Craftsman Automation Ltd (NSE: CRAFTSMAN) Q2 2025 Earnings Call dated Oct. 24, 2024
Corporate Participants:
Srinivasan Ravi — Chairman & MD
Analysts:
Mumuksh Mandlesha — Analyst
Mukesh Saraf — Analyst
Jinesh Gandhi — Analyst
Jay Shah — Analyst
Joseph George — Analyst
Khush Nahar — Analyst
Yash Mehta — Analyst
Neel Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the earnings conference call of Craftsman Automation Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Srinivasan Ravi, Chairman and Managing Director of Craftsman. Thank you, and over to you, Mr. Ravi.
Srinivasan Ravi — Chairman & MD
Good afternoon, everybody, and thank you very much for joining the earnings call. And today is a very important day because we have major events happening in Craftsman and its subsidiaries. So in the interest of time, I will just rush you through the financials, give an overview of the financial performance and what are the indicators which are to be considered in reading the financial statements. Then we will go to Q&A and we’ll spend more time on Q&A for — because of the two major acquisitions and also completing — completion of the DR Axion acquisition which has happened all in one quarter or the beginning of this quarter — beginning of the new quarter.
So the H1 performance more or less has been, I would say, slightly lower than the last year previous year H1 performance, after taking into consideration two important parameters. Of course, the main, Craftsman, there has been extraordinary expense which is related to two new plants, which are coming on — come up in Bhiwadi which has started production at the end of August, and now it is operating at 25% [Phonetic] capacity and will reach around 50% to 70% capacity in Q4.
The second plant in Kothavadi which is also a major milestone, is under trial production already. Both these plants have been incurring expenses, which have been — gone to another intricate [Phonetic] expenditure. So if you look at the EBITDA portion of the apple-to-apple comparison if you look at it, I think there is a hardly 8% to 10% drop in the Craftsman H1 EBITDA levels. And the consolidated level is also almost at a similar level, I would say, because there actually there has been a small drop.
So the three things which are now is we have taken over Fronberg and we are operating it smoothly from the first of October as Craftsman Fronberg Guss Limited in Germany. And this is a big strategic deal for us because we are getting our global customers also for Craftsman [Technical Issues] foundry and machining at Unit 3, more of it later.
Second thing is Sunbeam was envisaged as first an asset deal and also only for three plants. And subsequently it went [Phonetic] into four plants and it again was asset deal. But the complexity of the nature, we went in for the buyout of the entire company, and the CC [Phonetic] approval also came in late September, and we have — from the second week of October, we have acquired the company. So eventually, the deal, whatever we have envisaged, I think there were some INR400-odd crore deal, which was there, which has become around INR700 crore. But that is temporary because the land has not been sold in Gurgaon. And once the land is sold in Gurgaon, I think the money will come back into Sunbeam and indirectly, maybe also I think some of the investments what we have made in Sunbeam it can — money can go back to Craftsman.
So we have, because of these three major acquisitions and two major new greenfield projects, we’ve gone a little higher on the debt and maybe we’ll close FY ’26 at around — for a stand-alone rate of around INR1,600 crores [Phonetic] for Craftsman. And that we are also factoring that debt will become lesser when we sell the land of Sunbeam which is around 16 acres in Gurgaon. The subsidiaries will have also a little debt, but not much, I think, well within their capabilities. So we have one more year of operations, we’ll be back to between one to one and half times debt-to-EBITDA, which will be always in our comfort zone.
So with this, I will leave to Q&A and would like to talk about the opportunities of this acquisition and how the business will grow and how the revenue will look for next year because we don’t give any revenue guidance, but I would like to say that it will be upward of INR7,000 crores on a consolidated level in the next financial year, just to give — because of the game changes that’s happened in the last few months. Thank you very much for the patient hearing, and we’d like to listen to the Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead.
Mumuksh Mandlesha
Yeah, thank you so much. [Technical Issues]
Srinivasan Ravi
Sorry, I am not able to hear you.
Mumuksh Mandlesha
Yeah, sir is it better sir now?
Srinivasan Ravi
Yes.
Mumuksh Mandlesha
Yeah, so happy festival season to the management sir. And firstly, sir, on the Sunbeam, can you guide more how do you see the revenue and the margin trajectory over a medium-term perspective? What are plans to turn around this unit, sir?
Srinivasan Ravi
Okay. The revenue, I think maybe it’s not a public domain maybe, but it may be available somewhere, but I think the revenue is around INR1,000 crores, I would say, in the top line. And the EBITDA has been negative for almost three, four years, I would say, overall, in general.
Now there are three things which are changing now. One is the labor settlement, and the settlement is around INR150 crores will be done by March totally. It is already agreed on and agreements are signed up, and the first tranche of people are — a small group have left and the group is leaving by November, and the bulk will leave end of March. So will continue to have the impact of higher salary and double operating expenditure of trying to ship the Gurgaon plant until March.
