Steel Strips Wheels Ltd. (NSE: SSWL) Q1 2026 Earnings Call dated Aug. 04, 2025
Corporate Participants:
Unidentified Speaker
Mohan Joshi — Executive Director
Naveen Sorot — Chief Financial Officer
Pranav Jain — Deputy General Manager, Finance
Aditya Dixit — Executive Director
Analysts:
Unidentified Participant
Chirag Jain — Analyst
Param Gora — Analyst
Aditya Ketan — Analyst
Gautam Rajesh — Analyst
Jyoti — Analyst
Saurabh Jain — Analyst
Antima Jain — Analyst
Anand Kulkarni — Analyst
Shika Mehta — Analyst
Kedar Kailaje — Analyst
Piyush Arora — Analyst
Saket Kappor — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to Steel Strips Fields Limited Q1FY26 earnings conference call hosted by MK Global Financial Services Limited. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to to ask questions after the presentation concludes. Should you need assistance during this 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. Chirag Jain, Deputy Head of Research from MK Global Financial Services Limited.
Thank you. Thank you. And over to you sir.
Chirag Jain — Analyst
Thank you. Palak. Good afternoon everyone. On behalf of MK Global Financial Services I would like to welcome you all to the 1Q FY26 earnings conference call of Steel Steps Wheels Limited. Today we have with us Mr. Mawon Joshi, Deputy Managing Director and Mr. Navin Sorot, Chief Financial Officer as well as Mr. Pranav Jain, Deputy General Manager Finance. We’ll start with the brief opening comments from the management team post which we will open the floor for Q and A. I’ll hand over the call to the management team now. Over to you sir. Thanks a lot. I think we have another member with us which is Aditya Dixit who heads the entire interactive operations and marketing from SSWs.
We’ll start now.
Pranav Jain — Deputy General Manager, Finance
Yeah. Good afternoon. Hope everyone is doing well. I hope every everyone had an opportunity to go through the financial results and investor presentation which we have uploaded on the stock exchange and on our company website. Q1FY26 overall has been a good quarter for us. Top line recorded our reversed 15 year 15% year on year growth. Gross profit also registered a strong 15% increase reflecting healthy operating momentum. EBITDA stood at 125 crore marking a 6.1% year on year growth. However, EBITDA margin witnessed a slight decline during the quarter primarily due to increase in raw material prices and higher spend on spares, consumable and repair and maintenance.
These expenses will get normalized in coming quarters. Depreciation costs also rose during the quarter largely due to elevated capital expenditure undertaken over the past few years to expand capacity in alloy wheels as well as in Nacals, profit after tax increased from 46cr to 50cr representing an 8% growth on year on year basis. The export segment delivered an outstanding performance this quarter across both steel and alloy product, continuing the strong revival seen in the previous quarter. Export revenue rose sharply by 30% increasing from 123 crores to 160 crores. Looking ahead, we anticipate export revenue to remain relatively stable in the near term as we assess the potential impact of recently announced tariff hike by the US on Indian imports.
We are currently evaluating the full implication of these policy changes on our future growth prospects in the US market. To mitigate the impact of the recent imposed tariffs, we are working on de risking strategy thereby reducing our dependence on US market with specific focus on Europe and South America. The alloy wheel segment within the passenger car category emerged as a standout performer this quarter delivering exceptional growth. Its contribution to overall revenue increased from 29% in the same period last year to 35% this year. We anticipate this upward trend to continue with the segment share as a percentage of overall revenue expected to rise further in the coming quarters.
The strong performance of this segment has been a key driver to sustain our overall business margin. We remain optimistic about its growth prospects and expect the positive momentum to sustain going forward. Our tractor segment also seen a decent growth primarily due to favorable monsoon and sustained export momentum. In this category. The segment experienced strong traction in domestic market driving impressive sales expansion. On the other hand, the CV segment has not been doing well. One of the major reason is the introduction of AC cabins in all newly manufactured medium and heavy commercial vehicles starting 10-01-2025 according to the Ministry of Road Transport and Highway, all of which the sales in the month of June has been bad for us.
However, we hope to see a rebound in the industry driven by increased government spending on infrastructure, new highway projects and easier financing. Our new aluminum knuckle segment has done well for us in the quarter which had commenced commercialization in the third quarter of last year with an initial capacity of 2.5 lakh units per annum. In this quarter we had been able to sell approximate 50,000 knuckles to multiple OEMs which has generated revenue of 13.2 cr. Looking ahead, our goal is to fully launch this business line by FY26 and expand our customer base by bringing major OEM into the segment.
With this, we now open the floor for question and answers. 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 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 Param Gora from Trinetra Asset Managers. Please go ahead.
Param Gora
Good afternoon and thank you for taking the question. So what I wanted to ask was. That exports revenue grew by 30% in quarter one of financial year 26 compared to quarter one of financial year 25. So due to the upcoming tariffs on Indian products, are you planning to increase the share from domestic part or you are exploring new regions for export? Azita, would you like to take it?
