Everest Kanto Cylinder Limited (EKC) Q2 FY23 Earnings Concall Transcript

Everest Kanto Cylinder Limited (NSE: EKC) Q2 FY23 Earnings Concall dated Nov. 15, 2022

Corporate Participants:

Puneet Khurana — Managing Director

Sanjiv Kapur — Chief Financial Officer

Analysts:

Aesha Shah — Analyst

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Anurag Patil — Roha Asset Managers — Analyst

Sandeep Dixit — AGIO Partners — Analyst

Nishith Shah — Aequitas Investments — Analyst

Karan Asli — Maximal Capital — Analyst

Prakash — Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Everest Kanto Cylinder Limited, Earnings Conference Call. As a reminder, all participants’ lines will be in listen-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 Ms. Aesha Shah from CDR India. Please go ahead.

Aesha Shah — Analyst

Good evening, everyone and thank you for joining us on Everest Kanto Cylinder Q2 and H1 FY23 earnings conference call. We have with us today, Mr. Puneet Khurana, Managing Director and Mr. Sanjiv Kapur, Chief Financial Officer of the Company. We will initiate the call with the opening remarks from the management, following which, we’ll have the forum opened for the question-and-answer session. Before we begin, I would like to state that some statement made in today’s call may be forward looking in nature and the disclaimer to this effect has been included in the results presentation shared with you earlier. I would now request Mr. Puneet Khurana to make his opening remarks. Thank you, and over to you, sir.

Puneet Khurana — Managing Director

Thanks. Good evening, everyone and thank you for joining us — our earnings conference call. I will initiate the call by taking you through the operational and financial performance, after which we will open the forum to have an Q&A session.

Our performance during the quarter remained soft on account of the low demand witnessed in key commercial vehicle CNG cylinder segment. Weak CNG cylinder seen in the month of June continued through the second quarter impacting our revenue. Lower revenue along with significant drop-in contribution from higher margin CV CNG segment [Indecipherable] further impacted overall profitability during the quarter. Our consolidated basis revenue came in at INR339.7 crores in Q2 FY23. EBITDA stood at INR35.9 crores with a margin at 10.6%. PAT stood at INR18.5 crores.

And, on a standalone basis, revenue from operations stood at INR195.7 crores in Q2 FY23. EBITDA stood at INR24.4 crores with margins at 12.4%, PAT stood at INR15.3 crores. On a consolidated basis, the CNG segment witnessed a drop of 46% on Q-o-Q basis. In our Industrial segment, we have reported a growth of 29% on Q-o-Q basis which aided our overall performance during the quarter. Further, due to increase in sales of jumbo cylinders, our US subsidiary reported healthy growth during the quarter.

Our operational — on operational front, our second phase of brownfield expansion is now operational, increasing our total capacity by 1 lakh cylinders to about 1.1 million cylinders per annum. In current demand environment, we are going slow on our greenfield expansion at Mundra. As we witness some positively leads — for our customer, we will accelerate the investment and commission the initial phase of two lakh cylinders in FY’24 itself.

To conclude, as we have discussed over the years, the government has focused on its vision to increase the usage of gas in the energy mix of India. And on the back of the government policy, many private and public sector companies have made huge investments towards hard assets on the ground.

Moreover, we have recently seen most leading automakers launching a wide range of CNG-powered vehicles in both PV and CV segments. So we believe that the current difficult phase in CNG is [Technical Issues] in nature, and we hope to see the price gap between eco-friendly CNG and other polluting fuels widen sometime in the future. This brings the end of consumers of CNG vehicles back into the market. Hence, even as the demand environment for CNG cylinders is anticipated to remain soft in the near-term, we expect the demand to improve over the long-term. In the interim, we have consolidated our leadership position in seamless cylinder industry through our strong balance sheet and well-prepared for the opportunity in the future.

This brings me to the end of my opening remarks, and I would now request the moderator to open the forum for any questions or suggestions that you may have. Thank you.

Questions and Answers:

Operator

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. We have a first question from the line of Deepan Sankara [Phonetic] with Trustline PMS. Please go ahead.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Good evening, sir and thanks a lot for the opportunity. So firstly wanted to understand this fall in volumes as far as in this commercial vehicle CNG cylinder. So, this is mainly due to debottlenecking by OEMs, or we expect some volume improvement in the coming quarter from this commercial vehicle cylinders?

