Menon Bearings Ltd (NSE: MENONBE) Q3 2026 Earnings Call dated Jan. 16, 2026
Corporate Participants:
Arun Aradhye — Managing Director
Aditya Menon — Promoter Group
Analysts:
Vinay Pandit — Analyst
Bhargav Buddhadev — Analyst
Raghav Maheshwari — Analyst
Arnav Sakhuja — Analyst
Unidentified Participant
Sucrit Patil — Analyst
Himanshu Upadhyay — Analyst
Shubham Jain — Analyst
Keshav Kumar — Analyst
Darshan Gala — Analyst
Madhur Rathi — Analyst
Presentation:
Vinay Pandit — Analyst
Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q3 and Nine Months FY26 Post Earnings Conference Call of Menon Bearings Limited. Today on the call from the management, we have with us Mr. Arun Aradhye, Whole-time Director and CFO; Mr. Aditya Menon, part of the Promoter Group.
As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, this is a reminder that this call is being recorded.
I would now request the management to detail us about the business performance highlights for the period ended December 2025, the growth perspective and the vision for the coming years. Post which, we will open the floor for Q&A.
Over to the management team.
Arun Aradhye — Managing Director
Okay. Thank you. So, good afternoon, everyone. Wish you all a very happy and prosperous new year. And also thank you for post earnings call to discuss our performance for the third quarter and nine months ended on December 2025.
I’m pleased to share Q3 FY26 has been a strong quarter for the company, reflecting healthy demand across key segments and continued improvement in profitability. On a consolidated basis, revenue for the quarter stood at INR76.9 crores, representing a 32% year-on-year growth. Total income was INR78.5 crores, also up by 32%. Profitability saw a sharp improvement with profit before tax at INR12.4 crores, up 69% and PAT at INR9.3 crores also up 69%. Earnings per share for the quarter increased to INR1.65 compared to INR0.98 last year. For the nine months period, consolidated revenue reached INR206.6 crores, an increase of 18% year-on-year. PAT grew by 34% to INR24.5 crores, reflecting sustained operating leverage and improved efficiency across our business.
Looking at the business mix, OEM continues to be our largest segment, contributing about 48% of Q3 revenues. Exports accounted for over 36%, underscoring the strength of our international customer base and diversification benefits. The replacement market contributed around 8%, and we continue to see steady improvement in this segment as well.
At the business unit level, Menon Bearings benefited from healthy OEM demand, stable export orders and improved capacity utilization, which supported margin expansion. Menon Alkop delivered stable performance during the quarter with continued focus on higher volume alloy products and customer qualification initiatives. Menon Brakes, while still at an early stage, is progressing as planned, and we expect a gradual ramp-up as customer approvals and volumes increases.
On the cost front, raw material prices, volatility remains an area of close monitoring. However, a combination of partial price pass-through, better product mix and operational efficiencies helped us to protect and improve margins during the quarter. Apart from that, we have completed installation of 3.8 megawatt solar — rooftop solar installations, covering all plants, which will curtail electricity expenses by about INR2.25 crores per year.
As we move forward, we see a stable demand environment across OEM and export markets. With major capex behind us, our focus remains on sweating assets, improving return ratios and driving profitable growth. Our subsidiaries continue to add long-term strategies and value and optionality to the business.
With that, we will now be happy to take your questions. Thank you.
Questions and Answers:
Vinay Pandit
Thank you, sir. We will now start the question-and-answer session. [Operator Instructions]. We’ll take the first question from Mr. Bhargav Buddhadev. Please go ahead.
Bhargav Buddhadev
Yeah. Good afternoon, sir and congratulations on a good set of numbers.
Arun Aradhye
Yeah. Thank you.
Bhargav Buddhadev
Sir, my first question is that, obviously, we’ve seen a very strong growth in exports. So the share of exports has also now improved to about 36% versus 33%. So, if you can spend some time in terms of despite this tariff scenario, how are we managing such a strong growth in exports? If you can just explain that, that would be my first question.
Arun Aradhye
Okay. As I told you last time also in the earnings call, we have already started additional business with one of the major customers from USA, that is Allison Transmission. And that alone business has added value of around 2 point — more than INR2.5 crores a month. Apart from that DRiV — Federal-Mogul DRiV is also there. And other customers also added in the fold of our company so far as exports are concerned. So, we hardly have any impact due to the tariffs imposed by the USA. On the contrary, our exports are poised to grow further in future as well.
Bhargav Buddhadev
Sir, the second question is that, obviously, in the last one month, we have seen a significant increase in copper prices and also steel prices undergoing some inflation. So in this scenario, how are we poised to basically pass on these to our customers because copper, in particular has seen a significant rally. So, is it fair to say that despite such an inflation, we will continue to maintain our gross margins or EBITDA margins going forward as well?
Arun Aradhye
Yes, very right question. As you know, there is a tremendous volatility so far as non-ferrous materials are concerned. The prices are increasing like anything, and it will definitely have adverse impact on the margins. But at the same time, what we have done that our contracts typically allow for partial pass-through. We are in the process of passing the increased raw material cost to the customers, and that is a process maybe depending upon three months contract, six months contract for revision of rates. So, that is a continuous process that we are following.
