Action Construction Equipment Limited (ACE) Q3 FY23 Earnings Concall Transcript

Action Construction Equipment Limited (NSE:ACE) Q3 FY23 Earnings Concall dated Feb. 07, 2023.

Corporate Participants:

Sorab Agarwal — Executive Director

Rajan Luthra — Chief Financial Officer

Analysts:

Abhineet Anand — Emkay Global Financial Services — Analyst

Parag Thakker — Anvil Wealth — Analyst

Akshay Kothari — Envision Capital — Analyst

Himanshu Upadhyay — o3 Capital — Analyst

Suhrid Deorah — Paladin Capital — Analyst

Gaurav Gandhi — Glorytail Capital Management — Analyst

Jinesh Kothari — HDFC Securities — Analyst

Darshil Jhaveri — Crown Capital — Analyst

Hiten Boricha — Joindre Capital — Analyst

Sanjay Kumar — ithoughtpms — Analyst

Gunjan Kabra — Niveshaay — Analyst

Vyom Agarwal — Senior Vice President

Sanjay Kumar — ithought PMS — Analyst

Vipin Taneja — Individual Investor — Analyst

Pranay Khandelwal — Alpha Invesco — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Action Construction Equipment Limited Q3 FY’23 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Abhineet Anand from Emkay Global Financial Services. Thank you, and over to you, sir.

Abhineet Anand — Emkay Global Financial Services — Analyst

Thanks, Lisan. Good afternoon, everyone. I would first like to thank the management of Action Construction Equipment Limited for giving Emkay this opportunity to host this call. We have with us the senior management of Action Construction. We have Mr. Sorab Agarwal, Executive Director; Mr. Rajan Luthra, CFO; and Mr. Vyom Agarwal, Head IR.

I will hand it over to Sorab sir for giving the opening remarks, post which we’ll open the floor for Q&A. Over to you, sir.

Sorab Agarwal — Executive Director

Yes, thank you. Good afternoon, everybody, and welcome to this earnings conference call for discussing the results for the quarter and nine months ended 31st December ’22. I take this opportunity to wish all of you a fabulous new year with good health and happiness. Along with me in today’s earnings call, we have our CFO, Mr. Rajan Luthra, and our Head of Investor Relations, Mr. Vyom Agarwal.

I hope that all of you had an opportunity to look at the company’s financial statements and the earnings presentation, which had been circulated and uploaded at the stock exchanges.

Let me start with some of the recent business highlights. We strengthened our product portfolio and showcasing our technical products. The company has recently unveiled India’s first indigenously designed and developed fully electric mobile crane with breakthrough technology and zero emissions, expanding our presence in the heavy crane segment, we have also launched India’s biggest indigenous crane with 180 tonnes lifting capacity and also showcased 35 tonnes four by four pick and carry crane which is our biggest.

With our focus on the export market and the defense sector, the company has also launched new range of telehandlers and also India’s first series of aerial work platform, also popularly called as AWP for the domestic markets. This occasion of inauguration of all these new machines was graced by Mr. Nitin Gadkari, Honorable Minister for Road, Transport and Highways, India, amongst a gathering of industry leaders, customers, business partners and company delegates.

To address the emerging needs and technology requirements with the backdrop of reducing carbon footprint of our end users. With these new launches, ACE marks India’s first indigenously developed 100% electric construction equipment, and propels India’s growth on the global platform of technological advancements.

Further, to brief you on the financial performance of the third quarter of FY’23, the operational revenue grew by 27% on a year-on-year basis to INR555 crores with an EBIDTA of INR67.67 crores showcasing a growth of 58%. The EBITDA margin stood at 12.2%. The profit before tax stood at 10.9%, that is around INR60.27 crores, and PAT margins were at 8.1% around INR45 crores. I’m delighted to share that these are our best ever quarterly revenue, EBITDA, PBT, PAT numbers ever.

For the nine months ended FY’23, the operational revenue grew by 38% as compared to similar period of FY’22, and stood at INR1,545 crores with EBITDA of INR166 crores which is 49% growth on year-on-year basis. Our PBT grew by 57% to INR146.33 crores. The PAT stood at INR109 crores which is 56% growth on year-on-year basis. And EBITDA margin of 10.7% and net profit margin 7.1% are also better as compared to last year’s nine-month results.

Now let me give you a sequential perspective. For the third quarter FY’23, operational revenues grew by 13% on a quarter-on-quarter basis with 150 basis points improvement in EBITDA margins. The PAT during the quarter increased by 25.4% on a quarter-on-quarter basis and PBT and EBITDA numbers registered a growth of approximately 30% respectively. The company sustained its growth momentum across all operating segments during the quarter, driven by focus on customer centricity, execution and agility in operations.

In the crane segment, during the quarter gone by, we reiterated our dominant market leadership position and registered revenue of INR385 crores, with margins of 13.5%. The construction equipment segment clocked revenue of INR62.5 crores with EBITDA at 10.27%. The metal handling segment recorded revenue of INR44.5 crores with margins at 15.65%. And agri division registered revenue of INR64 crores, while maintaining margins at around 3.74%.

While the construction equipment and crane divisions have led the growth, agri has shown some signs of improvement with December quarter numbers sequentially better than September. With lower inflation, strong winter crop sowing and signs of pickup in farm incomes, it is likely that the rural slowdown is bottoming out. Our consistent strong all around performance is a testimony to our strategic clarity, strength of our brand, our capabilities, our execution skills, along with agility in running the business and most importantly the determination and passion of our talented purpose-driven team members.

On the operational side, the economic activity in India continued to gather momentum with sequential moderation in commodity inflation, even as core inflation remained elevated, all the major commodity still — all the major commodity still remain at an elevated level, when compared to long-term averages. This is evident when you look at the inflation from medium term perspective. Commodities such as What it is, such as [indecipherable] steel, alloy steel, pig iron, aluminum, copper, rubber etc are still close to 50% inflation when compared to pre-COVID levels.

To summarize, commodity — commodity inflation seems to have peaked and is moderating from its unprecedented levels and that augurs well for our industry. We remain focused to deliver on our growth agenda, growth that is consistent, competitive, and profitable. We will try and continue to manage the delicate balance of ensuring competitiveness of our products and keeping our margin profile in a healthy range.

Looking ahead, we would like to reiterate our previous guidance and expect a growth of 28% to 30% in the cranes seg — 25% to 30% in the crane segment for the current year and 30% to 35% growth in the construction equipment segment. Material handling and agri segments are expected to grow at around 10% and 15% respectively during this year. On the whole, we are looking at, at least 28% to 30% increase in our top line for the current year with expansion in EBITDA margins as compared to last year.

For this, our Honorable Finance Minister has presented the Union budget which lays down seven priority areas, Sab Krishi that is inclusive development, Sabka Saath Sabka Vikaas, reaching out to the last mile infrastructure and investment unleashing the potential green growth, youth power, and finally, very importantly, growth to the financial sector. The budget sets out realistic and inclusive vision for the nation and is in line with the vision of our Prime Minister to make India Atmanirbhar while giving a boost to Make In India concept.

Capital expenditure outlay will be stepped up by 33% for the third year in a row to INR10 lakh crores in ’23, ’24. Also, the effective capital expenditure of the central government is estimated at INR15.7 lakh crores, which is equivalent to 4.5% of our GDP. Allocation towards capital expenditure and infrastructure lay out including the setting up of new infrastructure finance [indecipherable] period. Will enhance opportunity for private investments in sectors like railways, roads, urban power and infra — urban infra and power, sorry.

Global manufacturers are looking beyond China. With our Prime Minister, Narendra Modi, stepping up to seize the moment, we believe that India will be a big beneficiary as companies move forward towards China Plus One strategy. This along with the PLI initiatives has been helping to revise the industrial capex cycle, thereby, solid private capex. This makes us believe that the demand scenario should be further strengthened and will continue to provide strong growth momentum to our company in the medium to long term.

