Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
PITTI ENGINEERING LIMITED (NSE: PITTIENG) Q4 2026 Earnings Call dated May. 18, 2026
Corporate Participants:
Akshay Pitti — Managing Director and Chief Executive Officer
Analysts:
Balasubramanian — Analyst
Avnish Tiwari — Analyst
Unidentified Participant
Rahul Kumar — Analyst
Presentation:
Operator
Ladies and gentlemen good day and welcome to the q four and fy twenty six earnings call of pitti engineering limited this conference call may contain forward looking statements about the company which are based on the beliefs opinions and expectations of the company as on date of this call these statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict as a reminder all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes should you need assistance during this conference call please signal an operator by pressing star then zero on your touchstone phone please note that this conference is being recorded I now hand the conference over to mister akshay s pitti managing director and chief executive officer piti engineering limited thank you and over to you sir
Akshay Pitti — Managing Director and Chief Executive Officer
Good afternoon everyone and thank you for joining us for the q four and full year fy twenty six earnings conference call of piti engineering along with me are members of senior management team and our investor relations partners from sgl our financial results revised investor presentation and related disclosures are already available on the stock exchanges and on company’s website I hope you have had the opportunity to go through the same let me brief you a bit on our journey because it provides important context to where we stand today and where we are headed we began our journey as a manufacturer of electrical steel laminations essentially a basic engineering commodity with limited value additional over the years we have consciously and steadily transformed the company from just electrical steel laminations into an integrated engineering solution provider with strong capabilities in machining casting fabrication and high value assembly over the years we have consciously moved up the value chain through sustained investment customer partnerships and capacity expansion today value added and integrated products contribute an increasing share of both revenue and profitability on the macroeconomic conditions fy twenty five was a challenging year for the industry marked initially by tariff loss followed by inflationary environment and best asia prices towards the close of the financial year these developments impacted both broader economy and industries through shortages of commodity metals supply chain disruptions and rising prices across domestic as well as global markets despite these headwinds global supply chains continue to diversify with india further strengthening its position as a preferred sourcing destination driven by cost competitiveness and well established engineering capabilities although demand trends differ across end markets the overall momentum remained healthy export oriented business continue to demonstrate resilience supported by improved visibility and relatively fair trade environment for indian suppliers across key markets towards the end of the year against this backdrop our core sectors maintained strong performance lamination business witnessed steady demand from sectors such as railway mining and power while growth in wind energy moderated it was effectively offset by robust demand from data centers and industrial motors on the end user industries traction motors railway components continue to be key strategic focus area for us although domestic railway capex has moderated to some extent our exposure remains well diversified supported by meaningful share of international locomotives and metro project business demand from power generation sector continues to remain stable driven by ongoing investments across bg sets and permanent hydropower plants industrial and commercial sectors are benefiting from infrastructure development and broader revival in capital expenditure and modernization while data centers represent one of the most promising mid term growth opportunities supported by new customer additions across multiple geographies in this category in addition mining oil and gas and specialized motors continue to witness healthy momentum in new product development for fy twenty six traction motor and railway components contributed thirty three percent of revenue followed by power generation at fifteen percent industrial and commercial motors at thirteen percent special purpose motors at seven percent mining oil and gas at six percent renewable energy at three percent data centers at three percent and other segments at nineteen percent on the volume side in queue for fy twenty nine total lamination and assemblies volume stood at eighteen thousand four hundred tons a growth of seven point three percent on bio y basis for fy twenty six lamination volume increased to sixty nine thousand five hundred tons up by ten percent compared to fy twenty five within lamination higher value added smd’s integrated shaft and stator rotor smds grew faster than loose lamination reflecting an improving mix total raw casting and machine components volumes for q four fy twenty six stood at two thousand seven hundred and eighty three tonnes there was a temporary softness on the year end due to sorry sorry there was a temporary softness in the year end for the full year fy twenty six volumes grew by fifteen point four percent to twelve thousand twelve tons on the capacity utilization front q four fy twenty six witnessed a meaningful improvement across operations sheet metal utilization stood at eighty percent machining r utilization reached eighty seven percent casting utilization was sixty four percent during the quarter for the full year utilization levels improved to seventy six percent for sheet metal eighty one percent for machining and seventy one percent for casting reflecting consistent execution and improved absorption of fixed cost we continue to progress on the previously announced capex aimed at enhancing manufacturing capabilities of this nearly one hundred crores has already been incurred and the capacities are expected to become operational by end of h one fy twenty seven given the rising capacity utilization levels and healthy order pipeline we are announcing a new capex program to further expand our capacities and address growing demand we have announced a greenfield facility for casting and machine components business with a planned investment of two hundred ninety crores a proposed capacity increase of eleven thousand four hundred metric tons in the casting site the facility is expected to be commissioned by q one fy thirty and will increase our total casting capacity to thirty six thousand metric tonnes more than doubling the current capacity levels additionally machine hour capacity will also increase from current seven twenty thousand machine hours toward ten point eight lakh machine hours the capex aggregation will broadly comprise of land acquisition and civil infrastructure approximately thirty percent and the balance seventy percent going towards plant and machinery the project is expected to generate asset turns in the region of one point two x this greenfield facility is developed with a focus on significant