Apar Industries Limited (APARINDS) Q3 FY23 Earnings Concall Transcript

Apar Industries Limited (NSE: APARINDS) Q3 FY23 Earnings Concall dated Feb. 1, 2023

Corporate Participants:

Kushal Desai — Chairman and Managing Director

Chaitanya Desai — Managing Director

Analysts:

Ambesh Tiwari — Essential Technologies — Analyst

Mahesh Bendre — LIC Mutual Fund — Analyst

Amit Anwani — Prabhudas Lilladher — Analyst

Gopal Agrawal — HDFC Mutual Fund — Analyst

Charanjit Singh — DSP Mutual Funds — Analyst

Chirag Setalvad — HDFC Mutual Fund — Analyst

Mihir Manohar — Carnelian Asset Management — Analyst

Maulik Patel — Equirus Securities — Analyst

Vivek Gautam — GS Investments — Analyst

Himanshu Upadhyay — O3 Capital — Analyst

Darshil Jhaveri — Crown Capital — Analyst

CA Garvit Goyal — Invest Research — Analyst

Yogesh Bathia — Sequent Investments — Analyst

Saurabh Patwa — Quest Investment Advisors — Analyst

Dhavan Shah — AlfAccurate Advisors — Analyst

Bobby Jayaraman — Falcon Investments — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY23 Earnings Conference Call of APAR Industries Limited. As a reminder, all participant lines will be in the listen. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Ambesh Tiwari from Essential Technologies. Thank you and over to you sir.

Ambesh Tiwari — Essential Technologies — Analyst

Hi. Good afternoon, everyone. This is Ambesh Tiwari from Essential technologies. I welcome you all to the third quarter FY earnings call for APAR industries. Can you discuss the business performance and outlook, we have from the management side Mr. Kushal Desai, Chairman and Managing Director. Mr. Chaitanya Desai Managing Director; and the CFO, Mr. Ramesh Iyer. I would now pass on to Mr. Kushal Desai. Thank you and over to you sir.

Kushal Desai — Chairman and Managing Director

Yes. Thank you, Ambesh. Good afternoon, everyone, and welcome to APAR Industries Q3 earnings call. Let me start by giving an overview of our performance and follow that up with short industry update. I would then like to get into more details on the segmental performance of the three businesses. And post that we can open up the floor to questions. So during Q3 FY 23, the consolidated revenue came in at INR3,942 crores, which is 77% higher than the previous year. This was largely driven by volume growth across all divisions. Our export revenue grew by 144% year-on year. And is today, contributing 49% of the overall company’s revenues. This is compared to 35% a year ago. The EBITDA is also up by 174% year-on year to INR349 crores at an EBITDA margin percentage of approximately 8.8%. Profit after tax for the quarter came in at INR170 crores, which is 210% higher than the previous year. It is at 4.3% versus 2.5% in the year ago period. Nine months consolidated revenue stands at INR10,270 crores, which is 63% higher than a year ago and our export revenues have grown by 105% for the nine month period.

In terms of some of the key industry highlights, India’s power consumption logged a double digit growth of over 11%, to INR121.19 billion units in December ’22 compared to a year ago. The robust growth of the power consumption indicates sustained momentum of economic activities through December. The peak power demand may which is a higher supply in day rose to 205.03 gigawatts in December ’22, while the figures for the previous year at the same period 183.4 gigawatts and it was 182.78 gigawatts in December. Power deficit in the country rose slightly 2.6% in the April, November period. India’s power consumption logged high of 9.6% to 343 billion units in Q3 FY 23 compared to year ago. So these are all robust growth indicators and clear sustained momentum in the economic activities that are a reflection of the amount of power consumption that’s the country is observing.

The central [ Technical difficulty ] as most of you may already know, as announced a very ambitious RDSS scheme largely around improving distribution, power distribution of approximately INR3,00,000 crores of this about 30% is allocated towards spend is approximately allocated towards cable and conductors. It will largely be cables and to a smaller extent conductors. This spending is expected to be deployed in a period of approximately five years. Also, the total outstanding dues owed by the electricity distribution companies to power producers that is to generation company has nearly half to INR675 billion as of December the ’22, compared to INR12, 110 billion as of December ’21. This can be attributed largely to the various steps taken by the government, such as the implementation of late payments surcharge rules. And provision of a facility for equated monthly instalments to utility. So if this trend continues, then it is a good sign of more disciplined coming in terms of the distribution sector. We so far has been the Achilles heel of the entire power infrastructure of the country.

I would now like to specifically talk about the business highlights by each segment. Our conductor business, revenues in Q3 FY 23 grew by 103% year-on year to reach INR1912 crores for the quarter with a volume growth of about 99%. The export revenues grew by 288% year-on year contributing to 53% of the divisions overall revenues. We– premium products in our basket of conductors contributed towards 44% of the revenue mix. The EBITDA per metric tonne post forex adjustment came in at 49,942 per ton, which is a historic high. We conducted division has seen a transformational journey in the past decade. And I think today we are reaping the fruits of all those investments and decisions that have been taken and invested it during the past several years. The improvement in the EBITDA is mainly due to the higher share of premium products. The higher share of exports in the conventional conductors, where our realization is better than in the domestic markets. They’ve also been a couple of strong tailwinds, where we’ve seen the price of steel having reduced as well as the container freight costs having come down to more destinations at the pre-COVID level.

During the nine month revenues they came in at INR4,899 crores. So they are 81% year-on-year, volumes are up 51% year-on-year. The EBITDA per metric ton for the period came in at INR37,900, which is 125% higher than the previous year. Our current order book stands at INR4,885 crores with 44% of the share coming from premium products. So overall, our conductor division has had a very good quarter and in fact, it’s the best quarter that it had in its all-time history.

Coming to the Oil division, there the situation has been a little bit more difficult. In Q3 FY ’23, revenues came in at INR1,245 crores, which is up 38% year-on-year. Volumes have grown by 9% in the quarter, backed by growth in the transformer oil business, both domestically as well as overseas. Exports contributed towards 43% of revenues. EBITDA post-ForEx adjustment came in at INR1,646 per kL. And this is in line with the guidance which was given earlier, where there was a clear expectation of lower profitability given certain inventory corrections and price corrections which were expected. The lubricant revenues came in at INR238 crores with a volume of 17,063 kL. Looking at the nine-nonth period, the Oil division revenues are up 33% year-on-year at INR3,489 crores. The volumes grew by 3% in the nine-month period. EBITDA post-ForEx, came in at INR5,190 per kL.

Looking at the Cable division, in the third quarter of FY ’23, revenues grew by 89% year-on-year to reach INR921 crores. There were significant increases coming from the sale of our elastomeric products, as well as exports. Our exports contributed towards 49% of the overall sales in Q3 versus 35% a year ago. The elastomeric cable revenues are up 29% year-on-year. We continue to see robust business in the renewable energy space, both domestically as well as overseas. So EBITDA post-ForEx for the quarter came in at INR109 crores, which is 11.8% of revenues, compared to 8.7% a year ago. Looking at the nine-month period for Cable, revenues are up 77% year-on-year at INR2,320 crores. And again, the elastomeric business and the export business is what has contributed to the growth. The overall export business is around 52% of sales in the nine-month period. The EBITDA post-ForEx is at 9.8% for the nine-month period compared to 4.4% the previous year. Our business is expected to hit the target which we had mentioned in our guidance of INR3,000 crores revenue for this segment.

So, overall, we continue to be quite optimistic about the growth prospects of the company. All the key growth parameters seem intact. We are well-placed to tap into the benefits of power, infra-led spends, both domestically and overseas in key markets like the United States, Australia, Europe and Latin America, especially as there is this push towards renewable energy, as well as the China Plus One benefit or opportunity for India continues.

I would also like to mention that we have an updated corporate presentation with significantly more details on the company profile and performance which has already been uploaded on our website. And specifically, I’d like to highlight that it carries more information, not only on customer mix but also on receivables and receivables funding that we have for the business.

So with this, I’d like to come to the end of my comments. I appreciate the time all of you have taken out for joining this call. And I can open up the floor to questions now, please.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.

Mahesh Bendre — LIC Mutual Fund — Analyst

Hi, thank you so much for the opportunity. Sir, there is a dramatic improvement at the EBITDA per ton for this quarter. So we are netting [phonetic] around 49,000 now, last year we were anywhere between 15,000 to 20,000. So why this improvement has happened?