So I would rather only look at marginal EBITDA for Q4 going forward. Q3, I don’t expect any EBITDA because of the holidays and the full workforce being there. I think we’ll be at least trying to stem that whether it is minor positive or minor negative, it will be nothing significant in Q3. But Q4 will be slightly positive on the EBITDA. For next year, overall, I think that the revenue stream will be more or less the same, I would say, or a slight increase maybe there from INR1,200 crores [Phonetic]. And we are targeting internally at a high single-digit EBITDA or at least a low double-digit EBITDA because still it will be work in progress of shifting the Gurgaon plant to release the land and to sell the land. So the selling of the land also will — I mean, moving the operations out, we’ll be able to reduce the plant overheads because we’ll be reducing the number of plants. And we are shifting the Gurgaon plant to Bhiwadi where Craftsman has already got line. So the — it will be a smaller shifting only.
So I think in that sense is that the Tapukara plant of Sunbeam is hardly a few minutes away, just a couple of — less than three, four kilometers away, I think, that is it. So the — it will bring a lot of operational synergy between the two plants of Sunbeam. And the Craftsman plant in Bhiwadi is producing alloy wheel, which is complementary to the Sunbeam activity. So with this, I would say that the export potential for Sunbeam is quite high. And the new orders, RFPs have not been coming for a long time because of the finance situation. Now with this new management and the infusion of capital and the profitability picture what we are trying to project, I think the customers will come back because of the track record of the capability of Sunbeam over a long period of time. And this will result in a significant growth in the export business in the years to come.
So if you look at the profile of Sunbeam and the profile of Craftsman and the profile of DR Axion and the customer base, I will give the overall picture. Craftsman is predominantly only — it’s only in the south and aluminum business, except for Bhiwadi alloy wheel plant. The customers of Craftsman and Sunbeam are not at all overlapping. There’s actually practically no overlap. That means we have acquired new customers with Sunbeam domestically as well as export totally.
The second point is the DR Axion is predominantly in low-pressure and graphite die-casting. And Craftsman is predominantly in high-pressure die-casting [Indecipherable] and mostly in the higher tonnage area, whereas Sunbeam is operating at a lower tonnage on high-pressure die-casting and to a certain extent also on the gravity and low pressure. So this brings a lot of synergy of operations between the three aluminum divisions. So how to move it closer to each other on the technology footprint and try to extract the best out of each other is still work in progress, which will happen in one financial year. We have set up strong functional teams across all the three plants, and we are very confident about turning around Sunbeam, with a lot of help is also coming up from the customer side. They’re encouraging us to — with more inquiries and things like that. I hope I’ve answered your question properly.
Mumuksh Mandlesha
Yes, sir. It’s very comprehensive, sir. Just further on this, is it possible to share, what kind of savings we would get from the employee cost reduction? And just a little more on the export opportunity for the Sunbeam, sir?
Srinivasan Ravi
I will give you only the top line number. It is very close to around — how much is it, INR270 crores to INR280 crores? Understand on a INR1,200 crore turnover of an aluminum business where aluminum is predominantly have been — I mean it is contributing to 60% of the revenue, or almost close to 60%, I would say. When you have INR280 crore employee cost, and similarly, when you look at DR Axion and compare Craftsman Aluminum segment, it is much, much higher. It is two things which are there. One thing is, of course, the duplication of people which is there and across all the plants because the Gurgaon was not shifted. In total, we are still carrying the people it will be subtle, number one. Number two is the footprint of five plants, which normally we would like to have three plants, and three plants in three geographies, one geography in the NCR region which I said, Tapukara and Bhiwadi, and Bawal we will say one region, and one in Halol and one in Ludhiana. So this will give better synergy. The operational cost management may be different. But I would say the developmental team can be leveraged between the two plants overall.
I will give you one example of how we leverage the DR Axion knowledge also to get into the alloy wheel business. And we are one of the few companies without a JV partner as Craftsman, we have done — our technological partner, we have started alloy wheel business, and we are able to — we decided in January, we applied for land in January because the line in February, and we started commercial production in August end. And today, the plant is functioning — and in Q4 this year, we will be generating revenue from the Bhiwadi plant of INR100 crores [Phonetic]. This has been also because of the — a lot of support from our Korean expertise who’ve got a long experience in the gravity area. And similarly, we will be leveraging DR Axion’s expertise for Sunbeam also to improve the operations in low pressure and gravity. High pressure by itself, Sunbeam is quite reasonably strong on lower tonnage missions, but the tool room support will be required from Craftsman. We have put a much larger tool room and a larger development team for making dies and things like that. So with that, I think there will be more synergy.
And the one thing is we can pick up the entire bouquet of request from the customer, whether it is the large tonnage high pressure die-casting or low-tonnage high pressure die-casting. And what we are first thinking is to communize [Phonetic] the business development strategy. That will be very important to tap the new opportunities across the globe.