opportunities we are seeing in machine components and castings for the mining locomotive data center and power generation applications several of our global marquee clients such as progressrail siemens mobility caterpillar voip and vaptech among others are witnessing strong growth in their own businesses and we believe as an integrated casting and machining supplier we are most well positioned to partner with them in their growth journey and their diversification of their supply chains accordingly our capex strategy is built around three key pillars first improving efficiencies and debottle making existing capacities the second is expanding capacities in areas where customer demand visibility is strong and third creating a larger platform for machine castings and integrated components which we believe will drive the next phase of the growth of the company moving to financial performance for q four fy twenty six our revenue from operations stood at five hundred and six crores as compared to four hundred and seventy two crores in q four fy twenty five a growth of seven percent for the full year fy twenty six revenue from operations stood at nineteen fifty three crores as compared to seventeen forty three crores in fy twenty five registering a growth of twelve percent adjusted ebitda for fy twenty nine stood at three hundred and twenty six crores up from two hundred and seventy two crore rupees in fy twenty five suggesting a growth of twenty percent with adjusted ebitda margin improving to seventeen percent from fifteen point nine percent margins were also impacted on account of sharp changes in commodity and forex exchanges in q four but this is part of the business and we see this now stabilizing which will support the overall performance in the coming year for the full year adjusted tax stood at one hundred and twenty eight crores compared to one hundred and twenty three crores in fy twenty five on the other income front we are planning to take the benefit of maharashtra state investment promotion subsidy for the capex which we have incurred in aurangabad from fy twenty eight onwards to maximize our claim which will be beneficial for the company fy twenty six has been a year of consolidation fy capacity building and continued momentum up the value chain we have delivered growth in revenue improved full year ebitda margins and expanded our product capabilities increased value added volumes and laid the foundation of the next phase of growth the piti of today is very different from piti of the past the next phase of growth will be driven by focus on value added products machine components automation working capital discipline and customer led capacity expansion with that I will now open the floor for the question and answer session thank you
Operator
Thank you we will now begin the question and answer session anyone who wishes to ask a question may press star and one on their touchstone telephone if you wish to remove yourself from the question queue you may press star n two participants are requested to use handsets when asking a question ladies and gentlemen we will wait for a moment while the question queue assembles our first question comes from the line of pala subramaniam from ariant capital please go ahead
Questions and Answers:
Balasubramanian
Good afternoon sir thank you so much for the opportunity sir in that two hundred ninety crore greenfield facility so if we could share some more details what is the detail roadmap for this capex and this capex is for existing products or we are planning to add new products in that
Akshay Pitti
This capex is for machine castings in terms of is it for existing products or new products I would say for similar products we make castings from fifty kilos all the way up till four ton single piece we are catering this capex towards the larger castings which will be required for mining off highway and data center related applications
Balasubramanian
From the inventory side I think
Akshay Pitti
On the machining side we are also currently investing a lot of that money towards the machine or expansion that is going to happen in a modular manner it will not be commissioned only in fy thirty it will start getting commissioned from fy twenty eight and twenty nine as well to support the machining growth that is required in the current machine components business as we have already debottlenecked the casting capacity to twenty four thousand tons by end of h one fy twenty seven
Balasubramanian
Yes sir so second question earlier we targeted inventory level of three hundred crore I think financial year so i’m trying to understand how we look at inventory levels in coming years it’s remain the four hundred levels I think we have secured new supplies from korea and japan and how do you look at supply side and inventory side in coming years
Akshay Pitti
So we have already like diversified the supply chain and the steel availability has improved significantly over the quarter four and currently in quarter one as well we see the inventory levels maintaining at around three hundred ninety four hundred crore level going forward as we continue to grow on the working capital cycle our days payable have gone down as obviously to reduce the inventory from its high water mark we have not procured as much as we start procuring material and consuming the same inventory the days payable will go up and our working capital will get released
Balasubramanian
Thank you sir
Akshay Pitti
Thank you
Operator
A reminder to all participants you may press star and one to ask a question the next question comes from the line of avnish diwari with makariya please go ahead
Avnish Tiwari
Hi can you articulate how over the years in your experience whenever the currency has depreciated in india compared to others how has that impacted any existing order book or customers looking for future orders from a sense of your profitability or cost position relatively assuming all else equal because you have done a great job in qualifying in so many projects with marki clients
Akshay Pitti
Yes so the currency position definitely helps india become more competitive as a destination however I would say it does not result in increased margins or anything as we have a quarterly price change mechanism with all of our international clients wherein the benefit of any currency depreciation is passed on to them and in the unlikely event that the currency appreciate they pass on the benefit back to us
Avnish Tiwari
Okay and have it created any benefit in terms of a discussion about new projects or benefits of the destination in terms of cost position has that phenomena you have experienced in past whenever the currency depreciates or even recently in last month or something where customers have engagements are getting more frequent or getting closer to the conclusion
Akshay Pitti
See it definitely helps but I don’t think it drives anything in terms of customer decision making as obviously these supply chains are very long term it takes a long time to establish these supply chains and approve these products so they are not looking at it from a quarter to quarter price change in terms of dollar strength or weakness they are looking at india as a destination for low cost engineering goods as an alternative to china and definitely the currency depreciation helps in bringing overall competitiveness when compared to other international destinations okay great thank you thank you