Kushal Desai — Chairman and Managing Director

Yes. So, as we explained in the opening remarks, the Conductor division has seen this transformation journey and the high margin is actually the result of two things. One is that the share of premium products is going up, which gives us a higher margin. And secondly, even on the non-premium products, the proportions of our overseas businesses has increased. Both has resulted in higher margin. And also we have seen some tailwinds in the form of steel prices, as well as freight which has come down since the last one year, which has increased this margin to about 49,000 per metric ton.

Mahesh Bendre — LIC Mutual Fund — Analyst

So if you strip aside the benefit of steel prices and the trade cost — transportation costs, so what will be the sustainable EBITDA per ton could you see going forward?

Kushal Desai — Chairman and Managing Director

So, in the short term, which is for the next couple quarters, you will still see EBITDA per ton which is relatively high, in the 30,000 kind of range, but we have given a guidance that sustainably if you take a longer period of time, just with the structural changes that have happened due to the premium products, we are looking at 20 — we have given a guidance of 22,000 to 24,000. As these premium products are growing, the EBITDA per ton will continue to edge upwards. See, one fundamental mix which has changed — so Ramesh here has already given you that 44% of the revenues has come from premium product. But when you look at the balance 56% of the revenues, a large portion of that is actually conventional conductors, which has gone overseas, as opposed to have been sold in the domestic market, where we have been seeing better realization.

In the domestic market, still realizations are quite poor because the standard itself expected from many of the EPC players are layered at a very low level, whereas as you go into the more developed markets, which I mentioned in my opening comments, which are countries like the United States, Europe, Australia, Latin America, the standards expected are much higher from suppliers. So, we look at the market on a global basis. Wherever we see the best netbacks in terms of profitability, then we focus on servicing those contracts. So in the current situation, we are seeing good opportunities in these overseas markets for our standard products and we are focusing on the domestic market, largely for the premium value-added products. So that mix is what is helping drive this. Of course, the tailwinds, as Ramesh mentioned, there are two specific tailwinds which are there which is that from the time that some of these prices were quoted, steel prices have moved down and some of the contracts are DPP [phonetic] contracts. We saw the brutal side of it last couple of years, but in the last two quarters, these freight rates have been coming down. So we’ve been seeing now the benefit of that. So I hope that kind of holistically answers your question.

Operator

Thank you, sir. We have the next question from the line of Amit Anwani from Prabhudas Lilladher. Please go ahead.

Amit Anwani — Prabhudas Lilladher — Analyst

Hi, sir. First of all, congratulations for the great set of numbers. So first question for the Conductors business, just wanted to understand in more detail. You had mentioned that the non-premium products are seeing higher exports and HEC, we are largely focusing on increasing the volumes in domestic market. So any color on two, three key geographies where you are seeing the higher traction for standard products or any two, three geographies where you’re seeing higher traction for HEC products, some color on that sense, how the market is accepting your products in conductors business and which markets are accepting it.

Kushal Desai — Chairman and Managing Director

So I’m not sure whether we understood your question exactly, but see, the order inflow for high-efficiency conductors and the copper production will continue in the domestic market. And as I mentioned earlier, 44% of our INR4,800 crore order book — INR4,885 crore order book is these products. But the standard products which are — standard conductors, we have been increasingly getting opportunities to supply overseas where the profitability is better than in the domestic market. So that’s the mix that we are [Speech Overlap]

Amit Anwani — Prabhudas Lilladher — Analyst

Yes, sir. My question was, like, you said standard products. Just wanted to understand the major two, three geographies where the standard product [Speech Overlap]

Kushal Desai — Chairman and Managing Director

So as I mentioned earlier, there the United States is the largest market. And following that is Australia and some markets which are in Latin America.

Amit Anwani — Prabhudas Lilladher — Analyst

So can we assume like these are contributing more than half of the exports for standard products?

Kushal Desai — Chairman and Managing Director

Yeah, absolutely.

Amit Anwani — Prabhudas Lilladher — Analyst

Okay. Sir, my question for cables, are we still sticking to 20%, 25% CAGR for the next two years in that? And second thing is you mentioned elastomeric cables contribution is going up. So if you can just highlight how much percentage it contributed in this quarter.

Unidentified Speaker —

Yes. So we continue our guidance, about 25% to 30% on the Cable business, as we have been talking earlier also. And, sorry, what was the next question on?

Amit Anwani — Prabhudas Lilladher — Analyst

[Speech Overlap] Contribution in the quarter in cable.

Unidentified Speaker —

Yes. So the total growth is coming from our HT cables, LT cables, as well as elastomeric cables, and it’s a combination of domestic as well as exports. What has happened in the cable business is that our share of exports has gone up considerably. So if you look at the quarter three, we are close to about 50% in terms of export, which was just about 35% last year. So the share of exports has gone up, which is what has resulted in the growth of this cable business.

Kushal Desai — Chairman and Managing Director

Also, there is a growth which we are seeing, it’s a smaller growth, but a growth has also come from our, what we call, light-duty cables, and the business, which is a distribution-based business. So we started off — first year we had INR20 crores, then INR60 crores and last year was INR100 crores. This year, we should be close to INR200 crores. And the following year we are targeting INR350 crores in that segment. So that business is also growing parallelly with exports.

And then you asked for the growth on the — what is driving the growth on the elastomeric side. So that growth is being driven by the renewable energy space, the expansion happening there.

Amit Anwani — Prabhudas Lilladher — Analyst

Is it purely domestic?

Kushal Desai — Chairman and Managing Director

So we were — until two quarters ago, the business was all purely domestic. But now, we have some of the increased capacities which I had spoken about even in previous quarters for cables that go into both windmill as well as solar. And so now the export of those products has also started. So you will see actually as we get into FY ’24, more and more export of these renewable cables also happening — cables going to renewable energy space.

Amit Anwani — Prabhudas Lilladher — Analyst

And this elastomeric is higher-margin business?

Kushal Desai — Chairman and Managing Director

Yeah, the elastomeric cables are very specialized cables. And therefore, they carry higher margin. We are also one of the few vertically-integrated players where we make our own — we do our own insulation — the polymers that are used for insulation. So we do our own formulation and mixing of those.

Amit Anwani — Prabhudas Lilladher — Analyst

Right. Sir, my last question on RDSS scheme which you mentioned in your opening remarks, and you highlighted that 30% might be allocated to cables and conductors over five years, which gives me about 18,000 to 20,000 each year. So if you could just highlight on the addressable market for Apar and how much Apar as an entity can grab out of this pie.

Kushal Desai — Chairman and Managing Director

So, theoretically, we have products that cater to the entire basket or what is required. So these are low voltage and medium voltage cables. It’s a combination of underground cables and overhead cables/conductors. So we are in a position to actually address all of these requirements which are there from a product standpoint. Now it all depends then, finally, in terms of who the counterparty is and what are the terms and conditions. But my main point of bringing this up is that there is going to be a good growth in the requirement of cables, both domestically, as well as export. And usually when we say five years, it may spill another year or two, but the market is going to expand because of this RDSS, in addition to whatever else is already there in terms of market segments. So, therefore, the overall bullishness on the cable side is also quite high.

Amit Anwani — Prabhudas Lilladher — Analyst

Right. Sir, last, if I may squeeze in, so can we assume that we are seeing a sustainable high — we will continue to see sustainable higher growth in exports markets, at least in the near term across conductors and cables?

Kushal Desai — Chairman and Managing Director

Yeah, absolutely. We expect the current momentum on the export side to continue not only for the next quarter but also whatever we can foresee in FY ’24 as of now. And as you may — you may be knowing that even in the United States, the Infrastructure Bill and all is already on its way to get approved and executed. So the benefits of some of that has still not come in. This is pre the Infrastructure Bill spend actually taking place.

And on the renewable side, as more assets are coming up, it requires not only cabling at the site, and then evacuation to the grid, but then the grid is basically a conductor grid that then evacuates the power into whatever is the grid in that particular country, through which distribution to customers takes place. So in short, there may be ups and downs in terms of quarters, but if you look at the trend over the next three to five years, the trend is very positive, because globally power infrastructure is being added.

Amit Anwani — Prabhudas Lilladher — Analyst

Thank you, very much, sir. All the best.

Operator

Thank you. The next question is from the line of Gopal Agrawal from HDFC Mutual Fund. Please go ahead.