In Europe, the aluminum manufacturing footprint is going down, and in U.S. also it is going down, and this is moving to other countries, including Mexico, and possibly we have got a good opportunity at this scale of business. I have always been saying that the — our aluminum competition outside the world between $1.5 billion to $6 billion, $7 billion [Phonetic] in revenue. At least we are looking towards the INR4,000 crores, which is $0.5 billion next year, approximately. So still we are not up to the multinational scales, but at least we are offering that we are capable of growing to that level. And this is interesting many customers today. I think that is the synergy what they are bringing about.
Mumuksh Mandlesha
Got it, sir. This was really helpful sir. Just lastly, on the heavy industrial business and the wind sector and the [Indecipherable] any new order wins or RAQs [Phonetic] for the segment, sir? And just [Indecipherable] what would be the order book for this segment as of now, sir?
Srinivasan Ravi
The Kothavadi facility at Stage 1 and the complementing mission shop at Stage 1 and machine shop Unit 3 at Craftsman was put up for a general engineering market requirement and mostly oriented towards are focused towards wind sector and for machine tool parts, I would say. So that is already under trial production as of today. So this means that the foundry Phase 2 will be more focused on the — when we can do the engine blocks in Phase 1, we already got some couple of big breakthroughs and orders from two customers, and third and fourth are on the way now.
The Phase 2 of the Kothavadi foundry will be oriented towards the cylinder block head [Phonetic] for the station engines for the backup power generators, which the demand is huge. So I mean, this is the strategy going forward for the industrial engine [Phonetic] division.
And the second part of your question, sorry, I missed it out, can you please repeat?
Mumuksh Mandlesha
If possible to share the order book as now sir, for this new segment, sir?
Srinivasan Ravi
New segment, the order book for next financial year will be around for the general castings, the machine tool castings, the printer castings, and we have one or two small subsegments also. I think that order book is more than INR100 crores as of now, the developers are going on. Now the second portion of the Indian business, that order book is more than INR100 crores as of now itself. But the only point here is the development cycle is huge. That is the reason we are — also stopped shutting this foundry business with quick wins on the industrial engineering product side. And while we wait for the development of the engine side, because engine development, each product development cost, which the customer has to pay, is millions of dollars. Their validation also is in the millions of dollars. And the time taken for development of the part and the validation takes anywhere between 18 to 24 months. So we will see the revenue flowing from FY ’27 onwards. And these are very, very sticky customers.
And one very good point is, in the top 10 engine manufacturers who are contributing to the higher power engines for the — generating power generation sets all over the world, some of them are directly now with the customer in Craftsman or already a customer in Fronberg. So I think this is a very key point. And the Kothavadi foundry will — already started to get support from the former facility for development. And some inquiries have come for Craftsman because we have acquired Fronberg, and some inquiries have come for Fronberg because Craftsman has acquired Fronberg. And that is — the former will be able to develop the parts fast. And the second incremental volume of the same parts production will be done in India for the customer.
So the customer is also happy that there will be two sites for the production of these parts going forward, which will also derisk them. Plus the requirements are booming there and time to market is extremely important. All of them are sitting on order books for the next two, three years, the outlooks are full. I think it is already on public domain that all these engine manufacturers are expanding their own manufacturing facility.
Mumuksh Mandlesha
Pretty helpful sir. Thank you so much. I will come back to the queue sir.
Operator
Thank you. The next question is from the line of Mukesh Saraf from Avendus Park. Please go ahead.
Mukesh Saraf
Yes sir, good evening and thank you for the opportunity. So it’s on the similar lines. Just if you could — I mean, you’ve given us a lot of information, but just trying to understand, for the Kothavadi facility and the Bhiwadi facility, what’s the kind of capex we are doing in the Phase 1? What have we done so far? And anything that’s pending for Phase 1?
Srinivasan Ravi
Phase 1 some equipment the key — one key equipment has to come, that is the Germany equipment for the core shorter. I think the — Kothavadi, I mean, okay, Kothavadi number is currently around the capex is all incurred for first half is around INR80 crores.
Mukesh Saraf
Okay. And we have some more that we’ll do, sir, Kothavadi, for Phase 1?
Srinivasan Ravi
This year capex for — no last year, we also incurred some capex, not this year. This year capex is INR80 crore. Last year we also incurred capex for Kothavadi. We started the project on October 2, so I’ll give you the total capex in a minute. Yeah.
Mukesh Saraf
Yeah, just the total numbers.
Srinivasan Ravi
And at Bhiwadi, I think we have completed around INR150 crores capex as of now.
Mukesh Saraf
INR150 crores Okay.
Srinivasan Ravi
That is without land. Land is a significant portion, it’s 25 acres, so that will house — I think that is one of the reasons also we are looking at the Gurgaon facility shifting there. The land is a long-lease item, I think that is around INR130 crores.
Mukesh Saraf
Okay, okay. So Bhiwadi, Phase 1, say, for utilization, what kind of revenues we can do, sir, maybe in a couple of years or so, maybe two, three years, at full utilization Phase 1?
Srinivasan Ravi
The revenue will have two parts to it. One is the casting part and one is the machining part of that. Both put together, the top line will be around — see, we can produce around 30,000 tonnes, I think between INR500 crores to INR600 crores, the revenue will be there on the top line at, I would say, at 80% utilization. But peaking I think we can go up to INR600 crores, INR700 crores. Because now one important point is we are going to get castings from rest of the world, coming from South America, coming from Europe, for machining for Craftsman, just because we put up the facility, the casting validation takes too much time, so we are starting with machining with these customers.
The orders are coming for machining now only for the simple reason is we have put up the Kothavadi facility and we acquired Fronberg. So they are confident that we will be able to make the castings from ’27, ’28 onwards. So I think the revenue from machining will come from ’26 onwards itself totally. But the machining on revenue, the turnover wise may be lesser, but it will be value addition in that sense.
Mukesh Saraf
Right. So this is Kothavadi is what you mentioned.
Srinivasan Ravi
Kothavadi INR126 crores [Phonetic] because we had most of the lines earlier. So, so far, the investment has been INR126 crores [Phonetic] crores to go before we complete this Phase 1.
Mukesh Saraf
Right. So the INR500 crores, INR600 crores revenue you said before, that’s for the Bhiwadi plant, so that 70%, 80% utilization?
Srinivasan Ravi
No, no I talked about Kothavadi only. Bhiwadi plant is very clear, it is 4 million alloy wheel for two-wheeler.
Mukesh Saraf
Right. And what kind of revenues you’re looking?
Srinivasan Ravi
There’s a seasonal demand there, and I have to be very careful when I comment that. Theoretical capacity of that plant will be around INR400 crores, on all practicality will be around between 300 to 350 because of some months demand not being there.
Mukesh Saraf
Right, right, right. Okay. Understood, understood. And right now, we have an order book of INR100 crores at the Kothavadi.
Srinivasan Ravi
That is for the general engineering part [Speech Overlap] for engine blocks and other things are much higher.
Mukesh Saraf
Sure, sure, sure.
Srinivasan Ravi
But that’s not going to see light of the day in ’26. So it will see only in ’27. On the revenue, it will contribute significant portion only in ’27. ’26 will be marginal revenue. That’s why I didn’t want to talk about that.
Mukesh Saraf
Sure, sure. And just the second question is, when I look at your — the stand-alone business, when I look at your industrial and engineering business, the margins there have dropped significantly. I would assume a lot of it has to do with the storage solutions. But if you could kind of give us some update there. The margins there are literally now come down to negative.
Srinivasan Ravi
There are three or four parameters. I think from Q3 onwards, we’ll see the margins looking up in the industrial engine sector. Undercutting or the entry cost, everything is over. We have established ourselves very well in the stationary racking business. So there’s no more undercutting in the market in that sense for the new orders which we have taken in the past few months. So it will start yielding result by end of Q3 and for full of Q4. That’s for the station engine. Now we opened the order book the automated solutions at INR80 crore level in April because these are long-gestation projects. And we had around INR40 crores exhibited. This is [Indecipherable] these stores. And now we currently stand with the order book on the automated solution which is around INR250 crore. And this is — will have significant margins going forward.
So in the coming years, we will see that the blend of the products will be more on the automated solutions of the particular lift modules, which will contribute the bulk of the revenue, whereas the racking business will be supporting the automated storage solutions. So will not be at a more high engineered solution provider.
So we have — we are already implementing for one of the largest corporates in India in plant in Tirunelveli which is a INR50 crore automated storage solutions. It is under implementation. And we have secured for another still major, very large order of INR50 crores for automated [Speech Overlap]. So this is only the beginning, and we have broken through now. I think the revenues and the profitability will be improving quarter-on-quarter starting from Q3 itself.
Mukesh Saraf
Right, right. Understand, sir. I’ll get back in the queue.
Srinivasan Ravi
I want to add on the industrial engine portion — industrial engine portion has been a backbone to support both the powertrain as well as the aluminum division, the special purpose missions, tools, dies and all the other engineering, what we do. And now that engineering division, this is also helping our operations to grow on the non-storage engineering capabilities industrial engineering side.
Mukesh Saraf
Right sir right. Thank you, sir.
Operator
The next question comes from the line of Jinesh Gandhi from Ambit Capital. Please go ahead.
Jinesh Gandhi
Hi Ravi. Just a clarification, you mentioned that order book for automated storage is INR250 crores.
Srinivasan Ravi
Yes, correct.
Jinesh Gandhi
And of which particularly has been executed in the first half?
Srinivasan Ravi
No, this is INR20 crore as of now. What I’m saying is there are long-gestation projects because the customer builds the — building after the order is placed, because it is all high-rise buildings. These are built to the requirements, and we are also giving engineering solutions. So the one step — order pipeline crosses the INR300, INR400 crores, our revenue stream will be more focused towards quarter-on-quarter on the automated solutions, because order to delivery takes around anywhere between 10 months to 15 months depending on the customer [Indecipherable]. That is what I am looking at.
Jinesh Gandhi
Right, right, right. And what would be revenues of storage solution in Q2?
Srinivasan Ravi
In H1, it is around INR262 crores.
Jinesh Gandhi
INR262 crores. And in this storage, automated would be about 10%, 15%.
Srinivasan Ravi
Automated would have been, H1, automated would have been only around 25% on the total, right? 33%, sorry, one-third.
Jinesh Gandhi
One-third. Okay, got it.
Srinivasan Ravi
But there have been more of these. The orders have been taken more than a year back at entry prices. We are trying to prove ourselves in the market. So, we had to be very, very cost competitive to convince the customer to place the order with us. So that [Indecipherable] under execution now. But all the new orders are coming at a fair value now.
Jinesh Gandhi
Fair point. On Sunbeam acquisitions, so this will be consolidated from third quarter itself from October onwards, or will it take longer time?
Srinivasan Ravi
October first week is not there. I think 9th October is the date which we have started. It will be consolidated from that date. But anyway, Q3 will be a transition phase because nobody produces much in December. But I think Q4, we will get more than the pro rata INR1,200 crores revenue — analyst revenue is what we are looking at.
Jinesh Gandhi
Right. And now since we have acquired the company and not the assets, will we be having a substantial carry-forward losses which will benefit our overall tax rate? How to think about that?
Srinivasan Ravi
See, there are some business losses which is above INR300 crores and there are some unabsorbed depreciation which is in the region of maybe INR350 crores, INR400 crores, something like this. I do not know the exact number. I think more than INR400 crores, it’s INR440 crores. This INR440 crores can be carried forward for a long time. But INR380 crores has to be more or less if it can be only for this year totally. So, unless we have some other plan, we will not be able to get the first portion of it. But we are also thinking about what are the strategy we can try to in the various aluminum businesses what we have, what we can do on this. But anyway there will be a tax saving of INR100 crores on the unabsorbed depreciation going forward.
Jinesh Gandhi
Got it. Lastly, what will be the capex for FY ’25, given that they have already invested roughly INR467 crores in first half, what would be the full year capex guidance?
Srinivasan Ravi
We are expecting to close at around INR850 crores overall capex for ’25.
Jinesh Gandhi
Got it, got it. Great. Thanks and all the best.
Srinivasan Ravi
The capex will be very muted for next year on this matter. I think I want to also bring, Mr. Jinesh Gandhi, I want to add one particular point here is that we see that even today we have the news that FDI is opening for multinationals.
Today we have companies who are willing to invest for capacity today for revenue three years later. We will have multinationals coming in, especially our Asian neighbor, which before even this submit, I think, two or three projects have been cleared for FDI. I think we should be open for multinational competition.
So as Craftsman, we are now always thinking about multinational competition coming into India, whether how we can do better and how we can grow our business. I think scale is extremely important going forward, coming to a factor that India is going to go into a manufacturing GDP country as a whole, and if we don’t have capacity, we’ll order for the equipment, it comes in two years or three years’ time, it doesn’t gel well with any multinational customer, because they have experienced different things with China.
Jinesh Gandhi
Got it. Great. Thanks and all the best. I’ll fall back in queue.
Operator
Thank you. The next question is from the line of Jay Shah [Phonetic] from JS Family Office [Phonetic]. Please go ahead.
Jay Shah
Hi. Can you hear me?
Operator
You are audible, sir. Please go ahead.
Jay Shah
Hi. Congratulations to the management moving forward with the acquisition. Sir, just one question what I wanted to ask, you actually quite hinted it in the previous answer, is that in some of the interactions with peer companies in the casting and forging sector, it comes to seem that India today doesn’t have the capability or the capacity, rightly speaking, and that is why some of these large engine sets guys are not coming to the country. So, is it like a chicken-and-egg problem that the companies are waiting for someone like a Craftsman to put things up and then come rather than like you just said that if you don’t have the machinery right now, people are not going to place orders. And apart from engines also, do you see that today the way Craftsman is progressing, that can open up doors for other industries as well for us to bag clients in those sectors as well.
We have a good examples, which are very positive examples, legacy wise. We have the at least the top two, three companies in India, top two at least, and maybe the third also. In the forging industry, we are quite significant in the global market, especially the top two. The top one is far, far ahead, and they’re attracting — they’re industrial engineering business. They are already serving the forgings for the stationary engines across the world. So, that is what is keeping them on a stable level overall. I cannot speak for any forging industry, but I would say that the vision was there to go ahead and put capacities ahead.
But I would say the opposite has happened in the foundry business where nobody put up the capacities which could be able to attract the attention for engine block casting for export and that went away to China, overall. So, we put up scale for machining of the blocks and heads. Even today, we don’t have capability to make — we have capability, but we don’t have the capacity or the infrastructure. We never put up a foundry because we are intent on machining. Machining wise we have the scale, but the foundries missed the export business on the block and head. But we have seen on the other carrier parts, we have partnered with the foundry. They were able to capture the market in North America now after almost 18 years of working.
