Bharat Forge Ltd (NSE:BHARATFORG) Q3 FY23 Earnings Concall dated Feb. 14, 2023.
Corporate Participants:
Amit B Kalyani — Deputy Managing Director
Subodh Tandale — Executive Director
Sanjeev Nimkar — Head of Industrial Business
Analysts:
Pramod Kumar — UBS — Analyst
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Mumuksh Mandlesh — Emkay Global — Analyst
Pramod Amte — Incred Capital — Analyst
Gunjan Prithyani — Bank of America — Analyst
Siddhartha Bera — Nomura — Analyst
Amyn Pirani — J.P. Morgan — Analyst
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Mahesh Bendre — LIC Mutual Fund — Analyst
Peter — — Analyst
Chirag Shah — Nuvama — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Bharat Forge Q3 FY’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Amit Kalyani. Thank you and over to you, sir.
Amit B Kalyani — Deputy Managing Director
Yeah, good afternoon, ladies and gentlemen. This is Amit Kalyani, and welcome to the Bharat Forge analyst con call. Thank you for joining us. I have with me our teams from management, both from automotive and industrial and Investor Relations and finance teams. As usual, I’ll take you through a quick rundown of what happened during the quarter and then open up for Q&A.
So we had — in terms of BFL, India, we had a fairly strong performance. We had a high revenue of INR19,052 crores, exports of INR11,066 crores, which was the highest ever. EBITDA margins was fairly good at 25.2%. PBT was impacted in this quarter because of finance cost and exchange impact on MTM of about INR35 crores, which is a one-time notional. I would expect in a normalized interest cost in the range of INR50 cores to INR55 crores per quarter.
Passenger vehicle revenue has continued to grow and is now at about 20% of total revenue, which used to be in mid to low-single digits three, four years ago. Our export industrial revenues grew by 14% sequentially, driven by both oil and gas and aerospace. We’ve had new order wins in Q4 of about INR265 crores and for the nine months of about almost close to INR1,500 crores.
Coming to our defense business, we’ve had a good run this year. We’ve had total order booking of about INR2,000 crores, including INR600 crores just in Q3. These are all export orders and this will all be completed in the next 2.5 or so years. These are both for artillery guns, mounted guns, and spares and consumables. And some part of this will be a repeat business, and obviously, the capital items will have an O&M component to it as well.
Coming to our overseas subsidiaries, we’ve had a miserable performance with EBITDA level loss of INR62 crores, primarily driven by three factors. One is low capacity utilization due to ramp-up of the new facilities in Germany and North America. Overall, we have about 7.5 million piece capacity per year and our products — our current rate of production is at about 50%. The old plant is running at about 70% and the new plants are running somewhere between 25% to 30%. So overall, we have about a 50% capacity utilization.
We have — I do want to reiterate that while we are in the ramp-up phase and we do have to have — we have a path to profitability in work going on, the capacity is fully booked with orders. We are continuing ramp-up and we are working on getting all our cost compensation and price increases from our customers. And I expect that we will see a better performance in Jan to March, and we’re very confident that in FY’24 all this will be significantly value accretive.
In terms of the JSA business, I’m happy to report that we have had a topline growth of 20% and EBITDA growth of 52% in Q3. We have secured new business of about INR153 crores this quarter and our total order wins post-acquisition stands at about INR250 crores. We have signed a binding term sheet with Indo Shell Mould Limited to acquire in SEZ unit in Sidco. We expect this transaction to complete by March 2023. This plant is located about three kilometers away from JSS Sidco plant and will therefore have a lot of efficiency benefits of management and overhead and give us significant increased capacity. Our total melting liquid — liquid metal capacity will go up to about 120,000 tons and casting capacity will be about close to 75,000 tons or so.
