indian market is about close to INR1,000 crores, so all put to together you would — I can fairly say that it’s about a INR6,000 crores market. And on the CMS crossings, again Jupiter has been one of the leading manufacturers of CMS crossings in India, we are already part one approved source by Indian Railways. The weldable crossings is a new design which has been introduced and which is now at par with the global standards.

So till now, no firm has been given all the — only I think six firms have been given trial orders by Indian Railways and none of the six firms has been certified. So we are the first firm to get such a sizable order and we expect our certification to happen by beginning of next year. And again the market on an average railway is talking about buying close to 20,000 crossings every year.

Tushar Raghatate — Kamayakya Wealth Management Private Limited — Analyst

Okay, sir. And sir what would be our ideal EBITDA margin like any target EBITDA margin which we keep?

Vivek Lohia — Managing Director

For which business?

Tushar Raghatate — Kamayakya Wealth Management Private Limited — Analyst

Sir, like — I presume like in this wagons business, so all the — the bid is on the L1 basis, so whenever we bid, any target of EBITDA margin we keep while bidding?

Vivek Lohia — Managing Director

So in terms of any target, I would not like to elaborate on specific numbers, but what you can well understand, there are two things which has to in our favor again our capacity utilization now from quarter two onwards, because most of the order book which came, it came to us in quarter one, so quarter one was really not a reflection of our — the capacity which we have built and our delivers to Indian Railways, that numbers will start hitting from quarter two.

So given the order book, you can expect that our capacity utilization will be very high, and as I told you already that Jupiter being the most integrated manufacturer of wagons, our EBITDA margins historically has been higher than our peers and plus if you add us manufacturing our own brake system, which is roughly about 10% the cost of a wagon, so you can do the math, it will definitely have a strong impact on EBITDA margins.

Sanjiv Keshri — Chief Financial Officer

And Ramesh [Phonetic] if you see our Q1 ’21 EBITDA margin, it was around 9.8% and this Q1 ’22, our EBITDA margin has increased to 10.25% so we are increasing and see how the other quarters go.

Tushar Raghatate — Kamayakya Wealth Management Private Limited — Analyst

Yeah, fair enough, sir. I will get back in queue. Yeah, thank you.

Operator

Thank you. Next question comes from the line of Ramesh Chedda from Spark Capital. Please go ahead

Ramesh Chheda — Spark Capital — Analyst

Good evening Sir. Congrats on the great set of numbers. Sir, few questions from my end, so what will be the current breakup of — on the consol basis, what will be the breakup between the wagons revenue and the CV business?

Vivek Lohia — Managing Director

See, this quarter around 50%-50% from the wagons and 50% from the — around — sorry, 75% from the wagons and 25% from the CV business this time. So, you can say that — and also we have revenue from the containers, so if we include the CV and container both, it will be around INR90 crores and the rest is the wagon. But you have to keep in mind historically for the CV business, the third quarter and the fourth quarter are the strongest. First quarter is generally a weak quarter, so if you go to the third and fourth quarter then the contribution from CV will be higher than what you see right now.

Ramesh Chheda — Spark Capital — Analyst

So for FY ’22 what can be the breakup if I can get that?

Vivek Lohia — Managing Director

We cannot exactly project the breakup at the moment, but definitely it will be higher than the percentage, currently which you see in quarter one.

Ramesh Chheda — Spark Capital — Analyst

Okay. Ballpark number — is it possible to share any ballpark numbers for FY ’22 the historical year — previous year?

Vivek Lohia — Managing Director

No, previous year numbers. Previous year, what was the breakup between CV and — for the quarter you are asking or for the year?

Ramesh Chheda — Spark Capital — Analyst

For the financial year — full year.

Vivek Lohia — Managing Director

For the financial year, just a minute. Around INR800 crores from the wagons and from the other business, CV business, it is around INR300 crores and rest is from the crossings and the containers.

Ramesh Chheda — Spark Capital — Analyst

Okay. So going forward because of the CV cycle turnaround, do you — what kind of growth do you expect in each of the segments for next two to three years?