With this, I would like to open the call for question-and-answer session. Thank you.

Questions and Answers:

Sorab Agarwal — Executive Director

Thank you, Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Parag Thakker from Anvil Wealth. Please go ahead.

Parag Thakker — Anvil Wealth — Analyst

Yeah, congratulations on great set of numbers and guidance. I wanted to just understand what is the breakup of our crane business, so how much comes from real estate, how much comes from industrial capex, how much comes from railways or refineries. I don’t know, so just wanted segmental breakup in the cranes business.

Sorab Agarwal — Executive Director

Thank you. I don’t think we have a segmental analysis available off hand with respect to the end User segment, but broadly, we can tell you that within cranes, about 10% to 12% comes from the real estate sites.

Parag Thakker — Anvil Wealth — Analyst

Okay.

Sorab Agarwal — Executive Director

And let’s say the balance about 45% and 45% approximately would come from infra and manufacturing. But cranes are used not only for infrastructure and construction at large, but also within for manufacturing for lifting, shifting goods within the factory, logistic — about 10% would be approximately real estate. About 45% to 50% plus minus with respect to infra, 45% to 50% plus minus with respect to —

Parag Thakker — Anvil Wealth — Analyst

Manufacturing.

Sorab Agarwal — Executive Director

Yeah.

Parag Thakker — Anvil Wealth — Analyst

Manufacturing includes refineries. It includes various things, right?

Sorab Agarwal — Executive Director

Everything right from the biggest like refinery, cement plant, steam plants, and obviously going down to the smallest of the factories in industrial areas. A lot of our cranes even in industrial area for loading, moving, lifting, shifting.

Parag Thakker — Anvil Wealth — Analyst

Correct, correct. And so how does industry order book work. So for example, when you are guiding for 25% to 30% revenue growth and EBITDA margin improvement. EBITDA margin improvement you’re guiding for is what 150 bps?

Sorab Agarwal — Executive Director

On a whole year basis, I think last year we did close to 10% and this year we had projected 10.5% to 11%, hopefully we should be around 11% this year.

Parag Thakker — Anvil Wealth — Analyst

11% for next year, right, FY’24?

Sorab Agarwal — Executive Director

No sorry, FY’23.

Parag Thakker — Anvil Wealth — Analyst

FY’23 will be 11%, FY’24 will be 13%, you said na?

Sorab Agarwal — Executive Director

Yeah, it should be somewhere between 12% to 13% that will unfold over the next years.

Parag Thakker — Anvil Wealth — Analyst

Yeah, yeah, correct, correct and 25% to 30% growth is for FY’24 right, over FY’23?

Sorab Agarwal — Executive Director

FY’23, you’re talking about the current year, 28% to 30% growth; for the next year, we’re looking at about 15% to 20% growth at least. And maybe we have a fall with — with the final this thing, we will be able to put a precise percentage — percentage to it.

Parag Thakker — Anvil Wealth — Analyst

Yeah, yeah correct. So basically you have order book kind of situation where you can predict revenues for next year?

Sorab Agarwal — Executive Director

Not really. See, in our industry, people want to order and take their deliveries as soon as possible. Generally extra but generally people don’t wait more than one or two months. General momentum in our plan and the understanding of the industry also coupled with our products, new ranges what we feel will further increase for example like construction, equipment, material handling and let’s say tower industry. So that’s how we are able to predict what additional incremental we’d be able to do.

Parag Thakker — Anvil Wealth — Analyst

Correct, within construction equipment space, we compete with players like JCB and all?

Sorab Agarwal — Executive Director

Yes, for our backhoe loaders, we compete with JCB, they are much bigger than us, much, much bigger than us, but yes slowly —

Parag Thakker — Anvil Wealth — Analyst

What should be our market share in the JCB segment?

Sorab Agarwal — Executive Director

See, currently I shall say that our market share there is about close to little over 3%.

Parag Thakker — Anvil Wealth — Analyst

Just 3%, okay.

Sorab Agarwal — Executive Director

But it is going to move very fast now.

Parag Thakker — Anvil Wealth — Analyst

Okay, okay and your manufacturing capacities are fungible right. So you can make construction equipment also in the same plant and you can make cranes also in the same, this thing. So suppose its demand for construction equipment where you compete with JCB that increases significantly.

Sorab Agarwal — Executive Director

Yes, see, it is not 100% fungible, but pretty well fungible, specially at the fabrication side. So yes, going up in something and going down is possible for us with great flexibility there.

Parag Thakker — Anvil Wealth — Analyst

And what will be the current year capacity utilization on — in FY’23?

Sorab Agarwal — Executive Director

See, as of now, if I talk of the last quarter on a company basis, we’re working at close to 68% to 70% utilization.

Parag Thakker — Anvil Wealth — Analyst

Okay.

Sorab Agarwal — Executive Director

But if we talk of cranes, we are about 75%, if we talk of construction equipment, we are at 50%, if we talk about metal handling, we are about 65%.

Parag Thakker — Anvil Wealth — Analyst

Construction equipment, you are only at 50%?

Sorab Agarwal — Executive Director

Yes, as of now.

Parag Thakker — Anvil Wealth — Analyst

Okay, sir, what is the capex for the — what was the capex for ’23 and what is the capex for ’24?

Sorab Agarwal — Executive Director

See, our plan for the current year which is ongoing. The exact number, I’m sure Mr. Luthra will provide, but we are setting up a new manufacturing facility for making bigger cranes spending close to about INR35 crores.

Parag Thakker — Anvil Wealth — Analyst

Okay.

Sorab Agarwal — Executive Director

So this will enhance our capability to produce more number of bigger cranes and now that we are also launching bigger models. Apart from that, we have also initiated capex with respect to our regular crane production. We really want to increase our capacity by 40%, 50%. So that will start to take shape in this quarter and hopefully we want to operationalize that by quarter two of next year FY’24, so that will again be to the tune of INR35 crores to INR40 crores.

Parag Thakker — Anvil Wealth — Analyst

What is the asset generally, if you put up INR35 crores, what is the revenue you expect at say 70% utilization?

Sorab Agarwal — Executive Director

See, INR35 crores — let’s say INR40 crores can give us a peak revenue addition of INR700 crores, INR800 crores, at 70% utilization, INR500 crores, INR600 crores.

Parag Thakker — Anvil Wealth — Analyst

With 10%, 11%, 12% margins?

Sorab Agarwal — Executive Director

More than that, sir. In cranes, we are currently doing 13% and —

Parag Thakker — Anvil Wealth — Analyst

I’m saying — I’m saying — I’m saying breakout — breakeven in within a year.

Sorab Agarwal — Executive Director

Yes, yes, yes, we should be able to recover that money in one full year of operations.

Parag Thakker — Anvil Wealth — Analyst

And you have got net cash of INR300 crores right now?

Sorab Agarwal — Executive Director

Approximately INR290 crores, INR300 crores, yes.

Parag Thakker — Anvil Wealth — Analyst

So what should be the dividend payout, one can expect?

Sorab Agarwal — Executive Director

That is for the Board to decide, but I’m sure going forward it is going to increase.

Parag Thakker — Anvil Wealth — Analyst

Okay, okay. That’s it from my side. Thanks a lot, sir, thanks a lot.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is from the line of Akshay Kothari from Envision Capital. Please go ahead.

Akshay Kothari — Envision Capital — Analyst

Thanks for the opportunity. So any update on the acquisition, which we had planned, which I think went into the IBC at company.

Sorab Agarwal — Executive Director

We have already submitted our resolution plan through the resolution for questions and things are — seem to be moving in the right direction. So hopefully, we should have some news over the next two, three months, Mr. Luthra, maybe faster than that.

Rajan Luthra — Chief Financial Officer

Yeah, in the next quarter — in the coming end — by March end.

Sorab Agarwal — Executive Director

By March end. So maybe by end of this quarter or early next quarter, some thing should materialize, hopefully.

