Technocraft Industries (India) Ltd (NSE: TIIL) Q4 2025 Earnings Call dated May. 30, 2025
Corporate Participants:
Unidentified Speaker
Ashish Kumar Saraf — Whole-time Director and Chief Financial Officer
Navneet Kumar Saraf — Chief Executive Officer and Whole Time Director
Analysts:
Unidentified Participant
Anshika Patnaik — Analyst
Riya Mehta — Analyst
Rahul Kumar — Analyst
Shri Ram — Analyst
Lakshmi Narayan — Analyst
Presentation:
Unidentified Speaker
It. SA ra.
operator
Ladies and gentlemen, good day and welcome to The Technocraft Industries Limited Q4FFY25 earnings conference call hosted by Systematic Shares and Stocks. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star 100 on attached on phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Anshika Patnai from Systematic Shares and Stocks Limited. Thank you. And over to you, ma’ am.
Anshika Patnaik — Analyst
Thank you. On behalf of Systematics Institution equities we welcome you all to the Q4FY25 conference call of Technotrap Industries India Limited. From the management side we have Mr. Ashish Kumar Siraf Director and CFO. Mr. Navneet Kumar Siraf Director and CEO and Mr. Anand Garodia Group CFO. I’ll now hand over the call to the management for their opening remarks followed by the Q and A session. Over to you sir.
Ashish Kumar Saraf — Whole-time Director and Chief Financial Officer
Thank you. Good morning everybody. And I would like to extend a warm welcome to everybody on this quarterly earnings call of Technocraft Industries. This call is to discuss our March 2025 results which we just declared yesterday. Overall, it’s been a fairly decent quarter for the company with most of our divisions performing quite well. I now look forward to more detailed discussions and Q and A with everybody on the call. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star N1 on the touchdown telephone. If you wish to remove yourself from question Q queue may press star in two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. Participants Type A star N1 on the Touchstone telephone to ask the question. The first question is on the line of Rhea Mehta from Equitas Investments. Please go ahead.
Riya Mehta
Thank you so much for giving me the opportunity and congratulation for good set of results. My first question is in the lines of Drum closure division. Hello.
operator
Yes.
Unidentified Speaker
Yeah.
Riya Mehta
So we’ve made exceptional margins this time around. And what segment? Or was it China or was it India where this growth has come from?
Ashish Kumar Saraf
Yes, the growth has come mainly on account of very good delivery to all our geographies. It’s not just China. There’s been a good offtake and good quantity sales in this quarter and that’s reflected in the revenue. And because of that our net profitability has also been record in this quarter. So it’s actually been overall across all the geographies like the us, Europe, rest of the world and of course China, not just one particular geography.
Riya Mehta
Got it. And do we expect this momentum to continue?
Ashish Kumar Saraf
You know, that’s very difficult to say. It’s, you know, like I have said earlier, DRUM closures, you know, 30% is our baseline EBITDA margin, which always continues. But we do have exceptional quarters like this where we did 39% and you know, so unlikely that this will be the case in every quarter. Certainly not this kind of result every quarter.
Riya Mehta
Is there some amount of it preponed because of the tariff and hence the incremental exports or something on those?
Ashish Kumar Saraf
No, no, no, no, no. The tariff has not yet actually become applicable also in case of drum closure, because drum closure is subject to reciprocal tariffs which are, as you know, paused for 90 days. So there is, I don’t think this has got anything to do with additional purchases in anticipation of tariffs.
Riya Mehta
Okay, got it. So maybe just because of raw material.
Ashish Kumar Saraf
Seasonality and you know, it’s quarter on quarter, there can be increases in demand by Drum customers for various reasons.
Riya Mehta
Got it, got it. And in terms of scaffolding, so basically I have to understand the scaffolding, almost 50% goes to us. So how is the tariff scenario there impacting us?
Ashish Kumar Saraf
We are, you know, the tariffs became applicable on scaffolding in the US since March, 25%. And it’s, it’s actually not impacting us at all. We are able to pass it on freely to the end customers. And our main competition, as I had said earlier, is China. The tariffs on Chinese scaffolding is much higher. That’s about 70%. So we have that advantage. So so long as we have that advantage, we are quite comfortable even with the 25% tariff.