I expect that the JSA business will grow at a very healthy double-digit CAGR over the next three years. When we bought this company, it had a revenue of about INR420 crores to INR430 crores and next year we should be at somewhere in the region of 30% to 35% higher than that and year-after that should be also possibly a similar amount, if not more, because we may also have the Indo Shell acquisition in place. We’re very bullish about this sector and overall I think next year is going to be really a turning point in Bharat Forge’s history because a lot of the businesses and ventures that we have incubated over a long-time and some of the new acquisitions and new ventures will all turn from either dormant to positive or negative to positive or mildly positive to highly positive. So we expect this growth to continue. We have a lot of new order wins on our traditional business, especially in the pass car sector, in the industrial sector, in the casting business, in defense, and we will turn around our aluminum forging business and our overseas operations. So overall, I expect that next year will be a good year and quarter four will be a step towards that direction. I think that’s really all I wanted to say, and I will now be happy to take your questions.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] First question is from the line of Pramod Kumar from UBS. Please go ahead.
Pramod Kumar — UBS — Analyst
Yeah, thanks a lot for the opportunity, Amit. And, Amit, my first question is on the on the US and Europe aluminum business. If it’s — please help us understand, you did mention in the opening comment that you expect them to be accretive next year onwards. If you can just help us understand what are the big drag what you’re facing from the ramp-up and how — where are we in terms of the utilization rates for this capacity? And directionally, how do you see the margins in context to your existing businesses once they have the full [Indecipherable] and the cost niggles are kind of behind us?
Amit B Kalyani — Deputy Managing Director
Yeah, so right now these — both these plants are operating at, I would say about 25% capacity utilization because we have a lot of product development going on, lot of product ramp-ups going on and also training and development of manpower, especially in the US. How do we see this ramping-up? We have a defined production that we have to produce in the year and we are working towards that. At the same time, we also have to get compensation for all the cost increases that have happened inflator revise in Europe and the US, which includes energy, which includes manpower, which includes freight, which include overhead, and so on and so forth. So it’s a combination of growing your topline, increasing your margin through cost compensation and reducing cost through efficiency.
Pramod Kumar — UBS — Analyst
And margin related to the rest of the business, do you expect [Speech Overlap] will flow?
Amit B Kalyani — Deputy Managing Director
I would expect our margins when we are running at, let’s say, 75%, 80% capacity to be in the high-teens, 16%, 17%, 18% in that ballpark.
Pramod Kumar — UBS — Analyst
And of course, there will be upside if you can ramp it up higher beyond 80%, 90% level as well to the operating percentage. So great. Thanks for that. And the second question is on the CV industry, Amit.
Amit B Kalyani — Deputy Managing Director
You said CV or PV.
Pramod Kumar — UBS — Analyst
CV, sir. Sorry, India commercial vehicle. Yeah, India commercial vehicle. You did talk about 4Q momentum being strong. Just want to understand is the RD not causing any production disruption when you look at the production schedule what do you have from the OEM? And do you expect it to get…
Amit B Kalyani — Deputy Managing Director
What is causing? RD. The real driving emission regime, the transition to the real driving emission regime. No, not that we see because I had a — we had to review just last week and our projections for Q4 MHCV is close to a 100,000. This is what our customers have told us.
Pramod Kumar — UBS — Analyst
And extending it to the international side, because of the increasing concerns on US interest rate and the economy, are you — is the commentary from the OEMs changing because as we understand they are booked out for ’23, most of the capacities are sold out. But our view on the margin seeing some bit of a cancellation and some bit of a reduction in the optimism around ’23 from the US OEM for the truck side?
Amit B Kalyani — Deputy Managing Director
No, nothing — nothing in that of that kind at all. Actually, I will let Subodh comment about this.
Subodh Tandale — Executive Director
We are not seeing any…
Amit B Kalyani — Deputy Managing Director
So we are not seeing any slowdown or any downturn in the US demand as of now. In fact, it strong and we expect that this year — next year will be and as strong as this year.
