KDDL Limited (NSE: KDDL) Q2 2025 Earnings Call dated Nov. 19, 2024
Corporate Participants:
Yashovardhan Saboo — Chairman and Managing Director
Sanjeev Masown — Investor Relations
Analysts:
Jiya Shah — Analyst
Ajay Kumar Surya — Analyst
Dhruv Shah — Analyst
Rishikesh — Individual Investor
Yash Mehta — Analyst
Pranjal Mukhija — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to KDDL Limited Q2 and FY ’25 Earnings Conference Call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict.
[Operator Instructions] I now hand the conference over to Mr. Yashovardhan Saboo, Chairman and Managing Director of KDDL Limited. Thank you. And over to you sir.
Yashovardhan Saboo — Chairman and Managing Director
Thank you very much. Good morning everybody. Thank you for joining us on the KDDL Limited Q2 and H1 FY ’25 Earnings Conference Call. I hope everyone has had the chance to view our financial results and Investor presentation recently posted on the Company’s website and stock exchanges. I am accompanied by our CFO and Executive Director, Mr. Sanjeev Masown, and SGA, our Investor Relations Advisors.
Over the past six months, the global environment has continued to slow down. Persistent inflation, sticky interest rates and weakened consumer demand in major economies have all contributed to this continuing downturn. The wars in Ukraine and the Middle East add considerably to the uncertainty in a geopolitical sense, and the lackluster economy in China is still showing little sign of an early. bounce back. The luxury goods sector, which includes premium watch brands, has seen a decline in consumer spending in major markets and regions such as China, Hong Kong, and many parts of Europe. Inventory corrections and subdued endpoint sales has resulted in continuous fall in Swiss exports for the last three quarters, impacting the flow of fresh orders and new launches of products on which our manufacturing of watch components depends.
The trend of decline has sharpened in the last two quarters, majorly led by the decline in sales in China and Hong Kong. Last month, for instance, Swiss watch exports to China were 49% below the previous year. That’s an unprecedented fall. And in Hong Kong as well, they were more than 30% below.
These are very, very important markets for the watch business. January to September 2024 witnessed an overall decline of 10% in volume. This is overall all markets included compared to the same period in the previous year for Swiss watch exports. The decline in value is witnessed at all price segments and in both steel watches and watches made from precious metals. Supply Chain disruptions have also presented ongoing difficulties as the cost and availability of certain materials continue to impact production timelines.
Specifically, shortages and rising costs of materials like steel and precious metals have put pressure on margins across the watch component sector. Additionally, currency exchange rate fluctuations have had a notable impact, increasing component costs for buyers in markets where currencies have depreciated. This challenging economic backdrop calls for adaptive strategies to mitigate these pressures and ensure resilience in a fluctuating market.
Coming to our performance in the watch component segments, the first half of FY ’25 has been challenging. As you have already seen, we expect these challenges to continue through the second half of the year. By the end of this fiscal year, we hope for greater clarity as we closely monitor the ongoing geopolitical situation and the slowdown in Swiss watch exports across major markets including China, Hong Kong, Europe, and Asia.
While we anticipate a gradual global recovery in demand for high-end products from the start of next fiscal the lower-end segments are likely to take more time to recover. This may impact our export performance. However, we are moving more and more towards the higher end of the spectrum and therefore we do believe that there will be a reasonably good recovery in the next fiscal year.
Additionally, what has happened this year is that many orders were fulfilled in the first half of the year. And this has resulted in a reduced order inflow for the second half. As I mentioned earlier, there is an inventory correction happening in the watch markets globally and therefore it is impacting the inflow of new orders. In our domestic market, the situation is much better.
We have a steady flow of orders and volumes remain good. In October 2024, we commenced commercial production in our bracelet division which has received a very, very encouraging response. We expect this division to help offset some of the performance challenges in our watch dials and hands segment. The bracelet manufacturing unit has been set up with an investment of INR44 crores and has a capacity of 75,000 bracelets per annum.