Apart from that, we focus on product mix improvement, yield, then yield optimization, and then cost efficiency to mitigate impact. And we are constantly having a vision on the raw material prices and to ensure that through the process improvement and yield improvement, our margins will not be affected to the greater extent. Maybe some dent can be there, but it will not have a major impact due to passing off the burden on the customers as well as reduction in the raw material consumption and process improvements.
Aditya Menon
And like you said, prices are volatile. With some customers, we have three months — like three months period of rate increases. As management, we are also sending them every month now because now it’s very volatile. Before it used to be like from INR900 to INR950, but now it’s from INR900 to INR1,200 a kilo. So, that’s a lot of cost which we are bearing. So as management, we are also talking to our customers, and we have relation for 20 years. So customers also — they are also dependent on us. We are also their suppliers. So they are also friendly with us. They have good relation. So, they are also what you say, they also try to help us pass the burden for like — take the burden from us.
Arun Aradhye
As he said, we are in the process of contracting all the customers to see that instead of looking at whatever contracts we have for three months or six months of provision. It cannot be like that in future. Considering the volatility in the prices, we cannot avoid by the contract that we have already entered with them. We are already talking with them that it will be on a monthly basis instead of three months or six months.
Aditya Menon
Because now even the Iran situation, Venezuela situation, it could be more volatile. So, the customers also are understanding, because you do high engineering, it’s big business. They are also understanding. We have a good relation with them. So far, the talks are positive, but we still have to finalize it. Maybe by next quarter, we get a better picture on this, but customers are helpful. They are ready to help us on this, pass on the burden, because for three months to six months, we can’t bear the burden of price increase. So they are like we have sent them the e-mails last month, had calls with them in December. Some of them have agreed for — in January to pass on the burden. Some are still in chats. But they are reasonable. It’s not an unreasonable thing that goes on here.
Bhargav Buddhadev
And lastly, sir, on the Brakes business, is there any development because that business can actually become a large business maybe in the next two years to three years. So, if there are any updates over there? And that would be my final question.
Aditya Menon
Yes. Actually, now we are almost reaching INR1 crore every month in Brakes. We are continuously working on our marketing. There are two OEMs. I won’t take the names now, but we have gone and had very positive discussions with them. Maybe by next meeting, we can give you more — maybe business also might start or we’ll give you more positive news on that.
And regarding railway, we’re still in the dynamometer like already start — ordered the dynamometer, maybe three months to four months for the dynamometer. So maybe by next one year, we’ll see a more huge growth in Brakes business. Because Brakes — because we had some — what do you say, some challenges with the dynamometer, we have already entered the two-wheeler segment market, where we are doing a big pie chart there already. And after our product quality and everything is going smoothly, we’ve got a big open order, which we currently are not even doing every month.
So, we’re getting a new line for two-wheeler segment also. So, we are not just waiting for HCV, LCV because there is a little bit break on the railway segment, we are going on — looking at other avenues where we can — in the friction material where else we can go. So two-wheeler also has picked up well. Other customers in two-wheeler also are now approaching us. But our still main focus is railway and HCV, LCV. So as management and team, we are focusing on that also currently.
Arun Aradhye
Apart from that, one of the auto giants have already contacted us. So, we had a detailed meeting with them. And probably, they will visit to our establishment in the next month by 15th of February, wherein we expect — we are not very sure, but we may expect that additional business of at least INR1 crore will start with them.
Aditya Menon
And even for the —
Arun Aradhye
Per month, per month.
Aditya Menon
Even for the export question you asked for bearings and bush. Now as management, we have taken a poll, not policy, we have taken a decision. We don’t do DDP where we do the delivery to US. We are trying to get everything ex [Phonetic] works India, because tomorrow, some other war happens or any other external factor should not affect our business. Maybe like we might lose some top line here and there, because it won’t be billing in dollar rate, it will be in rupees. But as management, we are trying to do everything ex work.
So in the long term, we are not — tomorrow Trump puts 100% tariff or some other issues happen in the world, which are not in our control, should not affect our supplier. So, that also we are doing, because you asked how export is increasing. Now we have some customers we don’t do X works India. We do DDP or their delivery terms. So we are trying to get it changed to our convenience. Maybe top line might come down a little bit. But in the long run, this is a much more sustainable way, a safer way for us to carry on our business ahead.
Bhargav Buddhadev
Okay. Thank you. Our payment cycle will also improve, right? If you’re doing [Speech Overlap].
Arun Aradhye
[Speech Overlap] prices from 180 days, it will come down to 30 days. There is a great amount of saving on account of interest as well as the total turnover of inventory.
Aditya Menon
So as management, we are taking big decisions. But in our industry, how it is, our suppliers are bigger than us and our customers are bigger than us. So it’s a challenge to get it done. So Mr. Aradhye is on his best to get this done. And probably we are going to conclude in the next week only.
Arun Aradhye
Yeah.
Bhargav Buddhadev
Okay. Thank you very much and all the very best.
Aditya Menon
Yeah. Thank you.
Vinay Pandit
Thank you, Bhargav. We’ll take the next question from Raghav Maheshwari. Please go ahead.
Raghav Maheshwari
Hello. Congratulations on a great set of numbers.
Arun Aradhye
Yeah.
Raghav Maheshwari
Sir, my first question would be around the capacity utilization this quarter.
Aditya Menon
In Menon Bearings, bushing and washers, we are around 90%, and in aluminum, aluminum castings, we are around 65%. And Brakes, we are around at 60%, 65%. So, there is still a lot of room for future expansion, like, we can — like what numbers we have given for 2027, we don’t have to go for a major new investment capacity.
