PITTI ENGINEERING LIMITED (PITTIENG) Q3 FY23 Earnings Concall Transcript

PITTI ENGINEERING LIMITED (NSE: PITTIENG) Q3 FY23 Earnings Concall dated Feb. 15, 2023

Corporate Participants:

Akshay S Pitti — Executive Vice Chairman and Managing Director

Analysts:

Balasubramanian — Arihant Capital — Analyst

Swati Jhunjhunwala — VT Capital — Analyst

Keshav Kumar — RakSan Investors — Analyst

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Ravindranath Naik — Sunidhi Securities — Analyst

Vikram Sharma — Niveshaay Investment Advisors — Analyst

Pulkit Singhal — Dalmus Capital — Analyst

Anurag Runwal — Moneybee Investment Advisors — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Pitti Engineering’s Q3 and Nine-Month FY ’23 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions at the end of today’s presentation. Please note that this conference will be recorded. Before we begin I would like to mention that some of the statements made in today’s call may contain forward-looking in nature and may involve risks and uncertainties.

For a list of such considerations, please refer to the earnings presentation. I would now like to hand the conference over to Mr. Akshay Pitti. Thank you and over to you sir.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Thank you. Welcome to all to our Q3 and FY ’23 earnings call. I intend to offer to you a brief overview of our operational and financial performance during the quarter before opening the floor to your questions. An increased capital allocation by 33% to INR10 lakh crores in the Union Budget is expected to add further impetus to our business growth. Railways has also received the highest-ever capital outlay of INR2.4 lakh crores during the recent budget. We look-forward to capitalize on the emerging opportunities in the RRTS, Vande Bharat, [indecipherable] in the days ahead.

We are well-positioned with new product developments and coupled with China Plus One Supply Chain strategy. We see continued growth in the company’s export business. I would like to shed some light on our financial performance now. For quarter three, the revenue from operations stood at INR239 crores compared to INR265 crores in Q3 FY ’22, down by 9.94% on a Y-o-Y basis. Capacity utilization during the quarter was 66.25%, our blended sales realization during the quarter stood at INR26000[phonetic] per metric ton. Blended EBITDA margin was INR42,428 rupees per metric ton.

The revenue de-growth and lower blended sales realization in absolute terms for the quarter is on account of softening of raw-material costs. While we have reported growth in sales volume on a year-on year basis through 9,150 metric tons compared to 8,500 metric tons. Company also recorded a net profit of INR12.13 crores as compared to INR11.60 crores in Q3 FY22 an increase of 5% on a Y-o-Y basis. The nine months capacity utilization stood at 70%, our network has improved to INR315 crores in December ’22. Net-debt has declined from INR336 crores to INR260 crores.

Consequently, net debt stood at 0.83 of equity. Now let’s come to the operational highlights. On account of softening raw-material prices and easing supply-chain bottlenecks we have been able to bring down our working capital by maintaining optimal raw-material and finished good stocks. Our continued efforts have allowed the company to reduce working capital outlay, by INR85 crores on a quarter-on-quarter basis. I would like to reiterate that the company has delivered a Five-Year CAGR revenue and PAT growth of 20% and 35% respectively. The demand outlook for FY24 remained strong and we expect about 20% volume growth in the next year.

Going forward, we see equally good demand from both railways and the non railway business. Our focus on machine component business will continue, which will see sizable growth from next financial year. Construction of new shed and expansion related work is on-track and we expect to meet our earlier announced deadline of completion of capex by end of Q2 FY24. During the end-of-quarter we also have received healthy order flows which have continued to boost our order book.

We have developed lamination for variety of electric mobility platforms, large hydro customers, lamination for 1,200 MW and 14100 MW pump storage application were also done during the quarter. These machines have dual purpose of power generation and water pumping. We further received new alloys for manufacturing parts using electric vehicles during the quarter. Company has also bought prestigious order for making shafts used for various applications and state locomotives. These locomotives are manufactured by our client in the North-America plants and our business potential of approximately $10 million in the first phase over the next 10 years.

