Nelcast Limited (NSE: NELCAST) Q3 2026 Earnings Call dated Feb. 10, 2026
Corporate Participants:
Abhishek Bhatt — Investor Relations
P. Deepak — Managing Director & Chief Executive Officer
Analysts:
Kunal Patel — Analyst
Ajit Sethi — Analyst
Maitri Shah — Analyst
Kairav Sundar — Analyst
Praneeth — Analyst
Kashish Gogar — Analyst
Prashant — Analyst
Saket Kapoor — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to Nelcast Limited Q3FY26 earnings call. As a reminder, all participants lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Bhatt. Thank you. And over to you.
Abhishek Bhatt — Investor Relations
Thank you. Good morning everyone. On behalf of Nelcast Ltd. I welcome all of you to the quarter three and nine month FY26 earnings conference call. The results and investor presentation have already been shared and are also available on our website and through our filings on the stock exchanges. Joining us today to discuss the Company’s performance and outlook are Mr. P. Deepak, Managing Director and Chief Executive Officer and Mr. S.K. shivakumar, Chief Financial Officer. Before we proceed, a standard disclaimer. Please note that anything said on the call during the course of the interaction and in our collaterals which reflects the outlook towards the future or which should be construed as a certain forward looking statement must be viewed in conjunction with the risks the company faces and may not be updated from time to time.
More details are provided at the end of the investor presentation and other filings available on our website@www.nelcast.com. should you have any queries or require further information following this call, please feel free to reach out to us via the contact details provided in the investor materials. With that, I now hand over the call to Mr. Pete Deepak. Over to you sir.
P. Deepak — Managing Director & Chief Executive Officer
Thank you Abhishek. Good morning everyone and thank you for joining us. Q3 has been an encouraging quarter for Nelcas with firm demand in the MNHCV and tractor segments. The improvement that began in late November, especially in mnhcv, continued through December, driving higher volumes and that operating leverage across our plants. The cost optimization measures that we took after the softness in Q2 are now visible and contributing meaningfully towards our improved profitability. On the export side, volumes are still below last year. We’re seeing clear signs of stabilization. Customer schedules appear to be normalizing, we’ve added new customers in Europe and the recent tariff relief announcements in the US have lifted sentiment.
We expect this to support export demand as we progress through FY26 and into FY27. Operationally, MNHCV demand remained very healthy on the back of seasonality, freight movement and GST reduction tractor schedule stayed stable supported by rural sentiment and also GST reduction. Exports improved sequentially and early traction in Europe is encouraging. As global emission non transitions take effect, the schedules you know look to strengthen going forward. A key development in this quarter has been the progress of our high value product pipeline at Pedaparya. These larger, more complex castings where only few global suppliers operate, are moving steadily through the approval stages.
Commercialization is expected from FY27 with a ramp into FY28. As these programs scale, we see a meaningful uplift to margins, asset terms and overall utilization at the Pedoparia plant. And as I’ve mentioned in the past, the Pedaparya facility continues to be central to our long term strategy. It houses advanced molding and automation systems and we successfully produced India’s largest single greensand casting of more than 500 kg. As the high value programs ramp up over the next 2, 3 years, we expect the utilization to move towards 60% from the low base that we’ve had in recent years, supporting both margin expansion and improved asset terms across the company.
Our priorities remain unchanged. We continue working towards expanding our value added product mix, strengthening our export relationships and our domestic relationships, improving utilization and maintaining tight cost discipline. Our investments in technology and processes position us well and we take this opportunity to also continue to advance our sustainability agenda, including the 1 megawatt solar power plant that we have in house in our Pettipariya plant. Today about more than 70% of the power requirement is met through renewables which is a benchmark in the global industry. Total Revenue for the quarter three stood at 332 crores up 11.8% year on year.
For the nine months the revenue stood at 971.2 crores which is up 3.9% year on year. EBITDA for the quarter was 35.9 crores which is up 56.5% year on year with a margin of 10.8%. EBITDA per kg improved to 15.9 rupees per kg up 35% year on year. For six months the EBITDA was 89.6 crores with a margin of 9.2%. And PAC for Q3 of FY26 was 15.9 crores which is up 166% year on year. And for the nine months was 33.2 crores which is up 39.6% year on year. Before I conclude I want to reiterate that the improvement in Q3 is structural.
Our mix is Shifting to higher value, higher complexity products plant throughput is improving and the export pipeline is strengthening. With domestic demand holding steady and giving a good fill up. With growth and exports showing early signs of recovery, we believe Nelcast is well positioned for sustained growth and margin expansion. With disciplined execution, we are confident of building a stronger, more competitive business over the medium term. Thank you. Now we’d like to open the floor for questions.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star in one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star in two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kunal Patel from Equiligence Capital Advisory. Please go ahead.
Kunal Patel
Can you hear me?
P. Deepak
Yes, yes Mr. Kunal, I can hear you.
Kunal Patel
Thanks for the opportunity and congratulations on good set of numbers, sir. Two, three questions from my side. First is in our commentary we mentioned that margin improved because of cost optimization and product mix. So two parts to it. First, if you can elaborate on the product that had higher margins this quarter, what kind of product that we have and margins if you can comment on. And the second part to this question is how much of this cost optimization is sustainable? Can you quantify it in EBITDA per kg, 51 per kg. What kind of cost optimization that we have done? So first question is that.