Vivek Lohia — Managing Director

See, again as we have clearly mentioned, our wagon order book is already very strong, we have close to about INR4,000 crores of order book in the wagon segment. So similarly we — again in CV better than us, the OEMs will be able to give you better guidance of the expectation because our CV business is dependent upon the business which the OEMs can generate from the market, but as far as understanding from the OEMs, we should do a business INR430 crores, I think this year we expect to do a business of about INR430 crores compared to INR350 crores which we did last year.

Ramesh Chheda — Spark Capital — Analyst

Compared to?

Vivek Lohia — Managing Director

[Technical Issues] business which we did last year.

Ramesh Chheda — Spark Capital — Analyst

So almost one third, 33% growth is what you are expecting?

Vivek Lohia — Managing Director

Yes.

Ramesh Chheda — Spark Capital — Analyst

Okay. That is good.

Vivek Lohia — Managing Director

I think which is in line with the growth forecast of the economy and the expectation in the industry because last year you have to also understand the entire auto industry went through a semiconductor crisis and plus there was also COVID months, so we expect this year the business to be far robust.

Ramesh Chheda — Spark Capital — Analyst

Right. And in terms of margins as we mentioned at around 10% will be your EBITDA margin on a consol basis, can we get a further breakdown in terms of wagons and the CV business and even the braking system what is the margins that you are expecting?

Vivek Lohia — Managing Director

So in the braking system, I think the margins will definitely be — since it’s a technology-driven product and again in India, the only three approved sources for this product and given the market size is about close to INR6,000 crores, we expect our EBITDA margins to be much higher, but exact numbers I’ll not be able to tell you immediately and last year, the breakup between the CV and wagons.

Sanjiv Keshri — Chief Financial Officer

As I told you know INR800 crores and INR300 crores.

Vivek Lohia — Managing Director

In terms of the percentage. I think that we don’t have right now, but we can share that numbers with you.

Ramesh Chheda — Spark Capital — Analyst

Sure, we will connect offline for that, that’s okay, that is understandable. And so as I was going through one of the news articles before merger, what you have mentioned is you are also looking towards leasing of wagons, is that a business model that you are thinking about?

Vivek Lohia — Managing Director

Currently, that is not our focus area, our focus area is in terms of executing our current order book as well as now with railway encouraging the industry to produce new designs of wagons and railways ready to give you the IP for those designs, so I think of — and with a strong partner like Tatravagonka who is the leading manufacturer of wagons in Europe. Our main focus is on the wagon business is to — on the execution as well as introduction of newer designs of wagon, which will be in line for the requirement of the DFCC.

Ramesh Chheda — Spark Capital — Analyst

Right. Got it. So if I look at a bigger picture, so next five years or seven years or 10 years down the line, where do you see Jupiter Wagons as a business because I think this INR4,000 crores order book is good enough for you to drive the business for the next two years and in a longer term perspective where do you see Jupiter Wagons as a company?

Vivek Lohia — Managing Director

So as you know if you look at our press release and as of a vision statement of the company, we always say that, we are a complete mobility solution provider. So wagon is yes, one of our core businesses and we expect this order book to become stronger because the railway has projected a requirement of another close to 50,000 wagons in the coming, which tenders we are going to — we expect the tenders to come out in the next six to eight months, so plus there is a robust demand on the private sector, but again as we have told you that the brake business is going to be a huge focus business for us, where we now with Vande Bharat being introduced and newer designs of brake systems and more high-speed brake systems required for Indian Railways, our partners can contribute much more in terms of technology.

We are thinking of setting up an R&D center itself in India to cater to both the requirements for the Indian design as well as for upgradation of the European design of brake systems, so that business we are expecting — we are looking forward to that business and that is — takes us higher on the technology curve. So the focus is more and more to go upward on the technology curve and to always be the best to give the best quality at the lowest price, so that can be achieved through backward integration where you have control over your quality as well as you can produce compared to your peers at the best price.

