Pennar Industries Limited (PENIND) Q1 FY23 Earnings Concall Transcript

Pennar Industries Limited (NSE: PENIND) Q1 2023 Earnings Concall dated Aug. 10, 2022

Corporate Participants:

Aditya Rao — Vice Chairman and Managing Director

Shrikant Bhakkad — Senior Vice President, Finance

Analysts:

Vikram Suryavanshi — PhillipCapital (India) Pvt Ltd. — Analyst

Nilesh Shah — Arrow Investments — Analyst

Ulhas — — Analyst

Vijay Kumar — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q1 FY ’23 Earnings Conference Call of Pennar Industries Limited, hosted by PhillipCapital India Private Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vikram Suryavanshi from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Vikram Suryavanshi — PhillipCapital (India) Pvt Ltd. — Analyst

Good morning and very warm welcome to everyone, and thank you for being on the call of Pennar Industries Limited. We are happy to have with us the management of Pennar Industries for question-and-answer session with the investment community. The management is represented by Mr. Aditya Rao, Vice Chairman and Managing Director; Mr. Shrikant Bhakkad, Vice President, Finance; Mr. Jay Krishna Prasad, Chief Financial Officer; Mr. Manoj, Head Corporate Affair; and Mr. K.M. Sunil. Before we start with question-and-answer session, we’ll have opening comments from the management.

Now I hand over call to Mr. Aditya for opening comments. Over to you, sir.

Aditya Rao — Vice Chairman and Managing Director

Thank you, Vikram. Thank you, moderator. A warm welcome to all our stakeholders for our Q1 FY 2023 financial results conference call. Thank you to all of you for taking the time to join us. We will follow our standard format for our conference call, so namely I will first provide an overview of our financial results. I will specifically focus on profitability, liquidity and growth as the metrics that we cover. This will be followed by commentary from our CFO, Mr. Shrikant Bhakkad and Mr. Krishna Prasad. Post that, we will open the conference call up for questions from our stakeholders. With that structure in mind, we will get started.

I will first cover profitability. For the first quarter FY 2023 ending June 2022, we recorded consolidated net sales of INR699.98 crores, almost INR700 crores. The corresponding quarter in the previous financial year saw record sales of INR488.31 crores, this represents growth of 43.35%. Our PBT for Q1 was INR18.74 crores, which compares with a PBT of INR9.03 crores in the previous quarter, in Q1 last financial year, which is a growth of 107.53%. Our cash PAT, which is PAT plus depreciation was INR29.88 crores, and this compares with a cash PAT last year of INR19.10 crores.

Next, I will cover our liquidity or our working capital. We have reduced our working capital days from 80 days to 78 days. We also believe that further improvements are in line, and we’ll continue to work on these improvements. Our annualized ROCE for the first quarter was at 17.07%, ROCE being calculated as EBIT divided by total capital employed.

Finally, we come to growth. Our BIW plant in Chennai has achieved sustainable cash profitability and will achieve its target profitability by October of this year. Our subsidiary in the US, Ascent Buildings continues to grow on the back of a large order book, and we’re confident of consistent improvements in our bottom line percent. Our PEB and Hydraulics business units also are projecting substantial growth. Based on these growth vectors, the next quarter will again see double-digit growth in revenue and PBT when compared with our PBT for Q2 last financial year. Furthermore, we will be also expanding our capacities in PEB for India, solar modules capacity and also engineering services. This will allow us to continue high growth rates in both our sales and PBT for the next few quarters.

In conclusion, I’d like to thank all of you again for your time on this call. As always, we’ll continue to focus on sustainable revenue growth, profitability growth, liquidity, and capital efficiency. I look forward to answering any questions that you have for us.

With this, I’ll hand over the call to our CFOs Shrikant and Shri KP for their comments.

Shrikant Bhakkad — Senior Vice President, Finance

Thanks, Aditya. Welcome to the shareholders of the first quarter FY ’23 earnings call. The key matrices, there has been increase in terms of revenue by 43%, EBITDA by 40%, PBT has also doubled from INR9 crores to INR18 crores, cash PAT has increased from INR19 crores to INR30 crores. So all the major matrices we have shown the increase. And in terms of working capital number of days, they have reduced by another three days.

There has been overall if you see in terms of the balance sheet, while the revenue has gone up by 43% while compared to employee — you would have some questions, and I would like to clarify those questions in-hand before. There has been increase in terms of employee expenses. The employee expenses have been predominantly increased on account of the new facilities that we have added in our Ascent increments and the lease settlement agreement that we had at some of our plants.

Depreciation has increased predominantly on account of the new capex that we have added, which is not that in the corresponding Q1 FY ’22 last year. The finance cost, you continue to see a declining trend in terms of the finance cost as a percentage of the net sales. So finance cost has also decreased as a percentage of the net sales there. Overall, we had a good quarter, and we continue to do well with the growth, keeping in mind. Thanks.

Operator

Sir, should we open for Q&A?

Shrikant Bhakkad — Senior Vice President, Finance

Yes, please go ahead.

Questions and Answers:

 

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Nilesh Shah from Arrow Investments. Please go ahead.

Nilesh Shah — Arrow Investments — Analyst

Yes. Hi, congratulations to the team at Pennar for a wonderful set of numbers and very happy to see the kind of results that you have performed. So I have a couple of questions. Am I audible?

Aditya Rao — Vice Chairman and Managing Director

Yes, please go ahead. Thank you, Nilesh. The two questions you had was on what would our fixed costs for the year be and from where we are right now, what would be the [Indecipherable] for the rest of the year and with the INR200 crores that we had last year, we would have that different cost. The second question you had was on our 2% PAT and potential improvements on that. So the fixed cost for the year are not comparable in the sense that for Ascent specifically, which was one of the major reasons for the rise and also lease settlements at our manufacturing plants was two big factors which resulted in the increase. For Ascent, we have now started including our bonuses, which were primarily included in our variable cost and the fixed cost. So that’s the reason for that. We can demarcate that and give a better breakup of it, so we can, but it’s not — a fixed cost it’s actually a variable component to very good performance that we are seeing from our SMB. That being said, we do have measures in place to control our fixed costs. At this point, I would not be able to give you an exact number of what we would be at for the financial year, but I can assure you, it’s not going to be INR250 crores or anything near that. A lot of the bonuses were taken, a lot of one-time events in this. And what you would see — we’ll see is moderation in fixed costs. And for the overall year, you should look at a number that’s around what we had last year itself. So we’re not going to see a massive increase on that. Now, the caveats to this are increases in our engineering services and increases in our other subsidiaries. So if we do have events where we need to take a call to increase it, there maybe be small increases, but nowhere near the INR250 million number which you had mentioned. So we will keep you apprised with those changes as they come. But as of right now, we are projecting stability in fixed cost. And the increase that you see is primarily because of two reasons; Ascent bonuses and other one-time variable costs, which are now attributed in fixed cost based on our conversations with our auditor and [waste] settlement at our India manufacturing plants.

Nilesh Shah — Arrow Investments — Analyst

Right, okay.

Shrikant Bhakkad — Senior Vice President, Finance

Question on your 2% PAT, you can — if you look at the last few quarters, I think you would have seen a consistent rise in our PAT margins. We can commit to further improvements on this. Our overall goal is to get to a net profit margin closer to 5%, which we think is appropriate for an engineering industry and a net cash flat margin of closer to around 7% to 8%, which is cash plus depreciation. So that is what we will work to watch. Right now, we’re about three to 350 basis points away from that from a cash PAT and a PAT point of view, but a lot of the revenue we are adding is high margin. So as our revenue scales, these numbers will tend to go off.

Nilesh Shah — Arrow Investments — Analyst

So would it be safe to assume a yearly guidance of INR2,800 crores on the top line and something in the range of 4% net PAT?

Shrikant Bhakkad — Senior Vice President, Finance

I don’t. Effectively, if I say yes to that question, I will be effectively giving the guidance for the year. But what I can commit to is quarter-on-quarter improvement on PAT margin and revenue. So that I can commit to. But I would hesitate and please do excuse me, I will not give guidance for the whole year and PAT margins.

Nilesh Shah — Arrow Investments — Analyst

Yeah. One last question on the new acquisition in France, we had EUR180,000. Was it a cash — I mean, was it a debt-free acquisition or are we having any other incremental expenses in addition to the debt for that acquisition?

Aditya Rao — Vice Chairman and Managing Director

Just give me a second, sir. There is some amount of debt, but not a very material amount. We are talking single-digit low crores, sir, but we’ll confirm the exact number to you. We’ve just completed the acquisition, but the consolidation with our balance sheet and our numbers hasn’t happened. That happens from Q2 onwards. We will get back to you and also make sure all of our other investors and stakeholders are also aware of this number. But as of right now, there is a small amount of debt, which is there in with that company.

Nilesh Shah — Arrow Investments — Analyst

All. Perfect, thank you so much for answering these questions and I wish you all the very best for the year ahead. Thank you. That will be all from my side.

Aditya Rao — Vice Chairman and Managing Director

Thank you Nilesh.

Operator

[Operator Instructions] The next question is from the line of Ulhas [Phonetic], an Individual Investor. Please go ahead.

Ulhas — — Analyst

Hi. You have announced a buyback of shares. And what I find is that at least for the — before last 10 days, you were making hardly any buybacks around 10,000 shares. Only in the last 10 days, I think the buyback has picked up to nearly 1 lakh shares, but the total quantity is still much below what we had sanctioned earlier by the shareholders, I think it was 50 crores. So can you explain why what is your strategy of not fulfilling the total quota of the buyback.

If you feel that the share is underpriced or if you want to reward the shareholders, I feel that the buyback should have been more aggressive, and you should try to complete your target of 50 crores. To add further, even in your previous buyback, when the stock price had crashed to around 15 or 18, I think you were not buying aggressively, and that was the best time for you to buyback. Unfortunately, I don’t know for what reasons, the management decided to not to go ahead aggressively with the buyback. So can you explain what is your reasoning or strategy behind this buyback? Do you want to just — do you want to reward the shareholders or you just want to just show to the shareholders and to the public that you have announced a buyback.

My second question is that in March 2019 and 2020, you had a profit before tax of INR93 crores and INR139 crores. I think the first quarter of the current year is one of the best years for most of the industries, including engineering industries. But unfortunately, what I see the numbers, there is a — we are still nowhere near whatever profitability we had achieved in 2018 and ’19. So can you explain or give reasons what is the reason why even after such an inflationary environment, we are nowhere near the profit before tax of 2018 or ’19. Thank you.

Aditya Rao — Vice Chairman and Managing Director

Okay. Okay. There were two questions you had asked; one was on the rationale for the buyback and perceive slow pace in us executing the buyback. And the second question was on our PBT scale up, specifically how this financial year relates to peak profit year, which is 2018.

On the buyback, the Board has taken a call that after their analysis, to go ahead with announcing and executing on buybacks. We have announced and we are executing our buyback. I can assure you, we’ll be fully compliant with our loss with relation to the buyback. And we are currently, as declared, we have — our intention was to get to 80 lakhs shares. We have bought back over 40 lakhs shares, and we will continue to scale our purchases. There’s a certain timeframe that we have in mind. But I would not be able to comment on exactly how much amount we will spend and how many shares we will buy back, but I can assure you that we will be fully compliant with all relevant laws.

Second, regarding the PBT what we had this financial year and specifically in the first quarter and how it relates to the previous years. We are quite confident that we’re at a long-term trend of PBT increase. We are also quite confident that we will be able to meet and cross our peak profit that we have recorded in previous years and we are working to make sure that happens. There is certain amount of cyclicality in this. So I would suggest not taking 4 times of the first quarter, we tend to have a very strong fourth quarter.

We also tend to have a good Q3 as well. So based on our current trends and our growth vectors with our PEB business doing quite well, with Ascent doing very well with our tremendous amount of improvement in our BIW outlook and our engineering services business doing well, Hydraulics business doing well, I’m quite confident that we will do better than our peak year soon. But having said that, we will not be giving any guidance for this financial year or beyond. But I can definitely commit to consistent growth and eventually crossing our peak profit, which was achieved about three years ago.

Ulhas — — Analyst

Sorry. My question on buyback was not on compliance side. My question was on what are the reasons why we are not completing our buyback sanctioned amount. Even in the previous buyback also, we did not complete the amount. And except for last 10 days, the progress on the buyback was very slow. So do you — are there any reasons that why the management is going very slow on the buyback.

Aditya Rao — Vice Chairman and Managing Director

We have a certain mechanism in mind for the way we want to do the buyback. As I’ve said before, we will be compliant — and I understand your question is not about compliance, but I can assure you, we will be compliant. More than that, if I were to give you exactly what mechanism we would use and how much we’re going to buy, that would be inappropriate in my view. So at this point, this is the information I’m okay with sharing.

Ulhas — — Analyst

Okay. Thank you.

Operator

[Operator Instructions] The next question is from the line of Vikram Suryavanshi from PhillipCapital. Please go ahead.

Vikram Suryavanshi — PhillipCapital (India) Pvt Ltd. — Analyst

Congratulations on good numbers, sir. We have seen significant improvement in profitability from subsidiaries also. So would it be possible to highlight which are the subsidiaries which are really seeing good traction and particularly your comments on the PEBS, are we seeing margin improvement also at PEBS or it is more on revenue traction and impact of that?

Aditya Rao — Vice Chairman and Managing Director

So there are two questions, sir. I think you asked how our subsidiaries are doing and specifically on PEB, are we seeing margin improvement. Our subsidiaries which have done very well are Ascent, that is one of our subsidiaries, which has done exceptionally well and is continuing to project a very high growth rate in terms of both revenue and in terms of profitability. And I’m quite confident that with increased scale-up of capacities, that business unit will continue to do well. Why I feel that this will happen is because it’s a combination of factors where we will be expanding capacity, we have an established presence and an execution capability now and our market share is very, very low. So therefore, that gives us the — while that is negative in one way, but I do take out in the past that we just started there.

And because our market share is low, it offers us a lot of growth opportunities. So that’s regarding our subsidiary performance. Regarding PEB, specifically, the order books have gone up, revenue has gone up. Margins have remained stable. So the expansion or improvement in net margins for PEB has been because of scale and not because of any specific improvement in margins, beyond maybe 100 basis points here and there. But going forward, we believe that the low base effect will definitely come into play here.

So I think what we see in line for our PEB business is a dramatic improvement in the overall net margins, consequently contributing quite well to the entire company’s net margins because on the back of this revenue increase because right now we’re at — we’re close to the — we are at a low PBT level primarily because our operating margins though they are higher than 10%, our net is substantially lower. But as we increase revenue, I mean, even if we increase revenue by about INR20 crores, INR30 crores, what drops down to bottom line or at least PBT is our operating profit in that revenue. So any additional revenue is coming in at a reasonably high clip. So I’m quite confident that PEB net margins will improve as will the entire company’s net margins. And yes, that’s my answer.

Vikram Suryavanshi — PhillipCapital (India) Pvt Ltd. — Analyst

And how on overall export we have done in this quarter and particularly tubes as well as other export businesses. So you can comment on that, I think that would also be helpful.

Aditya Rao — Vice Chairman and Managing Director

All of our export businesses has scaled up. Hydraulics has scaled up quite well as has our Engineering Services business, which — engineering services, its design exports, you can call it that. And both of these business units will do well or even better in Q2. Our overall exports are at a peak. Overall, our international revenue should this year touch over $80 million. So it’s quite encouraging.

Vikram Suryavanshi — PhillipCapital (India) Pvt Ltd. — Analyst

Got it. And what kind of growth we are seeing on the engineering services or if it is possible, revenue also.

Shrikant Bhakkad — Senior Vice President, Finance

Sure. I think we can share that. So our engineering services revenue on a per month basis, which is what I would say right now is about INR5.5 crores. We see this number going closer to INR6 crores or INR7 crores in the next couple of quarters, and operating margins are quite strong and net margins would be 20%, 30%. So it starts adding quite strongly to the PBT.

Vikram Suryavanshi — PhillipCapital (India) Pvt Ltd. — Analyst

Got it. Thank you very much, sir. Thank you.

Shrikant Bhakkad — Senior Vice President, Finance

Thanks.

Operator

The next question is from the line of Vijay Kumar [Phonetic], an Individual Investor. Please go ahead.

Vijay Kumar — — Analyst

Thank you for taking my questions. I would like to have a commentary from Aditya about how the trend on operating margin has behaved from FY ’16 to ’22, has been a significant drop in operating profits. What were the choices that we took, which led to this drop and how are we planning to recoup this? That’s one. The second one is, the Q1 of this year is a significant bump-up in revenue, but still our operating margins are around 8%. What are we doing to take this up? And then when are we going to get to double-digit margins in spite of Ascent contributing higher margin business contributing, why are we still stuck at 8%.

Aditya Rao — Vice Chairman and Managing Director

Thank you. So your question, if I understood correctly, is about the operating margins we had from 2016 and the decline in those margins up to the current year, which is 2022 and what the reasons for those — that margin decline was? And the second question you had was when we will get back to double-digit operating, which I’m going to interpret is double-digit EBITDA percentage. In 2016, through all the way up to 2018 and ’19, a very big component of our profitability was our Railways business unit, specifically for the coach and wagon business, where we used to supply to ICF and CF and other wagon manufacturers.

This is a high-margin revenue. Now this revenue is due to a combination of factors. Some part of it being hysteresis on the part of the railway board, some part of it being increased competition from other vendors who are classified as part one suppliers has resulted in a lot of uncertainty in the revenue and a decline. So it was a double impact where the revenue from that business was used to be about INR400 crores per year, fell to something approaching INR200 crores right now and additionally, even the margins of that business, which used to be around 20% fell from that to a lower number.

So that, in effect, is the reason why 2016 to 2022, there was a fair amount of up and down in our margin profile. However, we are now much less dependent on the Railways business unit or any one business unit for that matter for our profitability. We have several high-margin businesses. On the high margin, I mean, businesses with an operating profit margin after variable, not EBITDA, but margin after variable, north of 15%, north of 20%, in the case of service is north of 30% also.

So we have several of these contributing. And when we add revenue, which is a better quality, better margin, then consequently, all of these things drop down to bottom line and tend to take our bottom line up. I fully agree that our net profit or even our cash PAT percentage, which is at around 4%, 4.5% is low. So engineering companies typically tend to do substantially better than that.

But in answer to your question of EBITDA reaching about 10%, we will achieve that in this financial year, sustainably, not a decline again, but we don’t see any more risk like we had for Railways in the future for our business, which is why if you look at post-pandemic we’ve been committing and delivering on revenue and profitability increases. Railways, there are signs that there may be some come back from that, but it is not an event that we are counting on. And honestly, we are moving away from government and PSU revenue in Pennar and most of our business, the vast majority of our growth of our capex of our revenue now will be private sector capex. So that’s my answer to your questions.

Vijay Kumar — — Analyst

Thank you and good luck.

Aditya Rao — Vice Chairman and Managing Director

Thanks.

Operator

Thank you. The next question is from the line of Nilesh Shah from Arrow Investments. Please go ahead.

Nilesh Shah — Arrow Investments — Analyst

Hi. So just a follow-up question on something that is now, I mean, probably things that are not in our control, in terms of how inflation is proceeding, how interest rates are rising across the world. We have had a 17% to 18% increase in our year-on-year interest cost. And overall, we spent something like INR80 crores on the interest that — on the debt that we service, including your bills and discounting of bills and other things. So how well prepared are we to see if there is a further 0.5% to 1% hike in interest rate, even our RBI has been increasing rates.

Rates have gone up to 2.5% in the US and probably the Fed is going to hike more rates, and how well prepared are we to actually absorb the impact of higher finance costs, given that, I mean, obviously, given the kind of higher revenue, the percentage of finance cost has decreased, but at a constant currency terms, we are still at around INR80 crores per annum. If there is an increase of 0.5% to 1%, if you have a detrimental impact on the overall profitability, so how well are we prepared to ring-fence around the finance costs. Is there anything that the company is planning ahead in terms of repayment of debt or reducing the overall debt or how well are you geared up to actually meet the rise in increase rates?

Shrikant Bhakkad — Senior Vice President, Finance

Okay. As you had mentioned, the vast majority of our debt is working capital debt and the vast majority of that working capital debt is non-cash LCs. So effectively, as revenue increases, that number will increase. And we really do track, and I have mentioned this, I think, on our previous conference calls, we do benchmark ourselves to a certain percentage of profitability, which is high and I think it’s at 3.1% right now. It’s on the higher side. I think a more appropriate number would be lower. I think that comes about by working capital efficiency. The working capital days reduction brings that under control. So in the event there is a interest cost rate hike.

So what happens or the mechanism we have that brings that into control and make sure that we don’t have a precipitous rise in interest cost without a corresponding increase or without any increase in revenue, the controlling factor that we have on that is the payment terms we offer our customers. So when interest cost increase, if you have a net capital cost of say, 10%, and that increases by 50 basis points, accordingly, the amount of credit we can give our customers in terms of accounts receivable or the amount of inventory we can hold for our customers will be adjusted downwards.

What that tends to do is effectively make sure that our overall interest cost as a percentage of our revenue stays constant or stay stable. And also means that obviously, the rates are higher, that means the amount of non-cash and current short-term debt we use also declines. So that’s the way we control for this and we don’t currently believe that even a 50 basis points or 100 basis point increase in interest cost, even if that does come about, we will not see a precipitous increase in our interest costs because of that reason. Our interest cost will only go up if our revenue goes up. More importantly, you can count on that number 3.1% to be sustained and improved upon.

Nilesh Shah — Arrow Investments — Analyst

All right. Okay. So that answers quite a bit. So in the sense if your working capital improves, obviously, the debt level will be maintained. We don’t have an extra impact and our profitability is kind of ensured. Is that right?

Shrikant Bhakkad — Senior Vice President, Finance

That’s correct, sir.

Nilesh Shah — Arrow Investments — Analyst

Okay, fine. So the second part of that question was on the inflationary impact of products as well. In fact, there has been a lot of drop in the commodity prices, especially steel and all and we have got a higher amount of inventory. So is there any reduction or arrangements with customers that you have to downsize or re-bring the orders back to a little bit lower level. Are any customers demanding a lower price or are we still going ahead with the existing orders in the same pro rata that we have received?

Aditya Rao — Vice Chairman and Managing Director

So we do not believe. We monitor all the risks that can potentially affect our revenue and profit projections and cash flow projections and we do not see raw material price variations or any inflation return on those as metrics that will strongly impact our profitability. The reasons for that is 2-fold. One, while we hold substantial inventory, all of that is usually on the back of order books that are already in place. So there’s no price revision when — if the price happens to fall, so you’re not stuck holding on to high-cost inventory. Second thing that does happen is, we do have quarterly rate contracts. So when there’s a price increase or a price decrease, we have the ability to play within a quarterly contract pricing and also spot market pricing. So if spot market price is lower, we tend to buy more from a spot market suppliers.

If our quarterly price is higher, then we tend to go with — is lower we tend to go with quarterly. So that affords us some immunity in a sense [Indecipherable] any volatility in raw material price, whether that be appreciation or depreciation. As of right now, actually, people are projecting a slight decrease of about 3%, 4% in some of our raw material pricing and we don’t believe that will impact the margins. In fact, in the last one year, you would — I’m sure you’re aware that specifically steel prices and other commodity prices have been on a little bit of a rollercoaster ride.

And even when the price increases have been 20%, 25%, 30% in the quarter, which happened, I think over the last one year, we have not had a corresponding impact on our inventory or write-down. So we are quite secure in that. We don’t — we had a quick pass-through. A very large increase or a very large decrease may have a one-month impact on some portion of that, but it will not — our quarterly numbers will not be impacted because of raw material price variations. We are very careful that we watch for that.

Ulhas — — Analyst

Perfect. Thank you so much. Thanks.

Operator

The next question is from the line of Dinesh, an individual investor. [Operator Instructions] The next question is from the line of Ulhas Master, an individual investor.

Ulhas — — Analyst

Hi, Just a follow-up question on whatever guidance or indications you have given. There are 2, three questions on the margin front. One is that in one of our major lines of business, Tube Investments is one of our main competitor. I believe Tube Investments has done very well. So how does our operating margin compare with Tube Investments? Secondly, on the margin front, again, excluding the Railway business, how does our present margin or even the margin for the first quarter compared with the peak margin of 2018 and ’19.

And the third question would be, I believe, one of the earlier con calls, you have given some indication of some unutilized land. I think it was around 150, 170 acres, correct me if I’m wrong. So where is it located? And what is the present approximate market price per acre on how close it is to the land which we sold a couple of years back.

Aditya Rao — Vice Chairman and Managing Director

Thank you. There were three questions asked. One was the comparison of our product profile and margin profile to Tube Investments. The other was, if I understood correctly, a margin comparison of our current margin operating versus what we had in 2018, I think was the year that you used. And the third was on free land assets that the company possesses.

Regarding Tube Investments, Tube Investments is a company like us, which has a very broad product profile. The areas which we do compete in is in CDW tubes and in special grade CR. From a revenue point of view, those are very large business units for TI. And also TI has some product capabilities within those verticals, which we don’t currently have, but are trying to [Indecipherable]. This means some special grade alloys, which they make, which we don’t, and also in large diameter tube 8-inch plus. That is something that TI provides, that we do not.

Our margins are comparable. We both supply to the Indian automotive industry. We both export to the US. Our operating margins with them are comparable. But if you are comparing the entirety of Tube Investments to us, I think it would be important to bear in mind that Tube Investments has multiple other businesses, which won’t compete with us. They have a cycle business, which is different from us. They have a consumer electronics business with their acquisition of Crompton, which is different from us. And they also have a lot of automotive door-and-frame businesses, which perhaps now with our BIW line is not exactly competition, but it’s in a similar ancillary business.

So in comparison of our tube CDW output alone and special grade output alone can be made. But in my view, and I may be wrong on this, but I’m not sure that — I know we don’t, but I don’t know if TI also reports those as separate segments. So it would be difficult for us to compare. But from what I know the market, it is my impression that we source similar operating margin after valuables. So there is scale differences as well where contribution may be comparable, but EBITDA may not be. Your second question, which is on the margins comparison now versus 2018. I don’t have my 2018 numbers right now.

But I can guide you to, as I’ve said previously, our Railways business being the dominant contributor to profitability back in 2016, ’17 and ’18, it would be lower right now. However, with the growth of our higher-margin businesses, on the net profit basis, on an EBITDA basis and also on the operating profit basis, we are not far away from climbing back up to where we were at a larger scale as well, which will make sure that we cross as I answered to your question previously. We are aiming to cross and substantially grow over our peak profitability in the previous years. So that is the second question.

The third question on the, I think, call it unutilized land. I can give you an idea of the total land assets we have, but I would not be able to provide commentary on the current land prices. Pennar has plants across India. We have plants in the US. We have now plants in Europe as well. In India, right now, the total land assets we have, some of it used, some of it not used, would be closer to about 350 acres. And I would not be able to provide commentary on the exact value of that land.

As you are aware, we have — or you might be aware, I think we had mentioned it, we have disposed some land that we have not been using about 5 acres and we did it at a certain price. This was about three years ago. And my understanding is that there’s been a substantial appreciation on land value on top of that. Since those are the statements of fact I can comment on as far as the land is concerned. Precise valuation, I will not be able to comment, sir.

Ulhas — — Analyst

My question was on the unutilized land and not the utilized land. And secondly, about the margin front also, I wanted you to compare our operating margin, excluding the rail business between 2018 and the current value.

Aditya Rao — Vice Chairman and Managing Director

Okay. So if you exclude the Railway business, our current margins would be superior to what we had in — for all other business units would be on an overall superior basis. Now we do have multiple revenue streams, each one having its own margin profile. So we will endeavor to get that clarity to you at a later time, and we’ll communicate that to all of our investors as well. But on an overall basis, I can definitely say our margins right now, if you look at our contribution margins for the whole company would be 15% plus. And at that point of time, it was slightly south of 15%. So it is higher now than it was before.

Ulhas — — Analyst

And the land part?

Aditya Rao — Vice Chairman and Managing Director

Land part, I will not be able to comment further than what I have said, sir. I understand your question is unutilized land. We don’t classify it that way. We treat as laid-on area. Rather than me speak and give you a wrong number, I would suggest we — that is the information we can comment on right now, the total land assets we have. That’s it.

Ulhas — — Analyst

Thank you.

Operator

Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments.

Aditya Rao — Vice Chairman and Managing Director

So thanks to everyone of you who have asked us questions. And we are glad to have you on board as we continue on our growth journey. I’ve taken note of all of your questions and your comments. And I believe they’re in very broad agreement that we need to make sure that our margins improve, our capital efficiency improves and also that we cross the peak profitability we generated in previous years. I would like to commit to you on behalf of management that, that remains our priority, it remains our goal-post. And again, on behalf of the management, I will commit that on the following quarters, we will continue to see consistent improvement in our revenue and profitability growth while making sure that we are [Indecipherable]. Thank you very much for your time.

Operator

[Operator Closing Remarks]