P. Deepak
Okay, so I think in terms of the product mix, you know the, there has been a slight improvement in our Tadapariya plant. We expect much more improvement to happen in this upcoming year. So I think the, the larger castings, the mix has gone up and that’s something that is, that is helping us, helping us over there. The other advantage I would say also that we got in this quarter is in of softness of raw material prices. So that’s something also that we have seen. And in terms of the structural things that we have done, we have actually done a lot of optimization in terms of power as well as in terms of productivity.
So there’s a lot of things that we have worked on, especially Q2 and Q3 when we did see the slowdown, I think we took that as a great opportunity to focus on a lot of these things and, and make structural changes happen so that they would be sustainable improvements. And there’s still more improvements that are planned that are still ongoing in terms of order book.
Kunal Patel
The large casting mix that we Have. So can you just quantify what kind of order book we have for large castings or even the percentage of the total order book that we have?
P. Deepak
So if we were to look, let’s say, you know, two years out or so, the large castings we believe would probably translate to about maybe 10% or so of our, of our, of our overall revenue in about a year and a half to two years time.
Kunal Patel
Okay, and what is our current order book?
P. Deepak
So I mean, currently it’s much smaller. Currently it would be only in, you know, in the 3, 4% kind of range. So we will see that in addition to overall growth happening.
Kunal Patel
So over total, our fundamentals that we have.
P. Deepak
So yeah, I mean, looking at the, it’s a little harder to project that out because it can vary from month to month depending on market schedules. I mean, if you were to look at the last, last quarter, I think from a tonnage perspective, you know, we were at about 22,980 tons, right. So approximately that, that’s the tonnage of sales that we did. And production was almost similar at 22,550 tons. So very, so that’s the, you know, quarter order book that was there, but because of seasonality and you know, all of that, there is fluctuation that happens, but there’s a good order book of new, new business that’s, that’s in the pipeline.
Kunal Patel
What is our volume target for current year and next financial year?
P. Deepak
Yeah, so I think if you look at, if you look at the current year, we’re looking at a, a number that might be, you know, close to about somewhere between, let’s say 88,000 and 90,000 tons for the year. That’s what we are, we are forecasting right now.
Kunal Patel
Okay, and next year, sir?
P. Deepak
So I think it’s a little early to talk about next year. Again, depends on a variety of market forces. But and I think next year will be an interesting year because we have a lot of new product launches. So there’s a potential one month delay here and there could have an effect. But I would say at the absolute bare minimum, we are absolutely confident of at least 10% growth. And we would think that we should be able to easily beat that if all of the projects fall into place at the end without any delays from our customers.
Kunal Patel
Okay. And lastly, sir, one final question. What would be our exit EBITDA per kg this year? And given the order book or the product mix that we have, what would be EBITDA per kg next year?
P. Deepak
So I think right now what we are looking at in this year, if you see, you know, in the current quarter we were at roughly about 15.9 rupees per kg. I think we expect the fourth quarter might be largely in line with it. There’s a variety of factors that we also have to see. Which is the prime factor I think that we’d be concerned about on this is raw material prices. We are seeing some trend of increase in raw material prices. So that’s something we just have to watch out for a little bit. But I think we feel that this level of 15 should be maintainable given the positive sentiment that’s in the market right now.
Next year I think we’ll work on improving that for sure as well.
Kunal Patel
Okay, thank you so much sir. I’ll come back in with you.
operator
The next question comes from the line of Ajit Sethi from Eco Quantum Solution. Please go ahead.
Ajit Sethi
Yeah, sir, thank you for the opportunity, sir. As we are expecting good CV momentum going forward along with export recovery and we will also be manufacturing high value added castings going forward. Can we the EBITDA per kg to increase to around 18 to 19 per kg by FY27 or FY28.
P. Deepak
So I think, you know, if you look at all of our previous conference calls, we’ve always been talking about the goal of getting to 15. Getting to 15. We believe we’re almost, we’re getting there and I think now we believe we’re largely there, right in, in a stable market, right? There will be certain quarters that will be slightly better. There’ll be a few quarters that’s worse. So I think we’re at that 15. I think we will be working on our plan over the next three years or so that you know, we’d be working on seeing how we get that 15 up to, up to 17, 18 kind of a time frame, right in the next, in the next two to three years.
That would be where we could see margins go.
Ajit Sethi
Okay, sir. Okay, so can we expect our existing utilizable capacity of 1 lakh 30,000 ton to be fully utilized by FY28?
P. Deepak
I think we will see perhaps that towards the end of FY28. So maybe our exit at FY28 we might be close to fully utilized. So I think from a full year perspective full year utilization would probably be FY29. But by FY28 we certainly believe that when we exit FY28 we will be on track for that. That’s our belief at the moment.
Ajit Sethi
Okay, so what are your future Capex, then once this 1 lakh 30,000 capacity is fully utilized.