And finally again since we have about more than 20 years of experience in the commercial vehicle business, doing bodybuilding for the OEMs and then also directly supplying vehicles, so now we have decided to move into manufacturing of electrical vehicles ourselves. We have recently tied up with a company called Green Power Electric Mobility, it’s a company based out of US and Canada, it is listed on the NASDAQ stock exchange as one of the biggest manufacturers of EV commercial vehicles in the North American market. I believe it’s got order book of more than $600 million. They have vehicles ranging from 7 ton all the way up to 30 tons, so that business is something which we are looking forward to and hopefully beginning of next year we should be launching our first vehicle in India.

Ramesh Chheda — Spark Capital — Analyst

Okay. So can you throw a bit more light on what is this tie-up exactly about like, is it a technology transfer tie-up or is it a JV in terms of manufacturing in India, what exactly is the agreement between Green Power and Jupiter?

Vivek Lohia — Managing Director

So it will be a JV to manufacture vehicles in India for the Indian market.

Ramesh Chheda — Spark Capital — Analyst

Okay. And so will it be a 50%-50% JV or it’s yet to be negotiated?

Sanjiv Keshri — Chief Financial Officer

It is yet to be negotiated.

Ramesh Chheda — Spark Capital — Analyst

Okay, got it. So — thank you. That’s all from my side. I will join the queue eventually. Thank you so much. Thanks for your time, sir.

Operator

Thank you. Next question comes from the line of Anurag Jain from Aart Ventures. Please go ahead.

Anurag Jain — Aart Ventures — Analyst

Yeah, hi. Could you repeat — give the breakup of the brake market again, you mentioned brake disc was about INR1,000 crores, if you can repeat for the other INR5,000 crores, it’s the breakup on that?

Vivek Lohia — Managing Director

INR5,000 crores was for the market — for the brake systems, for the LHB coaches which are the passenger coaches in India and the freight, the brake systems which goes into wagons that put together is about the INR5,000 crore market and brake disc. So overall, the market is about INR6,000 crores which does not include the metro brake system markets and now the Vande Bharat train sets which Indian Railways is introducing.

Anurag Jain — Aart Ventures — Analyst

Sure. And LHB coaches you mentioned 22 lakhs per set and about 6,000 coaches so that is INR1,300 crores and wagon would be the differential?

Vivek Lohia — Managing Director

Wagons would be the differential.

Anurag Jain — Aart Ventures — Analyst

That is 1,50,000 per set you said or —

Vivek Lohia — Managing Director

Roughly it’s about INR1,60,000 per wagon is the current price of brake systems and we expect as per the railways order book and the private orders which are there, the expectation is that industry would be producing close to 30,000 wagons annually.

Anurag Jain — Aart Ventures — Analyst

Sure. And currently who are the market leaders in this segment and what kind of market share do you think can we gain over the next three or four years time, what’s the aspiration on that segment?

Vivek Lohia — Managing Director

So I can’t tell you on specifics on the market share, so — but, yeah, so there are currently two main players in this industry, one is Knorr-Bremse, it’s a German company and second it’s a company called Faiveley Wabtec [Phonetic] which is an American company, these are the two leading companies. And again the entry barriers are huge in this segment, because you need UIC Certification means European Union Certification to be approved source to supply to Indian railways and plus the obligation cycle is about close to two to three years. So globally only about three to four firms are approved. One being Knorr, second Faiveley, third DAKO with whom we have a JV now in India. And I think the other significant player is Siemens in this business. And if you look at the freight business as you know Jupiter [Technical Issues] that becomes a captive business for the brake systems.

Anurag Jain — Aart Ventures — Analyst

Sure.

Vivek Lohia — Managing Director

And again for the KOVIS JV again our focus is more, it’s on the Indian market, but greater focus is also on the European market because as you are aware that in Europe the production cost is already going up because due to the power crisis which they are facing, otherwise also historically now they have issues with regard to availability of labor plus the environmental costs are much higher than in India so we believe that we can — with the design and the technology from KOVIS, we can contribute greatly through exports to the European market.

Anurag Jain — Aart Ventures — Analyst

Sure. And given that it’s a technology product and given the entry to barrier — barrier to entry, would the margin be significantly higher versus the wagon business, say, can we do 18%, 20% margin on this?

