Raymond Ltd (NSE: RAYMOND) Q1 2026 Earnings Call dated Aug. 07, 2025
Corporate Participants:
Unidentified Speaker
Gautam Hari Singhania — Chairman & Managing Director
Analysts:
Unidentified Participant
Sanjeev Zarbade — Analyst
Pushpinder Singh — Analyst
Rokaesh Roy — Analyst
Kunal Ochiramani — Analyst
Balasubramanian — Analyst
Ujwal Lal — Analyst
Pushpender Jindal — Analyst
Thomas John — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Raymond Limited Q1 FY26 earnings conference call hosted by Antec Stockbroking Ltd. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjeev Zarbade from Antec Stockbroking. Thank you. And over to you sir.
Sanjeev Zarbade — Analyst
Thank you. On behalf of Antique Stockbroking, I’d like to welcome all participants in the Q1. FY26 conference call of Raymond Limited. Today we have with us from senior management of Raymond Limited Mr. S.L. prokarna who is President Corporate Commercial Mr. Amit Agarwal Group CFO Mr. Gautam Mandy, Managing Director, Engineering Business Mr. Navin Sharma, CFO Engineering Business Mr. Jatin Khanna Head, Corporate Development and Mr. Swami Deep s Head, Investor Relations. So without taking further time, I would like to hand over the call to Mr. Gautam Main. Over to you Gautam.
Gautam Hari Singhania — Chairman & Managing Director
Thank you Sanjeev. Good evening everyone. Thank you for joining us today for our Q1 FY26 results conference call. I hope everyone has had the opportunity to go through our financial results and investor presentation which have been uploaded on the stock exchanges as well as on the company’s website. Let me start by talking about the broader macroeconomic landscape that has influenced our performance and strategic decisions. India’s economy maintained a momentum in Q1FY26 with the GDP growth expected to hold at 6.5%. For FY26, the manufacturing PMI averaged 56 indicating sustained strength in industrial output. The Indian auto market presented a complex picture in the first quarter of fiscal 2026 revealing a divergence between wholesale and retail performance, particularly in the PV passenger vehicle segment.
At the wholesale level, PV dispatches saw a slight decline of 1.4% year over year while PV retail sales grew by a modest 2.59% year over year. Despite liquidity constraints and monsoon linked disruptions. Commercial vehicle sales grew by about 1% yoy aided by early quarter deliveries, but tempered by regulatory changes and soft infrastructure demand. The near term outlook is cautiously optimistic as strong government capital expenditure is expected to buoy the CV sector while potential supply chain disruptions and logistical hurdles from a heavy monsoon season remain key risks globally, the automotive environment remains cautious with with subdued sentiment in both passenger and commercial segments.
Further, rising tariffs in key export markets are introducing fresh complexities, especially for the Indian drivetrain and structural component exporters. The silver lining is the free Trade agreement signed with the UK where we can leverage growth with our current as well as new customers. The aerospace sector continues to benefit from a strong global demand as well as our localization push, increased indigenization, strategic wins under the make in India Initiative as well as bilateral agreements. However, emerging protectionist tariff trends in some export markets could present headwinds for subsystem and component suppliers in the coming quarters. A quick update on the Restructuring in the Engineering Business Two new subsidiaries of Raymond Limited are created through a scheme of arrangements, one focused on aerospace and defense and the other on precision engineering auto components as well as engineering consumables, each of them charting its own path for growth and a primary objective of value creation.
I’m pleased to announce that we have received the NCLT order on 4th of July 2025 and the scheme is effective from 1st of August 2025. As per the scheme, two companies are constituted namely JK Minie Precision Technology Limited in short JK MPTL comprising of erstwhile JK Files and Engineering RPAL which is the Ring plus Aqua and Auto business of Mine Precision Products Limited and the second company is JK Mini Global Aerospace Limited in short JKMGAL, comprising of the erstwhile aero business of Mining Precision Products Limited. This milestone marks a transformative chapter enabled by the deep strategic partnership between the Raymond Group and the Mining Group.
It reflects our collective commitment to operationally focus and market leadership leading to long term value creation. Raymond Limited now includes two subsidiaries JK Minee Global Aerospace Limited JKMGAO in Aerospace and Defense and number two JK Mini Precision Technology Limited JKMPTL in Precision Technology and Auto components. Quick review on the consolidated quarterly performance where Raymond Limited delivered a steady quarterly performance reporting a total income of Rupees 555 crores and delivering an EBITDA of Rupees 87 crores and an EBITDA margin of 15.7% in the first quarter of fiscal 26 versus a total income of Rupees 500 crores, delivering an EBITDA of Rupee 95 crores with an EBITDA margin of 18.9% in Q1FY25.