Puneet Khurana — Managing Director

Definitely we expect some improvement in the situation. But, I didn’t understand the de-bottling, what is — what do you mean by that?

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

So they already have some inventory to OEM-end, and they don’t want to take more volume from us.

Puneet Khurana — Managing Director

Yes. Yes, of course, there is definitely — must be an inventory pile up at their end, due to the situation suddenly coming up of these prices increase and the demand shift.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay.

Puneet Khurana — Managing Director

So once they liquidate, definitely there will be an opportunity again to for them to start making these vehicles.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Sir, so when we talk about these intermediate commercial vehicle categories, so what kind of tonnage vehicle we supply cylinders to?

Puneet Khurana — Managing Director

For all, from say from 1 ton to 5 ton, 9 ton, 12 ton, 15 ton, up to I think 40 tons, all the vehicle categories are there in this.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. So what will be the cylinder capacity per vehicle? So, it will be more — more the tonnage and more will be the cylinder capacity for the vehicle?

Puneet Khurana — Managing Director

Yeah. Yeah, you’re right, because you’re consuming more of CNG because the vehicle goes higher the — like an Ace probably will not have such a large capacity, because it’s a 1-tonner but a 15-tonner or a 16-tonner will definitely have much more cylinder capacity and more cylinders.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. So our profitability per this — per ton kind of cylinder so that will be more as the capacity increases?

Puneet Khurana — Managing Director

Yes.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. So, in the larger ton capacity, so we are seeing higher decline, so that’s the reason for our profitability coming down right?

Puneet Khurana — Managing Director

Yes.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. And so, how is the industry for these ICV vehicles? So that fall in volumes decline and our volume decline are in similar lines or we have fallen more than these intermediate vehicle?

Puneet Khurana — Managing Director

No, no. The customer has decided to go for the diesel vehicle.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay.

Puneet Khurana — Managing Director

Instead of the CNG which was the preferred fuel, maybe six, eight months back, because of the existing crisis that the world is going through in Russia because the gas prices have gone, you know, have increased substantially. So that is the reason the customer choices to — choosing diesel, to go in for as a better option today than CNG.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Understood that, sir, but — so, are we falling in line with the industry volume decline, or we are more than that, that’s what wanted to understand.

Puneet Khurana — Managing Director

No, no. I think we are falling in line, right? Yes.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. And lastly from my side, so how are we linked our price margin linked to steel cycle, so we have seen when the steel cycle was on the peak so we are making 25%-plus kind of margin. And now the cycle has turned downward. So we are facing some kind of margin pressure, so… [Speech Overlap]

Puneet Khurana — Managing Director

You know, when you’re supplying to most of the OEMs, it is more the price is linked, the customer is always updating the steel prices. So there is not really a kind of an advantage that we can keep much advantage when it comes to steel prices. So we are always updating the prices to the OEMs. So there is not much there.

And since we have sold less to the OEMs so that the result is margins have shrunk.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. So generally what is the time lag between we take up the price or give up the price for OEMs?

Puneet Khurana — Managing Director

I think maybe every quarter it has to be revised, depending again you know if the situation doesn’t change, if the steel prices don’t change and the process cost doesn’t change and the dollar doesn’t change, then you know, we don’t really need to visit the OEM again.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay, sir. Thanks a lot. I’ll come back in the queue.

Puneet Khurana — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]. We have next question from the line of Anurag Patil with Roha Asset Managers. Please go ahead.

Anurag Patil — Roha Asset Managers — Analyst

Thank you for the opportunity. So, sir, our margins have fallen from almost 20% to 10% in the last two quarters. So what is the reason for such a sharp decline? Can you just explain?

Puneet Khurana — Managing Director

So, it’s mainly, the CNG business that has declined substantially in some of our portfolio. So you can see the topline is also affected, and of course the cost impact is larger because your volumes have reduced. So volumes have reduced, your products which was fetching you a better margin has reduced. So this is impacted.