Vivek Lohia — Managing Director

Honestly, I cannot tell you on the exact numbers, but definitely again Knorr is a listed company, so you can go to the website and see the numbers, so you will get a flavor of the EBITDA margins. But definitely the margins are higher than the wagon business. And the good thing for us is [Technical Issues] gone through, our accreditation has already done with Indian Railways, so now from the next — I think from the last quarter of this year, you will start seeing revenue in these operations. Sure. Thank you so much. That is it from my side. All the very best.

Operator

Thank you. Next question comes from the line of Tushar [Phonetic] from Ratnabali Securities. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon. Sir, could you please give the breakup of our wagon orders and some insights into how much is it from the Indian Railways and private order book? And also if you could shine some light on what is the situation of your wheel sets like what kind of arrangements have you made to mitigate wheel set shortage in India?

Vivek Lohia — Managing Director

So if you look at our wagon order book, it is close to about INR4,000 crores. I will just give you the breakup on the — INR2,400 crores is from Indian Railways and INR1,600 crores is from the private sector. So when it comes to Indian Railway, IR orders, Indian Railways is committed to supply the wheel sets from RWF and RWF has already ramped up its capacity, so we don’t see any shortage on the wheel set supplies from RWF as well as now they have given a huge order of importing axles from China, so axles was the bottleneck, which I think they are going to mitigate by importing axles from China.

On the private order business, we have already placed the orders for wheel sets on the Chinese players and we expect the wheel sets to start coming from October onwards, so there we are not dependent upon RWF or Indian Railways on the wheel set supplies for the — our private business and we have covered — as of today our — on the private side, our order books are completely covered with wheel sets from China.

Unidentified Participant — — Analyst

And sir just another follow-up question on these orders, could you please shine some light on what is the raw material escalation clause built in or if it’s not built in and how we’ve handled the volatility in raw material prices over the last, let’s say, three, four quarters?

Vivek Lohia — Managing Director

So in all our — all railway contracts, there is escalation clause which is already built in, so for us raw material — escalation or de-escalation in raw material is a pass-on, so that doesn’t have any significant impact on EBITDA. And on the private side, as you are aware that when we take an order book, we get 30% mobilization advance from the private player. So generally historically as a practice, we book our raw material immediately on the receipt of the advances, so on that side also, I would say that we are pretty much covered.

Unidentified Participant — — Analyst

Sure. Thank you, sir. Thank you.

Operator

Thank you. Before we take the next question a reminder to all the participants that you may press star and one to ask a question next question comes from the line of Ramesh Chheda from Spark Capital. Please go ahead.

Ramesh Chheda — Spark Capital — Analyst

Thank you. [Operator Instructions] Next question comes from the line of Ramesh Chedda from Spark Capital. Please go ahead. Thanks for the opportunity once again. Sir, I had actually two questions together. What is your capex plans and how are you going to fund that capex plans for next three years and where will be your capex — in what segments will your capex be?

Vivek Lohia — Managing Director

So capex funding will mainly be from internal accruals only, because we expect our cash flows to be very robust and mainly the capex will be — for the existing business, it will be just replacement capex, because over the — during the COVID years, we already — we were anticipating these order books from Indian Railways and we have built capacities in anticipation and acquisition of CEBBCO was one of the prime reasons for expansion in our wagon capacity. So most of the capex which will go in will be towards our brake business as well as the metro business which we have now a JV with CAF.

Sanjiv Keshri — Chief Financial Officer

You can see our balance sheet also of the March 2022 where we have an operating cash inflow of around INR114 crores, so we have a sufficient cash — internal accrual cash in hand to do all the capex.

Ramesh Chheda — Spark Capital — Analyst

I’m sorry, what will be the capex amount for each year?

Vivek Lohia — Managing Director

The planned capex amount you are asking?

Ramesh Chheda — Spark Capital — Analyst

Yeah, yeah.