This performance underscores our enhanced operational execution, business integration, synergies and volume led leverage. We look at the segmental business. Let’s talk about the aerospace business JK Mini Global Aerospace Ltd. At the segment level, aerospace and defense business reported a robust performance reporting a revenue of 87 crores which is 37% year on year growth and an EBITDA of 21 crores with a 30% year on year growth and an eBITDA margin of 23.7% in Q1FY26 versus a revenue of 64 crores with an EBITDA margin of 16 crores and an EBITDA margin percentage of 25.1% in Q1F1FY25. The momentum in this business remains high and we are experiencing increased traction on RFQs and exploring exciting new partnership opportunities during this quarter.
A significant highlight was our participation in the Paris Airshow in June 2025 where we had very meaningful meetings and we are thrilled to announce the signing of a Memorandum of Understanding with Safran Aircraft Engines expanding our existing partnership to manufacture machined assemblies. Concurrently, we also signed a long term supply agreement with Pratt and Whitney for precision, machined and assembled aerospace components. These strategic agreements underscore our growing footprint and long term commitment within the critical aerospace sector. The global aviation ecosystem is undergoing unprecedented growth. Commercial aircraft backlog of over 16,000 units translates to between 12 and 15 years of production visibility.
Over 70% of our aerospace revenue is derived from engine components, positioning us squarely in the value core of this long term demand cycle. Our investments in capacity, automation and metrology have enabled us to meet close tolerance machining requirements across a wide range of materials from forgings to castings. Our contracts span 5 to 10 years aligning us with OEM ramp ups through 2035 and beyond. The second company which is JK Mini Precision Technology JKM PTL Limited at this segment level Precision Technology and Auto components reported a revenue of Rupees 398 crores which is a 12% year on year growth with an EBITDA of 42 crores which is an 8% year on year growth and an EBITDA margin of 10.6% in Q1FY26.
This is versus a revenue of Rupees 355 crores with an EBITDA of 39 crores and an EBITDA margin of 11% in Q1FY25. JKMPTL is seeing steady business momentum supported by China plus sourcing tailwinds, integration synergies and a strong international and domestic demand particularly in EV hybrid and motion control segments. Our tools and hardware business is further boosting sales through strategic expansion into new international geographies and industrial sectors we successfully launched three Files, our new domestic brand, reinforcing our leadership in India’s file segment and growing our global presence. Let’s talk about our debt and cash position.
We continue to remain a debt free business with a net cash surplus of 157 crores in June 2025. The total gross debt stands at 965 crores and have cash and cash equivalents of Rupees 1122 crores as of June 30, 2025. A quick status on the operations and the outlook looking forward. JKMPTL is also uniquely positioned to benefit from the global penetration of EVs and hybrids. The continued growth of premium OEMs in India. India we have opportunities to secure new programs as customers actively diversify supply chains away from China and we are currently seeing an increased traction in our RFQs.
Our ongoing focus remains on improving margins through cost engineering and continuously adding value to our processes. Increasing tariffs in key export markets are creating new challenges, particularly for Indian exporters of drivetrain and structural components. Despite these complexities, we remain committed to creating sustained value for all our shareholders through this cycle and into the future. Thank you again for joining our call and we would be very happy to take your questions. We may open the line now for questions. Thank you.
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sucrit departed from Eyesight Finclit Private Limited. Please proceed. The first question is from the line of. Pushpinder Jinder, please proceed.
Pushpinder Singh — Analyst
Hi, thanks for the update and I congratulate you for the good numbers. So just a question. In terms of the slide 8 that you’ve shown your manufacturing, 17 manufacturing locations, some of them seems to be in US and Europe. Can you please elaborate? You know, what are they and what kind of products they make?
Gautam Hari Singhania — Chairman & Managing Director
Okay, so just to clarify, all 17 manufacturing locations are in India. What you’re seeing in Europe is the 123 PL warehouses. So where we distribute products through warehouses globally. So the manufacturing just to reconfirm is all in India. Hello.
Pushpinder Singh — Analyst
Hello. All right, thank you sir. So you intend to ship your tools and hardware business to us. So do you see the headwinds in terms of the tariff and all those kind of you know, things going on at the moment.