Raghav Maheshwari
Right. Okay. And sir, building up a question that the last participant had about the tariff on Menon Bearings like on the tariff in India. So sir, Menon Bearings Products are subjected to the 50% tariff, right?
Aditya Menon
Some products are most now the new law has come for HCV and LCV. That is like trucks, they are waived off the tariffs. So a lot of places, we are not like where the tariff doesn’t apply to us. Wherever the other areas the tariff apply to us, majority of the tariff is burned by our customers. We also pay a small count. Our customer also helps us with that.
Arun Aradhye
So I will little clarify about that, a little more. So far as our new business, we have started additional business with Allison. Earlier the tariff was 50%, now it has reduced to 25%.
Aditya Menon
Yeah. And on that 25% also because of good relation and we have supported them during tough times, they share the burden with us.
Raghav Maheshwari
Understood, understood. And sir, marginal expansion that we have seen, now we are standing at around 20.5% for this quarter. Sir, I wanted to know what drove this margin expansion this quarter?
Arun Aradhye
You see, benefited from strong execution, healthy OEM demand and stable export orders. While we may not see the same growth rate every quarter, we believe the current run rate is sustainable. Over the medium term, we expect growth to be in line with industry trends supported by exports, new customer additions and gradual improvement in the replacement market. While we could maintain and we will be maintaining the growth — the similar growth in future as well in terms of volumes as well as in the margins, we have taken proactive steps to see how we can counter volatility in the prices of raw material.
Number of actions have been already taken by the management, which will definitely result in reduction in the raw material cost by about INR60 lakhs to INR70 lakhs per month, which will be — actually the burden of raw material prices per month will be around INR70 lakhs, but this month, we will be able to reduce it due to process improvement by about INR55 lakh to INR60 lakh. And from the next month, it will be around INR75 lakhs to INR80 lakhs. All actions have been already taken. And with this, we are sure that we will maintain the same margins, which are sustainable in future as well.
Aditya Menon
And Raghav, to add to this, like if you’re following our company or these calls for the last one year, two years, we’ve been telling about a strong order book, and we always said like it will be coming in third quarter and fourth quarter and next year also. So, whatever parts we developed for the last 2 years, we are benefiting those fruits now. Those new orders are coming in now and the SUVs are starting. So from the next quarter, you’ll see similar growth for the next one year, one, one-and-a-half years.
Raghav Maheshwari
Yeah. Do we have a number, sir, on order book?
Arun Aradhye
It is — for this year, what we project that whatever order book position, if we consider that, we may reach up to INR295 crores and next year, maybe around INR350 crores, and next year INR425 crores.
Raghav Maheshwari
So, that is the order book size, right?
Arun Aradhye
Yeah, right.
Raghav Maheshwari
And what is the execution timeline for this?
Arun Aradhye
Right, like next two years. See, this year, we are going to finish around INR290 crores. Next year, we’re going to do around INR340 crores.
Aditya Menon
Arun, INR350 crores.
Arun Aradhye
INR350 crores. A little bit conservative. So, when the results come you guys are a little bit more happy.
Raghav Maheshwari
Right. Okay, sir. Thank you so much. That was all from my side and all the best.
Arun Aradhye
Thank you.
Vinay Pandit
Thank you. We’ll take the next question from Arnav Sakhuja. Please go ahead.
Arnav Sakhuja
Hi. Congrats on a strong set of results. So, my first question is, in the PPT, we’ve mentioned that we’re planning to double the Alkop capacity from around 1,440 to 2,880 in the next two years. So, I just wanted to understand, would we fulfill these orders in the future by potentially increasing wallet share from existing customers? Or would we try onboarding new customers to fulfill this demand?
Aditya Menon
Yeah. Actually, a lot of — we have already developed around 60 parts. Currently, wallet share from one customer, but it’s not like one customer — there are two customers actually, but we are not only doing India. We are doing their plants in Germany, their plants in USA, their plants in South America. So you can — it’s like a new customer, but the main brand is like John Deere. We are doing John Deere USA, John Deere Europe, John Deere South America. So, that’s one place. At the same time, we are doing continuous efforts to get new customers also. So, there are new customers that are coming in, because the quality of our product, the criticality which we are able to achieve. So, we are doing both at the same time. But this current growth is from current customers. But when I say current customer means John Deere India is a complete different group with a certain turnover. John Deere Europe is a certain group with like INR10,000 crore turnover. John Deere US is a huge company, again, separate. So, it’s like new customers for us.
Arun Aradhye
Yeah, you can treat it as a new customer.
Aditya Menon
Because we get vendor code different for John Deere Europe, John Deere USA, John Deere in South America, in Brazil. It’s like a new customer, but the brand name is same. But we get a vendor code different for all locations. So, it’s a mix of both. I don’t know how to explain that. But, yeah.
Arnav Sakhuja
Okay, thanks. I kind of got your point. So, my next question is, in the PPT, you mentioned a couple of strategic investments that the company is undertaking for cost saving, one of which you mentioned in the opening statement as well, which is a INR2.55 crore cost saving because of the solar installation. So what would be the total cost saving if you add all the various ventures that you are undertaking?