Vivek Lohia — Managing Director

See, the planned — in the planned capex we don’t — in the Jupiter we do only the replacement or refurbishment which is around INR10 crores to INR15 crores in a year and for the JV companies, we are doing some capex and most of the capex on the JV side has already been incurred by the company and that too because since most of our JVs are 50-50 JVs, so again the capex is shared between both the partners. And as Sanjiv told you that we have a — if you look at our last year numbers, we have a surplus cash INR114 crores of operating cash, which we expect to become more robust as our numbers become stronger this year, so it will mainly all come from internal accruals.

Ramesh Chheda — Spark Capital — Analyst

Okay. So no fresh requirement of debt or anything or the fundraise will be required in near future right?

Vivek Lohia — Managing Director

So right now, very difficult to predict, but we don’t foresee a very strong requirement.

Ramesh Chheda — Spark Capital — Analyst

Okay. And on a steady state basis, what are the ROEs and ROCEs that you expect?

Vivek Lohia — Managing Director

Can you speak from — little far from your mouthpiece, because it is echoing, not very clear.

Ramesh Chheda — Spark Capital — Analyst

I’m sorry. Is it better now?

Vivek Lohia — Managing Director

Yes, better.

Ramesh Chheda — Spark Capital — Analyst

Yes. So on a steady state basis, what are the ROEs and ROCEs that you expect from the business overall?

Vivek Lohia — Managing Director

The ROE of March 2022 was around 7.52 and we expect that it will be higher. See, as I keep on iterating order books I think if you look at over the last five years, we have now one of the strongest order books and plus the company is much more diversified. We are now in various other segments which are again historically the EBITDA margins are higher in those segments, so you would definitely expect those numbers to become better.

Ramesh Chheda — Spark Capital — Analyst

Any guidance on that?

Vivek Lohia — Managing Director

Guidance?

Ramesh Chheda — Spark Capital — Analyst

Yeah, any guidance on to what extent do you expect?

Vivek Lohia — Managing Director

Honestly, it’s very difficult to give any kind of guidance, but definitely we expect the numbers to be given the order book and our thrust towards backward integration and bringing our costs down plus entering into businesses with better EBITDA margins, so definitely we expect the numbers to be much stronger.

Ramesh Chheda — Spark Capital — Analyst

Okay. Thank you so much, sir.

Operator

Thank you. [Operator Instructions] Next question comes from the line of Tushar from Ratnabali Securities. Please go ahead.

Unidentified Participant — — Analyst

Sir, a couple questions on our JV and technology partners, so could you please tell us if you have — what kind of arrangements do you have with them, do we pay any kind of royalty to them or technology transfer fee apart from the profit sharing from the JV?

Vivek Lohia — Managing Director

So when it comes to our JV with KOVIS, there is no royalty or technology transfer fee which we are paying to them, it is a pure 50-50 profit sharing. And in case of DAKO, the numbers have not been chosen as yet, but then again if there is no royalty and if there is some technology transfer fee also, it will be very miniscule.

Sanjiv Keshri — Chief Financial Officer

And it will be a part of capex.

Unidentified Participant — — Analyst

Okay. And what about for other companies Tatravagonka, Talleres and [Indecipherable]?

Vivek Lohia — Managing Director

Tatravagonka is a promoter in Jupiter, they have a minority shareholding in Jupiter, so there is no question of any royalty which they charge, again in case of Talleres also, it’s a pure 50-50 JV with profit sharing no royalty or any kind of transfer of technology fee.

Unidentified Participant — — Analyst

Okay. And sir, do we plan on banking on some of these partnerships to get deeper inroads like Tatravagonka into Europe?

Vivek Lohia — Managing Director

As I told that briefly in my call, one of the — with KOVIS, our focus is the European market, we already have an order book from them for about INR80 crores for the next year, which we expect the order book to — and this is for the European market and we expect this order book to become much stronger over the years.

Unidentified Participant — — Analyst

Okay. Thank you, sir.

Operator

Thank you. As there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Jigar Kamdar for closing comments.

Jigar Kamdar — Vice President

Thank you, participants. Thank you, management for your time to and give us opportunity to host this call. Thank you, everyone.

Vivek Lohia — Managing Director

Thank you, Jigar.

Sanjiv Keshri — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]