Pramod Kumar — UBS — Analyst
Great. And final question on defense, Amit. As you understand it is just — you’re gun is like the last one in the fray, and they did got used in the independence day celebration last year, but it’s been quite some time, but we still haven’t seen the order coming in, we have started the exports already for a separate gun. So by when do you expect some development on that count because I think you’re ramping-up capacities, you’re scaling the entire infrastructure, but we haven’t seen the orders coming through.
Amit B Kalyani — Deputy Managing Director
Well, think we’re at the — we’re on the edge. I think very soon you should hear something, hopefully in the next couple of months.
Pramod Kumar — UBS — Analyst
Great to hear that, and wish you all the best. Thank you.
Amit B Kalyani — Deputy Managing Director
The PM has also talked about this. So hopefully al of that should fructify in something. Thanks.
Pramod Kumar — UBS — Analyst
Yeah, thanks a lot, Amit. Thank you.
Operator
Thank you. Next question is from Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead. Hi, Amit. So continuing on defense question. So the INR600 crore order is largely for spares and ammunition or we have also won any gun or the vehicle order?
Amit B Kalyani — Deputy Managing Director
So it’s fifty-fifty. 50% is for capital items and 50% is for spares and consumables.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay, and you indicated this is largely for exports.
Amit B Kalyani — Deputy Managing Director
All of it is for export.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay, so export side is ramping up pretty well. in defense, so that’s good to see. Got it. And second question…
Amit B Kalyani — Deputy Managing Director
The entire order book right now is for defense — for exports.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Exports, got it. And coming to JS Auto cast. So we have seen of good amount of pressure on margins vis a vis what they used to make from 16% to close to about 11%. Is this largely because of metal prices or there is something else to that?
Amit B Kalyani — Deputy Managing Director
So there are two factors, one is inflation and the second is that they had one customer who had a very high margin business, which has now come down to almost zero because that customer had it’s end-demand coming from Russia. So because of that there is a postponement in that business.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Right. So sustainable margin for JS Auto cast would be about 13%, 14%.
Amit B Kalyani — Deputy Managing Director
No, I think our goal is to take it to about 15%, 16% in the medium term. I would say in a year or two.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it. And then lastly with respect to the the impact of commodity prices, have you started to see benefit of lower steel prices and aluminum prices?
Amit B Kalyani — Deputy Managing Director
Not yet. It’s flat right now.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay, so that will be additional driver of margins from here on?
Amit B Kalyani — Deputy Managing Director
Yeah, when they start coming down, yes.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Right. And lastly, can you indicate USD-INR for the quarter — USD realization?
Amit B Kalyani — Deputy Managing Director
It is 81.5 — 81.5.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it, thanks. I’ll fall back in queue.
Operator
Thank you. Next question is from the line of Mumuksh Mandlesh from Emkay Global. Please go ahead.
Mumuksh Mandlesh — Emkay Global — Analyst
Thank you so much for the opportunity, sir.
Amit B Kalyani — Deputy Managing Director
Can’t hear you, sorry.
Operator
Please speak up a bit.
Mumuksh Mandlesh — Emkay Global — Analyst
Okay, can you hear me, sir.
Operator
Yes, this is better.
Mumuksh Mandlesh — Emkay Global — Analyst
Yeah, thanks for the opportunity, sir. So what was the revenue for this M4 this quarter and how much is spent more pending in coming quarter? And any update on the reversal of penalty that occurred in Q2, sir?
Amit B Kalyani — Deputy Managing Director
No, so that matter is still being, let’s say discussed and delated with the Ministry. I don’t have a figure for you right now. I would say roughly INR80 crores for the KM4 for this quarter.
Mumuksh Mandlesh — Emkay Global — Analyst
Right. So can you share some light on the Bharat Forge attendance at the Aero Expo, what kind of traction and what are new products company displaying?
