Everest Kanto Cylinder Limited (NSE: EKC) Q2 2025 Earnings Call dated Nov. 27, 2024
Corporate Participants:
Mitesh Jain — Investor Relations
Puneet Khurana — Managing Director
Sanjiv Kapur — Chief Financial Officer
Analysts:
Deepan Sankara Narayanan — Analyst
Reet Jain — Analyst
Ankur Poddar — Analyst
Hiten Boricha — Analyst
Darshil Jhaveri — Analyst
Preeti Bhavna — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the earnings conference call of Everest Kanto Cylinder Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
I now hand the conference over to Mr. Mitesh Jain from CDR India. Thank you, and over to you, sir.
Mitesh Jain — Investor Relations
Thank you, Sagar. Good evening, everyone, and thank you for joining us on Everest Kanto Cylinder’s Q2 and H1 FY25 Earnings Conference Call. We have with us Mr. Puneet Khurana, Managing Director; and Mr. Sanjiv Kapur, Chief Financial Officer of the company. We will initiate the call with opening remarks from the management, following which we will have the forum open for a question-and-answer session.
Before we begin, I would like to state that some statements made in today’s call may be forward-looking in nature and a disclaimer to this effect has been included in the result presentation shared with you earlier.
I would now request Mr. Puneet Khurana to make his opening remark. Thank you, and over to you, sir.
Puneet Khurana — Managing Director
Thanks, Mitesh. Good evening, everyone, and thank you for joining us on our earning conference call. I will begin by sharing an overview of our performance for the second quarter and six months ended September 30, 2024, following which we will have the QA session. We are pleased to report a strong performance in Q2 FY25 driven by robust contribution from our international operations and a steady uptick in our Indian business. Consolidated revenue for the quarter stood at INR367 crores, reflecting a year-on-year increase of 22.7%. EBITDA grew by 28.7% year-on-year to INR53.1 crores with a margin at 14.5%, while the PAT saw a notable increase of 47% year-on-year to INR38.6 crores. Our strong performance in international operations were primarily driven by US, which was a key contributor during the quarter. The order based nature of our US business resulted in significant jump in profitability, while we anticipate the fiscal year as a whole to remain strong for the US market, the second half is expected to deliver steady performance compared to the same period last year.
In the Indian market, the outlook of seamless gas cylinders remain highly encouraging. The government’s focus on eco-friendly initiatives continue to drive the adoption of CNG vehicles. The ongoing nationwide expansion of CNG distribution network highlights the growing importance of CNG in India — India’s transportation sector. India’s focus on sustainability energy is also gaining traction, supported by private sector plans to establish multiple biogas to CNG plants, with CNG already recognized as a cleaner and more efficient alternative to traditional fuels, the integration of biogas into the energy mix will further enhance its sustainability and accessibility. This aligns with the country’s broader green energy goal and positions CNG as a future-ready fuel, capable of addressing India’s evolving energy needs, while reducing dependence on imported fossil fuels.
Contemplating with this achievement — advancement, green hydrogen is expected to gain prominence as a transformative force in India’s clean energy landscape. Offering immense opportunity for the growth, the company is already addressing hydrogen demand and anticipates significant potential in emerging in the market in India. With green hydrogen poised to play a pivotal role in decarbonizing industries and transportation, we are well positioned to leverage our expertise and support this high potential market.
Coming to an update on expansion plan, we are strengthening our manufacturing capability in developing our facilities in Egypt and Mundra, India. These plans designed to produce high pressure — seamless high pressure gas — CNG, hydrogen, industrial gas cylinders and progressing as planned and expected to becoming operational in the coming quarters. At our Mundra project, we are — marked an additional CapEx of INR50 crores to set up new manufacturing lines with execution planned over the next 12 to 14 months. This move reflects our confidence in the medium and long-term demand of CNG and sustainable energy solution in India. These expansions will enable us to meet growing market needs and further strengthen our leadership position in the industry.
To conclude, we would establish our leadership position and strong financial foundation. We believe we are well positioned to capitalize on growing opportunities for seamless cylinders in both domestic and international market, creating a long-term value for all our stakeholders in the years to come.
With that, I conclude my remarks and invite the moderator to open the floor for questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Deepan Sankara Narayanan from TrustLine Holdings Private Limited. Please go ahead.
Deepan Sankara Narayanan
Good evening, everyone, and thanks a lot for the opportunity, and congratulations for good set of numbers.
Puneet Khurana
Thank you.
Deepan Sankara Narayanan
So, firstly from my side, so what is driving India business growth [Indecipherable]?
Puneet Khurana
Yeah, yeah. Yeah, sorry —
Operator
Sir, we have lost your audio.
Deepan Sankara Narayanan
Hello?
Puneet Khurana
Yes. Yes.
Operator
We lost your audio.
Deepan Sankara Narayanan
Is it audible now?
Puneet Khurana
Yeah.
Deepan Sankara Narayanan
Yeah. So, what is driving India business strong growth performance during this quarter?
Puneet Khurana
Yes. Okay. So, mainly the CNG business continues to drive this quarter.
Deepan Sankara Narayanan
CNG business, this is — we are referring to the new two-wheeler CNG launch or our general cylinder business to ILCV —
Puneet Khurana
General cylinder business, the CNG cylinder business.
Deepan Sankara Narayanan
Okay, okay. But despite having incrementally grown over last year considerably, but our EBITDA has not grown much and margins remain lower at 7%. So, what is the reason for it and when do we expect margins improve at India business level?
Puneet Khurana
So, we had a little bit of a drop in our cascade business margin.
Deepan Sankara Narayanan
Okay.
Puneet Khurana
Yeah. Hopefully that will improve with our bettering the costs on the product.
Deepan Sankara Narayanan
Okay, okay. And how is our two wheeler CNG business doing, but we could see the volumes every month going up in the range of 4,000 to 8,000? So, are we 100% supplier to the two-wheeler OEM?
Puneet Khurana
No, no. We’re not 100% supplier. So, the volumes have just started. So, hopefully, they will pick up much going forward.
Deepan Sankara Narayanan
Okay. So, that will — that we will have a better margins in double-digits in line with other India business. Right?
Puneet Khurana
Definitely, the margins will be there. Only thing is the cylinder, the product itself is a low cost product. So, we will have the sales, but it may not be as large as the CV business or the PV business.
Deepan Sankara Narayanan
Okay, okay. It will be lower than PV business, but higher than our industrial business, right?
Puneet Khurana
Higher, not today, maybe in the future. Like I said, even in the industrial, lots of the products are very high value-added — high value products. The product here is a little bit a small — very small product — a small cylinder. So, the value of the product is quite small. So, you definitely add to the business of the company, but it may not be impactful as — yeah, it may not be so impactful as you’ll be expecting it to be.
Deepan Sankara Narayanan
Okay, okay. Ans sir, what is your opinion on this recent CNG price hike which has happened, which has further increased the gap between CNG and diesel prices? So, this will impact CNG demand or the CNG conversions happening at CV business? So, how do you see the impact going?
Puneet Khurana
Currently, we don’t see much. It’s not affected much because the CV business also continues to — the order book is there. So, a little — slight change in the price has not really created too much impact because now the customer is more or less used to this kind of pricing of CNG.
Deepan Sankara Narayanan
Okay, okay. And how do you see these opportunities from these hydrogen and biogas kind of opportunities and when it will actually get reflected in our numbers?
Puneet Khurana
So, biogas has definitely already started to reflect because lots of biogas plants are coming and getting commissioned. So, biogas definitely is happening and we’ll continue to see in the next three to — two to three years, you’ll see more and more growth on biogas. So, we’re already seeing that happening. Biogas traction has already started. And hydrogen, that is — hydrogen, the country has just started to set up infrastructure. So, hydrogen will take some time to happen.
Deepan Sankara Narayanan
Okay, okay. Sir, understanding this biogas opportunity further, so will it be a cascade kind of an opportunity or our cylinders will be used in biogas for –?
Puneet Khurana
It’s like an opportunity in every way. CNG station comes up, it gives you all opportunity. It gives you opportunity in the cascade business, it gives you in the automobile business, in the auto side. So, opportunities will come. More CNG stations, see, as the — we already had around 7,000 stations. And the way the biogas is going, maybe we will have — maybe by the end of next year, maybe 10,000 stations will be there. As the infrastructure grows, definitely the demand for people converting into CNG becomes greater because infrastructure is easily available near their home and biogas is just helping — is giving a big push.
Deepan Sankara Narayanan
Okay, okay. And this quarter, we have seen US business contributing heavily towards profits. So, do we expect this run rate of profit contribution continuing with US business or it will be more lumpy in nature?
Puneet Khurana
So, US business will be profitable. But sometime what happens is some orders are executed in — see, US business is a project business. So, you’ll always have one quarter, where you will have — the orders are executed in — because it was start — you start preparing in quarter one and the orders get executed at one time in quarter two. So, in quarter three, you will see that maybe the order book is very good and they may not be what you saw in the last quarter, but definitely there is a — the business will be good.
Deepan Sankara Narayanan
Okay, okay. Sir, lastly from my side, this incremental CapEx of INR50 crores at Mundra, so this being done with reflection of higher demand coming from our two-wheeler CNG or our normal CNG cylinders for CV business also we are expecting to pick up over time?
Puneet Khurana
So, it’s a mix of both. It’s a mix of what we’re expecting from the two-wheeler expecting coming from the CNG industrial market also.
Deepan Sankara Narayanan
Okay, okay. Thanks a lot, and all the best.
Puneet Khurana
Thank you.
Sanjiv Kapur
Thank you.
Operator
Thank you. The next question comes from Reet Jain from First Water. Please go ahead.
Reet Jain
Yeah. Hello, sir. Congratulations for the good set of numbers. I wanted to ask you, do we have a decent order book in the USA subsidiary? Like —
Puneet Khurana
Sorry. Sorry — okay, he said decent order. Yes, yes. Okay, okay. Yeah, please go ahead.
Reet Jain
Yeah. What is the order book that we have in the USA subsidiary?
Puneet Khurana
Okay. Yeah. $40 million to $50 million.
Reet Jain
Okay. And that is executable in what time period?
Puneet Khurana
Maybe 18 months.
Reet Jain
Okay, got it. And what is the current capacity utilization after the Q2 numbers?
Puneet Khurana
70%.
Reet Jain
And this is before capturing the further expansion that we have with — that we are doing —
Puneet Khurana
Yes.
Reet Jain
— in Egypt and Mundra? Okay.
Puneet Khurana
This is only India we’re talking about.
Reet Jain
Okay, got it. And regarding the new facility in Egypt and Mundra, are we going to produce only Type 1 cylinder or are we focusing on other value-added products like —
Puneet Khurana
We’ll be focusing on other value-added products also.
Reet Jain
So, that includes composite cylinders also, Type 3, Type 4?
Puneet Khurana
Yes, yes.
Reet Jain
And can you give us the idea about the size of the opportunity in Nigeria? Because a lot of conversions are happening from petrol to CNG.
Puneet Khurana
Nigeria is just — it just started, the market. And these countries really have very volatile places because foreign exchange issues, so it’s — and infrastructure again, everything comes down to infrastructure. So, as we talk a lot about Nigeria and other things, but the markets are just beginning. So, it’s just in a very initial stage and — but you cannot compare the opportunity to somewhere like India because we are in a very organized marketplace. We are in a very stable country. So, Egypt is a — I’m sorry, Nigeria is a very unstable currency related — currency issues. Government decision on how the CNG infrastructure will be laid out. So, there is no — a clear plan or execution of the plan that’s come through. So, the opportunity is very — I’d say very nascent stage.
Reet Jain
Got it. And Reliance has just announced INR65,000 crore CapEx for biogas plant. So, are we seeing any major opportunity there?
Puneet Khurana
Yeah. Of course. So, like I said, in the next two to five years, you’ll see that all these projects that have been announced are coming — is going to come on stream. So — because they announced today, obviously, the projects will take time to — but Reliance is already — they are already — we are selling to them. So, there are projects which are coming today and there are some projects which are planned in the future.
Reet Jain
Okay. So, it is very much possible that we are going to supply to them in the future?
Puneet Khurana
We’re already supplying to them. We are already supplying to them. And as the opportunity becomes bigger, we get a bigger chance to sell more and more CNG cylinders to them.
Reet Jain
Got it. And this is regarding the product development by our Time Technoplast. So, they just developed Type 3 cylinder, which has applications in hydrogen aerospace drones. So, are we working on any such innovations?
Puneet Khurana
No. So, we already developed the Type 3. We also have a product — we also have developed the Type 3 cylinder. So, we are also in line with development of these products.
Reet Jain
No, but they received the PESO approval. So, are we at that stage?
Puneet Khurana
Anything — see, anything we do is with PESO approval only. So, all the developments that we do is with PESO approval. Without PESO, we cannot do anything. Yeah.
Reet Jain
No, but —
Puneet Khurana
[Speech Overlap] develop these products. But like the market is just in the beginning stage of growth, so we’re going to definitely see a lot of growth coming from this market in the future.
Reet Jain
Okay. Because they mentioned in the —
Puneet Khurana
Company is product-ready, so we are ready with the product. So, they’re also trying to fill in the order book. So, definitely, there will be — you will see some impact in the future from here, some value add, some sales will be coming from here.
Reet Jain
Got it. And last question. Regarding the [Indecipherable] in Egypt and Mundra, what could be the peak revenue at 100% capacity utilization we can expect, like the peak revenue from each plant, Mundra and Egypt?
Puneet Khurana
So, Mundra, I think around INR300 crores.
Reet Jain
Okay. And Egypt?
Puneet Khurana
Maybe INR200 crores.
Reet Jain
Okay, got it. Thank you.
Puneet Khurana
Thank you.
Operator
Thank you. The next question comes from Ankur Poddar from Svan Investments. Please go ahead.
Ankur Poddar
Thank you, sir. Thanks for taking my question, and congrats on decent set of numbers.
Puneet Khurana
Thanks.
Ankur Poddar
Sir, my question is just a follow up of few questions participants have asked earlier. I wanted to know what was the impact in the cascade business you explained earlier, which impacted our margins? And when you see the things stabilizing and on a sustainable basis, what should the margin be assume in near-term in few quarters going ahead?
Puneet Khurana
So, the margins definitely will improve in the quarters, coming quarters.
Ankur Poddar
Okay, okay. So, sir, we have made earlier margins close to around 13% — 10%, 11%, 13% in three, four quarters back. So, can we go back to that numbers?
Puneet Khurana
12% to 14%, yeah, I think it should be okay.
Ankur Poddar
Okay, okay. And sir, we have seen some phenomenal spurt in the margins in US business for last two quarters, 17% in Q1 and 29% in Q2. So, you said that there was some revenue booked in this quarter. So, on the cost part, wasn’t it booked or it was booked in previous quarter? What is the sustainable margins we expect here?
Puneet Khurana
So, US is a project business, whole. So, you — if you — you cannot be taking the business quarter-to-quarter, you’ll have to take an annual overview of the business. So, annual overview will give you a 12% to 14% return, they will give it to you. So, that is a — you might get a few quarters, where things will look very, very good. But, overall, this will be the — should be the trend.
Ankur Poddar
So, you see this business can sustain around 12% to 14% margin, is this understanding right?
Puneet Khurana
Yes, yes. Because the order book is good, and the US also now, with the new regime, definitely there will be a huge boost in industry — a lot of industry activity.
Ankur Poddar
Okay, okay. And, sir, is there any plans to discontinue this business going ahead? Have we cancelled that plan or we are –?
Puneet Khurana
No, no. We were never going to discontinue the business. We have been fighting the costs, trying to find new avenues of growing the business. Definitely, there is an idea to continue the business.
Ankur Poddar
Okay, great. Sir, last question regarding the Egypt CapEx. When can we see the start of production for this plant? And you said the peak utilization levels — at the peak utilization levels, you can clock around INR200 odd crores.
Puneet Khurana
Egypt, currently, we have already completed the construction at the site and the equipment ordering has also begun. So, I would say, somewhere around June, July ’25 is when we think we can probably start commercial production.
Ankur Poddar
Okay. And when we see that the peak utilization can be achieved for this plant?
Puneet Khurana
Maybe in the next six months after that, so maybe by December.
Ankur Poddar
Okay, okay. And you said that at the peak utilization, the annualized revenue can be close to around INR200 odd crores?
Puneet Khurana
INR200 crores, yes, yes.
Ankur Poddar
And which market, sir, through this plant we will be catering?
Puneet Khurana
Locally. They will sell mainly local market.
Ankur Poddar
Okay, okay. Thank you so much, sir. Thank you, and all the best, sir.
Puneet Khurana
Thank you. Thank you.
Operator
Thank you. The next question comes from Hiten Boricha from Sequent Investments. Please go ahead.
Hiten Boricha
Sir, I — actually, you have given us sales breakup country-wise. Can I — can you highlight what is the cascade — sale from the cascade business?
Puneet Khurana
So, I don’t have those numbers.
Hiten Boricha
Okay. Is it significant like the cascade business is significant or — because that segment seems to be growing quite fast in India?
Puneet Khurana
Yeah, yeah. It is significant. Yeah, it is of course. It contributes.
Hiten Boricha
Okay.
Puneet Khurana
Yeah, yeah.
Hiten Boricha
Okay. One second, sir. So, your total India business is, I think, INR235 crores. So, out of that, how — what percentage would be the cascade business if I have to look at it that way?
Puneet Khurana
I don’t have the number with me. I don’t have the exact numbers with me.
Hiten Boricha
Okay, okay. And where do you see the maximum growth for us, from the commercial vehicles or from the cascade business or from — the bike business is too small right now?
Puneet Khurana
Yeah, yeah. We feel the CV business is where the growth is going to come.
Hiten Boricha
The CV business is where the growth is. Okay. In India also, we do the cascade business, right, not only in Nigeria?
Puneet Khurana
Yeah, yeah. Of course. India is only where we do the cascade business, we don’t have any cascade business anywhere else.
Hiten Boricha
Okay, okay. And — yeah, that should be all, sir. We’ll be back in the queue.
Puneet Khurana
Thank you, sir.
Operator
Thank you. [Operator Instructions] The next question comes from Darshil Jhaveri from Crown Capital. Please go ahead.
Darshil Jhaveri
Hello, good afternoon sir. Congratulations on a great set of numbers. Hope I am audible?
Puneet Khurana
Yeah, yeah, I can hear you. Yes, thank you.
Darshil Jhaveri
Yeah, yeah, hi sir. So sir, just wanted to know, I think in the opening comments you meant I think H2 is going to be steady as compared to rest so does that mean we’ll have similar revenue or our growth rate of H1 will be maintained?
Puneet Khurana
Sorry, I couldn’t hear you. I’m not very clear. Your voice is not very clear.
Darshil Jhaveri
Hello, sir hopefully, my voice is better right now.
Puneet Khurana
Yes, yes, yes. It is better.
Darshil Jhaveri
So sir, I think in the opening statements, you mentioned that H1 — H2 will be stable as compared to last year H2. So I just wanted to know, so our sales growth of like around 20% that you’ve done in H1 will that continue over for H2 or how would H2 pan out, sir?
Puneet Khurana
Yeah, the top line should be remain.
Darshil Jhaveri
So top line of H1, how our quarterly run rate has been that should remain?
Puneet Khurana
Yes.
Darshil Jhaveri
Okay, okay. Fair enough, sir. And sir, with regards to FY ’26, sir, like Egypt plant will come in, and when will our Mundra plant come in? So what kind of revenue growth can we see for FY ’26, sir?
Puneet Khurana
So Mundra plant I think around — in 12 to 14 months. So there, we can definitely see a growth of around INR300 crores.
Darshil Jhaveri
But that will come in FY ’27, right, or it will come in FY ’26?
Puneet Khurana
Yes, correct.
Darshil Jhaveri
Okay. So for FY ’25, what kind of — or FY ’26 what kind of growth can we look at, sir?
Puneet Khurana
Maybe 10% to 15%.
Darshil Jhaveri
Okay, okay. Fair enough, sir. And sir, the margins that we are doing currently will remain, right, sir?
Puneet Khurana
So they should improve, yeah margins should improve.
Darshil Jhaveri
Margins should improve. Okay, fair enough, sir. And just one question, sir. I just want to know what should be our effective tax rate because we have U.S. business also, so just wanted to know that what will be our effective tax rate, sir?
Puneet Khurana
25.16% is India.
Darshil Jhaveri
Yeah. But then because of U.S. is on a blended basis, I think we don’t have that much tax, right, sir? Or so — because I think last two years, you’ve not had 25%, right?
Puneet Khurana
Yeah, yeah. You’re right. Yeah.
Darshil Jhaveri
Okay, okay. Fair enough sir. That’s it from my side. Thank you so much.
Puneet Khurana
Thank you, so much. Thank you.
Operator
Thank you. The next question comes from Preeti Bhavna, an individual investor. Please go ahead.
Preeti Bhavna
Hello sir. Congratulations on your good numbers. I have a couple of questions in the series of questions. First question, how many units we are having operational and at what location and what is the overall capacity of all these units?
Puneet Khurana
So we have operations in India. We have a unit operational is in Tarapur outside Mumbai and 1 in Gujarat in Ghandidham. In Dubai, we have one unit running, that is in Jebel Ali Free Zone. And in the U.S., we have a unit running.
Preeti Bhavna
Okay. What is the capacity — overall capacity of…
Puneet Khurana
I think it would be around — I think give it total capacity with India, Dubai should be about 1.2 million. And U.S., usually the number of cylinders is around 4,000 cylinder capacity.
Preeti Bhavna
Per annum or per month?
Puneet Khurana
Per annum. This is — all are per annum.
Preeti Bhavna
Okay. And how much cylinders we sold in quarter two and quarter one? On the guidelines of revenue, what are the volumes we sold overall?
Puneet Khurana
So we don’t have those figures in hand currently.
Preeti Bhavna
Okay. Rough figures?
Puneet Khurana
I don’t have them right now with me, but we can always share with you if you are here in the office, we can always…
Preeti Bhavna
Okay. No issues, I will mail you, no problem. And on the part of, I have seen like the U.S. business has grown — like the margins are grown very high. I just want to understand what kind of project work we are doing in U.S.? And is that in U.S. and Hungary, both are the project works or we are supplying the cylinders there?
Puneet Khurana
No. So basically, U.S. is a manufacturing unit and then Hungary is just the company. So U.S., mainly the projects are all government-based projects in aerospace and defense.
Preeti Bhavna
Okay. So are we expecting these projects to be like in the future as well or they are time bound only?
Puneet Khurana
We already have an order book of $40 million, $50 million there. The U.S. business is all about projects. So they always have a good order book.
Preeti Bhavna
So we are having an order book for next year as well?
Puneet Khurana
Exactly. Yeah, yeah. You have an order book, yes. You have an 18-month order book.
Preeti Bhavna
Okay, okay. And on the part of like current cascade orders, what are the current cascade orders you are having in hand for India for the next six months?
Puneet Khurana
I don’t have the order book in my hand, but it’s quite — it’s decent. We have a good order book for cascades.
Preeti Bhavna
Can you answer in numbers like rough estimation of…
Puneet Khurana
I don’t have any numbers with me currently.
Preeti Bhavna
Okay, okay. Thank you so much sir. Thank you.
Puneet Khurana
Thank you, thank you.
Preeti Bhavna
Yeah.
Operator
Thank you. The next question comes from Hiten Boricha from Sequent Investments [Phonetic]. Please go ahead.
Hiten Boricha
Yeah, thanks for the follow up sir. My question is on the borrowing, sir. Our borrowing has went up from INR39 crores to INR114 crores. So can you throw some light on that?
Puneet Khurana
Yeah. So we have been utilizing our CC limits, which was not being utilized earlier. And top line also has grown.
Hiten Boricha
What would be our rate of borrowing, sir?
Puneet Khurana
9%.
Hiten Boricha
You’re not audible, sir, sorry.
Puneet Khurana
9%.
Hiten Boricha
9%. Okay, okay. And sir, one more clarification. You mentioned our cascade business is only in India. So what is this collaboration with Nigerian company related to cascades?
Puneet Khurana
No, we have no collaboration with Nigerian company.
Hiten Boricha
Hello?
Puneet Khurana
Yeah, we have no collaboration in any Nigerian company with — for cascades.
Hiten Boricha
Okay. So what exactly we do there?
Puneet Khurana
I mean see, we sell cylinders in Nigeria. And if somebody maybe customer, maybe if they require some cascades, we might have sold some cascades. But there is no such collaboration. And Nigeria is just a very nascent stage, the market. So just starting — the market is just starting, still early days.
Hiten Boricha
Understood, understood. Okay then. Thank you.
Puneet Khurana
Thank you.
Operator
The next follow-up question comes from Reet Jain from First Water. Please go ahead.
Reet Jain
On the financials, this quarter, we have interest of INR8 crores. So is there any one-off substance [Phonetic] here? Because the borrowing of close to INR160 crores should drop the interest rate of around INR16 crores for the full year, if I assume 10% interest rate. And for one quarter, we have expensed INR8 crore in this Q2. So is there any one-off here?
Puneet Khurana
One second, I am just looking at it. Can you give us some more details, we are not able to locate the number of one-off that you’re talking about. Yes, Sanjiv will talk to you.
Reet Jain
Okay.
Sanjiv Kapur
Yeah, tell me.
Reet Jain
Yeah. So if you look at the consolidated [Phonetic] P&L, the interest expense is close to INR8 crores and why is it so high? I mean if we have the borrowings of INR160 crores per quarter interest rate should be — per quarter interest expense should be close to INR3 crores, INR4 crores, then why it is INR8 crores?
Sanjiv Kapur
No, it’s just — it is normal. It is all based on the utilization of the current — CC accounts. There’s utilization then there’s probably there will be — if you take a new limit probably there are other charges processing fees, etc., which we have come, it’s because of that.
Reet Jain
Got it. Got it. Okay, got it.
Operator
Reet sir you have any other follow up questions.
Reet Jain
No, no.
Operator
Thank you. The next follow-up question comes from Ankur Poddar from Svan Investments. Please go ahead.
Ankur Poddar
Thank you for taking my question again sir. Sir, can you throw some visibility on our UAE business? What is the low visibility we are seeing here on a near-term to long-term basis?
Puneet Khurana
So we — see, UAE business is traditionally they have a good order book from countries like Egypt, and Europe, South America. So we are continuously exploring new markets here.
Ankur Poddar
Okay. So going forward, what is our order book? And what are we seeing run rate here? How do we proceed here for the next year or in the coming quarters?
Puneet Khurana
No, definitely, the sales will improve, and we have a decent order book. And it’s how the whole — that area is a little bit volatile, so sometimes we do have some disruption in product moving in sales because of some or the other disruption in that area, from war or something happens and some kind of disruption happens and then the sales gets hampered and move to the next few months.
Ankur Poddar
Okay, okay. Fine sire. Sir, and regarding the earlier question of interest cost, INR8 crore interest, I missed what was the answer here?
Puneet Khurana
Yeah. One second, I’ll give to Sanjiv.
Sanjiv Kapur
Yeah, it was on account of a change in one bank to the other. Because of that, U.S. had to bear some additional cost of processing fees.
Ankur Poddar
Okay. So from next quarter, you will see some benefit flowing here?
Sanjiv Kapur
Yes.
Ankur Poddar
Okay, okay. Thank you.
Operator
Thank you. [Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Puneet Khurana
Thank you once again for your interest and support. Should you any further clarification or would like to know more about the company, please feel free to contact our Investor Relations team at CDR. Thank you.
Operator
[Operator Closing Remarks]