Akshay Kothari — Envision Capital — Analyst

Okay. Sir, upgrade on Ghana project, have you received that EXIM Bank advance with we were waiting?

Sorab Agarwal — Executive Director

Yes, so we are still waiting for it. It is just around the corner, that is the confirmation we have. So we were actually planning and are geared up to start execution in quarter four this year, but I think that will delay to quarter one next year when we start execution.

Akshay Kothari — Envision Capital — Analyst

Okay. And sir, I just wanted to understand the incremental growth — the opportunity, which we are seeing, working capital would be essentially funded by borrowings only? Because I think you had —

Sorab Agarwal — Executive Director

[indecipherable] and I would say also very efficient management for the last two, two-and-a-half years. We had less our inventory [indecipherable] and I’m very, very happy to tell you that in the last quarter we started controlling our inventories, and at the end of last financial year, our inventory days were at 104 and now they have gone to 89, our receivables were at 40 days, now they are at 30 days, at the end of the quarter. And if you look at our creditor days, we are nearly similar at 105 they were earlier, 103 now. On the whole from 39 days, if you calculate our working capital, 39 days, which was at the end of the financial year. And if you talk of December quarter, it’s gone down to 17 days and we were targeting 25, 30 days. So we have been doing – could do a wonderful job in the last two, three months. And going forward, I think we should be in a position to evenly stabilize this around 20, 25 days. So our working capital record is 20, 25 days, so that requirements to run the business is not very high. And whatever it is, we will manage from internal accruals. That our aim.

Akshay Kothari — Envision Capital — Analyst

Sir, during September quarter —

Operator

Sorry to interrupt, Mr. Kothari. Sir, may we request that you return to the question queue, there are participants waiting for their turn.

Akshay Kothari — Envision Capital — Analyst

Yeah, okay.

Operator

Thank you. The next question is from the line of Himanshu Upadhyay from o3 Capital, please go ahead.

Himanshu Upadhyay — o3 Capital — Analyst

Congratulation on great set of numbers. And the effort which we have given in last few years is showing up, okay. You’re able to maintain the market share is great, okay —

Sorab Agarwal — Executive Director

We will increase it, sir.

Himanshu Upadhyay — o3 Capital — Analyst

I wish So, as an investor. I wish so.

Sorab Agarwal — Executive Director

All the props, all segments. We are very limited.

Himanshu Upadhyay — o3 Capital — Analyst

Okay, so first question was, in last few years, we have increased our basket of equipment. Okay, both in cranes and construction machinery, okay, what is the opportunity to cross-sell. This question I’m asking because I was doing some rural [indecipherable], okay, what I found the people who do equipment rental business, generally having both cranes and construction machinery. Okay, so that means the backhoe loaders.

So how focused are we in selling our backhoe loaders with our existing crane customers who rent the equipment out, and what measures have we taken, so that we can cross-sell and increase our basket of products to the existing customers so far. This is the first question.

Sorab Agarwal — Executive Director

See, to answer your question, about 50% of cross-selling is possible, specially crane team doing the backhoe loaders thing. And we use that definitely, but to be very frank with you currently, to the level of 10%, 20%, because what happens cranes even the last 27 years, we are established, we are leaders, we are number one. So it is very easy for any person who sell to be able to convince and get orders and execute.

Backhoe loader, because we are a comparatively smaller — is a slightly tougher task. So we have a separate set of people also doing that who are supported by the crane people and going forward with our numbers, which has started to increase now. And sales may [Foreign Speech] and I am sure over the next one or two years [Foreign Speech]

So eventually it will come to a level that 50% cross-sell or market, which is available but 20%, 30%, 35% of that we’ll be able to test where we are currently working at 10% level.

Himanshu Upadhyay — o3 Capital — Analyst

And then the second question is, we hear a lot of progress happening on warehouses. Okay, and capacity utilization, improving at manufacturing and new manufacturing facilities also coming up. But on our material handling, the sales is stagnating, okay. So what is the reason for that and what are we doing to increase our market share on the forklift and all those equipments, okay, material handling equipment, especially.

Sorab Agarwal — Executive Director

Unfortunately, quarter one and quarter two, we did suffer a little on our numbers. More to do with our internal problems with respect to supply chain and manufacturing. And we were not able to significantly increase our numbers and that’s why, even if you see in this quarter on a yearly basis, we increased our numbers only by 3%. But yes, definitely quarter-on-quarter you can see us above 25%.

Himanshu Upadhyay — o3 Capital — Analyst

One last question, then I’ll join back in the queue. Can you give an idea of applications of this 180 tonnes crane what we have launched and size of the market and how fast is it growing?

Sorab Agarwal — Executive Director

Yeah, I’ll just finish the first answer regarding metal handling. Yes, for some good bad reason, we’re not able to increase our market share and our numbers in the first half of this year. But I’m sure within quarter four and especially in the next year, we will surprise everybody very pleasantly about the metal handling, because all the orientation and alignment with respect to ensuring a good product and good numbers that is in place. And I think metal handling would grow faster definitely next year even in Q4.

Regarding 180 tonne crawler crane which is a new introduction, we’ve shown our first machine at an exhibition and first inaugurated also. We expect to commercialize this by June, July. So hopefully, quarter two onwards, we’ll start selling this bigger model of crane. And at that time, may be 100 tonne crane, which was under development that could also be in our kitty, and we’ll have the entire range of crawler cranes right from 40 tonnes, 45 tonnes, 55 tonnes, 75 tonnes, 80 tonnes, 100 tonnes,160 tonnes or 180 tonnes.

So by June July with the commencement of our new plant which we were talking about of bigger cranes, I think will start these 180 tonnes cranes as well.

Himanshu Upadhyay — o3 Capital — Analyst

The applications and size of the market?

Sorab Agarwal — Executive Director

The size of the market and —

Himanshu Upadhyay — o3 Capital — Analyst

Applications of these cranes.

Sorab Agarwal — Executive Director

Again, bigger plants, refineries, cement plants, infrastructure projects, bridges, flyovers, bullet trains, windmills. You know anything heavy — any 50, 70, 80 tonne load that comes to your mind is handled by such cranes.

Rajan Luthra — Chief Financial Officer

Average price of such a crane would be close to about INR3.5 crores. And currently, the annual size in Indian market is close to about [indecipherable] earlier.

Himanshu Upadhyay — o3 Capital — Analyst

Okay, thank you. I’ll join back in the queue for further queries.

Sorab Agarwal — Executive Director

Thank you.

Operator

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

Suhrid Deorah — Paladin Capital — Analyst

Yeah, hi, this has been a great quarter, congratulations [Foreign Speech]. I had a question on the construction equipment side. We’re just pulling up the numbers over the last two years and the realization seem to fluctuate a lot. So I think in quarter four of FY’22, the average realization was about INR45 lakh. This year the first half, it was about INR35 lakh, INR37 lakh and this quarter gone by quarter three, the realization is INR30 lakhs.

Could you help explain this and also in line with this, how to think about the margins, because [indecipherable] evaluation going down, your margins have gone up, so what should the — what does this segment look like going forward in terms of realization, volumes part.

Sorab Agarwal — Executive Director

This segment for us, the biggest for us by numbers is backhoe loaders followed by soil compactors and motor graders and eventually piling grids. So backhoe loader, average price is close to about INR23 lakh, INR24 lakh. Soil compactor again road rollers is similar — road vibratory roller. A motor grader is close to about INR65 lakh and INR70 lakh and a piling grid is close to about INR2 crores. That is why the variation you’re seeing. So if you end up selling two, three, four extra piling grids which is INR2 crore each, the number seems to be higher or lower. And it is dynamic. So, certain thing we really can’t control, but I would believe that backhoe loader being one of main risking and going forward motor grader also contributing in a significant way, [indecipherable] will stay in the range of INR25 lakh to INR30 lakh, little bit, I would say INR30 lakh plus or minus. And yes, if you noticed in our current quarter, we have actually — I always do say that once we start doing more than INR200 crores worth of construction equipment, our profitability will be going to double digits.