Amit B Kalyani — Deputy Managing Director
So, look, we currently have strong business in three areas of aerospace. By the way, we are at the Aero show and if any of you are visiting, kindly visit us, shaly number 35, and I will be there tomorrow as well. In fact, right after this I will head to Bangalore. So currently our exposure to aerospace is in three areas. We make aero structural components, which are forgings — complex forgings. We make landing gears and we make engine components. And I’m very happy to tell you that we are the only company in India which is certified for article forging by [Indecipherable] So we’re the only company which is certified for all material, including materials that we make in India in and using them and converting them to forgings. So nickel alloy, maraging alloys and titanium. These are the three materials that we forge, of course, aluminum also. There are certain aluminum parts also be we forge for Aerospace.
We are seeing very strong growth in our aerospace business. And currently what is happening is that we are seeing a lot of US involvement in Atmanirbhar Bharat by setting up manufacturing facilities to manufacture certain large systems in India, and that is where we are becoming part of their supply chain and by getting into the supply-chain and value chain of these companies in India, we also will get into eventually their supply chain outside India, because there has now been an agreement between India and the US where in areas of high technology, cyber and those kind of areas of working to closely together and creating mutual supply chain. This is what happened in the beginning of the month in Washington DC. So we expect to see some positive fallout from this going forward. In fact, there is a very strong presence of US companies on the buying side at the Aero show.
Mumuksh Mandlesh — Emkay Global — Analyst
Right, sir. Thank you for the explanation, sir. Sir, can you possibly indicate what kind of revenues for FY’24 we see for different segments, sir?
Amit B Kalyani — Deputy Managing Director
Yeah, I don’t want to give you a forward-looking statement, but it’s going to be substantially higher than what it is this year. It will be — I would say, order of magnitude higher than this year.
Operator
Hank you. Next question is from the line of Pramod Amte from Incred Capital. Please go ahead.
Pramod Amte — Incred Capital — Analyst
Yeah, hi, Amit. This is with regard to the international operations. I understand your aluminum forgings is taking time, but even if I were to look at your steel forging on the September quarter versus December, there seems to be a slippage into a losses again. Is it more seasonal or you feel…
Amit B Kalyani — Deputy Managing Director
No, there is no loss on the steel business. It’s all from the aluminum business and the steel business is operating positively, but at a slightly lower EBITDA than what we’d liked. See, all of the businesses have had to deal with a very strong, let’s say inflatory atmosphere. And Germany has been especially badly hit because not only has it been an inflatory atmosphere, it’s also had very big problems in terms of manpower availability during COVID. So combination of all this has led to decline in profits, but it is still EPS accretive and positive.
Pramod Amte — Incred Capital — Analyst
And coming to the Aluminum business, have you already seen the turnaround in the international operations or you are hopeful of turning around in the March quarter?
Amit B Kalyani — Deputy Managing Director
We are seeing a improvement in Q4 over Q3. And in Q1 we will be even better-off than Q4. And. As I mentioned, we will get to the numbers that we have indicated by the middle of the year, but we will be EPS accretive for the full-year FY’24.
Pramod Amte — Incred Capital — Analyst
And just to understand better, are these programs going slower and hence it’s taking time to ramp-up or it is more about…
Amit B Kalyani — Deputy Managing Director
It’s a combination of multiple things. Europe has lost over 1.2 million car production because of supply chain issues last year. Between the Europe and US, they have lost 3 million car production because of the supply chain issues. So it is a combination of external and internal factors.
Pramod Amte — Incred Capital — Analyst
Sure. And last one is…
Amit B Kalyani — Deputy Managing Director
And please remember that the price escalation and price compensation is something that we need to get in order to be able to operate at the level of profitability that we had planned.
Pramod Amte — Incred Capital — Analyst
Sure. With regard to EV parts, you are planning to open up some plants in India. Any update, in the sense you have started them, or are they on course?
Amit B Kalyani — Deputy Managing Director
The plants will start from next month. One plant will open next month, one in March, and one in May.
Pramod Amte — Incred Capital — Analyst
Okay, sure. Thanks and all the best.
Operator
Thank you. Next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.