It is meant to export the products completely and we have a very robust demand for bracelets. In fact, to the extent that an expansion by adding some balancing equipment is already being planned, the production volumes will gradually grow as we go through the learning curve and optimize the production process.
This is actually going very well. Having taken you through the subdued part of our business this year, now let me come to where the lights are shining brightly. Let me move to the precision engineering business Eigen. Eigen continues to show strong momentum with export demand remaining very robust and performance exceeding expectations.
In the first half of FY ’25, our revenue reached almost INR66 crores, marking a 46% increase compared to the same period in FY ’24, we are experiencing a very healthy order inflow and our execution rates are scaling up rapidly. Not only are we seeing substantial inquiries, but our conversion rate is also high.
As we look forward, we remain focused on expanding both our customer portfolio and geographical reach, further strengthening our position in the markets for Eigen. To support this growth, we recently secured a production facility of almost 30,000 square feet on a lease basis in Bangalore, not far from our existing facility, and we will expand our operations there next year. By next fiscal, we will already start to see the fruits of that expansion.
We anticipate still further expansion requirement in FY ’27, for which we will expand capacity by constructing a new factory space in our existing land. This continuous expansion in Eigen is a key part of our strategy to.meet the growing demand and support our long-term growth strategy trajectory in the precision engineering sector in our packaging business. We are pleased to announce that in October 2024 we began commercial production at our new packaging unit in Panchkula near Chandigarh as well. This facility has been set up with an investment of INR5 crores and has a capacity of 100,000 packaging boxes per month destined for the watch, jewelry, and related premium products, consumer products both for Indian market as well as for export.
Let me give some update regarding Silver City, the company that holds our brand Favre Leuba. We are pleased to announce that the global media and trade launch of Favre Leuba which took place in Geneva in August 2020 was met with an overwhelmingly positive response marking an exciting milestone for the brand.
Favre Leuba is actively focused on designing and producing high-quality Swiss watches of global standards. Starting January 2025, the exclusive new Favre Leuba collection will be available internationally in India.
Our subsidiary Ethos, which is also an equity partner in Silvercity, has the exclusive right to sell Favre Leuba watches, ensuring that Indian customers enjoy direct and immediate access to this iconic brand. We are confident about the bright future of Favre Leuba and its ability to resonate with watch enthusiasts worldwide.
We will share updates as we progress on this remarkable journey. As we enter the second half of the fiscal year, we anticipate moderate growth, though profitability may be somewhat impacted due to a shift in product mix compared to last year. We remain mindful of the broader economic landscape as the slowdown is likely to continue or could continue in the near term. So we are proceeding with caution until the environment turns.
Despite these headwinds, we remain very optimistic about KDDL’s long-term prospects. Our strategic initiatives and strong market position place us well to adapt to these conditions and maintain steady growth in the years ahead in all our businesses.
I would now like to invite Mr. Sanjeev Masown, our CFO and executive director to update you on the company’s financial performance. Thank you. Over to you, Sanjeev.
Sanjeev Masown — Investor Relations
Thank you, Mr. Saboo. Good morning everyone. I am taking you initially through the standalone financial performance for the quarter as well as the first half of the financial year. During this period, the total income for the quarter stood at INR97.4 crore and the half-yearly income was INR182 crore to INR182.4 crores. EBITDA for the quarter was INR26.1 crore and the EBITDA margin was 28.3% while for the first half the EBITDA was INR45.1 crore and the EBITDA margin was around 26%. The PAT for the quarter stood at INR10.1 crore and for the half year it was INR24.9 crores. A lot of this information is available even in our financial presentation but the brief part I am just sharing with you.
Now Moving to the consolidated performance. For this quarter ended September 25th the revenue was INR410 crores and for the half year the revenue was INR780 crores. EBITDA for the quarter at a consolidated level was INR76.8 crores with an EBITDA margin of 19.4%. While for the first half the overall EBITDA was INR141.9 crores which is around INR142 crores and the EBITDA margin was 18.8%. Spread for the quarter was at a consolidated level INR35.6 crores and for the half year INR63.6 crores.
During the first half of the financial year KDDL’s standalone basis we had done a capex of around INR11 crores and during the second half we expect to do further capex of around INR15 crores. This is excluding the investment and the new store opening by Ethos and their further buildup story that is not part of this concept.
During the current financial year the KDDL has completed the buyback of 2,37,837 equity shares and which involved a total cash outflow around INR109 crores which included the tax on the buyback. With this I open the floor for question and answers and with a request to all the participants that please restrict the questions to the KDDL manufacturing business.
As for the details there is always a separate investment cost and lot of detailed answers are provided there. With this I open the question answer.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Jiya Shah from Wealth Securities. Please go ahead.
Jiya Shah
Good morning. So my question is that would you like to provide a little bit of insight into the acquisition of the Favre Leuba where we plan to manufacture watches for the global market? Like, how should we perceive this initiative?
Yashovardhan Saboo
Okay, Shyam[Phonetic], would you like to ask all your questions at one go so that we can. Or is this your only question?
Jiya Shah
No, I have one more. So my second question is that we recently started a production, the commercial production for the bracelet division. So how quickly can we ramp this up and how has the overall response for the product been?
Yashovardhan Saboo
Okay, thank you. So the acquisition of Favre Leuba brand was done last year and of course it’s acquired in a Swiss company. The Swiss company is called Silvercity Brands, which is a subsidiary of KDDL and Ethos is a co-investor that of course has a minority shareholding and it also has two other minority shareholders. Now, Favre Leuba again, at the cost of repetition. Favre Leuba is a very, very iconic Swiss brand, originated in 1737 for almost 300 years of history. And it’s a revival of the brand. It had a very iconic and a very celebrated history in the annals of watchmaking.
And I’d invite you to actually go to the Favre Leuba website where a lot is explained and you can actually get a glimpse of what a huge heritage it has. And you will also see some of the new products that were revealed. So very exciting new products. And of course the goal is there will be Swiss-made products, the best standard. It has got excellent reviews from the market and the trade, international trade. And the team managing Favre Leuba based in Switzerland is now finalizing the distribution arrangements across the world, globally. In India it will be distributed exclusively by Ethos.
And our vision, and the vision of the Favre Leuba team in Switzerland is really to see this as a mainstream brand developing over the next five to 10 years into one of the top 20 Swiss brands in the world.
Jiya Shah
Okay, that was helpful. And on the second question, please.
Yashovardhan Saboo
So your second question. Sorry, can you just say that again? I lost track of it.
Jiya Shah
No problem. So we recently started a commercial production of the bracelet division.
Yashovardhan Saboo
Sorry about the bracelet. I got it. Yeah. So the bracelets again. So I’ll take a little bit of time to explain to you why it’s a very special project. Right. It’s meant for export to Swiss brands. Very high quality, very high price compared to what is the going price in India because the quality levels are extremely high. The bracelet doesn’t form part of the definition of Swiss-made. In a Swiss-made watch. What does this mean? When can a watch be called Swiss-made? A watch can be called Swiss-made if 60% of its cost of production is incurred in Switzerland. 60% of the cost of production, but the watch does not include the bracelet. Okay, so this means that even for a Swiss-made watch, the bracelet can be made outside Switzerland. Why is this important? Obviously, because cost of manufacturing in Switzerland is very high, especially bracelets where there is a fair amount of skilled labor content in terms of the finishing and polishing.
So it allows brands to actually control their costs of the Swiss watches by farming out and by buying bracelets outside Switzerland. Now, China has been the largest supplier of bracelets to a Swiss brand. But of course, as you know, there are many brands that do want to de-risk from China and that is how we got the opportunity and we believe it’s a fabulous opportunity. We should be getting to close to 100% capacity utilization in the next fiscal and the stage will be set to actually expand further. I believe it is possible to expand the capacity by at least 30% or 40% with some balancing equipment.
We are working on that project. But I believe there will be a continuous expansion in the bracelet production over the next two to three years at least.
Jiya Shah
All right. Okay. This was very helpful. Thank you so much.
Operator
[Operator Instructions] The next question is from the line of Ajay Kumar Surya from Niveshaay Investment Advisory. Please go ahead.
Ajay Kumar Surya
Thank you for the opportunity. So can you provide a breakup between our Q2 sales in the watch component, between the watch dial, the watch indexes, and the bracelet parts? So my follow-up question on the same is if you can provide the capacity utilization of the watch bracelet division. And Sir, we also got an advance from customers. So the part which we are referring in the opening commentary that we had early deliveries, so just wanted to know that the same order which got delivered completely or we still have some pending order and at peak utilization of wallet bracelets, how much revenue can it generate?
And sir, my last question is on the precision engineering. If you can throw some light on because we are adding a new capacity of 30,000 square feet and moving towards different place. So, as you can also throw some light on the order book which the Precision Engineering division has as of now and how much growth do we anticipate in that division? Thank you.
Yashovardhan Saboo
Thank you. So Ajay, thank you very much for your questions. I’m afraid we are not going to be able to provide a breakup, exact breakup between dials, hands, and the different watch components. I can just more or less tell you broadly that dials and hands in terms of value they’re approximately the same value and for both dials and hands close to 70% in value terms is exported and 25% to 30% is for the domestic market indexes is a smaller part but it’s actually growing faster then dial them hands.
Your second question was regarding the advance. I’m not very sure exactly what was meant, but I think you were saying that the orders that we received have been fulfilled in the first half and therefore there is a lower order inflow in the second half. It’s not that the orders were fulfilled in advance. I think in general there is a trend that a lot of the deliveries are asked in the first half.
For us it is the first half April to September because globally the watches are prepared and then pushed into the markets for the Christmas sale. And therefore quarter three is anyway that Christmas holiday is everywhere.
So the production and purchasing and all that is a little bit low. So that was what was implied in my, — in what I said. As far as bracelets is concerned, as I mentioned to the previous question and answer to the previous question, we have a capacity of 75,000 bracelets a year and we believe that we should be close to 100% capacity utilization in the next fiscal production is ramping up.
Well and we are adding new bracelet design which obviously helps and we are adding customers as well because the response has been extremely good. As I mentioned, we are already working on the first leg of expansion. But I believe that the bracelet business in the years to come can become as. I mean we can look at a business of INR80 crores to INR100 crores coming from the bracelet manufacturing after it has done the expansion and several rounds, INR8200 crores over the next three to five years.
And your last question was regarding precision engineering. As I mentioned already in my speech, we have a very robust order position. The growth is very good both in terms of new geographies, in terms of new customers, in terms of new products and technologies.
So that’s the reason why we need to. We need more space. It would take a very long time to build our own factory. We need it faster. So we decided to take a factory of just close to 30,000 square feet on these basis so we can start quickly which we will do in next fiscal. And simultaneously we will also plan a further expansion of the factory building facility in our plot which has the capacity to do that is placed for doing that. So that any expansion FY ’27 onwards can happen also in our own plot.
We expect very steady and a solid growth in the precision engineering division. So I hope I’ve answered all your questions.
Ajay Kumar Surya
Sir, just the clarification because in the previous quarter’s results.
Yashovardhan Saboo
Would you like to come back? Because I’m sure there are other people waiting in the queue.
Ajay Kumar Surya
It’s just a part of the previous question.
Yashovardhan Saboo
Okay, go ahead.
Ajay Kumar Surya
So we received a advance of INR26 crores from a large customer. It was mentioned in our results and presentation. So just wanted to take on. Is that order completely delivered or is it still pending? Just a clarification.
Yashovardhan Saboo
It is ongoing. The adjustment of the advance is ongoing.
Ajay Kumar Surya
Okay, thank you. All the best for future.
Operator
Thank you. The next question is from the line of Dhruv Shah from Ambika Fincap Consultants Private Limited. Please go ahead.
Dhruv Shah
Thank you. Thank you for the opportunity. So I have three questions.
Yashovardhan Saboo
Sure.
Dhruv Shah
First is where do you see our precision engineering as a percentage of revenue over next couple of years going to?. Second question is how much investments have we already made in Silver Lake? And when do you start seeing the revenue starting to flow? And related to that question, do you see any further stake sale in Ethos for that purpose?
Yashovardhan Saboo
Sorry. What was the third question? Do you see any further.
Dhruv Shah
Stake sale in ethos for the. For investments for Silver Lake. And my third question is. So you said that you want to be into the top 20 selling Swiss watches. So if you price the watch at similar levels of tag, how many watches do you have to sell?
Yashovardhan Saboo
I still didn’t understand your question about investment and Ethos in Silvercity.
Dhruv Shah
My question is how much investments have we already made in Silver Lake? And do you envisage any further stake sale in Ethos for investment in Silver Lake?
Yashovardhan Saboo
A stake sale from Ethos. Okay, got it. And your first question, just remind me on the precision engineering business.
Dhruv Shah
Yeah. As a percentage of revenue, where do you see this?
Yashovardhan Saboo
So again, it’s difficult to, say, what will it be? Because each business is pursuing its own growth. And, we left our business heads actually envision that growth. We help them to envision and try to be as ambitious and growing as fast as possible and as profitably as possible. But we do know, we foresee that the growth rate in the precision engineering business because of the opportunities that we see, is going to be faster than the growth in the segment of watch components.
And I’m not sure whether it will be faster than the packaging business because the packaging business will also grow fast. But the packaging business is still very small. So overall, I expect the precision engineering business to the share of precision engineering business and the overall total revenue of KDDL standalone to grow. And over the years, I would not be surprised if the precision engineering business actually became the largest manufacturing, the largest part of Canadian manufacturing business.
So, this would mean that it would be, if it becomes the largest and we’re talking about three businesses right now, we’ll probably be in the range of 40%, 50%. But again, a lot depends on how the other businesses grow and how they all grow relative to each other. But I can say that the precision engineering business, we expect it to rack up a growth rate faster than the others. Investment in Silvercity. What is the investment already made? Sanjeev, would you have that number? What? KDDL and.
Sanjeev Masown
Overall, at a group level, we have done an investment of CHF6 million, both KDDL and Ethos and the subsidiaries put together.
Yashovardhan Saboo
Yeah. So it’s CHF6 million. And your question was, is there a stake sale to invest more? I think we’ve clarified this. KDDL is committed to retaining majority stake in Ethos. We are currently at about 50.4%. We don’t foresee a further stake sale. And yeah, we don’t foresee that. Your third question was regarding top 20 brands. It’s difficult to say that, but, for example, and again, it’s in the top 20 brands, what happens and which other brands you want to consider in that. But a number of 100,000 units is some kind of a number which is an exciting target to go after. And I believe that medium to long-term Favre Leuba is a brand that has the potential to do those numbers globally.
Dhruv Shah
Great. Thank you so much.
Operator
[Operatort Instructions] The next question is from the line of Rishikesh [Phonetic], who is an individual investor. Please go ahead.
Rishikesh
Hello Yasho Ji, nice to speak to you again. First we’d just like an update on Estima, what the losses are now and what you see happening in the next coming quarters. And the second question is on receivables. We’ve seen quite an increase in receivables this quarter. So just curious why that’s happening.
Yashovardhan Saboo
So Sanjeev, I will let you answer about the receivables details, but on Estima, I can just tell you that unfortunately Estima is still continuing with losses. It’s a bit of an unfortunate timing situation because just when things were starting to become better, we’ve been hit with this situation of let’s say, a slowdown in the market. Obviously the customers for Estima are the Swiss brand that buy or wish to buy only Swiss-made.
And as I mentioned, because of the over-inventorized position, all these brands have delayed their new product launches, they’ve cut back on production. There are layoffs in various brands. That’s publicly known information. And a lot of it is happening because of the persistent slowdown and continuing slowdown of endpoint sales in China and Hong Kong, which are the two largest markets for Swiss brands. The result of this is that Swiss brands are less keen to try new suppliers and Estima, in that quality level is a new supplier because their first commitment is to their existing supplier base which itself has seen a cutback of order as we are experiencing in KDDL in India.
So it’s a difficult time for Estima. We are responding with of course a cutback in expenses there, but we are also using this opportunity to actually beef up the technology and the specialization of certain technologies in Estima. The use of laser, the manufacture of solid gold hands, the enhancement of the diamond cutting and faceting capability. And furthermore we are also taking up some very exciting new finishing aspects for watch dials at Estima because there is a scope for certain types of dials produced, Swiss-made dials of which we have specialization over here.
So there is, there is a, there is a very systematic plan to get Estima into a profit. We believe Estima has a fantastic potential in the Swiss market and that’s really our gateway to access to the high-end markets. It’s unfortunate that it has continued under losses but I am still very, very, very optimistic that from next year onwards we will start to see the turnaround. I take a lot of strength from if you were following earning calls of KDDL five years ago, just prior to Covid, the situation at Eigen was one of continuing losses and how is this company going to turn around, how is this division going to turn around and so on.
And I was very confident that I think it’s a matter of time. I see the opportunity and it will and we have seen how handsomely it has turned around and to become one of the strongest pillars of growth for the future for KDDL. And I’m sure that Estima is going to, is going to perform a similar role. I am spending a lot of time focusing on Estima and I hope that in the future calls we will be sharing a lot of good news about Estima.
Sanjeev, can you answer the question about receivables please?
Sanjeev Masown
Yeah. Rishikesh, your observation regarding the debtors at the standalone level going up is true. Majorly. The reason here is as the value of business in precision engineering is going up and it is becoming the major chunk of the overall business. The norm of the precision engineering business is that it has a higher credit date.
And normally if you do more export, the credit gets counted after the material has reached to the customer. So normally it takes up to two months for reaching the material and after that there will be a credit further off, 90 days or something like that. So if the value of the precision engineering is going up, the product mix change is leading to this increase in the debtors. But overall as such the debtors’ quality is good. The value will keep going up if. engineering business increases its share of the business. I hope you are. I’m able to make some point and you are clear with it.
Rishikesh
Yes, thank you very much. Also just one last point. We had mentioned that we would be organizing some visits especially given, the bracelet factory at ramp up. And also we are eagerly awaiting your visit being planned.
Yashovardhan Saboo
Yes, we will do that.
Rishikesh
Thank you very much, sir.
Yashovardhan Saboo
Thank you, Rishikesh. Thank you.
Operator
Thank you. The next question is from the line of Yash Mehta from Aart Ventures. Please go ahead.
Yash Mehta
Hi. Am I Audible?
Yashovardhan Saboo
Yes.
Yash Mehta
Okay. So in the last con-call said that the precision engineering business will grow by 20% to 25% in this year. So are we still holding that guidance?
Yashovardhan Saboo
Yes.
Yash Mehta
Okay. And sir, what is the growth rate that you anticipate in the watch component business?
Yashovardhan Saboo
It’s a little difficult to say because as I mentioned to you that, the watch component business is. The market situation is not very clear. We know it is soft but we don’t know when the recovery is going to happen. At the beginning of the year. We had anticipated that from January onwards we will start to see a climb back. As of now it doesn’t appear to be so. Because of the expected recovery in China which is expected after June of this year has not happened. I’m sure all of you are following what has happened in China.
There was a stimulus then people were excited about the stimulus then. Now people are not so excited about the stimulus. So there is a lot of uncertainty. So it’s really difficult to predict that. I think. I don’t think we will see growth in the watch component business this year.
Yash Mehta
Thank you very much, sir.
Yashovardhan Saboo
Thank you.
Operator
Thank you. The next question is from the line of Pranjal Mukhija from GrowthSphere Ventures LLP. Please go ahead.