P. Deepak
So I think we haven’t, honestly we haven’t started working on that yet. Our focus has been on getting, getting this utilization. Whatever project that we do will have a lead time that, that is about 12 months or so. And so, you know, we will take that call at the appropriate time. Perhaps at some point in a year from now or so, we will, we will do our evaluation and take that call. But at the moment there is nothing in the pipeline. It’s too early because we will have to also look at the kind of product mix and a lot of other things in terms of deciding what kind of investment would need to be made.
Ajit Sethi
Okay, thank you.
operator
Thank you. The next question comes from the line of Maitricha from Sapphire Capital. Please go ahead.
Maitri Shah
Yeah, hello, I’m audible.
operator
Hi, yes, you are.
P. Deepak
Yeah, you’re audible. Good morning.
Maitri Shah
Good morning. Firstly, if you could mention the differential between these beta small casting and lasting, that’s possible.
P. Deepak
Sorry, can you repeat the question? Your voice was a little garbled at the beginning.
Maitri Shah
Yes, the EBITDA per kg differential between the small casting and large casting products.
P. Deepak
Sure. So I think, see the reality of the small and medium castings that we do, it’s a fairly competitive market. So that EBITDA per kg would typically range from anywhere from maybe as little as 10 rupees all the way up to 20 rupees within this. Again, depending on complexity, depending on competition and variety of different things. Largely in the domestic it’s roughly around 10 and maybe a little bit more now and exports is getting closer to about 20 or so. But when we look at these larger castings where there’s a little less competition, I think we could look, the learning curve is a little steeper.
So we might not realize it immediately, but as we stabilize production, we would think that that number would be much higher, maybe even 25 or something higher than that also. But at this moment, very hard to, you know, put a finger on it right now because there is in many of these new products there is a learning curve that we have to go through.
Maitri Shah
Correct? Yeah. So you did mention the export differential as well. So are we, are we exporting any of our large castings currently or this is just a domestic market that we’re catering into.
P. Deepak
Currently we are not exporting any of the large castings, but there is, there are large programs that will get into production in the current financial year. So when I started. Sorry, current financial year. I mean the upcoming financial year at FY27 we will have quite a few that will go into production
Maitri Shah
and the. New products that are supposed to launch like loading to launch in FY27. Or. Are we also launching the small and medium size?
P. Deepak
Yeah, I mean we have, we have a whole portfolio of parts that will get launched this year, but the big volume and the big launch will be the larger. But we also have several smaller parts as well.
Maitri Shah
Okay, that’s great. And the exports are a bit muted this year probably because of the tariff. So are we expecting a higher percentage of exports going for FY27? And if you could set any target for what this number could be.
P. Deepak
Yeah, sure. So yeah, you’re right. I mean the exports were definitely muted due to the tariffs, but I would say more of an indirect, indirect effect. What I mean by that is we did not actually lose any share of business with our customers, but the end the market as a whole. If you look at the truck market in the US which is a big part of our revenues, so the truck market in the US actually dropped quite substantially, especially in the second and third quarter. And as a result of that, because the entire market was down, the demand for product, the pipeline was also full, the demand for product was reduced and therefore whatever we’ve experienced is a result of that.
So that’s more of a, I would say a structural issue in the US because of these tariffs having an overall impact on trade and even manufacturing. I think some of the manufacturing data in terms of jobs coming out of the US has not been very good also even recently. So there is definitely challenges the market itself is facing. I think the positive news is that our customers with a long term view have not, have not really impacted us in terms of trying to find other sources or anything like that. So we do expect this year that there will be some bounce back.
I think there’s been quite a bit written about that. I have been reading of a potential bounce back of the heavy truck market given that there’s some emission norms change that’s going to happen in 2027. So maybe some amount of pre buy effect might drive it potentially. The new Fed chair, you know, cutting rates might stimulate things, I don’t know. But overall we expect the sentiment of the same product year on year to be positive, especially considering, you know, the second half of the calendar year being a very, very low base for them. Right. So we expect growth had to happen there.
And like I said, we’ve got a lot of new products that are launching in this year. Timing is a little bit flexible. So it’s harder for us to project, but certainly I believe we’ll get back to, you know, reasonably strong growth. And I think we should see most of the effect of whatever we have done in towards Q4 of next year actually showing the real picture.
Maitri Shah
Okay, that’s perfect. And I would say the products that we’re catering to are in multiple different sectors, like commercial vehicles. So where do you see most of the traction coming from? What kind of segment is the one you’re getting the most orders from and the one that’s filling the order book right now?
P. Deepak
So actually, the segment that we’re seeing the most amount of growth is actually that the large and medium tractors, where, you know, there’s a lot of components that are large and heavy and they’ve typically, in the US They’ve either typically, you know, gotten these from China or they’ve gotten these, even if it is from China, typically from suppliers who are producing these in a more expensive process called the no big process. So I think that’s something. That’s where we are seeing a lot of traction in terms of new business. And then there’s also one, you know, we’re also developing some.
Many products that go into the. Which are the rear axles of heavy trucks. So that’s something that we had envisaged when we had set up this larger, more complex land to be kind of probably the highest volume of what we do there. It hasn’t materialized yet, but it is very much materializing before our eyes right now as we speak.
Maitri Shah
That is. Yeah. Also, these margins going forward will be sustainable if that can be taken. If the raw material sizes do increase, that can cause an impact.