I think scale is important, and also the orientation towards export and export quality is extremely important. Aluminum, if you look at our exports when compared to China, it will be hardly a single-digit percentage when compared to the export of China. The entire aluminum industry, tier one industries, sorry, suppliers like Craftsman or Sunbeam, if you total it up in the country, it will be less than 10% of the capacity in China for similar suppliers. So, this is a basic problem that they don’t see the infrastructure and then without the scale, we cannot invest for R&D, we cannot invest for development, we cannot have technological experimentation which we need to do to improve our process and things like that. So, this is one reason.
For example, alloy wheel, which we have put our plant in Bhiwadi, was getting imported mostly from China in a big way until the requirement for BS and other things have come up within India. But we also have to note a point, we have Asian companies. I don’t want to put names to the countries now. They also have a set of plants in India that are supplying to the OEMs. This means they have left their shores, and they have come to our shores, and they have done well. But I think the opportunity is there that if we put up scale, we have more, especially for North America where there are no people to work there, and they want to also derisk from China as a strategy itself. So, this means that — and they’re looking at India as a fast-growing market, the growth in China is slowing, and the capacities are enough already. So, this means for any product to be sold in India or in the other Asian countries, they are now preferring to develop the products in India. But they’re delaying their entire decision of investment of plant here or export out of here because of the lack of supplier capacities and capabilities. This is the real truth. Okay. Thank you so much, sir, for a comprehensive answer. That’s it from my side. All the best, sir.
Srinivasan Ravi
Thank you.
Operator
Thank you. The next question is from the line of Joseph George from IIFL. Please go ahead.
Joseph George
Hi. Thank you. I had two questions. One is the capex guidance of INR850 crores that you gave, is that including all the new subsidiaries, or is it just on the standalone basis?
Srinivasan Ravi
The subsidiaries’ capex doesn’t come into this number. If you look at the Bhiwadi, look at the land and the building which is there, the foundry building, the machine shop to complement the Kothavadi facility for the engineering parts as well as the engine block and the aluminum capex we have done standalone Craftsman and plus the maintenance capex. Maintenance capex itself is to the tune of around INR200 crores odd. So, all that put together. Because we have gone for two greenfield facilities.
Joseph George
Sorry, I didn’t get the answer. So, are you saying that this INR850 crores includes what you are spending in standalone, including the new plants, of course, and say what is required in Sunbeam or…?
Srinivasan Ravi
No. Sunbeam is a separate company. DR Axion is a separate company. Fronberg is a separate company. Those capex will not come into Craftsman.
Joseph George
So, this INR850 crores doesn’t include DR Axion and Sunbeam, right?
Srinivasan Ravi
No, no, we don’t talk about group capex now. Group capex will be not that, I think, no.
Joseph George
Okay. And sir, the second question that I had is in the context of the INR250 crores of order book for automated storage solutions, you mentioned that it’s not something that will be converting to revenues immediately. It is long gestation order. What I wanted to check is do you have price escalation clauses built in? Because in the past, it’s happened that we have bid at a particular price and then steel prices have gone up and then margins have been impacted. So, do these long gestation contracts have price escalation clauses?
Srinivasan Ravi
See, we have two things, one is on the static racking, which is all quick order wins and quick deliveries and will be consumed within a quarter or so. The long gestation periods on the automated storage solutions, the material content is very low overall. And there are bought-outs [Phonetic]. Bought-outs [Phonetic] prices are fixed immediately, electrical, electronics, mechanical and things like that. And a lot of activity happens inside for the value addition. So, the raw material content itself is very low — commodity raw material content is low.
Joseph George
As a result, even if there is no price escalation, it won’t make too much of a difference.
Srinivasan Ravi
Yes, we factor in something, but I think will not make significant difference, yes. It will not, yes.
Joseph George
Understood.
Srinivasan Ravi
And one thing is we will need a INR500 crores order book to have a consistent revenue because of the long lead time item. So, this is something like a long pipeline. Once we fill it up, I think, the consistency in the quarterly revenue on the automated storage solutions will improve.
Joseph George
Understood. Thank you. That’s all I have.
Operator
Thank you. The next question is from the line of Khush Nahar from Electrum Portfolio Managers. Please go ahead.
Khush Nahar
Hi, sir. Thank you for the opportunity. So, my first question was can you guide us on FY ’25 growth? How are we looking at FY ’25?
Srinivasan Ravi
FY ’25 will be in a similar line of H1 growth. That’s all. I think we are not looking — I am talking about standalone, but on a consolidated basis, it will be significant because we will have almost two quarters of…
Khush Nahar
Consolidation, right.
Srinivasan Ravi
Consolidation of these two subsidiaries. Plus, the Bihari plant operation in Q4 will bring significant revenue.
Khush Nahar
And sir, just one question on the EBITDA market. So, like you said, you’re targeting around INR7,000 crores in FY ’26 as revenue. So, that would be on what EBITDA?