Unidentified Speaker
Yeah. So if you see our split of exports geography wise, in the last year, you know, and year before that, US played a big role in our overall exports turnover, it was close to 70% in 2324. In 2425 it went down to 65%. And this year our exports to us, we are already, you know, got it down to 52%. And when I say this, it was a part of our de risking strategy not to be overdependent on just one geography for our exports outside India. So we had in the last two years or over two years had planned this very strongly to be present in Europe and South America.
And that is where you see the growth even in Q1. If you see the revenues that European region has generated, that is a key factor why the turnover has increased. And that also justifies what we thought of reducing our over dependency on the US market. On the tariffs perspective, yes, there will be challenges, but I think our competition is also going through the same phase, I would say. And we have, as I said, you know, going to Europe and South America is one point. But we do have certain actions planned and we will address and take them as and how we get more clarity on the tariff perspective.
Okay. Okay. Thank you so much.
operator
Thank you sir. The next question is from the line of Aditya Ketan from SMIFS Institutional Equities. Please go ahead.
Aditya Ketan
Yeah, thank you sir for the opportunity. So just a couple of questions, sir. First, when we look for commentary from the OEMs over the coming year for FY26, so they are talking of some slower volumes. And if you look at the incomes on the urban side also will largely remain weak only. So how do you see the transition from the steel wheels to alloy wheels? So would the transition be that smooth or there will be some short term Hiccups in this transition if the growth is low.
Mohan Joshi
I think from the OEM commentary, I think we agree to that commentary from a perspective of growth in each of the segments. But as far as the alloy wheel segment goes in, I think what is happening right now is that the pace of growth which was at 15% plus in alloy wheel market growth has tapered off a little bit because of the inflation which is coming in the car. But it is completely been taken up by the export side which has given better results last year and also for this year we are hopeful that they are going to have a mid high double digit growth in that segment.
And from the OEM side also the business has started for our company and we expect that any hiccup which is there because of the product mix change or any issue on the slowdown on the domestic side will be completely taken up by the export side.
Aditya Ketan
Got it sir. So when we look at the volumes for this quarter Q1 so we have grown by roughly 4% on YUI basis and we have had around 15, 20% growth overall and export side to be larger. So export numbers largely look to inline but the overall volumes in the domestic side looks to be largely on the so lower side. Are we sticking to overall?
Mohan Joshi
Are you talking about the full volumes. Sorry, value wise, top line growth or we are talking about volumes or something
Aditya Ketan
volume wise.
Mohan Joshi
Okay, so on the volume side I believe that. I don’t think so. That we said 20 growth on volumes for the whole company. Are you talking about for the company? I don’t think so. That it is, you know, 20%. We said that. But still I would like to say that last year’s volumes and this year’s market condition given that we are of the faint knowledge of the export impact yet to be absorbed, I believe that the volume growth is going to be anywhere between the current the last year plus closer 10, 9 to 10% in terms of the, what do you call industry dynamics in terms of the value. The value will be better because the alloy segment is doing better, the CV segment is doing better and the export segment is doing better.
Aditya Ketan
Got it sir. Just one last question sir. Onto our monthly number report. So June numbers has been reportedly onto the muted side like on volumes. I think it is the lowest volumes monthly which were reported reported in the last two years roughly around 14,000.
Mohan Joshi
Yeah.
Aditya Ketan
Any outlook for like why it is weak and how is the outlook for the coming quarters?
Mohan Joshi
So I believe that you would have seen that there is. There are two reasons to it. One is the June quarter shutdown which is usually the part of the previous side of shutdown which is one of the case. The second thing is I think there’s. A production output adjustment which is happening from the OEM to adjust the inventories. And the second factor is coming in. From the CV side which has caught everybody by surprise because of two things. There is a AC cabin changeover from the compliance side because of which the inventories were to be controlled. And the AC cabin availability for doing the full production during the monsoon season was on the shorter side. So this is one of the reasons which we felt the overall volumes have been impacted. And I believe that now the normalcy will come up where the confirmation of AC cabin availability for the CV cycle has been given from August onwards. And I think the up on August on onwards in terms of the typical cycle of CV uptick starting from September, October will be visible and it will be 1/4 knockoff.
I think the volume will improve from here on.
Aditya Ketan
Got it. Thank you, sir. I’ll join back in the queue.
operator
Thank you so much. The next question is from the line of Gautam Rajesh from Everflow Partners. Please go ahead.
Gautam Rajesh
Hi sir. Good afternoon. Thank you for the opportunity. I had two questions. My first question is what sort of growth do we expect in the alloy bead segment in the domestic market on.
Mohan Joshi
The alloy grain side? On the domestic side, we feel that the volumes are still great. Given that our share of business is at between 33, 35% and with our share of customers growing better like Mahindra, I think we expect this year to. Be close to almost 12%. 11, 12% kind of a growth which we expect from the domestic side and export. I think the volumes are going to be close to 18 to 20% given the momentum we have. And we do not have a very large exposure to us. So we are safer on that side. European side is safer from the export side.
Gautam Rajesh
Understood. All right. So and then my next question was is there any change in the growth outlook or order inquiries for the export business with the evolving situations of the tariffs you are mentioning?
Unidentified Speaker
Will you take it? Sorry, could you kindly repeat the question?
Gautam Rajesh
Yes. Is there any change in the growth outlooks or order inquiries that you’ve got for the Expo business with the evolving situation on Paris that you are mentioning?
Unidentified Speaker
Yeah, I would say, you know, Europe is definitely very strong and it is again an area which we had made conscious efforts to grow our business in.
So that remains pretty strong as far as US is concerned. I think all the buyers are just holding back their orders for another Probably a week or max two weeks because I think they’re all waiting for what happens on 7th of August, if at all there is any difference between what has been told until now and how it turns out beyond 7th of August. But you know, I would say that it is not going to be. I would say complete drop of orders. Yes. This situation, we feel that it will remain dynamic because there are a lot of question marks yet, not just about India, but even if you talk about Southeast Asia, US is going to go very strong against transshipments.
So you know anybody who was buying steel or aluminum on commodities from China and making them elsewhere in Southeast Asia region where our competition also has their manufacturing plants. So they are going to go very strong against them. So I would say that all our US buyers are being very cautious and they are operating at very marginal inventories because we also. It also depends on how the market is going to react to all of these tariffs. At the end of the day it’s going to be a burden on inflation. So it’s a very big process which will have much more time to make a sense out of it.
Understood. So basically the Europe and Europe side you see strong inquiries and GROSS Outlook by U.S. side It’s a hold like a hold till the. There’s more clarity on the tariffs. And are you getting. What about South America, sir? South America is also strong. I guess we are seeing receiving healthy RFQs from the OEMs and we have recently won a few projects in that region. So that still remains. It holds a lot of potential to have more business in that geography.
Gautam Rajesh
Thank you. Thank you.
operator
Thank you sir. The next question is from the line of Jyoti from Arihant Capital. Please go. Go ahead.
Jyoti
Yeah, Def. Just wanted to understand like on the knuckle side with Q1 knuckle sales 50k units. So when do you expect full 10 lakh capacity to be utilized? And also what is the revenue potential from aluminium knuckle in FY26 and 27?
Mohan Joshi
So as we said that the first. Phase of capacity is at half a million which we updated that for this financial year towards the Q3 end and Q4 this capacity will be almost at 85 to 90% utilization. And the new capacity is already up for manufacturing. Sorry for being set up in Gujarat which is going to be for additional 1 million which will be coming for production by March or April 2020. And. That will be having an order book of close to around 900,000 for financial year 2627. So this is the outlook as we have right now. And as this part is on safety part as very close to the electrical electric vehicles. So ongoing discussions with export as well as domestic market customers are happening for getting the businesses. And I believe that this is going to see the trajectory of alloy wheels that I said earlier. Also. So over a period of next five years we believe that it has a tendency to grow at close to 30, 35% given that the base is very low right now. And this is going to be a. Sunrise industry for us.
Jyoti
Okay, thank you so much.
operator
Thank you ma’. Am. The next question is from the line of Saurabh Jain from Sunidi Securities. Please go ahead.
Saurabh Jain
Yeah, good afternoon sir. Congratulations for another handy performance. So my question is on EBITDA per week this quarter we stood at around 258 rupees which was 246 rupees in the corresponding quarter of last fiscal while on sequential basis it was you know down from 268 rupees. So excluding the impact of increase in other expenses which you have explained in the presentation as well as in your opening remarks due to spares and all. So what would have been the EBITDA per deal and how do you see it moving in the coming quarters?
Saurabh Jain
Hello.
operator
Yes sir.
Saurabh Jain
Hello.
operator
Aditkya. Sir.
Aditya Dixit
I think that should be answered by Mohan or Naveen. It was particularly EBITDA of the total company. Right?
Saurabh Jain
Yeah.
Aditya Dixit
So I think Mohan. Naveen, you can address it.
operator
Mohan. Sir.
Aditya Dixit
Are they online? Is the connection good?
operator
Sir, I’ll reconnect them. Give me a moment.
Aditya Dixit
Yeah, yeah.
operator
Ladies and gentlemen, the line for the management seems to have disconnected. Please hold while we reconnect. Yes sir.
Mohan Joshi
Yeah, sorry, line got disconnected. So as I mentioned that the Q1 EBITDA number did hold it around 261.7 rupees versus 260, 260 that we had for the entire last year. The number is expected to move up based on the expectation of the volumes of Alloy and Nakal moving up. There have been some impact because of spares and repairs and maintenance expenses that got. That got accumulated in Q1. But as we proceed ahead in the year, I guess those expenses will get normalized and we should see an uptick in this number. But it all depends on what kind of volume that we are we are seeing going forward.
Specifically on the domestic front. If the volumes are expected to hold the current level, I guess these are the levels will also hold.
Saurabh Jain
Okay sir, my next question is on exports realization. So realizations were quite robust at 2000 rupees overall. I’m talking about especially alloys also was quite robust at more than 5,000 rupees which was like 20, 25% up on a buy basis. But in July our volumes, exports, volume overall were down 28% while our value in value terms there was some moderate growth of 4%. So my question is on how these realizations are going to pan out going forward and was this only due to the currency movement or if you can, you know just showcase the scenario here.
Mohan Joshi
So Aitha, you want to take this up?
Aditya Dixit
Yeah. So I think July because of the volumes are going to be very consistent going ahead for aluminum wheels. Also I think what you meant to say was whether the correction on the margins was only because of currency adjustment. Was that the question sir?
Saurabh Jain
It’s about realization. So our overall realizations in this quarter was around 2000 rupees. Visa was 1750 in cube of FY25 and 1960 of in the previous quarter. And also alloy wheel realization was also north of 5000 rupees which was like 10% higher almost. So just wanted to understand whether this was due to currency or like and also like the reason of the thing. And how do you see realizations going forward?
Aditya Dixit
Yeah, I think you know, for all the customers we have got typical settlement contracts on both commodity as well as the exchange for an exchange. So I do not see the realization going, you know, very differently than what you see presently for the remainder part of the year.
Saurabh Jain
Okay, that’s helpful. So my next question is.
Aditya Dixit
Just to add to what Aditya has said. So when you are looking at a realization value for July you are looking at the overall number for exports and the overall value for export. Whereas there is different segments that are being catered to within that export, export segment. So the mix of what we have catered to in July, let’s say in pv, Steel, tvli, otr, tractor truck have its play on the overall value as well. So when you say that the value or reliance on value has moved up from some level A to level B I guess there is an impact of change in mix as well.
So that’s why you find that the drop in drop in volumes are huge whereas there is an uptick in the value. So there will be a factor of mix as well in this.
Saurabh Jain
Right, understood. And so my next question is on. This proposal to incorporate wholly owned subsidiary in European Union. And with respect to that there is one press release which has come post the start of this call that the company has received the nomination for close to 300 crores business from European OEMs to European OEMs. So if you can shed some more. Light on the same. Like what would be the strategy here, whether we are considering any acquisitions? Because on the last call also you had indicated that many businesses are shutting down in Europe and you had some offers as well. So. So whether we are looking at manufacturing or for this new subsidiary. And also if you can talk about this order of 300 crores for Stevie.
Aditya Dixit
Yeah. So Naveen, should I take that? Yeah, please go ahead. So I think the first point as far as formation of European entities concerned, that is a part of requirement which one of the OEMs who has awarded business about a year back had clarified to us. So it was bound to happen as that is part of the agreement that we have with them. And yes, you know, in Europe, given the cost escalations, there have been certain opportunities which are under, you know, that had come up for discussions. But you know, the matter is too sensitive to be spoken about or clarified upon in this forum.
I would park it over there. And as far as the recent announcement that has happened, yes, it is from European OEMs for the steel wheel requirement. And this again, you know, is part of our very, I guess, measured approach that we took about two years back not to, you know, have over dependency on the United States for the export business because OEMs have their own lead time. They have got much longer lead time to, to avoid business per se. So this is not an effort of yesterday or six months back. We have been working on this strategy very, very diligently for the last two years.
And now we see that the businesses are getting awarded in European region as well as the South America portion of the world. And these are awarded by, you know, leading European oem. So I think we have got enough credibility in the system now that these OEMs have got confidence in our capabilities. And I think there is much larger potential that will come to sswl splatter in the months and years to come.
Saurabh Jain
Okay, so just a quick follow up and confirmation to previous calls. So you see, achieving 15% growth for the current crystal should not be an issue. And also you had indicated that with the rise in, you know, EBITDA per deal, there would be some expansion in EBITDA margin also for FY26. So are we on track for the full year? Of course you have achieved 15% growth for Q1.
Aditya Dixit
So is that just for exports you’re saying?
Saurabh Jain
No, no, overall, yeah.
Aditya Dixit
Naveen, can you address that?
Naveen Sorot
Yeah. So see on the EBITDA per week, as I mentioned, earlier that yes, we are able to hold on to our EBITDA per views at 261.71 levels as against the 261.6 that we had the entire last year. Based on the expectation that alloy knuckles and specifically export alloys will have a dominant play going forward. These numbers are expected to inch upwards. But then it is also dependent on the overall volume that we’ll be able to do for the entire year looking at the market conditions. But if the scenario remains as if we should be able to see a better number.
Saurabh Jain
Okay, all the best. That’s all from my time. Thank you.
operator
Thank you, sir. The next question is from the line of antima Jain from RBL Bank Ltd. Please go ahead.
Antima Jain
Hello.
operator
Yes ma’. Am. Please go ahead.
Antima Jain
I want to know about the. What impact will it cause on the company regarding the US Tariffs. Like we. I understand that the strategy is to reduce the dependence on us. But if at all the existing scenario as in the some. Some portion continues to be supplied to us, then what impact will it cause?
Aditya Dixit
I would say because the tariffs were up and running ever since the new president took to office early this year. So our business plan for this year had already kind of taken a note of some challenges in the US portion. So I would say the existing business plan should be pretty much on track despite the existing situation on the tariff side. And as I said, it is not just India but all several other countries wherein our competition has got their manufacturing plants. They are also going through the same situation. If you see the differences between what India has today and what the competition has in Southeast Asia, it’s hardly 4 or 5%.
So I do not think that 4 or 5% is going to be a hurdle wherein we just do not find a solution for. But as I said, we are taking things one at a time. So till we have more clarity in the next couple of weeks, we will do the needful. But all we can say at this point of time is that we do. We are. We are still very much hopeful that we will be able to complete our business plan for this year.
Antima Jain
Okay. So we can have the same margin guidance for this year as already informed by the company. The same margins will is expected, right?
Aditya Dixit
Yes.
Antima Jain
Okay. Thank you.
Antima Jain
Thank you. Ma’. Am. The next question is from the line of Anand Kulkarni from Front Wave Research. Please go ahead.
Anand Kulkarni
Thank you for the opportunity. A couple of questions from my end. First one being what is the timeline for the incremental capacity in steel range that EC from 205 lakh to take 270 lakhs to be operational. Additionally, what is the utilization rate we are looking at on this increased capacity? And second one being as earlier on this call, the pace of protein allergies is higher than steel. So any cannibalization or replacement demand in that segment or there are different applications, different segments being catered all together. Thank you.
Aditya Dixit
From the existing capacity I believe that if I’m just trying to understand the question. So imagine that we do 20 million and we do maybe something still like 16, 17 million. You’re trying to understand what to do with that A and W capacity. Is that what you’re trying to understand?
Anand Kulkarni
Yes sir. I’m looking at our blended utilization rate. How much are we targeting for next couple of years?
Naveen Sorot
See I’ll tell you, you know there are capacities which are being mapped, you know, segment wise in terms of, you know, the areas. So I can give you a perspective of how the utilization is. So as far as the Chennai plant goes, I think it is working at close to 80% utilization. As far as Dapper goes, it works. At close to. 70% odd. And when we talk about Jamshedpur I think it is at close to 80% and Masana is at close to 85 odd percent. And further capacity expansion is already happening there. And the overview going forward is, you know, while utilizing the assets of AMW for capacity expansion in our commercial vehicle domestic business which will, you know, will be completed by September 2025 or October 2025, we will add close to almost half a million capacity to cater this de risking philosophy of 80% plus utilization happening in the truck segment. And it will also optimize the economies of wider economies of scale.
The margin by close to half a percent to 0.75% in the CV segment and in the PV side I think the capacities are enough. And we are completely focusing on the area of export size where we feel that there are turbulences which are happening in the European manufacturing and where India can be a big beneficiary of that turbulence of manufacturing ability and sustainability. So I believe that Aditya can throw some light in terms of what he sees from export steel wheel business in terms of the area of turbulence that I’m talking about.
Aditya Dixit
Yeah. So I think costs have always been a big problem for steel wheel production especially in the Western Europe side. And India per se has got the advantage definitely at a very, very considerable level. And given these opportunities that are there in Europe wherein even the OEMs today really are thinking aloud to get away from the European wheel makers Just because they do not think that the production is going to sustain in Europe and they are willing to move outside Europe. And I don’t think there are too many options of steel wheel producers outside Europe who are able to meet the engineering and quality requirements and SSWL is among those few who can meet and come close to OEM expectations.
So I think this dynamics in Europe is definitely helping us to get much more businesses especially from the OEMs in both Europe as well as South America. Okay, understood sir. Second question was on as alluded pace of growth in alloy wheels is higher than steel wheels. So is this on the front of cannibalization in steel wheels as a replacement demand or altogether both have different segments, they are catering different applications as such. Mohani, I’ll take that. I think that’s for the complete industry process.
Mohan Joshi
On the cannibalization my name is Mohan so I’ll try to answer that. I think from the steel wheel side as we have said that if the industry grows between 5 to 6% on the PV side, I think the lion’s share of the growth will be taken up by the alloy side because slow and steady migration from steel to alloy is already happening. We are at close to 38, 39% of alloy penetration and we feel that over next two to three years this will slowly and gradually move towards around 48 to 50% with higher weight cars, higher what you call curb weight cars will be needing these alloy wheels because the spend on the car is going higher.
So this is one, the steel wheel segment I believe that is going to grow between 1 to 2% in terms of the PV side. And there is another segment which is growing very rapidly and which can benefit SSWL is the LCV segment which is the last mile connectivity which is going nicely for all these segment players be it Ashok Leland, be it Mahindra in Mahindra, be it Tada Motors and this segment has a potential which is beyond passenger vehicle for the steel wheel side. And obviously there is the market of steel which is obviously in Europe and US which is being targeted.
And I fairly believe that some share of business will definitely come from the OEM side given that there is huge issues of manufacturing cost which is happening from the European side over next two to three years.
Naveen Sorot
Understood? Understood. Great. Couple of questions if I may squeeze in previous earnings call. It was alluded that manufacturing cost for alloy wheels is approximately 4x of speed. So where do our aluminum knuckles fall on this cost spectrum? And second one being any update on top of entry into lower and upper Control arms.
Aditya Dixit
I think firstly I think four times is the raw material price and that’s why the real price was the context. I don’t think so that somebody gave a comment on the manufacturing cost. I think steel wheel is say a thousand rupees so alloy wheel will be 4000 rupees would have been the discussion but nonetheless I think I’ll try to answer that. I think from the second part of your question on the upper end lower than Thulam There are some RFQs which are being discussed with export denominations as well as the domestic denominations where this is a concept which is getting discussed and some R and D is already working on this and over a due course of time we will try to give some clarity on the subject from the perspective of cost metrics.
I believe that we have already clarified in terms of knuckles that this is the first quarter of good working for Knuckles and by Q2 some margin clarity will come and stabilize for the plant and we’ll try to give you the clarity which is in line with the alloy wheels which we are trying to talk about.
Naveen Sorot
Okay great. Understand. Thank you. That’s it from. Thank you.
Shika Mehta
Thank you sir. The next question is from the line of Shika Mehta from Time and Tide Advisors. Please go ahead. I just have two questions. One is on the AMW capacity. So out of the 7 lakh how. Much are we currently using and what. Is the timeline for and second is. On the debt band how much reduction can we expect for FY26.
Aditya Dixit
On the AMW capacity? As I’ve already said that half a million capacity has already been shifted from that plant to our Jamshedar plant. Then capacity build up in terms of the capability buildup which is already underway in terms of the tractor capacity. So we have added close to another.35 2.4 million in our duper plant to enhance our tractor capability. Then we are left out with close to 5 million odd smaller wheels capacity which is not getting utilized right now. We are not using that capacity because we are self sufficient on those smaller wheels in our existing plants.
But the machinery which is there is being utilized to increase the capability of quality and capability of manufacturing as well as capability of testing where the machinery is going to be utilized. And maybe over next three months we will try to give you the clarity in terms of how we are going to use AMW Bhuj for our future. You know steps there is some discussion which is going on right now with the all stakeholders and we’ll try to give you the clarity over next quarters. In terms of the second question, which. Is about what did you ask the definite.
Naveen Sorot
So we are doing capex of roughly I think around 280 to 300 cr within this current financial year. And against that we will be taking roughly around I think 50% of the debt. So net debt position, I think maybe it’s in the range of 850 to. 900Cr by the year end.
Shika Mehta
Okay. And this capex will be for.
Naveen Sorot
This capex is for alloy wheel and for knuckles expansion.
Shika Mehta
Okay. All right.
operator
Thank you ma’. Am. The next question is from the line of Keger Pelaji from Nan Partners. Please go ahead.
Kedar Kailaje
Yeah, hello. Yeah, thanks for the opportunity. So my first question is regarding your gross margins. Now I understand your EBITDA margins have dropped because of increasing other costs but I wanted clarity on why the gross margins have dipped despite higher contribution from alloy wheels like 29% to 35% now. And exports also contributed higher in terms of percentage. So shouldn’t your gross margins actually improve? Because both these segments are higher margin segments. So see when you’re looking at the gross margin you are looking at in terms of percentages. So what is happening with the change in mix as well as increase in the raw metal prices, both aluminum as well as steel though these are getting passed into the customer.
But because of the denominator impact in terms of percentages, these EBITDA margins as well as gross margins tend to look downwards but they have not decreased. If you look at the EBITDA per wheel that number has actually improved versus Q1 last year. So when you look at percentage it gives you a misnomer picture. Okay. Okay, understood. Yeah, thanks for the clarity. My second question would be like what is the current penetration of alloy wheels? I thought you gave that number but I missed that. And in connection to that right now we are selling to only four wheelers for alloy wheels I believe.
So is that plan to sell to two wheelers as well or are you currently selling to two wheelers as well? So that was my second question.
Aditya Dixit
So currently as I said earlier also the Penetration is between 38 to 39% for the PV segment and we are predominantly only a PV player which is for export as well as domestic markets. And we do not have any intent of getting into the two wheeler side because the margin compression is fairly in single digits and the capex needs are higher. So we will refrain from a two wheeler apex from, from a two wheeler loyal entry from the current point of view.
Kedar Kailaje
Okay, okay, understood. And third question is regarding again the European side So you mentioned that Europe has a higher cost also. Can you explain like which costs are higher for them? Is it power cost, is it labor cost? And where does India have an advantage? Do you want to take it?
Aditya Dixit
Yeah, I think you know in the last two years or so, three years or so the energy costs have gone up definitely so be it power, be it gas, you know, manpower definitely is way above, you know, the Indian levels. But I think all these cost escalations that have happened in Europe in the last two, three years they have put a pressure on the overall production cost of the wheel and this has become a big, big challenge for them.
Despite having much higher level of automation than what India does but still as an overall cost basis they are, they are not being competitive now.
Kedar Kailaje
Okay, understood. Yeah, that’s it from my side. Thank you.
operator
Thank you sir, the next question is from the line of Tiyush Arora from SOIC research. Please go ahead.
Piyush Arora
Hi sir, thank you for the opportunity sir, my question was moreover the financials in nature so last three years I think our business has changed Basically we are going for more geographical expansion and stuff yet when it comes to our fat growth it is flat over the last three to four years. So what do you think are the probable reasons for that?
Aditya Dixit
So if you look at Even in the Q1 result I guess there are two main factors which are contributing to lower PAT. One is debt region because there have been a back to back capex as we did in last three years all that capex is getting capitalized either it is in the form of alloy wheel extension or putting up nickel facility.
Now everything is getting capitalized and there is a depreciation attached to it so that depreciation number has already moved up. If you look at even in Q1 that number is around 30cr versus 25cr for March or 24.8cr for June. So this number on an annualized basis will be around 120 cr versus 101. So this is one factor. The second factor was increasing the finance cost though it is coming down quarter on quarter if you look at compare it with let’s say Q1 Q4 but that number increased because of higher CAPEX so CAPEX has a compounding effect on both depreciation as well as income which is impacting the PAT growth But going forward since all the capex is more or less normalized and there will be an incremental effect of on the revenue of the capex which we have already done I guess we should see a growth in the Pat as well.
Piyush Arora
And so second question is I think this quarter we saw a bit of expansion in gross profit margins but our EBITDA margins were down because of higher other expenses. So question was that have we preponed some of the expenses and as the year goes along do we see some benefits of operating levies taking in when it comes to your overall EBITDA margins on the reported financials.
Mohan Joshi
So what has happened? There are certain expenses that otherwise would have been spread over the entire year. But looking at the demand supply scenario there was opportunity which was available to us to prepoo some of these heavy repair and maintenance expenses and we did it in Q1 itself and save ourselves with any nice top edges going forward.
So these expenses will get normalized as we move forward.
Piyush Arora
And we do expect like 15% growth this year top line.
Mohan Joshi
15% growth in top line. See all depend on what kind of volumes which are there on the table and sitting at Q1 I guess. So we did had a 15% growth in Q1 versus Q1 last year but it will now all depend on what kind of volumes which are on offer from the customer in Q2 and going forward. So if the volume remains so I guess yes. But if there are any changes in the volume from the customer side that will have a direct bearing on the growth that we see.
Okay, all the way. Thank you.
operator
Thank you sir. The next question is from the line of Saket from Kapoor company. Please go ahead.
Saket Kappor
Namaskarn and thank you for this opportunity. Hope I’m audible sir.
operator
Yes, hello. Please go ahead.
Saket Kappor
Can you give the sales means from for the export part between and Europe and with the tariffs now in place and the uncertainty and the confusion around it, are we looking for this thousand crore revision for the thousand crore export target that we have set up for this financial year? 2526 earlier.
Aditya Dixit
Yeah. So as far as split of exports between Europe and US is concerned, I think we are sadly about 45% Europe and this equals to 50, 52% US balances the rest of the world. But that’s the split that we see and that should amount exports for this year to hover around 600 crores.
That’s that’s the number that we have and that, that’s what we have even planned for this year.
Saket Kappor
Okay. Because last, in the Last call our MD Mr. Garg was addressing the investors. And if you look at the transcript. Maybe I may stand connected also but he gave this thousand crores number for 2020. That is from where I have come across.
Aditya Dixit
No, I, I think it Must be a number for the growth debt or the potential that we have. I do not think that the number of thousand crores was planned for this financial year. Mohan, you want to comment more on that number?
Mohan Joshi
Yeah, I think the, the clarity on the tariff side was very fairly, very clear and I think that the volumes based value growth would have been around 600 crores. I think that discussion would have happened while what do you see in terms of the potential of this export going from this to what? And in that context maybe he would have said that the 600 crores he sees over next three, four years to be reaching thousand crores. Yeah, I think that’s what he would have meant. Okay.
Saket Kappor
Secondly sir, when you were mentioning about the July volumes and is it mainly on the impact of this cabin part of the story that has led to the lower dispatches for the month of July or what was the explanation given by you? I missed your comment.
Mohan Joshi
Can you, can you please repeat that question please?
Saket Kappor
Sorry sir, for the month, for the month of July our revenue and our dispatches were down. So what, what were the reason why the July numbers were softer, sir? And what does it, does it indicate for the ensuing quarter, sir, in terms of the business sentiment?
Mohan Joshi
So I, I’ll try to share that. I think the first impact was coming from the CV side wherein I gave the clarity that the AC cabin got introduced and it got a bottleneck from the manufacturer side to meet the demand of the customers. So there was a little bit of shock which came to the industry and the inventory of the pipeline got cleaned up in that context. The second thing was from the export side where the anticipated tariffs which are not known and people are in that question mark whether what is going to happen. Little bit of pause came in there in terms of declaring that let me see the order and let me see what he does and then I take a decision.
So there was a lot of indecisiveness in this process which got these volumes in the month of July and I think in the month of August I think the situation looks a little better and the situation of us still remains very uncertain because people are still waiting that you have seven days of negotiations or something and something comes up then the ships will move here and there. But till that time clarity is not there. It is very tough to give you a very concrete answer that this is how it is going to be panning out.
Am I correct?
Aditya Dixit
Correct.
Mohan Joshi
Okay. So as of now we are not sure how and who is going to be the impact for the tariff part. Also since the since we have already built and the dispatches must have happened for the month of July which will be reaching the customer somewhat in August. So in that case how will tariff be shared and what would be the impact on margin?
Aditya Dixit
So I don’t think there is any impact on the. Yeah, because it is very well understood and that that’s a part of our pricing that we submit to the customer that whatever tariffs are applied when the goods arrive at the port, US port, those tariffs will be borne by the customer.
So there won’t be any impact on.
Mohan Joshi
Also I will try to give you some clarity more here that the, the. The tariff system works like that the day it gets into effect from there the transit time has been covered because obviously there is, there is a lot of transit time which is considered so which is the base document will be considered for the tariff execution and we have another maybe three, four days when this diplomacy has to work and if it doesn’t work, it’s okay. From 8 top onwards, whatever boards the ship and reaches America will be participant to the tariffs that they have implemented.
Saket Kappor
Small point firstly on the aluminum knuckles, what, what are we advertising in terms of CapEx that we’ll be spending for this year and by the end of this financial year what would be our capacity for the aluminum metals part?
Mohan Joshi
So as I said, the capacity in the first phase is at close to half a million which is already under production and by Q4 we expect this half a million to be utilized close to the tune of almost 0.4 million kind of pace. And there is an expansion which we have discussed just now. Some questions back that another 1 million knuckles is getting conceived where we expect by next financial year end the Q4 of 2627 we see the pace of close to 0.8 to 0.9 million knuckles per month in terms of the pace and further the order book and the development is already getting discussed domestic as well as international market customers.
And as and when the capacity will be needed to be expanded beyond this 1.5 million we will let you know.
Saket Kappor
1.5 million is the annual or the.
Mohan Joshi
Monthly and it is annual capacities.
Saket Kappor
But you are mentioning 0.8, that is.
Mohan Joshi
The pace that I’m trying to talk about. The pace of month will be reaching that capacity because the capacity gets utilized month over month in terms of ramp up. So by you know, January, February, March of 27th we should be reaching around 65 to 75,000 numbers per month kind of a pace. This is what I meant.
Saket Kappor
And on the debt number, what was the as in March I think so there was some reduction in debt. So what are we guiding to close the year in terms of the long term debt with this aluminum metal capex to 900cr that is the combined one the long term and the short term. The long term and the short term debt. Can you give the split between the same sir and the cost of fund
Aditya Dixit
Long term debt will be in the range of maybe I think 450cr cost of debt will be in the range of roughly seven to seven and a half percent.
Saket Kappor
Okay. And lastly sir, as investors and shareholders our AGMs and all are just held on the last day of the the statutory limits. So please request the board and the secretary department and all to take note that the 30th of September being the last date there should be reasons why AGMs and that too also on a physical mode. So the participation is also lower. And. And I just kept on the last date. So any reference for what why is it done? Can you.
Mohan Joshi
Can you please. Can you please repeat that question? What is the statutory thing that you want to know?
Saket Kappor
Sir, 30th September is the last day for holding AGM and our company being in such a large investor base is holding the AGM on the last date. Of the scheduling requirement that is the 30th of September. So in any. Any reasons why we are handing our AGM absolutely on the last date of the Secretary as per the requirement by mca. And that too also in the physical AGM has been envisaged. So the participation for investors through the OVM platform would have been much better had it been on a hybrid mode. That was my observation.
Aditya Dixit
It’s an out of syllabus question. We were not prepared for this. So let me. Let me just take it up. I know I’ve taken the observation. Let me. Let me just take it up with the cs.
Saket Kappor
Yeah. Okay.
Aditya Dixit
Thank you.
Saket Kappor
Thank you. One more observation would be said that our MD would also be participating during the con call so that that would be on a continuous basis in continuity. Would we would suffice lot of things. His participation is also very well needed for elongated and insightful discussion. That is also a suggestion.
Aditya Dixit
Sure.
Saket Kappor
Being an investor from my side.
Aditya Dixit
Sure, sure. Thank you for repeat that. Yeah. Thank you sir.
Saket Kappor
Join the queue and all the best to the team.
operator
Thank you sir. Ladies and gentlemen, due to interest of time that was the last question. I now hand the conference over to management for closing comments.
Mohan Joshi
Now I hope we have been able to answer most of your queries. We look forward to your participation in the next quarter. For any queries, you may contact sga, our investor relations advisor. Thank you.
operator
Thank you, sir. On behalf of MK Global Financial Services limited That concludes the this conference call. Thank you for joining us. And you may now disconnect your lines.