Arun Aradhye
See, one thing is electricity charges or power charges for one year, we are 100% sure that we should be able to curtail the expenditure on electricity by INR2.25 crores per year. Apart from that, due to the process improvements improved yield in the raw material, we should be able to save at least INR8 crores of per year.
Aditya Menon
And at the same time, we’re doing a lot of technical innovation and investments where we are not dependent on that much manpower. As going forward, manpower don’t get scarce, like also the PF all the — like the salaries are getting increased like month by month, which is not — which is not given to us by the customer — like the customers.
Arun Aradhye
We cannot pass on that.
Aditya Menon
So we are doing a lot of technical innovations to try to reduce manpower in the future. So, which benefits will come by next year — next to next year. So, that’s all the different things which we are doing, like technological innovation where we are not dependent on manpower too much.
Arun Aradhye
Wherever automation is possible to avoid rejection as well as improve the productivity. That is definitely going to help us so far as productivity is concerned and which in turn will result in the reduced cost per item or per component in the long run.
Arnav Sakhuja
Okay. Thanks a lot for answering my questions. And congrats again on strong set of numbers.
Arun Aradhye
Thank you, Arnav. Thank you.
Vinay Pandit
Thank you. We’ll take the next question from Disha. Please go ahead.
Unidentified Participant
Hello?
Arun Aradhye
Hello.
Aditya Menon
Hello.
Vinay Pandit
Yeah, please.
Unidentified Participant
Am I audible, sir?
Arun Aradhye
Yes.
Aditya Menon
Yes.
Unidentified Participant
Yeah. So just a couple of questions. Firstly, what is the total amount of capex we’ve incurred till now for this year? And what are we planning for the Q4 and for FY27?
Arun Aradhye
You see, so far as this year is concerned, we have already completed capex of around INR15 crores. Additionally, for next years what we have envisaged is around INR20 crores.
Unidentified Participant
Next two years you’re saying, INR20 crores, right?
Arun Aradhye
Yes.
Aditya Menon
And last two years, we have done around — like Mr. Aradhye said, last year, INR15 crores, before that we did INR15 crores. So the major capex of building, land acquisition, all that has been completed. This INR20 crore is just more technology, machine, more value addition what we can do to our products.
Arun Aradhye
What we have to know — what we have to do now is to sweat the assets.
Aditya Menon
Yes. So the main investment has been like we have done it. Yes, somewhere.
Unidentified Participant
All right. And you mentioned — so like for the Brake segment, we are seeing a lot of growth potential. So I think the current revenue mix around Bi-metal is around 74%, 22% from Alkop and 3% from the braking system, right, for this quarter. So, how do you see this product mix or the revenue mix changing going ahead?
Arun Aradhye
You see, since the — across all the segments, what we foresee that for this year, it will remain more or less constant. But next year, it will change. Maybe it can be about 65% to 68% in Bi-metal, about 25% to 28% in Alkop and remaining in Brakes.
Aditya Menon
See Bi-metal is a parent company. It’s been there from 1993 and Alkop is from 2008, 2010. And Brakes is two — this is a baby company, two years old. So, that’s why the pie also looks similar. So — but we are doing efforts where Menon Brakes and Alkop will contribute more to the total pie chart.
Unidentified Participant
All right. And what’s the margin split between all these three sectors?
Arun Aradhye
See margin so far as EBITDA margins are similar in Alkop. But Aluminum as well as in Bearings it is similar. So far as Brakes is concerned, it is less, because we have just started and recovery that is in process as soon as we increase the volumes, what we foresee what we have given for the next year is comparatively a conservative figure. But from about 12% to 13%, it may go up to 18% next year.
Unidentified Participant
For the brake segment.
Arun Aradhye
Yes.
Unidentified Participant
And what is the overall margin guidance for the next year?
Arun Aradhye
Next year margin is around 21% to 22%. Maybe next year, it is 21%. And next to next in ’28, it should be 22%.
Unidentified Participant
And where do we see for this year on a consol basis?
Arun Aradhye
It is 20%.
Unidentified Participant
20% margins for an overall consol basis?
Arun Aradhye
Yes.
Unidentified Participant
Okay. All right. Okay. That’s it from my side. Thank you.
Arun Aradhye
Thank you.
Vinay Pandit
Thank you. We’ll take the next question from Sucrit Patil. Please go ahead.
Sucrit Patil
Good afternoon to the team. My name is Sucrit Patil from Eyesight Fintrade Private Limited. Am I audible?
Arun Aradhye
Yes.
Sucrit Patil
Yeah. So I have two questions. My first question is as global auto and industrial demands shift towards the electrification and lightweight components, how do you see Menon Bearings evolving its product portfolio to stay ahead of the competition? Could you share your vision for how the company plans to integrate new technologies and expand into emerging markets over the next, say, one year to two years? This is my first question. I’ll ask my second question after this. Thank you.
Arun Aradhye
Okay. Basically, so far as Bi-metal bearing is concerned, sorry, Bi-metal division is concerned, it will not have any impact on this industry, our industry, because we are not into car segment. And whatever EV is coming, that is in the segment of passenger vehicles more, not in heavy vehicles or off-road vehicles, where we are very strong and we don’t have any stake so far as passenger vehicles are concerned. So, it will not have any impact on us. So far as EV is concerned and emerging market, so we are concentrating more on that through Menon Alkop, our subsidiary company, which will be explained better by Mr. Aditya.
Aditya Menon
Yes. So like Mr. Aradhye said, in engine bearing also, we are not in passenger cars. We are in HCV, LCV, tractors, transmission, earth moving equipment, these kind of — our parts go to these kind of vehicles where electrification won’t come in the next five years, 10 years, because it’s high power, high HP required. So in that way, we are very good. Also, like we make bushes. So we are trying to get PTFE bushes, not only for engine application, but other applications also like air conditioning, fridges, other areas.
And like Mr. Aradhye said, to — even electrification is coming and electric vehicles are coming through our Menon Alkop division, we are already developing parts for different electric companies that Tier 2 supplier to Tesla through concentric pumps. We do some parts for Porsche E-Mobility through Eaton transmission. We even do electric parts for TACO Prestolite. It’s a Tata Motors company, subsidiary company. So that goes to Tata Punch and Curvv. We do electric motor covers for them. So, we are also through Menon Alkop entering the electric — joining the electrification. So, that’s our answer.
Arun Aradhye
So apart from that we are in the process of engaging one of the major customers for PTFE bushes, which are required for EVs. We are to that — and the business volumes are to the tune of almost INR1.25 crores a month. We have not yet finalized. The samples are under process, and we’ll see what happens with. That will be in the interest of the company as well. And we are very sure that we should get that business, which will come in from the next year.
Sucrit Patil
Thank you. My second question is regards to finance and margins. With rising raw material cost and currency fluctuations impacting exports, what forward-looking steps are you taking to sustain margin expansion, while continuing to invest in capacity and R&D. Specifically, how do you see operating leverage and cost efficiency playing out in the next coming quarters?
Arun Aradhye
You see, as I already told you that so far as electricity charges are concerned, we should be able to bring it down by INR2.25 crores per year. Apart from that, whatever initiatives that we have taken proactive measures that we have taken so far as process improvement and raw material yield is concerned, which again will save us around INR8 crores to INR9 crores per year. Apart from that, whatever automation that we are going to do, that will definitely help us in reducing rejection further so that more and more quantity is available for sale, that will again help in reduction in the total cost of the company.
With this and with the increased volumes so far as exports are likely to grow further. As I already told you that we are in the meeting with one of the major customers for business of bush, the volumes are likely to grow, which will definitely help in recovering the overheads. So, more and more overheads will be absorbed by taking the measures to curtail the expenditure on raw material, electricity and to curb the expenditures which are wasteful. The steps have been already taken. And with this, we are very sure that we should be able to not only sustain the margins, but we are looking forward to see how we can improve the margins further.
Sucrit Patil
I think that’s good guidance from your part. And I wish the team best of luck for the next quarter. Thank you.
Arun Aradhye
Thank you.
Vinay Pandit
Thank you, Sucrit. We’ll take the next question from Himanshu Upadhyay. Please go ahead.
Himanshu Upadhyay
Yeah, hi. Good afternoon.
Arun Aradhye
Good afternoon, Himanshu.
Himanshu Upadhyay
Congrats on good numbers. I had two questions. In the previous quarter, we had spoken about potential business from a competitor for US aftermarket, where they had sent some 800 parts, if I am not mistaken.
Arun Aradhye
Yeah, yeah.
Himanshu Upadhyay
You said that management will take some time to decide on that business, whether we’ll go forward or not. Any thoughts have you made on that business? And what are your thoughts now post this quarter?
Arun Aradhye
Okay. We are in the process of verifying the feasibility of all these parts. We cannot go ahead with 800 parts at the same time. But at the same time, we are verifying which are having the more volumes with better pricing and which will add better number to our total numbers. See, Himanshu, we are selecting those items only. But at the same time, we have to understand that we can develop not more than four to five items or parts per month. So considering that, we are concentrating on the parts which are having more value addition with more volumes. And one by one, we are going to have this productionized over a period of time.
Aditya Menon
And there is a constant like when they are given 800 parts, some parts are lucrative with high volumes and good margins. At the same time, some parts are more critical, less volume. So, there’s a back and forth discussion with the customer also. They want us to take some bad parts also. At the same time, we only want the good parts, which are high profitable. So, it’s still going in, what do you say? We are still in discussion. So, it’s not gone forward ahead, like we are waiting for the right what do you say —
Arun Aradhye
Partly, we have gone forward and probably after having report from them so far as the testing is concerned, we may start a business so far as out of 800 parts, some of the parts have been already developed and samples have been approved. And we are likely to get another business of INR1 crores per month from April or May onwards.
Himanshu Upadhyay
Okay. And second was, if we look at Alkop’s numbers for the quarter and nine months, it seems domestic business has fallen, okay? So for last nine months, it was domestic — means from 69% has come down to 62% of the revenue for Alkop. Any specific reason for that? Why would it have? Because we are seeing automotive, which has done pretty well, even engineering is doing well. So, what would be the reason for domestic business coming down in Alkop?
Arun Aradhye
You see in some of the components where we were not having a good amount of value addition, we have taken a conscious decision to part away with those components. And at the same time, we are in the process of developing almost eight parts for domestic components. And that business is likely to grow further and the mix-up of the business of export and domestic will remain same. The pie will remain same over a period of time.
Himanshu Upadhyay
And any new customers we would have added means on the domestic Alkop side?
Arun Aradhye
As Aditya already told you that — so, the John Deere is one customer as such, maybe domestic, but they are having different, different divisions, maybe in USA, like Germany, USA, and then South America, North America, some of the establishments in India as well. So we are developing that for John Deere as well as we are having — increasing the wallet share so far as Concentric Pumps and Eaton is also concerned.