Gopal Agrawal — HDFC Mutual Fund — Analyst

Good afternoon, sir. Congratulations for a great set of numbers.

Kushal Desai — Chairman and Managing Director

Thank you, Gopal. Could you just speak up a little bit because we are — your voice is a little soft.

Gopal Agrawal — HDFC Mutual Fund — Analyst

Sure, sir. So just wanted to understand — the two segments have done well. So in general what’s the outlook on the lubricants, because generally this quarter impacted by inventory and ForEx. So how do you see the trajectory? Thank you.

Kushal Desai — Chairman and Managing Director

Can you just repeat, your voice was very low?

Operator

Sorry to interrupt, sir. Mr. Agrawal, I would request you to use your handset to ask a question at this time.

Gopal Agrawal — HDFC Mutual Fund — Analyst

Yeah. Hello?

Operator

Yes. Please proceed.

Gopal Agrawal — HDFC Mutual Fund — Analyst

Yeah. Sir, just wanted to understand your outlook on the lubricant business, because generally this quarter had a negative impact of currency and inventory. So how is the trajectory on this, sir?

Kushal Desai — Chairman and Managing Director

So, yeah. On the lubricant — meaning — so on the — so let me address it specialty oil and lubricant, the two separately. In the case of the specialty oil side, which is your transformer oil, white oils, et cetera, the transformer oil volumes have been reasonably good, both domestically as well as export. We’ve had a bit of a cost pressure which is there. Part of it has come basically from base oils having fallen at a very rapid pace. Some of it is due to the lack of purchase from China, which is the largest importer of base oils in the world. All of us know the recent quarter problems which they have had and that has continued into January of this year because of COVID spreading and many establishments and factories not running fully normally. So as a consequence, there was a big drop that took place in spot availability — meaning pricing of spot cargoes of various base oils.

Also, the public sector refineries had a lot of surplus base oil for two reasons. One is the overall demand of lubricants has been a bit soft, especially the retail side has been a little bit on the soft side. And, I guess, this resulted in an untimely or unplanned increase in base oil inventory which the public sector oil companies had. In addition to that, we’ve also had record production of base oils compared to previous periods. This put together resulted in them having excess product. Base oil is a very tricky item to store because it’s — you can only store it in specific tanks or specific quantity. So if the volume is getting produced faster than evacuates, the only option is to crash the price, so that people end up buying it. And that’s precisely what happened. We were expecting a little bit of that to happen, but what actually ended up happening was much more brutal than had been envisaged.

Now, as we go into Q4 that situation is getting normalized. And my sense is that by the end of this year, that’s by March, the situation should come basically closer to normal because I don’t think fire sales will continue. There is also an industry view that Chinese demand may — may come out stronger. And that’s the reason why lot of the refineries around the world have actually cut production.

Gopal Agrawal — HDFC Mutual Fund — Analyst

Sure.

Kushal Desai — Chairman and Managing Director

So it seems like a bit of a short-term problem. And by the end of the year, I think you should start seeing more normal economics. Loop companies which give very low inventory of base oils and they buy on a just-in-time basis. So obviously, they have benefited because they could take advantage of the spot prices. Companies like us run 70% of our purchase on longer-term contracts. And therefore, it’s taken longer for the tail to get cleaned out in terms of the inventory.

Gopal Agrawal — HDFC Mutual Fund — Analyst

Got it, sir. Really appreciate, and really very happy to see the volume growth and profitability. And just wanted to understand your focus on B2C side on the cable business, sir, because your cable quality is quite good. How do we penetrate market, just your strategy on that? Thank you.

Kushal Desai — Chairman and Managing Director

So on the B2C side of the cable business, it’s — we’ve taken a strategy of wanting to build that on a step by step basis. I mentioned earlier that from revenue of approximately INR100 crores as we did last year, we’ll be at close to INR200 crores this year. And we have a target of getting INR350 crores in FY ’24. So that is largely coming up.

Products are very well received, they’re of the best quality is there in the country by — by a margin. The key is actually adding distribution. And so we’ve been going about that. We’ve today have the distribution in the five southern states. We’ve added Uttar Pradesh. We’ve also added West Bengal and Bihar. So the rollout is happening. And our expectation is that this will slowly increase on a step-by-step basis.

If there are some basic numbers you would like. If you look at March ’22, we had about 20 distributors. As we hit December ’22, we have close to 100 distributors. If you take our presence in retail counters, we were at 275 retail counters in March. We are at about 1,550 retail counters at the end of December. So that spread is increasing.

And our product, we — the way we sell the product is by conducting demonstrations to electricians and specifier. So we were at around 6,000 demos per quarter in the March quarter. We’ve increased to 25,000 demos in the — in the September-December quarter. So all of these is all grass root level.

For example, if you take electrician needs, we were at about 450 needs in the March quarter. We are at about 2,500 needs in the December quarter. So it’s — it’s a — we want to grow this on a grass root level basis with good distribution. So you will see every year about INR100 crores, INR150 crores getting added in this segment here onwards.

Gopal Agrawal — HDFC Mutual Fund — Analyst

Correct. Great, sir. Thank you very much. Thank you.

Operator

Thank you. The next question is from the line of Charanjit Singh from DSP Mutual Funds. Please go ahead.

Charanjit Singh — DSP Mutual Funds — Analyst

Hello, sir. First of all, congratulations on great set of numbers. So sir, my first question is regarding the exports market. So while these markets are pretty large and our opportunity size is pretty strong. From the growth perspective in the export segment, how we can see from the next two to three years’ perspective? And do you see the overall mix of export versus domestic increasing further going forward in the next two years’ timeframe? That’s my first question.

Kushal Desai — Chairman and Managing Director

Yeah. So in terms of overall growth, we expect that the domestic market will grow because of RDSS as well as industry growth and just general GDP growth. The good thing about wire and cables is that any — anything — any establishment that build requires some wire and cable just because of the electricity that needs to be distributed.

So the domestic side, you will see — you will definitely see growth. That growth will allow us to do a little bit of cherry picking in terms of who we want to service on the domestic side. Our sense is the export markets will — for us, export sales will grow faster than domestic because we’ve actually invested a lot of money in approvals for the — for example, the United States requires what is called underwriter’s laboratory approval, UL approval.

So we have the highest number of UL approvals in the addressable segments out of all the Indian manufacturers as of today. We are still working on more approvals. We’ve now penetrated the European market for cables that go into solar and wind. We already supply a fair amount of cables into Australia, for example, that covers solar, wind, and there, there’s a big expansion happening on metros, underground metros and train lines.

So we have — we’ve been a major supplier to the Sydney Metro. Now we are bidding on all the other metros over there. So the overseas business, I think, will also continue, and my sense is the overseas business to grow at a faster pace than the domestic business.

Charanjit Singh — DSP Mutual Funds — Analyst

Got it, sir. Sir, the other thing is like you talked about a lot of these distribution reforms and what we are also seeing on the ground, reconductoring. If you can touch upon that aspect, how these distribution reforms can add to the overall growth for the conductors business and even for our transformer oil business?

Kushal Desai — Chairman and Managing Director

Yeah. So as far as the distribution reforms are concerned, it is much more cable intensive than conductor intensive. So you will see the cable business being able to address a large portion of that opportunity. There are a certain class of conductors called medium voltage covered conductors where you really make a conductor and then you provide an insulation on it.

So it actually produced by our cable division, even though the alloys and conductors were really designed by our conductor division, but the finished product is sold by our cable division. So the — largely, this will be addressed by the — by the cable division.

In terms of transformer oil, you will have more and more distribution transformers going in. And you will also end up having some amount of power transformers, which will bring in power to the grid and then from that substation connecting to the next level of distribution. So in transformer oil, the demand will be kind of linear with the — with the number of transformers which are being supplied. And most of these transformers, almost all of these transformers in the RDSS will be oilfield transformers.

Charanjit Singh — DSP Mutual Funds — Analyst

Got it, sir. Sir, last question from my side is on telecom and convergence business. We have seen some ramp-up from your side with new business add. So how is that opportunity shaping up? Maybe it may not be in one year timeframe but in a longer term, do you think that was getting bigger for us?

Kushal Desai — Chairman and Managing Director

It is definitely getting bigger. We’ve created a separate team within the company with a — with a separate business leader and who is working across the synergy of the divisions that we have focused on this. So there, we have OPGW, which is a big play for us. And you will see within the conductor division more and more of this OPGW turnkey work which we are doing.