And we have done INR62 crores of revenue in the last quarter and our EBIT level is at 10.27. So going forward, I believe that once we are doing INR225 crores within this year itself, we would be doing INR230 crore to INR240 crores and going forward once we are doing INR300 crores to INR350 crores. So even the profitability will align totally with respect to our similar to our crane business. I would say, maybe a point — 100 points here and there. And the going will be good. And then, like I said, [Foreign Speech] we have to press the accelerator.

Suhrid Deorah — Paladin Capital — Analyst

Got it. Thank you. My second question was that you mentioned in your opening comments that the government itself is looking at a capex increase of 33%. So given that, you’re guiding 20% growth in FY’24. is there a reason for the difference?

Sorab Agarwal — Executive Director

I’m being very conservative.

Suhrid Deorah — Paladin Capital — Analyst

All right. Okay, thank you.

Sorab Agarwal — Executive Director

We keep on upgrading it as the quarters pass by.

Suhrid Deorah — Paladin Capital — Analyst

Yeah, thank you, I got it.

Sorab Agarwal — Executive Director

I don’t want to say 35% and end up doing 25% and still be on the backside.

Suhrid Deorah — Paladin Capital — Analyst

Yeah, I was expecting that, I just wanted to make sure. Okay. Thanks.

Operator

Thank you. The next is from the line of Gaurav Gandhi [Indecipherable] Retail Capital Management.

Gaurav Gandhi — Glorytail Capital Management — Analyst

Hello, sir, congratulations on the great set of numbers. It’s great that the company has launched the electric crane and really appreciable. But my question was regarding whether they are equivalent strength with the existing cranes which run on the oil and given the charging infrastructure is not that well in the country yet, is it make really the viable option for the players to buy that?

Sorab Agarwal — Executive Director

Yeah, the electric crane, so I’ll talk on two things, viability and the electric charging infrastructure separately. Generally, electric machines and things come at two-and-a-half to three times the cost, but we’ve been able to come up with a crane at about 72% [Phonetic] higher cost than a current similar crane for [Indecipherable]. And as per our calculations, the viability payback is in for extra company invested by the customer or retail hirer. It’s about two, two-and-a-half years. And after that for one-and-a-half, two years, to sustain, you have to replace the battery, is still — that earning is free, so you’re saving on additional INR15 lakhs, INR20 lakhs on account of fuel In the last two years out of the four-year life-cycle of the battery. So we believe that it is going to be, — and most importantly if I took a retailer, they — the operators and all given full fledged everything happens, all that will also finish. And for the bigger companies, everybody wants to be environmentally-friendly. Already the first proto machine which we have displayed, one of the main contractor, the Tata Steel, he wants to take it straight away, we said no wait for two, three months before we launch it commercially. Already, companies like Reliance, or L&T or Tata or X number of people who seen it already are already very much interested. So that’s the viability side of it.

Gaurav Gandhi — Glorytail Capital Management — Analyst

All right. That’s great. The second question, in that last conference call, you mentioned that you have received the export order — big export order —

Sorab Agarwal — Executive Director

Let me answer regarding the charging that you were asking about.

Gaurav Gandhi — Glorytail Capital Management — Analyst

Yeah, yeah, yeah.

Sorab Agarwal — Executive Director

[indecipherable] comes with onboard chargers. So, all you need to do 220 or 440 kilowatt Power Point needs to be a available and this machine can charge itself anywhere.

Gaurav Gandhi — Glorytail Capital Management — Analyst

All right. But whether charging points will be available in the area where this crane works maybe if something is happening at — the construction is happening of the bullet train, let’s say, whether such kind of power will be available there to —

Sorab Agarwal — Executive Director

Let’s forget the bullet train, but because you’ve mentioned bullet train, the site is working, they have electricity power and DG set giving them 220 or 440 supply already. That is how the things are happening there. So there is no infra site where power is not available or there is no factory where power is not available. And if you talk of retail hirers or the hiring segment, in their offices, shops, yards, everybody has power. 7

We are using the same power with onboard chargers, problem is cars and other things do not have onboard chargers. That’s why they need a charger. We have a onboard charger. So you just have to connect electricity, it is much simpler, much easier.

Gaurav Gandhi — Glorytail Capital Management — Analyst

All right. The second question is regarding in last conference call you mentioned that you have received some big export order, the result of which will start during from quarter three and quarter four, so given that the current increased sale of cranes, will it be sustainable or is it related to that export order only?

Sorab Agarwal — Executive Director

Yes, there has been some contribution in the, let’s say, cranes or in the construction equipment sector, it is very much sustainable. Rather, it is only going to become two-three times of this the projections that we had from our distributors and partners and also apart from that, we have received a good significant order from Namibia for traffic. So some execution this quarter. But most of it in the next year.

So, and like I said, we want to make for to be 10%, 15% of our portfolio. We have with this year, close more than 6%. Maybe INR120 crores, INR130 crores, maybe slightly higher. And going-forward I believe that next year we will hit our 10% planned target with respect to our portfolio.

Gaurav Gandhi — Glorytail Capital Management — Analyst

Alright. All right sir. Thank you very much. Thank you.

Operator

Thank you. The next question is from the line of Jinesh Kothari from HDFC Securities. Please go ahead.

Jinesh Kothari — HDFC Securities — Analyst

Hello, sir, congratulations for having good set of numbers to you and entire team — you and your entire team. Sir, I just wanted to know about — you mentioned about that we are still awaiting the letter of credit from the EXIM Bank and you are hoping it to get — receive by Q1. So what is the revenue that we can expect in the next financial year from that project of $25 million approximately?

Sorab Agarwal — Executive Director

See, we are expecting it within this quarter. So quarter one execution should start. So out of the total approximately INR200 crores. I believe at least 50%, 60%, if not more, we should be able to invoice and consider in revenue in the next fiscal.

Jinesh Kothari — HDFC Securities — Analyst

Okay, sir. And second question was about — we are receiving — of the pilot projects and orders from the defense sector as well. So do we have any defense order book number that we are currently serving and catering to them?

Sorab Agarwal — Executive Director

Yes, so see, as of now, we are executing that special multipurpose entity machine. And Luthra, what we have done about half of it?

Rajan Luthra — Chief Financial Officer

Half of it.

Sorab Agarwal — Executive Director

So let’s say that was about a 500 odd units plus minus and we’ve executed half of it, the balance will be then in the next year. And apart from that, the smaller MRSA and [Indecipherable] crane orders under execution, and actually slightly bigger cranes for handling. So the exact number we don’t have handy, if you could just process a mail or something, we will provide the exact detailsy.

Jinesh Kothari — HDFC Securities — Analyst

Sure sir, and just a small question on the agricultural segment part, so upon the last quarter, we improved on the agri margins, but they are not sufficient as we are doing in other segments. So how are we looking-forward to that in coming quarters?

Sorab Agarwal — Executive Director

We have been struggling a little in our agri segment for some time now, but things are changing. You can also see some improvement and inflation and commodity price coupled with our pricing power with respect to agri, we are really troubled up in the last one, two years. But going forward, things seem to have stabilized a little now, our numbers are also improving. So I’m sure this quarter four and quarter one numbers, quarter four FY’23 and quarter one numbers, you will see significant improvement and we are hopeful that in the next financial year, that number is also increasing and pricing stabilizing with respect to input costs. You should do 10% EBIT level there even in the agri segment on slightly increased revenue.

Another thing is that. Just like construction equipment, agri, again as we start to do upwards Iof NR250 crores, INR300 crores of revenue, that’s in the INR70 crores, INR75 crores on a quarterly basis, the operating leverage and the utilization levels will help us reach our 8%, 10% EBITDA level. Hopefully, we are on-track and next year we should be able to see.

Jinesh Kothari — HDFC Securities — Analyst

Right sir. That is helpful. And if you can please share the number of utilization rate we’re having currently in the agricultural equipment segment. And is that fungible or not?

