Rico Auto Industries Limited (NSE: RICOAUTO) Q3 2025 Earnings Call dated Feb. 13, 2025
Corporate Participants:
Arvind Kapur — Chairman, Managing Director, and Chief Executive Officer
Unidentified Speaker
Analysts:
Hazel Rathod — Analyst
Sharma — Analyst
Baskara — Analyst
Rahil Shah
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Rico Auto Industries Limited Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing the star then zero on your touchdown phone. Please note that this conference is being recorded.I now hand the conference over to Ms Hazel Rathod from Technologies. Thank you and over to you, ma’am.
Hazel Rathod — Analyst
Thank you. Thank you. Good evening, everyone, and thank you for joining us for Auto Industries Q3 FY ’25 earnings conference call. From the management, we have with us Mr Arvind, Chairman, CEO and MD; Mr Ragarma, Executive Director; and Mr RK, Executive Director; Mr Rakesh Sharma, Chief Financial Officer; and Ms Rojeka Gupta, Company Secretary. I now request Mr Arvind Kapoor to take us through the key opening remarks, after which we can open the floor for the question-and-answer session. Thank you, and over to you, sir.
Arvind Kapur — Chairman, Managing Director, and Chief Executive Officer
Good evening. My name is Arvind Kapoor and I’m sitting in the conference room with my colleagues here and I’d like to welcome all of you all today to today’s Rico Arthos conference. We are meeting immediately after the budget and fortunately, the focus of the budget this year was on consumption and we are all very happy about it.
And the tax exemption that the FM has given at a certain level, hopefully, that will translate into more buying of our auto products hopefully and but if you look at the geopolitical tensions, they are still ongoing we still have the issues and there’s a new change of guard in the US and there are lot of new things happening on a daily basis hopefully Mr Modi, who’s going to be meeting the President of the United States today in the evening or today in another couple of hours, hopefully India should not be majorly impacted as far as the tariffs are concerned.
The which have been opposed, by and large, we might benefit by that in the sense that there would be more aluminum and steel available in the market and the prices of steel and alumbin hopefully should fall here in India. And we are hoping for that at least.
We did participate in the auto export. We had very good interaction with our customers in India as well as many customers from overseas and also the aftermarket. It was a very good exhibition this year. The auto component industry is growing and hopefully this should continue growing by 8% to 10%. And the two-wheeler market has expanded and hopefully should continue like that. New technologies are coming in like hydrogen and others and we are totally involved with our customers as far as these technologies are concerned. The — even though the expectation is that the economy will grow by 6.7%, we are still hoping that it would be between 6.7% to 7%, that’s what we are hoping.
And we are very happy that the RBI has cut-down the repo rates and by 25 basis-point. And hopefully in the next quarter, there should be another — they should be able to reduce it further, provided the US also does take — does move the rates there.
To tell you what has happened at RICO, this quarter, the sales were not as per our expectations. We lost a lot as far as the exports are concerned, the exports have come down by almost a — our expectation was much higher and — but the electric vehicles in Germany and in France, they just collapsed. They came down by almost 40% and we have been supplying a lot of electric vehicle components to BMW and PSA and others and that had a direct impact on our sales. We see traction taking place now.
We see some improvement taking place, but we doubt whether the electric vehicles will ever reach the level that they had reached last year — last year. And — but we are hoping that there would be some — we — this year our loss of exports would be to the about INR100 between INR100 crores and INR120 crores. We are expecting that this is a loss of sales as far as exports are concerned.
In the domestic market, we have grown. We did manage to get a larger share of business from our current customers. But the new launches which are to take place, those were postponed by Toyota, and and these are — some are related to the electric vehicles and some are to the hybrid vehicles where they were doubling the capacity. It is to be done in June ’24, we have got the equipment installed, everything ready and that got postponed to — the hybrid vehicles got postponed to mid May of ’25.
Unidentified Speaker
Yes, sir. Yeah.
