Lakshmi Machine Works Ltd (LAXMIMACH) Q4 FY23 Earnings Concall Transcript

Lakshmi Machine Works Ltd (NSE : LAXMIMACH) Q4 FY23 Earnings Concall dated May. 25, 2023.

Corporate Participants:

B. Dhanalakshmi — Senior General Manager

V. Senthil — Chief Financial Officer

Analysts:

Dhaval Shah — — Analyst

Aditya — — Analyst

Varun — — Analyst

Forum — — Analyst

Unidentified Participant — — Analyst

Manish Goyal — — Analyst

Nitin Raheja — — Analyst

Rushav — — Analyst

Ritwik Sheth — Deep Financial — Analyst

Amit Shah — — Analyst

Sameer — NSDL — Analyst

Presentation:

Ladies and gentlemen, good day and welcome to Lakshmi Machine Works Limited Q4 of Fiscal Year ’22, ’23 Earnings Call hosted by NSDL. [Operator Instructions] This is Sameer [Phonetic] from NSDL. We have with us Mr V. Senthil, Chief Financial Officer, and B. Dhanalakshmi, Senior General Manager of the company.

Over to you, sir.

V. Senthil — Chief Financial Officer

Thank you, Sameer. Good afternoon, everyone, and thank you for joining Lakshmi Machine Works Ltd. Earnings Call for Q4 of FY ’22 ’23. We’ll have a brief about the overall performance of the company for the quarter ended March ’23 and FY ’22, ’23 followed by the interactive session. I would like to clarify that certain statements made and discussions in the conference call will be forward-looking in nature.

To begin, let me start with overall performance of the company, then we will proceed with the segment performance, then consolidated performance. The financial results have been posted on company’s website, and hope you had the opportunity to go through the same. I’m happy to share that the company has achieved a turnover of INR4,457 crores, which is 48% higher than the corresponding previous year. This milestone was achieved by our team with lot of effort amidst various challenges on material procurement, logistics, etc. The PBT stands at INR485 crores for the current year as against INR254 crores for the previous year, which accounts for 91% increase in the profits of the company.

I will go into division-wise specifics now. The TMD revenue for the quarter stands at INR980 crores as against INR967 crores for the previous quarter, resulting in almost a flat revenue. For the year end net, it was INR3,648 crores as against INR2,317 crores in the previous year, resulting in an increase of 58%. Currently, we hold an order book of around INR5,930 crores and — which has been lined up for execution over the current year. As you know, the TMD has over the last two years performed consistently and we have been able to achieve incremental shipments month-on-month.

With respect to the order book, the orders — order inflow, there is — the project orders stands at around 42% of the total order book. Export turnover had increased by 49% for the full year compared to the previous year. The ratio of export, domestic, and spares stands at 24%, 65%, and 11% during the year. With respect to Q4, few factors have had an impact, that is the unfortunate calamity in Turkey which had — which is one of the key export markets for us, and the product mix and the domestic machine share has also gone up. Currently, we are running at full capacity, and so, our focus going forward will be to continue and ensure that we’re able to deliver as fast as possible to the customers.

No going to machine tool division, the turnover on the division is up from INR690 crores to INR780 crores. We have seen an increased trend of sales of BMC machines and machine tool business, thereby helping us to serve the non-auto sector segment as well. With increase in manufacturing activity, we strive to achieve better turnover going forward.

With respect to foundry division, we have achieved a turnover of INR96 crores as against the turnover of INR78 crores last year, and this registered a 23% increase and our exports in this accounts for 23% of the turnover as well. With respect to ATC, the turnover was at INR95 crores as against INR39 crores last year and it registered a 142% growth. The profits have also increased for the current year and order book for this particular business stands at INR400 crores over the next three years.

I would like to cover our subsidiaries now. First, it is LMW China. With respect to our wholly-owned subsidiary, we have clocked a turnover of INR232 crores for the year compared to INR221 crores in the previous year, registering an increase of 24%. The profit for the year is around INR23 crores. Here again, we had quite a few challenges in terms of late COVID issues in China. We have been able to overcome that and it has done well. With respect to our LMW Middle East operation, which — wherein we have started our shipments from June ’22, the company has achieved an overall turnover of around INR120 crores and at the profit of around INR9 crores for the full year. Here, the focus will be on ensuring that we stabilize our operations in LMW Middle East.

I would also like to state that during the quarter, we have entered into a joint development agreement with Sobha Developers for us to develop the land to an extent of around 5 acres. This is adjacent to the already-existing project off Sobha which we had executed few years back. And the timeline for completion of this project is around 16 months. And we look forward to completing this project as well with Sobha successfully.

Now we can start the interactive session. Back to the moderator, please.

Questions and Answers:

Sameer — NSDL — Analyst

[Operator Instructions] The first person in the attendees that I can see with the hand raised is Mr. Dhaval Shah. We would request Mr. Dhaval Shah to please turn on your video for the question. You have been unmuted.

Dhaval Shah — — Analyst

Yeah. Hi. How are you, sir?

V. Senthil — Chief Financial Officer

I’m fine, Mr. Dhaval. Thank you. How are you?

Dhaval Shah — — Analyst

Good. Thank you.

V. Senthil — Chief Financial Officer

Yeah. Please, go ahead.