Riya Mehta
Got it. So China would be 25% which is across for steel and aluminum, plus the 30% which is there, right?
Ashish Kumar Saraf
No, no, no, no, no, no. You see, China had a 25% tariff on steel. And al, that didn’t go away on that. There was an additional 25% that was imposed which was added in February this year for all countries. So China as a result became 50% plus there was additional 20% ad hoc tariff added on China. So that’s how specifically for steel and aluminium, the tariff on China has become 70%.
Riya Mehta
Got it. And whatever tariff, 25% which we have, we have been able to pass it on entirely to the customers end, right?
Ashish Kumar Saraf
Yes.
Riya Mehta
And how is the freight impact we are seeing? What is the Scenario in terms of freight, are we seeing any uptake in freight?
Ashish Kumar Saraf
We have seen a slight uptake in freight at the moment, but nothing significant.
Riya Mehta
Okay, got it. And then I think form work we’ve done amazingly well in macro and this quarter also. So how are things over there? Like, are we seeing any real estate slowdown? Because I think we’ve been hearing that inventories have been piling around for some time in India specifically. So are we seeing any lesser inquiry or something or any directionally anything? If you can tell us.
Ashish Kumar Saraf
Mac1 is largely been a domestic India business as you know. And no, we are actually not seeing any slowdown in inquiries. We are sitting on a fairly healthy order book and order pipeline also. The pipeline is quite strong. We are. The slowdown in real estate that we are hearing is mainly in the very, very high end luxurious real estate segment which is actually not a target market for Mac1. Mac1 is more aimed at affordable housing and mid income housing and there continues to be acute shortage in the country and the prospects are that there is going to be continuous increase in supply happening in that segment also now we are looking at the export market for Mac1.
We’ve already started Saudi Arabia, we’ve started South America, we’ve also started the US and with our new capacity getting commissioned in Aurangabad where we see good supply coming in this year that will also open up. So I think overall we are very comfortable in Mac 1. It’s. It’s an important segment for us.
Riya Mehta
Right. I think that’s reflected in the numbers as well. I think we’re doing amazingly well there. Also exports is how much for us in Mac 1.
Ashish Kumar Saraf
Right now it is very minuscule. It is only 1 or 2% but that will increase. Our target is over the next three years we want to build up at least 40% exports, but right now it’s minuscule.
Riya Mehta
And how much order book are we sitting on for Mac1? How much month of order book we.
Ashish Kumar Saraf
Are currently sitting on about six months.
Riya Mehta
Six months of all the books. Okay.
Ashish Kumar Saraf
Yeah.
Riya Mehta
And now Aurangabad facility is fully operational for this year. So we will be seeing another 400 net environmental revenue.
Ashish Kumar Saraf
Not 100% operational. It is currently operating at about 75%. We expect it to be 100% by September this year.
Riya Mehta
Okay. Currently population is 75%.
Ashish Kumar Saraf
Yeah, yeah.
Riya Mehta
Got it. And in terms of steel formwork, what how are the scenario like, how is the macro environment looking like that business.
Ashish Kumar Saraf
Actually we are not so bullish about. We have maintained that business. We have actually not focused on Ramping up that business. It’s a very. It’s a business that’s sort of not very scalable. And in fact we are going to probably ramp down this business in the next two to three years because we find that, you know, it’s too specialized and it’s not something that fits our overall formwork segment. It’s only about 40 crores overall and so it doesn’t consider. So we are actually going to utilize the space to increase more of scaffolding there.
Riya Mehta
Got it. In a current mix of revenue, how much are we coming from Mac1?
Ashish Kumar Saraf
About 45%.
Riya Mehta
45%?
Ashish Kumar Saraf
Yeah.
Riya Mehta
And in terms of techno four, are we planning to look at something like a demerger? Because I think the size is also growing in the business we have. And with an increased focus on the business and Technosoft, what is our outlook there?