Gunjan Prithyani — Bank of America — Analyst
Yeah, hi. Thanks for taking my question. Just two follow-ups. Just going back to the US truck cycle, I mean, there is a six-seven month sort of backlog at the OEMs, But the order intakes have started slowing for last couple of months. So any color on how we [Technical Issues] the outlook for the industry beyond six-seven months of backlog?
Subodh Tandale — Executive Director
At this point, most of the production slots for 2023 are covered at least till November, it is not six-seven months. And then basically, the last two months or so have been around 18,000, which is — which is slightly lower than the the average, but the expectation right now is 2023 and 2024 will be reasonably okay.
Gunjan Prithyani — Bank of America — Analyst
Okay, got it. And the second follow-up I had was, I mean, I understand the defense ramp-up you mentioned next year, but is it possible to get the revenues for both defense and aerospace for this year, maybe nine-month or this quarter?
Amit B Kalyani — Deputy Managing Director
I think we’ll share that at the end-of-the year.
Gunjan Prithyani — Bank of America — Analyst
Okay, okay, got it. And this just the last thing on the order backlog, now INR2,000 crore which you mentioned. I mean, how should we be thinking about the translation of this into revenues? I mean, in terms of timelines, the large part of this start contributing from FY ’24 onwards and the incremental win that we’re talking about from Indian Army, that also starts kicking in F’24, so it will be INR2,000 crore plus-plus, is it?
Amit B Kalyani — Deputy Managing Director
Yes, it will be INR2,000 core plus-plus because this does not include any of the Indian orders. You should start expecting to see revenues from this start growing from the second quarter of ’24, which is the June quarter — July, August, September, okay? And the entire INR2,000 crores will be done in 30 months, largely in two years with some spillover into half year more.
Gunjan Prithyani — Bank of America — Analyst
Okay, and that should be same for the domestic orders also, right? Once they come through, like the execution timeline is pretty much…
Amit B Kalyani — Deputy Managing Director
See, it depends on what the order ask for. Okay?. If the order says I need it done in five years, it’s in five years. If order says I need it done in three years, it’s in three years. So it really depends on what the order conditions and terms are.
Gunjan Prithyani — Bank of America — Analyst
Okay, okay, got it. Thank you so much.
Operator
Thank you. Next question is from Siddhartha Bera from Nomura. Please go ahead.
Siddhartha Bera — Nomura — Analyst
Yeah, sir. Thanks for the opportunities. Sir, just wanted to understand, we have got a couple of orders on both domestic and export defense side, so are we incurring any costs right now in our P&L as well for some of these orders?
Amit B Kalyani — Deputy Managing Director
So we are always incurring costs. First of all, all the products that we have developed so far, we have developed on our own. And all these products, the product development, R&D and testing validation all has been passed-through our P&L. Nothing has been capitalized. Okay? Now, the new orders that we have one on the — all the new orders for this system are going to be executed by Kalyani Strategic Systems Limited. And we have already explained, because that is the — which is a 100% subsidiary of Bharat Forge. It’s only because our reps and warranties that one needs to give in this defense business, we don’t want Bharat Forge to be there. We want it to be in a separate entity. And all the value-added components which we have developed over the last five, six, seven years are all going to be manufactured by Bharat Forge and sold to this company at an arm’s length profitably basis.
Siddhartha Bera — Nomura — Analyst
Got it. But, sir, I wanted to understand, just in case, I mean, will it it be possible to quantify the amount of margin drag — some of these cost will be impacting the quarter so that when revenues ramp up this will get normalized, so quantify to…
Amit B Kalyani — Deputy Managing Director
See whatever costs are being incurred or being incurred as it is, there is not going to be any increase in cost. okay?
Siddhartha Bera — Nomura — Analyst
And on the RM side also we had some one-off defense cost last quarter, so if I adjust for that it does not seem that it is — we have seen any benefit since it has gone one up on a quarter-on-quarter basis. So can you just throw some more color on why the the RM sale [Speech Overlap]
Operator
Siddhartha, your voice is muffled. Can you please use the handset mode.