Gautam Hari Singhania — Chairman & Managing Director
Yeah, absolutely. And I think, you know it is such a situation with the US tariffs that it by every hour you have a new information. So I think and the number has gone to such a level that neither a vendor nor a customer or a retailer eventually the final last mile customer will have to bear the brand. So therefore I think, and it seems to be more like a negotiation tactics by the White House. Otherwise why would they put the second increase effective only from 27th of August? Because before that they are having the trade team coming from the US to negotiate with India.
Second, as we all know, we read the same newspapers that the US and Russia as well as, what should I say Ukraine are also having an active dialogue in the next few days. So it is all to do putting a, creating a large pressure so that a ceasefire happens and few other big ticket happens and then things settle down. So we are, look, we are not making any knee jerk reaction. I think it is very simple. Maybe there is a couple of weeks here and there delay but over time these things would settle down. Who knows.
Like for example, look at Japan. Few weeks back they had agreed but yesterday he put additional duty. So I think that is a situation we are in. We don’t know what it unfolds next day, next morning, next afternoon. And I think for us, US is in market. I would not say no to that. But at the end of the day we have a larger market between Latin America, South America, Europe, UK and Africa. Especially for the five business. It is a very attractive market where we sell actually our own branded products in the African market.
So we play that game fairly well in that market.
Pushpinder Singh — Analyst
The last question I have on the, I think that must be in everyone’s mind is how does our aerospace and industrial automotive kind of businesses get affected by this with Boeing and hopefully the leap program doesn’t get affected.
Unidentified Speaker
Okay, I think that that’s a much easier one if you look at it. If you are having an aircraft which is a hundred million dollar aircraft, the product which we would supply the tops is 10, 15,000, $20,000. Even if there is, I think the guys will have the ability to subsume that duty. Second, as I said, when these things change, it will change across the board. So the aircraft components and all are not going to be a major issue for these guys. It will settle down. And what we supply primarily is to France. Gautam, maybe you can elaborate.
Gautam Hari Singhania — Chairman & Managing Director
Yeah, so our major markets are still Europe and also a lot of the markets, you know, where the US customers are already present in India. So therefore those cases we supply locally plus most of our contracts are all DAP. So therefore we will wait and watch like Mr. Amitakerwal said to see what happens. But so far we are not really seeing any changes and we’ll wait and watch.
Pushpinder Singh — Analyst
Thank you sir.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press star in one to ask a question. The next question is from the line of Rakesh Roy from Boring amc. Please proceed.
Rokaesh Roy — Analyst
Hi sir. Hi sir. My first question regarding Europe. Can you give me outlook for your aerospace and industrial business for FY26 in. Term of now tariff is going. What’s your outlook for both businesses? So first of all in Europe really we don’t, we know we don’t have any issues because we’ve been supplying to different countries within Europe. We are going to continue to see our reasonable growth as you have seen in the past. So there’s no such tariff or anything to do with Europe. So we see a steady growth and we’ll continue to look at that in terms of the US Market like I just covered, you know, we’ll have to wait and watch. As of now we’ve not seen any effect because you know these are supply chains that are developed over years.
For instance, to get an approval from an engine manufacturer anywhere in the world on a civil aviation program like leap, you know it takes a long time, it takes a couple of years for us to have got those approvals. Secondly, a lot of our product even for the leap engine, even if it’s for Boeing, it goes to France because we supply these in Europe. So a major portion is in Europe and therefore we feel more secure with this business. So we have a. We will look at a high teens growth basically in aerospace, you know and an early teens growth in our.
Okay, so high tin for aerospace and early team for the industrial. Sir, how much in term of percentages we can calculate how much revenue come from US market currently if you, if we add both aerospace industries.
Gautam Hari Singhania — Chairman & Managing Director
So our, our US Is a smaller percentage. It is about roughly. I would say 10%. Yeah. Sub 10%. We do in the U. S in the U.S. okay.
Rokaesh Roy — Analyst
Okay. Right. Right sir.
Gautam Hari Singhania — Chairman & Managing Director
So if you assume just. Just to know if 20 tariff is exist.
Rokaesh Roy — Analyst
Okay. Trump removed 25 extra 20. In that case who will be at this 25, 5050 or only by client or how is it?
Gautam Hari Singhania — Chairman & Managing Director
Look, I think it is very clear that we don’t have an ability to bear this. So we don’t want to engage into a discussion Half and half. And as I said at the beginning of the call, quantum is so large it is not a question of who will bear it. Ultimately either the consumer bears it or the two governments find a solution for this tariff. So it is not a question of neither the vendor would bear nor the middle customer, who is an industrial customer is going to bear it. Because the quantum is so large, nobody has the ability to absorb this.
