Technocraft Industries (India) Ltd (NSE: TIIL) Q3 2025 Earnings Call dated Feb. 12, 2025
Corporate Participants:
Navneet Kumar Saraf — Director and Chief Executive Officer
Anil Gadodia — Group Chief Financial Officer
Ashish Kumar Saraf — Director and Chief Financial Officer
Analysts:
Anshika Patnaik — Analyst
Chetan Kirti Vohra — Analyst
Uttam Reddy — Analyst
Viraj Parekh — Analyst
Riya Mehta — Analyst
Koushik Mohan — Analyst
Sarvesh Gupta — Analyst
Akhil Parekh — Analyst
Vikas Gupta — Analyst
Chirag — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Technocraft Industries India Limited Q3FY25 earnings conference call hosted by Systematic Institutional Equities. 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. Conclude, should you need assistance during the conference call, please signal an operator by pressing STAR then zero on your touch tone phone. Please note that this conference is being recorded.
I now hand the conference over to Ms. Anshika Patnaik from Systematic Institutional Equities. Thank you. And over to you, ma’am.
Anshika Patnaik — Analyst
Thank you, Yusuf. On behalf of Systematics Institutional equities, we welcome you all to the Q3 and 9N FY25 earnings conference call of Technocraft Industries India Limited. From the management side we have Mr. Navneet Kumar Saras, Director and CEO, Mr. Ashish Kumar Saraf, Director and CFO. Mr. Anil Varodia Group CFO.
I will now hand the conference over to the management for the opening remarks followed by the Q and A session. Thank you.
Navneet Kumar Saraf — Director and Chief Executive Officer
Good morning everybody and welcome to the Technocraft Quarterly results investor conference call. This is Navmeet Saraf, Director and CEO. So as you all have seen, it has been a mixed quarter for Technocraft this December 2024. While we have seen an increase in sales compared to the last quarters, we have seen some pressure on the bottom line. We’ll be discussing these further in the call. Predominantly what we have seen is impact of depreciation, particularly in our scaffolding and textile units on account of the new units that we had set up. So that’s contributed and along with that there has also been some mark to market losses that we have taken on board this quarter. So it’s been a mixed quarter overall.
And I would now like to take it to questions. 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 the Touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two participants are requested to use handset while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. First question is from the line of Chetan Kirti Vora from Abacus Asset Managers. Please go ahead.
Chetan Kirti Vohra
Yeah. Hi. Good morning, sir. Hello. Am I audible?
Navneet Kumar Saraf
Yeah, yeah. Good morning. Good morning. Please, please go ahead.
Chetan Kirti Vohra
Yeah, yeah. Sir, I just wanted to understand, you know, what’s the outlook on the scaffolding. We are as the execution has been quite strong but in terms of profitability it has been quite subdued. I understand the reasons mentioned by you, but it is now, you know, five quarters in row when the margins have been hovering at around 13 to 15% range. Marin we used to make in anywhere between about 18. So how do we plan to bridge that part?
Navneet Kumar Saraf
Yes, so yes, yes, you are right that the margins have been under pressure. But you know, basically if you see the past four quarters, what we have there are, you know, what we have primarily observed in scaffolding is there has been a marked increase in depreciation because we’ve set up the new plant in Aurangabad where total capex of about 220 crores has been incurred and the plant has started. And so we have started depreciating the asset. In this quarter October to December itself, the total Depreciation was about 5 crores, just under 5 crores and whereas in the preceding quarter of September it was about 2 crores. So there’s a 3 crore increase in depreciation in this quarter itself compared to the last quarter.
So if we were to, you know, so that is basically a major reason because after depreciation quarter on quarter, the segment profit of scaffolding is more or less the same compared to the last quarter and it’s actually higher than the December 2023 quarter. So that’s really been the main reason. Other than that, you know, there, I think the margin profile as such has been intact. You know, we’ve continued to have. There has been in the past some impact which I have mentioned in our call about freight. You know, we’ve had, I think it was June or September quarter where freight freight costs had increased significantly.
So we had taken some hit due to that. So that’s also been the case. December quarter is also seasonably a little weak. So that also has some effects. But overall the prospects continue to be robust. Our new capacity in Aurangabad is taking shape. We will now see gradually increase in output coming from till December. The output from that facility has actually been very, very, very, very small. And it has negligible impact on our top line and bottom line. But we’ll start to see a material impact coming from the March quarter of this year onwards and you know, and then as I said earlier in the next fiscal year we will see a stronger impact of that particular plant coming.
Chetan Kirti Vohra
So say that so far the revenue growth of 28% what we have reported in scaffolding it is the newer, the new plant which is commission. The contribution of those plant in this number is quite low. Right. This is the ordinary growth. What we are seeing
Navneet Kumar Saraf
It is actually negligible. It’s actually zero because we have, you know the Mac1 output has been zero till December. What we have seen is only some of the backward integration started aluminium extrusion. But that’s also been in testing, debottlenecking kind of phase. So this 28% revenue growth is purely out of the Murbad units.
Chetan Kirti Vohra
So if you were to, if you were to just. If you were to directly, if you can guide us, if you were to exclude the, the front fronting cost of the newly commissioned plant. The profitability is maintained of the Mujbad plant at around 20 odd percent sir for this cap only.