In addition to that, the 5G rollout will give a lot of impetus to normally the fiber optic side but also the copper side and hybrid products. And so this 5G rollout is going to happen in India, but it has already started happening in the United States and in some of the overseas markets. So we have a set of products which are addressing this.

We are in the process of getting a whole series of products, which are under approval from some of the big players in these overseas markets. So you will see this — this particular vertical also growing over a period of time, and it’s pretty much going to be new growth that is there. And even though it involves conductors and cables, but it’s a — it’s a different vertical and you’re addressing a different market segment, which is basically telecommunication and 5G infrastructure.

Charanjit Singh — DSP Mutual Funds — Analyst

Got it, sir. Sir, thanks a lot for taking my questions. All the best for the future. Thank you.

Kushal Desai — Chairman and Managing Director

Yeah. All right. Thank you.

Operator

Thank you. The next question is from the line of Chirag Setalvad from HDFC Mutual Fund. Please go ahead.

Chirag Setalvad — HDFC Mutual Fund — Analyst

Sir, congratulations on a fantastic result. Just a few questions in terms of profitability. You mentioned on the conductor front that the improvement in mix, steel prices, and lower freight, all contributed. I missed those numbers. So I know the third quarter profitability came in at INR40,000 a ton. What do you think is a sustainable level in the near future? And what do you think is the sustainable level in the long term? You mentioned it, but I missed those numbers.

Chaitanya Desai — Managing Director

Yeah. So in the short term, this momentum can continue. Of course, the exact number will depend on the exact kind of products that we execute, also depending on how much orders that we get during the period. But we expect in the short term, it could be in the range of about INR22,000 to INR24,000 per metric ton.

Chirag Setalvad — HDFC Mutual Fund — Analyst

And what are your thoughts if the drop. Is it because it is the mix that will change, how much of this INR40,000 can be attributed to the steel prices and lower freight.

Kushal Desai — Chairman and Managing Director

So the way maybe to say that it depends on your macro and geopolitical situation prevailing currently the situation for all favoring us and this kind of situation favorable possibly we could see this high momentum going forward. But no, we are able to give a visibility depending on what we can clearly see as of now. I’m just to sharpened sort of numbers or the view here. Did you see what has been the transformation in terms of the margin per tonne that domestic business South Asia within India and Nepal, Bangladesh, all this–that has seen a lot of high efficiency conductor supplies as well as copper as a premium product and that’s contributing towards about 44% of revenue. The balance 56% today is largely going towards exports and good realizations into fairly developed markets like the United States, Australia and to some extent Latin America. So the realization that are possible there and the kind of competitive intensity is very different compared to the domestic Indian market because expectations on the customer significantly higher.

So this mix is what has given that boost. If this mix continues, you will be in the 30,000 range. But if things are getting fully normalized. There is also some China plus one advantage which we have. So some of these things disappears, then you will still be at just because of the product mix that is available today will still be in that INR24,000, INR25,000 per ton range. Simply because you’re selling higher value added products. So if you were to modulate over the short-term, you will be in the INR30,000 odd range. If you modeled it over a longer period of time INR24,000, INR25,000 a tonne can be taken as a base number. And then whatever favorable situation that there will be a top up on that.

Chirag Setalvad — HDFC Mutual Fund — Analyst

Perfect, that’s very helpful. And similarly the cables business, where do you see sustainable profitability?

Kushal Desai — Chairman and Managing Director

The cable business, you say in the last few quarters, our margins have gradually increased and this quarter we had 11.8% as EBITDA. We see that on a long-term basis double digit of 10 percentage would be sustainable with the product mix improving within our geography mix improving and also getting higher economies of scale. At this point of time, we are maintaining the guidance of about 10 percentage on the cable business.

Chirag Setalvad — HDFC Mutual Fund — Analyst

Perfect. Great. Tank you very much and all the best.

Kushal Desai — Chairman and Managing Director

Yes. Okay. Thanks.

Operator

Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.

Mihir Manohar — Carnelian Asset Management — Analyst

Yes. Hi, thanks for giving the opportunity and congratulations on a great set of numbers. Sir, I wanted to understand around the premium conductor side. I mean, given the kind of conductors percentages point up and even export is getting incremental focus, which is leading to higher profitability. I was wondering, just wanted to understand, it isn’t the competition putting up cost over, given the fact that this is part of the business is that turning out to be a bit profitability business. So how are you seeing competition largely from our Indian players. Now over to export and you be local players. So it is geographies. So if you can throw some light around that, are there any incremental capacity, which are coming up from competition or there some movement around that. That was my first question. Our second question, on the copper prices have been off-late around the month we have seen copper going up by 10%. So how do you see that impacting our profitability on the other recent. I don’t know if it has happened on the copper prices and my third question was on the US infra freight. I mean, given the incremental focus which will come on US [Indecipherable]. So whatever the strategy here, what is on ground people there that was put what’s the GTM strategy and what kind of business are you possibly looking at for the next two to three years statistically from the US infra being outside of the GTM.

Kushal Desai — Chairman and Managing Director

So, I’ll take the first question first. The competitive advantage that you’ve mentioned on the conductor division, this if you look at this, our updated presentation we have a separate slide that talks about our competitive advantage on conductor cable and oil division. But just to talk about it. What do you feel is that our products which are premium products as well as conventional product, we have some competitive advantage as compared to the competition, basically in terms of technology and the know how that is involved in this product and design, which actually acts as a barrier to entry for the competition and in more a special Syngene made mechanism as well as there is a lot to do with the design of the product, which is something that cannot be easily copied and it’s just not a product supply, but the entire turnkey solution that is what we give for some of the premium products, which actually acts as a barrier to competition over there. Also in terms of conventional product and the export D2C, a lot of requirements that a customer demand is not only the product, but also in terms of reliability, quality and also in terms of the risk management exercise. So they look at the holistic things instead of only looking at the product and the pricing there. And based on the years of experience that we have in this business, we are at a very advantageous position when it comes to supplying these products overseas market.

Could you repeat your second question. I just missed out.

Mihir Manohar — Carnelian Asset Management — Analyst

Yes. Sure sir. My second question was on the copper prices. I mean, off-late, we have seen copper prices going up by 10% in the last month. So how would that impact our profitability. And if you could throw some light on what is our hedging strategy, how do we hedge it some color around that.

Kushal Desai — Chairman and Managing Director

So the copper price, there won’t be any impact because the entire B2B side, we hedge the product on a back-to-back basis for movement we have orders we hedged not just like we were running the hedging strategy on aluminum, we run a similar hedging strategy on copper. So you won’t see any major impact due to the new mineral copper prices as such.

Mihir Manohar — Carnelian Asset Management — Analyst

The prices higher are lower getting passed on to the customers. So we are…

Kushal Desai — Chairman and Managing Director

In many cases is actually fixed, because your order has come at a fixed price. And the metals has been booked back-to-back on that. So for example, all the deliveries digital for solar cables, windmill cable for your defense, for the railways, we follow the same strategy. Where moment the order comes forward cover has taken all the forward booking has taken and metal is pitched. We are open is to some extent on the wire and cable side through the distribution network. But there we see in all the major players the increase and decrease prices on a regular basis and you know, that takes a much higher. So we are just a follow-on in terms of of those changes, which happened to move Polycab, Havells, Kei, RR kabel other ones, which moved the price up and down based on copper movement and also we will just follow based on the same proportions.

Mihir Manohar — Carnelian Asset Management — Analyst

Sure.

Kushal Desai — Chairman and Managing Director

So we don’t see major impact on the cooper.

Mihir Manohar — Carnelian Asset Management — Analyst

Sure sir. Got it. Yes and the third question was on the US infra freight.

Kushal Desai — Chairman and Managing Director

Sorry. [Indecipherable].

Mihir Manohar — Carnelian Asset Management — Analyst

Yes. The third question was on the US infrafreight and I mean, given the fact that US have come out with different categories.

Kushal Desai — Chairman and Managing Director

On the US in franchise, the fundamental growth is coming from three areas. Number 1, cable requirements, which are going into the installation of solar fundo and we’ll fund. Second is evacuation that’s happening from that into the grid, which is the weather conductor comes into play. And the third piece is the actual strengthening or replacement of old transmission network, which are there. So we are part, we are in a position to actually participate in all these three.

Mihir Manohar — Carnelian Asset Management — Analyst

Sure, under control. And just lastly, an extension to the earlier question which was there on the premium conductor side. So are you seeing competition putting up capacity for the premium conductor space. I mean is industry putting up incremental capacity on that offering.