Operator
A reminder to all participants you may press star in one to ask a question the next question comes from the line of vivek ganguly with tgc amc please go ahead
Unidentified Participant
Thank you one simple thing we just were trying to understand in layman’s term so in this table you have given high high value added assemblies laminations and laminations and then loose if you can in layman’s term explain what this means in terms of value addition and how they are different and how you know while we are seeing the growth rates in different for the value add is much higher than in the you know the loose assemblies if it would be helpful if you can articulate in your own terms
Akshay Pitti
Okay so the loose lamination is basically a engineering commodity it’s a piece of sheet metal which is zero point five millimeters thick in which you do a stamping operation so there’s not really much value add that goes into it and therefore the margins also are lower when we add low value added assembly to that we add that for a simple reason sometimes the customer says don’t send it as loose lamination just do a single weld and send it as a stack by doing that does not become an assembly therefore by nature of it becomes a much higher value add it’s a very low level of value add in that assembly so that is why we bucket these two into this segment I would say you should look at it more like an engineering commodity the loose laminations and low value added smd’s now when you move to high value added smd firstly these are possible in niche segments such as data centers railways wind turbine generators special purpose motors to name a few wherein the motor complexity is much more when compared to the other applications such as dg sets or a ceiling fan if you will so there are two different kind of end markets and end use cases therefore different levels of value add so we classify them in a different category if I have to give you a delta between a loose lamination to a high value added smb based on today’s selling price a loose lamination would be selling at approximately one lakh eighty thousand rupees a ton one lakh seventy thousand to one lakh eighty thousand rupees a ton depending on the grade of steel a high value added assembly would trade somewhere between two lakh twenty to two thirty thousand rupees a ton the second thing that happens is you know when you’re going to these higher value added assembly it’s not just laminations which are just welded together there are multiple things which we call as child parts which you can see in the line below of total lamination these are other machine components going into the lamination assembly that’s what differentiates the high value from the loose end low value added assembly when we talk of stator frame and or rotor integrated shafts in the lamination business these are basically these higher value added assembly wherein the customer wants us to either face the shaft of the rotor or the frame of the stator and supply to them enough fully usable condition where the only value add remains is the winding of the motor or the generator so there we take these high value added smd’s and integrate them with the machine castings or machine shafts to get the final product in terms of margin profile obviously this is going to be significantly higher when compared to the high value added assemblies as well
Operator
Does that answer your question vivek
Unidentified Participant
Just another question so what is the borrowing at the end of twenty six and the cost of borrowing
Akshay Pitti
You mean the total borrowing or the net borrowing
Unidentified Participant
Total borrowing
Akshay Pitti
The total borrowing is three hundred six hundred ninety eight crores
Unidentified Participant
And cost of borrowing
Akshay Pitti
On an average cost basis just give me a second around seven percent seven and half seven to seven point five percent
Unidentified Participant
Okay thank you that’s all my
Operator
Participants you may press star in one to ask a question our next question comes from the line of dheeral shah with philip capital please go ahead
Avnish Tiwari
Yeah good afternoon sir thanks for the opportunity sir if I look at your q four numbers and if I look at your export segment particularly
Unidentified Participant
So on a yy basis there has been a big growth so any particular reason what I like to this even if I look at overall fy twenty six number the growth on the export side has remained on the maybe around five to six percent kind of average growth
Akshay Pitti
Okay so see firstly I mean the answer for both the questions is interlinked if you look at the q four numbers there’s a degrowth in the export numbers that is largely led by two issues one from first of march there were severe issues with petroleum products which are used in our foundry operations so if you see even our foundry output is lower in q four so that has impacted our and that is mainly on the export side so that has impacted our overall q four number and more specifically export numbers secondly if you see on the lamination side of the business as well where we were not impacted with the energy situation the containers were still not moving out in most of march so due to that around about twenty odd crores of sales have not taken place which would have taken place ideally mostly which were export oriented
Unidentified Participant
Okay so will this revenue will start very the jump in q one itself
Akshay Pitti
It will be a slight slog because even now the energy situation is not fully normalized especially on the lpg side as you know you’re living from moment to moment anything can happen in west asia right now
Unidentified Participant
Okay so what is the overall growth that we are looking at fy twenty seven and such for the next year fy twenty eight in terms of revenue and margins
Akshay Pitti
So let me first give you on the quantitative side on the lamination side of the business vis a vis the sixty nine thousand five hundred seventeen tons that we have done in fy twenty six we have targeted seventy eight thousand tons of sales and on the machine component vis a vis the twelve thousand tons that we have done we are targeting around about sixteen thousand tons of sales this should in current commodity price terms translate into roughly twenty three hundred crores of top line
Avnish Tiwari
In terms of margins is there any margin improvement
Akshay Pitti
Yeah in terms of margins I think we should look at similar margins in terms of percentage going forward like I said if the commodity prices continue to rise obviously your top line will grow more but then the margin will be lesser
Unidentified Participant
Okay okay thank you so much
Operator
Thank you the next question comes from the line of nikhil purohit with fit end ascent management please go ahead
Unidentified Participant
Hi thanks for the opportunity just to understand on the capacity side so by fy twenty seven we will have ninety three from standalone and eighty thousand from pipl right
Akshay Pitti
I would say you should look at it as we’ll have one like eight thousand tons of consolidated capacity because you are moving capacities between facilities for optimization which is why we have not given any breakup in standalone and subsidiary capacities
Unidentified Participant
