Carraro India Ltd (NSE: CARRARO) Q4 2025 Earnings Call dated May. 28, 2025
Corporate Participants:
Unidentified Speaker
Balaji Gopalan — Managing Director
Davide Grossi — Whole-time Director and Chief Financial Officer
Analysts:
Unidentified Participant
Sonal Gupta — Analyst
Mahesh Bendre — Analyst
Ashok Shah — Analyst
Anish Rankawat — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to Carraro India Limited Q4 and FY25 earnings conference call. This conference call may contain forward looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines should be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please please signal an operator by pressing Star then zero on your touch tone phone.
Please note that this conference is being recorded. I now hand the conference over to Dr. Balaji Gopalan, Managing Director of Carraro India Limited. Thank you and over to you Mr. Gopalan.
Balaji Gopalan — Managing Director
Thank you very much. A very good morning to everyone and thank you for joining us for Carraro India Limited’s Q4 and full year financial year 25 earnings call. I am Balaji Gopalan, Managing Director and it’s my pleasure to welcome all of you especially as we close out our first full fiscal year post IPO. This is a defining milestone in Carrara, India’s journey. I am joined today by Mr. Davide Grossi, our CFO and whole time Director, our Chief Operating Officer Mr. Sudhinder Manikar, Mr. Ashok Rai, our Director Sales along with other members of the leadership team and Strategic Growth Advisors, our investor relation partners.
I would first start with something which is very positive and we look at the dividend today. At the outset I am pleased to share that the Board has recommended a final dividend of rupees 4 rupees 55 paise per equity share of rupees 10 face value for financial year 2025 subject to shareholder approval. This marks our first dividend post listing a significant milestone that reflects our commitment to create shareholder value while ensuring sustainable and profitable growth. Looking ahead, we continue to prioritize strategic growth and CAPEX initiatives. We remain focused on maintaining a prudent and consistent dividend policy in alignment with our long term investment capital allocation framework.
Coming to financial year 2025 performance highlights it has been a year of strategic execution, resilience and laying the foundation for accelerated growth. We are very pleased to report that we have successfully met our top line and EBITDA guidance despite operating in a challenging macro environment, particularly with global softness in export markets and muted demand in some segments during the election phase in India. While total income for the year was relatively flat on a year over year basis. We achieved a 24% year on year growth in EBITDA with the same revenue of previous year, underscoring the strength of our business model, operational efficiencies and the ongoing benefit of product mix optimization.
On the margin front, ladies and gentlemen, I am pleased to share that we exceeded our guidance of 10% EBITDA margin delivering a full year margin of 10.2% up 192 basis points from the previous year with a pact at plus 29% from 62 crores last year to 88 crores this year. This margin expansion was driven by a stronger contribution from our high value four wheel drive product portfolio. Increased localization which reached 77% up from 67% about four five years ago, tighter control on cost and supplier collaboration early traction from high margin segments like engineering services. Our domestic business excluding indirect exports continued to gain momentum driven by consistent demand in the agriculture and construction equipment sectors.
OEM partnerships continue to strengthen as customers increasingly rely on Carraro for integrated technology driven solutions. We continue to see long term growth potential in our export segment supported by recent new business wins despite ongoing global uncertainties. In the near term, however, export performance has remained under pressure primarily due to macroeconomic headwinds and cyclical softness in key developed markets such as Europe and the United States. Importantly, this softness is entirely demand led. We have not lost a single customer or contract underscoring the strength of our relationship and and competitiveness. While the timing of recovery remains uncertain, we are actively engaged with global OEMs and are well positioned to ramp up as the demand normalizes.
Let us now talk or let me walk you through some of the key strategic highlights for financial year 2025 in construction equipment segment. The teleboom handler recorded our first export shipment in Q4 of of financial year 25. Though volumes were modest, this represents a strategic entry into a high potential export segment domestically. Also, we secured two projects with local customers for the tele boom handler Accel platform. Backhaul orders business remains stable across both domestic and export markets. We mitigated export softness by securing a new series order from an existing customer, dispatches of which began in April this year.
Additionally, one of our local OEMs secured a back to back supply agreement with a global player supporting future volumes for Carrara India. Coming to agriculture equipment we go to four wheel drive axles and gears. Domestic growth continued driven by wider four wheel drive absorption. However, our gear business saw a slight dip in the last two quarters and is expected to remain stable with limited near term Growth high power transmissions that is the high horsepower transmissions beyond 100 horsepower. We successfully developed and piloted a new prototype for export customers series Production is scheduled to begin in Q2 financial year 26.
We have also won projects with two tractor OEMs, one for export, one for domestic for more than 105 horsepower transmissions with production starting in financial year 2627 and 2728 respectively. Encouragingly, the we are seeing rising interest in this category of high horsepower transmissions from Indian OEMs as well. Engineering services business is witnessing a growing number of inquiries for higher horsepower and advanced technology configurations. Some of these are currently under active negotiation. We expect this business to contribute some revenue in FY26 as well as in as we got it in the past. Customer addition we added six new customers during 2025 including two very recently in Q4.
Out of these customers, two are in the domestic construction equipment segment for axles and transmissions and one for electric tractor transmissions Export Business Overall demand remains muted particularly in the agriculture segment. While near term recovery is not evident, we are proactively engaging with customers to be ready when volumes improves. Probably during the last quarter of the year. Capex in FY 2025 our total capital expenditures stood at rupees 515 million. 515 million. This investment was primarily directed to towards supporting new product introductions including the launch of a new axle line for telescopic boom handlers and a high performance transmission range tailored for agriculture applications, both aimed at enabling incremental capacity to support our financial year 2026 sales.
Additionally, we allocated CAPEX towards process upgrades and maintenance in our plant to drive efficiency improvements and integrate state of the art technology across all our operations. Product Development we developed nine prototypes during the year with five moving into production. For us, Prototype is a bellwether for future revenue because we develop prototypes only when we get a concrete order or contract signed with the OEMs. 9 prototypes is an indication of how inorganically we will grow in future. This reflects a strong focus on technology driven product development and deep customer engagement. While revenue conversion from these efforts takes time for a period from two to three years, they form a critical part of of our market seeding and long term customer stickiness strategy recognition and customer trust.
We are very happy to share that we were honored with multiple customer awards during this year including recognitions from Mahindra and Mahindra, Caterpillar and Escort’s Kubota. These are proud moments that reflect our relentless focus on quality and delivery excellence. In particular, I am very delighted to share that in April 2025 bull machines awarded us the Best Supplier Award for Strategic Excellence. This reflects not only our operational strength, but also the deep trust we have built with customers who view us as strategic technology partners and not just as suppliers or vendors. I will now move briefly to the financial year 26 outlook.
Looking forward to FY26A. We expect top line growth in the range of 8% to 12% so we are surely going to add revenue in the current financial year. We are targeting continued progress towards our medium term goal of increasing EBITDA margins by at least 1% year on year for the next 3 years, building on our financial year 2025 margin EBITDA of 10.2%. So we are looking at growing 1% EBITDA. We will add 1% EBITDA hopefully year on year for the next 3 Years. Margin delivery may fluctuate quarterly due to product mix, but we urge all stakeholders to kindly focus on full year profitability.
Key levers such as localization, operating leverage, value added, product contribution to the product mix remain central to our strategy. Growth Drivers in financial year 2026 stronger domestic demand across agriculture and construction sectors we see a ramp up in tele boom handler axle volumes. Revenue contribution from engineering services seems to be very much on the finalization of the contracts. Enhanced localization targeting around 86 to 88% over the three years. These are directions that were taken as strategy one year ago and we realized that our strategy that we took on the journey that we took on is giving us results that were anticipated by us and hence we are continuing the same strategy for the next year as well.
We are also enhancing operating leverage through productivity improvements in our operations. As part of a recently signed wage agreement with our labor union, we have secured a commitment to an increase of 20% in our labor efficiency enabling us to to support margin expansion without adding to our headcount. In conclusion, ladies and gentlemen, Carraro India is well positioned for sustained profitable growth built on the pillars of technology leadership, OEM trust, deep localization and customer centric innovation. Our pipeline is robust, our foundations are strong and our confidence in our strategic direction has never been higher. With that, I now invite Mr.
Davide Grossi, our full time director and CFO to walk you through our financial performance. Davide Grossi.
Davide Grossi — Whole-time Director and Chief Financial Officer
Thank you Balaji and good morning to everyone. Let me take you through our financials for the quarter 4 and the full year 2025. I will quickly walk you through and then we will leave some space of course for your questions starting with Q4 2025. Our total income stood at 4479 million rupees, 448 crores, up by 13% on a year. On year basis, our EBITDA was 489 million rupees with an EBITDA margin of 10.9%. Our profit after tax for the quarter came at 3,237 million rupees. When we look at the full year FY 2025, we recorded a total income of 18234 million INR.
Approximately 200 million Euro. We register an EBITDA of 1864 million 86 crores up to 24. Compared to the last year, the EBITDA margin as already mentioned by Mr. Balaji was at 10.2% up from the 88.3% of the last year with a 24% increase. Year on year, our profit after tax was at Rupees 881,000,088 crores from the 62 crores on the year 2024. Segment wide revenue for FY 2025 are as follows. In Agriculture Vehicles segment we record 8,565 Million Rupees, contributing 47% of our total revenues. The construction vehicle segment reduced revenues for 7,000 for 491 million rupees, contributing 41% of our total top line.
The other segment, which includes gears, spare parts and other tools reported 2019 million rupees of revenues contributing at around 11% on the total revenues. When we look at the split by geography, our domestic sales were $12,155 million contributing for 67% of the total top line. While the export segment with 5,921 million contributed 32.8% of our top line. As you can see, we maintained a healthy balance sheet throughout the year ensuring sufficient liquidity to support operations and strategic investments. CAPEX was directed towards product development, capacity enhancement and process automation. Looking ahead to FY26, we expect improvement across key financial metrics supported by higher value product sales, engineering targets, growth and localization gains.
This is all from my slide. Balaji, back to you.
Balaji Gopalan — Managing Director
Yeah, thank you Davide. I will just take 30 seconds to summarize after which we will have the question answer session. To Summarize, financial year 2025 was a year of consolidation and margin recovery. Financial year 2026 will be a year of acceleration across core new and emerging segments. We remain focused on our long term roadmap of reaching Euro 350 million in revenue and enhancing our EBITDA by 1% each year. In the medium term, we deeply value the continued support of our investors, customers and partners. Thank you for your trust and for joining us on this journey.
We now welcome your questions. Thank you.
Questions and Answers:
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on a Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question comes from the line of Raghu Nandan with Duam Research. Please go ahead.
Unidentified Participant
Thank you sir for the opportunity. Congratulations Banerjee sir. And Davide for. For strong margin performance for both Q4 and FY25. Few questions. Firstly, the outlook for domestic tractor industry is positive for FY26. How do you see the underlying industry growth especially for four wheel drive tractors?
Balaji Gopalan
Yeah. Good morning Mr. Raghu. Thank you for the question. It is a very valid question and you have rightly touched the point that the four wheel drive market has been the strategy for growth of Carraro in India. And this is the field that we entered just about four years ago. And we have been capturing significant market in the four wheel drive segment. And we are still continuing to acquire more business and grow. But what is relevant and important is to understand that the absorption of four wheel drive technology in the Indian tractor industry four, five years ago was just in the range of 1 to 2% of the total tractors being sold in India.
One year back, or 1.5 years back it had reached around 14% to 15%. And I’m very happy to share that it has already reached close to 20% in this financial year. And it is very important that the global four wheel drive tractor market stands in developed countries at 99%. So we are at a nascent stage. Carrara’s strength in technology is in four wheel drive axles. And that segment is growing. And you have seen it has grown beyond what we had estimated during our earlier calls and during the roadshow we. We were estimating it to become around 17%, 17.5% but it has grown much faster.
This is very normal when it comes to any new technology absorption in the market. So the initial seeding takes a little bit of time but when the threshold reaches then it just shoots up the absorption. So we are hoping for it to reach about 40, 45% in the next two to three years which will all be a favorable direction for Carrara in India. Have I answered your question?
Unidentified Participant
Yes. Thank you very Much that provides a very optimistic outlook. Secondly, the company started small supply for telecom handler in Q4. How do you see the ramp up in FY26 and 27? And also would this order have higher margins compared to the blended level of margin of the company?
Balaji Gopalan
Okay, see Telugu. Bangalore is at a nascent stage in India. It is occupying no more than 1% of the total construction market industry at the moment. And it is growing, it is inching forward. Okay. So it is at the infancy stage. All other similar vehicles and technology which already entered India in the last five years initially were 1%. Today they are at about 8% to 9%. So we are expecting teleboom handler also to grow in the similar direction. But we have a big advantage that the initial small step that we took has turned out to be very significant because of one global customer who is one of the largest player in this world.
We have been able to secure that order that we had spoken in the past. And I’m very happy to share that the OEM is pushing us to ramp up much faster than what they estimated because the product that they launched with our actions has been very well received by their global final customers. For that reason, the ramp up is growing and we are in a position where we will be required to do a plant expansion to cater to their requirements in the next one to two years. So we will be able to manage with our improvement in efficiencies.
We are trying to keep our fixed cost the same, not investing too much and maximizing the capacity that we have. So that is bringing in the operational efficiencies. Plant efficiencies is helping us in ramping up the new volumes that are being demanded. But very soon, in about six to nine months, we would be in a position where we have to do the groundbreaking ceremony for expansion of our plant. And we will do it keeping in mind the ramp up. So it will be done in at least three steps. The expansion, which we are expecting ultimately to be around 25,000 square meters, which is around two and a half lakh square feet, will be the extra expansion of for these kind of access, but in a phased manner so that we don’t have to put in all the investment in one go.
Coming to the margins that you had asked about, I will rope in Mr. Davide Grossi to give you insight.
Davide Grossi
Yeah, good morning. So when we talk about margins for Turbo Mender, we can say that the current set of orders that we have will be in the mid term accretive in terms of margins compared to the average of our portfolio. However, in the very short term, you will not be able to appreciate that because whenever we introduce a new product, there are a number of efficiencies that we need to develop in terms, of course, quantities that need to be produced. And also this is a bit of a paradox, but whenever you have a new product, your localization components would be lower.
So you first start producing, start manufacturing, and once the volumes ramp up, you are able to produce with a level of efficiency that you want and you are gradually able to localize the components that at the beginning you have to import. So long story short, this project, yes, will be improving our margins, but it’s something that you will see in due course.
Balaji Gopalan
Yeah, let me come in again. Any new product, because of quick time to market, we get available parts probably from our global sources to launch the product. Then after we start stabilizing and the volume increases, it becomes interesting for local vendors also to become part of that. Then we localize. So that is when the margin will start growing. To answer your first question also let me give some numbers for your satisfaction. The expected volume for this year is roughly 6,000 axles. This will move to 9,000 next year and then go beyond 14,500 in this. This 14,500 translates to a revenue of 35 million Euro, which is roughly around 300 crores.
So we are getting from one customer, a single product, a growth of 300 crores in the next three years. So I hope you people will realize and understand the magnitude of this business that we have got. And this is largely, or I would say more or less export business that has come into India.
Unidentified Participant
Thank you sir for the detailed answer and wonderful to know the magnitude of work you’re doing. Sir, on the localization part, 77% is the share of Indian suppliers in raw material. How do you see the share increasing in FY26 and how do you see it going over the next three years?
Balaji Gopalan
Yeah, localization is a focus. We had explained this during roadshow. We have put a special team that is identifying not just localization. Now we have fine tuned it to identify high runner products in our order book and focus our localization on that so that we are able to see the benefit in our numbers. Otherwise, localization remains on paper. It doesn’t reflect in my performance. So we are now focusing on high running components and we are focusing on that. We have looked at a total of 46 components that qualify for cost optimization and we have already closed 20 of them in that 46 basket.
So our estimation based on the product mix for that particular year, we are expecting to touch 80% localization for the current year. So this also depends, as you all know, the order mix can change quarter to quarter. So if it is as per what we are anticipating now, looking at the order book, we will be 80% this year.
Unidentified Participant
Thank you very much sir, and wishing you all the best. I’ll fall back to the queue.
Balaji Gopalan
Thank you. Thank you.
operator
Thank you. Reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Sonal Gupta with HSBC Asset Management India. Please go ahead.
Sonal Gupta
Hi, good morning sir, and thanks for taking my question. So just continuing with this localization bit, right? Like I mean like while you’ve said we’ve touched 77% localization, I mean like I would have imagined that we will see, I mean do you think that that benefit is also flowed through or we’ll see the benefit of this localization more in cost terms next year? I’m just trying to understand like we are and I think Davide also mentioned that some of this will flow gradually. So I’m just trying to understand that. Have we reached optimum from a 77 or we just touched 77 and the benefits are yet to come.
Balaji Gopalan
Yeah, you’re very right. This localization is a kind of a sun and cloudy season. So when the product mix is good, we get a good benefit into our numbers. When the product mix is going towards existing products or it is too much of the new technology products, then although I have the localization, those components are not going into the products that are getting dispatched for that month or for that quarter. Hence answering your question, the consolidation of all these localization will take place at the end of one and a half, two years, two and a half years, depending at which stage we have started the localization.
So we assume that with the growing volumes the absorption will be better and we will get the benefits. So to answer your question, the localization benefit accruing directly into my financial numbers will be on a staggered basis. But it will keep getting consolidated between what was in the past and what is emerging in the future.
Sonal Gupta
Got it, sir. And sort of you also talked about on the backhole orders, we’ve won orders and you said we’ve added two customers on the construction equipment side in the domestic. So I mean like, I mean like construction equipment because of this CV5 norms. I mean we understand that there is some amount of a slowdown. So I mean just from your perspective, how do you, I mean even if the industry Is sort of more flattish this year. How do you see construction equipment growing for you?
Balaji Gopalan
Yeah, see the model of Kararu business. We are at a stage where we are not dependent fully on the organic growth in the industry. So we are beating the industry estimation because we are growing in this segment that we operate. So I always tell everybody that please look at the big in the small. We are part of a larger market but the whole market does not affect us because we operate in a smaller segment and we are big in that small segment. So keeping that as the background for us, for example in construction equipment tele boom handler, I have given the reference of the contract that we have got which is leading us to 300 crores in the next three years or rather two, two and a half years.
Similarly, in backhoe loaders there are new orders that are coming and one of a very big significant backhoe loader player in India who is in the top two in the market has got a contract manufacturing for a big global OEM and he will be assembling it in India and using it for their global requirement for export. And he will be taking the transmissions from us. So I don’t want to take the name of the big brand for which he will be doing it but the fact is he has got an order for branding it. So it’s like a white, good manufacturing, white label and he is able to sell it to that global player and he in India is in the top two, top three of the back on order market.
So these are the kind of projects and wins that we get with our customer that is helping us grow in a very challenging market where the market itself is showing growth between 3 to 5%, 3 to 6% we are beating that and growing. And to that reason even in the last financial year that we closed now, now on the 31st of March, we have shown a significant increase in our revenues. As we projected, we crossed the estimation for this year we are looking at growing to about 215, 218, 220 million euro. So there would be about 8 to 10, 8 to 12% growth coming into our revenue.
That is why we always suggest to all the analysts that don’t gauge us by the growth projection of the market itself. In the market our segment is growing, our customers are taking more products from us, our export is also growing. Although we are saying in general the export market is soft. So our storyline is a bit different which is very specific to our products and the customer penetration that we have in those segments.
Sonal Gupta
Right? No, no, that is well understood. I understand. I mean that’s what we like about the story that I mean it will grow faster than the market. So. And just on the domestic, I mean like, sorry, just on the export side, do we see any impact from the US tariff situation?
Balaji Gopalan
Okay, US Tariff, we have very interesting discussion. Everybody has, but for us this is a hanging sword to be very honest. At the moment we have limited exposure to the US market. We have done a kind of analysis. We don’t have a reliable direct validated number because we supply to the OEMs and from that stock the OEM can decide where to dispatch their finely built vehicles. But looking at whatever information we have gathered from the market, it seems like we are in the range of 4 to 7% or I would say we are in single digit exposure to the American market.
So it’s not a very big concern for us, number one. Number two, we dispatch from our factory and our responsibility is over the customs duties. The import duties are paid by the OEMs who are buying from us. So we don’t pay any of the duties or we are not affected directly by any of the tariffs. We have a contract price contract and we get it based on that. Number three, the nature of our business. We have explained it takes two years to three years for replacing any of our products. We are mission critical. 20 to 25% of the my transmission axle cost is the cost of the, I would say the cost compared to the cost of the vehicle.
So it is very important. And it takes two to three years to do the testing, validation and then replace us. So very honestly speaking they have no choice. They have to continue taking it. They have to manage the impact of any. But they have very limited choice in the next two years to do anything and, and there is nothing better they can get because they are sourcing it from India to then develop it in another country and source it from there. It’s a long shot for them. So all in all we feel we are very well protected and we are insulated from any negative effect because of the US market.
Davide Grossi
And maybe Balaji, we could just add that as of now we have not seen any, let’s say red flag. None of our customers have reach out to us trying to open a discussion on this point. So then of course it can happen in the future, but as of now we don’t see this happening.
Sonal Gupta
Got it? No. So yeah, that’s where I understand your point. But I was more concerned like say, I mean we have deemed exports also, right, like supplying to customers domestically within exporting or to exports to parent who is potentially then exporting. So we’re not directly impacted by the tariffs. But if the end demand sort of slows down then that will sort of. So I’m just trying to understand from that point.
Balaji Gopalan
Yeah, it could happen. But also consider the fact that the indirect sales from Indian OEMs abroad is not who most of the developed economies because there are emission norms that could kick in over there. So. So they are more for the developing countries and the unregulated market. So we don’t see a very big impact. None of the OEMs have reduced their volumes or anything. We are going steady and that is the reason we are giving a guidance of 8 to 12% revenue growth in my current financial year.
Sonal Gupta
Okay, great sir, thank you so much and wish you all the best.
Balaji Gopalan
Thank you very much for your support.
operator
Thank you. Next question comes from the line of Mahesh with LIC mutual fund. Please go ahead.
Mahesh Bendre
Hi sir. Thank you so much for the opportunity. Sir, I think most of my questions have been answered. You mentioned about the 8 to 12% of growth current year. So this is assuming that exports off so next year if exports come back. So is there any case we will be able to grow more than 15% for next year?
Balaji Gopalan
See, I’ll put it this way. There could be setbacks. We are in an environment where things are uncertain. So we will not say that there are no risks. But we have to look at an optimistic and realistic situation. And being in the business, we have all the data points with us. We have the market intelligence. We are directly dealing with all the OEMs in India. All the tractor manufacturers are our customers. So we have a better database and an evaluation of how the market is moving. Because it is not a single source of input that comes to us.
We get inputs from all the OEMs. So we are able to validate it, we are able to normalize it and and then we make our estimation. So it doesn’t matter. Last year the exports were low but we compensated it by domestic. So we are always in a position and we have that maneuverability to ensure that we are meeting our targets. In business. We say our strategy is that we adjust our sales rather than trying to control the wind. So we don’t have to really worry about what is going to hit us or what is more important for the business is are we prepared to handle the storm if it comes.
And let me assure you we are well protected. We are well strategized to handle any ups and downs. We will go steady this Is the strategy of Carraro. Consolidation and sustainability is the key words that we use for our business. So answering your question, we will still achieve 8 to 12% irrespective of how the export market will behave.
Mahesh Bendre
And sir, as you mentioned, about 100 basis point margin expansion every year, the next three years. So if the growth comes back, I mean, I understand there is uncertainty in the environment, I mean no one knows what is going to happen. But as things tense now, if the growth comes back in the 27, more than 10%. So is there an upside to this 10%, this 100 expansion over here?
Balaji Gopalan
Yeah. See, it’s a very difficult question for me to answer today because I am not an astrologist or I cannot predict anything. But the fact remains that with the current situation, we are talking of 1%. Now why do we give these kind of guidances is to give a kind of a flavor to our investors that we are working on. Our marginality and our profitability will keep increasing year on year. We have different strategies in place. It is not because of one extraordinary income that we are showing an increase in ebitda. We are structurally strengthening ourselves to ensure that we are are sustainable in the EBITDA that we are giving to our investors.
So this will keep increasing. We have plan A, we have plan B. And you are seeing in the last one year we have lived up to what we are saying. So we do what we say and we say what we do. So please be rest assured that yes, if there is a holocaust or a nuclear war, then you and me won’t be even having this call. But if the business goes on in its normal way, fluctuations are there. It is part of our business strategy. Setbacks could be there, but we have to reset our sales and we have to ensure that we deliver to the market what has been committed.
We are working for ensuring that we deliver what we say and the numbers that we say and the guidance that we give are all realistic. We don’t want to come back and give excuses. This is not the storyline that Cararo would take now or in future. Every call will only strengthen that we have achieved what we have committed.
Mahesh Bendre
Yeah, thanks so much.
operator
Thank you. Next question comes from the line of Ashok Shah with Eclavia iv, UNESCO Family office. Please go back.
Ashok Shah
Thanks for taking my question. Sir, I must congratulate you for excellent reason. Sir, you told in your presentation and talk that four wheel drive is around 99% except India. So what is the addressable market in India? Can you just give the approximate size of it?
Balaji Gopalan
Yeah, see we Are looking at roughly 1 million 10 lakh is the industry. And in that 10 lakh we are looking at 2 to 2.2 lakhs. 1.9 lakhs to 2.2 lakhs will be the four wheel drive market and that will inch up slowly moving to 40%. And we feel that the 40% could be a pivot point inflection point where from 40 it can start shooting up and going to about 60, 65.
Ashok Shah
So that is actually size wise. I wanted to be a monetary form.
Balaji Gopalan
Monetary form as part of our revenue.
Ashok Shah
Yes, yes, it could be. No, it’s a market addressable size. Whether it could be a 300 crore, 500 crore, 1000 crore. What is the size? If it is we reach around 70, 80%.
Balaji Gopalan
All right. This is a good question. Actually it is out of syllabus for us now. But we will try to work on these numbers and probably you can reach out to us and we will give it to you because we have no work.
Ashok Shah
So what is our current sales and size? We are around 20%. And what the cells in 20% four wheel drive?
Balaji Gopalan
Yeah, yeah. That is again Ashok. Here we operate in 41 horsepower and above market. So in 40 horsepower and above market the market size is approximately 170,000, 180,000 tractors this year. Now in that in the non captive segment we have almost 60, 65% market share. But when you ask about the number of or the value on the crore probably we will prepare this answer for you and we will answer you offline because there are different sizes of the axles and the market. So it’s very difficult to immediately answer as the value of the market.
Ashok Shah
Could it be 40% of ourselves. Sorry to disturb you sir. Could it be 40% of ourselves? Currently.
Balaji Gopalan
Yes. In case of domestic agricultural. If we talk about it could be in that band 40, 45% would be. The band in which we.
Ashok Shah
So what is the value of the 40%? 40% of our domestic sales?
Balaji Gopalan
Yes, more or less.
Ashok Shah
So what’s roughly about 450, 400 to 500. So.
Balaji Gopalan
So definitely it is more than addressable market. More than 2000cr for India if it reaches 60% over next three to five years.
Ashok Shah
Yeah, yeah. That can be an inferred value. Why we were reluctant to give numbers was we have not calculated it but the way we are doing it. You are quite spot on.
Balaji Gopalan
Are we have a capacity to supply such a market over next five years?
Ashok Shah
Yes, yes. We have a land bank of roughly about 30 acres still available for the expansion and Even in the current 53 acres that we have, we are able to expand our existing plant also. So we can go up to 5 to 600 million euro. Around 5000 crore. 5500 crore. The land is available. The land bank is always with is already with us.
Balaji Gopalan
No, sorry sir, I am not talking about land bank. I am talking about actual plants capacity to supply. We explained to you that even this current tele boom handler business of 300 crores requires expansion. So we will be investing in three steps starting the last quarter of this year and ending it in the next to next financial year. So it will be an investment that has been planned and it will be invested in a phased manner depending on the ramp up. So we first get the order. By then we start ramping up. Till then we seize our existing capacity to cater to the market. So answering your question, we will have to invest periodically to reach that figure of 5,000 crore.
The next expansion immediate that will happen will take us to 350 million which is roughly around 3200 crore.
Ashok Shah
So we have lots of confidence in four wheel drive. So why we are planning for expansion at the end of a year and not just start starting just now? Because we have a cash and everything with us.
Balaji Gopalan
It is a strategy that we use. The requirement for the four wheel drive will come more or less from the efficiencies and other improvements that we are doing. The expansion is largely required for the tele boom handler business which is basically the construction equipment segment that is going to grow and our capacities will be tuned in for that. The four wheel drive market, we already have installed that capacity. We just have to keep increasing the number of ships, increasing the number of people in the line. We have to plan our supply chain. So these are more practical things for which we have already factored in everything.
So infrastructure is existing. I have to increase the headcount, increase the number of shifts and I will be able to get the output.
Ashok Shah
Sir, I have one suggestion. Since this is a first year, you organize a plant visit for the investor and analyst and also do the annual general meeting in physical format. So everybody can visit the Puna and have a look at it and have a good discussion. Thank you. That’s all from my side. I will hold back. Thank you.
Balaji Gopalan
We will be very happy to host any of the investors who are visiting. It could be done in a set of small groups through our advisors, strategic advisors. You can contact them. And we are willing to open factory for investors as many days as they want. So it may not be convenient to have it on a single day. We are open to have it over a period of time on pre fixed days. So all are welcome. We will be very proud to showcase our facility and trust me me investors will get more confidence when they see the world class facility that we have.
operator
Thank you. Next question comes from the line of Anish Rankavat with UTI mutual funds. Please go ahead.
Anish Rankawat
Hi, thanks for taking my question. Sorry if I missed this. The other segment is down about 10% on a full year basis. Can you highlight what comes under the others business and what could be the reason for this decline? That’s my question.
Balaji Gopalan
So the others is. Yeah, yeah you got a valid point. Others is basically our gear business that we have. We also have engineering services over there. We also have spare parts over there.
Anish Rankawat
Also some loose components which we assemblies.
Balaji Gopalan
That we provide to our other plants globally. So those are the others business.
Anish Rankawat
And what’s driving the decline?
Balaji Gopalan
I mean what’s the gear business is a little bit down. So to that reason because the gear is not going directly to construction or to agriculture sector. We supply gears to other industries as well. So the offtake of gears has gone down a bit. Like even Cummins is our customers. So they use it for engine timing gears. So the drop is largely on the gears.
Anish Rankawat
And what’s the outlook for FY26?
Balaji Gopalan
For Gears it is more or less stable. We are looking at protecting what business we are doing in the last year and we are getting similar indications that it will bottom out. So it is already at the lowest and they are also looking at some growth in this year. But people are being very conservative and saying that growth is going to be flat and in that environment I am giving all of you the hope that we are looking at 8 to 12. So you could sense what is giving me that confidence based on our product portfolio which is very balanced.
Agriculture, construction, domestic export. So the revenue basket that we have is very balanced. So when one pulls down we are able to work on the other and bring in the stability that is required.
Anish Rankawat
Secondly last year I think the capex number was 515 million if I’m not wrong. How much are you envisaging for FY26?
Davide Grossi
Yeah, so we have budgeted for FY26 70 crores of fresh capex. And this is not including any possible addition that we might deliberate related to the expansion. So since Balaji already mentioned about already expanding our plan we are currently assessing some options we do not have. We have not finalized yet the final plan. Whenever that will be done we will also Communicate the same. But as of now, we can take a number of 70 crores for the financial year. In case of any update, we will also communicate.
Davide Grossi
We don’t want underutilized capacity in our operations. When you people will come and see the plant, you will see that every corner of the factory, every machine in the factory is being utilized. You will see that flow that is happening over there. So our investments for expansion will be need based. Only when we have a confirmed order will we invest so that it will help us in our ramp up. But no investment based on anticipation. We don’t want to do that mistake.
Anish Rankawat
Yeah, right. And just. Just to, I mean just to confirm, the expansion that you’re looking for is for the tele boom itself or any other product line.
Balaji Gopalan
We will be expanding as a concept of assembly lines. Okay. So when we move on the current assembly line and we set up a new one for tele boom handler, the existing one also gives me some capacity. So largely the expansion is for construction equipment. That’s it. So. So it could be used for tele boom. It can be used for something else. It could be used for mobile trains, but the family is largely construction equipment. When I do the expansion for construction equipment, I will get the residual benefit of moving the current line to a new line.
So my agriculture line gets more capacity. They are all interlinked. You get my point.
Anish Rankawat
Understood? Yeah. Just lastly, if you can quantify what could be the overall utilization.
Balaji Gopalan
See, currently for the industries which we operate in, that is gearbox and axles, anything in the range of 80% is considered adequately utilized. Because sometimes there are spikes from our customers. So they get some new tender, they win some contract for say developing countries or for Africa. And they would give us a requirement of say 500 axles and gearboxes to be supplied within 45 days. So it is important for us to keep that. It is also important to keep a little bit of a buffer backup in case of any failure of a particular machine or something.
So all machines will not be at 100% capacity. We will collapse if that is done. So we are at the right level, optimum level of around 75 to 80% is our utilization now. And we will continue, it may go up to 85, 88, 87, but we will not be keeping it at that. The moment expansion happens, it will probably come down to 70%. And then as we ramp up the numbers, it will go to Titi. To answer your question, we will consciously not fill our capacities beyond 80, 85%.
Anish Rankawat
Understood? That’s all from me. Thank you and all the best.
Balaji Gopalan
Thank you very much.
operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Abbas Verma with East Queen Advisors. Please go ahead.
Unidentified Participant
Yeah, hi. Good morning sir. Am I audible?
Balaji Gopalan
Yes, yes. Please go on.
Unidentified Participant
I just have one question. Could you please share your RD spend as a percentage of resident for FY25. And how do you expect this number. To evolve going forward?
Davide Grossi
So this is a bit of an articulated answer but you can take the fact that at Carraro level, R and D expenditure is usually in the range of 3% even higher than that in some years. In Carraro India the situation is a bit more complicated than this because the R and D comes in two different ways. There are some R and D services that we buy from our quarter sometimes when as needed and they are very erratic depending on the project on which we are working. The other chunk of R and D expenditure comes from our subsidiary, Carraro Technologies.
Carraro Technologies is a company that sells R and D also within the group. And it’s de facto a kind of a profit center because it’s a company that operates with a profit. It sells services to Carraro Group as well as Carraro India. So we do not have a specific number that I can give you. And also please keep in mind that this setup that I just mentioned is something that saw the light of the day less than one year ago. So it’s a number that will have to stabilize over the years. So we will probably be able to create a history and tell you exactly what are those figures.
But as of now we do not have a reliable number to.
Balaji Gopalan
In any case, it’s a profitable subsidiary that we have. We are making profit in that. Although it could be small because it is basically services human capital, but it is giving us a positive bottom line.
Unidentified Participant
Sure, sure sir.
Balaji Gopalan
Thank you. Thank you so much.
Unidentified Participant
All the best.
Balaji Gopalan
Thank you.
operator
Thank you. Next question comes from the line of Sridharm R, an individual minister. Please go ahead.
Unidentified Participant
Thank you for the opportunity. I have one question. Could you please share the domestic revenue. Split between Agree and construction?
Balaji Gopalan
Yes, just give us a second. So domestic we have 42% in construction, 50% in agri and 7% in others.
Unidentified Participant
That’s helpful sir. Thank you.
Balaji Gopalan
No problem.
operator
Thank you. Next question comes from the line of Ashok Shah with Eklavya Invesco family office. Please go ahead.
Ashok Shah
Thank you for giving me again offer. Sir, you stated that we would be increasing 1% margin every year. So what is how it will be done. Can you just elaborate?
Balaji Gopalan
Yes, sir. There are couple of factors that will add into our ebitda. One significant is the localization. Whenever we localize any part, we save roughly, if not more at least 15%. So the range is between 12 to 15% because we save on the duty, transport, everything. But if it is from a low cost country like China then my savings are probably close to 10%. So this will add. Today we are at 77. We are moving to 80 in the current financial year. And our target Is to reach 88 in the next two years. So this will add to my margin significantly.
Number two, plant efficiencies are being increased on a daily basis. For example, the revenue we will grow by 10%. But my headcount goes down by 100 people. So we are using manpower and our plant and machinery more efficiently and more effectively. And all other fixed costs we are controlling. So that as the revenue grow, I am not having a model where my costs are also growing along with the revenue. My cost will be kept at the current level of 200 to 210 million euro. And I will try to push my revenue by keeping the costs under control.
All these three things. And it is a strategic concerted effort where even with the union we have got a 20% improvement in labor efficiency over the next one and a half two years. And they have signed as a very special case a four year wage agreement which normally in India all agreements are for three years. Carrara India is one of the probably 1% of the companies in India have a four year or a five year agreement. We are very fortunate. We have signed a four year agreement. So the plan, the journey for reaching 350 million that is more than 3,000 crore is already charted out.
Everybody has the buy in unit and we are all going together as a team to achieve it. So there will be no surprises. Because we have tied the knots wherever it is required for them to contribute to our 350 million journey.
operator
Thank you. We have lost the line, ladies and gentlemen. Due to time constraints we have reached the end of question and answer session. I would now like to hand the conference over to Dr. Banerjee Gopalan for closing comments.
Balaji Gopalan
Yes, thank you very much. We hope we have addressed all your questions satisfactorily. We try to be as transparent and as open to share the situation with us. Because we feel the situation, the reality is in our favor. And we have got into the right track of the journey to reach the EBITDA numbers that we have been planning to achieve. And the revenue that we want to achieve in the next three years. So you’re all in a company that is very stable, sustainable, realistic, transparent and professionally run. So please, I thank all of you again and I hope I will have the continued support of all the investors.
And lastly, as suggested by one of the investors, I open heartedly welcome all the investors to our plant. Please come and spend a couple of hours with us. It will be our pleasure and our honor. With this I would like to end this call. Thank you very much. Once again.
operator
Thank you on behalf of Carraro India Ltd. That concludes this conference. Thank you for joining us. You may not dispatch it.