Aditya Menon
We are exploring new customers also. But it takes — like I told you, it takes three months, six months, new customer, they have to have belief in our technology, there are audits that are happening. So, in continuous process of that. And also, Mr. like Aradhye said, we are looking more at export — like we develop a lot of export stuff because we are getting better margins and better rates for export. That’s why a little bit focus is on that side.
Like what you meant by saying why domestic has fallen a little bit, some parts where while doing the casting, fettling brings more value addition, the margin is not that high. So as management, we are taking decision. Should we do this, it’s not donkey works. Should we do this for such low margin just because we are having a relation for 10 years, 15 years? Or should we go for a more lucrative or more attractive business. So, we are taking some of those calls also now. So that will be over by this quarter. By next quarter, next two quarters, you will see a better pie chart between export and domestic.
Arun Aradhye
Further, we are in discussion with other four customers, a very big customers, so that is in pipeline, and it will be successful. What I feel that it will take another five months to six months.
Himanshu Upadhyay
We have not lost any customer on Alkop. It is just we are restructuring the business already —
Arun Aradhye
Correct. Absolutely.
Aditya Menon
Just making the product mix better, so we get better value. Making the product mix more efficient, so our margins are better.
Himanshu Upadhyay
Okay. Thank you. I’ll join back in the queue.
Vinay Pandit
Thank you. We’ll take the next question from Shubham Jain. Please go ahead.
Shubham Jain
Am I audible?
Vinay Pandit
Yes, Shubham.
Shubham Jain
Pretty much all of my questions are answered, but I have some specific questions.
Arun Aradhye
Sure.
Shubham Jain
On the railway front, what’s exactly the issue with dynamometer, why it’s getting delayed and such?
Arun Aradhye
You see, we have already given the order for dynamometers and another two — when we ordered last time to one of the manufacturers of dynamometers, but unfortunately since he had to leave the country and go to USA., he could not complete that. Because of that, it is delayed. We have now given to another manufacturer and he has given the assurance that it will be completed within a period of four months from now. Since the registration with railways is always — already completed, and we are likely to get that along with quality checking for not only railway, for OEMs as well. So, fingers crossed, that is the key for railway business as well as OEMs.
Aditya Menon
Yeah. And it’s like — dynamometers are very, like it just sounds simple, but it’s a very critical equipment. So, we have gone and like done our audits and seen who’s capable of doing it or not. Finally, found this party in Pune, who is ready to do it. And according to our specs, we want to do it in a higher capacity and also next five years, 10 years, we don’t have to invest another dynamometer. So, the old guy couldn’t do it, and there are other XYZ reasons, which we had to pull out also. We didn’t want to get stuck there. So, this is a new person we have after a lot of inspection and final audits, we have finalized him.
So after this dynamometer comes in the next four months, five months, we should be good to go for railway. We finished all the other paperwork, other registrations for railway. But the main thing is that you should have a dynamometer in-house. So, we were — we had a few discussions with them, if we could do third-party for the first few months and all, but they were very persistent on having an in-house dynamometer. So as management, we finally found the right candidate to get a dynamometer done according to our special specifications. So, in the next four years, five years, we don’t have to go for another dynamometer or another changes in that.
Shubham Jain
Right. And on the capex side, we have INR20 crores of capex left to be incurred, right?
Aditya Menon
Yeah. So —
Arun Aradhye
That is over a period of two years.
Aditya Menon
Two years, yeah.
Shubham Jain
Right. So 10 each I guess.
Aditya Menon
Yeah. 10 each.
Shubham Jain
Over next 2 years, okay?
Aditya Menon
Roughly, depending how order book comes.
Arun Aradhye
Maybe in the remaining period in this quarter, we may be incurring expenditure to the tune of around INR3 crores and rest INR17 crores consolidated basis, we have to incur during next two years.
Aditya Menon
And it is like how we have already submitted all the samples and all. As soon as the samples are approved, production start, we just have to order the required machinery. We don’t want to do it too early or too late to have a good cash flow or not use our funds in a wrong way.
Arun Aradhye
So I can give you the tentative details. So for Alkop is concerned, we will have to incur capex of around INR7 crores in the next two years in Bearing about INR7 crores and in Brakes around INR6 crores.
Aditya Menon
This is a roughly breakup, yeah.
Shubham Jain
And on the Alkop side, as you have mentioned, John Deere, right? It should be based I mean, analyzed as if it’s five different companies as such.
Aditya Menon
Correct.
Shubham Jain
So, where is the major growth coming in from a geographical point of view?
Aditya Menon
I would say more of exports.
Shubham Jain
No, I mean from which geography of the world.
Aditya Menon
Germany, export, Europe and USA. Those are the two driving more big exports.
Shubham Jain
Right.
Aditya Menon
Yes.
Shubham Jain
That’s it —
Aditya Menon
At the same time, John Deere also is there, at the same time, talking to Brakes India; GPP, Ghaziabad Precision. Then there’s the Allison Mayekawa [Phonetic]. So there are different — but I want to — in this meeting, I want to tell you 100% concrete. The other ones are 70%, 80% done. They will be get converted. So, when they get converted, I’ll take those names also. I don’t want to give you a false hope or wrong names. So maybe next meeting, I can — when their order is confirmed, when I have PO in my hand, I can give you those names.