Okay okay so so one hundred eight k okay so in fy twenty eight where will this where will this be
Akshay Pitti
By fy twenty eight this capacity will be same we have not announced any additional capex for the lamination side of the business
Unidentified Participant
But we’ll be around it at eighty percent more than eighty percent utilization right in fy twenty seven
Akshay Pitti
Fy twenty seven we should be a little less than eighty thousand eighty capacity seventy eight thousand would be roughly seventy eight point two percent seventy two point two percent it would be definitely beyond fy twenty eight we should depending on the market situation look at additional capex on the lamination side the current capex is sufficient to take us to the fy twenty eight
Unidentified Participant
Got it got it and can you give the revenue numbers for pipl and bcpl individually in the subsidies
Akshay Pitti
Just one second I need someone to pull that up for me for the full year revenue from piti industries was three hundred and fourteen crores and revenue from dakshin foundry was sixty seven point six five crores
Unidentified Participant
Got it got it and just to understand on quarter four our gross margins were hit in this quarter right they’re down one hundred books I think and this is after we had indicated that bcpi the production will ramp up from january onwards and margin should ramp up even higher so why did we see this just to understand
Akshay Pitti
Two factors like I mentioned we couldn’t execute around twenty crores worth of sales of the machine components and export laminations which are a higher value added product so that’s lying in the inventory so obviously the gross margin has not been accounted for it will only be accounted for when we sell it and secondly in terms of energy cost we were on a very high energy cost regime in the month of march and typically our price change mechanisms are on a quarterly basis so this was like a black swan event where you know there’s a sharp increase in energy cost mid quarter post the price change
Unidentified Participant
Okay okay and like you mentioned quarter one should also be slightly slower on that side right
Akshay Pitti
Yes quarter one will continue to be slightly slower on that side as well as on the lamination side
Unidentified Participant
It will not be worse
Akshay Pitti
Than quarter four but you will not see a sharp recovery in quarter one
Unidentified Participant
Got it got it and on the debt side with our inventory levels maybe stabilizing how do we see net debt reducing our finance cost and do we see our finance cost basically going back to fy twenty five levels that inventory levels normalize
Akshay Pitti
I think it will be somewhere in between fy twenty five and fy twenty six levels to be very honest in terms of debt what we are looking at is about one hundred twenty five crores of credit are increasing so our payables will increase by one hundred and twenty five crores which should help offset interest cost to that extent
Unidentified Participant
Okay okay and you mentioned in the opening remarks that the maharashtra scheme for the aurangabad plant coming in from fy twenty eight can you maybe quantify that and do we have any benefit in fy twenty seven
Akshay Pitti
So we are eligible to take the benefit in fy twenty seven typically these incentive schemes are given for seven or nine year basis so we have invested roughly about four hundred crores in maharashtra facility over the last four years which we are now eligible to recover unfortunately for us the government has approved a seven year recovery plan so the recovery per year is very very high the requirement to recover per year is very high and the current maharashtra sales will not support maximum recovery so we are doing two things we are also looking to work with the government to allow us to recover this money over nine years in which case it becomes very simple we can start accounting for and therefore start receiving these cash flows in the next eighteen odd months however if that does not happen and we still have to recover in seven years we feel we have a better chance to recover more money if we delay the accounting by one year because by then the local sales in maharashtra would ramp up further and thereby resulting in better recoveries
Unidentified Participant
Got it got it that was clear just one last question bookkeeping question so I was just comparing fy twenty five full year numbers and noticed some changes in figures to other expenses and employee expenses like has there been any reclassification here if you could
Akshay Pitti
One second
Unidentified Participant
Sure sure
Akshay Pitti
That expenses I don’t think there’s any reclassification from what I understand
Unidentified Participant
Twenty two has become so in fy twenty five if you it was earlier twenty two something now it is twenty seven six hundred nineteen this is fy twenty five number
Akshay Pitti
For q four
Unidentified Participant
No i’m talking about the whole year fy twenty five
Akshay Pitti
Twenty seven has become
Unidentified Participant
Twenty seven thousand six hundred and nineteen is the current number other expenses right
Akshay Pitti
Two hundred and seventy one crores yes
Unidentified Participant
Yeah so that was earlier two hundred twenty crores approximately is that right fy twenty five if you look at it and I think so I mean your other expenses reduced and your employee benefit has increased so is there some declassification there
Akshay Pitti
No there is no declassification there
Unidentified Participant
Okay maybe i’m
Akshay Pitti
Let me just check on that i’ll make a note of it but as far as I know there’s no reclassification all we have done is we have started giving you the adjusted ebitda on the investor ppd slide wherein the employee cost is slightly reduced to the extent of the impact of esop cost
Unidentified Participant
Got it got it okay and
Akshay Pitti
And one more thing which we have done is we classify the forex loss on contract on our potential receivables in oci as per the standard however last year there was hardly any value to that number most of it is only in port of
Unidentified Participant
Got it okay got it those are my questions thank you
Akshay Pitti
Yeah thanks
Operator
The next question comes from the line of mohit jain with doctor chalksi finserve please go ahead
Unidentified Participant
Hi accessor good afternoon can you hear me
Operator
Yes hello
Unidentified Participant
Hello
Operator
Yes please go ahead with your question
Unidentified Participant
Yes yes hello okay sir basically hello hello yeah
Akshay Pitti
Can you hear
Operator
Me
Unidentified Participant
Yeah yeah I can hear you hi hi good afternoon so basically my question is my question is on the segmental side so traction motor traction railway segmental revenue drop from you know thirty eight percent as a percentage of revenue to thirty three percent especially in q four in absolute terms I guess we have done around one hundred and sixty five odd crores versus one hundred and seventy eight last year same quarter we have seen an actual decline in the segment especially on the quarterly basis so I will sit there saying I was just checking on that webtech was described as you know consistent and growing customer of ours so either other railway customers indian local mesa pullback or what is the case that has been in this quarter especially in the traction side
Akshay Pitti