P. Deepak
Yeah, exactly. Right. So other than, you know, some fluctuations in raw material prices which go up and down, and there’s typically a quarter lag between when, you know, we get it and when we pass it on, both positive and negative, we believe that we should be able to hold these margins in a normal market.
Maitri Shah
That’s okay. And you did mention the current chivalry with 3 to 4%. A year and a half or two. So now can we expect a close to 7.7.5% contribution from these large castings?
P. Deepak
Yeah, sorry, I. I think your. Your voice was a little gobbled, but I think you’re talking about the growth coming from large castings, Right?
Maitri Shah
Correct.
P. Deepak
Yeah. So the. On the large castings. Yeah, we believe that they. These would come to about 10% plus of our overall revenue in the next couple of years. That’s. That’s correct.
Maitri Shah
Okay. Yeah, that is. It for my. Sir. Thank you.
P. Deepak
Thank you.
operator
Thank you. The next question comes from the line of care of Sundar from Spark Capital. Please go ahead.
Kairav Sundar
Hi sir, good morning. Kair from Spark. Congratulations on great set of numbers. I want to check with you on. The signing of the EU trade deal and how it will help us or do you think it will help us in slightly hastening the process of entering the market?
P. Deepak
Yeah, so yeah, maybe I can touch on both the EU and the US trade deals a little bit. So the EU trade deal is a positive, but I would say it’s probably a mild positive when we look at euro, EU previously used to have tariffs of about 4.5% or so on the type of components that we supply. Now this tariff was put on hold during COVID and I believe that that hold was supposed to expire this year.
So now this keeps us at zero and doesn’t push us to that 4.5%. It also I would say helps in terms of new business, especially with clarity that there will be zero tariffs as against potential tariffs that might come into the future. And certainly I would say that between that as well as where the FX rates are at about 100, 500 and 810 rupees per to the euro, somewhere in between that. Now, in the recent months, we think that the opportunities that are there in terms of being able to win business in Europe have also gone up quite significantly.
Now regarding the US trade deal, it’s still a little bit unclear. So we are all of the products that we export to the US today all fall into a section 232 tariff. So none of these go into the reciprocal tariff, the ones that are going today. Right. So these have all not been at 50%, but since November at least, the heavy truck parts also have been at 25. The automotive parts have been at 25 since April. So there’s not a significant change that’s there. It’s a little unclear in the wording whether the section 232 will remain at 25.
The only wording that is there regarding section 232 is it said preferential tariff. Different people are interpreting that in very, very different ways. Some people are interpreting to say it will come to zero, some people will say it will be at 18, some people say it might be at 25. So there’s still some ambiguity there. But whether it is 18 or 25, I don’t think that really moves the competitiveness needle too much. Ideally we, of course, we want it to be as low as possible, but I don’t Believe that that hurts our, the business, changes the business case dramatically.
Right. So it helps for sure, but it doesn’t, but I, you know, I don’t think it’s a substantial help. That being said, a lot of the new products that we are developing now that are going into the tractor segment and the construction equipment segment in the US those would have been at 50% once they got into production later this year. So those are now will be at 18%. So that way it’s a, it’s a huge benefit to some of the newer programs that we are launching either directly or indirectly through our customers.
Kairav Sundar
Thank you very much. Best of luck.
P. Deepak
Thank you.
operator
Thank you. A reminder to all the participants that you may press Star in one to ask a question. The next question comes on the line of Praneet, an individual investor. Please go ahead.
Praneeth
Thank you for the opportunity. So first question regarding the overall EBITDA per kilogram, because I understand that the lower raw material. Could you quantify on what, how much of the improvement from let’s say 11.5 to 15.5 was a result of what. Because and I want more, some more clarity on what did the COP optimization help us where and did we also start passing on few prices, a few costs that we used to absorb? Could you give some more idea on what happened exactly?
P. Deepak
Yeah, so there was a small drop, I would say, in raw material prices perhaps, you know, somewhere between somewhere around one one and a half, somewhere in that range with the actual effect of the, of the raw material prices in the last quarter. And I, you know, I, I wouldn’t say it’s, you know, the biggest chunk of it. Right. The biggest chunk I think came out of, you know, better operational efficiencies as well as better capacity utilization also in comparison, especially to the previous quarter.
Praneeth
But in terms of tonnage it is not substantially different. Right. So I was wondering why.
P. Deepak
So in terms of, in terms of tonnage, when we, when we compare the second quarter of 2526 to the third quarter of 2526, our production quantity went up from about 20,780 to about 22,550. Right. So there is a jump that was there on a quarter on quarter sequential basis. Right. About eight and a half percent or so. So that, that was certainly a positive as well.
Praneeth
So can we expect substantial jumps as we, because increased production also because with 8% we almost increased by or 15 to 20% in terms of EBITDA. So will that be the same case as we continue to grow from, let’s say 88 to 90 to let’s say 100,000 tonnes.
P. Deepak
So I don’t think this kind of a jump will happen to the same extent with the better operating leverage. I think like I said, third quarter did benefit from slightly better raw material prices and second quarter was also a little bit of a transition quarter because I think if you see from first quarter to second quarter we did have a dip, right. So we were carrying some of those. A little bit more heft coming into the second quarter given that there was a lot of uncertainty that was happening. So I think that way we won’t see such a big jump but certainly we would expect to see continued improvement as we ramp up.
Praneeth
And I understand that you have given revenue guidance but could also do volume guidance in terms of how, where we are at today in terms of domestic and exports and how was volumes of, let’s say domestics going to grow versus exports going to grow? Because the prices can be affected by several factors, especially with exports of freight charges, the duties like whatever it is. So could you give some volume guidance specifically?
P. Deepak
So I mean I think the 10% that we talked about at the very minimum. Right. Is a volume guidance that, that, that you can take. I think if you look at the current year, I think I mentioned already that we’re looking at about 88 to 90,000 tonnes that we expect to finish this year at. You know, so far this quarter looks quite strong with, especially with the MNHCV momentum that’s there. Typically, you know, it’s a little harder to project because towards the second half of March there is a, you know, people start focusing on what their year end inventories look like.
So there might be, you know, the last 10 days of March might be a little weaker, so it’s a little harder to that. But we think this 88 to 90,000 is for sure and we think next year at a minimum we should be able to do 10% driven by both domestic as well as export. Export. We are holding off on projections mainly because we see some uncertainty with new product launches as well as with this emission change that’s going to happen in the US and potential pre buy effect. So you know, so it’s a little, I would say muted in terms of what we’re giving as commentary.
But we expect that if all goes well, you know, we should quite comfortably beat that.
Praneeth
Understood. Could you also in terms of the large castings we already do. Which segment do we right now give it to in the domestic market? You mentioned that most of the large castings go in the domestic market. So is it MHCV or tractors? And could you also explain in terms of domestic margin specifically, which has the highest margin profile, whether it be MXCV tractors, off highway among them?
P. Deepak
Okay, so off highway I would say is probably is only like 2% or 3% of our revenue if you look at it. So I just ignore that for the time being. But I would say domestic commercial vehicle is marginally better. But that’s also because the complexity profile is a little higher because most of what we do in commercial vehicles, you know, our ductile iron castings versus most of what we do for tractor or gray iron casting. So the margin profile I would say is marginally lower on gray iron because the complexity level is also marginally lower.
But even within the gray iron, most of the components we do for tractor are heavily cored and you know, require a lot of core assembly. So they would be on the more, you know, complex side of that. But sorry, what was the other part of your question? So at the moment we’re doing more of the larger castings going into the commercial vehicle segment in India and not as much into the, into the tractor segment because majority of the tractors manufactured in India I would probably all of the tractors manufactured in India I think are probably a sub 100 horsepower range.
So many of these bigger castings don’t necessarily go into. Fit into that profile.
Praneeth
Understood. And one last question regarding Europe. So I understand we wanted to start Europe with specifically mhce. So do we also see. Do you think tractors might be a much better opportunity at this point of time? Could you explain that since we’re exactly entering into tractor market and you also given guidance that tractor might be a much higher growing segment at this point of time.
P. Deepak
So yeah, so Europe, I think there are opportunities in tractor that we are evaluating. I think from a volume perspective, I think the focus is a little bit more on the US because of the opportunities that we have. But no doubt, I think even in Europe there are some great opportunities that are there that we are exploring. But I think we will keep working on it. It’s not that we don’t want to do the tractor. I think we see that the opportunities, especially in the MNHCV space in Europe are very, very strong. Mainly because a lot of the local European foundries are struggling with their financials, struggling for labor, struggling with energy transition, a lot of things.
Right. So there’s a. I think the bigger pie that’s there to be taken more easily, I think at the moment is more of the commercial vehicle. But that being said, we are not ignoring tractor
Praneeth
but in terms of Europe. Specifically and little macro level in terms of cash streams, did you actually see capacity shutting down or is the fact that because they’re settling you expect it to come?
P. Deepak
No, we’ve actually seen over the last two years we’ve seen actually capacity close down. Not I would say it’s happened in smaller bits. There’s been one or two that have gone into this administration. Right. Which is basically the equivalent of a chapter 11. It’s unclear whether they will continue or close down also. But they’ve already been some capacities that have closed down. We’re aware, I’m aware of at least three maybe small to mid sized foundries that have closed down
Praneeth
which will directly. Let’S say product which we can take over those type of foundries.
P. Deepak
Exactly right, exactly. So we have been awarded one of the businesses that came out of one of these foundries. So we, you know, so that’s it’s going to happen. Right. And they. In other cases it’s a risk mitigation. Here it is, you know, a real need. Right. So it’s. While the volume of that business might still be small, it’s a great opportunity to get into that, into that market and prove yourself to be a capable supplier.
Praneeth
So basically always it will be, we’re not. It will not be from resourcing from China. It will be mostly resourcing from that local destination to us. That will be the way forward.
P. Deepak
Yeah, I would say that that’s probably what we expect. And of course when they’re doing the resourcing they will look at everybody and I think from a geopolitics standpoint there is definitely hesitation in trying to source from China.
Praneeth
But have there been any specific parts that there were resource from China apart from the 500 kg part we are planning on getting into production right now.
P. Deepak
So that is in the US market. Yes, in the US market. Yes. Those parts are today made by. Made in China and those are being resourced to us the European market? No, not yet.