Pranjal Mukhija
Yeah. Hi. Thank you for giving me this opportunity. So sir, I had a couple of questions. So the first question is around Eigen. So you mentioned that like we’re expanding into a new facility of 30,000 square feet. And this will be operational starting next year. And post that like we will further expand in our existing facility in Bangalore in FY ’27. So sir, just wanted to understand why not expand first in the existing facility and like what’s the reasoning behind expanding our new facility first?
Yashovardhan Saboo
Sure. Any other questions, Mr. Mukhija?
Pranjal Mukhija
Yeah, two other questions. So second question was again around Eigen only. So I just wanted to understand how are things progressing in the EV and the aerospace sub-segments of Eigen? Like what is the progress on the product like and like can you just throw some color on the demand environment and like future overview of this segment. And so finally the last question that I had, luckily I had the opportunity to visit the, you know, visit the KDDL facilities in Bangalore. So I also saw that bracelet division. So sir, so this visit was around in March and I think around then you guys are mentioning that you will probably order some new CNC machines, some additional CNC machines.So sir, just wanted to understand what is the update on that?
Yashovardhan Saboo
Right. So regarding Eigen facility expansion. So right now the bottleneck in Eigen to grow based on the opportunities we are seeing is the bottleneck of space, factory space. Okay, now we can build factory space, but building factory space, getting all the permissions and everything, it’s a 15-month to 18-month affair. And we have precision machines and so on. So you can’t, you have to build certain specifications. And if we were to rely only on our new building that we will have to construct in our plot, the whole thing would get delayed by 15 months to 18 months.
And we don’t want to miss the opportunity that is swinging to our side. So the idea was to grab that opportunity fast. Let’s get hold of a lease facility. And that facility is in the same vicinity as our factory. So it’s not very convenient. But this allows us to fit out that place within the next three, four months and be completely ready to start serving the new demand from early part of next calendar year. And we’ll have the full fiscal year to take that. However, looking long term, right. We anticipate that this 28,000 to 30,000 square feet that we’re getting may not also be sufficient and we will need further space going forward. Now that further space is something which we can plan in our factory for which the construction also we will start to do next fiscal so that by FY ’27 our own factory would be ready for the third leg of expansion.
Right? So we are moving, we have second leg of expansion to the leased facility that will continue because we want to get early into the expansion the new opportunity. And meanwhile we will prepare our own building in the existing facility, a new factory building where we will do the third round of expansion.
So I hope I’ve clarified that. As far as the EV and aerospace I think is concerned, overall we are seeing a very robust demand. Of course, EV is a robust and hot growing segment. There is another segment, which I’m sure you have read about it, which. is energy storage systems. So you have large energy storage systems, especially with the environmentally friendly kind of energies which are produced at one time of the day but use at some other.
So there is large mega battery kind of systems. They are called bess[Phonetic]. And it really, it is one of the fastest growing segments globally of storage of energy. And that is emerging as an important segment for us and again, aerospace while it is there. But there are a lot of segments which take up the kind of products stamping and precision stampings that we are making. So yes, EV Aerospace is a great space. We are seeing progress there. But energy storage systems is probably the fastest growing segment in Eigen right now. And the third question with Bracelet.
Yes, the CNC machines are there. They have been installed and that’s the reason why we are coming. We are now approaching a high capacity utilization and aiming for close to 100% in the next year. And as I mentioned that we are starting to work on the next leg of expansion in the Bracelet factory. So of course that would mean adding some more CNC machines as well.
Pranjal Mukhija
Sure, sir. Thank you.
Yashovardhan Saboo
Thank you.
Operator
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Yashovardhan Saboo
Thank you, friends. I hope I have been able to answer all your questions satisfactorily. Thank you also, Sanjeev, for taking the questions relating to finance. If anyone on the call needs further clarifications or want to know more about the company, please contact the SGA team or Investor Relations Advisors.
Thank you very much for joining in.
Sanjeev Masown
Thank you.
Operator
[Operator Closing Remarks]