Rokaesh Roy — Analyst
As you mentioned, your industrial and aerospace margin is on your basis is down due to the product mission. So can we assume this margin will improve from here on what Q2 or Q3 for FY26?
Gautam Hari Singhania — Chairman & Managing Director
No, our margins are up. I don’t know. In terms of. You look at it that it is 42 crores and 21 crores.
Rokaesh Roy — Analyst
For aerospace. Is margin nearby 150bps down on an annual basis. As you mentioned, the PPT slide number.
Gautam Hari Singhania — Chairman & Managing Director
Yeah. So basically what happens is your product mix continuously changes. For instance, you make 3, 400 products out of several hundred materials. And every quarter you could have the demand on different materials. So a lot of it depends on product mix and which will even out in the long run. So therefore margins will have very minor impact in terms it will just be quarterly adjustments. But overall you will, will see minor impacts.
Rokaesh Roy — Analyst
For FY26, how much we assume sir nearby 25%. And your view sir, for FY26 to.
Gautam Hari Singhania — Chairman & Managing Director
Margin there around the same level. Around. Yeah.
Rokaesh Roy — Analyst
Okay. Okay. Right sir. Sorry. Any new product in. Just as you mentioned, Your slide number 28. This quarter some new production will start. Same thing. Any new, any, any plan to start any new product production in Q2 also which is already passed by earlier.
Gautam Hari Singhania — Chairman & Managing Director
Yeah. So. So basically in aerospace we are making almost one new part every day. That is the, that is how we are. We are growing. And that’s why the product mix keeps changing. Because every quarter you’re introducing several new products, then you’re ramping up those products. And that is how the business will grow. And that is the reason why there will always be a product mix difference. Because the variety of materials ranges from something like inconel and titanium, which are extremely expensive and difficult materials to machine, right down to aluminium. So the variety is so large that it will always balance out because of the number of parts that we are making.
Also we are, you know, 75% traditionally on the engine side, which is that you are making more expensive and exotic materials that you’re dealing with. And then depending on the part, the product mix will change. Okay.
Rokaesh Roy — Analyst
Okay. Thank you sir. Thank you.
operator
Thank you. The next Question is from the line of Kunal Uchiramani from Alpha Alternative. Please proceed.
Kunal Ochiramani — Analyst
Wanted to understand our long term vision. How are we planning to grow? Secondly, do we have any capabilities in defense and are we planning to bid any contracts or develop any relationships? And thirdly, what are we planning to do with our factory in Nashik? Are we planning to develop new capabilities or regarding files or we are just planning to continue servicing the old clients or crossing the clients with.
Gautam Hari Singhania — Chairman & Managing Director
Okay, so obviously long term vision is quite a big statement. So to give you some key points, there is a lot of synergy that exists between all of the manufacturing plants. And obviously in the first stage we’ve already tried to list all these synergies together which are both on the market side as well as on the purchasing side. So those are being, you know, put together to see where we are, where we are growing in terms of synergies. In terms of basically we are trying to see in the aerospace, we are trying to double in the next three to four years.
So we have a plan for that and we are going to, we are working on that plan. In terms of your second question of defence, we have had a lot of overseas exposure. So we have been contributing in several programs that were ultimately sold to India as well. And we have full capability for building on the make in India story. So far we have focused on exports, but in terms of our technical competitiveness and the technical abilities that we have, we are looking into the make in India space in a very serious manner. And over a period of time you will hear about our new as they develop.
So it’s definitely a part of our vision as we go along in terms of our factory at Nasik, just to inform you, I mean it’s a workhorse. We inaugurated a new plant there which is Infinor and we are now looking to grow those businesses because we have steady products there, which is the flex plate and the bearings which are up to capacity and we’re going to increase some capacity there as well as we are going to horizontally deploy the knowledge from the MPP side of the business unit and combine it with the strengths of SynHR.
So therefore we will also see more product introductions as we go along. In terms of the tools and consumable sides of the business. We are seeing a lot of value addition that we will try to do to that business because again, once again of the synergy and the international exposure that we have in Europe and us so we will definitely utilize the best efforts to see that the long term vision grows to a Much more value added proposition in terms of our entire product range in a much more synergized and global manner.
Kunal Ochiramani — Analyst
When you say synergies, I just wanted. To understand. Will that be in revenue increase or can we expect some margin improvement and how are we planning to increase our margins if in case by reducing what kind of cost? Secondly, the plant you are talking about what could be a potential revenue year and if you could give us three to five year guidance of our company as whole.