Operator

I’m sorry to interrupt sir, we are not able to hear you clearly. Mr. Kothari.

Jinesh Kothari — HDFC Securities — Analyst

Hello, am I audible now?

Sorab Agarwal — Executive Director

Yes.

Jinesh Kothari — HDFC Securities — Analyst

Yeah, so if you can please share the number of utilization rate, we are currently having in the agricultural equipment segment and whether that capacity is fungible for other manufacturing units or not?

Sorab Agarwal — Executive Director

Yeah, our current utilization with agri segment is close to 45%. And this is not fungible with others except for that, yes, some engines and transmissions we do in our transmission plant, it’s definitely fungible. But the end-product facility definitely not fungible and we are currently utilizing 45% in agri and we expect that next year this will also go to 60%, 65% actually.

Jinesh Kothari — HDFC Securities — Analyst

Fine sir, that is all from my side. All the best for the upcoming quarters.

Sorab Agarwal — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.

Darshil Jhaveri — Crown Capital — Analyst

Hello, good evening, sir, and thank you so much for taking my questions. Congratulations on a great set of numbers. So most of my questions have been answered, so I would just like to ask a bit more capex side, so we are doing around INR70 crores capex in the — in by next year, correct sir? So that capex should be online by Q2 FY’24, correct?

Sorab Agarwal — Executive Director

Yes.

Darshil Jhaveri — Crown Capital — Analyst

And too, we can expect around revenue of INR700 crores from the INR70 crores capex and that utilization could happen — how much time would it take to — needs a certain level of utilization where we can expect the revenue to reach — our peak revenue?

Sorab Agarwal — Executive Director

Here are two capex we are doing, this INR75 crores, one is about INR35 crores, one is about INR40 crores.

Darshil Jhaveri — Crown Capital — Analyst

Okay.

Sorab Agarwal — Executive Director

This INR35 crores of capex in return period wil give us the capacity of around INR300 crores, INR400 crores. And we should be able to utilize that in FY 25, FY 26 in totality. FY 24 we would use 30%, 40%, 50% but FY 25, FY 26 over the next two-three years. This is about INR300 crores, INR400 crores, and the other capex INR40 crores, we were expanding our current capacity of our existing thing by about 40%, 50& by investing about INR40 crores in plant and machinery. That will be also become seen by quarter two and we should be able to utilize some of it in this year if the demand is to that tune, but I’m sure by FY ’25-’26, again that we should be able to use and that will give us revenue, we see our utilization and availability of close to INR700 crores, INR800 crores. So INR700 crores, INR800 crores plus INR300 crores, INR400 crores is INR1,000 crores to INR1,200 crores of capacity addition we are doing by spending this INR75 crores, first thing. Second thing, what is also happening simultaneously in fact in one of these capex, we are setting up a new facility within our existing premises, we are — within our existing land, we will further free up locations for forklift and tower cranes, so there again, we expect fifty-fifty percent increase in capacity. So that’s about a INR100 crores, INR150 crores of forklift utilization possibility and another INR150 crores of tower crane utilization possibilities. So all in all, this will help us to do with INR1,200 crores to INR1,400 crores of revenue.

Darshil Jhaveri — Crown Capital — Analyst

Okay sir, that helps me a lot, sir. And all of these our additions would be margin-accretive, correct sir?

Sorab Agarwal — Executive Director

Yes. Yes.

Darshil Jhaveri — Crown Capital — Analyst

So our just current Q3 margins are on a sustainable [indecipherable] you’re seeing additional growth. We don’t have any seasonality per se right in the business?

Sorab Agarwal — Executive Director

We do not have, what — I didn’t get you — you’ll have to be little bit clearer please.

Darshil Jhaveri — Crown Capital — Analyst

Sorry, sir, sorry sir, am I audible right now?

Sorab Agarwal — Executive Director

Yeah, yeah.

Darshil Jhaveri — Crown Capital — Analyst

Sorry, sir. I just wanted to ask, we don’t have any seasonality per se right sir in our business, our margins will — with our new revenues will keep on growing quarter-on-quarter or is there some element of seasonality in our business?

Sorab Agarwal — Executive Director

There is definitely an element. Generally, quarter one is definitely slower than quarter four. And quarter two is definitely better than quarter one, but still on the slower side. The second half picks up very fast, quarter three and quarter four. So if you look, traditionally, we do about 40% to 45% of our revenue in quarter one and 55% to 60% of our revenue will — sorry in the first half, sorry. 40%, 45% in the first-half and 55% to 60% in the second-half. And accordingly, the margins, when the revenue slightly not so great, do not rush up in the first-half, but just start to improve in the second-half. So that seasonality, is there a little bit, first-half and second-half.

Darshil Jhaveri — Crown Capital — Analyst

Okay sir. Thank you so much. That helps me a lot. All the best for your result. Looking forward to great numbers.

Sorab Agarwal — Executive Director

Yes, thank you.

Operator

Thank you. The next question is from the line of Hiten Boricha from Joindre Capital. Please go ahead.

Hiten Boricha — Joindre Capital — Analyst

Hello. Thank you for the opportunity, sir. Sir my most of the questions have been answered, just a follow-up question on this capex, you mentioned, we are doing INR35 crore capex for these bigger cranes, 180 tonnes, and the balance INR40 crores we are doing this, I didn’t get that. Where are we spending this INR40 crores?

Sorab Agarwal — Executive Director

So this is again to increase our capacity for smaller cranes, which is our bread-and-butter product, to increase our capacity by 40%, 50%, our existing plants are being — their size and shape and form is being increased to accommodate to do more business, application as well as assembly.

Hiten Boricha — Joindre Capital — Analyst

Okay, so by any chance you can provide like what number of cranes we can produce per year or anything like that?

Sorab Agarwal — Executive Director

Yes. With respect to our pick and carry cranes, our mobile cranes, currently our capacity is about 8,000 to 8,500. And post expansion it will go to 12,000 plus.

Hiten Boricha — Joindre Capital — Analyst

Okay.

Sorab Agarwal — Executive Director

And for the crawler cranes, our current capacity is about 40 units roughly.

Hiten Boricha — Joindre Capital — Analyst

Sorry sir, I didn’t got you, what, sorry. Hello.

Sorab Agarwal — Executive Director

The crawler cranes and the truck cranes, our current capacity is about 40 units per annum. This will go to 200 plus per annum.

Hiten Boricha — Joindre Capital — Analyst

200 plus, okay.

Sorab Agarwal — Executive Director

And simultaneously, after doing this thing, our capacity we can currently produce 175 forklifts, that will go up to around somewhere around 275 per month.

Hiten Boricha — Joindre Capital — Analyst

Okay.

Sorab Agarwal — Executive Director

Our tower cranes, which we have been currently doing 30-35 in a month, that will also go to 50 units per month. So I’ll put it in the annual perspective, it will be easier for you. The forklifts is currently from about 2,000 the capacity that we have will go to around 3,300 annually.

Hiten Boricha — Joindre Capital — Analyst

Okay.

Sorab Agarwal — Executive Director

And for tower cranes, our capacity of currently around 350, that will go to 550, 600 annually.

Hiten Boricha — Joindre Capital — Analyst

Okay. And everything —

Sorab Agarwal — Executive Director

Utilization revenue may be close to about anywhere between INR1,200 crores to INR1,400 crores likely fungible, maybe even INR1,500 crores.

Hiten Boricha — Joindre Capital — Analyst

Okay. So sir, if any of this capex has already been spent or is it going to start from Q1 itself?

Sorab Agarwal — Executive Director

We have already spent, I think we would have spent close to 40% of it, approximately 40%, 45%.

Hiten Boricha — Joindre Capital — Analyst

Okay, okay and balance we’ll be spending in next six to eight months, okay, okay, sir.

Sorab Agarwal — Executive Director

We will make It operational by quarter two positively.

Hiten Boricha — Joindre Capital — Analyst

Okay and everything will be start generating revenue from Q2 next year, right?

Sorab Agarwal — Executive Director

So we are trying that the bigger crane facility to operationalize that in Q1. But definitely, by Q2, yes.

Hiten Boricha — Joindre Capital — Analyst

Okay, okay. That’s all sir. Thank you.

Sorab Agarwal — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Sanjay Kumar from ithoughtpms. Please go ahead.

Sanjay Kumar — ithoughtpms — Analyst

Hello. Sir, first is a book-keeping question, can you give the exports for Q3 and the nine-month?

Sorab Agarwal — Executive Director

Export numbers for Q3 and nine months. Just a second. I think I have the revenue, for nine months, we have exported about INR74 crores.

Sanjay Kumar — ithoughtpms — Analyst

INR74 crores?

Sorab Agarwal — Executive Director

Yeah and Q3 we have done about INR50 crores.

Sanjay Kumar — ithoughtpms — Analyst

Five zero?

Sorab Agarwal — Executive Director

Yeah.

Sanjay Kumar — ithoughtpms — Analyst

Okay, okay and we could share some insights on which countries, as I was looking at some data it was Tanzania, some of the African and Asian countries. So what is driving this and —

Sorab Agarwal — Executive Director

About 25 to 30 all over the world including our immediate neighbors like even Nepal, Bangladesh, we were doing to Afghanistan but that has reduced quite a lot in last two, three years. But apart from that we are doing in Southeast Asia, some in Middle-East Asia in six, seven, eight countries within African continent, where there is potential. And recently, we have started, Turkey. And in the last six, eight months, we have also gone into the South American continent, especially, focused on Brazil and Argentina. some in Mexico and some as well as in CIS countries including Russia.

Sanjay Kumar — ithoughtpms — Analyst

What is driving this because we are already seeing significant growth, does the markets don’t have established players there. Is it a relatively new market for everyone?

Sorab Agarwal — Executive Director

They have everything and they are already buying something and utilizing. We are driving it. We are trying to foray into these markets, offer equally good products, maybe more lucrative, maybe cost effective. We are trying to export. Till two, three years back, we were not trying to export our machines in any organized fashion. So the machines which are technically similar and acceptable abroad, for example, forklifts and especially backhoe loader, and tractors. So our export team — our expert division is driving this.

Sanjay Kumar — ithoughtpms — Analyst

Okay and will there be a 10%, 20% —

Operator

Sorry to interrupt, Mr. Kumar. Sir, may we request that you return to the question queue.

Sanjay Kumar — ithoughtpms — Analyst

Okay.

Operator

Thank you. The next question is from the line of Gunjan Kabra from Niveshaay. Please go ahead.

Gunjan Kabra — Niveshaay — Analyst

Hi sir, thank you for the opportunity and congratulations for the good set of numbers. Sir, wanted to understand that — that you mentioned that manufacturing sector it seems contribute around 50% of the revenue. Sir, we have real estate and infrastructure it’s quite clear, but in manufacturing, which sectors contributes to our revenue?

Sorab Agarwal — Executive Director

Ma’am some of your voice was not audible.

Gunjan Kabra — Niveshaay — Analyst

Is it audible now?

Sorab Agarwal — Executive Director

Slightly better, yeah.

Operator

Sorry to interrupt ma’am, there’s a lot of echo from your line.

Gunjan Kabra — Niveshaay — Analyst

Just a second. Just a second.

Sorab Agarwal — Executive Director

I’m so sorry, but let’s say, within cranes, I discussed — I have not been able to understand your question, but little parts of it. Vyom, if you have been able to understand —

Vyom Agarwal — Senior Vice President

No sir, there was a lot of echo from her side.

Sorab Agarwal — Executive Director

Yeah, so but let’s say out of — within our cranes segment, which is 70% of our revenue, 10% approximately goes into real estate, 45% goes hardcore into infrastructure-related activity of any type and about 45% to 50% goes into manufacturing within the cranes segment.

Gunjan Kabra — Niveshaay — Analyst

Sir. I wanted to know in the manufacturing sector, which — in the manufacturing sector which sector contributes for the major revenues is what I wanted to understand.

Sorab Agarwal — Executive Director

The steel sector ma’am, because finally cranes are built to handle heavy goods and all heavy goods are made of steel. So right from the scheme of things of steel whether it is, let’s say, an iron-ore mining to factories which are producing [Indecipherable] iron or going into the final product, pellets or plates because at every place steel we are handling. And then from the bigger factories or the, let’s say. Steel Authority of India or Tata Steel or whichever JSW, they go to the yards, there again handling is happening, loading, unloading, then they move to the theaters, then they go to the end-users who fabricate create some component out of it or some fabrication. Then finally it is installed somewhere. So in the entire cycle, cranes are used for heavy goods and directly, indirectly, steel sector, mainly apart from everything else, which is heavy.

Gunjan Kabra — Niveshaay — Analyst

Okay. Sir, I’ll get back to the queue. Thanks.

Operator

Thank you. The next question is from the line of Akshay Kothari from Envision Capital. Please go ahead.

Akshay Kothari — Envision Capital — Analyst

Yeah, thanks for the opportunity again. Sir, can get one of the webinars on construction equipment industry, and one thing, which came out was half of the construction equipment industry is backhoe loaders. First of all, is it — is it really like that?

Sorab Agarwal — Executive Director

I would say, one third, a little more than one third maybe. Maybe around 35%-40% is backhoe loaders, yes, construction equipment.

Akshay Kothari — Envision Capital — Analyst

Also one thing also came out backhoe loaders utility value compared to other construction equipment is much more and it’s a very useful machine. So is it like —

Sorab Agarwal — Executive Director

Yes, it’s a multipurpose machine.

Akshay Kothari — Envision Capital — Analyst

Yeah, it’s a multipurpose machine. Is it somehow marching in the share of cranes as a total percentage of construction equipment or cranes would always have that utility?

Sorab Agarwal — Executive Director

Cranes are totally different, see, backhoe loader is basically a machine which has loader in the front-end and excavation in the rear-end. So it is used for loose aggregate. Loose aggregate when I say is sand [Foreign Speech] or let’s say in a tiles shop, let’s say tile factory [Foreign Speech] cranes are used for solid goods, so they can never compete with each other.

Akshay Kothari — Envision Capital — Analyst

Okay. Okay. And sir.

Rajan Luthra — Chief Financial Officer

I would just like to add little bit, cranes are used wherever there is lifting and shifting.

Abhineet Anand — Emkay Global Financial Services — Analyst

Yes.

Rajan Luthra — Chief Financial Officer

Whereas backhoe is basically for digging. So wherever we can visualize and digging and earth handling, that is where you have a backhoe, wherever you can visualize the lifting and a shifting there you would need a crane. So there are two different, totally different applications to each other. And they are kind of complementary rather than supplementaring each other.

Akshay Kothari — Envision Capital — Analyst

Understood. Last question from my side would be sir then are we also having any pipeline to develop electric backhoe loaders, just like what we did in cranes because that would be something remarkable.

Sorab Agarwal — Executive Director

So. I think we can easily develop for electric backhoe loader, but it will not be commercially viable, because what happens, in cranes we can afford to have the battery weight, we already need some counterweight. But in a backhoe loader, if we add one or two, two and a half tonnes of battery weight, the self weight of the machine goes up. And the characteristics of the machine changes and even battery consumption and power consumption. And cost versus saving, It is easily to develop a machine. But I feel that in backhoe loader segment, it might not be that viable. With respect to backhoe loader and going forward maybe in the next two, three, four years, even in the crane segment, the more viable option would be hydrogen fuel-cell technology, which will help us to eliminate [Indecipherable] backhoe loader or any other machine which does not require a counterweight. It will make more sense to going with hydrogen technology, hydrogen IC engines, hydrogen fuel cells.

Akshay Kothari — Envision Capital — Analyst

Okay, understood. Thanks a lot and all the best to you.

Operator

Thank you. The next question is from the line of Himanshu Upadhyay from o3 Capital. Please go ahead.

Himanshu Upadhyay — o3 Capital — Analyst

Yeah, hi. See, out of the 200 sales of construction equipment, what would be the number of backhoe loaders, in this quarter?

Sorab Agarwal — Executive Director

Out of our construction, equipment, the numbers for backhoe loader in this quarter. Luthra sir, what is the number of backhoe loaders in this quarter?

Rajan Luthra — Chief Financial Officer

184.

Himanshu Upadhyay — o3 Capital — Analyst

It is 184, you said?

Rajan Luthra — Chief Financial Officer

Yes.

Himanshu Upadhyay — o3 Capital — Analyst

And last year how much was it in the same quarter?

Rajan Luthra — Chief Financial Officer

Last year in the same quarter it was 144.

Himanshu Upadhyay — o3 Capital — Analyst

Okay. And one more thing. As more and more grow, okay, what percentage of our revenues are currently from spares and services in this quarter and nine month. How are we — those numbers moving?

Sorab Agarwal — Executive Director

Luthra saab, spare parts revenue to our revenue is how much —

Rajan Luthra — Chief Financial Officer

Nine months we have done sir about INR65 crores

Sorab Agarwal — Executive Director

So 68 divided by —

Rajan Luthra — Chief Financial Officer

In the current, we have done INR27 crore as compared to last corresponding quarter INR19 crores.

Sorab Agarwal — Executive Director

About 4%, 5% of our revenue is coming from spare parts.

Rajan Luthra — Chief Financial Officer

That’s right.

Himanshu Upadhyay — o3 Capital — Analyst

See, one question I have. This business is cyclic, okay. Currently, the penetration of these equipment is very less, okay. But over next five years, six years, when the penetration becomes very high, we find most construction equipments have to go for the, I would say, spares and services to keep their vendors healthy and also for their own profitability, okay, once penetration increases of these equipment. So how are we focusing on, because if we are not focusing in this period of time when the times are good, okay, on this, and when people are ready to shell some money out. In tough times trying to convince people to do a factory renewables or factory spares and services becomes much more tougher, okay. And being in a cyclical business, this will help play you an important role for a longer-term sustainability of our numbers, our vendors, okay. So how are you thinking now, okay. I mean, some thoughts on that.

Sorab Agarwal — Executive Director

Firstly, we have a very well spread-out network for spare parts and service. And as a matter of fact for any construction equipment or crane, mobile crane, for any manufacturer, it is imperative to have good availability of spare parts as well as service close to the locations where the machines are working, and that is what we’ve been able to do in India, we have spare parts from more than 100 locations available within the country.

And in the last one and one and a half year, I would say, one and a half years, also our system on automated BMS wherein spare parts availability and altering with respect to our staff locations is everything is as on record on our dealer management system. So I think that task, we very well understand, because the success of any equipment is totally based on the availability of spare parts, finally it’s a machine, something will go wrong. It will require maintenance parts, it will require everything.

So that is a very-very key aspect with respect to our industry and we are doing whatever best is required to cater to that.

And you — cyclical thing you were talking about, yes, our business is that way cyclical, because it depends on the economy, it depends on infrastructure spend, it depends on manufacturing sector doing good. And to overcome these [Technical Issue], that’s what we decided two-three years back that 5% to 10% of our portfolio, our revenue should come from defense and other 10% 15% from exports, to be able to generate some counter flexibilities in our business if the macros go wrong in the country. So we are very much focused there also.

Himanshu Upadhyay — o3 Capital — Analyst

See, when we have a target of growing our market share in across the businesses, okay, are we also having a team whose target is to take this aftermarket spares services to something, let’s say, 10% 12% of our revenue at least in double digits or —

Sorab Agarwal — Executive Director

We have created similar structure within our company only in the last five, six months. So, take back business into the mainstream from the aftermarket with respect to spare parts. And we have very actively started working on this aspect in the last two, three quarters. So hopefully going-forward, the spares revenue contribution will improve a little bit.

Himanshu Upadhyay — o3 Capital — Analyst

Okay, and lastly, you had an aim of —

Operator

Sorry to interrupt, Mr. Upadhyay —

Himanshu Upadhyay — o3 Capital — Analyst

Okay. Thank you.

Operator

Thank you. Ladies and gentlemen, we would request you to the restrict your questions to one per participant only. We’ll take the next question from the line of Sanjay Kumar from ithought PMS. Please go ahead.

Sanjay Kumar — ithought PMS — Analyst

Hello. Sir, just one follow up exports, so do we sell directly, globally or is it through set of distributors? And if you said that our products will be lucrative or cheaper compared to global players, so you shouldn’t miss the bigger opportunity for us going-forward, the exports piece.

Sorab Agarwal — Executive Director

Yes. What you’re saying is precisely true. And mentioning our target as 10% 15% that all are initial target, but I think going-forward over the next two years, five years, 10 years, the potential is enormous, for us to make in India and the things that even our country is talking making for the world. And for the first time we started moving in that direction. So the potential is enormous. There can be a time, five years to 10 years from now, where we say that, if we do X revenue, but we are doing 30%, 40%, 50% in the next quarter, that is a possibility and we are working very hard in that direction. And to attain that in the last six months we are working very actively now on all our products upgradation. And I feel that within calendar year ’23, most of our products would be very much export worthy and comparable to the European look, feel, fit, finish quality also standards. And then we are working very actively in that direction. And let’s just hope and say that results follow. There was a second part of your question, what was the first part of your question, I forgot while answering.

Sanjay Kumar — ithought PMS — Analyst

Do we sell directly or through distributors or through any other partners?

Sorab Agarwal — Executive Director

We sell through dealers and distributors, because like I said, machines need parts and service. We just do not want to sell some odd units. And then the customer gets troubled after one or two or three years. Saying that some units do get exported directly to countries, which are not represented through a distributor or a dealer. And we try to ensure that we provide them adequate spare parts, along with the supply of the machine.

Sanjay Kumar — ithoughtpms — Analyst

In that case, are we building this network of dealers and distributors increasing it year on year?

Sorab Agarwal — Executive Director

Yes, we are today operating out of 25 countries and more than that exact number is not handy and potential by potential, we are opening up markets like I mentioned in the last year three, four critical markets, four, five which we opened, one is Turkey, — in the current year, sorry, Turkey, Argentina, Brazil, Mexico. And even Ukraine, you’ll be surprised when the first as I landed there, our containers, the first containers of our machines was at the port last year. And even Russia, we have opened. Apart from I’m sure some of the farther markets.

Sanjay Kumar — ithoughtpms — Analyst

Okay, okay. And finally on when —

Operator

Sorry to interrupt Mr. Kumar. Sir, may we request that you return to the question queue.

Sanjay Kumar — ithoughtpms — Analyst

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vipin Taneja, an Individual Investor. Please go ahead.

Vipin Taneja — Individual Investor — Analyst

Hello. Sir am I audible?

Sorab Agarwal — Executive Director

Yes, yes.

Vipin Taneja — Individual Investor — Analyst

Sir, my greetings to you on fabulous results sir. And sir, just you mentioned about the defense sector. Sir — and reading about all these MSRM [Phonetic] and Akash missile program. I think they’ll be mounted on your truck cranes only. So can we see by 2027, ’28, slight difference itself going towards INR1,000 crore revenue because the opportunity says so, are we going forward for that kind of sales growth?

Sorab Agarwal — Executive Director

See. It’s very difficult to put a number to it, but what you’re saying is possible, maybe not INR1,000 crores, maybe INR700 crores, INR800 crores, it is very difficult to put a number to it. But anything is possible. And another thing that our government is focused, earlier they were also importing cranes at two times, three times the cost to the price such requirements. Giving an example, we are supplying some special cranes again to the Navy, which will happen — which will be executed in the — we received this order about three, four months back which will be executed in the next year. That alone is about INR35 crores, INR40 crores, we will finish it in two, three months. So things are happening now, whether it is INR100 crores, INR200 crores of cranes or INR800 crores, INR1,000 crores, that time will tell. I really can’t put the numbers, but yes thinking on it I think INR300 crores, INR400 crores looks easily doable, the type of pipeline that we see.

Vipin Taneja — Individual Investor — Analyst

And what are the margin differential versus on normal market and defense markets?

Sorab Agarwal — Executive Director

See, margins, from the bottom of our heart we are Indian and we want to work for our defense forces. So we’re not overcharging or anything, just sustainable. And that’s our intention to service the defense. I’ll be very frank on it.

Vipin Taneja — Individual Investor — Analyst

Okay and sir couple of more question. I have two more questions, if you can permit me.

Operator

Sorry to interrupt, sir. But there are participants waiting for their turn. May we request you to return to the queue. Thank you. The next question is from the line of Pranay Khandelwal from Alpha Invesco. Please go ahead.

Pranay Khandelwal — Alpha Invesco — Analyst

Hello, thanks for the opportunity. Sir, can you just give us some insight on the present landscape in maybe mining, construction and roads sectors.

Sorab Agarwal — Executive Director

Yeah so, mining, construction and road sector, what do you want to know, I couldn’t figure out the questions.

Pranay Khandelwal — Alpha Invesco — Analyst

Like can you give us the landscape of what kind of demand, we can expect from —

Sorab Agarwal — Executive Director

Okay. I think the demand is very robust, all across. And with respect to end user segments, whether it is manufacturing, whether it is mining, whether it is infrastructure. I mean whether it is upgradation of railway stations, ports, roads, bullet train, steel industry. Steel prices have again started firming up a little in the last one and a half, two months spanning on a few striking steel. Which is very good news because steel prices going up means the demand is going up, More cranes will be required. So. I think it is across sectors, wherever we operate, there is buoyancy.

Pranay Khandelwal — Alpha Invesco — Analyst

Thank you. That will be all.

Sorab Agarwal — Executive Director

Yeah.

Operator

Thank you. The next question is from the line of Vipin Taneja, an individual investor. Please go ahead.

Vipin Taneja — Individual Investor — Analyst

Sir, just wanted to know. I think you mentioned a lot about exports. So what would be your like a billion dollar dream. Are we even thinking on those lines, because 40% 50% exports. The company is totally thinking differently altogether now, that’s what my assumption is.

Sorab Agarwal — Executive Director

Last six months, one year we’ve started thinking this differently. I didn’t say that we will do 40% 50% exports I say, that is also a possibility. So that’s how efficiently we are able to create upgrade our products and sell our sales into the international markets. I think, looking at the capabilities of our company and our ability to, be very flexible with respect to whatever needs to be done for the end customer, this could be a reality, but obviously we can only put in efforts, right, and we’re doing that.

Vipin Taneja — Individual Investor — Analyst

And currently, what —

Sorab Agarwal — Executive Director

And just I’m answering that question. I would just say that and certainly most parts of the world, who are using machines from China wants to avoid that or doesn’t want to do it and is looking for alternatives. So there is generally an opportunity to do wonders, do wonders, I mean, it can go anywhere.

Vipin Taneja — Individual Investor — Analyst

All the best. Because I’m interested party too, for the company. And sir, coming on like what would be the equipment, or the cranes which you are currently very bullish on or maybe in terms of cranes in terms of tunnels like this is the — would be the most hot sector currently and going forward, maybe in the medium-term. And on the equipment side as well, construction fee equipment. Because in bauma Expo this is the thing that you mentioned that the current capacity — the current size of the construction equipment industry, which is INR50,000 crores, will be INR1,00,000 crore going forward in next two years 31st December 2024 you mentioned.

So both in construction equipment and cranes, what are the like — really you are bullish on —

Sorab Agarwal — Executive Director

Within cranes, we do pick and carry cranes, which one of our main products and tower cranes, where again we are market leaders. And yes, last three, four years, we’ve been trying to enter into the bigger crane segments, BS-III to BS-IV transition was an issue. I feel that I’m very bullish on pick and carry cranes, this is nothing the numbers that are happening in the country, the way country is growing and things are happening, this will double, triple, maybe become five-six times in no time. So that’s my assessment.

If I talk of tower cranes, which are primarily used for building construction, with per capita income increasing, the economy stabilizing, yes, currently, the interest costs are going up, but sooner or later will start to go down. Is already a boom in the housing sector already real estate. I’m very bullish on real-estate. If you ask me that what these 50 cranes a month or 600 for the year, which we intend to do from next year onwards. This capacity should get utilized within the next year, maybe even faster.

The way things are we are not able to deliver. So, all across, like you talk of bigger cranes, let’s say, 40-50 tonnes and bigger, where in the last five-six years our country has allowed China to capture the market. And Chinese have used only one tool. Sell at ridiculous prices and offer one year credit to the end-customer. That is the primary reason why a company like CIL has gone down under Captive India Limited.

Vipin Taneja — Individual Investor — Analyst

Okay, they’ve gone down under, right.

Sorab Agarwal — Executive Director

More or less, they are under some restructuring or some takeover or something is happening. So — and the Chinese have captured that market, they’re selling about 300, 400 units every year. So we need to think about that to the country — that’s why we’re setting up this bigger crane factory. Not only to grow our company, but as a true patriot bring it back to the country, the Chinese have taken it. How can they? How has the government allowed them to? As a matter of fact, I have already started meeting some of officials and the right people even at the highest level. How have they allowed this to happen? And Tractors India Limited, sorry for — I have become little emotional now, Tractors India Limited are supplying to Indian Defense, maybe Army, refineries, all high-value projects and sensitive things and they’ve allowed it to go to dogs. Can’t they see? I’m sure this government sees, so things will happen very quickly.

[Foreign Speech] If they want to turn off your refeneries, they can. They expect that Chinese players will load the missiles and components and things or pull out wreckage when there is a war happening. It will never happen. One of the oldest Indian companies which was doing 70, 80 tonnes cranes has been allowed to sink at the hand of Chinese, what will happen to the mobile sector. I mean, cell phones and what they are trying to do in the automotive sector which they have been constrained already.

Vipin Taneja — Individual Investor — Analyst

Sir, they were the only one who were dong all these —

Operator

Sorry to interrupt, Mr. Taneja. Sir, this is the last question that we could take.

Vipin Taneja — Individual Investor — Analyst

Okay, and sir, we would be competing —

Operator

I’m so sorry, sir. Mr. Taneja.

Vipin Taneja — Individual Investor — Analyst

That’s okay.

Sorab Agarwal — Executive Director

Please mail it to us, we can answer. Yeah.

Operator

Ladies and gentlemen, due to time constrain, we may not have taken all questions. We thank you for your active participation. I now hand the conference over to the management for their closing comments.

Sorab Agarwal — Executive Director

Yep. Thank you. We’ve had a very good quarter and hopefully quarter four seems to be in line to be even bigger, better with margin expansion again on the anvil and going forward I would like to say that about two years back we have projected that in three years, by FY ’24, we should be able to do a INR2,500 crore with about a 10% coming from exports. So I have a feeling that in FY’24 we should exceed both of these targets which we have set for ourselves. Crossing INR2,500 crores revenue and then our exports being more than 10%. And with the profit margins further increasing and stabilizing on account of better utilization, on account of operating leverage. And the country’s overall scenario is pretty buoyant, even in the phase of global recessionary news everywhere. So I see that short term prospects are good, medium term are good, long term are very good.

With that I just hope we are able to deliver as per the expectation of our investors. Thank you.

Rajan Luthra — Chief Financial Officer

Thanks a lot.

Vyom Agarwal — Senior Vice President

Thank you everybody.

Operator

[Operator Closing Remarks]

Sorab Agarwal — Executive Director

Thank you.