We have provided the investor presentation on our website [indecipherable]. Now I would like to open the floor for question-and-answers.

Questions and Answers:

Operator

Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] Ladies and gentlemen we will wait for a moment while the question queue assembles. We’ll take our first question from the line of Mr. Balasubramanian from Arihant Capital. Please go-ahead, sir.

Balasubramanian — Arihant Capital — Analyst

Good evening sir. Congratulations on a good set of numbers today. Sir, I want to understand about the realization between assembled and value added and loose lamination products like we have seen assembled and value added. Volumes are growing by 14% year-on year, while loose laminations are down by 8% year-on year. So how do we understand like while we are focusing on assembled and value-ordered components and what would be that realization difference between loose lamination and assembled and value-added components. These are my first question, sir.

Akshay S Pitti — Executive Vice Chairman and Managing Director

The difference between the realization of assembled lamination versus loose lamination varies dramatically, if it’s a simple blended lamination stack, it has always been much different from a loose lamination sale realization. However, it’s a highly value-added assembled stack utilization can be multiple excess of loose lamination. Because of the various complexities involved in [indecipherable] which are dependent on customer design, if you’re not prepared for a number on these blended assembled value-added for sales realization.

Balasubramanian — Arihant Capital — Analyst

Sir, on that shop it is manufacturing you have mentioned about $10 million revenue over 10 years. We may assume every year INR7 to INR10 crores kind of revenue range we may expect or like how you can understand.

Akshay S Pitti — Executive Vice Chairman and Managing Director

It’s approximately $1 million per year opportunity over the next 10 years in the first phase and depending on its success will be getting more-and-more orders on the shaft business going-forward.

Balasubramanian — Arihant Capital — Analyst

Okay sir. In that papers like how you are importing some advance payments to the suppliers. If you go through.

Akshay S Pitti — Executive Vice Chairman and Managing Director

I’m sorry. I couldn’t hear your question. Your line cut out in between.

Balasubramanian — Arihant Capital — Analyst

Sir, right now different, [technical issue] we have made any advance payments to the suppliers.

Akshay S Pitti — Executive Vice Chairman and Managing Director

You are asking about the capital equipment advances.

Balasubramanian — Arihant Capital — Analyst

Yes, sir. yes, sir.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Yes, yes, of course, we have done. The longer lead-time machines we have already ordered. Machines which are less than six months we have obviously not ordered right now because we have capacity to come in by Q2 FY ’24.

Balasubramanian — Arihant Capital — Analyst

Sir, if you could share any numbers for advance payments that will be really helpful.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Approximately INR75 crores is the capex incurred during the year so far.

Balasubramanian — Arihant Capital — Analyst

Okay, sir. Thank you sir, I’ll come back in the queue.

Operator

Thank you sir. [Operator Instructions] We take the next question from the line of Swati Jhunjhunwala from VT Capital, please go-ahead.

Swati Jhunjhunwala — VT Capital — Analyst

Yes, hi, am I audible?

Akshay S Pitti — Executive Vice Chairman and Managing Director

Yes, you are audible. Please go ahead.

Swati Jhunjhunwala — VT Capital — Analyst

Yes, thank you for taking my question. So my first question is, could you give me a brief breakup of the raw officials that we use.

Akshay S Pitti — Executive Vice Chairman and Managing Director

So majority of the raw materials that we use is cold-rolled silicon steel, which is the electrical grade steel. Apart from that, we use a variety of other materials depending on the product. In terms of trial part raw-material not primary raw material [multiple speakers] unless plates costings I mean there’s a long list of raw materials.

Swati Jhunjhunwala — VT Capital — Analyst

Understood. And how much would be the cold-rolled silicon steel approximately of the total RM.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Cold rolled silicone steel of the total raw materials consumed should be about 70% by value.

Swati Jhunjhunwala — VT Capital — Analyst

70% by value. All right, understood. Second is can you tell me what are the major competitors right now in the EV space that you’re operating, like the products that you’re selling to the electrical, — how much competition is there right now at least in India.

Akshay S Pitti — Executive Vice Chairman and Managing Director

See, right now most of the EV products are imported from China, which are consumed in India, there are many people and lot of countries are doing it as a cottage industry as you must be aware we are smaller manufacturers of three-wheelers and two-wheelers a lot where they are getting the lamination from us predominantly the unorganized sector, the organized players are right now still starting to make their own motors and as they increase, we’ll get more competition. So far, all these products are in developmental stage, so there’s not really any competition for orders. It’s more of the product development that is going on right now.

Swati Jhunjhunwala — VT Capital — Analyst

Understood. So, okay, and can you give any idea of market share in all the segments that you operate in, like on the basis of end-user applications.

Akshay S Pitti — Executive Vice Chairman and Managing Director

I have noted. Your question will get the answer to you one you share your contacts. I will not have that off-hand[phonetic].

Swati Jhunjhunwala — VT Capital — Analyst

All right, thank you so much.

Operator

Thank you. We’ll take the next question from the line of Mr. Keshav from RakSan Investors. Please go-ahead, sir.

Keshav Kumar — RakSan Investors — Analyst

Hi, sir, with a focus in EV space being motor sub-assemblies or some other value chain as well.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Right now, it is what we mainly motorize motors which are going into the motor of the EV. That is the correct EV opportunity that we have. Going-forward again how these customers decide to develop the supply chains, whether they want more assembled parts or they want loser parts that is currently something that we cannot comment on. It depends on their supply-chain strategy.

Keshav Kumar — RakSan Investors — Analyst

Sure. Sir, so for laminations, do you think that for EV particularly, do you think that we need to step into powder metallurgy or have FMC capabilities if we look from [indecipherble] loss perspective. I mean, it happens to offer pretty good incentives so or another way to project it if you see a risk FMC, or taking market-share from laminated steel — silicon steel.

Akshay S Pitti — Executive Vice Chairman and Managing Director

See. Right now most of the EVs that we are making is predominantly from very-very efficient E-steel. This is 0.19, 0.25 mm thick, [indecipherable] As of now, this is what is going on in the market. If it decides to move into a different direction, then we’ll see whether we are in a position to capture that opportunity or not.

Keshav Kumar — RakSan Investors — Analyst

Sure, understood. And sir, in one of your annual reports, there was a data point that China supplies 90% to 95% of windmill parks. We were also then continuously hearing in China plus when it goes well in almost four or five years now, and the global wind turbine market itself is north of $50 billion. And we do, when we just kind of make the components. So, the kind of growth we are seeing in locomotives, because of the playing field being set for domestic manufacturers why are we not seeing that kind of traction for the windmill vertical. If we are in testing and validation phase with clients that is why or other companies or countries, taking the lead or is the barrier-to-entry, looking for China in this particular [technical issue].

Akshay S Pitti — Executive Vice Chairman and Managing Director

If you go back to the 2.5 to 3 years and see the Renewable Energies contribution to our revenues I think it is one of the most [indecipherable] in some quarters even zero contribution. Today, this is almost 5% of revenue. So we are already getting that opportunity but to move such large supply-chain out of China takes time. So first move out of smaller companies that used to be established for which we also has a facility and capability to do. The bigger opportunity would be there in very large machine castings. Castings which are used in the rotor hubs or the mainframes or the Blade adapters, those are things that we don’t do as of now.

Keshav Kumar — RakSan Investors — Analyst

Sure, so just taking [indecipherable] in this particular vertical where do we see its contribution — potentially contribution coming in, say in another three to five years by then I think a lot of supply-chain could already be shifted.

Akshay S Pitti — Executive Vice Chairman and Managing Director

See, right now, on the wind mill components, we are focusing primarily on the generator parts and the shafts and the smaller castings. In those combined I think the revenue potential could be close to INR100 crores over the next three years per annum.

Keshav Kumar — RakSan Investors — Analyst

Sure, sir. Sir if we take a player like craftsmen which is also present in many of the sub-segments we operate in and they’re also locomotives supply to — locomotive component supply to GE, for example, they have sheet metal casting machining as well as tooling utilities as per their disclosures. So instead of being a player in machining, they look like more like-to-like player in other aspects as well. So firstly, now we’ve spoken a barrier-to-entry with long gestation period to onboard clients, so do two players like us and craftsmen co-exist by the virtue of demarcation of product expertise and if we speak about motor assemblies, such as laminations, [indecipherable] we would be the leader.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Sorry to interrupt you, but to the [technical issue] is not supplying anything in significant quantity to Wabtec at least over the last three years. Most of the components they will shifted out as their focus I think is on I don’t want to comment on what their focus is but to the best of our knowledge, they are not supplying any components to Wabtec.

Keshav Kumar — RakSan Investors — Analyst

Okay, sir. Understood. Thank you.

Operator

Thank you sir. [Operator Instructions] We take the next question from the line of Mr. Balasubramaniam from Arihant Capital. Please go-ahead, sir.

Balasubramanian — Arihant Capital — Analyst

Hello sir.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Yeah, hi.

Balasubramanian — Arihant Capital — Analyst

Hi sir. Sir, two questions. First is what is happening on the EV side of our business right now. Electric mobility. What kind of growth you are expected to see next two years, if you can throw some light on the EV side of the business. Second, I just joined late, so I may be repetitive, on the railway side, some of our suppliers — some of our clients have received big orders. Are you seeing some — are you getting some queries what is happening at this level, sir.

Akshay S Pitti — Executive Vice Chairman and Managing Director

So on the EV side let me start-off as I’ve already mentioned, most of the work is in the developmental stage. Today there is not really significant commercial supplies. How the manufacturing of EV motors in India ramps-up will depend on how the business plays out next couple of years. As of now the business indication given to us is that it can be a INR30 to INR40 crores per year opportunity by two years from now. Lot of developments, needs to be done to get there. As far as the locomotive orders I think you must be referring to the Siemens award for 9,000 horsepower locomotive. So we have discussions going on with our clients on the possibility of supplier components and we are receiving orders and inquiries both. Apart from the Siemens 9000 horse power locomotive orders there is also the RRTS Agra, Kanpur, Bhopal, Indore which is under developmental stage.

Keshav Kumar — RakSan Investors — Analyst

Okay, sir. Sir, also two questions — two more questions. One is now the steel prices have started picking-up, so are you going to see some, like, how much days of inventory it can be kept and when we are going to see some impact of the steel prices. Are we going to see some inventory gain in this quarter, sir.

Akshay S Pitti — Executive Vice Chairman and Managing Director

The very nature of the contracts that we have with our clients here more or less insulated from any inventory loss. And by that same virtue would be not getting any inventory gains. Okay, so we should not see any inventory gain or loss.

Keshav Kumar — RakSan Investors — Analyst

Okay and sir, what kind of incentive, we are expecting in Q4 for the GST benefits[phonetic].

Akshay S Pitti — Executive Vice Chairman and Managing Director

INR30 crores is expected in Q4.

Keshav Kumar — RakSan Investors — Analyst

Okay, okay, sir thank you, sir, if I have anything else I’ll be in the line sir. Thank you, sir.

Operator

Thank you. We’ll take the next question from the line of Mr. Sanjeev Zarbade from DreamLadder Investment Advisors. Please go-ahead, sir.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Yeah, sir my question was regarding the revenue growth. So I can understand that raw material prices have come down while our volume growth has gone up, but overall revenue growth has declined. But if I compare it with other peers who are in the same product segment like Bharat Bijlee, or CG Power, they have reported year-on-year growth on positive growth in revenues. So despite much positive business environment our revenue growth has declined on a year-on-year basis and on top of that we have a sizable debt also on the balance sheet. So, you know, how do we plan to take it forward in terms of cash generation in terms of growth if you could.

Akshay S Pitti — Executive Vice Chairman and Managing Director

I think you are very comfortable in terms of cash generation and liquidity position, net-debt is I think less than INR260 crores today, which is way lower than the big debt that we had actually projected. So on the debt side and the cash-flow side, we are very-very comfortable. Revenue in our industry because we are an intermediate to these players that you just referred to. So the revenues for us have no meaning at the end of the day, because it is determined by the raw material prices. In fact, if the revenue grows because of say inflation we actually require more working capital for the same amount of profit. The correct barometer for our performance is the volume growth.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Yeah, volume growth is not also not very original it’s like I think late single-digit or maybe early teens, so something given the kind of background you are seeing in the railways side and even the manufacturing side, one would probably expect company of our size to grow in high-teens. So, in volume terms. So that’s what I was actually looking at.

Akshay S Pitti — Executive Vice Chairman and Managing Director

I think on a year-on-year basis for nine months you have grown just to correct you, 14.63%.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Okay, fair point. And sir, in terms of incentives if you could share the details in terms of how much we received in FY 22, and also in the current year.

Akshay S Pitti — Executive Vice Chairman and Managing Director

So FY 22, we received INR12 crores. Curent year so-far, we have received noting and we will be receiving it in Q4 in one-shot, which is about INR30 crores.

Sanjeev Zarbade — DreamLadder Investment Advisors — Analyst

Okay, okay. That’s it from my side sir, thank you so much.

Operator

Thank you sir. The next question from the line of Swati Jhunjhunwala from VT Capital, please go-ahead.

Swati Jhunjhunwala — VT Capital — Analyst

Yes. Thank you. Just a small clarification. So if I see on the [indecipherable] the gross profit per tonne has decreased from 92,200 odd to 86,200. So any specific reason for that based on a quarter-on-quarter basis.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Those things will keep changing. I could not have a specific answer for that. So blend of all our products and services that will be. In certain products it flow-through from gross profit to EBITDA will be higher in certain kind of products the flow-through from gross profit to EBITDA will be lower. It also depends on the value-add that you’re doing.

Swati Jhunjhunwala — VT Capital — Analyst

Understood. So, is it fair to assume that EBITDA is a better judge of the profit rather than gross profit.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Of course, that would be the most appropriate because on the operating level, after all the operating costs are accounted for EBITDA per ton, would be the best barometer for the profitability of the company.

Swati Jhunjhunwala — VT Capital — Analyst

Right, understood. And so on EBITDA per ton this quarter I think we posted something around 42,400, so where do we see this going into Q4 and let’s say for FY24.

Akshay S Pitti — Executive Vice Chairman and Managing Director

See, Q4, I will not be able to give you a specific answer because precise if you take it over a long-term, say over the next two to three years. We expect this to move closer to 45 and upwards of that. What you have to see is that if you see the contribution of machining and machine components business in the overall blend of steel sales as that increases the EBITDA per ton would increase, because those are typically the higher profit margin kind of business.

Swati Jhunjhunwala — VT Capital — Analyst

Right. Understood. All right. Thank you.

Operator

Thank you. [Operator Instructions] We take the next question from the line of Mr. Ravindranath Naik from Sunidhi Securities. Please go-ahead, sir.

Ravindranath Naik — Sunidhi Securities — Analyst

Thank you for the opportunity. Sir, you mentioned about briefly about this [indecipherable] what is the opportunity we are looking at this order first and how the ecosystem will work, how you are going to benefit from this order or not benefited from this order or how the system will work. Can you please briefly tell about that, how the things will work-out for you for the [indecipherable] if at all any opportunity comes.

Akshay S Pitti — Executive Vice Chairman and Managing Director

It will require a bunch of casting for the [technical issue] There’s a whole list of components. Now obviously we try to bid for all the products. It depends on how many of those products do you get the order for? Whatever we get the order for will be our additional business from here on.

Ravindranath Naik — Sunidhi Securities — Analyst

Okay, so you will get direct orders or it will be basically throw some other party type until we get the orders.

Akshay S Pitti — Executive Vice Chairman and Managing Director

[technical issue] across the supply chain [multiple speakers].

Ravindranath Naik — Sunidhi Securities — Analyst

Okay. So as part of our discussions are going on with are we talking directly to Siemens or through the intermediaries we are talking to them.

Akshay S Pitti — Executive Vice Chairman and Managing Director

See, those are things I cannot actually [technical issue].

Ravindranath Naik — Sunidhi Securities — Analyst

Okay. Sir, regarding you have given around 10 segments in the industrial exposure of your business. So among them which segment particularly is you are doing more value addition, if you can tell in the pecking order spaces so that would be helpful to understand better.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Variable energy traction motors railway components, mining, oil and gas, data centers, these are highest value addition, followed by a special-purpose motors, power generation and then coming to automotive and Industrial commercial.

Ravindranath Naik — Sunidhi Securities — Analyst

Okay, so automotive comes last in terms of value addition, right.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Absolutely.

Ravindranath Naik — Sunidhi Securities — Analyst

Okay, okay and about target tonnage for FY23 for you what are targeting for ’23. And what about your capacity addition in terms of machining, what is the status for that. Can you please highlight something on that?

Akshay S Pitti — Executive Vice Chairman and Managing Director

The capacity addition across-the-board is on track FY 24 Q2 end. Machining capacity, obviously is getting added further beyond that as well. As we require them we will be building them in. In terms of target for FY23, up to now we have done about 26,700 tons approximately. We are targeting about 10,000 tons in Q4 as of now, we have [indecipherable] for that. [multiple speakers] 37,000.

Ravindranath Naik — Sunidhi Securities — Analyst

Okay, okay. And if at all in Siemens order we get any thing sir would be to do further capex for that or we don’t need further capex. No, no, we don’t need further capex. The current capex which is, of course, is more than sufficient to take care of those requirements.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Okay, okay, and what is the targeted date for FY23 net debt by the end-of FY23. I think, it will hover around the same level as Q3, which is about 262 to 280.

Ravindranath Naik — Sunidhi Securities — Analyst

Okay, okay. Okay, thank you very much. Thank you. All the best.

Operator

Thank you. We take the next question is from the line of Mr. Vikram Sharma from Niveshaay Investment Advisors. Please go-ahead sir.

Vikram Sharma — Niveshaay Investment Advisors — Analyst

Hi, sir. So what is current net-debt of company and what is our debt repayment plan.

Akshay S Pitti — Executive Vice Chairman and Managing Director

The total net debt of the company as on today is INR260 crores, out of which the overall long-term debt I think is less than INR90 crores which is payable over the next five years. The residue of that is entirely working capital. And what is the interest cost — interest rate. It will vary from different kind of facilities, for example, we have significant export facilities which are over denominated. So on a blended basis, we are about 8% cost of finance. On a blended basis.

Vikram Sharma — Niveshaay Investment Advisors — Analyst

And with the increase in steel prices. We can expect some increase in debt also in next quarter.

Akshay S Pitti — Executive Vice Chairman and Managing Director

If the steel price increase of course a little more working capital would be required. How much is in fact the net-debt pictures [phonetic] is a little difficult to say, but I really don’t see any negative impact of the net-debt side going-forward. As the cash generation at the Company’s side is robust. I don’t think these will have a net-debt issue. Okay. Thank you.

Operator

Thank you sir. [Operator Instructions] We take the next follow-up question from the line of Mr. Balasubramanian from Arihant Capital. Please go-ahead, sir.

Balasubramanian — Arihant Capital — Analyst

Thank you sir for taking my question. And sir, out of INR884 crores order book like if you can throw some light on between railway orders and non-railway orders.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Bala, I don’t give that out, because that will keep changing from time-to-time as on timetable of the order book. I think our IR person can give you a split of that on that date.

Balasubramanian — Arihant Capital — Analyst

Okay, sir. Okay.

Akshay S Pitti — Executive Vice Chairman and Managing Director

As on 31st December, whatever it is [indecipherable] can get that across to you.

Balasubramanian — Arihant Capital — Analyst

Fine, sir. Fine. Sir, my second question regarding this automotive segments like last call if I mentioned around INR40 crores of revenue expected by FY23, so how we are on-track on it. And by next year, if I mentioned about INR90 to INR100 crores of revenue. So like, is there any change in that guidance or.

Akshay S Pitti — Executive Vice Chairman and Managing Director

See, development from our customer end is going quite slow if you see year-on year I think now got to INR2 crores per quarter kind of revenue as of Q3. Going-forward as the business develops I think six to eight months kind of a push-outs will be there from the original timeline on that number. At the very minimum from what we are seeing today.

Balasubramanian — Arihant Capital — Analyst

Sir, we also doing additional capex of INR197 crores like these capex will be funded growth, internal accrual, or we are going for debt, or we are planning for some QIP. If you could throw more light on that.

Akshay S Pitti — Executive Vice Chairman and Managing Director

That will be from internal accruals only, even if I take that number the balance capex which you are planning to incur over the next two years. Including the first INR270 crores, which was approved by the Board on 27 June 2020, and the second capex which was approved of INR197 crores in May of 22. Totally [indecipherable] 257 over the next few years.

Balasubramanian — Arihant Capital — Analyst

Okay, sir. Okay. Sir like till now, we stand at INR75 crores for this quarter or the whole nine months.

Akshay S Pitti — Executive Vice Chairman and Managing Director

For nine months.

Balasubramanian — Arihant Capital — Analyst

So how much capex is left out of this INR270 crores.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Out of the first INR270 crores.

Balasubramanian — Arihant Capital — Analyst

How much capex is left.

Akshay S Pitti — Executive Vice Chairman and Managing Director

From the first INR270 crores we have just hold-on for one second INR60 crores is what we spent.

Balasubramanian — Arihant Capital — Analyst

Okay, sir. Got it. Thank you so much sir.

Operator

Thank you. [Operator Instructions] We have the next question from the line of Mr. Pulkit Singhal from Dalmus Capital. Please go ahead, sir.

Pulkit Singhal — Dalmus Capital — Analyst

Yeah, hi, thank you for the opportunity. The first question is just trying to understand I mean how do budget capital allocation of INR10 lakh crores and INR2.4[Phonetic] lakh crore to railways. How and when does that flowing through to your order book. I mean, you must have seen the budgets every year. So how do we understand how different this is and when we could possibly see this in your order book.

Akshay S Pitti — Executive Vice Chairman and Managing Director

[Technical issue] order book certain shorter lead-time businesses such as the allocation towards Vande Bharat train. Those can flow as early as the next four to five months. The longer-term provisions which are like the Siemens order or the RRTS initiatives, those take more time to flow because it requires design and development on our client end itself and then those orders will flow to us. So [indecipherable] lag which is not consistent across all product categories. If you talk of the INR10 lakh crore capital investment, the government has done now the breakup of that is you know wide and diverse right from highways to power projects where everything is coupled in that INR10 lakh crores.

Pulkit Singhal — Dalmus Capital — Analyst

Right. But how does — how do you see your planning over the next two-three years, like once these budgets come in. Was this a surprise for you if it was, you would accordingly have to create certain capacities as well, right. So how did your thinking change post the budget?

Akshay S Pitti — Executive Vice Chairman and Managing Director

For us, nothing much changes post the budget, it is just that the government has actually allocated the money to the project, that they were already discussing. So right yes project of the Vande Bharat express is not something that has come up in the last two months or six months. Vande Bharat train has been in development since 2018 and we’ve been supplying developmental cost from 2018 itself. RRTS is a business that we are currently discussing and do a design work for our clients for the last year, so not seeing much changes on the budget, except that no, actually, the projects are going ahead, rather than just being discussed.

Pulkit Singhal — Dalmus Capital — Analyst

Right. And also in terms of Pittti Casting, I mean any timeline for merging that entity and also I mean, Pitti could just talk about the kind of opportunities and synergies that might create once you do so.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Pulkit I won’t able to disclose anything related to that right now.

Pulkit Singhal — Dalmus Capital — Analyst

Okay. Understood. All right, great. Thank you and all the best.

Operator

Thank you. We take the next question is from the line of Mr. Anurag Runwal from Moneybee Investment Advisors. Please go ahead.

Anurag Runwal — Moneybee Investment Advisors — Analyst

Hi, Akshay sir, congratulations on a great set of numbers. On the capex part I just wanted to confirm, so you mentioned as far as first phase is concerned around INR60 crores is pending, right. Yet to be spent and how much is left in the second phase?

Akshay S Pitti — Executive Vice Chairman and Managing Director

Entirely, INR197[phonetic] is pending.

Anurag Runwal — Moneybee Investment Advisors — Analyst

And when do you plan to sort of cover it.

Akshay S Pitti — Executive Vice Chairman and Managing Director

That is planned to be covered starting first of October 2023 through end of 2024.

Anurag Runwal — Moneybee Investment Advisors — Analyst

Okay, so these capacities which are coming since Q2 or.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Anurag, you can take it approximately like INR60 crores over the next six months and about INR100 plus crores per six months there on.

Anurag Runwal — Moneybee Investment Advisors — Analyst

Okay, okay. So the capacity additions which are committed those are relating to Phase one.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Yes, those are related to Phase one and those are related predominantly to the lamination side then will be doing the transfer of the lamination capacity from Hyderabad to Aurangabad and then expanding the machining facilities further.

Anurag Runwal — Moneybee Investment Advisors — Analyst

Okay and how much expansion will be happening in the machining capacity in the second phase.

Akshay S Pitti — Executive Vice Chairman and Managing Director

See, it is better to kind of club both the phases because it is happening in a overlapping manner. So currently we are so like machine as of December, will be going to [indecipherable] by end of December 2024.

Anurag Runwal — Moneybee Investment Advisors — Analyst

Okay. Okay, so but the INR100 crores that you are spending in the second phase that you mentioned over so INR100 crores each year spending, right. I’m getting a bit confused so. Right. This will be till October, in which are increasing the laminating capacity and then you are spending around INR197 crores additional over the next two years, starting from October 23, correct. And in this there is going to be transfer of.

Akshay S Pitti — Executive Vice Chairman and Managing Director

The modernization of the existing lamination facility of Hyderabad and expansion of machining facility at both Hyderabad and Aurangabad.

Anurag Runwal — Moneybee Investment Advisors — Analyst

Okay, okay, okay. Okay, all right, thank you. Got it.

Operator

Thank you. [Operator Instructions] The next question from the line of Ravindranath Naik from Sunidhi Securities. Please go-ahead, sir.

Ravindranath Naik — Sunidhi Securities — Analyst

Sir, what is our total incentives from the Maharashtra government [indecipherable] book in this year by 23.

Akshay S Pitti — Executive Vice Chairman and Managing Director

[technical issue]

Ravindranath Naik — Sunidhi Securities — Analyst

Pardon sir.

Akshay S Pitti — Executive Vice Chairman and Managing Director

INR30 crores.

Ravindranath Naik — Sunidhi Securities — Analyst

Okay, thank you.

Operator

[Operator Instructions] As there are no further questions I would now like to hand the conference over to the management for closing comments.

Akshay S Pitti — Executive Vice Chairman and Managing Director

Thank you everybody for a wonderful call. If there are anymore queries, please reach out to Rama Naidu from Intellect IR. Thank you. Thank you.

Operator

[Operator Closing Remarks]