Gautam Hari Singhania — Chairman & Managing Director
So on the revenue side, just to make you understand, you see, we make parts for the same sectors. For instance, if you take engines, engines are supplied by the Ring plus Aqua erstwhile Link plus Aqua, which you know, has the flex plates and the ring gears. They go between the automatic transmissions and the engines as well as on the engines. Similarly on the MPP side, the erstwhile MPP side, we are supplying into engines and we are supplying into transmissions. So now what we find is that we can cross sell to all the different customers. Because if you see the MPP side of the story, we built our story on capability, which is on a horizontal plan platform, which means that we made products for different parts of the engine, different parts of the transmission from different materials like castings, forgings, aluminum die castings, etc.
And therefore we were more a capability supplier, whereas on the RPAL side of the business we were more a vertical supplier. So we went into ring gears, went into flex plates, went into bearings. So now the beauty is that we have the advantage of cross converting all of our horizontal stories into vertical stories, which means that we can really expand our businesses on both sides because of the knowledge and technology. And these customers already know us because now it’s one common name. So overnight we get one vendor code which is jkmptl for all of the businesses of all of our plants is quicker.
I hope that answered your question on revenue in terms of the bottom line itself, you know, obviously when you recorded. So in terms of our bottom line, it is very clear that we have a lot of synergies because you know, all of the companies ultimately buy steel, buy materials, we use similar consumers used to use similar tools. So you have a lot of synergies. Our logistics, warehousing, we have an export model on all the companies. So there is a lot of synergies available to cool off all of these resources together. And the details are being worked out as we speak.
Kunal Ochiramani — Analyst
Understood. Thank you so much.
Gautam Hari Singhania — Chairman & Managing Director
Thank you.
operator
Thank you. The next question is from the line of Bala Subramaniam from Aryan Capital.
Balasubramanian — Analyst
Please Good evening sir. Thank you so much for the opportunities. Sir, I just want to understand and EV hybrid focus side around 15% of auto business is coming from hybrid focus. And what is the pipeline for ev specific parts like ID sleeve, input shaft park calls and how does we plan to compete with our competitors? And secondly, tool and hardware margins are at 10 to 11% kind of range. And what specific value added products like medical jewelry files will drive improvement? And what is the timeline to achieve mid teen margins?
Gautam Hari Singhania — Chairman & Managing Director
Okay, so let me answer this on in two parts. So talking about the EV and hybrid story, you know this is a very important story because as you know in Europe and this is a story that we developed across mostly in Europe as well as in India. But I’ll give you the hybrid story in Europe. You all are aware that over the last many years people were talking about EVs being a big success in Europe. And even countries had signed up to an agreement which said that in 2030 onwards we should stop, etc. All these countries, you know, got together and have postponed those dates because they believe that only evidence is not possible.
In Europe we read the market a few years ago to say that we must be in the hybrid business because that is the more logical business in Europe that will survive. We took the right calls and we developed with one of the big primes, we developed several components for the hybrid engine. Luckily it all worked out and we were able to ramp up these businesses, you know, very, very quickly, quickly over the last two years in fact. And we have reached a stage where we’ve had this high percentage in hybrid due to this massive export order which covers several models across Europe.
So this is a great beginning and we will plan to horizontally deploy it. It all takes time, but it’s a great positioning for us in terms of the local market. In India we have concentrated on the three wheeler transmission segment where we have a prime customer for the transmission fully assembled transmissions of the EVP wheelers which we supply. So on both those fronts we have a good market. Hybrids overseas and EVs in India. On the tools and hardware side we are trying to, I can give you an example of how we are trying to increase our value of the products.
For instance, we, we have a very high exposure to tools that we make in this side and front. We are looking at industrial segments now, especially aerospace segments which are high value segments. We are doing our trials in our own factories, which is the synergy part of the story. And we are coming out with how these tools can be sold at higher prices. And how can we add more value and also then leverage our current position of testing to make sure that our tools meet the highest manufacturing standards. So over a period of time, this is not overnight, it takes time.
But over a period of time we will develop higher value tools in that area. The same way in files, you know, jewelry files and other files which have more value. We have started to develop them with our own technologies today. So it will take a little bit of time and, and then we will develop further. So that is a quick example of how we will look at value addition in these areas.
Balasubramanian — Analyst
Okay, sir. Sir, on that raw material side, aerospace raw materials like inconal titanium is largely imported. Like where they are importing, which are the countries and what are the steps they have taken for localizations, how this will unlock synergies and margin subside.
Gautam Hari Singhania — Chairman & Managing Director
Yeah, so you’re right. As of now all raw materials are mainly imported because of the full process. But there is a strong push to try and localize these. So I see a long IVF time frame. You will see a lot of localization which will further help the competitiveness of the Indian market. So I see this as a long term positive. But it takes long, it takes time to get them approved. So it is, it will happen step by step.
Balasubramanian — Analyst
Okay, sir. On the export side like we have seen weaker exports demand but however it’s been offsetted by domestic growth in ring. Yes, flex plates. I just want to understand which geographies are underperforming and what is the outlook for H2.
Gautam Hari Singhania — Chairman & Managing Director
Well, you see, I mean in the end the markets in Europe and in the US have been more subdued than they were in the past. The volumes are changing. You know, the schedules are given in advance. So you. But they change every month. So we saw some drop of volumes in the export market which offset the domestic growth which was going as per plan. So there is a small blip there. But we are hoping that the volumes would come back.
Unidentified Speaker
And auto is a cyclical business. We all know that some quarters or some few periods it will do very well. The demand will come down, then again it will pick up. And I think this is an inventory we see very clearly. And that is why we have created a unique mix between the domestic market and export market so that you can continue to balance. And it has always happened. We build the capacity a ring year from a 3 million just before the COVID to 11 and a half million capacity. And we have been far successful.
If you see this business of ring plus has delivered grown the revenue of more than double itself. Over the last four years doubled the margin also. So therefore it is a business where you will have to go through the cycles. But over time, if you have the right product with the right cost structure, you will succeed. And that is why the success on the auto component business and now with a larger portfolio of putting together both the mining auto side and the ring plus have a formidable force which caters to all the top 15 global OEMs in the auto sector.
So that is a great synergy to have.
Balasubramanian — Analyst
Got it sir. Thank you.
Gautam Hari Singhania — Chairman & Managing Director
Thank you.
operator
Thank you. The next question is from the line of Sanjeev Zarbade from Antique stockbroking. Please go ahead.
Sanjeev Zarbade — Analyst
Yeah, thanks for taking my question. Sir, if you could throw some light on where do you see the aerospace and auto component business maybe three, four years down the line.
Gautam Hari Singhania — Chairman & Managing Director
So basically in terms of aerospace it will be double. And you know, the automotive business will grow in the, you know, low to mid teens depending on how the macroeconomic situations play out.
Unidentified Speaker
And the reason being very simple that we are into engine critical components. So you see the journey of our aerospace has been we started with 50 skills. SKUs move to 100, move to 200 and reaching what, five SKUs. So as you continue, you need to win the confidence of the customer. And there he keeps increasing you from a component you go to what you call assemblies which is much more value added. So I think this is a journey which we have started few years back and slowly and steadily we are going to get the benefit of that.
Sanjeev Zarbade — Analyst
Right sir? And sir, we had acquired land parcel in Andhra Pradesh. So when do you expect to start work on capacity expansion in aerospace?
Gautam Hari Singhania — Chairman & Managing Director
So basically if you look at it that you know, this is an initiation which we have done and we will evaluate all the things because we have a plan, as I said, as Gautam mentioned very clearly, we have a plan to double our business in the aerospace. The auto components also going at a faster pace. I think we need space. The space continues to be a constraint. So therefore we thought appropriate to expand into Andhra. But it is not happening today, tomorrow because any project takes its own course of time. Whether it is 18 months, 24 months.
Months is something which we look at it in terms of churning the products out of there.
Sanjeev Zarbade — Analyst
Right sir. And sir, I have couple of more questions. Sir, on the EBIT margin side in aerospace we did 12% in the first quarter. But our sustainable margins are much higher, I guess. And so when do we expect to reach those kind of margins? Probably you know, 25% kind of EBITDA margins. What Is the timeline, what should be, what should we expect?
Gautam Hari Singhania — Chairman & Managing Director
So you look at it when the scale comes and as Gautam mentioned that we continue to develop every day a new product, there is a cost. Obviously that cost gets debited to the business. We continue to grow that business. And second thing, as you know, these equipments which we had bought because of the accounting reasons also we had to do the fair value accounting. So that also increased the depreciation. And that is why the EBIT is low. But as we are very confident as we scale up our EBITDA margins continue to grow in that range which we talked about in around the 25%.
And then the EBIT margin also continues to grow.
Sanjeev Zarbade — Analyst
Right sir. And sir, on the auto components side we’ve done ebit margins of 8%. But since we are into precision manufacturing and hence we expect much higher margins since it being a precision manufacturing business. So when can we reach at least a double digit kind of margins in the auto components and engineering business?
Gautam Hari Singhania — Chairman & Managing Director
Well, you know, there is some legacy business that exists in other portfolios, you know, because when you’re in business for 40, 50 years, there are legacy businesses that are being now reviewed. The new businesses are all coming in the double digits. So it’s only a question of time before it averages out, you know, and as we keep growing, the weighted average will tend towards the double digits. So it’s not very far away. In a couple of years it will be there.
Sanjeev Zarbade — Analyst
Okay. And sir, your return on capital employed has huge room for improvement. What are your thoughts on raising the ROCE or ROE profile of the business?
Gautam Hari Singhania — Chairman & Managing Director
As I said, clearly what you said is right. I think we need to give you the numbers of an operational roce. Because what happens is if I look at the business we have, as I mentioned, fair value accounting done for the acquisition of the mining business and that has created a large intangible value and because of that the asset deployed to becomes larger. So that is one of the reasons if I take that off, then your ROCs in these businesses are much longer higher. Second, this is also very important to understand that in these businesses you are in a phenomenal faster growth phase.
So you need to put the CAPEX before and then the revenue and the EBITDA follows in the next two to three years. Therefore it will take a while in order to get to the level of ROCs which we all are used to. And you have seen that because these numbers were reported in the past for the engineering business of Raymond Limited that had shown always a very good 20% plus Roce and because of the fair valuation and such things you are seeing a lower. But I think very quickly we will see in the next two years or so when we stabilize the revenues in those businesses you would see again going back to the 20 plus percent on an operational basis, the ROC.
Sanjeev Zarbade — Analyst
Okay, and sir, final question from my side. Has there been any increase in gross debt? Because I think we had around 600 crore odd debt in FY25 and now I think as you mentioned we have around 960 crore kind of number. So has there been any increase in gross.
Gautam Hari Singhania — Chairman & Managing Director
Yeah, you’re right. You’re right. So what happened? First the debt was given from a Raymond Limited to the engineering business and now we have got it extra externally refinanced that debt and therefore the gross debt is higher to that extent the cash is also higher and therefore what you’re seeing is the difference.
Sanjeev Zarbade — Analyst
Okay, and sir, what could be the debt reduction targets for the subsidiaries?
Gautam Hari Singhania — Chairman & Managing Director
I think what is happening is I would assume there is a small debt repayment schedule every year, but we are in a growth phase and I would say that for the next three to four years a significant portion of the cash flow except for the mandatory repayments which we are there scheduled repayments, not mandatory scheduled repayments. Are there other than that? I don’t think so. We will have a very big debt reduction except for some of the other capital transactions if we plan to do at some point of time. So our whole focus at this juncture is deploy back the capital into the business and take a faster growth.
Because if you plan to double your business of aerospace in the next three to four years, you need to invest rightfully, carefully and grow the business. I think that is a very large focus which we are carrying.
Sanjeev Zarbade — Analyst
Right sir, I think that’s it from my side and over to the moderator.
Gautam Hari Singhania — Chairman & Managing Director
Thank you.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press Star and one to ask a question. The next question is from the line of Ujwal Lal, an individual investor. Please proceed.
Ujwal Lal — Analyst
Thank you for the opportunity. My question is to Amit. While I congratulate the whole team for the demerger, there is still a complex holding structure where Raymond Limited owns 47% of JK Investo and JK Helen Curtis which own 18% of Raymond Limited, Raymond JRC and 15% of Raymond Livestock. So Raymond effectively owns 9, 9 and 7% of these three companies. So is there any way in which we can unlock this value which would be around 1500 crores. At even at current prices.
Gautam Hari Singhania — Chairman & Managing Director
You know, considering this whole structure and this is a historical legacy structure to unlock that value, there is a sort of a large sort tax incidence which may arise. And therefore we are in a hesitation mode that what is the advantage of going into that simplification of the structure. But for us what is was more important is that you are creating a pure play respective businesses which are net debt free. So you have raped Raymond Limited which has 66% equity stake in the two engineering businesses. Then you have got the lifestyle which is completely independently listed.
And then you have got the real estate which is completely independently listed. So you got the operating businesses on those three companies. Very, very clear. Now this whole structure above the Raymond Limited or the holdcore structure, holding structure there it is a technically challenging from a tax point of view.
Ujwal Lal — Analyst
Okay, and that’s another question like I read like Raymond Limited bought 1.47% of Raymond Lifestyle. So what was the rationale for this? I mean we have invested using our cash.