Arvind Kapur — Chairman, Managing Director, and Chief Executive Officer
And as far as the electric vehicle components are concerned, the new launches which are to take place, those from July ’24 got postponed to February ’25. This has resulted in a loss of about — rather about INR100 crores of business. The investments are all-in place and we are ready to go. And the — The electric vehicle components, the production has — will start by the end-of-the month and there would be only one month of production this month, but in month of March this year. And hopefully next year, we would be running a full blast as far as the EV components are concerned. So would start in May ’25 onwards and that would also be a good volume increase that would happen. In the export front, it was basically both in the European market as well as the US market. And at the moment, there is no impact as far as the tariffs are concerned, but we are waiting for the — what happens in the meeting that our Honorable Prime Minister has with the President of the United States. And if all goes well, hopefully business should expand. We have been able to pick-up new businesses, confirm businesses and in the domestic market, the business that we picked-up from and other domestic customers is to the tune of about INR510 crores a year and the export business is INR210 crores a year. Now this comes to about INR720 crores per year increase in sales. And this is the peak sale that I’m taking. And, the production of summer components would start by February they are starting. By the beginning of next year, they will start — the production will start and — but the peak will come in this early third year. So we will receive the INR710 crores by third year. But there’s a caveat here. These are confirmed orders where advances are received, the dies are getting ready or component and the preparation is taking place. But some tariffs should not impact us as far as exports to US are concerned, that’s one worry that we have in mind and we are looking at as to what has to be done in case those tariffs are imposed. And the second thing is that the customers don’t postpone the launch of the new vehicles. That’s the — we experienced it last year. We did experience last year also, but we are hoping that there would be no postponement — and the — so this is the growth that would happen. These are the new businesses that we have acquired already. And by March-end, I think the INR720 figure should go to almost about INR800 crores INR815 crores. That’s what we are estimating. So the turnover, has been lower than we had estimated. A, the month of December is August slower normally, both in the export front as well as in the domestic front and — but it has been slower than whatever we had estimated, whatever we had budgeted and — but we are hoping that to recover all this, even though the investments are all made. We have been able to free a lot of capacities as far as our castings are concerned and both in the iron as well as aluminum. At the moment in the iron side, we are running at about 50%, 52% utilization, the — I’m talking of the casting area and this current coming year — the next year that we should be able to go to almost about 70%, 72% and the year-after that, it should be around 85%, 89%. That’s what we are estimating. This is as per the confirmed orders that we already have in-hand and the share of the iron components will go up from 15% to almost 25% 26% and we are hoping to grow this further. In the aluminum side, we have — we’ve improved our technologies, we’ve improved our productivities and earlier we had — we were utilizing almost 80% of our capacity, but now we’ve been able to free almost about 15% of our capacity. So we have that equipment available for further expansion on — for newer orders, et-cetera. So that’s a new development that has taken place and this is our — this is a lot of R&D that my teams have been doing and also the learnings that we’ve had from Toyota and our customers. Okay. So in the year ’27, we had said we’ve been touching around INR3,000 crores and that still stands where we should cross that. And in the — and ’28, we should be around INR3,200 crores. And the export front, this year we are losing a lot. Last year we were 422 crores. This year, we would be in the region of about INR360 crores. And next year, our — we should be crossing INR500 crores. That’s what — as per the orders that are in-hand as per the investment that have been — that have taken place. And now these are the commitments of the customers. If there are tariffs imposed, that is one thing we are all waiting for. By tomorrow morning, I think that there would be total clarity on this. But we are hoping that this would. Otherwise, we’ll have to look at alternatives as to what else we need to do so that we do get our goods into the US market. The — if you — if you look at quarter-on-quarter from the previous year and this year and both in consolidated and our domestic sale has gone up. This could have grown — grown more than whatever has been indicated here, but because of the postponement of some of the — some of the programs this year did not materialize, but those are materializing now. That’s — we see a very clear traction there. And your company has also decided to switch to the new tax regime that we made that announcement this time. And there has been one consolidated — in the consolidated the other expenses, including one-time impact of INR6.8 crores on account of unused assets which are sold. So that’s a loss that this is a one-time loss that we have incurred. So I wanted to point this out so that there is clarity on this is what I wanted to say and we are open to questioning and please ask us, please ask us any questions on the results. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking your question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Arvind Kapur
One other thing I’d like to add is on defense, we were — I did mention last-time that we are making shooting ranges for the defense. The production has started. We started shipping them now. We’ve shipped about nine containers already. And hopefully will be more will be shipping. And next year, I think the target is to ship about over 100 and the setup is ready and the production is on the defense side.
And besides that, there are a lot of other things that are also happening now in the Make in India program in
Operator
Ladies and gentlemen, if you wish to ask a question you may press star participants who wish to ask a question may press star and one. The first question is from the line of Sharma, an Individual Investor. Please go-ahead.
Sharma
Hello, sir. Good evening, everyone. Thanks for the opportunity. So I just had this one question, like going-forward, what are your expectations and how do — how should we see FY ’26?
Arvind Kapur
Yeah. Yeah,
Sharma
That’s it from my side..
Arvind Kapur
We expect FY ’26 to be much better and our — the sale expectation is around INR2,600 crores. That’s what we — the budget that we are preparing. It’s little short of INR2,600 crores, but our target is to cross INR2,600 crores in ’26.
And we — the — in the export front, like I mentioned, from INR3,360 crores this year, we should go to about almost INR500 crores. And in the domestic also the orders in the hand, we should be touching about INR2,600.
But having said that, because we’ve been able to free our capacities as aluminum, we are trying to get a larger share of businesses and in the current components that we are supplying to our customers and we hopefully we should get about 5% to 7% increase in there also, but which we have not factored in this INR2,600 crores.
And having said that, we’ve also — if you look at the results, we have been able to save power primarily because of the changes that we made in our melting areas and also the solar energy that we from solar as well as our hybrid, the bed win and in the MAPAR cost also, we’ve been able to be — we’ve started using our reco production system, which is very effective where we have been able to reduce a lot and as the production goes up and the new lines start adding, you’ll see a further reduction in the manpower cost. So we are — as far as the cost is concerned, we are working very diligently on these costs and there would be further reduction in these.
Sharma
Okay. Okay. That’s it from my side. Thank you, sir.
Operator
Thank you. Before we take the next question, we would like to announce to participants that you may press star and one to ask a question. The next question is from the line of, Faskera an Individual investor. Please go-ahead.
Baskara
Hi, hi, everyone. Sir, like last quarter you mentioned that the margin will improve in this quarter, right, Q3 compared to Q2. But again, we are back to 8%, right? So could you please tell me why we couldn’t able to reach like double-digit that you mentioned in last call and what we can expect in Q4 on margin side?
Arvind Kapur
Yeah. See, one thing you would have noticed in the address that MD was telling you that our exports have come down substantially. So normally, we have been talking in past meetings also that our exports give us better margins as compared to the domestic sales. So because of that reason, there is a pressure on profitability definitely.
But in standalone, some improvement is definitely there and we hope that we’ll do better in Q4. But yes, there is a pressure on profitability. Our target is still the same as a 30% margin that the Board has given us very clear direction and we are working in that direction. All the new components that we are talking of the INR710 crore INR20 crores of new orders that we’ve got, the domestic supplies are in the region about 13% to 14%, that’s the EBITDA margins in those.
But in the export front, we are in the region of about 17% to 20%. So that’s the range that we are working on. And if it is less than that, we don’t take the orders. And as those start getting into production, you will see the change that is happening in the balance sheet. And having said that, another — if we had managed to remain as per our budget of INR150 — another sale of INR150 crore, INR200 crores, that the percentages would have changed absolutely.