Siddhartha Bera — Nomura — Analyst
Yeah, so, is it better now.
Amit B Kalyani — Deputy Managing Director
Yeah, little better.
Siddhartha Bera — Nomura — Analyst
So just wanted to check, last quarter we had some 70 bps one-time cost on defense vehicles last quarter. So if I adjust for that, RM to sales seems to be slightly higher only in the current quarter, so possible to highlight any particular reason why RM to sales remains elevated?
Amit B Kalyani — Deputy Managing Director
No, its just raw material prices are high. I mean, nothing else.
Siddhartha Bera — Nomura — Analyst
Okay. So, based on current procurement, how much benefit should you think we should expect from current levels?
Amit B Kalyani — Deputy Managing Director
In what? I can’t understand your question.
Operator
Please come closer to the mic and speak.
Siddhartha Bera — Nomura — Analyst
I’m directly speaking only [Speech Overlap]
Amit B Kalyani — Deputy Managing Director
Maybe we can — you can have a discussion offline with our team and understand this is in more detail, because I think this is a very detailed question that you’re asking and I’m not exactly clear what you’re asking, we are not able to hear you.
Operator
Thank you. We take the next question from the line of Amyn Pirani from J.P. Morgan. Please go ahead.
Amyn Pirani — J.P. Morgan — Analyst
Yes, hi. Thanks for the opportunity. And apologies if the question I’m about to ask has already been asked because I joined a bit late. Your interest cost has increased quite sharply quarter-on-quarter. Is there a reason why that has happened?
Amit B Kalyani — Deputy Managing Director
Yeah, so let me explain very simply. The interest cost for this quarter had a INR35 crore MTM impact, which is one-time and notional. If you remove that, the interest cost will come to about INR55 crores. Now, this INR55 crores is quite a large increase over what it used to be in the past and the reason for that is that, on our foreign currency loan and the working capital loan, we have seen a pretty steep rise in interest rates and so forth. So while the spread remains tight, the overall cost has gone up — the base has gone up. So that is the increase in financing cost.
Amyn Pirani — J.P. Morgan — Analyst
Okay, and now it will remain here unless global interest rates come down?
Amit B Kalyani — Deputy Managing Director
I would say that on a normalized basis, we should expect a INR50 crores, INR55 crores a quarter interest cost.
Amyn Pirani — J.P. Morgan — Analyst
Okay, okay, okay, understood.
Amit B Kalyani — Deputy Managing Director
But the MTM is not going to happen every quarter.
Amyn Pirani — J.P. Morgan — Analyst
Of course, of course. And just going back to the commodity question, I think the reason why a lot of us are a bit confused because a lot of the OEMs and it’s not like-to-like, have been talking about benefits on commodities which they have seen in the quarter. But I guess for you, your input is not just basic steel, it is specialized steel, so maybe the…
Amit B Kalyani — Deputy Managing Director
[Speech Overlap] pass through, right?
Amyn Pirani — J.P. Morgan — Analyst
Yeah, yeah. Okay.
Amit B Kalyani — Deputy Managing Director
Please understand that the OEMs bear the brunt of this whereas companies who are in the conversion business like us have a pass through.
Amyn Pirani — J.P. Morgan — Analyst
Correct, correct. So ultimately we should be looking at gross profit per ton or EBITDA per ton rather than looking at RM, right?
Amit B Kalyani — Deputy Managing Director
Exactly, exactly. Absolutely.
Amyn Pirani — J.P. Morgan — Analyst
Fair enough, fair enough. Thanks a lot. I’ll come back in the queue.
Operator
Thank you. Next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please go ahead.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure. Sir, thank you for taking my question. Sir, my first question is on the defense piece again. So while we’ve talked of the order book of INR2,000 crores, Chairman on television talked about this largely being export. So is it a fair understanding that this is incremental defense business apart from what we already have and the INR1,000 crores what you’ve talked of execution FY’24 would be incremental revenue for the company?