Kushal Desai — Chairman and Managing Director

So, in that we have competitors who are also adding some capacity on that, but here it’s just not a question of adding capacity like in the conventional conductors. Because most of these are part of a solution that provides. So there is a design element of the conductor involved this is a design element of the network that involved. When you do it reconductoring. And then there is also still new technology, which needs to be in place. So as a turnkey operator, we actually have the most advantageous position, because we have all these three elements with that. We have the product, we have a design of the network and we have the ability to string and deliver the reconductoring or new conducting projects involving these special products.

Mihir Manohar — Carnelian Asset Management — Analyst

Sure sir, that’s it from my side. Yes. Thank you very much. And best of luck for the future.

Kushal Desai — Chairman and Managing Director

Yes. Thank you.

Operator

Thank you. The next question is from the line of Maulik Patel from Equirus Securities. Please go ahead.

Maulik Patel — Equirus Securities — Analyst

Yes. Thanks for the opportunity and set of numbers. I think what we’re discussing earlier, I think it’s finally taking place for the conductor segment. And could you see that — would you see that we are still having the confidence that this business will continue to grow. A couple of questions, I think, more on the balance sheet side and on the capex side. What’s the acceptance as of Q3 FY ’23?

Kushal Desai — Chairman and Managing Director

So our interest-bearing acceptance is about INR3,400 crores as of December end.

Maulik Patel — Equirus Securities — Analyst

Okay. And the debt will be — in that the normal debt, working capital debt?

Kushal Desai — Chairman and Managing Director

So we have a long-term portion of the debt about INR200 crores. And the current maturities of long-term debt is about INR50 crores.

Maulik Patel — Equirus Securities — Analyst

Okay. Got it. And what kind of capex this year, you’re spending more on the cable side and not in other businesses. So how much you spent and what’s the outlook for the next year?

Kushal Desai — Chairman and Managing Director

So the capex spend over the next 15 months, we expect to spend close to about INR300-odd crores between the cable division, which is the lion’s share of it, and the conductor division. There will be very little capex on the — on the oil side.

And our plan is that not only do we want to put in capex to meet the current growth, but now look at ensuring that we have some excess capacity or surplus capacity in place a little bit earlier than the demand comes in and hits.

Because as we are going around the world and getting approvals, and more and more projects are getting approved, we continue to see the growth taking place. So it’s more prudent, we believe, to actually put the capacity a little bit ahead of time. So we’ve looked at a new greenfield site for cables.

Maulik Patel — Equirus Securities — Analyst

Sure.

Kushal Desai — Chairman and Managing Director

And in conductors, we’ve acquired some land right adjacent to our — one of our plants near the Silvassa area and machineries are going in there. So about INR300-odd crores over the next 15 months is what we expect the capex to be in. That should help keep the momentum going in terms of growth, both in tables and conductors.

Maulik Patel — Equirus Securities — Analyst

Sure, sure, sure. And out of this INR300 crores, large part, I assume that it will be spend over the next 12 months, right?

Kushal Desai — Chairman and Managing Director

Yeah, the whole thing will go in the next 15 months.

Maulik Patel — Equirus Securities — Analyst

Sure.

Kushal Desai — Chairman and Managing Director

What’s happening today, is that the reason why the number looks a little higher and the period also is about 15 months is that if you place an order for equipment today, the equipment delivery times have substantially gone up, whether it is because of manpower or is because of electronics and many critical components for these still coming from — from overseas markets like Europe and the United States.

So delivery times have gone up substantially. So that’s why we don’t — if we want to make sure we don’t miss the opportunities, we need to invest a little bit of head of the curve.

Maulik Patel — Equirus Securities — Analyst

Sure. I got it. I got it. Yeah. Thanks. Thank you.

Operator

Thank you.

Kushal Desai — Chairman and Managing Director

Thank you.

Operator

The next question is from the line of Vivek Gautam from GS Investments. Please go ahead.

Vivek Gautam — GS Investments — Analyst

Congratulations on excellent set of numbers. So few questions is about the due to Ukraine crisis and now China opening up after three years of COVID, it is now, instead of the China plus one policy prevailing has been told that exports to Europe and U.S. are suffering because China is able to supply at a competitive price. So how come we are getting so good performance in exports?

And secondly, is there a transformer oil shortage in India, leading to high prices? Even black marketing have been told that our transformer oil, which is helping us a lot?

Kushal Desai — Chairman and Managing Director

Well, let me address the two questions separately. So in terms of the China plus one, I think it’s far more — it’s a very strategic decision that many utilities and countries have taken. So it’s not related to COVID being there for the last three months and COVID going away.

So we have seen customers who have taken undertaking from us. There’s not a single component that goes into whatever we supply to that country will have a product coming in from Russia or China, for example. So I don’t think that China plus one is something in our industry, at least that is going away in a hurry. It’s here to stay. And Indian companies actually like us stand to gain because it’s part of our strategic vision that buyers are having.

As far as the second question, there is no shortage of transformer oil. We can deliver any quality of transformer oil. There is no black market transformer oil happening. So I don’t know where this has come from. But there is no shortage in short. There is no shortage of transformer oil either in India or anywhere in the world at this stage. The growth which we have seen has largely been in volume because we’ve been able to address. We are approved pretty much everywhere wherever the demand is taking place. But on the contrary, because the raw material comps has fallen very sharply, as I mentioned earlier, people like us to work on longer-term contracts have hit in the short term because we’ve had to adjust our prices lower than what the supply chain reduction would have normally allowed us. And that will start reversing the trend will start reversing in this quarter, probably normalize in the first quarter of next financial year.

Vivek Gautam — GS Investments — Analyst

And sir, how is the opportunity size and what CAGR we can grow and how sustainable it’s been the book performance over the last two quarters, sir?

Kushal Desai — Chairman and Managing Director

So in terms of sustainability, especially in cables and conductors, cables especially, we can see a 25%, 30% growth to come for the next several years.

In terms of conductors, we’ve — we’ve seen growth at least for the next two to three years, we will continue to see a good momentum as all these transmission networks continue to be — to be built. So this is not a short-term phenomenon. I think it’s a big structural play. And depending upon how much infrastructure is replaced in countries like the U.S., you have to keep in mind that a lot of infrastructure they went in between 1945 and 1970 before the oil shot took place.

So as that infrastructure gets replaced, so far people are in some of the other pulling on, pulling on, but this is a finite life that all these products have. They’re designed to last for 30 to 35 years. Already in many places, they have lasted for over 50 years. So they’ll finally give way. So depending on that, you will start seeing conductor demand growing.

But if you exclude any major, just a steady growth, you will see at least for the next two, three years, clear visibility is available?

Vivek Gautam — GS Investments — Analyst

And how has been the B2C performance and branding and how are we getting the response under [Indecipherable]?

Kushal Desai — Chairman and Managing Director

Our B2C response has been good. I actually thrown up very specific numbers and against one of the earlier questions. But bottom line is that the business has grown last year was about INR100 crores. This year, we will be at about INR200 crores. Next year, we are targeting INR350 crores.

Vivek Gautam — GS Investments — Analyst

Okay, sir. Thank you, sir.

Kushal Desai — Chairman and Managing Director

Yeah.

Operator

Thank you. The next follow-up question is from the line of Amit Anwani from Prabhudas Lilladher. Please go ahead.

Amit Anwani — Prabhudas Lilladher — Analyst

Hi, sir. Just a couple of questions on any targeted debt level which you are looking in the medium term. And I can see interest costs and financial at INR225 crores for nine months, significantly higher than the last two full years. So any elaboration on that? How should we model the interest cost in coming quarters?

Chaitanya Desai — Managing Director

So I think the sofa rates have actually increased over the last seven to eight months. And if you see every quarter, our interest cost is going up. In terms of the rate increase, almost Q3 would be maxed out unless any further rate increases are there. And also, it’s a function of improvement in the business.

If you see the business is growing you will see the interest cost also going up in line with the volumes there. But these will all be taken into consideration when we price our products to the customers because we take the recent exchange and the recent interest rate at the time when we price to our customers. So you will see an increase in EBITDA as well as you’ll see an increase in finance cost as our volumes and interest rate goes up. But Q3 could be a good approximate at this level of business.