Navneet Kumar Saraf
So this quarter the profitability was 39 crores and like I said 39 crores had a 5 crore depreciation of the Aurangabad plant included. So you know without that it would have been 44 crores.
Chetan Kirti Vohra
Right. But the, the other audit cost also
Navneet Kumar Saraf
Would have 15% which would be about 15% of revenue.
Chetan Kirti Vohra
Right. And but the, apart from depreciation the other override cost of the. The Aurangabad fund also would have got. Right,
Navneet Kumar Saraf
Exactly. Without those fronting costs. Like I’m saying, without those fronting costs our margin would have been maybe 16, 17% closer to the 20 mark.
Chetan Kirti Vohra
Okay sir, on the engineering vertical I was just slightly worried to see you know the revenue growth since last two quarters has been like negative 1%, 2% and the margins have also declined and this quarter the margins have gone, you know, all time of 10%. I understand that we are ramping up the bench, bench trend. Can you explain, you know what is leading to this revenue decline and how do, how should one see this engineering vertical?
Navneet Kumar Saraf
Okay, so first of all I don’t see a revenue decline compared to the September quarter. The revenue has marginally gone up. Maybe you’re saying compared to the December 23rd quarter there is a small revenue decline.
Chetan Kirti Vohra
Yes, I was comparing with the December decline.
Navneet Kumar Saraf
Firstly the December quarter is always seasonably a little bit of a weak quarter because of Christmas holidays and so you lose billing because of holidays over there. So that’s that you know, that’s one aspect that contributes then the other major aspect is, like I mentioned before, this year we have increased our sales and marketing spends considerably. We’ve increased that in the us, in Germany, in both these geographies. We’ve also increased our brand strength by starting new verticals like plant engineering and automation where we’ve been recruiting heavily. And these are verticals in this business. It takes about a year for materially new revenue to come in for new verticals. Now we are seeing actually on the ground, we are seeing good positive traction because our strategy of, you know, getting larger accounts is actually working. We’ve been able to open several new accounts.
We’ve been able to open several new accounts in new vertical like plant engineering as well. But it takes time for the revenue from these accounts to ramp up. Similarly, even when we had seen the strong revenue growth of 38% in this business in March 22 or March 23, prior to that couple of years, we would have seen some pressure on the bottom line because we would have increased our costs. And it takes a year longer for the revenue to come in. So it’s the same thing. We will see a jump in revenue as we start to see the revenue from new accounts and new verticals start to materially increase, which we should start seeing in the next financial year. But the demand environment continues to be strong, the markets are strong and there is. We are not seeing any slowdown as such.
Chetan Kirti Vohra
Right. Could you quantify from what to what the employees have gone increased on the sales and bench strength.
Navneet Kumar Saraf
So I don’t have exact numbers with me. I can give you rough figures. We have increased our sales and marketing expenditure this year by I would say roughly about one and a half to two crores a month. So you know, that’s about, you know, so that’s the increase. In addition to that, we have also increased costs of, you know, by hiring senior delivery heads in verticals like plant engineering for which I don’t have exact numbers. I mean we can give it to you separately offline, but that’s in addition to that. But one and a half to two crores definitely has increased on account of additional sales and marketing spends.
Chetan Kirti Vohra
So going forward on optimal utilization, what revenue can this vertical generate for us on annual basis? Sir, which used to do anywhere between 2 to close to 230 to 40 crore. Crores or 60crores yearly quarterly. So it can be ramped up to what levels.
Navneet Kumar Saraf
So based on the new have created and the capacity that we have created and the bench strength we have created, we are actually good to do about 270 crores in revenue. You know, based on that additional. That’s what our revenue target is which is in the immediate preceding year, in the next year.
Chetan Kirti Vohra
Got it. Got it. Thank you. Thanks. And sir, the other income has gone quite low. Can you explain the reason for that?
Anil Gadodia
Yeah, the other income has gone low because of the mark to market. So December quarter, you know we have to whatever investment we have, we have to take it to the value as on 31st December. So December 2023 the market was robust and it was quite high. Whereas in December 2024 the market was down. So mark to market has led to different.
Chetan Kirti Vohra
Okay, got it, sir. And sir Navinji, can you, you know, guide us? You know, how’s the the full year outlook looks like for 2526 for the company as a whole? You know,
Navneet Kumar Saraf
For 2526?
Chetan Kirti Vohra
Yeah, for 25. FY25 as well as FY26.
Navneet Kumar Saraf
Right. FY25. I think we have one quarter left and I think we are going to see from a revenue standpoint we will definitely see revenues to be higher than December quarter because some of the seasonal effects will go away. March is always a little bit of a better quarter. We will also see I think better bottom line because we will start to see more positive impact coming from Aurangabad plant. We will also not see the holiday effect coming for the engineering services business. So I think March 25, last quarter should be definitely better both in top line and bottom line than December quarter. As is always. As far as next fiscal year 2526 goes, I think drum closure is steady. You know, we will see similar growth in that as we had seen last year scaffolding. We’ll see, like I’ve said before, the increment coming from the Aurangabad unit should see about 400 crores net increase in top line.
Chetan Kirti Vohra
That will be in the next year itself, sir.
Navneet Kumar Saraf
2526. Yeah, fiscal year 26.
Chetan Kirti Vohra
So 400 crores organic growth, what we are seeing, right?
Navneet Kumar Saraf
Yeah. I mean taking into account everything, I think we should see a net increase of at least 400 crores in top line.
Chetan Kirti Vohra
Okay. Okay, got it.
Navneet Kumar Saraf
Which would be partly growth from Murbad, partly growth from Aurangabad and we should see corresponding growth in the bottom line. Where at least about 70 crores or so. We should see increase in the bottom line engineering business. We should see getting close to that 270 crore revenue based on the new capacities that we have created. So that’s, you know, we should see ramp ups of new accounts and we should see that happening as well. And so I think, and then on the textile front while Ashish can tell you more but I mean overall, you know we are seeing CA profits now. The reason why it’s negative is because of depreciation. So you know, while challenges are there but we are still, you know, we are actually, we are actually seeing some improvements in our spinning as well as in our utilizations in garments etc. So I think next year should be better than this year. So that’s where, that’s how we see the next year.
Chetan Kirti Vohra
And lastly if you can guide us on the margins front on the annual basis, the drum closure, scaffolding and engineering sir, for the year as a whole.
Navneet Kumar Saraf
So drum closure will be similar to this year and scaffolding will obviously be better than this year because of, you know, better utilization of assets and same would apply for engineering.
Chetan Kirti Vohra
Got it. And lastly if you can explain, you know, what’s the outlook on the textile side, that will be great. Thank you.
Ashish Kumar Saraf
Now good morning. I think textile side we now this year we have started a new spinning unit which took some time to stabilize. So we haven’t seen the full benefit in the top line of that this year but we will see it in the next financial year. So that unit will add about 200 crores to the top line of the textile division and fixed cost will kind of remain the same, you know, so we’ll be taking advantage of economies of scale and hopefully the EBITDA of the spinning will improve further to what it is now. Market outlook for India seems to be positive especially in the ready made segment because of, you know, what we can see happening between us and China. And I think it’s just going to get worse. I think there’s a lot of opportunity which will come to India’s way in the ready made segment. So that’s where we are also focusing on and we’re trying to ramp up that and strengthen operations in the garmenting side so we can convert all our raw material and sell it as a finished product rather than selling the raw material as it is. So that’s the plan for next year and we hopefully that will pan out in better bottom lines.
Chetan Kirti Vohra
Okay. Okay. Thank you. That’s it for my side. Thank you.
Navneet Kumar Saraf
Thank you.
Operator
Thank you. Next question is from the line of Uttam Reddy from Reddy Enterprises. Please go ahead
Uttam Reddy
Sir. Good morning. Now that the Aurangabad plant Capex is completed can you guide if you have any major capexes planned for the next two, three years? Any big projects coming up?
Navneet Kumar Saraf
No, nothing significant in the next two, three years. We don’t have any significant capex planned in any of our divisions. Orangabad is going to. You know we are going to basically be. It’s going to be maintaining Capex.
Uttam Reddy
Okay. Secondly sir, the taxation on buybacks has changed starting from the 1st of October 2024. So is that something the management will continue to pursue in terms of buyback or if not how will the shareholders be rewarded?
Navneet Kumar Saraf
Yeah, we will discuss this in the board meeting. You are right that the buyback is no longer tax effective as compared to dividend. The board will take appropriate decision for rewarding the shareholder maybe in the form of dividend. But it’s too early to say anything as of now.
Uttam Reddy
Okay sir. And thirdly lastly actually I see that we are doing a lot in the defense space. Last time we spoke about JT coolers. This time I saw some pictures of some missiles and all that collaboration with Israel. Can you give some guidance on how large of an opportunity this might be speaking for the defense sector as a whole that we are pursuing?
Navneet Kumar Saraf
Yeah, as of now the defense sector is quite small. Basically defense assets takes a lot of time. What happens is you know you make a product and go to DRDO or to the defense division government of India and present them. These are the products we develop and to convert that samples or the product that has been developed into a commercial order. It takes lot of time. And we are discussing with the France company and another company from let’s say which one was that?
Ashish Kumar Saraf
Israel.
Navneet Kumar Saraf
Israel. Yeah. So there are two countries we are talking to but you know it always takes time. So very difficult to predict what will happen for the defense. But we are putting you know all efforts for success of those products.
Uttam Reddy
Okay. Okay sir, for FY26 in previous con calls we have given a rough guidance of an increase in top line by 450 crore and a bottom line by 80 crore or so. So we are sticking to this guidance. Correct sir?
Navneet Kumar Saraf
Yeah. So like I said, yes. For scaffolding segment we are expecting somewhere between 400 and 450 crore increase in top line and 80 crore increase in bottom line coming due to full. Capacity utilization in Aurangabad. Yes.
Uttam Reddy
Okay sir, thank you so much. That’s it for my end.
Operator
Thank you. Thank you. Next question is from the line of Viraj Parikh from Carnelian Asset Management. Please go ahead.
Viraj Parekh
Good morning, sir. Thank you for the opportunity. I just want to follow up on our first participants question. The scaffolding business, currently I understand we have, you know, have a new capacity come on stream and we have certain overhead expenses which are of our margins. But when you say that if you normalize those, we would be inching more towards the high teens margins. But as we ramp up the capacity going ahead and as I see our volume data for scaffolding, it’s at 8,100 or 8,000 MT, which is similar as H1 last year or if not more so. Do you think that there’s scope for margin improvement and scaffolding beyond the high teens as we optimally utilize the capacity and even improve the product mix?
Navneet Kumar Saraf
Yes. So you know, scaffolding. One major contributor which is going to come is the European market. We have recently obtained the B certification last month and we’ve become the first non European company to get that. As a result of that, we are now certified to do our own distribution to end customers in certain key countries in Europe like Poland, Czech Republic, Norway, Sweden, etc. Already we are ramping up our sales presence there and we are already seeing good traction on the ground. So this has largely been an untapped market for us. You know, scaffolding, just the scaffolding segment, I’m not talking about the formwork segment here, that’s a different ball game. But just the scaffolding segment has largely been relying on our US market which is a good 95% of the total scaffolding revenue.
So there we are continuing to grow, but obviously there the growth percentage will become smaller because we are becoming a dominant player. So this is going to be one major increase and it’s going to give us additional margin because we are selling direct to the end user. Similarly, on the aluminium formwork side, it has largely been a domestic business for us right now that continues to grow, but we are also starting Saudi Arabia and there again it’s a virgin market and we are seeing strong growth potential there. We’ve employed our own salesperson there. We’ve also set up a distributor there. So I think these two geographies, Saudi Arabia and Europe, have the potential to give a big jump in revenue and margins for the scaffolding as well as the formwork segment.
Viraj Parekh
Thank you, sir. Just one thing which I maybe I didn’t understand. We’ve been seeing that the demand has been good and that of a scaffolding segment and that is reflected in our volume numbers. But when I look at our ppt, it’s written that in the segment outlook that, you know, the demand is still pressure on margins due geopolitical disturbances slow down in US and Europe and you’re optimistic on this. So if we are at current levels of volume, if we are still seeing that demand can improve further, is it that the product mix currently is a little bit on the weaker side, which is also an impact on our margins apart from the overheads of the new capacity.
Navneet Kumar Saraf
So the product mix is actually very optimal. Our product mix, we have, you know, designed the product mix to have the best impact in all our markets. Look, as far as geopolitical conditions are concerned, obviously you know, there are geopolitical disturbances. You have heard about the tariffs that Trump has introduced. Luckily it’s not come on steel or aluminum products of ours. It’s only on raw material. And you know, so we are, you know, the Russia, Ukraine war continues. So you know, globally there are a lot of disturbances and there is a lot of uncertainty. And by no means are we living in a very booming economic market worldwide. It’s challenging. But in spite of these challenges, I think due to our product mix, due to our, you know, our business presence and the way in which we sell with our own distribution presence, we are able to navigate and we are able to continue to grow. That’s what we are saying when we say about the geopolitical disturbances. I hope that answers your question, if I have understood your question correctly.
Viraj Parekh
Right, sir. The second is on the Trump closures piece of our business there. Sir, I think our outlook has been good this year in terms of mid teens kind of growth. How do you see next time? You already answered the question that you do see that business going well. But I want to be a bit more specific in terms of we are already a global leader with good market share. So if you can elaborate a bit on our plans to grow in terms of volume, maybe, maybe it’s gaining more market share or is it entering new geographies? Because when I look at our volume, it’s kind of at 186 lakh sets or 170 lakh sets. So is it gonna, what are we seeing on that front in terms of the volume growth?
Navneet Kumar Saraf
So one major growth segment is China. China is, you know, we are now the largest drum closure supplier there. But our market share is still only 12%. So. And the market in China is growing, so we are adding capacity there and there we will see volume growth. So that’s, you know, we are in a strong position there with our own manufacturing plant outside of China. We will, the volume growth depends on growth in drum production which is not substantial. So there we will continue to see whatever, you know, organic growth happens with our drum producer customers in most of the markets. And the good thing is that we are very well diversified so we are not exposed to any one particular geography. Even though there has been very much slowdown in Europe, we’ve been able to continue to grow because you know, we’ve been able to grow in other countries. So I think China is where the volume growth will come from. Barring that, we’ll see similar single digit growth in volumes.
Viraj Parekh
So in terms of China as a market, are we able to, will we be able to perform at those 30, 35, 36% kind of EBIT margins which we operate at a console level or as we see China piece growing, like how is the market, if you can explain me in terms of competitiveness, in terms of pricing.
Navneet Kumar Saraf
So first of all, we have never operated at 35, 36% EBIT level in China. China, the EBIT margins have always been lower. It’s been about 20% and you know, the market is definitely more competitive than other countries continue to be that, you know, we are able to command a better price in China compared to local Chinese producers because of our brand. We’ll continue to command that and the, and we’ll continue to maintain the 20% EBIT margins.
Viraj Parekh
Right. Lastly sir, just a bookkeeping question. I see our tax rate for this quarter has inched slightly upwards. If you could help me understand that. Hello.
Ashish Kumar Saraf
Yeah, what you say is correct. It’s around 28% as against 25% because of, you know, consolidation effect of all the countries taken together. So there is a minor adjustment that needs to be done for the other country. But otherwise overall our tax rate in India is 25%.
Viraj Parekh
So going forward this should normalize at 25%. Am I right?
Ashish Kumar Saraf
Correct. Correct. On, on an annualized basis it’s always been around 24 or 25% at the most.
Viraj Parekh
Thank you so much for all the very best.
Ashish Kumar Saraf
Thank you.
Operator
Thank you. Next question is from the line of Rhea Mehta from Equitas Investments. Please go ahead.
Riya Mehta
Thank you for giving me the opportunity. My first question is in terms of our volumes and scaffolding has increased by around 50% if we let go of the homework. However, on a total basis we have up by 28%. So have we seen pricing gone down by around 20, 25%?
Navneet Kumar Saraf
Can you repeat the question?
Riya Mehta
So our volumes in the scaffolding division, so basically that is basically a Mac one and scaffolding division has almost grown by 50 odd percent in terms of metric test. However, overall has grown by 28% on a yoy basis. So is it fair to say on a YOY basis our pricing has reduced by around 15 to 20%.
Navneet Kumar Saraf
So yes, the increase in volume has largely been due to Mac1 because Mac1 the sales this year is substantially higher. I’m not sure how much higher is the scaffold sales volume in metric times compared to last year. It may be similar actually I don’t think there, there is a very substantial jump in quantity and as far as the revenue growth is concerned, you know, I really don’t have data to tell you whether there has been some decline in pricing compared to last because you know in aluminium the price fluctuates with LME and you know, so it’s. So it really depends on, you know, what was LME last year for the same period and this year for the same period because raw material constitutes almost 70% of the selling price. So there is a lot of fluctuation.
Riya Mehta
Got it. So actually a scaffolding has gone up from 5,300 metric tons to 8,000 metric tons.
Navneet Kumar Saraf
So. Yeah, and so has, and so has the aluminium form work, you know, so that.
Riya Mehta
Yes. So our pricing of aluminum has gone down by 15, 20%.
Navneet Kumar Saraf
It is quite possible because you know, like I said, the pricing of aluminium formwork varies with the lme. In fact the price is never fixed. So it is quite possible.
Riya Mehta
Got it. And formwork we’ve seen a little decline in volume by around 7%. So what is happening there? This is because of domestic India slowdown,
Navneet Kumar Saraf
Not slow down. I mean this is a smaller piece. This formwork is only for infrastructure and it’s a smaller part of the business. It’s very restricted to a few customers. So there can always be some reduction in offtake or some slowdown or delay in the project, ramp up cycle kind of a thing.
Riya Mehta
Got it. And in terms of you just mentioned we are adding capacity in drum closure in China. So what would be the capacity addition.
Navneet Kumar Saraf
Currently we are already doing about 2 million sets a month in China and we are expecting to increase this to 3 million sets, which will happen gradually over the course of next 3, 4 quarters.
Riya Mehta
34 quarters. And how much percentage of revenue is China currently?
Navneet Kumar Saraf
China would be roughly about 15%.
Riya Mehta
15%. So going forward on a whole, on a drum closure basis we would see a certain decline in margins because China is, as you mentioned, is 20% EBIT margin business. Is that a fair understanding?
Navneet Kumar Saraf
Yes, possibly. It all depends on how much growth we have in the other segments. We have always said that the EBIT margin in drum closure is about 30%. We see fluctuations. Sometimes it’s higher. Normally we always see higher than what we predict. So when we say 30%, it’s always a mix. You know, what we get from other countries and what we get in China. Europe last couple of years has been slow. You know, we are seeing some recovery happening there. So you never know. We may see more increase in Europe business at higher margin and that may also compensate for the lower margin from China.
Riya Mehta
Okay. Europe would be how much for our drum closure?
Navneet Kumar Saraf
I don’t have exact percentage.
Ashish Kumar Saraf
30. 30. 30%.
Riya Mehta
Okay, that’s. That’s good to know. Now second question. In terms of engineering division, we had mentioned that our cost have been front loaded because of the expansion. So how is it going and what kind of inquiries are you finding? How is the progress on that end?
Navneet Kumar Saraf
Like I said, we have actually signed up a few large accounts already opened this year. We have also opened new accounts in plant engineering which is a new vertical that we have created and there is business going on but the business is currently in small revenues. So we will see ramp up of that as we are building our credibility and all that we are seeing ramp up happening.
Riya Mehta
So is it fair to say that our costs would be now not increasing at the similar pace as revenue?
Navneet Kumar Saraf
Yes. Not on the sales front because that we have front loaded this year, but there will be increase in our delivery capacity as revenue picks up.
Riya Mehta
Got it. So we expect FY26 to have similar 15 to 20% growth in revenue for the segment.
Navneet Kumar Saraf
Yes,
Riya Mehta
Got it. And margins to be on a upward trajectory right from now.
Navneet Kumar Saraf
Yes, yes,
Riya Mehta
Got it. That’s it for myself. I’ll join the queue for further questions.
Operator
Thank you. Next question is from the line of Kaushik Mohan from Ashika Group. Please go ahead.
Koushik Mohan
Hi sir. I hope I’m audible now. One of my question got really answered and I just wanted to understand that you also told it you will be discussing with the board and then coming up with the dividend. If it is what kind of benefit that we can see if it is not happening through and buyback. Because the taxation benefit is not there? No, that. Not at all there.
Anil Gadodia
So the board will definitely consider rewarding the shareholder in whatever form possible. Various, you know, forms in which the reward can be passed on. So let’s wait for some time let board decide about the dividend its policy. We used to declare dividend prior to 201615 but after that we shifted to buyback because that was more tax effective for everyone. So wait for some months and the board will come with whatever best proposal one can, you know, think of.
Koushik Mohan
I have a longer term one more question. I just wanted to understand do we have any. My like plans or anything sort of this, that we will image our divisions and then separately list them or like something like textile getting into something. Something like that. Do we have any ideas like that?
Anil Gadodia
No, we don’t have any
Koushik Mohan
Long run or anything.
Anil Gadodia
Yeah, you know, look, we don’t have any plans as such today of demerging any division in the long run. But you never know. We’ll see depending on the, you know, as things go forward and you know if, depending on we have to keep weighing pros and cons if there is any. If something changes in taxation or something changes in regulatory environment which makes us feel that that is possible, we look at it. But as of now we don’t have any plans to demerge any division into a separate company.
Koushik Mohan
Got it. And the last question from my end, I just wanted to understand what is our strategy towards European markets for the shaffolding as I had. I think on this we have just got that certification, the B certification and that now qualifies us to sell scaffolding in European market to end users. Okay. It’s a very, very tightly regulated market. So with that now what we are doing is we are creating our distribution presence which means we are going to open yards and create optimum amount of inventory and have you know, the sales people there. So already those efforts are on and we are already seeing results happening on that. So do we have our own warehouses there or like are we planning to put out some.
Anil Gadodia
As I had. I think on this we have just got that certification, the B certification and that now qualifies us to sell scaffolding in European market to end users. Okay. It’s a very, very tightly regulated market. So with that now what we are doing is we are creating our distribution presence which means we are going to open yards and create optimum amount of inventory and have you know, the sales people there. So already those efforts are on and we are already seeing results happening on that.
Koushik Mohan
So do we have our own warehouses there or like are we planning to put out some. Yes. So we already have a sales company there for some time.
Navneet Kumar Saraf
We are already selling some ancillaries of scaffolding there for last several years which did not require certification. Now we are able to sell the core products. So we have a warehouse. But we maintained very minimal amount of inventory there because our sales was quite minimal. Now with the certification we will be ramping up that warehouse and keeping inventory of our core products.
Koushik Mohan
Okay, so what will be the price difference between European market, Indian market as well as US market and Australian market?
Navneet Kumar Saraf
European market is actually the highest price. So I think for the similar you cannot compare with Indian and Australian because the products are different. But the European you can compare with us. So the European market price should be about 10% higher than what we get in the US
Koushik Mohan
1% higher than what we get. So that will be a revenue contributor. So if I assume the revenue contribution from US market as well as European market becomes in the Same similar like 50, 50 in the going forward. So that means that our revenue numbers will look on a greater side. Because I think European markets are having most engine rules is what my understanding is. My assumptions are right. Something like that.
Navneet Kumar Saraf
Not. Not quite. Because firstly the European market will not be 5050 with us because us is a bigger market. Also the current certification that we have doesn’t include all the countries in the European Union. For example, Germany is excluded. So we cannot be. That’s much. That’s a different certification. So this, this certificate is actually for Poland, Czech Republic and certain Scandinavian countries. So combined effect of those will be about, you know, 10 to 15 million dollars a year U.S. we do about 55, 60 million dollars a year.
Koushik Mohan
Thanks. I’ll come back in the day.
Operator
Thank you. Next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Sarvesh Gupta
Good afternoon, sir. On the tariff part, so because of this recent tariffs which have been put on China by us. So how does that impact our business? Especially because we have a presence in the drum closure division in China as well.
Navneet Kumar Saraf
The China plant only sells in China. We don’t export to the US From China. So there is no impact of that. And outside of China the impact is positive. Because right now there is no tariff on exports from India to the US So. The tariffs on China is helping our plants in India.
Sarvesh Gupta
Okay. And secondly, sir, you mentioned, I think you know about a new product that you guys have developed related to AI. So what is that? And if you can dwell a little bit on that.
Navneet Kumar Saraf
Sorry, I don’t recall saying anything about AI. So which product are you talking about?
Sarvesh Gupta
Sir, in the presentation I think you had said about a new product development which has come.
Navneet Kumar Saraf
Okay, you are talking about. Yeah, yeah, okay, I got it. I got the clarification. So this is pertaining to our engineering design division. So we have, we have developed a new platform for visual detection. And that is a. That is something that we have developed in technosoft in our IoT division. And yes, we are, you know, that is just. That is currently in testing stage and we expect to, you know, get good traction of that amongst. In our existing markets.
Sarvesh Gupta
Understood. And sir, if I understood it correctly, so you were saying that on the scaffolding division, if we exclude these facilities overhead and the depreciation which has come because of that, then net. Net, we should be like on similar sort of an operating profit margin compared to previous years, same quarter.
Navneet Kumar Saraf
Yes, yes.
Sarvesh Gupta
So the only impact which we have seen in the margins is because of the new facilities overhead as well as the depreciation which has come into it.
Navneet Kumar Saraf
For the most part, yes, predominantly.
Sarvesh Gupta
Okay. And on the engineering design services, you know, like again, you said that we have increased probably the sales and marketing cost by 18 to 24 crores on a yearly basis. So that has had some impact. So that I understand. But on the revenues itself, I think we have seen only a 10% sort of growth in the last 12 months. So that has been relatively tepid given the smaller scale of this division. So how do we look at these revenue growth parts? I mean we could have probably done.
Navneet Kumar Saraf
You cannot get every year. You see, you have to understand that we are. We had 38% revenue growth last year over the previous year. So it is not possible for this division to have 35, 38% revenue growth because of the sales cycle every year. So we have started this year from a higher base because last year the revenue was 198 crores and the year before it was 138 crores. So now this year naturally the revenue growth is only 10%. But like I said, the capacity that has been created now is for 270 crore revenue. But it will take another year for that to be recognized to materialize.
Sarvesh Gupta
Okay. So it is mostly a base effect which has sort of played this year and maybe in next year we should have a higher sort of a growth trajectory.
Navneet Kumar Saraf
Yes, correct.
Sarvesh Gupta
Okay. And finally on your textile division, so we are seeing sort of similar sort of environment or are we seeing any improvements going forward? Because I think because of the cotton prices, etc. There were some hopes of sort of better performance across the board in the textile industry. But even in other yarn players we haven’t seen, you know, this quarter to be good. So how is the environment shaping up?
Navneet Kumar Saraf
It’s very, it’s very difficult to say because there is so much of shifts happening in the world. You know, with this Bangladesh situation happening, then Trump coming in, we don’t know what he’s going to do but we are overall the industry is little optimistic as far as India is concerned. In the ready made sector, spinning, I don’t think there is going to be much change in the market. Corporate cotton prices also have kind of remained pretty much range bound last three, four months. Spinning side I think will be status quo. We will just be taking advantage of the economies of scale in our division by doubling the capacity and keeping the fixed cost same. Our focus is going to be more towards the ready made segment where we as an industry, we feel that there India has a good chance to, to outperform.
Sarvesh Gupta
Okay. And we had made some shifting also I think of our production facilities.
Navneet Kumar Saraf
Yes, yes. We shut down our Murbad operations of spinning and we set up a new manufacturing unit in Amravati near Nagpur. So there we are, you know, getting a lot of benefits of subsidies and power subsidy and the cheapest power cost in Maharashtra. And also we are having the advantage of capital subsidies there.
Sarvesh Gupta
Okay. And finally, this one bookkeeping question. What is the net net debt or net cash as of now as on December, net cash or net debt?
Navneet Kumar Saraf
So cash equivalent is around 440 crores. And the working capital loan is around 490 crores.
Sarvesh Gupta
Okay. Thank you, sir. And all the best.
Navneet Kumar Saraf
Thank you.
Operator
Thank you. Next question is from the line of Akhil Parekh from BNK Securities. Please go ahead.
Akhil Parekh
Thanks for the opportunity. Most of my questions have been answered. Just two small quick questions. One is what kind of impact we can see because of the depreciation on our overall business. That is one. And second is what is our overall exposure to the US markets And do we see tariff risk to our business? Those are the good questions.
Navneet Kumar Saraf
There is no material impact right now on our business due to the disturbed geopolitical conditions globally. As I had said earlier, yes, there is a lot of turbulence in various countries with all these tariffs and Russia, Ukraine and other disturbances happening. But we have been able to navigate. And we are not seeing any kind of a big drastic reduction in demand. Certainly there has been some slowdown in demand growth. US Is a major contributor, like for example, in our scaffolding business. About 90% of our scaffolding sales alone is in the US. So obviously we are affected by any kind of a major disturbance there. But we have not seen such a disturbance. And as far as tariffs are concerned right now there is no tariff on our products to the US From India. You know, Trump has only increased the tariff on aluminium from 10 to 25. But that’s on raw material. So our products currently continue to be, you know, unchanged.
Akhil Parekh
Sure, sure. But if the aluminum prices decline or steel prices decline, obviously we’ll see that impact of our realization of our end product. That understanding is correct.
Navneet Kumar Saraf
Sorry, you are not very clear. What did you say?
Akhil Parekh
I’m saying if the. If the aluminum prices decline our realizations will decline accordingly. Is that a fair understanding?
Navneet Kumar Saraf
Of course. Yes. For our aluminium formwork products. Yes, of course.
Akhil Parekh
Sure. Sure. Okay. That’s all for me, thanks.
Operator
Thank you. Next question is from the line of Vikas Gupta from Wealth Guardian. Please go ahead.
Vikas Gupta
Hello, I’m audible, sir.
Navneet Kumar Saraf
Yes, please.
Vikas Gupta
Yeah. Thank you for the opportunity. My few questions are regarding the some numbers. So you said the cash is around 440 crore and debt is around 490 crore, is it right?
Navneet Kumar Saraf
That’s correct.
Vikas Gupta
Okay. And there was a reduction in other income. Can you just quantify the amount and the reason for that?
Navneet Kumar Saraf
So the reduction in other income from 19 crores to 6 crores. No, sorry, 25 crore to 6 crores. There are two. There’s major one impact. That is the fair value of the investment which is done mark to market. It’s around 22 point something. Let’s say 23 crores.
Vikas Gupta
Okay. And so generally how many skews do we have in scaffolding division?
Navneet Kumar Saraf
Skus
Vikas Gupta
Or maybe the part.
Navneet Kumar Saraf
Okay, yeah, we have more than 500.
Vikas Gupta
Okay. And generally how many new skus or parts do you develop in a year?
Navneet Kumar Saraf
There is no such fixed number. I mean we are, we are currently developing one new system which will have about 10 to 12 SKUs.
Vikas Gupta
Okay. So annually we are developing new product
Navneet Kumar Saraf
Which is like we will be developing so much every year. It depends on, it depends on our markets and our product development strategy.
Vikas Gupta
Okay, thank you. And so last question is on the market size opportunity. So can you just give us a brief idea about the size of individual segments, the market opportunity that we have?
Ashish Kumar Saraf
You want to know the size of the market, right?
Vikas Gupta
Yes, yes, yes.
Navneet Kumar Saraf
Yeah. So you know, we are in four different verticals. So there is not like one size in each segment. Drum closure. We are the second largest. Drum closure. Roughly there are about 200 million drums made worldwide excluding China. Another 100 million made in China. So about 300 million drums. We are already catering to about 80 million. So we are about 40% market share. Scaffolding, it is very difficult to give an estimate of the total size because there are various ways in which the market totally globally, if I were to say the scaffolding market would be worth about $50 billion. But that includes material and labor which also is a big chunk. We don’t play in the labor segment. We only play in the material supply segment. So if I were to consider just the material supply segment also it may be about $10 billion as the total market worldwide. And that’s just scaffolding. Formwork is a different ballgame. Engineering services is again a multibillion dollar industry. Tech Ernd Services, textiles is again a big market vry difficult to give a size, give an estimate. We know what the total exports of textiles is from India. Again it’s more than $500 billion. So yeah, I think that’s the best way I can answer.
Vikas Gupta
Thank you for that someone. Last query is on the rental side. We used to do some rental of scaffolding in US has there been any pickup of that or anything?
Navneet Kumar Saraf
Clarification. We never used to do any rentals of scaffolding in the U.S. we, we only do some very small amount of rentals of certain formwork products and only in the Indian market. And we continue to do that.
Vikas Gupta
Any plan to start the rental in US?
Navneet Kumar Saraf
No, we don’t. We don’t. We don’t have any plans to do that.
Vikas Gupta
Okay, thank you so much sir.
Operator
Thank you. Next question is from the line of Chirag. An individual investor. Please go ahead.
Chirag
Thank you for taking my question. So wanted to understand a little more about the outlook for the formwork business. More from a medium to long term. We understand that now the business will give us 400 crores more of revenue in the coming year. But how do you see that growing say in three to five years?
Navneet Kumar Saraf
Right. So you know one of the major products in our formwork segment is aluminum formwork. Through our Mac 1 product line this year FY25 we will be doing about 520 odd crores in revenue. Almost close to double of what we did last year. Now this is purely from the Indian market, I mean 100% domestic. We clearly see an opportunity to double this in India itself. From the growth traction etc. That we are receiving currently. We are already based on our order booking and based on production that has already started in the new facility in Aurangabad, we are already averaging right now about 60 crores a month in revenue currently from January onwards.
So we easily see that 450 crores of additional capacity that we will get for the full year next year actually can get easily absorbed in the Indian market itself. Having said that, we are also starting Saudi Arabia now. Saudi Arabia. We recently had a team from our company visit. We’ve employed a salesperson there, we have a distributor there and we are seeing some very strong growth numbers coming from there. We are receiving inquiries, et cetera. So we are seeing that that could actually be even bigger than the India market which would require us to further add capacity in Aurangabad. Which is not a problem because we already have set up the large aluminium extrusion backward facility and we have enough land available there.
So we will be continuously adding on the forward side in our Mac 1 front there. So over next, if I were to take a three to four year outlook, you know, not just the next year, next year outlook we’ve already shared, but if I were to look at a three to four year outlook, I see the formwork segment being two and a half thousand crores, about five times what it is right now. Based on India, Saudi Arabia and South America is another market that we have started. You know, there again there is strong demand for these products. So that’s how we see it.
Chirag
Understand? Thank you. Thank you for that. Sir. Is there any pricing difference that we see in the Indian and Saudi Arabia markets?
Navneet Kumar Saraf
No, very similar,
Chirag
Very similar. And generally in the past you have said that this margins are generally around 15 to 20% for this business. Is there any outlook for that as well? That how do you see this evolve or stick at the same levels?
Navneet Kumar Saraf
Yes, it is at 15 to 20%. It is competitive because there are new players coming in. So we do expect to see competitive pressure in margins but we are addressing that because of our backward integration. So the aluminum extrusion plant, we are the first company in India to set up an aluminium extrusion plant. Backward integration that will add 2, 3% to our margin. So given that given our scale, given our quality, we should be comfortable in maintaining 15 to 20%.
Chirag
Okay, very helpful sir. Thank you.
Operator
Thank you ladies and gentlemen. That was the last question for the day. I would now like to hand the conference over to the management for the closing comments.
Navneet Kumar Saraf
Thank you very much everybody and it was a very nice interactive session. Your questions please do feel free to reach out or to us in case you have any further questions. Thank you and have a good day.
Operator
Thank you. On behalf of systematic Institutional equities. That concludes this conference. Thank you all for joining us and you may now disconnect your lines.