Gautam Hari Singhania — Chairman & Managing Director
So basically if you see the cash is there to support the businesses and we are very clear that whenever there is a need for investment to be made into any of the businesses, we can do that. And our primary focus is in this point of time there is a value. And that is why we invested from Raymond Limited into Raymond Lifestyle Limited.
Ujwal Lal — Analyst
Okay, and just another request, maybe you can include a couple of pages of the performance of Raymond Yuko Denim JV in the presentation. And given that it has been loss making and we also had to invest equity in the past, so what are the future plans for this jv?
Gautam Hari Singhania — Chairman & Managing Director
Sure we can include that. But as we say the denim industry has started to improve itself and I think we have seen a capacity utilization which was more in the 63, 64% range has moved up to 80 to 85%. So I think that we are seeing a little bit of a positivity around there. Denim industry has been in the severe challenge for the last few years. So we look at it at this juncture, they are managing their business on their own and with the JV partner which we have and we are not seeing right now any need for, for additional equity to be infused into that business.
Ujwal Lal — Analyst
Thank you. And I have been very happy with the actual performance on the engineering side. These are just my few questions. Thank you. All the best.
Gautam Hari Singhania — Chairman & Managing Director
Thank you.
operator
Thank you. The next question is from the line of Pushpender Jindal, an individual investor. Please proceed.
Pushpender Jindal — Analyst
Sir. The other question that I had about the defense optionality. So what kind of product do you make in defense. And there is an import substitution that India is planning. How do you see that business growing apart from the engineering, automotive and aerospace business? Is it, you know, can you show some light? You know, how do we see that optionality growing?
Gautam Hari Singhania — Chairman & Managing Director
So we are looking, like I said a little bit earlier, you know, in terms of our technology and our machining competence, there are a lot of options that have been there in defense. So so far we have been focusing on exports and we’ve done some defense programs for the global OEMs. Now the make in India opportunities are becoming larger. So we are planning to see how to leverage all our relationships and our technology to ensure that we can be a larger part of the overall make in India program. So we will start with of course like components and move to assemblies and move to larger products in stages.
So we will. What we did in the export world, we will slowly start to do in the domestic world.
Pushpender Jindal — Analyst
So currently that export that you do under the defense is being included in the automotive and precision products, right?
Gautam Hari Singhania — Chairman & Managing Director
No, I mean so the defense, whatever we’ve done so far has been more related to aerospace so far.
Pushpender Jindal — Analyst
Okay, so those opportunity and optionality will arise in the aerospace business.
Gautam Hari Singhania — Chairman & Managing Director
In the aerospace business so far. But we also have opportunities arising in other spaces of defense and therefore we will take them as they come.
Pushpender Jindal — Analyst
Okay, thanks.
Gautam Hari Singhania — Chairman & Managing Director
Thank you.
operator
Thank you. The next question is from the line of Thomas John, an individual investor. Please proceed.
Thomas John — Analyst
Yes, I joined the column 8. So I just had one question in. I don’t know if this has been addressed. It’s about the exports that we have for Boeing. Do you think, do you see, do you think that there will be discussions because there’s already a huge order of backlog for Boeing. Do you think that there could be exemptions for industries and aerospace from the U.S.
Gautam Hari Singhania — Chairman & Managing Director
We know that there is a large backlog with both the aircraft manufacturers. I think the Asian economies have been doing very well and they place large long term models. And clearly we are seeing the benefit. And that is why we are very confident to say our aerospace business would double itself in the next three to four years.
Thomas John — Analyst
This is with regards to the tariffs, the US Tariffs and all. I’m talking about that. Do you see any.
Gautam Hari Singhania — Chairman & Managing Director
We did answer that question. But in any case US tariff 50% nobody has a capability to operate a business and in environment where by the hour the stance changes of the White House. So even if I plan something tomorrow, I don’t know in which uncertainty I’m living, whether it is 50% or 500%. So therefore it is really. And I think we don’t want to make any conjecture at this juncture to say sharply react on any of these things. We stay focused and it is more negotiating tactics, nothing more than that.
Thomas John — Analyst
Okay. Okay. Thank you.
Gautam Hari Singhania — Chairman & Managing Director
Thank you.
operator
Thank you. Due to time constraints. That was the last question. I would now like to hand the conference over to the management for the closing comments. Over to you.
Gautam Hari Singhania — Chairman & Managing Director
Thank you. Thank you very much and really appreciated all of you taking time to attend and hear our call and interest in the company. Look forward talking to you all in the next quarter. Thanks. Bye.
Thomas John — Analyst
Thank you.
operator
Thank you. On behalf of Antec Stockbroking. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.