Praneeth
But do you see let’s say in terms of the casting activity in the U.S. also there’s been a lot of consolidation but the thing is the larger factories are also becoming more optimized and growing larger a little bit with pack of putting up large plants. So just wondering what, how does the company see that particular activity there in the US it’s going to expect the growth from the US or how is it going to work.
P. Deepak
So at this point we are seeing actually a fairly good amount of growth coming from the US which will happen, I believe in these next two, three years, we should still see a good amount of growth coming from the US And a lot of that is also driven by a cost advantage that’s still very much there. I would argue that if you buy the same, the castings that we do, if you buy these castings locally within the US you would probably be paying about 40% more. So that being said, so you know, Even at an 8, whether it’s an 18% or a 25% tariff, I don’t think it really changes the decision.
But I think it certainly will continue to be opportunities for us to grow in the US and like I said with the European thing, we see given the overall market environment, given the pressures that they have, especially around sustainability as well, we think that there’s some very large opportunities that will come. But we have to do our time right? We have to take the small opportunities, we have to prove ourselves and we have to be there in that position when the large opportunities come to grab them. So that’s, that’s where we believe we are.
operator
Mr. Praneet, you may rejoin the queue for the follow up question. The next question comes from the line of Kashish Gogar from Prabhudas Lilida Asset Management. Please go ahead.
Kashish Gogar
Hello. Congratulations on the good numbers. Could you please walk us through some experts that would help improve the touch. And there’s no.
P. Deepak
I’m unable to hear you. I’m unable to hear you clearly. Maybe you could speak up a little louder.
operator
Ms. Kashish, can you speak louder? There is a background noise as well from your end. Yes, you are very mildly. Yeah, discussion. Speak few lines from your end.
Kashish Gogar
Conversion.
operator
Ms. Kashish, we cannot hear you. There is a background noise also. Your voice is not clear.
Kashish Gogar
Yeah, I’m just saying that could you walk us through aspects that would improve cash conversion over time?
P. Deepak
Okay, now we could hear you perfectly clear. Thank you. So I think in terms of, in terms of cash conversion, I think the main effect that’s there is a mix of domestic and export, right? So as we have quite a bit of exports and that’s been growing, you know, our net working capital cycle has gone up because of that. However, a lot of the newer programs that we are launching with customers, with export customers, we are targeting to receive the payment within 60 to 90 days. As against currently all of our exports are typically closer to about 150 days.
So there is going to be certainly an. That is an area we are actively working on and we do expect Improvement to happen there.
Kashish Gogar
Thank you so much.
operator
Thank you. A reminder to all the participants, please restrict yourselves to two questions. The next question comes from the line of Prashant, an individual investor. Please go ahead.
Prashant
Thanks for the opportunity. Am I audible? Yes, Prashant, you’re audible. Yeah. So a couple of questions. One is, you have guided that this year we may be around 88 to 90,000 tons and next year would be 99,000 tons, which is a 10% increase. The. Are we also to. Am I also to infer that next. I mean, the pricing will be the same and we will not be able to take a price hike or a price division next year.
P. Deepak
So I mean, the pricing, as per the formula does have increases and decreases every quarter based on raw material price movement that happened in the previous quarter.
So that will continue as is. There’s no change in that. But we will not be taking an inflationary price hike. At least that’s not the intent at the moment that we will take an inflationary price hike on any of the, on any of the existing products.
Prashant
And is that because of commoditized nature of the product or intense competition or trying to get market share? I mean, just trying to understand why we would not push for a price hike, inflationary price hike or anything of that sort.
P. Deepak
So I mean, I think that’s something that I think more or less is an industry standard.
Right. If there is something that is real, we’ve always gone back and gotten from customers. Right. When we’ve seen, you know, the huge hike that happened in terms of freight cost, when there’s some increase in power, these kind of things we do. But for a lot of the other things, like for example, labor costs and things like that, we typically work on our productivities to manage that part of it. Right. So. But in terms of any raw materials power as well as freight, things like that that are beyond our control, in those cases, we definitely go to customer and recover those costs.
Prashant
Understood. I mean, so price that would help in margin expansion, that kind would not be possible in the next year. If that is. Is my understanding correct.
P. Deepak
Yeah, I mean, typically we, unless there is something that’s gone completely out of whack in terms of pricing, we don’t typically do that. But yeah, it’s. I think some of it is also you don’t want to, you know, leave a bad taste in the mouth. It’s important to protect the share of business and, and all of that. Right.
Prashant
Okay. In the presentation you have mentioned that. I mean, our capacity is 1 lakh 60,000. And with minimal investment it can be increased by another 50,000 tons.
P. Deepak
Yes,
Prashant
yeah. So what if we were to do that? I mean what would the capex require for increasing the capacity?
P. Deepak
So it will depend a little bit exactly on the, on the product mix and all of that. But you know, roughly I think it would be a, you know, 40 crore kind of an investment. 40, 50 crore kind of an investment to get to unlock to the full capacity. Okay. And our energy costs are for the nine months of 38 crores and it is a energy intensive industry I guess what would be the share of renewable energy out of our total energy consumption as of now? How we, what are our plans to increase that if at all? And, and what capex or investments or anything guidance that you can give around that.