Amit B Kalyani — Deputy Managing Director
Yes, so this — so, yeah, INR2,000 crores is our current total order book. All of it is exports, okay? And. Roughly that amount what you mentioned is what we hope to do in the first year, execute in ’24.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure, and we already have a defense piece, we supply other equipment to India, etc., so that business [Speech Overlap]
Amit B Kalyani — Deputy Managing Director
We haven’t received orders yet, large orders.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure. I’m talking of spares and we have sales, etc., other routine business that [Speech Overlap]
Amit B Kalyani — Deputy Managing Director
Actually that comes in our forging business because we’ve been doing that for so long.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Right. Sure.
Amit B Kalyani — Deputy Managing Director
These are new businesses which we have developed in the last few years and which are more than just forging, components, subsystems and systems.
Operator
Thank you. The next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Mahesh Bendre — LIC Mutual Fund — Analyst
Hi, sir. Thank you so much for the opportunity. So for the quarter, we have reported tonnage up around 63,000, which is the best in the last 16 quarters and we have recovered very fast, but still compared to FY’19 we are around. 10% below that. So do you think given the growth prospects for next year we’re talking about, we’ll able to cross all-time high tonnage next quarter?
Amit B Kalyani — Deputy Managing Director
I think next year our numbers will be significantly higher than what we have ever done both in terms of, I would say production and definitely in terms of sales, because we have so many new business. See, when he looked at it 16 quarters ago, it was the forging business, okay? There was no defense, there was no aerospace, there was no casting. So these are three big new growth drivers which are going to have a big impact next year. So, those are going to be significant positive growth driver, in addition to growth coming from our overseas subsidiaries, our Indian fundamentals — standalone business growing, and so on and so forth. So you’re going to have a lot of other growth drivers.
Mahesh Bendre — LIC Mutual Fund — Analyst
Sure, sir. And sir, the last question from my end is, you were talking about the European business, I mean, because of the war and everything, there was a weakness in the European side, but if I look at the numbers, our numbers are really good. I mean, they are very comparable, its better than FY ’19, what we have reported. So actually those weakness has not been reflected in our numbers. So if Europe come back next year or recovery happens, then our numbers would be substantially higher than what it is now.
Amit B Kalyani — Deputy Managing Director
Well, that’s what we’re hoping and that’s what we’re working towards.
Mahesh Bendre — LIC Mutual Fund — Analyst
Okay, sure, sure. Thank you so much, sir.
Amit B Kalyani — Deputy Managing Director
Thank you.
Operator
Thank you. Next question is from the line of Peter from [Indecipherable] Management. Please go ahead.
Peter — — Analyst
Hello, sir. Sir, just want to probe a little bit on the Europe front. So in FY’22 when US revenues decreased and Europe increased. So, first I wanted to know that as a nine month basis, what is the revenue split between India, US, Europe and rest of the world?
Amit B Kalyani — Deputy Managing Director
I don’t have nine months, I have the quarter.
Peter — — Analyst
Okay, sir.
Subodh Tandale — Executive Director
We can have our team shares that with you later.
Peter — — Analyst
Okay. For the quarter if you can share, sir.
Subodh Tandale — Executive Director
So quarter, India was 40%.
Amit B Kalyani — Deputy Managing Director
Its in the update. Read the update itself. In the update on Page 6 of the update.
Peter — — Analyst
And in terms of the revenue split in Europe, like, what percentage is taken by CV passenger vehicle and industrial? And what is the outlook for industrial?
Amit B Kalyani — Deputy Managing Director
I don’t have that information with me right now. Honestly, I think you should take that offline. But we expect both the CV and PV to be fairly strong globally for us.
Peter — — Analyst
Okay. And then my final question is torque. Any update on any sales numbers and how is the demand looking for torque 18.
Amit B Kalyani — Deputy Managing Director
Demand is looking good and their new production facility will start next month and then they be able to ramp-up quite dramatically. Whatever vehicle they have sold so far, they’ve sold 700, 800 vehicles which have covered more than 1 million, 1.2 million kilometers without any accidents and fires and recalls. The technology is robust and well-proven.
Peter — — Analyst
Thank you, sir. That is all from my side. Thank you.
Operator
Thank you. Next question is from Chirag Shah from Nuvama. Please go ahead.
Chirag Shah — Nuvama — Analyst
Yeah, thanks for the opportunity. Sir, two questions. Sir, one is a housekeeping one. There is a big forex gain of INR41 crore in other expenses. Does it pertain to US business mark-to-market on the US exposure or is there something else in that?
Subodh Tandale — Executive Director
Mainly on the receivables from the euro side.
Chirag Shah — Nuvama — Analyst
Receivables You’ve heard on the euros side, okay. And this is again, mark-to-market, right? This will reverse based on how it plays out for you unless you realize this.
Subodh Tandale — Executive Director
Yes.
Chirag Shah — Nuvama — Analyst
Yeah. Sir, second question is on the domestic revenue there is a sequential decline of around 2% odd in the presentation that you have said. Is it more to pass-through effect of commodity or it’s largely mix and seasonal thing? Anything specific to call-out over there?
Amit B Kalyani — Deputy Managing Director
I think there was a small drop in pass car and there was an inventory correction of production in tractors. Sales didn’t drop but production for some OEMs had dropped a little, small drop, that’s all.
Chirag Shah — Nuvama — Analyst
Okay, so its driven by pass car, its not driven by CV?
Amit B Kalyani — Deputy Managing Director
No.
Chirag Shah — Nuvama — Analyst
Great. Thank you. Thank you very much and all the best.
Operator
Thank you. Next question is from the line of Jinesh Gandhi from Motilal Oswal. Please go ahead.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Hi, can you also update on Sandeep Forgings, how it is doing, where are we in in terms of our ramp up plans and do we plan to expand capacity or look to increase value add there?
Amit B Kalyani — Deputy Managing Director
Yeah, Mr. Sanjeev Nimkar, head of our Industrial business will talk.
Sanjeev Nimkar — Head of Industrial Business
Yeah, first correction there. We have named it as Bharat Coach Industrial and Technology Solution. So we don’t call it as a Sandeep Forging. Coming to your question, this year we’ll be doubling the sales than what we acquired last year. So that business is doing very well and right now we are at around 55% of capacity utilization, so we have huge scope to go ahead with that. We do not need to expand it at this point, but down the line two years we can look at it.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. And are you looking at increasing machining there? I believe machining levels are very low ad that’s a opportunity to increase value-added products there.
Sanjeev Nimkar — Head of Industrial Business
So, you are absolutely right. The machining levels are low there. But going forward, when I’m saying about expansion, primarily it will be on the machining side.
Amit B Kalyani — Deputy Managing Director
Also, we don’t need to expand the forging capacity. To increase forging output, all we need to do is increase some heating capacity, burners, which are not expensive. The main heavy investment as it is already in place. And that asset can produce as much output as we used to produce from our 4,000 ton forging press in Mundhwa, which is quite a large amount.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it, got it. And it is now profitable at PBT level or we are in process of turning it around?
Amit B Kalyani — Deputy Managing Director
It was profitable from day-one. But as we add value to the product and we get new products approved and accredited, that’s when we will start seeing increase in margins.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it, got it, great. Thanks and all the best.
Operator
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to Mr. Amit Kalyani for closing comments. Thank you and over to you, sir.
Amit B Kalyani — Deputy Managing Director
Ladies and gentlemen, thank you very much for your patience, interest and questions about our company and comments. Your constant support is something that motivates us and keeps us going and keeps us on our toes as well. So thank you very much and have a lovely week. And lastly, please do visit us at the Aero show, even if not tomorrow, any of the other days. Our team will be there. It’s shaly number 35. And if any of you need help in getting passes or whatever, get in touch with Kirti from my office and he will coordinate it. Thank you so much.
Operator
[Operator Closing Remarks]