We would have been in the region that we had assured you last-time. But this time, there was a total collapse in the export front, that’s what actually let us down and the postponement of the Toyotas and programs. So it got postponed primarily because there was some issue that happened on homologation and so there is some issues that happened and because of that whole thing collapsed. But now they’ve given us a green signal and we are ready for the volumes to be given.
So as these components start adding up, you see a certain absolute change in the total thing. Okay, sir. And also you mentioned like in side also, we would be able to deliver at least four containers, right?
Baskara
So do you have that revenue in Q3 or we didn’t take
Arvind Kapur
We have delivered 9 containers already and we’ll be delivering 30 — 20 more 30 more containers by the end. Total revenue, I’ll be able to tell you later that we
Baskara
Actually delivered in Q3, not in Q4, only in Q3, like some October, December started.
Arvind Kapur
No, this delivery has started now in this month. After all and everything is done, the delivery has started. We ship to co-chin and we ship other places as well.
Baskara
Okay. So how much we can expect revenue from defense in this quarter, Q4?
Arvind Kapur
Are we — our defense, we are going to grow dramatically. So the problem we could have delivered many containers in the last quarter as well. But we could not deliver them because they were only inspection, people were — the defense people, they come and inspect the whole thing.
That got delayed and delayed and delayed. It was for us also first time getting it done, but now we are in it and we hopefully we should be able to ship more. And our internal target is also cross INR40 crore 50 crores as far as defense is concerned, but let’s see what — how many containers get clear.
Baskara
Okay. If I understand correctly, based on our previous con-calls, defense at least we will have some 18% to 20%, right, margins.
Arvind Kapur
Yes, we’ll have 18% 20% margin, but that comes in — see, we made investments there, the land building and everything is there. And the volume has got to go up. And so as once we cross, say, about 80 to 100 containers a year, you will see the total change the margin will be even more.
Baskara
Okay. At the moment, at least in Q4, do you think we would be able to see at least double-digit one, lower double-digit margins in defense side or that is also difficult to understand.
Arvind Kapur
Can you repeat your question can you repeat?
Baskara
Say in Q4 because you would be able to deliver at least 20 of them, do you think you would be able to see at least lower double-digit kind of margins or that is also difficult because of the investments
Arvind Kapur
The — it is definitely on the positive side. There’s nothing negative with that. But we will be delivering 20 and hopefully we’ll get the inspection also done out of 20 and we’ll try to do even more than that. And because next year we’re going to deliver more than 100. The margin will be there, but I will not be able to comment at the moment on the margins.
Baskara
Okay. And there is — yeah, I usually ask this question in every con-call, but just want to ask one more time. Is there any movement on the Gurgon’s the site?
Arvind Kapur
I did explain last-time that what we were getting was not enough and the shareholders actually don’t benefit by that. And the difference is only about INR300 crores of — after all the adjustments of shifting and new buildings and everything, the advantage is only about INR300 crores.
So for INR300 crores, the Board also said there is no point in doing it, the shareholders are not benefit by this. So we have a margin about INR1,000 crores, certainly we like to do it. And we are talking to people, but it’s a large piece of land, it’s about 27 acres and so there are very few buyers who and we want everything above board. So that’s a bigger challenge.
Baskara
Okay, sir. One last question like in this quarter we have other expenses like somewhere around INR36 crores, right? And because you mentioned like one-time expense of INR6 crores. But in the coming quarter, I mean like the running quarter, Q4, do we see any surprises like that or just kind of a more?
Arvind Kapur
It’s one-time only.
Baskara
Okay, okay. So basically, you usually have like around 20, right, 20 to 24 that will be the ballpark, you usually have other expenses.
Arvind Kapur
So around 2525 28 years.
Baskara
Okay, okay. Usually this — this is more of a subsidiary related expenses, other expenses means like — if you don’t mind.
Arvind Kapur
Yeah, this particular thing relates to one of our subsidiaries.
Baskara
Okay. Is there is no way that we can reduce the cost other expenses, less than 20 or it’s kind of…
Arvind Kapur
No, we have been reducing. In this quarter also there has been a reduction in selling and distribution cost. So — but because of this one-time item, this short-up that you’re are observing is there.
Baskara
So in the future, there is any chance that it can grow down to INR20 — 10 crores?
Arvind Kapur
No, I don’t think so, because we’ll be increasing our volumes continuously. So I don’t see in absolute terms, it will go down whatever expense we have been incurring, but less there is a variable portion in this, which is relating to selling and distribution expenses. In percentage terms, it has been coming down.
Down and in future also, we expect that it will come down further. And besides that, the new launches taking place which are supposed to take place in the month of July last year, those also take place by the end of this month.
So one month of sale we’ll have this year, of course, the benefit we’ll get next year. So we’ll be utilizing our equipment better than before.
Baskara
Okay. So one last question, sir, like what — what is the progress of that new plant for Toyota, I think soon.
Arvind Kapur
We can — I just actually. It’s in-progress. We have got to have the building ready by month of June. By month Of June because when does the production start? October 21. October this year, October. In October, we got to start delivering from that plant to see, there we have — the samples have got to be submitted from that particular plant in the month of October and the whole volume production start by the end-of-the year. And so for the sampling, the building has got to be ready and the machine has got to be in-place there.
Baskara
Okay. So we will see some kind of some revenue from that plant from October onwards then. Okay.
Arvind Kapur
It will be lesser revenue mainly because of sampling and the prototypes and other things it will go by the production starts in which one mid of next year, 2026, ’26 it starts., it will be very samples will get a okay, for both Toyota as well as I said, yes.
Unidentified Speaker
It will be supported right now from Chennai, keep on that — those will shift there.
Arvind Kapur
Okay. So some of the volume which will be — which are required to be produced there, we will support it from a Chennai plant and then shift it from the Chennai plant to Hosur also, we’ll do that and but the full volume comes in from middle of next year. Yeah.
Baskara
Okay, okay. Sorry to squeeze. I want to squeeze one more question. Apart from the containers, do we have any other orders from defense? The reason I’m asking is like I will see more margin defense that’s the one which will improve.
Arvind Kapur
We are bidding for many items and in fact, we’ve got the license for almost 20 items and we also have DRDO collaboration for some of the items. And so a lot is happening, but okay. Another thing I’d like to add is the railways. That’s the other field that we have taken-up and there are lot of castings and other components which go to the railways where we are also looking for orders.
And hopefully, the railway business would be faster than the defense startup and we should be able to — we probably start delivering in another two to three months’ time — we’ll give you an update on this.
Baskara
Okay. So we are creating another subsidiary sir for this one for railways or it’s kind of
Arvind Kapur
No, no. We are trying to merge all the subsidiaries into the main and we don’t want to create any further subsidiar. Not on the rail. See, in the defense side, we had to create a subsidiary because some of the foreign companies don’t deal with companies which are dealing in defense. For that reason, we had to make a separate defense subsidiary.
And but for the railways or not, it doesn’t matter. We would like to do it in this company only.
Baskara
Okay, thanks, sir. That’s it from my side. Thank you very much, sir. Last question.
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 Rahil Shah from Crown Capital. Please go-ahead.
Rahil Shah
Hi, sir, good evening. Can you hear me? Hello,
Arvind Kapur
Very well.
Rahil Shah
Yes. Yes. So firstly, on this defense product, what did you mention? What is it exactly that you are shipping and have already shipped?
Arvind Kapur
These are shipping ranges, factor shipping ranges where the Army, Navy, the DSF, the IF and the police Air Force, they all need to train the people in shooting.
Normally you have these open shooting ranges where people were shooting and you could hear the bullet sounds early-morning. In Delhi, we hear it. And — but now there’s a restriction on that and these are totally in closed ranges with electronic controls and everything on the target and the decimal level is below 80 when you fire a short, even fire a light machine gun, it is — so it’s contained in that container, the sound and everything is — so in this the ranges — the sizes vary from a 26 foot or 28 footer to almost 40 footer, then it goes up to 150 feet also.
Those are — then those are the assembly of containers that actually happen there. So these are the for — and every force needs it for retraining their forces.
Rahil Shah
Okay. And which size of container are we shipping, making and shipping? Is it varying for us also?
Arvind Kapur
Are we — are we we started shipping the 20 footers and then the next 40 — 40 voters.
Rahil Shah
Okay. When you say 20 to be shipped soon and then next year you expect 100 ranges. So these are confirmed orders? Is there a certain order book for this?
Arvind Kapur
Or they — 100 are confirmed also and there’s 20 already in-production.
Rahil Shah
Okay. So 100 is the current order book for next year is what we can assume.
Arvind Kapur
No, we’ll be getting more also, but this is what we haven’t had.
Rahil Shah
Okay. Okay. Any idea on like the opportunity for this kind of product overall like in the — from DRDO and how big is it like that?
Arvind Kapur
Yes. See, now I’ll give you an example. The Navy loan has a requirement of almost 300 ranges immediately.
Rahil Shah
Okay.
Arvind Kapur
So I’m only talking on Navy in particular. This is the first order that they are trying to get-out. And we are betting absolutely on that. That and but the army would have much more because army is located everywhere and everywhere they need not one range but they need multi ranges right so similarly CISF and all the forces would need border security forces they would need it, everybody will need it.
Airport also.
Rahil Shah
Got it.
Arvind Kapur
And then let me tell you another thing. There are even the amateur people who participate in Olympics, et-cetera, they also need the ranges to actually practice. So we do see that also coming up.
Rahil Shah
Okay, sir. And next year you mentioned something that INR720 crores of new orders. Can you explain the nature of those orders to me? And like what does it consist of?
Arvind Kapur
Yeah, yeah, we can give you complete it is that. This is a breakup for export as well as domestic. In the domestic, it is INR510 crores in this — the updated. Customer.
Unidentified Speaker
Okay. So in this, we have Marti,, Toyota, GK and Tatas, Nord Bendex, Maruti two-wheelers as well and KS New Holland, Musashi,, Daimler,. So these are the names I’m picking. They are the orders from these companies.
Rahil Shah
What is it for.
Unidentified Speaker
All that the INR720 crores that’s totally for auto — auto components. Auto components are.
Rahil Shah
Okay. Okay.
Unidentified Speaker
I’m not including the defense and others in this.
Rahil Shah
No, no, got it. This is the new order for auto components, okay.
Unidentified Speaker
These are new order.
Rahil Shah
Yeah. And lastly, you mentioned the margins you expect 13%, correct? So by when do you expect to touch those numbers? Like what was the trajectory by FY ’27 when you expect INR3,000 crores of revenue?
Arvind Kapur
INR3,000 is 27 I did mention 3,000 — we’ve got to cross 13% definitely because Board has monitoring it on every quarter basis. So in the next two years, slowly 13% by FY ’27, price.
Unidentified Speaker
Yeah, certainly.
Arvind Kapur
No, you will see a change even the current year. We would have been in the region of 12% this year, definitely, but we could not achieve the sales. That’s where we got start.
Rahil Shah
Okay. Okay,
Arvind Kapur
Because of the postponement what kind of improvement might continue.
Now if I look at the exports, we are — in some component, we are at about 22%, some are 18%, some are one. Then in the domestic and some of them we are 18%, 20% semi.
Okay. In the Maruti we are 13% where they are the and the heroes are top customers.
Rahil Shah
So basically gradually we can move to 13% into yes. That’s one we can assume, correct?
Arvind Kapur
Certainly. Certainly.
Rahil Shah
That’s all I wanted to know. Okay. Thank you and all the best.
Operator
Thank you. A reminder to all participants that you may press star and one to ask a question. Ladies and gentlemen, if you wish to ask a question towards the management, you may press star N1. Participants, you may press star and one to ask a question. The next question is a follow-up question. It’s from the line of Baskara, an Individual Investor. Please go-ahead.
Baskara
Hi, sir again. A quick question on — if you remember like I started investing in this company in 2012, around 2012, we actually Diluted some equity, right, for — to pay-back loans and all. Is there any chance in next one, two years to buy-back? Because if you remember in 2012, we diluted right at least if I remember correctly. Is there any chance that you can buy-back some share just to give some no returns to investors like me who stick to our company almost a decade? Yeah, that’s it from my side. Thank you
Arvind Kapur
This is this is a debate that carries on in the board also and there’s a discussion that takes place every time and when it happens, we’ll definitely inform you about it.
Rahil Shah
Okay, that’s it from my side. Thank you.
Operator
Thank you. All the participants who wish to ask a question may press star and 1 as there are no further questions from the participants, I would now like to hand the conference over to the management for their closing comments thank you.
Arvind Kapur
Well, thank you so much, gentlemen, and thank you for ladies and gentlemen for participating. And we do apologize for not having been able to achieve the results that we had promised and but hope. There is a delay, but it is not a permanent situation at the moment.
The programs had — they have not been delayed. We were ready, investments in-place and production is in-place, samples given, samples approved, everything done, but the supplies would not take place because the customers did not want — they were not ready because of their own internal matters. Those have got sorted-out now and hopefully we’ll blast out from next month onwards.
And the INR2,600 crores that we are talking over next year, we are confident that we will exceed that because we have become very aggressive both in domestic and the export market. Export market, by and large, wherever we are supplying, we are single-source the — or to companies like BMW and and.
And the domestic market normally there are dual sourcing in and Hero. There we are trying to increase our share of business and hopefully we’ll increase. This year, if you notice our hero sale has gone up dramatically. Even our sale has gone up dramatically, there’s a lot of pushion in that direction. We will exceed this and unfortunately, we’ve been able to free a lot of capacities in the plant, in the casti capacity.
So the investment in casti will not be required for the — maybe for the next two, three years. And we are actually not required in the next three, four years. And we’ve been able to free a lot of capacity with the new technologies that we’ve introduced in our die castings and with better-quality, lower rejections and high-speed and the capacity buildup, whatever would be required would be primarily for the machining side and the inspection side, otherwise the investment would be minimal.
So we are very — of this — the free time that we had in the last almost six months, we’ve been able to utilize that for improving our efficiencies and our technology and taking our technology level to a next level, both in the casting and also in the machining area by reducing our manpower, by utilizing the manpower better and making the lines more smooth.
We will continue doing this. You will see the cost-reduction taking place every time. And the moment we cross INR2,500 crore INR2600 crores, you see the margins change dramatically also.
So hopefully, next quarter onwards, from the first-quarter of next year, you’ll see the margins improve dramatically. And we’re looking for — we only hope that the US President doesn’t oppose major tariffs on India. And if that goes well, I think the orders we have on the US are huge. And because of China Plus One, we are seeing a lot of traction taking place between us and the US companies and also the European countries. Germany is in a slowdown at the moment and so — but we do see some growth taking place in BMW and others.
And they might not come back to the volumes that were there about two years back or three years back, but we are seeing newer components being introduced and the is picking-up slightly. And hopefully, if Mr Trump manages to-end the war in Ukraine, hopefully, hopefully the economies would come back to the previous economies.
We are looking for a good year the next year and we are hoping that there would be better margins and further cost reductions will also take place.
Thank you so much for attending the conference call and we look-forward to giving you better results next time. Thank you so much.
Hazel Rathod
Thank you. On behalf of Rico Auto Industries Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.