Dhaval Shah — — Analyst

Yeah, sir. Sir, so firstly, on the textile machinery division. You mentioned the order book is INR5,900 crores. So, this is — if you can break up between the live order, the older orders, and how much is the export order book out of this. And also, your outlook on the textile machinery division, how do you see in terms of utilization of the capacity? Are we planning to do any expansion here? I mean, since last two, three quarters, we are doing well and we have not thought of any expansion, but have you changed your mind or anything?

And secondly, your thoughts on the outlook on this CNC machine division. Yeah.

V. Senthil — Chief Financial Officer

Okay.

Dhaval Shah — — Analyst

Yeah, these are my two questions.

V. Senthil — Chief Financial Officer

Okay. With respect to the order book, the order book of INR5,930 crores odd, I think, the way it splits is around INR600 crores is towards exports. The balance order book is domestic, you can take INR600 crores as exports, balance is domestic, and then within domestic, We have inactive order book of INR950 crores to INR1,000 crores is the inactive order book. That is the split of our order book. With respect to how the outlook of it, yes, you’re absolutely right. We have been utilizing our full capacities. In fact, even last two, three falls, we have also said that our aim is to bring in capex for Balancing capacities and not to kind of add in mass capacities, which is practically not possible. And we have done that and we continue to do that. So, whatever balancing capacities we have been able to bring in, we have brought in and this year also, we’ll continue to do the same. As we find bottlenecks, we will have to bring in capex into those areas. Capacity utilization is at its peak. We are doing all what we can to kind of reduce the delivery times and ship out as many machines as possible.

Coming to the CNC business, two things are happening. I think we expect that, generally, the market for CNC business, especially, with lot of engineering, industry itself is moving. There is going to be a lot of demand. And we are prepared in that sense. Over the last two years, we have increased our capex spend in the — for the machine tool business. We have put in our capacities and we have told even this last time capacity utilization based on what we are currently rolling out, we still have easily close to 30% to 40% gap against what we’re shipping versus what is the capacity actually which is available. And that is all down to the fact that we have always been adding capacities there and we have done that. So, yes, the outlook for the business is positive.

Within that, we also have something product mix of turning centers and machine centers. Over the last couple of years, the focus has been on the machining centers and that’s what we are trying to kind of push into the market. And that’s where we have able to over the last few years move the mix from predominantly laying on auto sector to making this almost 50-50 or 51-49 ratio where 51% is towards non-auto sector machines which are basically being non-sold on non-auto sector. So, yes, we are quite planned to see that we’re able to get as much as prepared to cater to the demand in the CNC segment of machine tool business. Okay.

Back to you, moderator?

Sameer — NSDL — Analyst

Thank you so much, sir. Thank you so much for answering to that. Proceeding with the next person who has raised the hand in the attendees. We have with us Mr. Aditya [Phonetic] Sir, you have been unmuted. Can we have your video turned on for the question, please? We can hear you.

Aditya — — Analyst

Yeah. Sir, so in APC division, we are seeing nice scale-up this year. So, just wanted to understand what factors or things have to work for us to help us scale our revenues in this division to INR400 crores as we have mentioned? And how confident are we in achieving the same?

V. Senthil — Chief Financial Officer

Can you repeat that, please?

Aditya — — Analyst

So, sir, in the APC division, So we have mentioned that we like to scale this business to around INR400 crores. So, just wanted to more or what factors or what things have to work out for us to achieve this kind of scale-up in the next [Speech Overlap]

V. Senthil — Chief Financial Officer

What I basically — what I meant is, we have order books. See, basically, these things work on what we call long-term orders, and we have order books in this particular business for — where we have visibility for three years with around INR400 crores of orders in line which needs to be shipped out. We don’t require much because we have already invested capex in this particular business. For these shipments, it will only be — it’s not a huge capex. Because INR400 crores over the next three years is also close to INR120 crores odd of existing kind of rollout. That’s what it is. But yes, within this capex is a substantial — composite is a substantial business which we should plan to grow. And for that, we will require capex and we will be investing capex over a period of time as and when we see the potential in this business.

Sameer — NSDL — Analyst

Thank you so much, sir. Thank you. Proceeding with the next person on the list in the attendees. We have [Indecipherable] and Varun [Phonetic] probably jointly connected through the same device. Can we have your video turned on for the question, please? Sir, you have been unmuted.

Varun — — Analyst

Hello?

V. Senthil — Chief Financial Officer

Hi. You’re audible, Mr. Varun.

Varun — — Analyst

Good afternoon, sir. Thanks for taking this question. Sir, just I noticed that the order inflow has slowed down a little bit over the last couple of quarters your commentary here. This is with regards to the textile machinery business. Sir, second thing is, as you said, you’ve been doing some balancing capex in this business to sort of improve the execution. How much more of this can be done? What kind of peak revenues do you see on a quarterly basis given your order book? Sir, and third question is on the machine tool business, you talked earlier about some supply-side issues on availability of electronic components. How is the situation now? And what kind of utilization ramp-up are you seeing over the next year or so? Thank you.

V. Senthil — Chief Financial Officer

Okay. [Indecipherable] is a wide range. So, yes, you’re absolutely right. I think the order inflow of TMD has over the last year tapered. If you actually look at the numbers which we have put out there, the order book has shrunk by close to INR900 crores odd. Of course, we should also take it from the view as to what was happening the year before was a huge surge in orders. And at that point of time, we did mention that lot of projects had come through in the order book and almost everyone had kind of — whoever wanted to invest had already planned for investment. So, ideally, we are quite happy to see whatever the orders which have come through also now, even though the order book has shrunk a bit. Going back even further a couple of years, the order — the surge was on account of two reasons, right? One is post-COVID demand, one is even pre-COVID. There was very less investments happening within the textile sector. And that has changed over the last two years. So, whilst we don’t — it is very difficult for us to expect the same amount of order flow year-on-year because that amply pushes your delivery needs longer and longer, right? So, order flow has reduced, but we think what we see now is more of a sustainable order flow. And coming to — replicating what happened last year is not going to — last year when I mean to say, ’21, ’22 is — we all knew that it was not going to happen. And, of course, because we have this stable outlook — and please do take into account this last six months, last — prior to Jan ’23, we had the spinning industry itself was having a lot of challenges with respect to the cotton prices the spreads. So, it was not — it was — it was not a very smooth-sailing, I should say, for the spinning industry. And we had taken cognizance of that as well. So, now, we feel that the industry is coming back. We are seeing the order flows are happening now. And this would sustain.

With respect to the capex, the way we operate is we have to bring it to a particular level and then we — then the way scientifically, we’ll look at all the options as to where the balancing capex is needed. Then we invest so. Last year, we had invested close to around INR60 crores, INR65 crores in purely the machinery side. And we will be replicating — that is of TMD alone, we are talking about TMD alone. And company as a whole, of course, we had invested close to INR100 crores to INR110 crores on machines alone. So, we’re looking forward. We will be replacing. We will be bringing in some more capex to a similar — for a similar value. I mean, that’s the idea. And this would happen what TMD and MTD. But ideally, the thought process is to keep the utilization as high as possible as currently it is today.

Peak revenue, I mean, if you ask me, we would say, already we are there, we are trying to incrementally keep nudging the turnover higher and higher. But in — for the capacities available, we are already at the peak revenue. And with respect to machine tool division, actually, the challenges what we spoke about on the electrical electronics actually is applicable for textile machinery division. And if you see what has happened over the last full year, we had the geopolitical crisis, the war which has happened in February ’22, and subsequently, pricing has gone up, the challenge on availability of material. And to this day, yes, electrical and electronic component continues to have that challenge. And we are working over time here, our supply chain management is doing stumpage and management is doing all what it can to ensure that our supply chains are kept up and running and we are able to deliver the machines. I mean, that issue has not gone away. And on top of this, there has been a consistent cost increase also on this on this parts. So, there is both impact, the cost and the availability, both are a challenge as far as the TMD business is concerned. As far as MTD business is concerned, we don’t have that challenge because these supply chains are different to that of TMD. We are relying on a different geography as far as machine tool is concerned. And that is already de-risked. And the utilization, as well as machine tool is concerned, is a lot, like as I already mentioned for the previous question, we have at least 30% to 40% possibility to scale on the turnover, because that’s the kind of capacity is what we have for machine tool business. And that’s the kind of investment what we’ve done which I already mentioned. Okay?

Back to the moderator, please.

Sameer — NSDL — Analyst

Thank you so much, sir. Thank you so much for answering to that as well. So, going to ahead with our next person in the attendees with the hand raised for the question. We have with us Forum [Phonetic] We have you unmuted. Can we have your video over the — for the question, please? Can we have your video turned on?

Forum — — Analyst

Video won’t be possible. Sir, congratulations on a great set of numbers. Sir, I just — I’m new to the company, so please, pardon me, if my questions are naive. But, sir, does this mean that your order book you said is INR5,900 crores. So, does this mean that we’ve had order inflows of around INR500 crores this quarter?

V. Senthil — Chief Financial Officer

I’m not sure where you’re getting that number from here, but I’ll do one thing. Kindly ask all your questions and then let me reply it one by one. That will be easier.

Forum — — Analyst

I have many questions. Okay.

V. Senthil — Chief Financial Officer

Yeah. Please, go on, and then we’ll — I’ll make a note of it. Not an issue.

Forum — — Analyst

Okay. On the order book side, I’m getting the number from — like last year, we had INR6,500 crores of order book — sorry, last quarter. This time, we did sales of about INR1,000 crores. So, that is how I’m calculating that number. The second question is, we’ve seen some decline in our gross margins this quarter. And we are seeing that a lot of commodity pressure is easing. So, what is the reason for that? Second, the third one is, sir, where would the demand is — where the demand coming from? Is it from the spinning companies or from the government companies that are going for backward integration? Would want to understand that bit. And in one of the calls, one of the spinning calls, it was mentioned that the spindleage capacity of India is at 90% — the utilization is at 90%. So, just wanted to I understand at what level of utilization would we see capex happening? And how has the spindleage capacity moved over the years?

The next one would be, could you just give us a breakup of the machines sold this year in terms of the spinning yarn and the breakup that we used to give? And sir, what would be our contractual employees for this year? And how do we plan to utilize the cash that we have on our balance sheet? Thank you.

V. Senthil — Chief Financial Officer

Okay. With respect to the order book, the way we look at it and you’re looking at two things, right? You’re looking at the turnover. But when you talk of order book, we only talk of domestic partners and LCs on hand what we at that point in time. So, it is very difficult to just add it back to say, okay, explain us why and then come to a particular number because this INR1,000 crores is inclusive of spares orders, which we don’t take, and it could be also of some cases where exports could have kind of come in. So, this one — the way we operate on the order book is overall, the domestic orders plus LCs only, which is where I said it is close to INBR5,930 crores. And within that, I also gave the number of what is active, inactive, and what is the export split.

With respect to gross margin, thanks for the question. I think it will also help me to explain a little bit in detail. What has happened, like I already mentioned on the geopolitical situation, post-April, we had seen such a surge on the cost of material. Yes, you’re absolutely right. The cost of material has gone up and then subsequently, it has gone down. But if you were to actually see the cost of material, which has gone down, it has not come back to the levels where what we saw pre-COVID. And we are still talking about be it steel or whatever it is, it’s in the high-60s and 70s pattern. So, the issue to address here is the fact that while the cost has gone up and it has not come back down, we have also not revised our pricing the whole of last year. And we did take cognizance of the fact that we could not, because post April, May, June, and including the first — the second and the third quarter, the spinning industry in itself was not doing great. And subsequently, in the current one, when the industry is looking a little bit better, we had taken a call, because, again, one year we had waited — in fact, a little bit more than a year because our previous price increase was in December ’21. And we had waited till May to actually revise our prices on TMD machines, which we have done and we have communicated to the market. That’s what we could do. So, the gross margins are reduced in account of cost of products going up and we had taken action in the month of May.

Apart from this, I already clarified on the electrical, electronic parts, that availability and the price both are a challenge today, and we are working towards it. So, this is the kind of impact what we’re having on the gross margins.

With respect to the — where the demand is coming from, we have seen the pattern shift, whilst last year we had seen perhaps 70%, 75% project orders. This year, whatever order has come and we are seeing close to 40% to 42% in terms of project orders and 60% in terms of unitary machines, modernization, those are the orders what we see. And it is very difficult to put a exact number at what utilization or what capacity the orders would actually come in, because of the reason that generally, when the market is a little bit dull, especially when a project order is getting executed, everything is lined up, land, building, loan, from the investor’s perspective. And we — generally, they continue to install them during a lull — they continue to finish everything and wait and it is always a cycle and then they can be completely prepared for the up — the demand as it comes in. So, it is very difficult for us to quantify the order flow as against utilization of the mill.

And with respect to the number of contract — the employees we have close to 3,400 odd employees, that is both — all staff and workers put together. And contract, perhaps, we will — we should have a similar amount of people on the contract, on subcontracts and everything else.

With respect to cash on the balance sheet, I think you have seen the results. We have declared a very healthy dividend this time. And we look for further investment in capex and do whatever is best decided by the board.

Sameer — NSDL — Analyst

Thank you so much, sir. Thank you.

V. Senthil — Chief Financial Officer

Thank you. Back to you, yeah.

Sameer — NSDL — Analyst

Proceeding with the next question on the list. We have with us Huzefa J. Cutlerywala [Phonetic] We would request you to please turn on the video for the question, if possible. And you have been unmuted. Can we proceed with the question, please? Huzefa ji, can we proceed with your question, please? Sir, can you hear us? Sir, would you want me to proceed with the next person on the list?

V. Senthil — Chief Financial Officer

I think he is on mute. I think Mr. Huzefa, you’re on mute.

Sameer — NSDL — Analyst

Can we request the technical support team to unmute him?

Unidentified Participant — — Analyst

Actually, I can’t because he has the right to unmute himself only.

Sameer — NSDL — Analyst

Okay. Perfect. Thank you.

V. Senthil — Chief Financial Officer

Okay. I think we’ll move to the next one and we’ll come back to him, please, before we close.

Sameer — NSDL — Analyst

Sure. Proceeding with the next person on the list. We have with us Mr. Manish Goyal [Phonetic] sir. We have unmuted you. And can we have your question with the video, please? Mr. Manish?

Manish Goyal — — Analyst

Can you hear me?

Sameer — NSDL — Analyst

Yes, sir. Now you’re audible.

V. Senthil — Chief Financial Officer

We can hear you, Mr. Manish. We can hear you.

Manish Goyal — — Analyst

How are you, sir?

V. Senthil — Chief Financial Officer

All well, Mr. Manish. Thank you. And how about you?

Manish Goyal — — Analyst

Same here, sir. Thank you so much. I have, sir, a few set of questions, because I’ll ask them all together, otherwise moderator will mute me. So, first is on machine tool revenues this quarter, we have seen flat revenue growth and margins continued to be remain weak. If you can probably let us know what’s the reason? And on TMD, you gave a breakup. So, was it a breakup for Quarter 4 or FY ’23? Maybe if you can clarify that and give it separately for Q4 and FY ’23 both put together? And whatever numbers you specified, if I look that, it implies that sales of spares have declined significantly. So, maybe if you can clarify that and provide our outlook for that as well? And the order inflow — okay, you gave us the breakup between projects and unitary machines. Sir, as for cash flow, we see a capex of INR274 crores in FY ’23. And you mentioned that we have done INR110 crores towards machinery. So, maybe if you can clarify, because I see that jump in the textile machinery division as far as segmental is concerned, the large part of [Indecipherable] So maybe if you can clarify that. And we have seen improvement in subsidiary performance both in China and Dubai. So, maybe China, if you can give the revenue number, again, on a comparative basis on profits and the revenue and how do we see performance in the subsidiaries and what is the order book in China and Dubai? And other income has also jumped significantly. So, I believe, is there any — some onetime income or gains? And recently — just now you mentioned, we have taken price action in the month of May. So, is it that we have taken price increase in both textile machinery as well as machine tools? If you can provide more clarity on that. Thank you so much, sir.

V. Senthil — Chief Financial Officer

Yes. Thank you, Mr. Manish. I’ll take the MTD thing first and then we’ll come to the TMD, right? With respect to MTD, the revenue is of course flat, but the margin — the revenue mix is kind of changing, right? So, we have got turning centers and machining centers. And the margin impact of this particular change is the reason the margin has kind of reduced. We are able to pump and push out more machining centers, which addresses the non-auto segment. And that is kind of reducing the overall margins as far as machine tool division is concerned. And we would like to continue to increase the turnover on machine tool and in that. And because of that, what we have done last year is we had built the second facility for machine tool division. Whilst we have built the second facility for machine tool division, we are yet to see the off-take increase from that division. So, two things are impacting. One is the product mix and one is the cost which we have kind of taking in currently because of having the second facility for machine tool business. I think that is the reason we are seeing mission tool margins are quite flat for the current year, or rather, it’s a little reduced compared to the previous year.

With respect to textile machinery division, I’ll give the numbers again. I think domestic was 64%, exports was 24%, and spares was 11%. And this is for the full year. And for Q4, this is almost a similar number. It is no different compared to the full year. And you’re absolutely right, the spares as a percentage has reduced from what it used to be. And that is to the reason that last Q2 and Q3 have — were not great for the textile industry and we had seen that reflection in terms of the off-take of spares and things related to that. That’s the reason the spares turnover as a percentage of overall turnover is reduced.

And with respect to the — I’ll also cover China, the China with — is INR272 crores as far as the current year is concerned. And last year, it was INR222 crores. IN current year, the profits are close to 23% in China as against a breakeven last year. What had happened was that last year we had — that is, ’21, ’22, there’s a huge surge in, if you remember, the FOB cost, and same — sorry, the logistics costs. And since the contracts were all including logistics, I think we had an impact there. But however, our current shipments within China are all FOB. And that has resulted — the turnover has gone up and we have also done a decent margin there. With respect to order book in China, we have an order book for a quarter. For the upcoming quarter in China, we don’t have a long order books like what we currently have here in India. And of course, we — today, we are able to send people more freely to China. In fact, if you have been following and we have — till November ’22, we could not actually have our people freely move because of lot of COVID-related restrictions. But subsequently, thanks to the efforts on both sides, our people are — have reached and we have our expat people also there and we hope to continue with more order intake and we have been able to send our sales teams all into China at the moment.

With respect to the other income jump, the onetime income was the sale we had disposed of older aircraft, which we held for 18 years, I think 17 years, and that is for — that is one item there and the value is close to INR24 crores. And the capex, INR275 crores of spend, the rough breakdown on that is around INR110 crores of machinery. And we had another around INR86 crores of an asset purchase, which is our aircraft — secondhand aircraft which we had purchased in the month of September. And then we had invested in building, that is the MTD building, that is the second unit what I just spoke about, we had invested in that. So, that is the reason the overall capex stands at around INR275 crores. And with respect to the price action, I think, the question was whether we have done it for both TMD and machine tool. We have only done it for TMD. We have done it only for textile machinery division. As you know, only in index textile machinery division, we have fixed-price contracts across the domestic market. And of course, the export is the negotiated price. So, this impact is only on textile machinery domestic segment, where we had not changed because the previous increase to this was in December ’21. That was what was the previous price increase, and we had not touched it at all whole of last year. That’s that’s it is.

I think I’ve answered all the questions. Okay. Back to you, moderator.

Sameer — NSDL — Analyst

Thank you so much, sir. Thank you. Next — to proceed with the next person who has raised the hand for the question. We have with us Mr. Nitin Raheja [Phonetic] Mr. Nitin,, you have been unmuted. We can go ahead with the question along with the video, if possible. Thank you.

V. Senthil — Chief Financial Officer

You are on mute, I think, Mr. Nitin, or I’m not able to hear you, sorry?

Nitin Raheja — — Analyst

Hi. Can you hear me, because I’ve unmuted myself.

V. Senthil — Chief Financial Officer

Okay. I can hear you now.

Nitin Raheja — — Analyst

Yeah. So, I have a follow-up question to my colleague, Varun [Indecipherable] You talked about the fact that at the current capacity in the textile machinery division, you’re at peak turnover. And any incremental growth will come from debottlenecking, if — that’s what you mentioned. So, just to understand, considering our order book and, A, what tenure over which this order book has to be delivered, and, B — and maybe you talked about it and I must have missed missed it in the first part, but — and the second part of the question was post-debottlenecking, what kind of peak turnover would that help you to achieve?

V. Senthil — Chief Financial Officer

Okay. See, the delivery period today is anywhere between, you’d say, depending on the type of machines between nine months to 16 months, right, or 15 months. The existing order book is, again, a mix, right? I mean, it’s that projects, when they start, there is a sequence in which we would like to deliver. And they can keep going in that kind of a sequence. You can always shuffle in between — in case there is a unitary machines. So, our capex plan is, it is not to say that okay, this is what we would like to achieve and then we just increased the capex because we know, and as what we have seen, this was again asked quite a few times over the last year when we had a good surgeon order book to say why we are not expanding capacities instead of delivering 18 months and 20 moths, why can’t we shrink everything to 12 months. And we always maintained that our industry always runs in ups and downs. It has its own cycles. And that’s what we have — we could see even Q2 and Q3 of last year, right? So, that’s what happens. And we’re very much aware that this is the cycle. So, what would happen is they will say, okay, push mine out, we’ll come back later, we’ll take a few machines, we’ll not take the entire range. All these things happen. So, we are very sensitive to this. So, whilst we try to keep within a reasonable time the delivery period, at the same time, depending on the — really, I would say long-term view, we add capex. And this year — last year, we always said balancing capex, that has been to a large extent done. Now we will say okay, which mission — which are the ones which are actually giving us the longer lead times, right? And that is where we would like to go and invest. And of course, we are — we can’t share which are the ones which are having the longer lead times. But that is the scientific way of doing it. So, then you can on an even basis try to reduce the time of delivery to the customer.

I hope that answers the question.

Nitin Raheja — — Analyst

And this is a part of the INR400 crores that you mentioned over a three-year period? This would include that?

V. Senthil — Chief Financial Officer

I think that INR400 crores was basically ATC order book.

Nitin Raheja — — Analyst

Okay.

V. Senthil — Chief Financial Officer

That’s — I was talking about ATC when I was talking about ATC order book, which for execution. Capex as it comes yearly, I mean, as a policy, we have — as a policy, we always had that depreciation is always invested. But in situations like this where we have got an order book to deliver, then of course we go just whatever I explained is what we do.

Nitin Raheja — — Analyst

Okay. And so, commensurately, with this little change if you have to see, what kind of growth or incremental peak turnover would we see in the textile machinery?

V. Senthil — Chief Financial Officer

Okay. I mean, we have seen right now around 20% over the last year. So, it will get a creeping incremental turnover increase as the capex comes in. That’s what it is. We are not going to see — because it can go only step by step. It is not one-shot. We’re going to see another 20% jump. It doesn’t work like that.

Nitin Raheja — — Analyst

So, you’re saying it’s not like you’ll see another 20%, but it will be more creeping, like as you said?

V. Senthil — Chief Financial Officer

Yes. Efficiency has to be driven. And that comes in as a creeping increment.

Nitin Raheja — — Analyst

And in terms of the machine tool business, because there you said you have capacity, there you’d probably see the faster growth?

V. Senthil — Chief Financial Officer

Yes, we should.

Nitin Raheja — — Analyst

Okay. And you’re — I mean, it’s one of the oldest companies, it has been one of the most well-run companies and businesses in the country. But from a cyclicality perspective, is there a thought process in terms of how this company should look three, four years from now? Where — you have sort of diversified to prevent the kind of cyclicality that we normally see in the textile sector?

V. Senthil — Chief Financial Officer

See, textile sector comes with its cycles. I mean, that — those cycles, and if you follow us over the — I mean, just before I start off, is there any other questions which I should note down so that we can answer them together?

Nitin Raheja — — Analyst

Not from my side. I’m done.

V. Senthil — Chief Financial Officer

Okay. See, textile sector — then I’ll take this and complete. So, textile sector comes with its own cycles, right? And we have been seeing this over the entire lifetime of what it is. But I think on the machine tools side, things are only growing now. Things are actually with the industry growing and with so many things have come in, PLIs have come in, Plus 1 factor, they also talk about Minus 1 factor. So, all of them are kind of indicating towards a very healthy growth over the next few years, I would say, as far as the engineering sector is concerned. So, there — that’s the reason we have felt that this is definitely an area for us to kind of invest and which we have done. With respect to total diversification out of this, I mean, that is of course up to the board. But we are an engineering company. We pride ourselves in bringing the latest and the most advanced technology to both the industries of CNC machines and also to the textile machineries, building segment. I think we continue to do that. And on top of this, there is also space for us to grow within that textile spinning segment where we have new machine which we introduced new automation products which we have launched. And on the machine tools side, there is ample scope for us to expand on the machining centers. Right now, we don’t have a very large market share there. So, there is an ample opportunity for us to expand there. So, given our core focus, I think there is ample scope for us to be focused on this area to kind of continue to expand and gain market share and also expand the footprint of our business.

Thank you. Back to you, Mr. Sameer.

Sameer — NSDL — Analyst

Yes, sir. Thank you so much. Thank you. Proceeding with the next person we have with us, Mr. Rushav [Phonetic] Mr. Rushav, you have been unmuted. Can we proceed with your question, please?

Rushav — — Analyst

Yeah. Am I audible?

Sameer — NSDL — Analyst

Yes, sir.

V. Senthil — Chief Financial Officer

Yes, Mr. Rushav, yes.

Rushav — — Analyst

Yeah. Hi, good evening, sir.

V. Senthil — Chief Financial Officer

Good evening, Mr. Rushav.

Rushav — — Analyst

Yes, sir. I had three questions. First of all, sir, you mentioned, you’re seeing a lot of opportunity in MTD. So, just want to understand, suppose, if I want to look at a broader picture, the market market potential of ATC plus MTD, is there a possibility that the next four, five years can they become 40%, 50% percent of our top-line, because currently, we’re at 85% from textile division? That’s question number one.

And second question is, has the ATC division, has it come to conflict — infection point wherein we can scale exponentially consistently and profitably on year-on-year basis? Second thing is that.

And then my last question is, we were talking about some strategic and financial investor in aerospace industries for which we have created a separate entity. Any update on that and what kind of investor are we looking to onboard? These are my three questions.

V. Senthil — Chief Financial Officer

The — see, the machine tool industry — let me take these two as two separate things, right? Machine tool industry is growing. I think that is the sum and substance. And we have been growing along with the machine tool over the last — I mean, if you take the past 10 or 12 quarters, or a little bit more, we have seen machine tool having a consistent growth trajectory. So, considering that we have invested and we feel that there is definitely enough possibility to grow in machine tool. Now the one thing in machine tool industry is it is more of an assembly because most of the components are bought out, right? So, we are in a position to expand our capacities in a very planned manner. What we basically do in machine tool industry is that we have to address different segments of the market. And that is where our R&D and everything is spent as far as machine tool business is concerned. Now, can it grow? I think there is all the possibility for it to grow. Can it grow to 40%? I don’t think we can give you any of those projected numbers here. But definitely like we have repeated and we have also said that, yes, we have capacities and the idea is to build capacities that there is room for us to grow and that is why we have been investing in this particular business.

With respect to ATC, I’ll ask Madam Dhanalakshmi to take that that question. She will reply for you now.

B. Dhanalakshmi — Senior General Manager

Thanks. Mr. Rushav, as you see, that the advanced technology center turnover? [Indecipherable] As you see, like ATC turnover has increased from INR95 crores to [Indecipherable] crores giving there are around 142 [Indecipherable] This itself indicates that out of the INR400 crores of order book as and when we have, there is quite a possibility for execution, because now, we see opportunities which was just on books coming to us. So, as far as the strategic partnership or tie-ups and sign-ups, nothing has as of now took place. We are still with the NCLT waiting for the order for [Indecipherable]

V. Senthil — Chief Financial Officer

Back to you, Mr. Sameer.

Sameer — NSDL — Analyst

Thank you so much, sir. Thank you so much for answering to that, and thank you so much, ma’am, for answering to that as well. Next person on the list we have with us, Mr. Ritwik Sheth. Sir, you have been unmuted. Can we have your question with the video, if possible?

V. Senthil — Chief Financial Officer

Yes, Mr. Ritwik, you’re audible. How are you?

Ritwik Sheth — Deep Financial — Analyst

Good, sir. How are you, sir?

V. Senthil — Chief Financial Officer

All good.

Ritwik Sheth — Deep Financial — Analyst

Yeah. I have few questions.

V. Senthil — Chief Financial Officer

Please, go ahead.

Ritwik Sheth — Deep Financial — Analyst

[Technical Issues]

V. Senthil — Chief Financial Officer

You’re not audible, Mr. Ritwik.

Ritwik Sheth — Deep Financial — Analyst

Is it better?

V. Senthil — Chief Financial Officer

No, Mr. Ritwik. You’re not audible.

Ritwik Sheth — Deep Financial — Analyst

Is it better, sir, now?

Sameer — NSDL — Analyst

Mr. Ritwik, the audibility has gone down. The volume has dropped down significantly. You’re barely audible.

Ritwik Sheth — Deep Financial — Analyst

Hello?

Sameer — NSDL — Analyst

Mr. Ritwik, you were audible in the very beginning. I don’t know. Like, did you change something, like your — did you put your system away or did you move away from the system a bit?

Ritwik Sheth — Deep Financial — Analyst

Am I audible now?

Sameer — NSDL — Analyst

Sir, you’re barely audible. The volume is way too low.

Ritwik Sheth — Deep Financial — Analyst

I’ll get back in the queue.

Sameer — NSDL — Analyst

Okay. Senthil sir, with your permission, we would like to take Mr. Ritwik once he’s ready again. Going ahead with the next person on the list we have with us Mr. Amit Shah [Phonetic] Amit sir, you have been unmuted. Can we have your question with the video, please? Amit sir, I believe you have muted yourself.

Amit Shah — — Analyst

Yeah. Am I audible now?

Sameer — NSDL — Analyst

Yes, sir. Thank you.

V. Senthil — Chief Financial Officer

Yes, Mr. Amit.

Amit Shah — — Analyst

Yeah. Hi, sir. Sir, my question — first question was on the TMD side. You said you have taken a price hike in the month of May. What is the quantum of price hike in that particular segment? Secondly, does this price hike — is the price hike sufficient enough to take care of the cost increase that we have witnessed over the last one year? And can the margin bounce back to double digit? Third question on the TMD side is that your order backlog has come down to INR6,000 crores odd. And out of that, almost INR1,000 crores odd is inactive orders. So, we have somewhere around about INR5,000 crores odd for the execution which is available. With this kind of an order backlog, what is the kind of growth that we can expect in TMD division for FY ’24? And lastly on the TMD side, we had launched this autoconer machine. So, what is the status of that? What is the kind of sales that we have been generating? I suppose that is somewhere roundabout INR1,500 odd crores market. So, if you can just highlight on the market share gains. One more question from my side was on the capex side. So, what is the kind of capex that we are planning to do for FY ’24? Which are the areas that you would be investing into? And on the MTD side, you suggested — so if I look at your quarterly run rate of revenue on the MKD side, it has been very flattish of INR250 odd crores for the last couple of quarters. So, what is the kind of growth? Can we reach to, say, INR300 crores, INR400 crores kind of a level on a quarterly basis? Sir, if you can just highlight on these points. Yeah. Thank you. That’s it from me, sir.

V. Senthil — Chief Financial Officer

With respect to TMD, the price hike what we have done is closer to around 5% to 7% depending on various types of machines. Yes, the idea basically is that we should go back to margins. We should get back to our margins. I think that is the very purpose that we have to whilst we have absorbed as much as possible the last year all the increased cost. And I think since the markets have also stabilized at the moment and we have done this to [Indecipherable] get a higher margin, we had to [Indecipherable] prices. With respect to the order book, I mean, I’m not really able to understand the question. Between INR6,000 crores, yes, it’s around INR6,000 crores with INR1,000 crores of inactive orders. We will see even this — every year, we see an order inflow. So, that order book will get replenished and the growth in FY ’24 is going to be based on whatever we are able to kind of ship out and that I’ve already answered. With respect to autoconer machine, it is not yet commercially launched at the moment. We said we did mention last time that as we launch it, we’ll keep you informed as the machine starts to get commercially getting launched, we will keep you informed. The capex side, we’ll — we plan to invest similar amount because already we spoke a lot about capex. We are going to look at further reducing the length or see what are the bottlenecks and we’ll be investing there. So, we see a further investment as to what we have done in FY ’22, ’23 between both capex of MTD and capex of TMD. We should be, again, closer to INR100 crores plus as far as capex is concerned.

MTD, yes, the industry has its own challenges with respect to the auto segment. But in the engineering side, it’s going well, but the auto segment, again, doing various — the passenger, the non-passenger segment. It has its own challenges at the moment. But like we said, we have capacity to do what you have asked, where you are indicating close to INR300 crores odd a quarter. I don’t think that’s a challenge for us. It’s only how the market is and how we are able to establish our market share within this segments where we currently operate.

I hope that answers all the questions. Now back to you, Mr. Sameer.

Sameer — NSDL — Analyst

Thank you so much, sir. Thank you so much. The last person who we would like to take is Mr. Ritwik Sheth. He is back with us. Mr. Ritwik, we would request you to please proceed with your question.

Ritwik Sheth — Deep Financial — Analyst

Yeah. Am I audible now, sir?

V. Senthil — Chief Financial Officer

Yes, Mr. Ritwik. You’re audible.

Ritwik Sheth — Deep Financial — Analyst

Yeah. Hello, sir. Sir, so most of the questions have been answered. Just two questions. Firstly, just extending the previous participant’s question on the machine tool division. We’re about INR250 crores per quarter in the last six to seven quarters. So, is it that we have lost some market share because it seems that despite having the headroom to grow, we are in that range only? And sir, my second question is on the textile segment. Our current installed base is about 58 million spindles in India, 58 million, 59 million spindles in India. Now, what is your sense on the outlook for this? What kind of growth can we see on this base? And generally as a thumb of rule, what percentage of this come for upgradation every year? These are my two questions, sir. Thank you.

V. Senthil — Chief Financial Officer

Okay. I think pretty much we’ve covered most of it, Mr. Ritwik, but still let me try and answer on this headroom of machine business, right? See, the order execution and capacities are two different things. So, whilst we have got our capacities done, yes, we have to get the orders for execution and that’s where we covered areas between turning centers, machining centers. We have market share — quite a large market share in terms of turning centers, just closer to around 25% to 27%. And with respect to turning centers, we’ll be in closer to a higher-single-digit in terms of machining centers. The idea basically is we need to get more of these machines out there and that’s where we talk about the capacities. And the reason we have that headroom out there, it is not for lack of orders, it is that we are creating more headroom than what we should. We should be in a question to what we have been supplying. And that gives us that flexibility and that leverage to supply more as the demand comes in.

With respect to the spindles, India perhaps over the last two years has absorbed a little bit more than between anywhere from 2.5 million to 3 million kind of spindle is what it has absorbed. And this is what — actually what we cover in the project versus unitary. The unitary machines are the ones which generally come up for replacements and projects are basically new projects. And like I said, perhaps this year, what we have seen is, since lot of projects orders were already placed in ’21, ’22, this year, we had seen closer to 60% being upgrade kind of a scenario compared to last year only 25% being upgrade and more of it being project orders. I mean, that’s — that also we had covered. Okay?

Thank you. Back to you, Mr. Sameer.

Sameer — NSDL — Analyst

Sir, thank you so much. I believe all the questions have been answered. There are no more hands…

V. Senthil — Chief Financial Officer

I think Mr. Huzefa, I think we couldn’t get him to talk. Is he there?

Sameer — NSDL — Analyst

Mr. Huzefa, I checked, he is not part of the attendees anymore. I think he left the meeting.

V. Senthil — Chief Financial Officer

Okay.

Sameer — NSDL — Analyst

So, if at all, if any of the attendees — if you think we missed your question, you’re always free to put those questions down in the mail. And this brings us to the end of this meeting. Sir, with your permission, we’d like to conclude the same.

V. Senthil — Chief Financial Officer

Thank you. Thank you, everyone. Thank you for attending.

Sameer — NSDL — Analyst

Thank you so much, Senthil sir. Thank you so much, Dhanalakshmi ma’am, for answering to all the questions. Thank you so much, all the attendees, for being with us. Thank you so much, everybody, for joining with us at this meeting. Thank you so much. Thank you. Well, thank you.