Anurag Patil — Roha Asset Managers — Analyst

Okay. So compared to industrial or CNG business has a much better margin so that is the reason for margin decline.

Puneet Khurana — Managing Director

Yes.

Anurag Patil — Roha Asset Managers — Analyst

Okay. And so sir, when do you see this recovery happening next quarter or somewhere towards the end of this quarter, any idea you can give?

Puneet Khurana — Managing Director

Very difficult to give a timeline on this when this will happen because this is like a global scenario that is happening. So, it’s very difficult to say the — when the things will — gas prices will finally come. Everything will normalize, that is a — very difficult to give you a specific timeline. But what I can tell you is that, there is a bunch of customers who prefer the CNG vehicles and they will continue to buy the — there will be a continuity on buying CNG vehicles. Only thing that the volumes will have come down.

So — but there is a mystery that has been created infrastructure that has been created and definitely that will continue to rollout vehicles of CNG, only thing the volumes that were there in the last year will only come back when there is a substantial advantage to the customer. But there will be some — there will be movement, movement will continue. So, there will be, we will have definitely sales every month towards CNG, it is not going to completely disappear, and it will — from here on, it will probably increase a bit. But the volumes that we were seeing can only happen when the situation in the gas prices internationally cool down.

Anurag Patil — Roha Asset Managers — Analyst

Okay. So based on the current situation, Q3 shall we continue to see the decline in the revenues and volumes?

Puneet Khurana — Managing Director

Yeah. It might be similar, yes.

Anurag Patil — Roha Asset Managers — Analyst

Okay. That’s it from my side sir. Thank you very much.

Operator

Thank you. [Operator Instructions]. We have next question from the line of Sandeep Dixit with AGIO [Phonetic] Partners. Please go ahead.

Sandeep Dixit — AGIO Partners — Analyst

Hi. So my question is, given that a large part of the problems, the headwind that you faced is macro in nature. Is there something that the Company or the management can do to sort of, at least dampen the impact? I mean, we understand that we all live in this uncertain environment [Phonetic]. [Speech Overlap]

Puneet Khurana — Managing Director

See, obviously, what we’re doing is, we are focusing more on the industrial aspect, pushing the industrial business further so that we can continue to grow that finding the — wherever CNG segment, any movement happens, we try to push the product, we’re also very closely working with the OEMs so that any opportunity comes up where they can make some vehicles we are taking that opportunity. So that there is a — there is a lot of work happening across to see that the — we push the product, we understand that this is happening. And so, we are finding other ways of getting the sale up and pushing the product.

Sandeep Dixit — AGIO Partners — Analyst

And so, couple of follow-up to questions if I may.

Puneet Khurana — Managing Director

Yeah.

Sandeep Dixit — AGIO Partners — Analyst

The first is that in terms of the market penetration, is there something — something that we can look forward to improving that, or are you in sort of — I mean, obviously, you’ll never get to a 100% market share, but do you think you are [Indecipherable]

Puneet Khurana — Managing Director

Yeah. But you know, these are all continuous process that we do. And you know, ours is a bit of a long-term business because when you’re dealing with OEMs and other things, so, we will not be able to kind of switch — it’s not — it cannot switch-off so quickly. I mean you cannot have a — this vehicle designing, everything, it’s a little bit of a process. So whatever OEMs that we are working with, we continue to push them only that is probably the best option that we have right now.

Sandeep Dixit — AGIO Partners — Analyst

Fair enough. And then in terms of the fixed costs, is there any possibility of sort of assume for a moment that the macro stays as it is for the rest of the year.

Puneet Khurana — Managing Director

Definitely, there will be [Speech Overlap]

Sandeep Dixit — AGIO Partners — Analyst

Can we expect a incremental margin from the fixed cost?

Puneet Khurana — Managing Director

Actually, we are definitely taking lots of actions that — we were also hoping that the situation improve, but now we realize that it is taking longer than we expect. So, we are taking a lot of actions at our end to reduce the costs and see that how we can, you know, help the margins.

Sandeep Dixit — AGIO Partners — Analyst

Would you like to give us any guidance on margins or toplines or anything?