So we are currently at about 70% renewable energy. Right. So this is, I would undoubtedly say that this is the benchmark in the world. I don’t believe there’s anybody else in our industry of this size and scale and these kind of products that is anywhere close to this number. So I think that way, you know, I think we’re already made a lot of these investments and these investments are bearing fruit. But I think we’ll, our goal would be to push this closer to 80% and to get there obviously on a very, on a growing denominator. Right. In terms of our power consumption which will continue to grow as we grow the business
Prashant
and so this going to 80%, I mean what.
operator
Mister, Mr. Prashant, you may join the queue for the follow up questions. We have.
Prashant
Not a fresh question.
operator
There are participants waiting sir.
Prashant
Okay.
operator
The next question comes from the line of Saket Kapoor from Kapoor and company. Please go ahead.
Saket Kapoor
Hello
operator
Mr. Kapoor.
P. Deepak
Hi sake. Good morning.
Saket Kapoor
Yeah, Namaste. Good morning sir. How are you doing? Sir?
P. Deepak
I’m doing very sa.
Saket Kapoor
Yeah, thank you sir. So you, you mentioned that for this financial year we are expecting ton is in the tune of 88 to 90,000. So what is our numbers are currently for for the nine months?
P. Deepak
For the nine months is 65,378 production. 68, 66 to 68. Yeah. So about 66, 65,380 is the production quantity and 66,270 is the sales quantity.
Saket Kapoor
Okay, so we will be in the vicinity of this 22, 23,000 for tonnes where we can envisage for Q4 also.
P. Deepak
Yeah, I think, I think Q4 our expectation this time will be, will be slightly better than Q3 in terms of volume.
Saket Kapoor
Okay sir, I will just quote you. From your press release. Firstly, you said you in your presentation have mentioned about recalibration of costs. So if you could just throw your right that is a permanent in nature and if you could just quantify and in continuation to that you have also written about a key highlight this quarter. Sorry, A key highlight this quarter is the progress on our high value product pipeline, particularly from peda per year facility with commercialization plan from FY27. We with domestic demand, CV demand expected to stay strong and a robust product roadmap under execution, we are poised for sustained growth and margin improvement.
So if you could just dwell on the aspect and why I was asking that the variation in our earnings on a quarterly basis surprises us on both sides. So if you could just give us some understanding how are we modeling our business aspect so that we can also have predictable and good money. Similar trends in number, not the type of variation that we see currently. These are my points.
P. Deepak
Yeah. So I think if you look at some of the things that we have done that are structural and that will remain even beyond the quarter is we’ve actually done optimization of power. So the maximum demand we have been able to increase our production with the reduction in our maximum demand charges that we have with the state electricity boards by doing some optimization and some structural changes in terms of how we operate. So that’s actually one area where we’ve saved, saved cost and that will continue even at higher production levels. We are able to maintain this with a lower maximum demand.
The second is in the area of productivity. I think we focused quite a bit use the opportunity of the slowdown to focus quite a bit in terms of our productivity in terms of output per person and how do we optimize layouts and things like that. And we did a lot of that activity as well, especially in Q2. So I think that’s something that we are. We believe both of these are things that will continue to give us benefits even beyond, you know, what we might have seen in the third quarter and on. And especially on the productivity side there are a lot more things that are planned that are still ongoing.
So we believe that that will aid in some of the. In some of the margin expansion that we are targeting. And I think the other thing is we’re seeing pretty good volume increase also in the domestic side. I think the GST cut has really given a big push to both tractor as well as commercial vehicle. We’re a little uncertain about the exact effect I think when we last spoke about three months ago. But the effect has definitely been Quite pronounced in these last two months, especially since we saw MNHCV really take off towards the end of November and December and we’re still seeing it remaining strong.
Now is this a structural shift? Does it move up? Time will tell but we think that overall the prices have come down for new vehicles which makes them more attractive. MNHCV came down from 28%, GST to 18% and tractors came down from 12% to 5%. And of course I think the expectation is that they will stay there for the foreseeable future. So we think that that’s positive. And then definitely a lot of these new products that are launching in Tadaparia, we’re getting to that end stage. Many of them are in customer testing, some of them have completed approval.
So we have a lot of this happening and ramp ups will start in the next few months and quarters. So we think that by Q4 of FY27 we should have most of these products ramped up with some more that we get launched the following year as well. So we’ve got, we are quite excited about that. Right sir.
Saket Kapoor
And in terms of the variations that. We see in the earning aspects with. The type of processes and recalibration, what. Should be the weight of this?
P. Deepak
So I think, I would think, you know, so the raw material part of it will have, will create fluctuations which is, you know, like I said, I think we had multiple discussions on this topic especially in FY22 and 23. But the raw material part will have its fluctuations which will impact earnings on a quarter to quarter basis. I think the sudden drop, especially in the export markets and the recalibration that we had to do impacted us negatively in the second quarter. But I think that’s probably a one off thing that we hope we won’t really see too much of going forward.
Saket Kapoor
It didn’t get you sir, last two. Statement on export and quarter two impact.
P. Deepak
Yeah. So I think because of the sudden drop in export with the US tariffs and all of that and a lot of uncertainty, I think second quarter was the impact of the effect was much more pronounced and exaggerated. Probably very unlikely we will see something like that again, but we will see raw material based things going up and down. Right.
P. Deepak
I think the question is more about, you know, what the baseline is that it goes up and down from and you know, I don’t think it will be that big a swing as what we’ve seen between second quarter and third quarter.
Saket Kapoor
Can I ask a question on export or. I join the queue, madam.
operator
Sir, you may rejoin the Queue on your exports.
Saket Kapoor
If you could just throw some light how the revenue had been for nine. Months and going forward. That’s all. Thank you.
P. Deepak
Okay, okay, I will answer that question. I think export, the revenue for the quarter was about 86 crores which is compared to second quarter which was 79 growth. But obviously on a year on year basis. Fairly big degrowth actually last year, third quarter was poor in exports and then bounced back in fourth quarter. But for the whole nine months it was 280 crores for the full year. Last year export was at about 445 and was about 320 or so approximately for the three quarters.
operator
Thank you. The next question comes from the line of Praneet, an individual investor. Please go ahead.
Praneeth
Hi. Thank you for the opportunity again. So yeah, I just was trying to understand in terms of with us scaling from the 80,000, 80 whatever thousand tons to 130,000 tons, what kind of EBITDA improvement this extra, adding this capacity would lead. I was just wondering about that.
P. Deepak
Yeah, so we believe that we should. The EBITDA at that scale would be about 18 rupees or so per kilo on a blended average.
Praneeth
So hypothetically, let’s say exports were not to scale substantially from the existing levels. They remain at 30 but like around 40%, 50% levels. So do we expect it to grow for like just with the existing mix. Do you think it’s going to be. 18 or with exports it will grow from there? I was just trying to get more perspective like that.
P. Deepak
I think it’s just based on the general mix that we have that we think that 18 is what we should be able to.
Praneeth
Today’s mix.
P. Deepak
Yeah, with a little bit of the forecasted mix and some of it as unknown. Right. We are forecasting some mix based on new export business that we’ve got as well as new domestic business that we’ve got, plus growth in the domestic market as well. So just using a, you know, I would say fairly conservative forecast, we think that that will get us to about an 18 plus.
Praneeth
But I understand that there have been multiple times the management has guided that we would like the mix of 50×50% exports. 50% the mistake. So would there be ever a case that exports can grow more than the domestic business and will the company be willing to have that kind of place?
P. Deepak
Yeah, I think. I mean our goal is to grow, right? I mean if we get the best opportunity, wherever we get the best opportunities, whether that’s domestic or export, we will definitely want to exploit those. So yeah, I mean if the export market continues to grow at a very strong rate, then there’s no sanctity of saying that we will not exceed 50%.
Praneeth
Got it. And last question regarding the receivable days, you mentioned that it used to be around 150. Now it’s coming down to 60 to 90. What is the reason? Are we taking any margin cuts to pay on earlier? Could you explain why? Yeah.
P. Deepak
So the. So the existing business, which around close to 150 will remain at the same 150. It’s the new business, the new customers that we’re negotiating with. So for those guys, we have now negotiated, you know, better terms while we are starting the businesses itself. Normally the challenge is once you’re already, you know, established a baseline, you can’t really come down on terms of the days. But before establishing the baseline, and it’s a new customer completely, you know, we are negotiating hard to establish a lower baseline in terms of receivable days.
Praneeth
But how do you see them being receptive regarding it? Because that’s a substantial hit to their working capital.
P. Deepak
Yeah. I mean again, if it’s at that point, see, it’s a lot easier at that point because they’re looking at it as an overall picture. Right. They’re looking at their cost savings and they’re looking at their hit to working capital. So it’s a lot easier sell to make at that point of time as against later. Right. Because the cost savings already been realized. So only the hit to working capital is there. Right. So that’s the.
Praneeth
We’re actually pricing a small price cut like what our margin reduction so that we’ll get the money before. Is that right? Understanding the new orders?
P. Deepak
Not really. It’s just, it’s is. I think it’s more of a pure negotiation in terms of negotiating harder for the just setting a baseline. I think it’s just about setting the baseline and the benchmark.
Praneeth
But with existing customers, even though we start up new contacts and increase the sourcing, it’s unlikely to go down from here.
P. Deepak
Exactly.
Praneeth
But do we see a substantial change to happen? Because we already have onboarded. The largest customers in the world already are on our books. So how much do you think this will make substantial impact to our cash flows in terms of exports?
P. Deepak
I think it will on the growth side of it. Because while we have many customers, there’s still many more that we’re going after and trying to. Trying to get. So I think it’s something that how big the impact is, how it varies over time, very hard to project but it is something that we are actively working on.
operator
Mr. Praneet. Mr. Praneet, due to time constraint we have reached the end of Q and A session.
Praneeth
Okay. Thank you so much for your answers.
P. Deepak
Thank you.
operator
Thank you very much. Ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to management for closing remarks.
P. Deepak
Thank you everyone. Thank you very much for your interest in Nelcast and for all the wonderful questions. We continue to be focused on our execution and we hope we can deliver many more quarters of great results. I also want to apologize for the technical issue that was there at the beginning of the call with the chorus team which slightly delayed the start of the meeting. But thank you all very much for your patience and your questions.
operator
Thank you. On behalf of Nelcast Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines.