RAJOO ENGINEERS LTD (RAJOOENG) Q4 FY23 Earnings Concall Transcript

RAJOO ENGINEERS LTD (NSE:RAJOOENG) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Khushboo Chandrakant Doshi — Managing Director

Prakash Daga — Chief Financial Officer

Sunil Jain — Executive Director

Analysts:

Harsh Sharma — — Analyst

Mahendra Gala — H&M Associates — Analyst

Revanth — — Analyst

Anik Mitra — Finartha — Analyst

Hameed — Niveshaay — Analyst

Daniel — — Analyst

Keshav Garg — CCIPL — Analyst

Raj — — Analyst

Neha Jain — Ortega Wealth — Analyst

Rohan Mehta — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Rajoo Engineers Limited Q4 FY2023 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Khushboo Chandrakant Doshi from Rajoo Engineers. Thank you and over to you ma’am.

Khushboo Chandrakant Doshi — Managing Director

Good evening, everyone. I would like to welcome you all to Rajoo Engineers Limited earning conference call for the fourth-quarter and full-year ended on 31st March 2023. Thank you all for taking the timeout and joining us today.

With me today on this call, we have Mr. Utsav Kishor Doshi who is the Joint Managing Director; Mr. Sunil Jain, Executive Director; Mr. Prakash Daga, CFO, and being from Adfactors PR, our Investor Relations team.

We have shared our results, updated and presentation and media release. I hope you all must have gone through that. I would like to share financial performance, recent developments and outlook for the future. Coming to the full-year financial performance, revenue from operation FY23 was INR159.79 Cr, at being INR172 Cr in FY22, a Y-o-Y decrease of 7%, mainly because of delay in export of switches. There has been tremendous shortage of USD currency in financial system in some of the African countries. Our customers in these countries are not able to open the [Technical Issues] pre-dispatch payment due to which at the end of the year, some machines were ready but waiting for dispatch [Technical Issues] orders.

EBITDA stood at INR13.99 Cr against FY22 of INR20 crores, a decrease of 33% Y-o-Y, mainly because some significant expenditure on sales promotions and exhibitions and R&D. EBITDA margin was two was at 8.6%, a decrease of 340 bps Y-o-Y due to significant strategic expenditure made by the company under opportunity building exercise, resulting into — a little pressure on the margin for FY23.

Profit-after-tax was INR10.02 Cr in FY23 as compared to 14.18 Cr in FY22, Y-o-Y, decrease of 32%. PAT margin was 6.16 and decrease of 233 bps Y-o-Y Basic EPS stood at INR1.63 in FY23 as compared to INR2.40 in FY22, Y-o-Y decrease of 32%.

If we talk about the development during the year, we are happy to share that as a part of our strategy to increase the focus in agriculture sector, we have backed the business worth of INR30 crores one of the leading manufacturer of agriculture product from export market. This prestigious order for our cutting-edge Blown Film Lines, machine for manufacturing of silo bags as per need and requirement of the customer. We believe that our machine will empower silo bag manufacturer to optimize their operation and deliver superior storage solution to every sector and around the world.

Earlier being sourced from the European supplier, these bags will now be manufactured right there. We are continuously expanding our product portfolio. As the world increasingly shift towards renewable energy, we see a tremendous growth opportunity in solar panel manufacturing. That is where Rajoo entered and captured the opportunity through our new product called Lamina E. This is the India’s first mono and multilayer EVA or POE sheet extrusion system for producing encapsulant sheet for solar cells. It is an import substitution product and a move that will empower solar panel manufacturers and also make a difference to India’s energy program and our country’s journey towards energy independence by 2047. At, Rajoo, with our business strategy, we are expanding our global footprint, focusing on market penetration and making continued investment in R&D to promote the advancement of energy efficiency in our product line and digitalization of our aftermarket services. We continue to endeavor for our customer-centricity approach and stakeholder’s delight. As we move forward, our focus is to take significant market share in agriculture and renewable sector, giving equally importance to plastic recycling.

We will continue to invest in sustainable technology and practices to ensure that we play our part in protecting our planet for future generations. Going ahead, we expect to maintain our growth trajectory combined with strong product offering and brand position in market. Based on the domestic and export outlook, we are confident that we are looking-forward to a high-value orders in line with our expectation from high-growth markets. Our target is to grow at 15% to 17% year-on-year in terms of revenue. We are also focusing on improving EBITDA margin by increasing the contribution of high-value products and improving our operating efficiency.

So with this brief, I Thank you, very much, and invite you to ask any question that you may have. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Harsh Sharma, Individual Investor. Please go ahead.

Harsh Sharma — — Analyst

Hello. Hi, good morning.

Khushboo Chandrakant Doshi — Managing Director

Yeah, hi, good evening.

Harsh Sharma — — Analyst

So my first question is what is our current order book? And what is the tenure for the same?

Khushboo Chandrakant Doshi — Managing Director

The current order book is INR185 crores and lead time of the product ranges from three months to eight months.

Harsh Sharma — — Analyst

Okay, fine, thank you so much. And what is the domestic and global share as for Q4 and FY23.

Khushboo Chandrakant Doshi — Managing Director

FY23, the domestic has contributed to a 65% of the total revenue while export has contributed 35%.

Harsh Sharma — — Analyst

Right, fair enough. And how does the company plan to stay ahead of the competition and like. [Speech Overlap].

Khushboo Chandrakant Doshi — Managing Director

Yeah. Staying ahead of the competition. we have a plan for development of enhancement in our existing product and that’s why we are focusing on high value orders with latest technologies that can give us an edge over the competitors, not only from India, but from Europe as well.

Harsh Sharma — — Analyst

Yes, so basically — last question — are there like any specific growth strategies that are planned ahead?

Khushboo Chandrakant Doshi — Managing Director

Yeah, we are more focusing on export market, because and with that reason, we have invested heavily on the R&D, other sales and marketing promotions and also on the sales team, building up the entire sales team for looking after the world market.

Harsh Sharma — — Analyst

Fine, thank you so much..

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

[Operator Instructions]. The next question is from the line of Mahendra Gala from H&M Associates Please go ahead.

Mahendra Gala — H&M Associates — Analyst

Yeah. First of all, I congratulate to the team that they are able to maintain, leaving that sales promotion and exhibition expenses or R&D, I think the comparables from the FY22 and FY23 are nonetheless lesser than the previous year. Because of these all expenditures of the expansion, I would like to ask, what is the expansion plan right now when we are spending sizable amount of INR5 crores on sales promotion and R&D. What is the expansion plan that company is looking-forward?

Khushboo Chandrakant Doshi — Managing Director

Sir, if it touches the INR200 crores, the capacity will be over. So this is the right time for the expansion and we have been doing expansion in this year, not only on a tooling, but also in terms of building up a new capacity in terms of space as well. So we do have a plan for the expansion this year and company may around INR20 Cr to INR25 Cr for increasing the capacity.

Mahendra Gala — H&M Associates — Analyst

Okay. Another question I would like to ask if there is any sizable trade receivables this year and quarter-four ending so and high bank balances of around INR15 crores. And there is also a loans given off INr28 crores. Compared to the previous year, the loans are almost double. I did not find any increase in the other income compared to the last year because there is an income of INR2.73 last year, FY22 of the other income. And current year also, there is other income of INR2.79. When the loans have increased to double, can we ask where these — when these loans are being increased exactly?

Khushboo Chandrakant Doshi — Managing Director

Sure sir. Prakash Bhai, would you like to take this? Hello.

Prakash Daga — Chief Financial Officer

Hello, am I audible? Yeah.

Mahendra Gala — H&M Associates — Analyst

Yeah

Prakash Daga — Chief Financial Officer

Yeah, Mr. Gala. The loans are representing mostly the fixed deposits held with the the bank. It is not actually the loans given to any third-party. So — and the amount which is showing an increase, it is just because of the heavy amount of advances received — again the new orders during the last quarter of the year.

Mahendra Gala — H&M Associates — Analyst

So are the advances, are they in the form of loans?

Prakash Daga — Chief Financial Officer

No, no, they are deposits held with bank, actually there’s a slight scheduled presentation.

Mahendra Gala — H&M Associates — Analyst

Because when I see the figures, it shows that we’re in in double, exactly figures are double in the loans. That I fail to understand in the other income, there is no corresponding increase in the other income.

Prakash Daga — Chief Financial Officer

No, no, those are deposits — those are representing fixed deposit with the bank and the amount has substantially increased just because of the heavy advances received in the last quarter with new order.

Mahendra Gala — H&M Associates — Analyst

I understand — then the fixed deposits are increased. So the other incomes should also have corresponding impact, which did not find on the profit and loss account.

Prakash Daga — Chief Financial Officer

The fixed deposits, what I’m saying is that the substantially it has increased during the last quarter only. So, a very small amount of interest earned on the — only for a month.

Mahendra Gala — H&M Associates — Analyst

Okay and one more doubt we had is in the cash-flow statement, there is shown that there is bank overdraft of INR1.52 crores and there is a bank balance of INR15 crores. So is this figures sounds correct as I have understood or there is any misunderstanding by me because I just want to understand that there is an overdraft, as well as there is a bank balance of INR15 crores as well.

Prakash Daga — Chief Financial Officer

No, there was no overdraft. If that was there, I will just see the.

Mahendra Gala — H&M Associates — Analyst

You could see bottom-line of the cash-flow statement last line. I see that there is a figure of 1425.82 and and when I look at the bank balance in my statement of assets and liabilities, we show that 1578.03 is the positive balance of the bank. When I reconcile, because cash flow normally has the previous figures of 1080.97 and it has to reconcile with 1578.03. But there is any particulars, [Technical Issues] that it is because of the bank overdraft or what it is exactly.

Prakash Daga — Chief Financial Officer

No, there is no bank overdrank certainly because the company is already flooded with the cash, so we are.

Mahendra Gala — H&M Associates — Analyst

Right, right, so. I just wanted to know whether this figures have gone like.

Prakash Daga — Chief Financial Officer

I’ll just have to check the figures because I do not [Technical Issues] schedule.

Mahendra Gala — H&M Associates — Analyst

Sure.

Operator

Thank you. Do you have any follow-up question, Mr. Gala?.

Mahendra Gala — H&M Associates — Analyst

No thanks a lot. Thank you for giving me the opportunity and all the best for the coming year of the expansion.

Prakash Daga — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions]. Next question is from the line of Revanth, Individual Investor. Please go-ahead.

Revanth — — Analyst

Hello, thank you for the opportunity. I have a question that what would be the sustainable PAT margin for next few years?

Khushboo Chandrakant Doshi — Managing Director

Hello.

Revanth — — Analyst

Hello, am I audible?

Khushboo Chandrakant Doshi — Managing Director

Yes, yes, yes.

Revanth — — Analyst

What would be the sustainable PAT margins for next few years?

Khushboo Chandrakant Doshi — Managing Director

Sustainable margins would be around 8% to 10%.

Revanth — — Analyst

And for how many years, this came to 18% growth guidance that you’ve given is sustainable?

Khushboo Chandrakant Doshi — Managing Director

Sorry, I didn’t get that question properly, if you can repeat it please.

Revanth — — Analyst

Yes, yes, for now many years the 15% to 18% guidance for revenue growth you have given is sustainable?

Khushboo Chandrakant Doshi — Managing Director

We are seeing — I mean, we are expecting a more growth, but for this year, they are seeing it conservatively. So far in the next three years, we feel clear pipeline and feel that it can be achievable.

Revanth — — Analyst

Okay, good and what would be the capex for the year. As you said that INR200 crores is the limit for the existing capacity.

Khushboo Chandrakant Doshi — Managing Director

For the next year, we would be investing around INR20 Cr to INR25 Cr for enhancement of the existing [Indecipherable] and of course on the tooling.

Revanth — — Analyst

Thank you.

Operator

Thank you. [Operator Instructions]. Next question is from the line of Anik Mitra from Finartha. Please go-ahead.

Anik Mitra — Finartha — Analyst

Hi, am I audible?

Operator

Anik, you are sounding very distant. Can I request you to speak through the handset.

Revanth — — Analyst

Yeah, sir.

Operator

Yes, go ahead.

Anik Mitra — Finartha — Analyst

Yeah, thanks for taking my questions. I just wanted to understand like we have exposure in agriculture, in plastics extrusion, as well as in the solar industry. I wanted to understand like. if you can roughly give some breakup?

Operator

Anik sorry to interrupt you, but we are losing your audio in between.

Anik Mitra — Finartha — Analyst

Am I audible now?

Operator

Yes.

Anik Mitra — Finartha — Analyst

Okay, my question is, your company is exposed to mainly sea sector, agriculture, solar and plastic extrusion. Now, my question is, if you can provide me some color on the breakup in terms of its volume, that will be helpful?

Khushboo Chandrakant Doshi — Managing Director

Mr. Jain, would you like to take this please.

Sunil Jain — Executive Director

Yeah, good evening. Firstly, let me clarify that there are three segments, which are agriculture and infrastructure, solar, and flexible packaging, packing per se. All these sectors are a fusion in the process, which is involved in all the three sectors. And coming to your next question, that flexible packaging will continue to. grow, continue to contribute to about 50% to 65%, followed by infrastructures would be about 30% to 35%. And rest will be solar. And this ratio over a period of time will change because we are trying to derisk ourselves and develop more in the agriculture or the process sector and infra sectorDoes that answer your question?

Anik Mitra — Finartha — Analyst

Sir, you referred infra 30% to 35%. So, do consider Agri and plastic extrusion both in infra?

Sunil Jain — Executive Director

No, no, let me first clarify. Extrusion is a process. Rest all are applications. And all these applications use extrusion. So extrusion is not a category.

Anik Mitra — Finartha — Analyst

Okay. Understood.

Sunil Jain — Executive Director

Extrusion is a process and all these applications, whether it’s packaging or whether it’s agriculture and infrastructure or solar energy, [Technical Issues].

Anik Mitra — Finartha — Analyst

Okay. Sir. In terms of margin, what sort of margin is involved — is margin is almost similar in all the segments or do you attract different margins?

Sunil Jain — Executive Director

Obviously, the emerging technologies margins will be better. And that is the reason why there is a shift towards new application and as Ms. Doshi also mentioned to you, when we get into exports, the margins are better. So there is a very heavy focus on exports as well. The margins would be different for each of them.

Anik Mitra — Finartha — Analyst

And your [Technical Issues], can you give me some rough approximate allocation of the slippage. For FY22, you referred I think INR200 crores [Technical Issues]. Madam mentioned if I’m not wrong, Madam mentioned INR200 crores of capex for FY24, if I’m not wrong. So, I just want to understand the allocation of the capex.

Sunil Jain — Executive Director

[Speech Overlap]. This INR200 crores was expected topline. We then further — and if you want to go beyond INR200 crores, what you mentioned was, there will be capex of INR20 crores to INR25 crores. This will largely come from building space and tooling,

Anik Mitra — Finartha — Analyst

So 200 crore in FY24.

Sunil Jain — Executive Director

No, no, what she said was that the current capacity, we can do INR200 crore.

Anik Mitra — Finartha — Analyst

Current turnover?

Sunil Jain — Executive Director

Current turnover, the expected growth is 15% to 17%. Those are two separate things.

Anik Mitra — Finartha — Analyst

Understood, understood, sure, thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Hameed [Phonetic] from Niveshaay. Please go-ahead.

Hameed — Niveshaay — Analyst

Hello, ma’am. am I audible?

Khushboo Chandrakant Doshi — Managing Director

Yes, sir.

Hameed — Niveshaay — Analyst

In press release, you’ve mentioned that due to some practical difficulties, customers and some orders got dispatched during Q4, which resulted in increased raw-material costs impacting the margins, right. So how this kind of late deliveries impacting our margins?

Khushboo Chandrakant Doshi — Managing Director

That’s a good question. It does impact the margins. And it is moreover this machines are very big in the sizes. So whenever the delivery gets held, it occupies a lot of space, resulting into the delay of other projects, which probably customers are ready to let. So, the way Mr. Jain mentioned that because of the high-value products, which is — when we say high-value, those are in high-technology and the sizes too. So the probably, they affect the margin and of course because of that, other things get delayed further. So, around — I would say that around 2% to 3% of margin, it depends what kind of projects that were.

In this particular year, those are the very big projects which we have dispatched after Q4 gets over. So, yeah, does that answer your question?

Hameed — Niveshaay — Analyst

Okay, in Q4 also, we have mentioned that there will be some delay in deliveries. So our margin will be also impacted in Q1?

Khushboo Chandrakant Doshi — Managing Director

Right. So if overall margin, if we have to talk about, it affects and the net margin get affected 2% to 3%.

Hameed — Niveshaay — Analyst

Okay, so when we can see this recovering the margins?

Khushboo Chandrakant Doshi — Managing Director

For this year, we are sure of that there will be an improvement in the margins.

Hameed — Niveshaay — Analyst

And guidance for the margin.

Khushboo Chandrakant Doshi — Managing Director

It would be around 8% to 10% in terms of net margin.

Hameed — Niveshaay — Analyst

Okay, so my next question is when new capex will come on the land and how much revenue we can expect from the new capex at the 100% capacity utilization.

Khushboo Chandrakant Doshi — Managing Director

See in this case, 100% capacity utilization is never possible and one cannot even intend to have that situation, because then it is too risky for the company. So we intend to utilize our capacity to 80% to 85% and for the new capex, which we will be planning in this year, so we will be able to have the result sin FY24 onwards.

Hameed — Niveshaay — Analyst

So another, how much of revenue we can achieve at 80% to 85% on new capex.

Khushboo Chandrakant Doshi — Managing Director

Now on a new capex, we would be able to — see, for example, this year, we are targeting to grow by at 15% to 17%. So with — if we have to continue to register our Y-o-Y growth at the same level, then we need a more capacity. So with the new capacity, we will be able to achieve the 15% to 18% growth for FY 24 and FY25.

Hameed — Niveshaay — Analyst

Okay thank you.

Operator

Thank you. Next question is from the line of Daniel, Individual Investor. Please go-ahead.

Daniel — — Analyst

Hi, am I audible?

Khushboo Chandrakant Doshi — Managing Director

Yes, sir.

Daniel — — Analyst

Okay. So in terms of overcoming challenges, what are your strategic plans and any — regarding if there are any other binding issues in the business?

Khushboo Chandrakant Doshi — Managing Director

So, the current challenges if we talk about — the manpower and the skill-set, which is a real problems. And of course, the dependability on the same. From our side and from the customer side, there is a lot of dependability on the manpower. So as and — as we mentioned that we are heavily spending on the R&D front, basically mainly into digitalizing everything and make the kind of a product where the customer also do not need to depend on the manpower and skills of the current available manpower. So that is one of the challenge.

Another important challenge where you know in capital goods, you spend two, three years in marketing and develop the market and then, you start getting results and some geopolitical issues gets in a different direction and all the effort get different — in a different direction. So this is the biggest challenge, like we have, Pakistan, very good market, but we cannot dispatch. And, of course, countries — European countries and countries like Turkey is where we heavily invested in the previous year and started having the fruit, but then again geopolitical situation between Russia and Ukraine which resulted into many challenges like supply-chains, developing market and then on this page and of course resulting into other issues which is out of control. When the company as an institute is ready to deliver the product, but because of many other issues which are out of control, one cannot do that. So these are the challenges which are not in our hand.

Other challenges, we feel that the price competitiveness in the domestic market, which is again, India being a very-very price-sensitive market. It is very challenging to have the appreciation of the technology, but we also see that Indian players are growing and can now afford the European technology. So for the European technology, we are able to compete with them and then we are able to give right value proposition to the market with the same kind of, same level of a technology, we would be 25% to 30% more affordable as compared to any technology coming from Europe.

So these are the challenges as far as total growth on margins are concerned.

Daniel — — Analyst

Thank you so much for that. And if I talk about packaging industry, it has increased over a period, the demand. So how do you expect or how do you measure this demand to be in the future in collaborating with our business?

Khushboo Chandrakant Doshi — Managing Director

Packaging is currently — see our product line — product portfolio mainly contributing on the packaging industry, which includes flexible packaging and semi-rigid packaging. So both are contributing well and after COVID, all the doors have opened for this industry, because of the high-level of hygiene required in food packaging. So the industry is growing and we feel that for another next three years, we see a good growth as far as domestic industries and also for the export market.

Daniel — — Analyst

Okay, okay, thank you for those insights. And also one more thing, in our export markets, which specific regions account for most orders, from where the major orders are coming in or which country to be specific.

Khushboo Chandrakant Doshi — Managing Director

Major countries, yeah, if we talk about the continents, its African countries, then Asia-Pacific countries are contributing more. And we — since these are the matured market for us and gradually has been established in the market very well, [Indecipherable] players. So these our main contributing and that’s why, we are now again diversifying into other markets where there is a lot of opportunities as far as the extrusion machineries are concerned. So we are now targeting Europe and CIS as well.

Daniel — — Analyst

Helpful, just one last question. If I talk about interest costs on a Y-o-Y basis, it has increased from INR0.05 crore in Q4 FY22 to 0.14 crore in the latest results. So, I mean why there is an increase of around 200% in the interest cost. So, have we like taken any loan or?

Khushboo Chandrakant Doshi — Managing Director

No, as Mr. Daga has explained, we are totally debt-free and we have not taken any loan or there is no debt. But these are the things which you know when you get into the high-value projects, there is a problem in getting bank guarantees and the payment terms a little different than direct payment terms. So that has resulted into a increase in the finance cost.

Daniel — — Analyst

Well, okay, and just one last question, do you have any targets in mind with respect to revenue margins for the next two-three years [Speech Overlap].

Khushboo Chandrakant Doshi — Managing Director

Yeah, we are expecting to have the growth from this figures to 15% to 18% in topline and we are expecting our margins to remain at 8% to 10%.

Daniel — — Analyst

Okay, thank you so much for all the insights and wish you the very best. Thank you.

Khushboo Chandrakant Doshi — Managing Director

Thank you sir. Thank you.

Operator

Thank you. Next question is from the line of Keshav Garg from CCIPL. Please go-ahead.

Keshav Garg — CCIPL — Analyst

Hello.

Operator

Yes, Keshav, go-ahead. You are audible.

Keshav Garg — CCIPL — Analyst

Yes, Ma’am, I am just trying to understand that what is the USP of our company and how do we differentiate our products from the competition and also what is our pricing? I mean, is it at par with competition at premium to competition or are we price warriors and basically selling at a discount to competition?

Khushboo Chandrakant Doshi — Managing Director

Okay. So if you talk about the domestic competition, there is the price war, but then also we are little premium than the existing players. And our most important differentiating factor is energy efficiency. This is a recurring costs at the customer side. So this is where our focus on and if you talk about the world market, then we are 20% to 25% less expensive as compared to the European and American player.

Keshav Garg — CCIPL — Analyst

Okay Ma’am. That’s very heartening to know. And Ma’am, how do you, Ma’am, at our current installed capacity, how much is the peak production that we can generate provided demand is there.

Khushboo Chandrakant Doshi — Managing Director

If the demand is there and the listing is right, then as you have witnessed that in Q4, we have registered INR71 Cr, which is utilizing all the the sources in one quarter. So the current capacity, if we talk about the total revenue, one can easily reach out to INR200 CR, and that is why in the plan of the expansion has been taken up.

Keshav Garg — CCIPL — Analyst

Right. And Madam, you mentioned that we should be expecting around 8% margin for this financial year. I’m talking about basically operating margin, EBITDA margin, but Madam, in FY18, we reached 15% operating margin.

Khushboo Chandrakant Doshi — Managing Director

I talked about the net margin, I think.

Keshav Garg — CCIPL — Analyst

Okay, okay. Yes, thank you very much and best of luck.

Khushboo Chandrakant Doshi — Managing Director

Thank you sir.

Operator

Thank you. Next question is from the line of Raj from [Indecipherable] Partners. Please go-ahead.

Raj — — Analyst

Yeah. Hello, am I audible?

Khushboo Chandrakant Doshi — Managing Director

Yes, sir.

Raj — — Analyst

Yeah, someone you said you have clear pricing advantage when when you do exports, okay. So, your prices are 20% to 25% lower compared to our peers in international.

Khushboo Chandrakant Doshi — Managing Director

Yeah, in the international side.

Raj — — Analyst

So when you do the peak sales of say INR200 crores, so how much of exports can you push-out of two sales? Because, since a year, you have a clear pricing advantage. So, I wanted to know what exactly is stopping you from pushing the expansion.

Khushboo Chandrakant Doshi — Managing Director

Yeah, so if you talk about this financial year, we will end up having the export for 35% of total revenue and our target is to reach above 50%.

Raj — — Analyst

In FY24?

Khushboo Chandrakant Doshi — Managing Director

Correct.

Raj — — Analyst

About 50%.

Khushboo Chandrakant Doshi — Managing Director

50%, yeah.

Raj — — Analyst

And also I see in your PPT that you have launched a new sheet line for [Speech Overlap]. So how big can this opportunity really get?

Khushboo Chandrakant Doshi — Managing Director

Currently, the market is flooded with some Chinese machines. So this is a very good opportunity as far as no Indian machinery are contributing into this space. We are the only one and that and the kind of solar target, which RPM has taken and a lot many [Technical Issues] subsidiaries and available for this solar industry. So we see that there would be another requirement of 30 to 40 machines in the next two to three years.

Raj — — Analyst

Okay. All right. that’s fine. Thank you.

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Neha Jain from Ortega Wealth. Please go-ahead.

Neha Jain — Ortega Wealth — Analyst

Good evening. Just had couple of questions. So our new product that we have launched this year Lamina E, just wanted to understand what is the potential and opportunity for the product and where do we plan to export the product.

Khushboo Chandrakant Doshi — Managing Director

Thank you. Mr. Jain, would you like to take this please.

Sunil Jain — Executive Director

See, this is a new product catering to the renewable energy sector. As of now, we are looking more at the domestic market because that’s where there is a huge capacity being invested in developing solar energy modules, solar modules. So export market, we are yet to explore, but we do think that there is an export market. But currently, this is the first machine which we’ve made and we want to first stabilize on the domestic market before getting into the export market. So we see no reason why we cannot get this to contribute at least 10% to 15% of our turnover.

Neha Jain — Ortega Wealth — Analyst

Okay, so with the new launch in the domestic market, how has the market reacted to the product? What is the response from the customers?

Sunil Jain — Executive Director

It has been very positive. The customers are quite satisfied. I mean, this is the first launch. Customers are quite satisfied, and the response is very encouraging, and we have been able to come up with all the performance parameters matching the produc t.

Neha Jain — Ortega Wealth — Analyst

So with this product, do we see that this product can help us increase our market share?

Sunil Jain — Executive Director

Absolutely, that’s the whole idea of getting into this product.

Neha Jain — Ortega Wealth — Analyst

So market in the domestic, righ.

Sunil Jain — Executive Director

Firstly, domestic, later on getting into exports.

Neha Jain — Ortega Wealth — Analyst

Right, okay, got it. What earlier in the key indicators of impacting the plastic extrusion machinery in the industry, like what are the key market trends?

Sunil Jain — Executive Director

The key market trend as Khushboo mentioned earlier, it’s more to do with energy efficiency and then also getting into sustainability. Meaning, coming up with extrusion solutions, which are more sustainable and recyclable.

Neha Jain — Ortega Wealth — Analyst

So there is a possibility if LAMINA E does well in the market, we might come up with new products?

Sunil Jain — Executive Director

Absolutely.

Neha Jain — Ortega Wealth — Analyst

Okay, got it. So as of now, we don’t have anything in pipeline, right sir? We’re just trying to focus to improve the market-share of this product and then get into newer products?

Sunil Jain — Executive Director

See we continuously keep on innovating. So it’s a process. As and when we have some products, we will definitely revert.

Neha Jain — Ortega Wealth — Analyst

Okay. Just one last question — balance sheet questions, so the short-term borrowings have increased during the year. So is this mainly due to working capital requirement or is there any other reason for it?

Prakash Daga — Chief Financial Officer

Can I take this question? Hello.

Khushboo Chandrakant Doshi — Managing Director

Yes, sir, yes sir.

Prakash Daga — Chief Financial Officer

See, that’s the short-term borrowings represents [Technical Issues], which was discounted [Technical Issues]. Otherwise, we have not taken any borrowing. LC for 90 days is discounted. So that is only [Technical Issues] credit [Technical Issues].

Neha Jain — Ortega Wealth — Analyst

Okay sure, sir. Thank you so much and good luck.

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

Neha, do you have any follow-up questions.

Neha Jain — Ortega Wealth — Analyst

No, done. Thank you. Thank you so much.

Operator

Thank you. Next question is from the line of Revanth. Individual Investor. Please go-ahead.

Revanth — — Analyst

Sunil Ji, again, I want to ask that I have calculated that if you grow sales by say 20% and the ROE would be again be equal to 10% only as the capex would increase the total assets. So what are you — what are your plans for to increase the ROE?

Sunil Jain — Executive Director

Hello. shall I take this question, Ma’am..

Khushboo Chandrakant Doshi — Managing Director

Yeah, yeah please.

Sunil Jain — Executive Director

See, as Ms. Doshi mentioned the proposed expansion would be majorly into creation of space — additional space for assembly lines and some part of the capex would be enhancing the capacity — engineering capacity. So the major portion would be in creating infrastructure in terms of building, lend additional space for the assembly of the machines. So that if you calculate, considering that value of asset, then ROEs will definitely be at around 10%. But the strength is going into building an asset and not in machioning..

Revanth — — Analyst

But then also, the10% ROE number is not good for such a decent company. Are there any plans to expand this ROE number to 15%, 20%?

Sunil Jain — Executive Director

I will come into it. The additional space which is being created under this expansion project, it will be for another 10 years because — see the space which is being created will be accommodating the assembly line of 15% growth or additional assembly of machines for next eight to ten years. So, accordingly, it has to be calculated.

Revanth — — Analyst

And the next question is where — how you will fund the capex of INR25 crores. Would you take debt or any equity issuances.

Sunil Jain — Executive Director

The company is having sufficient internal [Technical Issues] as on date. So right now, there are no borrowing plans. We do manage with the internal [Technical Issues].

Revanth — — Analyst

Okay, thank you.

Operator

Thank you. Next follow-up question is from the line of Hameed from Niveshaay. Please go ahead.

Hameed — Niveshaay — Analyst

Hello, am I audible?

Khushboo Chandrakant Doshi — Managing Director

Yes, sir.

Hameed — Niveshaay — Analyst

So my question is, when new capex will start contributing to the revenue, Q1, Q2, any guidance?

Khushboo Chandrakant Doshi — Managing Director

Sorry, sorry, I didn’t get the question.

Hameed — Niveshaay — Analyst

So new capex we are planning of INR22 crore, right. So, from when we can expect it will contribute to the revenue, Q3, Q4, any guidance.

Khushboo Chandrakant Doshi — Managing Director

It will contribute into the FY2024 revenue.

Hameed — Niveshaay — Analyst

Okay, and my question is, what would be your operating margin, not MAG margin, so any guidance for the operating margin line.

Khushboo Chandrakant Doshi — Managing Director

Prakash bhai, would you like to take this please. Prakash bhai?

Sunil Jain — Executive Director

Sorry. I will update. The operating margin — margin will somewhere remain between 12% to 15%.

Hameed — Niveshaay — Analyst

Okay, thank you.

Operator

Thank you. Next follow-up question is from the line of Keshav Garg from CCIPL. Please go-ahead.

Keshav Garg — CCIPL — Analyst

Ma’am. I am trying to understand you mentioned that we can do around INR200 crore revenue at full capacity and in fourth-quarter we operated at full capacity, So we had revenue of INR71 crore in the fourth-quarter. So ideally we should be — our peak capacity should be around INR280 crores, like seven fours are 28, so it’s — you mentioned INR200 crores, so what am I missing.

Khushboo Chandrakant Doshi — Managing Director

Yeah, you are missing that capacity cannot be utilized 100%. That’s. I mean that is a wishful position, But practically, it’s not happening. So capacity utilization has to be calculated as 80% to 85%,not more than that.

Keshav Garg — CCIPL — Analyst

Sure, ma’am. Also, madam, we had a joint-venture, Rajoo Bausano.

Khushboo Chandrakant Doshi — Managing Director

Bausano, Bausano, yeah.

Keshav Garg — CCIPL — Analyst

Right, so, Madam. I don’t think we have come out with consolidated results in with our 49% share of profits of that joint-venture are included.

Khushboo Chandrakant Doshi — Managing Director

Yeah, this was a quarterly thing we’ve been, but. In the final year of the report, you will get the consolidation from that company as well.

Keshav Garg — CCIPL — Analyst

So, Madam, is it like material to our numbers, like. I mean, our 49% share of the profit, is it significant or not really material?

Khushboo Chandrakant Doshi — Managing Director

The company is doing. I mean the same company is doing turnover of around INR30 Cr. So that will give the numbers coming to the our P&L.

Keshav Garg — CCIPL — Analyst

Madam, INR30 Cr will be top-line and since it’s 49% owned, so we will not consolidate the revenue part, only the 49% of the profits of that joint-venture. So madam, any idea you would like to give the shareholders that what is the bottom-line of that joint-venture?

Khushboo Chandrakant Doshi — Managing Director

If you talk about the margins, there the current margin would come down 10% to 12%.

Keshav Garg — CCIPL — Analyst

So Madam, this is profit after tax margin, NPM.

Khushboo Chandrakant Doshi — Managing Director

Right, right.

Keshav Garg — CCIPL — Analyst

So, Madam, approximately 1.5% would be our share of the profits.

Khushboo Chandrakant Doshi — Managing Director

Right, right.

Keshav Garg — CCIPL — Analyst

And madam, lastly, just wanted to understand more about that renewable machine for solar films that you talked about. So, Madam, basically what is the function of that film that our machine will be manufacturing? Where exactly does it help. I mean is it replacing the glass on the solar plant.

Khushboo Chandrakant Doshi — Managing Director

No, no, no. Wherever you see the solar panel, you see the aluminum structure and glass, right. Photovoltaic cells are inside and it is encapsulated by the sheet, which is being produced on the machine which we have this developed. So each and every solar panels currently is being installed with this kind of a sheet and it will continue to use the same sheet.

Keshav Garg — CCIPL — Analyst

So Madam, it is not as though it’s a new application, it’s existing application, but it is being imported and we are trying to make an import substitute. Is there.

Khushboo Chandrakant Doshi — Managing Director

It is a new application for Rajoo. Rajoo has always been focused in the packaging sector, considering the plastic, but with the same plastic and the same process, now we are focusing on the renewables sector.

Keshav Garg — CCIPL — Analyst

Sure, madam. And madam, one last thing, Madam, last year, government banned single-use plastics. So madam, is it. I mean, any impact on our company?

Khushboo Chandrakant Doshi — Managing Director

Yeah, there was impact from the domestic market. And as a part of the strategy, we literally got out of that particular segment wen the ban is there and with the same technology, we have launched this EVA sheet line which goes into the solar factor.

Keshav Garg — CCIPL — Analyst

Sure, Ma’am. Ma’am, that’s all from my side. Thank you very much.

Khushboo Chandrakant Doshi — Managing Director

Thank you.

Operator

Thank you. Next question is from the line of Rohan Mehta, an Individual Investor. Please go-ahead.

Rohan Mehta — — Analyst

Good afternoon, Ma’am. Good afternoon, everybody. I just, from a macro perspective, I wanted to ask, as it has been mentioned in the past also that as a company, we are sort of exploring other avenues away from plastic packaging also, as one of the measures to de-risk the business and its dependence on plastics. So any views, your thoughts on that, how that is progressing and what is the roadmap ahead on that aspect?

Khushboo Chandrakant Doshi — Managing Director

Yeah. Absolutely. I mean, last-time we also spoke about this. So yes, of course, we have a diversification plan, but as part of the de-risking strategy, what we have started doing is that we gathered the whatever in the existing infrastructure and fused which as a group we have at. So what we have done is maintaining the same technological and with that technology, we are diversifying into the different sector. So, the technology will remain same. The plastic will remain same as the main material, but we are catering into the infrastructure. We are catering into the agriculture and now with the solar sheet, we would be in a renewable. So that is how we have started looking at. Probably down to — two years down the line, there would be some more projects, which is completely new than other than the plastic.

Rohan Mehta — — Analyst

Okay, okay, that’s great. So would we be also looking at collaborations with some other companies in doing that or all of that development would be in house only?

Khushboo Chandrakant Doshi — Managing Director

So the current development in the renewable and agriculture is totally in house and the technology is upgraded in the house, but of course, for other technologies, we remain open for the collaboration or any other sort of association, the technology lag. So, yeah, that would — we as a company are open for such opportunities. But currently, we are doing everything inhouse.

Rohan Mehta — — Analyst

Okay, okay and Ma’am, since we’re making headway on product development and diversifying into the end applications and we have a fair amount of exports also, so in terms of geographical expansion, do we have any sort of a vision as to enter any new geographies or change the amount of revenue that is coming in from export as a complementary growth strategy to the product development.

Khushboo Chandrakant Doshi — Managing Director

Yeah, as I mentioned earlier, we are targeting Europe and CIS region and also targeting Middle East.

Rohan Mehta — — Analyst

Okay, okay. Right. so there is this new order of INR30 odd crores from a European manufacturer. So, is that going to be a onetime or can we expect likelihood of repeat orders or how will that work?

Khushboo Chandrakant Doshi — Managing Director

So a huge — the improvement is huge and the capacity is also huge. So once the — normally in capital goods, we get the repeat order after two to three years depending on the growth story of the customer. So in this space, we are expecting that to be repeated with the same customer. Of course, with this installation, we can — we would be able to open up the door for many other similar prospects in the market.

Rohan Mehta — — Analyst

Oaky, And the revenue from this would start reflecting by next quarter or later on?

Khushboo Chandrakant Doshi — Managing Director

Next quarter.

Rohan Mehta — — Analyst

Q1 of the next financial year.

Khushboo Chandrakant Doshi — Managing Director

Yes, yes.

Rohan Mehta — — Analyst

Okay, okay, Ma’am. And so — all right -so right now, and there is no partnership or collaboration on the immediate horizon, right, just to confirm?

Khushboo Chandrakant Doshi — Managing Director

No. There are many in the pipeline, but nothing much to disclose about till we get some finalization stage, but yeah, so there is nothing much to disclose, let’s say, put it that way.

Rohan Mehta — — Analyst

Fair enough, fair enough, Ma’am. All right, that’s all from my end. All the best to you and the entire team. Thank you so much.

Khushboo Chandrakant Doshi — Managing Director

Thank you sir. Thank you.

Operator

Thank you. Next follow-up question is from the line of Mahindra Gala from H&M Associates, Please go-ahead.

Mahendra Gala — H&M Associates — Analyst

I have a couple of questions. One is about the capex investment, presently sufficient to service like quarter ending March ’23 is showing INR71 crores of turnover. That shows that around INR200 crores to INR250 crores of turnover we can generate from the existing capacity. Now, can I understand that, what is the additional capacity which we are going to build up so that, how much it will be running for like INR100 crores, INR200 crores or what is the targeted amount of the revenue that we are expecting to generate from the new capacity?

Khushboo Chandrakant Doshi — Managing Director

Sir, the capex which we have talked about, that would be in a phase-wise manner. So the first thing we will only enhance our capacity by INR50 crores and FY25, again, we will enhance the capacity. So this will happen in a phased-wise manner. But to answer your question, yes, with the current capacity, we can do INR200 crores and with additional capacity, we would be able to do INR250 crores or INR275 crores.

Mahendra Gala — H&M Associates — Analyst

Okay, so it will be around, say, 30% expansion?

Khushboo Chandrakant Doshi — Managing Director

Right.

Mahendra Gala — H&M Associates — Analyst

And, the investment that we are looking at is something around INR20 crores to INR25 crores. Will it be in the phased manner as you said in ’24, ’25 and and so on or what will be..

Khushboo Chandrakant Doshi — Managing Director

It will be spread over two years.