Puneet Khurana — Managing Director

Very difficult to give you any guidance at this moment. But it definitely there is a lot of work going on and the results will be there. There will definitely be some results.

Sandeep Dixit — AGIO Partners — Analyst

Okay. Thank you. That’s my questions.

Operator

Thank you. [Operator Instructions]. We have next question from the line of Nishith Shah with Aequitas Investments. Please go ahead.

Nishith Shah — Aequitas Investments — Analyst

Good evening, sir, and thank you for this opportunity. Sir, I want to understand what is the mix of industry and CNG in revenues right now?

Puneet Khurana — Managing Director

Right now, I think it’s what is it? 75%? [Phonetic] It’s around 60%? Sorry, did you say consolidated basis?

Nishith Shah — Aequitas Investments — Analyst

No, no. Standalone.

Puneet Khurana — Managing Director

Standalone? Okay, standalone yeah?

Sanjiv Kapur — Chief Financial Officer

Standalone is at 50-50.

Puneet Khurana — Managing Director

It’s at 50-50.

Nishith Shah — Aequitas Investments — Analyst

It’s 50-50?

Puneet Khurana — Managing Director

Yeah.

Nishith Shah — Aequitas Investments — Analyst

So, sir, is the industry side of the business also not doing well?

Puneet Khurana — Managing Director

No, no. Industrial side of the business is doing well. [Speech Overlap] CNG was — it was 70% last — you know, previously. Now it has come down to 50%. CNG was dominating.

Nishith Shah — Aequitas Investments — Analyst

Okay. And sir, how do we see execution in our international operations going forward?

Puneet Khurana — Managing Director

Sorry, what? How do we see?

Nishith Shah — Aequitas Investments — Analyst

Execution in the international?

Puneet Khurana — Managing Director

So international business, this quarter also US has rebounded. They had a lot of inventory pile up over the — because of COVID a lot of order delays. So that actually — one positive thing happened that, they were able to double the EBITDA and double the sales. So that is one positive thing that’s come out of the US business. Dubai also, you know, this quarter because of again some hold up on the order front, but now I think they are releasing the orders. So again the next quarter will be looking much better.

Nishith Shah — Aequitas Investments — Analyst

So US can we expect to continue this kind of revenues?

Puneet Khurana — Managing Director

Yeah. It should have better revenues.

Nishith Shah — Aequitas Investments — Analyst

Okay. That’s it, sir. Thank you.

Puneet Khurana — Managing Director

Thank you.

Operator

Thank you. We have next question from the line of Karan Asli with Maximal Capital. Please go ahead.

Karan Asli — Maximal Capital — Analyst

Yeah. Hi. Thanks for the opportunity. Few questions from me. Could you give us some idea on how the demand is from the cascade segment, while I understand OEMs is under pressure, but any traction on the cascade front?

Puneet Khurana — Managing Director

So cascade, you know, it’s because you know, the overall effect of the vehicle population not increasing, the gas prices, definitely the CNG company — gas companies have also slowed down their projects on further infrastructure. There is obviously there are some orders in the pipeline which we have been executed as we speak. But, they have slowed down the — you know, the offtake of the major projects that were going on have put down a little bit — they’ve been slowed down.

Karan Asli — Maximal Capital — Analyst

Sure. But would we expect that to take-off quicker then, because I understand they’ve slowed down. But there is still some bit of activity over there. So…

Puneet Khurana — Managing Director

No. As the scenario turns around, as they see some hope, then this will be the first thing that will take off again.

Karan Asli — Maximal Capital — Analyst

Sure. Exactly. And how do we see the retrofitting market doing versus OEM? Is that also… [Speech Overlap]

Puneet Khurana — Managing Director

Retrofit market is almost — you know, it’s almost finished.

Karan Asli — Maximal Capital — Analyst

Retrofitting is seeing a lot more pressure, is it?

Puneet Khurana — Managing Director

No. I mean, yeah, it’s — we have over the last two, three years, we anyway wanted to focus our entire business to OEMs.

Karan Asli — Maximal Capital — Analyst

Any particular reason why?

Puneet Khurana — Managing Director

You know, because we knew that the retrofitted market is not going to be a very long-term play.

Karan Asli — Maximal Capital — Analyst

Sure.