Arun Aradhye
So those are in the pipeline.
Aditya Menon
Yeah.
Shubham Jain
Thank you.
Vinay Pandit
Thank you. We take the next question from Raghav Maheshwari. Please go ahead.
Raghav Maheshwari
Hello? Yes, thank you for the opportunity. Just a follow-up question. The next thing that we think — that you were talking about. So, if you can just give a detail on what portion of your revenue will be booked as like ex works. And then what [Speech Overlap]
Vinay Pandit
Sorry, Raghav, your voice is not clear. If you can little more —
Shubham Jain
Yeah. Is it better now?
Vinay Pandit
Yeah.
Raghav Maheshwari
Yeah. So sir, I just wanted to understand more on the ex work revenue booking that you were talking about with the previous participant. So, what impact will it get us on our cash conversion cycle on a consolidated basis?
Arun Aradhye
On a consolidated basis, the cash conversion, whatever you are telling you know, it will drop down from 180 days to almost 30 days. That is amazing we can save much — so far as interest is concerned on working capital. At the same time, while we will be saving huge costs on account of interest, because of ex works, we will have to shell with some of the margins so far as transit — shipment costs are concerned, tariff is concerned, then interest is concerned. So maybe around some of the business will be impacted by 15% probably. But at the same time, margins will remain same because we will be reducing the cost by about 20%. On the contrary, 5% margin will be increased.
Aditya Menon
And again, as management, we have safety, like we are doing ex works. There’s no pressure of third external factors affecting us. So, maybe margin here and there might be affected marginally. But at the same time, we have peace of mind and everything is in our hand. We have less external factors affecting our business.
Raghav Maheshwari
Okay. And sir, are we planning to do this for our entire business or just the export or like what?
Aditya Menon
This only happens for exports. So, we are trying to —
Raghav Maheshwari
That too like —
Aditya Menon
We are trying to get it done for all our US exports.
Raghav Maheshwari
Okay. All our US exports.
Aditya Menon
But I can’t promise you it will happen for all. It’s in customers’ hand. So, it’s a negotiation, it’s a dialogue to have with the customers. So, wherever it can happen, it’s good for us. Wherever not, we’ll try to minimize the risk as much as possible.
Arun Aradhye
But we are sure that almost 90% of the exports will be covered under ex works.
Aditya Menon
Yeah. So, that gives peace of mind in the long run.
Raghav Maheshwari
So this 130 days to 30 days, this will happen once the 90% of exports are converted into ex works, right?
Aditya Menon
Already actually 60% to 70% of exports are ex works even currently.
Raghav Maheshwari
Okay, okay. Got it, sir. Thank you.
Vinay Pandit
Yeah. Thank you, Raghav. We’ll take the next question from Keshav Kumar. Please go ahead.
Keshav Kumar
Hi. Sir, on the Bi-metal front, would you be able to tell how much of our exports come from EU and US, if you could give a split between the two?
Arun Aradhye
See, majority of the exports are to the USA. Almost 60% to 65% export is to USA.
Keshav Kumar
Okay. And sir, if this EU FTA happens, then how difficult or easy would it be to scale the business — the EU business considering the business is sticky, and therefore it’s difficult to dislodge the competitors.
Arun Aradhye
We don’t see any issues. So far as you see, recently, in the last week only, one of the major customers, John Deere, they have visited our factory Bi-metal for global sourcing for their — all the plants across the globe.
Aditya Menon
And especially for Europe.
Arun Aradhye
Especially for the Europe and specifically for Germany.
Aditya Menon
I think if quality and technology, if your delivery is on time, other factors are workable. There are not loopholes. There are — you can work around. If your product is strong, if your communication with them is strong, technologically, you are achieving the quality, delivery is on time. The other factors are 10%, 20% in the challenge of the 100% business.
Arun Aradhye
And what we learned from the discussion we had with them that China Plus One policy is getting further momentum now.
Aditya Menon
Yeah. They’re implementing that even more. It’s [Speech Overlap].
Arun Aradhye
And they are looking at India as a major source.
Aditya Menon
Yes.
Keshav Kumar
So sir, say, this FTA happens, is the EU opportunity size equally big? Or would US be the bigger focus for us, say, for the next five years to seven years?
Arun Aradhye
No, no. USA will be the major focus.
Aditya Menon
Yeah, yeah. USA is still our — we’ve been exporting there for the last 30 years. So, we have a good base there, good customer relation also. So — and if EU gets better, there’s no harm in exploring EU also. We can’t say which is focused, whichever is more lucrative and if EU also grows at that rate, both will have equal priorities, not like one has less priority or another has less priority.
Arun Aradhye
So far tariffs have not impacted our business.
Aditya Menon
I was asking about the opportunity size, not the, I mean, priority. But just like arithmetically, if I can get some sense.
Arun Aradhye
Currently, US is like bigger size-wise for us.
Aditya Menon
Either markets.
Arun Aradhye
Yeah.
Aditya Menon
But in EU comes, we are making good like good size of business there, why not?
Arun Aradhye
Like I don’t know what to give you answer here, but like currently, US is our big export goes there. We have a warehouse there, team there. Then again, we have tapped the South African market as well. That is a business of around INR6 crores to INR7 crores per year that we have already backed. There we export. We are already catering to the African market through distributor in Dubai.