Srinivasan Ravi
See, the EBITDA will be now in transition — Sunbeam EBITDA will be in transition. It will not be a quick turnaround. It will take one more year, I would say. So, that will bring down the overall EBITDA levels. And then I think Craftsman will be able to sustain very high teens in the range of 18%, 19% is what we look at. The EBITDA of our overseas subsidiary, the revenue is small. I don’t want to comment too much on that because the revenue itself is around INR250 crores. Then we’ll be single-digit EBITDA, whether it’s low-single digit or high-single digit, we have to see the operations going forward there totally, but it is EBITDA positive, that is clear. And then Sunbeam wise we are looking at between around 8% to 10% EBITDA, which is what we are targeting internally overall. So we look at the blended average more or less we will be around 17%, 18% as the overall company goes.
Khush Nahar
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Yash from Duro Capital. Please go ahead.
Yash Mehta
Hi, good evening. Thank you for the opportunity. I just had a bookkeeping question. Can you just please tell us the value added across the segments for H1 as well as this quarter?
Srinivasan Ravi
There is a little — I would say that I don’t mind giving it, really speaking, but I have seen that none of our peers give it. And that has been adverse to us on this matter like, okay, this is the revenue and this is the value add, then there is a raw material content and how is it happening. And this is becoming more sensitive in the aluminum segment. So, now, we don’t want to get into those numbers. There is a cost which is there overall.
I think it is better you know the aluminum content and things like that. You know the aluminum revenue and aluminum across the segment will be having more or less the same cost. It is not beneficial as a strategy to give these details, I think so, now going forward.
Yash Mehta
So, can you just tell us in a direction wise how it’s gone, if you could not give us the exact numbers?
Srinivasan Ravi
On the powertrain I think the product mix is more towards with material because of the other wherever we are buying engine blocks and doing, so that is when we are also doing job work there, so we cannot really quantify that. In general, the value addition and as a percentage has been in the powertrain has been in the range of around 60%, I would say. And the aluminum also it is very close to around 40% because we are doing value-added products in the machining side, casting and machining totally. And the industrial side has been lower because of the legacy orders on the storage solution business, which is less than 30%, I would say.
Yash Mehta
Okay. Thank you. That is all from my side.
Srinivasan Ravi
Thank you.
Operator
Thank you. The next question comes from the line of Neel from ValueQuest. Please go ahead.
Neel Shah
Yeah. So, firstly, my question is around the QIP that we did, about INR1,200 crores that we have raised. If I was to net off the sale of the land in Gurgaon, then about INR700 crores to INR750 crores odd we have already spent, and just about INR400 crores odd you will still be left with. So the question is what are we planning to do with this amount in terms of are we looking into M&A or is it towards debt reduction for maybe Sunbeam or some of the subsidiaries, or…
Srinivasan Ravi
Sorry, I think it’s not clear, please, sir. The voice is very feeble. If you don’t mind, you can use the…
Neel Shah
Is it better now?
Srinivasan Ravi
Yeah, better now, yes.
Neel Shah
Yeah, sorry. So, my question was around the QIP that we did. So, about INR1,200 crores odd that we have raised. If I were to net off the sale of the land from Gurgaon, about INR700 crores to INR800 crores would be spent, and we will be left with about INR400 crores odd. So, what are the plans around that if we are planning to do M&A or maybe spend towards paying down debt?
Srinivasan Ravi
No, we are not looking at any M&A because we have done our strategy very, very clearly. On aluminum, we didn’t have a footprint in the north. Now we have a footprint in the north. We have got customers like Maruti, Vitesco, Bosch. We have Vibracoustic [Phonetic]. I think a lot of exports also happening to North America, and we are trying to grow that. And if not for the Sunbeam, I think our footprint would have not got into the North Indian region, NCR region, I would say. This is one thing.
Second thing is, if not for Fronberg, I think we would have missed the bus on the large engine segment, which China is at least 15 years ahead of us as of today, totally. They had started this investing for the foundry 15 years ago. Today they are the major supplier in the world. And in fact, there was a comment saying that for the large engine production, the capacity of the Chinese foundries can serve the entire world totally. And there’s all the other foundries in Europe and U.S. can be redundant. So, much capacity is there. And the capability is also there, because they have done major investments and technology upgradation from learning from customers and things like that.
So, we’re trying to do catch up. I think their Fronberg facility was important, and putting up the Kothavadi facility was important. For Kothavadi facility to make the castings in a proper way quickly, which will give confidence to customers, is what’s important. So, there was some question of cost which was there. I think the second thing is the other bidder for us was why the price went up from the initial say 5 million to 10 million is the simple reason is that the customer wanted to buy the foundry. So desperate they were, so we were pitted against the customer. And one of the key customers for Fronberg.
Now coming to the DR Axion, we have completed the 100% acquisition that is also done overall, and the aluminum portfolio by itself is complete. We don’t need any acquisitions at all. Organically we can first set right the plants, bring those energies, then growing capacities. Even on the powertrain, having done this Fronberg deal and the Kothavadi facility, we don’t need any acquisitions in the powertrain business.
And in the industrial engineering business, unless something comes up in a different way in the coming year, it may be small acquisitions, maybe in the region of INR100 crores or INR50 crores, if it brings some strategy. But no large acquisitions are planned at all — not planned means we are not going to do that any larger acquisitions in the next two years.