If you see again like I mentioned there was about twenty odd crores worth of sales impact in this quarter due to various issues including the energy situation and the dispatches that didn’t actually get affected on produced material due to shipping constraints and that is mostly and entirely for our export market which is largely traction motor and railway components both to vaptic and siemens mobility
Unidentified Participant
All right and got it akshay my second question basically I joined the call late so I don’t know if this has been answered or not so this newly newly announced capex of two hundred ninety crore clean field facility especially for casting where will this be located
Akshay Pitti
Hyderabad it is adjusting to our existing facilities so we have we are in process of acquiring land right adjacent to the existing foundry facility
Unidentified Participant
Got it got it thank you sir best wishes
Akshay Pitti
Thank you
Operator
The next question comes from the line of sahil sharma from dalmas capital management please go ahead
Unidentified Participant
Yeah hi thank you for
Akshay Pitti
Hello
Operator
Sahil you’re not quite audible
Akshay Pitti
Hello
Operator
Sahil please use your phone on handset mode in case if you are using it on a wireless mode
Unidentified Participant
Hello
Operator
You’re still not audible
Unidentified Participant
Hello
Operator
Yes go ahead please
Unidentified Participant
Yeah yeah so I just wanted to understand on the new capex program so what what are the expected margins and you know working capital investment requirements for the same
Akshay Pitti
So see once it’s fully operational we are estimating a one point two x asset terms with approximately a twenty five to twenty twenty eight percent ebitda margin
Unidentified Participant
Okay and working capital requirement would be how much
Akshay Pitti
Working capital requirement would be roughly ninety odd days in this ninety to one hundred and twenty days net working capital it’s going to be little heavier on the working capital side
Unidentified Participant
Okay got it thank you
Akshay Pitti
Yeah
Operator
Thank you the next question comes from the line of rahul kumar with wakariya fund please go ahead
Akshay Pitti
Yeah hi just one clarification out of these machine components and you know the high value assembly what is the mix between
Rahul Kumar
Domestic and exports
Akshay Pitti
So if I have to give you let me start from the state of frame and voter shark integrated smd I would say that’s about fifty fifty ballpark on the high value added smd I would say it’s about one third to forty percent export and the remaining domestic
Avnish Tiwari
Okay and in the machine components
Akshay Pitti
On the machine components part export and domestic you’re asking that would be about eighty percent export and about twenty percent domestic right now
Rahul Kumar
Okay okay got it so just on exports I think last time we had mentioned about a couple of you know new clients customer acquisition so what is the development on that front
Akshay Pitti
So the process products are under development we have made the samples on some of the parts and the remaining parts are in process of sampling we would expect revenue from q three
Unidentified Participant
Okay
Rahul Kumar
And this is for the around q
Akshay Pitti
Three yeah
Rahul Kumar
Okay and this is for the competitor of the our existing customer
Akshay Pitti
Yes it is for the competitor of our existing customer
Rahul Kumar
Okay okay and we have mentioned
Unidentified Participant
That in total I think we are speaking to two three more customers on the exports front so what is the progress on that those two companies
Akshay Pitti
Sorry it was a little unclear I couldn’t fully hear your question if you can no I was saying
Unidentified Participant
We were speaking to a couple of more customers apart from the you know on the traction motor front so what is the progress on those two companies
Akshay Pitti
So we are already working with siemens mobility as I mentioned in my speech through our dutch foundry and then those parts which were going as raw exports are now getting machined progressively and being shipped out obviously progress has been added as a new customer and alstom is already a customer in india and we are exploring opportunities for their international requirements if you take into account these three sorry these four customers including vaptech I think you covered majority of the railway locomotive metro client customers globally ex of china I mean the japanese mitsubishi and toshiba are the only ones left
Avnish Tiwari
Okay that’s great I think for the fy twenty seven I think you had given a
Akshay Pitti
Guidance of volumes and the ebitda margins would you be comfortable sharing the bottom line part numbers for this thing for next one year two years
Avnish Tiwari
Can you share your guidance for the path for fy twenty seven and twenty eight
Akshay Pitti
That would be little difficult for me to predict as this capex which is going on when does it get capitalized and how the depreciation will start getting accounted
Avnish Tiwari
Okay okay and how much is the case
Akshay Pitti
Is something which will be slightly more nuanced as we keep going forward
Avnish Tiwari
Okay okay how much is the capex ongoing capex for the new casting and language facility which is not going capex
Akshay Pitti
For fifty crores as of the thirty first of march one hundred crores was already spent fifty crores of cash flow was yet to be spent
Unidentified Participant
Okay okay and this use you mentioned that it will be you know commissioned by q h one of fy twenty seven
Akshay Pitti
Yes in the opening speech also you mentioned about adding a couple of clients on the data center part of the business yes just talk about a
Unidentified Participant
Bit more on that trend are there
Akshay Pitti
Customers
Unidentified Participant
Or you know and what products are these
Akshay Pitti
So we have two products that we’ve added for the export side both are existing clients it’s just the application is new for the client one is casting for data center this is basically our housing for data center generators as well as certain engine parts which we are looking at now for the data center turbine engine on the casting and machining side the other client again based out of us it’s basically right now those laminations going to them for smd in the us once we get that relationship into a mature level they will then explore taking these high value added assemblies out of india from us so it’s a two step program with them and thirdly there’s again an existing client in the diesel generating space based in india which is looking for the data center assemblies again for the domestic and export requirement but for us those would be domestic sales so these are the three additions on the data center side
Unidentified Participant
Okay understood thank you
Operator
Thank you the next question comes from the line of harsh patel with share india securities please go ahead
Akshay Pitti
Hello thank you so much for the opportunity I just wanted to understand that what would be the our total on consolidation level the debt that on considering working capital as well as long term debt for fy twenty
Avnish Tiwari
Seven twenty eight like we had an approach that we would go for debt free so what would be the debt reduction plan going forward
Akshay Pitti
So see as of now the net debt is around five hundred and seventy odd crores we expect one hundred and twenty five crore release from working capital so that should take our net debt down to about four hundred seventy odd crores before any current year earnings and cash generations out of the two hundred ninety crores of new capex and the fifty crores of pending capex from the previous announcement we intend to spend about one hundred crores from own funds and the remaining is going to be funded to net debt so whatever cash you generate I believe should flow through to your net debt numbers going forward
Unidentified Participant
Okay okay so for fy twenty eight twenty nine what would be our net debt expectation
Akshay Pitti
See again this is without looking at any further capex in the lamination side as I mentioned in my previous response to one of the questions the current lamination capacity is sufficient till fy twenty eight requirements so ideally speaking if the market supports us we should be looking at further capex in twenty eight having said that if you don’t look at any capex happening in twenty eight I would estimate that your net debt should be down to about two hundred fifty odd crores
Unidentified Participant
Okay and sir one more thing on consolidated side like our tax rate has increased to thirty percent so is there any deferred tax adjustments going forward or what would be our sustainable tax rate for fa twenty seven twenty
Avnish Tiwari
Eight
Akshay Pitti
See there are deferred tax adjustments which are there and unfortunately they’ll continue one which is relating to esops which is not permitted as an expense under income tax computation secondly in terms of hedge the hedge accounting that we do so the forex losses especially the ones which are uncristallized on open contracts again not considered in income tax and the difference in depreciation so these are the three reasons why your tax rate is different from your and looking at around thirty three percent going forward I think this would be similar it may come down slightly but it’ll be similar this issue is not going to go away till the end esop and the difference in depreciation rates goes away
Unidentified Participant
Okay so it will pay for at least couple of years to see I would believe
Akshay Pitti
So
Unidentified Participant
Okay okay thank you so much
Akshay Pitti
Thank you
Operator
The next question comes from the line of keshav kumar with nivashay please go ahead
Unidentified Participant
Yeah thanks for the opportunity so sir like on the data center side do we supply anything to the global giant like caterpillar especially for the windsets
Akshay Pitti
That is a customer which is under development which I mentioned in my opening remarks so one of the key clients is caterpillar both directly and indirectly directly for their data center housing and engine related components which are machine castings and indirectly for the generator part the status and motor assemblies which we are supplying to their vendor so these two are under development and we expect again q three for start of commercial revenues on these two products
Unidentified Participant
Got it so thank you that’s it from my side thanks
Operator
Thank you the next question comes from the line of avnish tiwari with vikarya please go ahead
Avnish Tiwari
Hi this capitalization or depreciation you mentioned so that is regarding the fifty crore of capital work in progress you have or is it a more capex which you think will have an impact on depreciation which is hard to predict right now
Akshay Pitti
The fifty crores of investment which is pending from the one hundred fifty crores announced last year that is pretty well predictable out of the two hundred ninety crores of current capex that we have announced there are two parts to it which is why we have to give the revised slide the greenfield foundry will take two to two and a half years for commissioning and then becoming operational however the machine our capacity that they are increasing is for immediate consumption so as how quickly these machines will get delivered given the current global environment and how quickly we will be able to ramp up will determine the rate of depreciations out of the two hundred ninety crores for the foundry side it’s only about one hundred ten one hundred twenty crores of investment the remaining is largely going into the machining centers
Avnish Tiwari
Right right
Akshay Pitti
Those depreciation rates are tougher
Avnish Tiwari
To predict how much and how fast can you how much and how fast
Akshay Pitti
Both yes
Avnish Tiwari
More so
Akshay Pitti
Because you’re under these finance arrangement
Avnish Tiwari
But they will start getting revenue and ebitda also as soon as they start getting capitalized so they will be profit accretive right
Akshay Pitti
Yes obviously obviously I mean your ebitda will shoot and only then that depreciation would come in
Avnish Tiwari
And beyond like that machine component part if you just look at the base business the depreciation rate should be largely at the rate currently we are at and plus fifty crore which is not yet capitalized or is there any other moving part on depreciation
Akshay Pitti
Yes
Avnish Tiwari
Okay so there’s no moving part other than that right
Akshay Pitti
No nothing else
Avnish Tiwari
Thank you
Akshay Pitti
Thank you
Operator
The next question comes from the line of dheeraj reddy with alpha square please go ahead
Unidentified Participant
Hi sir thanks for the opportunity I have two basic questions hello yeah am I audible hello hello
Akshay Pitti
Yes yes yes you’re audible
Unidentified Participant
Yes yes thanks I have two basic questions sir one is like how should one think about margin structures for basic casting machining I mean casting plus machining sub assembly and integrated assembly like these are four different things done by a company like how are the margin structures different for these four works
Akshay Pitti
They are vastly different it’s a good question so if you look at broadcasting right at a gross margin level they would be somewhere around fifty fifty five percent gross margins and in terms of ebitda it would be roughly around thirty or thirty thirty five thousand rupees a ton kind of ebitda on the raw casting the minute you move to machine casting firstly the weight drops you are machining away some of the casting element right so and you’re putting in a lot of value the sale price you know shoots up somewhere around three hundred fifty odd kind of rupees and you look at you know again about fifty five sixty percent gross margin however the float into ebitda is much better here you would look at almost eighty thousand to one lakh rupees a ton as your ebitda margin
Unidentified Participant
Okay okay so sir if you can mention this percentages that would be much better actually
Akshay Pitti
Percentages is misleading because as you know we have a full pass through on costing barring a black swan event where towards the end of a quarter you have energy costs all costs are passed through to the customer so when the prices go up the percentage goes down and the prices go down percentage margin goes up so we are always more comfortable giving you in per ton basis because that is what is the actual margin that is negotiated with the customers
Unidentified Participant
Understood understood and how about
Akshay Pitti
Now now when you go to lamination side I finish the lamination in the second part when you talk of the state of frame integrated casting if you are already accounting for the machining margin in the casting then you have to look at it slightly differently if you are only looking at strata frame related thing from a lamination side so different thing otherwise you’ll double account the margin so if you now look at the lamination side your low lamination and low value added smd are roughly fifteen thousand rupees kind of a margin fifteen to eighteen thousand rupees ebitda margin your high value added smd are somewhere between thirty thousand to even sixty thousand it all again depends on the type of high value add that there is there is no definition for high value added assemblies right so if it’s a very complicated product if it’s a limited quantity then it’s a higher margin if it’s a regular high running volume and not as complicated we are lower margin so it is very variable there so you have a very wide band in that now when you come to the state of frame and rotor shaft integrated assembly is nothing but a high value added lamination assembly which is integrating with the machining casting so there you can add the margin of both and then something on top of that for processing
Unidentified Participant
Understood no this is very helpful sir this is very helpful sir if I if I if I may ask you one more question see fundamentally I think the company overall profitable structure and growth structure has changed a lot in the last five years if you see right what has led to this kind of what has led to this kind of inflection point and and how do you see the next like next four to five years because because we have moved that phase and what are the next complicated or like areas which the company is working on which are very very hard to replicate or where fundamentally there is a moat which the company is trying to establish
Akshay Pitti
On the loose lamination side it’s very strange but we are always doing the higher value added assembly and the status shafts integrated smd’s in the past our exposure to loose lamination low value added smd was lower so the inflection point for the company was that we tried to grow this lower margin volume based business therefore increasing our overall capacity and ability to absorb the higher fixed cost that we have so that is what has led to the inflection point number one inflection point number two was this whole consolidation of pithy casting into pitti engineering vertically integrating a casting facility which has both iron casting and steel casting facilities along with the machining supplier so with that the ability of the company to offer solutions to customers especially in the challenging environment of the COVID years which you know which are fresh in our memories where the supply chains are all disrupted and our ability to execute across lamination and machine testing for these customers helped us grow our capabilities as well as our base now we have gotten into a virtual cycle I would say wherein the demand for such kind of products is increasing due to trade wars with china us buying iron castings from india is cheaper than to buy from china now due to the duty structures there are fta is coming in so it is leading into a cycle wherein india is more and more emerging as a strong contender for being the next supply chain solution to china for most of the global release and if you have demonstrated capabilities in terms of products or facilities obviously your name is on the top of the list with all these clients so that’s how the future is evolving from that inflection point
Unidentified Participant
Understood and if I may ask one more question here how can a company actually extend their capabilities into new metal areas like for example today piti has both steel and iron capabilities right how can someone really expand their capabilities into titanium nickel or like some of the more complicated areas where the future is also like growing a lot in terms of space or be it aerospace defense etcetera right I mean those are the applications where we are currently hearing so how can one company even expand their capabilities into those areas is pd engineering is even thinking about it etcetera
Akshay Pitti
In terms of ability to expand I would say we have maybe sixty to sixty five percent of the tools required in our toolkit in terms of understanding how to do those machinings understanding how to do the simulation pattern making etcetera in terms of doing the other stuff which is you know institutional knowledge of how a particular metal would behave when it is being casted or how it reacts with certain sands and coatings those are things that you learn as you you know go through the journey so if you ask me it would take like three odd years for us to expand into the non ferrous side I won’t just say titanium i’m saying like non ferrous castings it would not be a far leap from where we are however today we are not looking at it as a sector for growth because our core competencies which is iron casting and steel casting we are seeing a huge requirement and the things that you mentioned are typically used in aerospace and defense where the volumes are smaller obviously values are higher but then the sustained growth across such four sectors such as mining of heavy vehicle locomotives these are more sustainable businesses which we understand very well and we don’t need to reinvent anything so today we are not looking at anything on that side
Unidentified Participant
This helps thanks thanks a lot i’ll johan back with you
Operator
Thank you the next question comes from the line of rahul kumar with bakaria fund please go ahead
Unidentified Participant
Yeah hi
Operator
Just one question on this esop course so
Rahul Kumar
Till when this esop cost will continue to you know the expense
Akshay Pitti
I believe we have given given a schedule of esop cost if we have not will be shortly updating it on our website I think this eleven ten point nine sorry ten point three crores esop cost which is booked per annum this would be there for the current year and then after this year it starts tapering off so we can give you a small excel sheet which has this accounting treatment over the next seven years how it will keep going downwards
Unidentified Participant
Okay understood understood and second question on
Akshay Pitti
This you know this value added products in the lamination I think how do we see this going forward do we see the share going up or do you believe
Unidentified Participant
That the next volume growth is going to come from lower value add laminations
Akshay Pitti
See both are going to grow they are completely different drivers now when we qualify something say as a dg set we would put it in loose and low value added lamination because of the value add that there is into it so we are seeing all of those sectors still growing and again some of the wind lamination assemblies goes loose some of the railway related laminations that we supply within india go loose so those sectors are still continuing to perform strongly and if you ask me how I see the mix in fy twenty eight for something like a ninety thousand tonnes I would say that those lamination and low value added smd would be something like sixty five odd thousand tonnes and the remaining sixty odd one thousand tons and the remaining would be high value added in state of laminations so the growth rate in those would be slower or smaller the growth rate in the others would be higher however the base effect is such that you know that is still going to grow exponentially
Rahul Kumar
Okay and this ninety thousand ton which you mentioned is the total lamination volume including the it includes the lamination as well as assemblies
Akshay Pitti
Yes
Rahul Kumar
Okay
Akshay Pitti
What is sixty nine thousand five hundred and seventeen today
Rahul Kumar
Yeah
Akshay Pitti
I’m talking of that
Rahul Kumar
Okay got it and the similar question on the on the casting side also how do we share this seamless machine component share you know going forward
Akshay Pitti
So the target that we have for current year of sixteen thousand tons I would say that your machine castings going into smd’s will expand to maybe about two thousand tons and total machine components the second line in the slide number eight that should rise to the somewhere on six and half six six and a half thousand tons and the remaining would be in the raw casting bucket
Rahul Kumar
Okay
Akshay Pitti
And this this may change depending on how quickly we get our machines and how quickly the ramp up happens it goes back to your same question on the depreciation side right so it’s all related to that
Unidentified Participant
Got it understood thank you
Operator
Thank you the next question comes from the line of kushal with asian broking please go ahead
Unidentified Participant
Hello yeah so I just wanted to know one thing in your concourse you have said that you do not hedge like I just want to know the reason behind it like as far as the entire business is surrounded around electrical steel so there should be some correlation with steel prices and all there should be hedging possible if i’m not wrong
Akshay Pitti
See there are two things we one hundred percent hedge our forex I don’t know which hedge you’re talking about so if you’re talking about forex commodity hedging is not required in our business if you look at our business we typically hold one month worth of inventory with us in raw material stage if you look historically over the last two and a half three years and the way the price chain mechanism works with our clients is that you have a quarterly price with them and we have a quarterly price with our raw material suppliers which is stable the quarter for price change the customer is deferred by what staggered by one quarter one month so for example my new prices for q one fy twenty seven that my clients would get implemented from first of may so the one month of inventory that we sold the low cost inventory which would be lying in our books in april gets consumed at april pricing which is the last quarter pricing similarly in an environment where the steel cost is coming down if i’m holding high cost inventory it will get liquidated in april and the lower prices get implemented from first of may this largely works and there’s no reason to hedge the contract structuring is in that way
Unidentified Participant
Okay so raw materials are priced every quarter like new prices and all it’s done every quarter with customers and everywhere
Akshay Pitti
Yes
Unidentified Participant
Okay okay take it take it thank you sir
Akshay Pitti
Yeah
Operator
Thank you the next question comes from the line of abhijit mitra with ionius alpha investment management please go ahead
Rahul Kumar
Yeah thanks for taking my question just to sort of understand the mix change as machining capex comes in so you mentioned that currently this year two thousand tons will be machine castings into assemblies you know machine components will be six six and a half thousand tons and almost seven and a half thousand tons will be so as machining hours pick up seven and a half thousand tons will move from raw casting to the machine components bucket
Akshay Pitti
Yes I would say that is the right way to look at it and also new products which are getting developed so the sixteen thousand also will rise further and that all that development that is happening is in directly a machine component
Rahul Kumar
Got it got it got it expansion segments
Akshay Pitti
Yeah there are certain segments and clients such as pump casings and cement mixer related plants where the machining is not so value accurate for us so we are not focusing to do that today in house
Rahul Kumar
Got it done by
Akshay Pitti
Yeah
Rahul Kumar
Yeah sorry so machine component six six and a half thousand tons will will will be the number which will keep growing as you move to twenty four thousand tons and then to thirty six thousand tons
Akshay Pitti
Yes
Rahul Kumar
Okay
Akshay Pitti
Yes absolutely
Rahul Kumar
Got it got it and also the the machine casting into assembly is the two thousand tons that will also grow
Akshay Pitti
Yes that will not grow significantly that will grow significantly over the next twelve to eighteen months this is part of a transition of certain clients where they are taking more value added products from us to offset the duty structures in the us if you recall I had mentioned that about a year ago and this is the longer term plan so that is now playing out
Rahul Kumar
Okay got it got it
Akshay Pitti
So some of the high value added smd that you see will move into the state of flame and integrated smd bracket and some of the machine components will move up the bracket into the machine casting going into lamination assembly
Rahul Kumar
Understood understood and and just rehash the margin numbers which you mentioned earlier you mentioned that machine castings I mean raw castings ebitda is around thirty thirty five thousand rupees per ton and machining machine casting would have what around eighty thousand per ton
Akshay Pitti
Eighty thousand
Rahul Kumar
Okay got it got it and for integrated casting you have to sort of add machining and on top of that on top of that lamination which is essentially fifteen thousand
Akshay Pitti
Yeah yeah add machining add lamination add the other machine components going into smg so these are basically tasks or they are basically like other machine pieces which come from say forging or bar steel that we buy and machine so all of those values less than something on top of all three
Rahul Kumar
Got it got it got it great that’s all from my side we should all thank you
Akshay Pitti
Yeah thank you
Operator
Thank you ladies and gentlemen due to time constraints we would take that as the last question for today I would now like to hand the conference over to the management for the closing remarks akshay sir please go ahead
Akshay Pitti
Yeah sorry just one second thank you everyone for your time and for joining us today we appreciate your continued interest and support and as we move into fy twenty seven our focus remains on disciplined execution improving working capital efficiencies completing ongoing capex and scaling our machine components vertical strengthening our position as an integrated engineering partner for customers across india and global markets should you have any other queries please feel free to reach out to our investor relations partners sga and we’ll come back to you with our answer shortly thank you
Operator
Thank you sir ladies and gentlemen on behalf of pity engineering limited that concludes this conference call thank you for joining us and you may now disconnect your lines