Aditya Menon
Yeah.
Keshav Kumar
Understood, sir. Thank you. That’s all from my side. All the best.
Vinay Pandit
Thank you, Keshav. We’ll take the next question from Darshan Gala. Please go ahead.
Darshan Gala
Hi, sir. Good afternoon. I would just like to know when you say that now we have to sweat our assets. So, what is the asset turns in peak level we can achieve from the capacity which we have currently and the capex which we might do in —
Arun Aradhye
It will be almost 2.5.
Aditya Menon
Yeah, 2 to 2.5.
Darshan Gala
All right, all right. That’s it from me.
Vinay Pandit
Thank you, Darshan. We’ll take the last question from Madhur Rathi. Please go ahead.
Madhur Rathi
Sir, thank you for the opportunity. Sir, I wanted to understand, you mentioned that in the Brakes segment, our margins are currently in the 12%, 13% range, and that could go to 17%, 18%. So, what would lead to this such huge margin increase? Is it that the dynamometer when it caters to railway, our margin profile will increase significantly or is something else other than this?
Aditya Menon
Actually, like you said, that also is one point. Currently, we are only 60% utilization. So, 40% utilization currently we are not doing. So automatically, when you go out to 80%, 90% utilization, your margins get better. So currently, we are only at 60% utilization of the whole plant. So second shift is half running, third shift is not running.
Arun Aradhye
So you are in the finance, you also know how we can recover and absorb the overheads.
Aditya Menon
Yeah.
Arun Aradhye
So as the volumes grow you know which will [Speech Overlap] the margins.
Madhur Rathi
So I’m just looking at our competitors Rane Brake and Sundaram Brake Linings. Sir, these guys do very little margins versus what we are targeting. So is our product profile different from them, or I’m not trying to understand how can a big large OEM give us margins when our competitors are making so little margins?
Arun Aradhye
You see, they are concentrating more on aftermarket, where the value addition is definitely very less because we have to have a total network throughout India and the cost of establishment and selling and distribution is always higher. But at the same time, when a big giant, automotive giant is coming and visiting our factory in the next month, and we are absolutely sure that we may get additional business of INR1 crores to INR1.5 crores a month, where the cost involved is definitely almost INR0 so far as marketing is concerned. That is definitely going to add to the margins.
Aditya Menon
And I don’t want to compare with competitors then for Bi-metal also, you check all our competitors. Bi-metal Bearing, Federal-Mogul KSPG, you check their margin 6%, 7%. Then you’ll ask how can I do 18%, 20%. [Speech Overlap] and capabilities, and that’s why we’re doing well for the last 20 years.
Madhur Rathi
Right. Sir, so that’s very good to hear. Sir, just a final question from mine. Sir, if I look at our aluminum casting business, so we — just based on the 60%, 65% utilization that we are doing currently, I am getting that we do close to INR2 lakhs to INR2.2 lakhs per metric ton realization, whereas some of the larger players do INR4 lakhs, INR4.5 lakhs. Sir, so how do we plan to bridge this gap by either doing more complex products or doing the 38 products that you mentioned that are in the pipeline. So, how do we plan to bridge this gap?
Arun Aradhye
You see, when we look at the quarter part, we have developed for exports and for domestic. So, they’re totally 51 parts. And the total volumes that are looking at is almost INR30 crores over a period of one-and-a-half years, the items which are already developed, which have been approved since for one or the other reason in European countries, some of the projects have been postponed by that customer. And that’s why we were looking at this business to start our productionize by the end of this quarter — by end of this year last quarter. It is postponed to some extent and maybe that will be productionize during the entire next year.
So, all those items will be productionized one by one, one by one. So that, per year impact maybe, if we consider half of the year for the next year, INR15 more crores of new business will be added during the next year and another INR15 crores of business in the next year.
Madhur Rathi
This is confirmed numbers?
Arun Aradhye
Confirmed.
Madhur Rathi
Got it. And sir, this — in your investor presentation, you have given that we expect to generate INR50 crores to INR60 crore incremental revenue within two years. So where will this rest of INR45 crores come in from?
Arun Aradhye
See, we have already increased our wallet share with the existing customers as well. Then addition of new customers, what we discussed just now, that is in the pipeline. And we are sure that we will be able to grab that business as well as so that there will be addition of INR50 crores, INR60 crores during the next two years, 100%.
Madhur Rathi
Got it. Sir, that was from my end, sir. Thank you so much and all the best.
Arun Aradhye
Thank you.
Vinay Pandit
Thank you, Madhur. Sir, since that was the last question, would you like to give any closing comments?
Arun Aradhye
So we are very much thankful for the investor community as well as to our all stakeholders and our customers, bankers, everybody, including Menon. Kaptify, you see, Kaptify our P&R. They are excellently doing well. They are having very well coordination with all the investor community. And I look forward for more and more investors to come here and see the facilities so that they can appreciate and spread a word of appreciation amongst all the community across the country.
So, I will be very thankful, if they come and visit the factories. I request Kaptify to arrange such visits in the future as well as during this quarter as well. So, that will be very happy to welcome all of you. Thank you very much again, and wish you again a very happy and prosperous New Year.
Vinay Pandit
Thank you, sir. Thank you to the management team, and thank you to all the participants for joining on this call. This brings us to the end of this conference call. Thank you.
Arun Aradhye
Thank you.