Kushal Desai — Chairman and Managing Director

So on a unit basis, I think you’re already at nearing the max depending on whatever the FOMC meeting results are. And the number of days for modeling purposes, the number of restructure of the receivables, inventory, etc., is reasonably steady. So that is what can be used.

In terms of long-term debt, we will — we have the balance sheet has a capacity to borrow. We have INR250 crores of long-term debt, INR50 crores will get repaid in this quarter. So we intend to take some borrowings for the INR300-odd crores of expansion. That’s in place so that the retained earnings are available for working capital requirements, etc.

But for modeling purposes if you can take the current NODs, number of days for each of these and they are — they should be reasonably representative of what will happen in the — in the days to come.

Amit Anwani — Prabhudas Lilladher — Analyst

Got it, sir. Thank 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, congrats on good set of numbers. My question would be on capital allocation, okay? So from here on, we have already stated that INR350 crores is going for capex, okay? Can you elaborate how much capacity will increase through this INR350 crores of capex?

Kushal Desai — Chairman and Managing Director

So the ratio for most of these is 1 is to 4, 1 is to 5 in terms of the amount of products that can come out. Plus part of this is a whole greenfield site, which will be 40-plus acres of land. So that there’s room to then keep adding machinery as the business continues to grow.

So the key thing here is to look at what will be the return on — return on equity that you’re able to maintain through this period. So we are already close to about 18.5% to 20%. I think for, if you take the nine months, it’s actually 21%.

But our idea is to not allow the ROE to drop substantially. And most of these projects have a reasonably good payback because the market is already there and most of the market development activities have already been done. So as you ramp up the production we’re already working on customers and channels to be in place.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. See, if I break our return on equity, so there are three sides, okay? Revenue to gross block, which has been always very good for the company. The revenue to working capital, which has been generally on the higher side and EBITDA margins on conductor, where we have already seen a lot of work which has gone and improvements are, I think, visible in cables also. Is there some scope to improve EBITDA margins on the transformer sustainably or not just transformer or in the oils business, okay?

And with economies of scale, which is coming because [Indecipherable]. Is there something you can do to improve working capital further on? Means what can be the bigger driver of sustainable ROE for you from here on in the working capital side and the EBITDA margin side?

Kushal Desai — Chairman and Managing Director

So on the — let me specifically address the specialty oil segments. So the Specialty Oil segment, you’re not seeing any spectacular growth. Growth will be there 5%, 7%.

In transformer oil, the growth may be higher than that as transformer capacities get added, both in India as well as overseas. But you’ve got white oil and some of these other segments where you may see even lubricants, particularly automotive lubricants as electric vehicles start getting rolled out the growth on some of that may slow down. But where the company’s real growth is going to come in on the cable and conductor side, where you can clearly see a lot of infrastructure getting added.

Now in terms of the working capital, there is a slide in the deck which gives you an idea in terms of secured receivables that we have. Because wherever we end up giving extended credit to customers it’s usually backed by a letter of — letter of credit on the other side. You may end up getting payables for some of your raw materials, which is extended. But on the other hand, you also have a whole lot of letters of credit or secured payments on the receivable side.

So both payables and debtors are both, we are working on both sides of it.

Himanshu Upadhyay — O3 Capital — Analyst

And one thing…

Kushal Desai — Chairman and Managing Director

And in case there are interest costs associated with the extended credit as they are factored into the pricing of the — of the product. Because the customer usually has a certain number of days of interest free, and then they add the interest for the extended days of credit.

Himanshu Upadhyay — O3 Capital — Analyst

And one more thing. Generally, our dividend payouts have been between 20% to 30%, okay? Is it higher growth rate what we are visualizing? Do you think the dividend payout ratios will remain the same? Or do you think more cash will be required for those?

Kushal Desai — Chairman and Managing Director

So that probably which the Board has to decide. But as of now, the ratio that we have is between 25% and 30%. And given if there is continuous — continued growth taking place, and I think we probably would still remain in the same range, having a bias towards reinvesting back. Because as I mentioned earlier, I don’t see — we don’t see this growth as being a short term and this market momentum not being short term.

This is a clear opportunity for a company like us to grow not only domestically but overseas. And it does require the right investments to be made and those investments have made correctly will have a good payback.

Himanshu Upadhyay — O3 Capital — Analyst

And the growth, what we are expecting is in those segments, return on equity and capital employed would be upwards of 20%. So that is what we are trying to get. Because commoditized business, you can get anything. And even in the brand cycle whenever [Indecipherable].

Kushal Desai — Chairman and Managing Director

So we’re targeting to keep our ROEs in that range. I mean it’s taken a lot of effort to get it to the 20% mark. Every time you have a capital block going on, you can have a short-term — short-term drop because it takes a few quarters to ramp up the production and realize the full volumes.

But I think we are at a momentum today where it is possible to be in that 18%, 20% range through all the expansions, etc. There is a clear economy of scale available both in the cable and conductor business. So as the volumes go up, there is a conversion efficiency, which will clearly kick in.

Himanshu Upadhyay — O3 Capital — Analyst

See, my question was that the segments where we are seeing growth because of — currently, because of high demand, it can be a good ROE. But even in the commoditized business, sometimes the ROEs can be high because of demand supply. But our focus remains on high margin or high ROC businesses only for growth also that should remain on track?

Kushal Desai — Chairman and Managing Director

Yeah. So we are — I don’t think you will see a big change in the mix of what we have got today. The target — the idea would be to keep increasing the — improving the mix i.e., which is more value-added products or premium products and then where there are standard products moving to more premium buyer.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. Okay. And in Europe also, are we seeing the growth?

Kushal Desai — Chairman and Managing Director

[Indecipherable] one fundamental thing. So it will put it in perspective. You see when you go under the — when you supply to Indian buyers, they really go essentially on a two bid process. So once you clear a technical specification, then it becomes only price.

So if you are 41 on 100 or 99 on 100, you’re almost equated. Whereas when you go into the overseas market, that 41 on 100 itself is in the 70. So the bar itself is much, much higher in terms of what they classify as pass or fail. So that’s where I say that we’re looking at premium products and for standard products, we’re looking at more premium buyers.

Himanshu Upadhyay — O3 Capital — Analyst

And one last thing. See we are speaking about the U.S., okay? Where a lot of growth is visible, okay? So what is your sense on Europe? Because a lot of other capital goods companies on the power side are extremely optimistic on the euro because of ways to heat and so many in the energy transition, which is happening in the business growth, which is happening. What is your exposure and what are you seeing?

Kushal Desai — Chairman and Managing Director

So in Europe, we are also seeing demand in place. We’ve been successful in starting to supply cables, particularly into the nonconventional energy space, which is both largely solar and also some amount of wind.

So our expectation is, as I mentioned earlier, that Europe is one of the target markets which we have. And with the current issues that they have on both power and manpower in Europe, it bodes well for India. Recently, there was an industry meeting that our commerce minister Shri. Piyush Goyal had with the top exporters of the country. And in terms of laying out what is expected over the next few years, there is also — they already have a free trade agreement in place now with Australia. They have put an agreement in place with UAE. There’s a — there’s a free trade agreement under negotiation with the EU. So if that happens, then Indian products have 3.8% to 4% custom duty, which if that comes off, then that makes us that much more competitive.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. Thank you, and best of luck for the future.

Kushal Desai — Chairman and Managing Director

Yeah, thanks.

Operator

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

Darshil Jhaveri — Crown Capital — Analyst

Hello. Hi, sir. Thank you so much for taking my question and congratulations on a great set of numbers. So sir, I’m a bit new to the company, so pardon me for some basic questions. So as you said, our EBITDA margin in the conductor businesses, which are at around INR40,000, they will come down to INR30,000. So could you just help me with how that works, so we would see a decline in our EBITDA margins?

Kushal Desai — Chairman and Managing Director

So what we feel is that depending on the order book that we get, the margins could change. We’ve got some tailwinds in this particular period. But definitely, the profitable product mix has changed, and that’s the reason you see higher EBITDA margin on the conductor division. Now what — how exactly this — these orders will get executed, it will depend at the end of Q4. But what we are saying is that if you want to build a model for a long period of time about two years, three years, we don’t know how the macroeconomic and geopolitical things will pan out in future. And from that perspective, we feel that a conservative estimate of about INR24,000, INR25,000 per metric tonne would be there in the model. That’s what we’d intend to say. But definitely, in the short-term, we expect good order and profitability continuing in the near future.

Darshil Jhaveri — Crown Capital — Analyst

Okay, sir. And in terms of our revenue growth, what can we expect or let’s say, what is our — any target that we have that we want to reach that number or something that could help me.

Kushal Desai — Chairman and Managing Director

See, for cable business, we are talking about 25% to 30%. In our conductor business, you should see at least a 15% to 20% growth between this year and the coming year. The oil business will be closer to about 5% to 7%.

Darshil Jhaveri — Crown Capital — Analyst

Okay, sir. That helps a lot. And with regards to the fluctuation in the finance cost, I understand correctly that we pass it on in our EBITDA and that’s why we have a higher finance cost. So as revenue increase, the finance cost would be a similar figure will be dependent on that. Is that — is my understanding–

Kushal Desai — Chairman and Managing Director

No, no. As I mentioned earlier, if you take the number of days for outstanding inventory, all the components that contribute towards the business model is reasonably set. So we don’t expect any major change to be there in that. So really, the movement will be up and down depending on where the interest rates are. So I guess, in the shorter term, you’ll have higher interest rates when inflation and things come off, then maybe the interest rates will also start coming off. But we’re entering into our business that higher interest rates are being taken into account as part of the cost base.

Darshil Jhaveri — Crown Capital — Analyst

And our new CapEx, what kind of asset turn can we expect from it?

Kushal Desai — Chairman and Managing Director

So on the cable side, you have, depending on the product, anywhere between four to six times. If you go to house wires, then it can be as high as about eight to 10 times. And in conductors also, it’s around six — five to six times, depending on the nature of the product.

Darshil Jhaveri — Crown Capital — Analyst

Okay, sir. And sir, if I may squeeze in one more question. So what kind of — what would be our capacity utilization currently?

Kushal Desai — Chairman and Managing Director

So currently, most of the cable and conductor products are running pretty much flat out. And that’s the reason why this CapEx is being incurred and more equipments are coming in to support the growth.

Darshil Jhaveri — Crown Capital — Analyst

Okay, sir. Thank you so much for your time and all the best for the next quarter.

Kushal Desai — Chairman and Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of CA Garvit Goyal from Invest Research [Phonetic]. Please go ahead.

CA Garvit Goyal — Invest Research — Analyst

Hello, good evening, sir. Am I audible?

Kushal Desai — Chairman and Managing Director

Yes. Good evening.

CA Garvit Goyal — Invest Research — Analyst

Okay. Sir, my question is on the EPS side. In last conversation, quarter two con-call, you were mentioning that the overall EPS will be — half two EPS will be in line with the half one EPS. But now for the nine months, it is INR1.03. So where do you see the EPS laying out for entire FY ’23, sir?

Kushal Desai — Chairman and Managing Director

So we are looking — we have given an overall guidance. If you build that model, you’ll be able to know how much will be the EPS. Specifically, we can’t comment on exactly what could be the number in the next quarter. But based on the division top line and bottom line profitability, you’ll be able to work out the EPS, how it will pan out. Because each of the divisions have different growth rates, so we’ll have to put that math to see how the EPS will move going forward.

CA Garvit Goyal — Invest Research — Analyst

Because you are saying conductor business would grow 15%, 20%, oil 5%, 7%, and cable 25%, 30%. So this seems to be a little bit conservative confusing your first nine months growth and one side you were also saying that this high growth momentum will continue. So that’s why it is little bit confusing regarding the growth guidance.

Kushal Desai — Chairman and Managing Director

Yes. So we’re looking at the long-term guidance, that’s what if you want to put that in a model, those are the guidance numbers that you need to build into that. If you look at FY ’23, you can pretty much extrapolate whatever in the first nine months — the first nine months, you can carry forward into the fourth quarter. We are looking specifically at what is expected in this financial year. If you want to build our long-term model and —

CA Garvit Goyal — Invest Research — Analyst

Basically you’re saying nine months — this nine months section will continue in the —

Kushal Desai — Chairman and Managing Director

That is the figure — price, which is given in the new deck that addresses what the current structure and EPS by business is indicated also.

CA Garvit Goyal — Invest Research — Analyst

So kind of momentum we witnessed in nine months, we can expect it in the next two to two quarters, you are saying?

Kushal Desai — Chairman and Managing Director

For the next quarter, I mean, you are talking about this current quarter then the average that you see over the first nine months will continue further. I mean that’s the visibility which we have as of today.

CA Garvit Goyal — Invest Research — Analyst

Understood. That’s all from my side, sir. All the best.

Operator

Thank you. The next question is from the line of Yogesh Bathia from Sequent Investments. Please go ahead.

Yogesh Bathia — Sequent Investments — Analyst

Hi. Congratulations, sir, on a very good set of numbers.

Kushal Desai — Chairman and Managing Director

Thank you.

Yogesh Bathia — Sequent Investments — Analyst

Sir, I wanted to know that do you think the worst in the base oil business is behind us, what we saw in Q3, high cost inventory, etc., do you think it is behind us?

Kushal Desai — Chairman and Managing Director

Yes, at least in the current situation, I think the worst is behind us clearly.

Yogesh Bathia — Sequent Investments — Analyst

Okay. That’s it, sir. Thank you.

Operator

Thank you. The next question is from the line of Saurabh Patwa from Quest Investment Advisors. Please go ahead.

Saurabh Patwa — Quest Investment Advisors — Analyst

Thank you, sir for taking the question. Am I audible clearly?

Kushal Desai — Chairman and Managing Director

Yes, we can hear, Saurabh.

Operator

Yes, sir. Please proceed.

Saurabh Patwa — Quest Investment Advisors — Analyst

Sir, congratulations on a great set of numbers. I just — I think a lot of my questions have already been answered. Just two things. On the conductor side, for a very long time, we had — we used to give a guidance of around — sustainable margins of around 12,000 to 14,000 basis of higher margins in HEC, which used to be around 25,000, 26,000. So is there any possibility of going back to that situation?

Kushal Desai — Chairman and Managing Director

No, I don’t think we’ll go back to the 12,000 to 14,000. Because if you also look at the product mix that existed in that 12,000 to 14,000 period, it was largely a) conventional conductors, and b) it was being largely sold in the domestic market, which is very competitive.

Saurabh Patwa — Quest Investment Advisors — Analyst

Fair enough.

Kushal Desai — Chairman and Managing Director

So right now, there is a structural — mix of product. And at least, as I have been saying over the last hour, we see more premium buyers coming forth to buy standard conductors.

Saurabh Patwa — Quest Investment Advisors — Analyst

Do we need to make any adjustment to our plans to have a higher share of these products?

Kushal Desai — Chairman and Managing Director

No, we made our manufacturing fungible. So as a consequence, as the more premium products need to come on board, we already have capacity on the aluminium side. On the copper side, we’ve been making adjustments and additions as the copper side has been — the capacity has been going up. In terms of quality of premiumness of the products, which we can produce, that has always been built into our system. So I think we’re just getting more premium buyers who have a much higher standard of what they require, especially when you go overseas, the minimum bar for passing is significantly higher than in the domestic, the domestic one. In domestic market, anything that conducts current is good enough.

Saurabh Patwa — Quest Investment Advisors — Analyst

True sir. In the past you used to highlight that since they have been lot of conductor things happened in US and other North American market and that’s why the competition, there won’t be any actually lot of players left there. So, now when you see that opportunity actually arising there, is the same true now, is it or some Chinese player or other players have started getting to that business.

Kushal Desai — Chairman and Managing Director

So I think that’s holding true that local manufacturing there is not able to keep pace and I don’t think we see investments going in by new — for new capacity to be added at any huge appreciable pace in North America, Europe, any of these places, because they are fundamentally not so cost-competitive in terms of the operating cost over there. In terms of this Chinese player and all, we don’t expect anything sudden to happen, because many of these buyers are actually quite strategic in their — in their project and they’ve laid down quite clearly their policies. I mean, we’d be surprised if it changes dramatically from what we’ve laid it out to be.

Saurabh Patwa — Quest Investment Advisors — Analyst

Great. And just one last question if I may add. Is the capacity which you are adding at conductor[phonetic] side, I believe you mentioned [Indecipherable] but in Orissa where we have the electro[phonetic] plant, we have some arrangement where you get liquid melt and mottle. So, any specific reason because [Speech Overlap]

Kushal Desai — Chairman and Managing Director

So, the capacity for rods that we are adding is being added in Orissa, but the conductor making capacity we are adding in Silvassa. Simply because if you see a higher and higher percentage of export taking place, we are today, exporting from both Silvassa plant as well as the Odisha plants and export logistics out of Odisha are not the best, whereas we are getting more and more options for export out of Sivlassa, because you have the ICD Tumb which has now been taken over by Adani Logistics. They are increasing capacity there. There are more ports coming up in and around Gujarat. So, Silvassa is a very good location for manufacturing for export.

Saurabh Patwa — Quest Investment Advisors — Analyst

Understood. On oil side, how is our Hamriyah plant doing? You had plans of bulk exports from there.

Kushal Desai — Chairman and Managing Director

Hamriyah plant has been doing quite well. In fact, the volumes have been consistently growing, they are at almost 18% above the same period previous year for this — for this particular quarter. The Middle-East has been doing better because of the current oil prices, etc and they are able to weather the whole energy situation also better. So our expectation is that growth from that plant will continue to come especially on the transformer oil side.

The white oil, etc is in trouble because the three largest countries that buy in Africa, don’t have foreign-exchange. This is Egypt, Nigeria and Ethiopia, but the transformer oil side is coming from the more industrialized countries and we have the whole GCC, we have Latin America, Europe, everywhere power conductors going in, distribution conductors, transformers going in. So, the transformer oil side seems quite good.

Saurabh Patwa — Quest Investment Advisors — Analyst

Thanks a lot sir and all the best sir.

Kushal Desai — Chairman and Managing Director

Okay. Thank you.

Operator

Thank you. The next question is from the line of Dhavan Shah from AlfAccurate Advisors. Please go ahead.

Dhavan Shah — AlfAccurate Advisors — Analyst

Yeah. Thanks sir for the opportunity. So, I have a question on the conductor side. In this slide, you mentioned the revenue mix between exports and premium products. So, would it be possible to share the volume number, volume mix between exports and premium of the — out of the overall 44,500 tons for this quarter.

Kushal Desai — Chairman and Managing Director

So, you see, if you take premium products of 44% and if you take exports, that is also almost 50%. So the amount of standard conductor sold in the domestic market is very, very low.

Dhavan Shah — AlfAccurate Advisors — Analyst

Volume wise, it will be the same, the revenue mix will be same.

Kushal Desai — Chairman and Managing Director

It is difficult to tell you volume, because there are so many different types of products, shapes and sizes. Basically, I think the value mix will give you an idea of what’s happening and in fact, that’s been one of the major reasons why the profitability has also been a bit higher.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay, in terms of the EBITDA per ton, can you please share the differentiation between the exports and premium products against the INR49,900 a ton what we have done in [Speech Overlap].

Kushal Desai — Chairman and Managing Director

We don’t want to go down to such a granular level because along with you, we have competitors who are also looking for that information. So, I think coming to the extent possible for us to give information. I think we have already displayed.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay and suppose, I think you also mentioned that some input inflation and the lower freight cost, which has helped to improve EBITDA per ton. So, if you exclude these two things and what could be your EBITDA per ton, against the INR49,000 [Speech Overlap].

Kushal Desai — Chairman and Managing Director

[Speech Overlap] base case of INR24,000 to INR25,000 per metric ton and then we’ve also given what could be tailwinds, which are there, which is standard product for export continues at at a higher pace in that and other, if steel prices remain steady then that helps. So our expectation is that in the long-term — in the short-term will be our own in the INR30,000s in terms of value addition, in terms of longer period, you can take INR24,000 to INR25,000 per ton.

Dhavan Shah — AlfAccurate Advisors — Analyst

Okay, but again…

Kushal Desai — Chairman and Managing Director

That is for the base number going forward.

Dhavan Shah — AlfAccurate Advisors — Analyst

So against the base number, would it be fair to assume that the premium products EBITDA per ton would be roughly 1.5x to 2x against the base business.

Kushal Desai — Chairman and Managing Director

So depending on the product we’ve classified a basket of products. So, if you look at that range of products then it is — compared to typical, if you compare it to domestic transform — conductor and resellers is at least 2x from that. In terms of the overseas conductors, it is somewhere in between.

Dhavan Shah — AlfAccurate Advisors — Analyst

Got it, got it.

Kushal Desai — Chairman and Managing Director

It depends on the order to order, country to country, etc. So that’s why we try to simplify it by giving EBITDA per ton, considering a certain product mix.

Dhavan Shah — AlfAccurate Advisors — Analyst

Right. So these premium products is entirely for the domestic market, right, 44% odd.

Kushal Desai — Chairman and Managing Director

Yeah, largely going into India, Bangladesh, Nepal, mostly because it’s been done largely on a turnkey basis.

Dhavan Shah — AlfAccurate Advisors — Analyst

Right. And what is our overall market sir in this segment.

Kushal Desai — Chairman and Managing Director

So, on the premium depending upon, of course. So if you look at copper products, we may be in the 15% to 20% range. The reason is we have much higher. We are about 40% – 50% and if you look at HEC high-efficiency conductors etc, we won’t be at least 40% — 40% – 45% market share, because it is dominated currently by Apar and Sterlite Power. There are obviously over a period of time, more players will come in, but so far we’ve been able to hold a fairly good market share.

Dhavan Shah — AlfAccurate Advisors — Analyst

Got it, sir. Thank you.

Operator

Thank you. The next question is from the line of Bobby Jayaraman from Falcon Investments. Please go ahead.

Bobby Jayaraman — Falcon Investments — Analyst

Yeah, hello. Do you do EHV cables?

Kushal Desai — Chairman and Managing Director

We don’t do EHV cables. We basically go up to 66 KV. So that is actually considered as medium voltage or in some cases high voltage, but not extra high voltage.

Bobby Jayaraman — Falcon Investments — Analyst

Any plans to get into that?

Kushal Desai — Chairman and Managing Director

Not at the moment because the products which we have at the moment, where we have the approvals, we have the expertise in place, we see a fairly large addressable market there and our current focus is to address extra high voltage situations by medium voltage covered conductors or by conductors.

Bobby Jayaraman — Falcon Investments — Analyst

Okay, got it. And the other thing, you said the US is a major market for exports, right, but I was wondering these countries have a lot of local procurement rules. So, how is this going to impact your — they all want it locally manufactured, right, ideally. So how is that going to impact your export trajectory.

Kushal Desai — Chairman and Managing Director

So, I don’t see any emphasis on local manufacturing coming from, for example, the United States, because there just isn’t enough local manufacturing. And if you — the unit cost of production there relative to a place like India, it’s much cheaper to produce here and ship. There is some pressure in terms of having availability of stocks. So we do have many large distributors who buy and stock up product and then resell them to utilities there. We’ve also been investigating — looking at setting up manufacturing facility at some point which is nearer to the United States, to service the US, Latin America, etc. So you can then, once you have a site there, then you’re going to have some production going from there and then also production coming in from India, but at the moment for whatever our immediate plans are, we can easily service them for our plants in India.

You see a lot of the project sites which are there, they don’t need overnight delivery. We have a planned project delivery schedule. So when a solar plant is being built or a wind farm is being built, there is time available to manufacture and deliver the product to the site within the window that the customer defines.

Bobby Jayaraman — Falcon Investments — Analyst

Right. No, that’s perfect, because I thought the Inflation Reduction Act specifically asked for products to be locally manufactured.

Kushal Desai — Chairman and Managing Director

So right now, it’s not — it’s not hurting us. We are examining manufacturing in geographies like Mexico, Colombia and these sort of places where Mexico, of course, has an advantage because it falls under NAFTA and is considered as local manufacture, but most of these cases, just a physical availability of product itself is not there and the cost of manufacturing there is relatively very high compared to what would happen over here.

Bobby Jayaraman — Falcon Investments — Analyst

Okay, got it, right. Thank you very much.

Operator

Thank you. As that was the last question for today, I would now like to hand the conference over to Mr. Kushal Desai for closing comments. Over to you sir.

Kushal Desai — Chairman and Managing Director

Yeah. Thank you very much for being on this earnings call. Just in conclusion, I’d like to say that the opportunities that we see in our business will present present itself, not only in the short-term, but also in the medium-term. And we will continue to remain focused on the products and markets, which we have established ourselves in, because we see good growth coming in from those areas. And with that, our objective and aim would be to continue to sustain a good momentum as we go forward. So, thank you very much for being on this call. And look-forward to interacting with you all in the future. Thank you. [Operator Closing Remarks]