Puneet Khurana — Managing Director

Yeah. And that’s happened. That has happened. So retrofitted market is — you know, because the new regulations have come, so it’s become more with the new vehicle, Euro 6 vehicle, the conversions have become more complicated. So, I think that’s more or less, it’s come to a standstill, the aftermarket.

Karan Asli — Maximal Capital — Analyst

Alright. Understood. And, any thoughts on the competitive scenario just on the market? I think we have about 11 lakhs of capacity. So, what would this be in terms of market share either in capacity or production terms or? And are we serious in competitive scenario, sort of shaping up going forward? Do you see consolidation happening since the market is in quite a tough space right now?

Puneet Khurana — Managing Director

Could happen. Could happen. There’s a possibility that people will see what to do. It might happen.

Karan Asli — Maximal Capital — Analyst

Sure. But at this time, maybe over the past few quarters when things have been slightly rough, have you seen any change in the scenario or has it increased or decreased?

Puneet Khurana — Managing Director

See, I think situation is getting a little better than the previous quarters. We can see some hope there.

Karan Asli — Maximal Capital — Analyst

Alright. Great. That is all from me. Thanks.

Puneet Khurana — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]. We have next question from the line of Deepan Shankar from Trustline PMS. Please go ahead.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Yeah. Thanks a lot for the opportunity, again. Sir, what is the margin difference we have for these CNG CV cylinder versus PV cylinders?

Puneet Khurana — Managing Director

We might not be able to give you such a — you know, this kind of an answer.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Sir, broadly like it is 5% above or 10% above something — even broad sense could be helpful sir.

Puneet Khurana — Managing Director

I think CV will be higher. That’s what…[Speech Overlap]

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Yeah. That we understood. But what kind of higher is what we want to know.

Puneet Khurana — Managing Director

I don’t think we’d be able to give you that kind of information.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

It will be two times of PV sir, that we can assume? Margin could be?

Puneet Khurana — Managing Director

Yeah. Yeah — you’re talking about margin?

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Yeah.

Puneet Khurana — Managing Director

No.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Are realization two times of PV kind of realization?

Puneet Khurana — Managing Director

PV has only one cylinder.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Yeah.

Puneet Khurana — Managing Director

And CV might have three, four. So it is — it’s kind of — it’s not — we’re not comparing apple-to-apple really, to kind of come up with the– the product is different also. So margins also will — PV uses more of a kind of a basic standard product. So it’s not, — it’s very different to kind of put in say the margin will be what will be the margin difference.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. So we are trying to get a sense like even if these CV don’t pick up and we make up the similar volumes to PV cylinder, so will our margins improve to at least 18%, 20% levels?

Puneet Khurana — Managing Director

No. Definitely margins will improve. If that situation happens, definitely margins will improve.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

So, 18%, 20% achievable if with the PVs if we achieve full utilization, 18%, 20% we can still achieve 18%, 20%.

Puneet Khurana — Managing Director

[Technical Issues] give a exact number on that, but definitely, there will be. Because again, higher value added products, better margin, yes, definitely, there will be a change if — even if PV business occupies most of the capacity definitely, you will see. You know, again the fixed-cost gets absorbed. Now what’s happening is, the fixed cost are not getting absorbed to certain extent because of this sudden decline.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

And PV margins should be definitely higher than industrial margins, right?

Puneet Khurana — Managing Director

Yeah. Yes.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Sir, what is the current utilization for this quarter?

Puneet Khurana — Managing Director

Current utilization — 60% only.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

60%?

Puneet Khurana — Managing Director

Yeah.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. So, do we expect Q3 to stand at this current utilization rate or volumes we are expecting a further drop in Q3 and Q4?

Puneet Khurana — Managing Director

Be in the line, in the similar lines you can, yeah — because nothing has changed from last quarter. I mean there is no real change, I mean we can all see that the gas prices nothing has changed in the gas price. The global situation still continues to be the same.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Sir, if on CV side, if things remain same, and so we try to improve on industrial cylinders and passenger vehicle, so by when we can again get back to 90%, 100% utilization, sir? How many quarters it might take? [Speech Overlap]

Puneet Khurana — Managing Director

Very difficult for me to give you any time — specific timeline as when this will come back.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Because we could see that PV is — in the CNG space is growing at a good pace.