Neel Shah
Right, got that. So, the rest of the QIP money will mainly be allocated towards the capex plan that we have for the next two years, right?
Srinivasan Ravi
Yes, that is the history. In history, we say that we raised INR150 crores from private equity in 2010, ’12 put together, INR150 crores in the IPO. Only INR300 crores equity was raised apart from the original equity of the promoters, which was way back in 1986. And then apart from this, the INR1,200 crores is one step-up opportunity for making the company more safer and sustainable on the growth path for the next decade, I would say.
Neel Shah
Got that. So, next two years what kind of debt level your will be comfortable at?
Srinivasan Ravi
See, we will be — standalone debt I think we are targeting around INR1,600 crores for this year and after the land sale happens that will come down to INR1,200 crores. And in FY ’27 if you look at it, with the normal capex and normal maintenance capex, I think debt level will be to the tune of the EBITDA level of Craftsman standalone I would say, around that level 1.2 to 1.3 times, is what we look at it. Even at group level, I think 1.3, 1.4 times EBITDA level will be the debt. And after that it may come down to less than — we want to keep it between 1 and 1.5 times. We do something extraordinary, that can go to 1.5 times. This is something one-time situation where we did a step change, but that is not going to be repeated.
Neel Shah
All right, got that. And last question is on DR Axion. So, this quarter sales were weak for us in that particular subsidiary. Now going forward, the expectation in the market is that over the next six, 12 months, PV sales are going to remain weak, especially for a player like Hyundai who is not really gaining market share. So, are we expecting any growth to happen in DR Axion entity on standalone subsidiary basis?
Srinivasan Ravi
We feel that whatever export we have started in a small way, it will be for the full year next year. So, that will help us to grow next year. This year, more or less, it will be flat, I would say.
Neel Shah
Okay, got that. Thank you and all the best.
Operator
Thank you. We have a follow-up question from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead.
Mumuksh Mandlesha
Yeah. Thank you for the follow-up, sir. Is there any impact of higher aluminum prices this quarter, sir, on the revenues and margins? Has the passthrough happened, or is there any lag also there in the passthrough?
Srinivasan Ravi
Sorry, we’re not able to hear properly.
Mumuksh Mandlesha
Sir, can you hear me better, sir?
Srinivasan Ravi
Yes, please.
Mumuksh Mandlesha
Yeah. So, I want to understand, sir, how is the impact of the aluminum prices for this quarter on the revenue and margins?
Srinivasan Ravi
No, nothing. I think overall nothing. I think we have been ramping up capacity. When there’s ramping up of capacity, normally there will be some expenses. For example, even for the Craftsman as a whole, we incurred all the other extraordinary expenditure for all the three acquisitions that is DR, Sunbeam, and our subsidiary Fronberg, and that was the tune of more than, I think, around INR10 crores odd, which has hit us in the first half.
And we have spent without capitalization for the expenses running on generator at Kothavadi and Bhiwadi and putting people for trial production, another INR20 crores we have spent for pre-operative expenditure, which has also gone as the expenses in the first half. These INR30 crores has also on the standalone has impacted our EBITDA level. And with higher depreciation, it is showing the EBIT level optically lower. This is a big problem which we have. I hope I have answered your question.
Mumuksh Mandlesha
Yeah. No, basically I was specific on the we’ve got changing aluminum prices, raw material prices, is there any impact on this quarter margin, sir, because there’s a lag in the passthrough, sir?
Srinivasan Ravi
No, I don’t think so. I think aluminum wise we are more or less same. As I mentioned that aluminum when we are expanding sometimes, for example, there are some Bhiwadi expenditure might have happened, I would say. That might have impacted some margins, I would say, not any aluminum prices.
Mumuksh Mandlesha
Okay. And sir, lastly, the standalone aluminum margins have come down this quarter to 11.8% versus 13.2% last quarter. Any reason for the fall for this margins?
Srinivasan Ravi
See, we have to look at the [Indecipherable] depreciation and look at the EBITDA level, more or less we are same there. I would say that sometimes — no, I think, the EBITDA level is marginally lower, correct. Totally is around 15%, yes. That can be the product mix, that can be little on the top line increasing because aluminum price, there is some Bhiwadi expenses which has happened which has been not capitalized, so Bhiwadi expenditure is quite significant I would say because of the operations. So I would say that 0.5%, 1% margin coming down maybe due to organic reasons and the extraordinary things are 1%, 1.5% would have been with the Bhiwadi expenses.
Mumuksh Mandlesha
Got it, sir. Thank you so much for this.
Operator
Thank you. Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to Mr. Srinivasan Ravi for closing comments. Over to you, sir.
Srinivasan Ravi
Thank you very much for patiently listening through the entire conversation, and we’re very happy that a lot of people have participated in this Q&A, and I was happy to answer all your questions. Because we are looking at a lot of shareholder support when we transit this journey from being a medium scale industry to an upper medium scale industry or where we can attract global customers, with the good scale of operations in each of the segments we perform. Thank you.
Operator
[Operator Closing Remarks]