Mahendra Gala — H&M Associates — Analyst

Okay, and what is the exit exactly the INR20 crores to INR25 crores on percentage to the existing investment that we have made up.

Khushboo Chandrakant Doshi — Managing Director

Sorry, sorry.

Mahendra Gala — H&M Associates — Analyst

The expansion that we are looking at 30% and what is the exact amount of cash investment that we have at present, right, in the 100% that we are looking at like.

Khushboo Chandrakant Doshi — Managing Director

Prakash, Bhair.

Prakash Daga — Chief Financial Officer

So, Mr. Gala, if I am correctly understanding your question, then you were asking about the phase-wise investment of the.

Mahendra Gala — H&M Associates — Analyst

Madam has clarified the phase-wise and just understanding that 30% is total investment we are going to make and what is the existing capacity is something around INR200 crores to INR250 crores of turnover. What exactly it is amount is to the existing one, like 30% is the revenues that we are going to run rate. But what is — what is the investment that we are going to make if percentage to the existing that we are having?

Prakash Daga — Chief Financial Officer

So, there will be — additional investment will be in creating an additional space. That is one.

Khushboo Chandrakant Doshi — Managing Director

No, no, no, that is not a question. Okay, go ahead, go ahead.

Prakash Daga — Chief Financial Officer

So if I’m correctly understanding, what Mr. Gala is asking, what is the existing capex which has already been incurred?

Mahendra Gala — H&M Associates — Analyst

Yes.

Khushboo Chandrakant Doshi — Managing Director

Right, right.

Prakash Daga — Chief Financial Officer

It is somewhere around INR2 crores, INR2.5 crores which is shown capital work in progress.

Mahendra Gala — H&M Associates — Analyst

No sir, I’m talking about revenue generation is INR200 crores to INR250 crores of turnover. So it is — it is on what capex that we are generating on this. That is what my question is.

Prakash Daga — Chief Financial Officer

The current asset block is INR35 crores.

Mahendra Gala — H&M Associates — Analyst

So, we are able to generate on INR35 crores something around INR200 crores to INR250 crores and now we are planning INR22 crores to INR25 crores of investment, and we are looking for something INR70 crores to INR75 crores of an additional turnover. right.

Prakash Daga — Chief Financial Officer

Right.

Mahendra Gala — H&M Associates — Analyst

And this all investment would be in the building as you explained or is there any other plants that is in pipeline.

Khushboo Chandrakant Doshi — Managing Director

So there would be building. There would be tools the and also investment in the — further team building because we need more people in the R&D and of course in sales and marketing.

Mahendra Gala — H&M Associates — Analyst

Okay, okay and one more question is about, we are looking for around an export of 50% this year going to be the product mix of the current year. So what is — what is on the margin side, whether the domestic and the export margins are the same where companies [Technical Issues] or is there any difference compared to the margin benefit. Sorry, Ma’am, looking at the indirect tax benefits that company has on the exports, so what is going to be the margin on the local domestic turnover the expect turnover?

Khushboo Chandrakant Doshi — Managing Director

Yeah, Prakash Bhai.

Prakash Daga — Chief Financial Officer

See takes benefit which are [Indecipherable] normally that it is the benefit, otherwise, earlier [Indecipherable] and all –benefits have been withdrawn already. So, GST percentage is a cost between exports and what domestic and rating also all our export customers are much aware about, does not give any additional benefit in terms of the margins. It is only the price basically we negotiate with the customers and that gives the market.

Mahendra Gala — H&M Associates — Analyst

So you mean to say there is an equal amount of margin on the domestic and exports?

Prakash Daga — Chief Financial Officer

No, it might be different. It might be different, depends on the customers.

Khushboo Chandrakant Doshi — Managing Director

It will be different. It will be different than because the domestic market, the need of domestic market is less sophistication and less automation in the machine and the technology where export demand is more which also contributes into the margin. So, export margin will be more as compared to domestic.

Mahendra Gala — H&M Associates — Analyst

Yes, yes we understood that the domestic, the total size right now is shifting to 17% of the gross revenue. So in terms of the domestic and the in terms of export, can you just I mention about what is going to be margin side on the exports, like?

Khushboo Chandrakant Doshi — Managing Director

If you talk about the net margin in domestic, it is extremely price-sensitive market. So you can say a 4% to 5%, whereas, it comes to export it is nearly 30% to 35% more.

Mahendra Gala — H&M Associates — Analyst

Okay, thanks. Thanks a lot. All the best.

Sunil Jain — Executive Director

Mr. Gala, are you there.

Mahendra Gala — H&M Associates — Analyst

Yeah, yeah. I am there.

Sunil Jain — Executive Director

You had a question regarding the cash-flow, if I remember. So, just because we had discounted bill against LC of INR5 Cr, so it has been net off against the cash and bank balance. That is only thing.

Mahendra Gala — H&M Associates — Analyst

Because there is something written as a bank overdraft.

Sunil Jain — Executive Director

Its not an overdraft. Its a bill discount of the label. It has Hello, sir, sorry, of 90 days, which has been discounted. So because because because there is a mention of it in the bracket, some bank overdraft, something is mentioned on that.

Mahendra Gala — H&M Associates — Analyst

Yes, but I thought, whether it is a back overdraft because there isn’t enough of cash-flow. I don’t think earlier anytime, we’d be funds the shortage of funds, I think.

Sunil Jain — Executive Director

Exactly, I agree to it.

Mahendra Gala — H&M Associates — Analyst

Thank you sir. Thank you. Thank you sir.

Operator

. I now hand the conference over to Ms. Khushboo Chandrakant Doshi for closing comments.

Khushboo Chandrakant Doshi — Managing Director

So I would like to thank you all for taking the time-out and attending this call. I’m also thankful to entire Rajoo Engineer’s family, as well as our clients for retail, bank financial institutions and all other stakeholders. For any other further questions or information please get in touch with our Investor Relations. Thank you very much.

Operator

[Operator Closing Remarks]