Puneet Khurana — Managing Director

As we are communicating on a regular basis, we’ll definitely if any changes such a change we’ll definitely communicate to everybody that this is happening. And that once the order book and things start getting more and more clear, we’ll definitely indicate it.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Sir, current quarter UAE business margins has turned negative. So any specific reason for that?

Puneet Khurana — Managing Director

I think the hold-up, the — Dubai had a lot of inventory hold-up because of some orders that were supposed to be executed, or not — did not get executed. So now I think this quarter, I think it will normalize.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. So, it will be back to that Q1 kind of margin?

Puneet Khurana — Managing Director

Yes.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

And the US business has been growing well, but US margin seems to be quite low. So, will we see some improvement in the margins of US business?

Puneet Khurana — Managing Director

Yeah. I think it should improve.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

It’s currently around 5.0%, 5.5%. So even in India level currently we are at 10% debit levels.

Puneet Khurana — Managing Director

Yeah.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

So it can go — come up to 10% level, sir?

Puneet Khurana — Managing Director

I don’t know about 10% level but…[Speech Overlap]

Sanjiv Kapur — Chief Financial Officer

Yeah, but there will be a improvement.

Puneet Khurana — Managing Director

There will be improvement, yeah.

Deepan Sankara Narayanan — TrustLine Holdings Pvt. Ltd — Analyst

Okay. Thanks a lot.

Puneet Khurana — Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]. We have next question from the line of Prakash, an Investor. Please go ahead.

Prakash — Investor — Analyst

Hi, good afternoon, Puneet. How are you?

Puneet Khurana — Managing Director

Good. Thank you.

Prakash — Investor — Analyst

So keep the chin up, and I think the numbers will also start coming better. I mean, I think one thing that I had always thought about EKC was that at some point of time the margins should start to get rationalized.

Puneet Khurana — Managing Director

Right.

Prakash — Investor — Analyst

Given the kind of business that it is, it’s not possible to sustain those kind of margins, I would think. It takes a normal — it’s not a rocket science business as I were to put it. So, I think from an investor point of view, like I’m not too much worried about the margins coming down, because they should expectedly come down. I think the more important thing is that the alignment of expectations is more important between the Company and the investors.

So, just because you had one year as an outstanding year doesn’t mean that every year will be an outstanding year.

Puneet Khurana — Managing Director

Yeah.

Prakash — Investor — Analyst

So that’s another quite [Indecipherable]. However, like in the previous couple of investor calls as some people have raised this concern as to why your presence is not there in the PV segment. And I think that suggestion from the investors would be kind of like really kind of hitting you hard at this point of time as you kind of try to spread and go beyond the commercial vehicle segment. And the…[Speech Overlap]

Puneet Khurana — Managing Director

Yeah.

Prakash — Investor — Analyst

So that’s — I wanted to ask specifically about the Egypt expansion that you were planning. Three things I wanted to ask actually. What’s happening to your — what is your current capacity utilization? What’s happening to the capacity expansion that you were doing in India? And about the expansion [Phonetic] you had planned in Egypt and in Hungary, are they — are they on hold or are they — how are things looking up on those lines?

And one suggestion that I wanted to make was that like, of course, the answers to those questions are pretty straightforward, and I’m sure you will say something nice and good about it. But the more important material suggestion that I wanted to make is that, see the numbers of EKC have come down or they are not in the outstanding range because of reasons beyond your control, and these are macro headwinds. You never knew that in Ukraine there will be a crisis and the gas prices will start to going up in that manner. So these are reasons beyond your control. There is not much you can do about it except for, you know, you have more marketing, have better tighter cost controls and do what you need to do as a management which I’m sure you must be doing.

But given just from an investor market confidence point-of-view, I don’t know what is the present status of the promoter loan into the company. So it may be a good idea because you have cash on the balance sheet, if that debt can be retired, and you could probably do some creeping [Phonetic] acquisition from the market which would instill the confidence that — and slide the erosion of, I mean, arrest the erosion of value that is happening.

Like you get the [Indecipherable] issues, there have been conversations about the stock prices in the market. We saw the stock go up, inch up to INR300, close to INR300. It has come down to INR100. I think actions like that from the management will really instill a good amount of confidence in the investor community. I’m sure this slide will ebb away, and things will start looking up again. So…[Speech Overlap]

Puneet Khurana — Managing Director

That is a good suggestion. It’s a good suggestion. Definitely we’ll discuss it and then you know see what can be done on this.

Prakash — Investor — Analyst

I think — See, Puneet, my thought over here is that frankly I find EKC to be a very good investment even at this point of time. I don’t think EV is going to be the solution for India because in the environment given carbon footprint and those kind of doesn’t make too much sense.

So gas and PNG and those things are here and there. It just [Indecipherable] headwinds need to pass off. And we say well I think I mean. I don’t think the world is coming to an end because of Ukraine. So and at INR100 where the stock is currently priced at, I think the PE of the stock is close to five like or probably less than five. It’s a decent business, it’s a well-balanced business, your intent has nice, you’ve been retiring debts of all kinds, you have realized all the revenues that all the exceptional items that you projected over a period of time, everything is nice and good. You know, like — and one management suggestion which I can make is that you should not be spreading too thin, like just going into new geographies, Egypt, Hungary and then you kind of rolling back so and so forth. I mean, that’s a suggestion which I can make from outside.

Of course, you’ll be taking — I mean, so I think at this point of time, to counteract the impact of erosion of value on the stock, because of macro reasons beyond your control, I think it’s may be a good idea for the management to take some actions or which sends the right signals to the market. And in the context of that, also start to kind of align the expectations of the investor community who are invested into EKC. Like, it’s not fair for the investors to keep expecting from the management, to keep delivering quarter-on-quarter outstanding outcomes. So that’s what I wanted to kind of suggest [Phonetic].

Puneet Khurana — Managing Director

Thank you so much.

Operator

Thank you. [Operator Instructions]. We have next question from the line of Prakash an investor. Please go ahead.

Prakash — Investor — Analyst

Yeah. My question was not answered by Puneet. What’s happening in Egypt and Hungary? Like — and the expansions in India?

Puneet Khurana — Managing Director

Yeah. So here the expansion we’ve already completed the brownfield, whatever was planned all the brownfield has been completed in India.

Prakash — Investor — Analyst

Right.

Puneet Khurana — Managing Director

And in Egypt we are [Speech Overlap] we should get more clarity in the coming quarter about what’s the — what’s the progress on this, because you know there are lot of processes that we need to go through before we finally make the investment into Egypt. So it’s still in the process documentation phase. So there is not really an investments that’s gone in for that as yet.

And Hungary, as it is, you know, we had kept it on hold after this Russia crisis. So I think that is still on hold only. That I don’t know whether — when this crisis ends and what will be the situation of Europe. So I would say that, that project is more or less, I cannot comment right now on that, anything on that project.

Prakash — Investor — Analyst

What is the amount of resources that we have committed into these — particularly these two explorations, investable explorations? Because, I remember you were quite upbeat about the Hungary thing.

Puneet Khurana — Managing Director

It’s only sorry — it’s only Egypt where we have kind of — we have a team that’s — a project team that sits in Dubai and kind of monitor the progress and kind of works on — and, you know it’s very, very initial stages right now. So there is not a big deployment of a big team. And in Egypt being a joint venture, so you know, we have the partner who is also kind of supporting in all the documentation and other process, before we get into serious commitment of funds.

Prakash — Investor — Analyst

So, no serious allocation of resources in those two geographies?

Puneet Khurana — Managing Director

No. Not at this moment. No.

Prakash — Investor — Analyst

Okay, thanks.

Puneet Khurana — Managing Director

Thanks you so much. Thank you.

Operator

Thank you. Ladies and gentlemen we have reached the end of the question-and-answer session and I’d like to hand the conference back over to the management for closing comments. Over to you sir.

Puneet Khurana — Managing Director

Yeah. Thank you once again for your interest and support. Should you need any further clarification or would like to know more about the Company, please feel free to contact our Investor Relation team. Thank you.

Sanjiv Kapur — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks].