Concord Control Systems Ltd (BSE: 543619) Q2 2025 Earnings Call dated Nov. 21, 2024
Corporate Participants:
Gaurav Lath — Joint Managing Director
Vinay Pandit — Investor Relations, Kaptify Consulting
Analysts:
Agastya Dave — Analyst
Unidentified Participant
Mihir Ambani — Analyst
Mahesh Atal — Analyst
Hanu Rao — Analyst
Suman Kumar — Analyst
Pritish Chheda — Analyst
Presentation:
Operator
Ladies and gentlemen, I welcome you all to the H1 FY ’25 post earnings conference call of Concord Control Systems Limited. Today on the call from the management team we have with us Mr. Gaurav Lath, Joint Managing Director, along with his finance and secretarial team. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risk and uncertainties. Also, a reminder that this call is being recorded.
I would now request the management to quickly run us through the investor presentation, talking and detailing about the business and performance highlights along with the growth plan and vision for the coming year, post which we will open the floor for Q&A. Over to the management team.
Gaurav Lath — Joint Managing Director
Thank you, Mr. Vinay and, Kaptify team for putting this together. And along with me, I have our CFO, Mayank; our CS, Puja; and Avisha, who are joining me in this presentation. Based on the contents of this investor presentation and the earnings call, we’ll quickly talk about us, followed by the business overview, then the way forward key highlights, and the industrial overview all put together.
So friends, we started Concord Control Systems Limited in 2011 in a very humble setup — very small setup, but the Company was always focused on Indian Railways ecosystems and being an OEM to the railways and supply only exclusive products to railways as a whole. When Nitin and me started this company, we both had a vision that there are a lot of technologies and products which can be improved in this ecosystem. And we will always focus on railway as our key competency as well as the main client. So today we are approved by various railway approval authorities like RDSO, all the production units for locomotives as well as the production units for the passenger coaches. We have a significant size of team which focuses on the R&D. And we as a company has always focused on looking at three to five years ahead from where we are today. And we always keep churning out products accordingly and keep the development process at the core of the company as a core strength.
Next slide, please. Awesome. Yeah, today we have facilities in Lucknow, Bangalore as well as Hyderabad. All these facilities put together, we are always focused on giving a more holistic presence to the Indian Railways because railway has a large network of more than 69,000 track kilometers. And with these four facilities, it becomes easier for us to cater to the requirements of the railways. And within the facilities, we always focus on the testing and the quality aspect of the product which we manufacture. And we are very well equipped in forms of the testing and the quality equipments we have in the company.
Next slide. This is a small glimpse of an R&D facility. We are in the process of setting up a center of design and excellence where we completely focus on the research side. And it’s a parallel activity which always complements the operations. And today we stand with a large team of more than 50 people in all the companies put together of Concord Control Systems, which are only focused on the R&D aspect of the company.
Next slide. In past 12 to 13 years, the journey has been nothing more than gratifying. And from a very small setup to having one facility, then adding new facilities, adding new products line, entering — starting from the traction products to the coaching items and then moving on to locomotive wayside and all of that came through the process. I think 2022 October, we got listed on the SME exchange of Bombay Stock exchange and since then the journey has three acquisitions. One of Concord Lab to Market, second Progota India Private Limited and a significant stake in Advanced Rail Control Systems which was a very recent acquisition in May of 2024.
Next slide. We are part of the core team. Nitin and me started this business together. Nitin is an engineer and I look after the management or the commerce side of the entire organization. So we two together are at an average age of 39 years and we still have a long, long way to go. So we always say that we have barely scratched the surface.
Next slide. A quick business overview of the company today. Today, apart from Concord Control Systems, under the umbrella of Concord, we have three significant ventures. One is Progota India Private Limited where we hold 26% stake. And this company is completely focused on indigenized development of Kavach which I think we all know that today is one of the most critical technologies to be perforated across the country in the — in such a large railway network. Second is Advanced Rail Control Systems which we acquired in 2024. And here we are focused on all the embedded electronics which are used in locomotives as well as propulsion technology. In Concord Lab to Market, we hold 50% and we focus on the wayside equipments which are — it is a startup which was incubated under IIC Bangalore. So, a very eminent team of research scientists have been working hard to develop a lot of products. Our focus is to bring these products to the market and plug it into the railway ecosystem.
Next slide. So quickly, just to give you a business structure of the company, we have four different verticals. Traction, coaching are part of the standalone business. These were primarily verticals where we were only manufacturing products. And gradually we wanted to transition from a product manufacturing company to more of a solution provider. And with that perspective, when we were able to acquire Advanced Rail, Progota and Concord Lab to Market, with all these three companies we are adding locomotive and wayside and our focus is more to shift towards solutions as a complete offering to the Indian Railways rather than just a product.
Next slide please. In traction products, we do battery chargers, we do a lot of control panels, we manufacture a lot of distribution panels, terminal boards, AC, DC, all types of various products which are related to the overhead electrification of Indian Railways. A large part of the network, rather almost the entire network has now been electrified. But with the recent change in the consumption pattern of power of — or rather the power utilization of the railway network, the railway is now moving into 2 into 25 and that is a new market which is opening up and we’re already ready for it and I started supplying products. So our entire range of products have moved from the conventional traction products to these 2 into 25 KVA offering.
Next slide. Coaching products. In this, we do a lot of products related to the passenger coaches which are from the intervehicular couplers to BLDC fans, to emergency lights, to cable management systems and to bellow ducts and exhaust fans. This is a vertical which has seen a significant growth in the past few years and has contributed largely to the EBITDA of the company in the past few financial year performances.
Next slide, please. Now talking about Advanced Rail which was the recent acquisition in this half year of the financial year. In this, we are making all the embedded electronics which are primarily contributing to obsolescence management of Indian Railways as an import substitute for large HMIs and products. And this is a completely design driven organization. And not only we supply to Indian Railways, but we supply to almost every company which manufactures rakes today whether it is Alstom, BHEL, CG, anyone, we are a supplier to them. Mahesh Ji, can I request you to please mute.
Vinay Pandit — Investor Relations, Kaptify Consulting
Sir, I muted him. You can continue.
Gaurav Lath — Joint Managing Director
Yeah. So the products in Advanced Rail range from locomotive, diagnostic system, doppler radar, addition control, traction motor, speed sensor, remote monitoring, brake interface units, DPWCS which is one of the future of railways and is called Super Anaconda, which is again a very, very lucrative opportunity which we are pursuing. And along with that we manufacture all types of driver displays or the HMIs. We manufacture vehicle control units, master controllers, many, many products. Anything and everything which is related to locomotive electronics, we try and do everything in house.
This is a quick range of products. As you can see, these are all products which requires high skill set of engineering. And whether these are speed sensors, remote monitoring solutions, doppler radar, everything is a combination of hardware and software put together bundled, exclusively designed for Indian Railway requirements. Next slide. So distributed power supply is again a product which is a combination of so many products whether it is a CCU, a brake interface unit, a driver interface unit, a BIU control panel, all of this put together combines to one single product which is called distributed power wireless control system. And this is primarily used for freight locomotives in the country. Basically in India [Foreign Speech] that was having a priority and the priorities was always set in terms of traffic management [Foreign Speech] freight vehicle would be permitted on the on the track. So the idea is that when you clear the line for a freight movement [Foreign Speech] we with this — with the help of DPWCS, we are enabling the railway network to push two to three, four locomotive — freight vehicles together on the same track at the same point.
Next. Again, these are all products which are in addition to fire detection unit, pressure sensor, oil circuits, everything which we do at advanced range. Next slide. These are all PCBs which are designed internally completely in-house as an obsolescence management tool for Indian Railways. There were a lot of locomotives which were brought with the technology transfer many, many years back in India. And now it is difficult to find working solutions globally. So, we do this obsolescence management for Indian Railways as well through these products.
Next, the last bit is the wayside equipments. On the wayside equipments, we are into Kavach from — so we have 26% stake in Progota India Private Limited. We are having this facility at Hyderabad and we are completely designing the indigenized Kavach for Indian Railways. There are only few parties today which are approved and we are one of the front runners of the technology which will be approved soon and the product is already ready and in process and it’s a large market opportunity in itself as we can see.
Next slide. Multi section digital axle counter is again a product which we are developing under Progota. This is a product we are also getting a transfer of technology from a Spanish company and this is also something which helps I identify whether the track is clear for the next movement of train or not. So for example [Foreign Speech] and if one of the wheels is left behind, it basically counts the number of axles which have gone and decides whether the signal should be red or green, whether the track is occupied or clear. So, it’s again a breakthrough technology which we are bringing to the railways through a Spanish partner.
Next, under Concord Lab to Market Innovations Private Limited, we are developing a product called WILD, Wheel Impact Load Detector. It basically identifies the wheel condition and it does condition monitoring whether the wheel is the right place or not, whether it is chipped or not, whether it is — there is any wear and tear or there’s a strain on the wheel. And this will help identify a lot of reasons of derailment or accidents. So, this is again a product which we are jointly developing bringing to the market soon.
Next slide. Multiple competitive strengths which we have working on various strategies to go forward. I’ll just skip this slide for reaching to the key highlights. Next slide. So, way forward as a business opportunity from all the product lines which we just shared, traction can contribute up to INR550 crores of a target opportunity size until 20, 30 coaching again. So all put together, it’s a large opportunity size which we are targeting and working towards.
Next slide. So, as we were talking about numbers, we look to grow the company until next three to five years with a CAGR revenue of about 40% to 50%. And this growth will also sustain the EBITDA margins in the range of 23% to 25%. We are very hopeful that we’ll be able to garner such kind of growth as well as perform and show results which we are aiming at. And along with this from a global perspective, a lot of products which we are now developing and doing, we can also look at global opportunities. So we are also starting to look outside India, focusing on more opportunities globally on the ESG side, but also bidding for multiple battery and hydrogen powered locomotives projects which are in the developmental phase right now.
Next, in the H1 FY ’25, we have today as on the 30th September, the order book is at INR206 crores. The asset has grown from INR3.13 crores to INR24.12 crores. So there has been a significant jump in the assets largely contributed with the acquisition of Advanced Rail. And the return of equity stands at around 28.15%. And the EBITDA margins have also increased by 248 basis points.
Vinay Pandit — Investor Relations, Kaptify Consulting
Gaurav, shall we move to the Q&A now. These numbers are in.
Gaurav Lath — Joint Managing Director
Yeah.
Questions and Answers:
Vinay Pandit
We’ll take the first question from Mr. Agastya Dave. Agastya, you can go ahead please
Agastya Dave
Thank you, Vinay bhai. Thank you, Gaurav.
Gaurav Lath
Hi, Mr. Agastya.
Agastya Dave
Hi, how are you? Very nice presentation as usual. So you actually answered a lot of the questions that I had in my mind, but there were a couple of points I wanted to ask you. One is clearly you have a lot of products. There is clearly a requirement for all these products to be used by the railways, but in how many of these product segments are the railways actually looking to buy? In how many segments are they actually convinced that they need a solution?
Gaurav Lath
So as I mentioned about the opportunity size, all the verticals, all the products are regularly bought by Indian Railways today and we are continuously supplying to them.
Agastya Dave
All of them?
Gaurav Lath
Yes. These are all different verticals and different products which are used at different — so every product has a different use case. Like for example, if I have to give you a very basic example, [Foreign Speech] So there is a market which we have to serve. [Foreign Speech] for example [Foreign Speech] in the past that 2 into 25 is the new thing which is happening and there is about 2,000 to 3,000 track kilometers which are to be built this year and the next year. So every year there’s a rolling plan of 2,000 to 5,000 kilometers depending on the budget and [Foreign Speech] whether it is a battery charger, whether it’s a distribution panel. So products are to be used like for example, Kavach. Kavach, you see it’s a 69,000 track kilometers where the implementation has to happen, only 1,100 or 1,200 kilometers — track kilometers have been energized with Kavach till now.
Agastya Dave
Kavach was actually the reason why I asked you because there is clearly a need for Kavach and the railway has been dilly-dallying on it for such a long time. And as you said, barely I think 1,000 odd kilometres have been covered. So [Foreign Speech] progress is very, very slow. So it doesn’t look like the railway is actually convinced that they need all. So not for a second am I questioning the opportunity or your capabilities. I’m just worried on the railway side with how enthusiastic they are about deploying all of these, especially Kavach?
Gaurav Lath
So, I will not answer especially for Kavach, but I would say as a whole, the largest amount of capex spend of Indian Government today is on railways and the focus is to indigenize a lot of technology. The focus is to bring more and more comfort and safety to the passengers. And railway at all the levels is doing everything to ensure it. We see it from inside. So, [Foreign Speech] we will all see the progress happening.
Agastya Dave
Understood?
Gaurav Lath
And we are very optimistic about it.
Agastya Dave
Understood. So this INR40,000 crores of Kavach that is the biggest opportunity, right? So for you, how do you see — first of all what kind of market share do you think you can capture there? [Foreign Speech] this is your total addressable market, right? So what kind of — to what extent can you mine this opportunity?
Gaurav Lath
So as an entrepreneur, everybody wants to mine the maximum that is where we see. There is no number associated to our efforts or capabilities. But every product has a different competition mix. Like, for example, Kavach has three approved vendor as on date. The rollover has been slow for the past five years. But now we will see a significant rollover of Kavach happening across the country. So a lot of tenders are about to come. We are maybe the fourth or the fifth maximum. We are one of the few ones who will be soon part of the list of Kavach manufacturers.
Agastya Dave
When are you expecting that to happen officially, you be approved as a vendor?
Gaurav Lath
So it’s a process which is full of milestones. And I think we are very close, one or two milestones are left.
Agastya Dave
Okay.
Gaurav Lath
First the product has to be developed, then the capacity assessment has to happen. That is the second milestone. Then the third milestone is that the product feasibility has to be checked and approved by RDSO. Then it goes for a field trial. And parallelly, the SIL 4 certification, which is the highest level of safety certification globally for any such public usage product has to happen. So that will be going on parallelly. I would not want to comment where we are exactly, but we are at a pace which is commendable.
Agastya Dave
Understood.
Gaurav Lath
We have already crossed a lot of milestones which I just shared.
Agastya Dave
Yeah. Understood. Gaurav Bhai, last question from my side. To cater to all these opportunities and the guidance that you have given for the next three to five years, one thing that I don’t understand about you and your company as of now is the manufacturing setup. And what kind of capex do you need to actually translate that growth into reality? So [Foreign Speech] I’m not asking about working capital here, purely asset based, your manufacturing base and what are your plans there? Is there an element — is there a situation where certain products will be outsourced to someone else and you will just be the supplier or everything will be manufactured in-house? If everything needs to be manufactured in-house, what kind of facilities do you need going forward?
Gaurav Lath
So I will just give a one line answer for that saying that I just showed in one of our key highlights that our asset base has increased significantly in last year…
Agastya Dave
Because of the acquisition INR24 crores, correct.
Gaurav Lath
Which adds to a new facilities facility altogether. It’s a 1 acre facility in Bangalore with a lot of capabilities in-house. So all of that is for targeting this addressable market.
Agastya Dave
That’s sufficient as of now?
Gaurav Lath
So that’s a step forward and we will keep adding facilities as and when required.
Agastya Dave
So what kind of annual capex would you need? Again, ballpark. I’m not asking for like even specific.
Gaurav Lath
We will get back to you.
Agastya Dave
Okay, I was assuming like INR2 crores to INR5 crores every year minimum capex. Is that like — does that sound accurate to you or is it more than?
Gaurav Lath
Maybe more than that.
Agastya Dave
More than that. Per year INR2 crores to INR5 crores minimum then.
Gaurav Lath
Hopefully.
Agastya Dave
Understood, sir. Thank you very much, sir. Thank you. All the best.
Gaurav Lath
Thank you. Thank you for the question.
Agastya Dave
And congratulations for a very good quarter. Thank you. Thank you, Vinay Bhai.
Vinay Pandit
Thank you. We’ll take the next question from Prathamesh. Prathamesh, you can go ahead.
Unidentified Participant
Yeah, I’m audible?
Vinay Pandit
Yes.
Gaurav Lath
Mohsin, can you please change the slide to the H1 FY ’25? Yeah, Prathamesh, please go ahead.
Unidentified Participant
Yeah, so just wanted to know about the industry in terms of Kavach. So recently I think government has came out with a new outlay of Kavach in three phases. And as per my understanding in phase one around 14,000 kilometers worth of tender will be allotted in this year. I just wanted to know how has been the process around? Has the tender started coming out or…
Gaurav Lath
Yes. Government is moving very fast.
Unidentified Participant
So for this year has this tender outlet started?
Gaurav Lath
Yes.
Unidentified Participant
Okay. And so how much time it takes to like get into the order book let’s say from bidding tenders — from bidding to the tenders to getting into the order book the timeline?
Gaurav Lath
12 to 18 months.
Unidentified Participant
Okay. 12 to 18 months. Okay. And so in terms of our subsidiary company Progota, I think we have around 25% stake in it.
Gaurav Lath
26%. Yeah.
Unidentified Participant
26%. So are we planning to increase it in coming time?
Gaurav Lath
Time will tell.
Unidentified Participant
Okay. Thank you. That’s it for.
Gaurav Lath
Thank you, Prathamesh Ji.
Operator
Thank you. We’ll take the next member from chat, Mr. Rahul Arya. Okay, next question from Mihir Ambani. Mihir, you can go ahead please.
Mihir Ambani
Thank you for the opportunity. Hope I’m audible.
Gaurav Lath
Yes, Mihir, you are. Thank you. Please go ahead.
Mihir Ambani
Yeah. So this was — like the first half of the question was already answered regarding Kavach. But I wanted to know apart from that, is there any major contributor in the growth guidance which is 40% to 50%?
Gaurav Lath
From the locomotive products, we said that the target addressable market is about [Indecipherable] crores for the next five to six years. And that is going to contribute heavily on because that adds a completely new vertical at Concord from traction and coaching. We added locomotive as a strong base. So that will heavily contribute to the growth forward and obviously along with others.
Mihir Ambani
Sure. And do we have any other PIL benefits associated with Kavach as of now? And if yes, can we quantify them?
Gaurav Lath
Difficult to answer that right now.
Mihir Ambani
Just a vague ballpark.
Gaurav Lath
I will get back to you.
Mihir Ambani
Sure. Thank you.
Gaurav Lath
Thank you. Thank you, Mihir Ji.
Vinay Pandit
Yeah, we’ll take the next question from Mahesh Atal. Mahesh, you can go ahead please.
Mahesh Atal
Hi, Gaurav. Congratulations. Great set of numbers I would say.
Gaurav Lath
Hi, Mahesh Ji. Thank you so much. This all boosts our confidence.
Mahesh Atal
Yeah. So let’s delve into. I would be very — I mean asking you very basic question because this is going through your company just now. So first I would like to know, let’s say there’s a bogie, okay, which is a passenger bogie. I don’t know the cost of it. Please tell me the cost of one bogie on an average, okay. And let’s say LHB bogie, general bogie. And what is that we bid for, let’s say, in Concord. This is my first question. At Concord. Okay? Now what would be my bidding out of all [Foreign Speech]? This is my first question.
Second question is coming to Advanced Rail controls. If I take Advanced Rail controls today, what was the last financial year sale for them? And again the same query with Advanced Rail that they are I think into more into the — I mean the engine part I guess [Foreign Speech] all the things will be inclined to the engine part. So I would like to know, let’s say there’s a CLW and there you bid for it. And how much would be the bid value of Advanced Rail per locomotive? Okay? These are my two questions with two different companies.
Gaurav Lath
[Foreign Speech] right? That is your question.
Mahesh Atal
[Foreign Speech]
Gaurav Lath
[Foreign Speech]
Mahesh Atal
[Foreign Speech] not for the all LHB bogies?
Gaurav Lath
I am talking about LHB bogies.
Mahesh Atal
But not to the AC bogies, right. You don’t supply much to the AC bogies.
Gaurav Lath
We supply to them as well. So it’s a product mix which is well spread across all sorts of coaching solutions which Railway offers.
Mahesh Atal
Let’s say AC bogie and general bogie, what could be the differentiation?
Gaurav Lath
A very small differentiation would be a general bogie would use more of fans.
Mahesh Atal
Yeah. So I’m asking what value wise. [Foreign Speech]
Gaurav Lath
[Foreign Speech]
Mahesh Atal
[Foreign Speech]
Vinay Pandit
[Foreign Speech]
Mahesh Atal
[Foreign Speech] so more or less you averaged out it to 4 to 8 [Phonetics].
Gaurav Lath
Yeah, And when you questioned about the products related to Advanced Rail which for example CLW is manufacturing [Foreign Speech] to answer that question, roughly a locomotive [Foreign Speech]
Mahesh Atal
What would be the cost of general bogie? Total cost, Gaurav ji, if you could — general bogie?
Gaurav Lath
That I would not know.
Mahesh Atal
You are not aware of that. Okay.
Gaurav Lath
I would not have it offhand [Foreign Speech]
Unidentified Participant
So Advanced Rail, my question would be now again the second after getting a detail on this. Now my query would be look there is be change in a railways style of — I mean since last years the focus has shifted from the premium cars like Vande Bharat to more of general. Okay. Now they are looking more into manufacturing like 10,000. I was reading one con call where the management was of you that they are a bit — they are now going for a 10,000 wagon. I mean, they’re going to give bring a tender 10,000…
Gaurav Lath
And what is the question sir?
Mahesh Atal
So my question would be do we see this more opportunity coming to us in Concord also going ahead?
Gaurav Lath
Absolutely.
Mahesh Atal
Our growth could come major from Concord rather than…
Gaurav Lath
I would not say major from Concord. It is well spread. I would say we are not limited or rather our risk is well distributed between traction, coaching, locomotive [Foreign Speech]
Mahesh Atal
Right.
Gaurav Lath
So this keeps changing. When you are — when you are working with a government or a policy driven client, you always have to be well spread across verticals to ensure that nothing impacts your top line or bottom line to an extent where you are not able to meet your targets. So I think today we can safely assume that we are very well spread. If I have answered your question.
Mahesh Atal
Yes. So let’s say there’s a tender tomorrow of 1,000 bogies. What are the chances that we could get how much of that? Because I’m asking about taking into account the all the competition that we have in that particular segment. [Foreign Speech] generally on an average.
Gaurav Lath
Sir, very difficult to comment. [Foreign Speech] It depends on a lot of factors.
Mahesh Atal
[Speech Overlap] past history.
Gaurav Lath
I will check and get back to you, sir.
Mahesh Atal
Fine. And my last question if I could phase in would be on the Progota. Okay, Progota you were just told that it is on the stage of approval. So could you please enlighten like what is pending from their side? Where are we on that stage and how much time it could take?
Gaurav Lath
Whose side sir?
Mahesh Atal
On the railway side, right. It is under approval you said.
Gaurav Lath
Precaution is on, it is going on. There’s nothing pending. It is an activity which is in progress. As I earlier mentioned, there are multiple milestones. We have achieved a few of them and next milestone is being done. [Foreign Speech] It’s a process. It is going on. It is moving. It is not stuck anywhere. [Foreign Speech] everybody wants Kavach to be implemented. So everybody is focused on it.
Mahesh Atal
Sir, what was the turnover of this Advanced Rail last year — last financial year?
Gaurav Lath
Last financial year, I think we did — Mayank, can you please give the exact number? [Speech Overlap] INR19 crores.
Mahesh Atal
[Speech Overlap] And what would be the target or any guidance you could give on that?
Gaurav Lath
Sir, we have already — we have an order book which is significantly large and a lot of it has added. When we acquired the company, the company had an order book of INR140 crores in pending, which we hope that we will be completing in next 16 months to 18 months. So you can have a ballpark from there.
Mahesh Atal
Fair enough, Gaurav ji. Thank you for answering all my queries. All the best.
Gaurav Lath
Thank you, Mahesh ji.
Operator
Thank you. We’ll take the next question from Hanu Rao. Hanu, please go ahead.
Hanu Rao
Thanks, Gaurav. It’s very good set of numbers from your company. I have a question. Yes, I have a question related to Kavach. So what is the margins on this business actually?
Gaurav Lath
Sir, too early to comment.
Hanu Rao
Okay, right. Because in your PPT you presented like INR50 lakhs for the 1 kilometer of track and INR70 lakhs for around locomotive installation. So I’m just asking based on…
Gaurav Lath
We have tried to assess the opportunity size. Margins would fairly be close to our way forward…
Hanu Rao
Any rough estimate? I’m not asking about exact, just rough estimate?
Gaurav Lath
Very difficult to answer today, sir. More or less we should have a good EBITDA from — a healthy EBITDA I would say.
Hanu Rao
Okay. Maybe because already around three projects are ongoing with some other different locations like Chennai, and then one more I heard is like in Kolkata. So maybe if you have any rough estimate or else it’s okay.
Gaurav Lath
Sir, it should be close to the guidance given by us, close to our EBITDA. Let’s see.
Hanu Rao
Okay. Thank you. All the best for you and your team.
Gaurav Lath
Thank you, sir.
Vinay Pandit
We’ll take the next question from Suman Kumar. Suman, you can go ahead. In the meanwhile, I’ll take a question from the chat window. There’s a question from Rahul Arya. Sir, you recently raised preferential money from marquee investors. Can you highlight what are we looking forward to from these funds? Is it for inorganic acquisition or increasing stake in subsidiary or anything else?
Gaurav Lath
It is a mix of — actually, Rahul ji, it’s a mix of all. It’s also to fund the working capital requirement. It’s also to reduce leverage of Advanced Rail in terms of loans. It is also to further improve on — invest on capex and further acquisitions and so it’s a mix of all.
Vinay Pandit
We’ll take the next. Suman Ji, you have unmuted. You can go ahead, please.
Suman Kumar
Yeah. Am I audible to you?
Gaurav Lath
Yes, Suman, you are. Please go ahead.
Suman Kumar
Hi. Thank you, Gaurav ji. Thanks for the opportunity. Couple of questions. One, I track few other players in the railway industry, right, primarily people who manufacture back wagons and passenger cars. What I’ve seen is probably the onset of bidding pipeline probably has not been so forthcoming over the last couple of quarters. So while we have been hearing that there is a lot of focus from the Government, but from your experience or from your knowledge of the industry, have you seen that the bidding pipeline has not actually moved at the pace that they have been talking about. So is that a concern for you — from the perspective of bidding new ones?
Gaurav Lath
First of all, Suman ji, we see a significant growth in all the sectors, whether it is coaching or wagons or any other sector for that matter. And going forward also, as you mentioned that since we are risk averse to a large extent, and that’s why we have been able to focus on distributing our bets in so many areas. Any policy change will not majorly impact the current growth. [Foreign Speech] So I don’t think it is going to impact the guidance which we have given. We have tried to be…
Suman Kumar
And could you repeat the guidance for me please?
Gaurav Lath
We should grow at a CAGR of 40% to 50%.
Suman Kumar
40 to 50%. Okay. The next question is I see that operating margin is a good healthy 26% to 28%. I just wanted to understand from you whether these are sustainable in medium to long-term or there is an opportunity to do further or you’ll see risk?
Gaurav Lath
Yeah, I’ll answer that. Mohsin, can you please go back to the transformation slide from products to solution. See the current numbers which we have given, only a few INR11 odd crores have been contributed from Advanced Rail from the locomotive, primarily everything is coming from the standalone as we speak till now. And we have always been a product driven company as I mentioned from traction and coaching standpoint which was covered under the standalone business as mentioned in the slide A and B. When you move from a product company to a solutions company, your margin tends to improve slightly. So we are hoping that it will further improve. So sustenance should not be a problem. If I have answered correctly to your questions.
Suman Kumar
Sure you did. I had the last question [Indecipherable]. In the past, we have seen your ROCE, which is basically the uses of capital in the range of around 65% to 70%, right. Last in this half, we have seen it come down to a level of around 25%, 28%. Is it happening because you have just raised the capital and then you again see it inching to the level of, what you have been delaying. Or you see there is a dilution in terms of how you are able to spread your assets?
Gaurav Lath
So I think largely it is to contribute for the acquisitions and all we’re doing. And it should significantly improve going forward. We will see a better ratios I think when we look at the entire year together
Suman Kumar
Where do you see it stabilizing, sir?
Gaurav Lath
That’s a hard number to count today. I’ll definitely reach out to you.
Suman Kumar
No problem. Thank you so much. That was all that I had and all the best.
Gaurav Lath
And it was more for the new issue of shares and all that. So largely when you look at the entire year, it will stabilize.
Suman Kumar
But traditionally do you think that it would be upwards of a tip end [Phonetics]?
Gaurav Lath
Very hard to comment, sir.
Suman Kumar
No problem. Sure. Thank you so much. Appreciate you patiently hearing all of it. Thanks.
Gaurav Lath
Thank you, Suman ji. Thank you for all the questions.
Vinay Pandit
We’ll take the next question from Pritish Chheda. Pritish, you can go ahead.
Pritish Chheda
Yeah. Hi, my question is this order book that you’re talking about INR140 crore in Advanced Rail. My guess is easy to do with the embedded electronics side of the order where you have the existing product line, is that INR340 crore order to be executed over the next whatever 12 to 18 months is right, my understanding.
Gaurav Lath
Yes, Pritish, you’re right.
Pritish Chheda
This piece of the market is what market size in your opinion. You mean giving time across all the other product line. The existing product line is, what size of — what is the TAM market — annual TAM market?
Gaurav Lath
You’re only talking about the embedded electronics, which we’re doing from Advanced Rail?
Pritish Chheda
Your doppler radar, your locomotive diagnostic, the traction motor, these all things.
Gaurav Lath
Until 2030, about INR2,000 crores to INR2,500 crores.
Pritish Chheda
No, I want to know now, not about 2030. What is — okay, what is the ongoing market size? My guess is this thing must be going in locos, right?
Gaurav Lath
Yes.
Pritish Chheda
So you have a annual loco production of whatever 1,200 or 2,000 or whatever that number is, I think just put together is some 1,200 or 2,000 number, right?
Gaurav Lath
[Foreign Speech] Roughly we sell INR40 lakh to INR50 lakh of product in every new loco. Plus there is a lot of retrofitment opportunities which we’re working on.
Pritish Chheda
So INR40 lakhs x 1,200 is about — INR50 lakhs x 1200 is about INR600 crores market.
Gaurav Lath
So we say INR400 crores to INR500 crores — INR400 crores to INR600 crores.
Pritish Chheda
INR400 crores to INR600 crores. So here your market share today is what? 20 divided by 400, right? Last year we did about INR20 crore of business, so when you bought this Advanced Control, right? This market share should go where on the existing product line?
Gaurav Lath
So we’re very hopeful that we will grow much more than what it was growing till now. 20 was a very small number.
Pritish Chheda
You don’t want to give out a market share?
Gaurav Lath
Sorry?
Pritish Chheda
You don’t want to give out a market share — targeted market share?
Gaurav Lath
Sir, the target is we want to do everything, but you eventually grab a bite…
Pritish Chheda
Sir, my question is in this INR600 crore or INR400 crore to INR600 crore piece of business, you don’t want to give out a targeted market share because a loco production is a loco production, right? 1,200 locos or maybe 1,500 locos produced every year.
Gaurav Lath
We can safely assume INR120 crores to maybe INR200 crores approximately.
Pritish Chheda
You will reach that type of business?
Gaurav Lath
We are targeting that.
Pritish Chheda
And how many players are there in these product lines today?
Gaurav Lath
Every product has a different competition mix. It’s very hard to say that some products would have four vendors, some products would have eight vendors. You really can’t give a number to it.
Pritish Chheda
No problem. And in your speech, you’re talking about products like Anaconda, then Wheel Impact Load Detector, and MSDAC or whatever that means. What is the progress on these product lines? The progress is are these RDSO approved products? They’re supposed to be RDSO approved. Where are we on these product lines?
Gaurav Lath
So, for Super Anaconda, we have already approval from the desired approval agency. Everything is not approved from RDSO, but there are verticals in railways where you get the approvals from.
Pritish Chheda
You are ready to sell, basically. It’s a commercial available product ready to be sold to railway if you want to start selling tomorrow.
Gaurav Lath
Yes, if you want to know whether it will be commercialized this financial year. Yes, we will see the commercialization happening this financial year.
Pritish Chheda
Okay. So that product is a product which is ready to sell. It’s not like which is to be ready to sell, right?
Gaurav Lath
Yes.
Pritish Chheda
And the super — so this is for Super Anaconda.
Gaurav Lath
Yes. And second question was WILD.
Pritish Chheda
Wheel Impact, yeah.
Gaurav Lath
We are under guidance, so we will not be able to comment for WILD right now. But there’s a significant progress happening. And the third product was MSDAC which is currently under approval.
Pritish Chheda
Okay. So basically we would see one product getting commercial and the other three products, we have to check with you on the progress.
Gaurav Lath
Sure, sir.
Pritish Chheda
Right. Which of the product do you think is closer to commercial next year?
Gaurav Lath
All of them, sir.
Pritish Chheda
Okay. Okay. No problem. All the best to you, sir. Thank you.
Gaurav Lath
Thank you, Pritish ji. Thank you for the questions. I really liked it, enjoyed it.
Pritish Chheda
I tried to put it in the right way. Bye sir.
Vinay Pandit
We’ll take a question from chat by Faisal. His first question is Europe has an aging infrastructure in railways, and they’re looking to revamp. Is the company looking at tapping opportunities in the
Region?
Gaurav Lath
Yes.
Vinay Pandit
Indian Railways will be launching hydrogen trains for trials in December 2024. Do you see opportunities in that business as well?
Gaurav Lath
Yes.
Vinay Pandit
So do you want to elaborate a bit or both of these?
Gaurav Lath
We can’t.
Vinay Pandit
Okay. There’s a question from Suman Kumar. Do you foresee the need to raise capital to meet the growth guidance you’ve given over the next two to three years?
Gaurav Lath
As of now, no.
Vinay Pandit
There’s a question from Riddhi Agarwal. Are you looking for any further acquisitions?
Gaurav Lath
Yes. Multiple deals are in discussion.
Vinay Pandit
I think we’ve already answered this, but I’ll just repeat it in case we missed it. Sameer Nair has asked a question. Have you already started bidding for Kavach for the supply to Government tenders?
Gaurav Lath
It will start soon.
Vinay Pandit
Okay. We’ll take the question from Agastya. Agastya, you can go ahead.
Agastya Dave
Yeah. Thank you, Vinay Bhai. Gaurav Bhai, just a follow-up on what you just said. [Technical Issues] multiple deals that you’re looking at. So your guidance is without these deals or taking into account that there would be further acquisitions.
Gaurav Lath
This is based on the current business structure we have.
Agastya Dave
Okay. And when you’re evaluating deals, so what exactly are you looking at capabilities or capacities?
Gaurav Lath
Capabilities.
Pritish Chheda
Great. Thank you. All the best.
Gaurav Lath
Thank you, sir.
Vinay Pandit
Thank you. I think there are no further questions. Would you like to give any closing comments, Gaurav, before we end the call?
Gaurav Lath
So thank you to all the investors who took out time to — for this call and was patient enough to wait for the queues to ask questions. And we feel that Concord as a company is trying to do a very small change and trying to transform the railways. And that’s why we say we — by transforming railways, we’ll be able to transform India to some extent. So that’s where the focus is. We are focused on this vision and we are always custodians of investor capital and we very, very prudently choose to invest that in the — whatever appropriate manner we can. Thank you so much.
Vinay Pandit
Thank you. Thank you to all the participants for joining on the call. And thank you to the management team. That brings us to the end of today’s conference. Thank you.
Gaurav Lath
Thank you, Kaptify team and Concord’s finance team to be there for and putting this up together. Thank you, Gaurav.