Ashish Kumar Saraf
The outlook is good. The company is growing even though this year the profitability was lower than last year. But that was because of investments we have done for which we will see results next year. But no, we are not looking at demerger right now. We don’t think at the current size there’s any value and it makes sense. We are very much planning to keep it part of Technocraft.
Riya Mehta
Okay, are we seeing any slowdown in US or other clients in terms of it? Because other IT companies will. Listening. I understand we are into designing and all. So are we seeing anything on those lines for that?
Ashish Kumar Saraf
Not, not for Technosoft? Because you know it’s. It’s not. IT focused, it’s engineering focused. And actually engineering there is a strong uptake mainly driven by shortage of engineer. The engineering labor availability in countries like US Europe continues to be very tight and there in fact unemployment is almost zero percent. And so therefore there is a large shift towards outsourcing to countries like India. So we are seeing the demand environment quite robust there.
Riya Mehta
The technical almost 70, 75% would be us.
Ashish Kumar Saraf
75% is us. That’s right.
Riya Mehta
75% would be us. Right, that’s it for my end. I’ll join the queue for further questions. Thank you so much.
operator
Thank you. The next question is from the line of Jason, Kirti Vora from Abiskis Asset Managers. Please go ahead.
Unidentified Participant
Good morning sir. Thanks for the opportunity to ask that. The drum closure is doing quite exceptionally well. So for the full year as you have been guiding out that only the margin should be in the range of 30% and growth should be in 5, 7%. But we have written that quite by lips and bounds. So how do you see the sum closure for the next year, sir, for the full year as a whole.
Ashish Kumar Saraf
We see the drum closures growing at mid single digits like it has grown in the last two to three years. You know, China continues to be quite robust and I think there will grow by about 10 to 12%. Rest of the world will grow by 4,5%. So I think we are looking quite comfortable because of the diversity to grow next year at about 5, 6%. Of course you know there are some disturbances in the US on account of tariffs which keep changing. You know there’s a 90 day window and July 8th we’ll come to know whether reciprocal tariffs kick in or no.
There is talks about the interim trade deal which is likely to be announced between India and the US by end of June. How that may impact the tariffs specific to India. So there are all these unknowns. You know, yesterday you must have heard about a court in the US putting a temporary stay on all tariffs. Whether that gets challenged and gets into effect or no. So those kind of things are there which can sometimes affect demand. But at the moment we are not seeing any such trend. So that’s why I think 5 to 6% is something we should be quite comfortable, right sir.
Unidentified Participant
And what about the scaffolding again both on the growth and the profitability wise? Because now this year we will be seeing the the new facility getting fully utilized and hence the operating leverage benefit should also tickle down, right sir?
Ashish Kumar Saraf
Yes, absolutely. Yes. The scaffolding also, I mean, you know this year we will see close to 90% utilization from the new facility in Ahmedabad. So we should see a good, you know, close to 400 crores incremental revenue coming on account of that. And that will certainly improve the profitability. This year the profitability was a little stretched because of heavy depreciation. We had about 15 crores of additional depreciation cost that’s come in this year without full utilization of the facilities. Actually if we don’t consider that depreciation this year the margins were actually quite good of the scaffolding segment.
Next year we should see getting the margins closer to the 20% level which is what our target is. And we should see a incremental 400.
Unidentified Participant
Crores revenue coming in and the incremental 400 crores revenue from rolling about how much it was this year, sir? FY24, FY25.
Ashish Kumar Saraf
This year it was roughly about 20, 20, 25 crores.
Unidentified Participant
But you told that it’s operational at 75%, right?
Ashish Kumar Saraf
That happened only from February onwards.
Unidentified Participant
Okay, got it okay. So that from the last year it was nothing minuscule. So incremental 400 crores. And the. The X of that will be the steady state whatever growth rate. X of that. What growth it should be expect.
Ashish Kumar Saraf
That we should expect a growth rate of at least 10%. 10 to 15%.
Unidentified Participant
Okay, got it. Similarly on the engineering and techno force front we have been making our investment and we have increased the bank size also. So can you elevate how much how many people we have recruited in last one year? So what’s the bank strength and whether we seek the margins to improve to the previous level of 2021% from current.
Ashish Kumar Saraf
14% this year we have firstly recruited a lot of people in the sales and marketing teams overseas across various verticals. Then we’ve also added some new disciplines like plant engineering. So across those disciplines we’ve recruited about 50 people. Plus we’ve recruited on the sales front. Yeah. So that’s in terms of the number of people.
Unidentified Participant
Okay. And in terms of the profitability whether it will be getting restored to the previous levels of 20% this year.
Ashish Kumar Saraf
Sorry,
Unidentified Participant
the margin, what we used to make 20% in engineering. Yeah.
Ashish Kumar Saraf
So next year we should be. Next year we should. We are targeting next year that we should be close to the 20 margin. Maybe even higher.
Unidentified Participant
Meaning FY26 or 26.
Ashish Kumar Saraf
FY26. FY26.
Unidentified Participant
Okay. Consider lastly on the textiles fund the losses have increased from 17 crore to 39 crores this year. May be yours. Any, any comments on that concept?
Navneet Kumar Saraf
There is a heavy depreciation in this financial year because of the new unit. The depreciation value is about 26 crores. And also you know the second unit was not fully running at full capacity because we faced severe labor shortage throughout the year. And the. I think our sales was not to the extent that we expected. It was only about 60% of what our target sales were.
Unidentified Participant
Okay. So these are the way we should see our reduction on the losses accordingly. Right?
Navneet Kumar Saraf
Yes.
Navneet Kumar Saraf
With the. With the production going up we will see reduction of losses and hopefully we should see some positive. Only cash positive.
Unidentified Participant
Thank you. What is the grosset as of now? Gross debt?
Ashish Kumar Saraf
Gross. Sorry.
Navneet Kumar Saraf
I think about 400 something for the full company. The debt now. Long term debt.
Unidentified Participant
Yeah, yeah. For the full.
Ashish Kumar Saraf
The current 400 something long term debts we don’t have. One second. One second.
Unidentified Participant
Yes, sir.
Ashish Kumar Saraf
Yeah. Chan. The term loan is 193 crores overall.
Unidentified Participant
And working capital sir,
Ashish Kumar Saraf
around 650.
Unidentified Participant
Okay, got it. Thank you. Thank you sir.
operator
Thank you. The next Question is from the line of Rahul Kumar from Wakira Scaptle. Please go ahead.
Rahul Kumar
Yeah, hi. So just on scaffolding, I think you mentioned sometime back that the margins you are expecting for this segment is close to 20%. Was that EBIT margin you are mentioning about?
Ashish Kumar Saraf
Hello. Yeah, it was EBIT margin that was mentioned earlier, correct?
Rahul Kumar
Okay, okay. No, so even for FY25 if I just adjust for the depreciation which you mentioned for that also, I think EBIT margin was close to 15% for the year. So was there any other impact other than the depreciation as well on this in this year?
Ashish Kumar Saraf
Net margin this year was actually when you adjust for depreciation, 15 crores is only the incremental depreciation. Total depreciation is actually much higher.
Rahul Kumar
No, I understand that.
Ashish Kumar Saraf
So what figure are you catching? I’m not sure. What figure are you catching when you say adjusted for the depreciation it’s 15%.
Rahul Kumar
No, I think you mentioned that for the new capacity you incurred 15 crore depreciation which is not adding to any output. Right. So if I just add the bit for the year and add the 15 crores that gives me a figure of 15% EBIT margin for the year. Right?
Ashish Kumar Saraf
Okay. Yeah, yeah, yeah.
Rahul Kumar
So I was saying, I mean was there any other factor other than the depreciation as well on this, this front?
Ashish Kumar Saraf
So, you know, other than depreciation, there couple of things do come in. For example, when we look at our consolidated results, we have consolidated with the US subsidiary. The US subsidiary runs on a different period which is calendar year and this runs on fiscal year. So due to different periods of consolidation. Also the percentage margin and EBIT can vary. There have been previous quarters where the EBIT margin has actually been 26, 27% as well. Our guidance is close to 20%. In addition to that, sometimes there have been a couple of quarters. I think this year only in the second quarter there was a sharp increase in freight cost.
So that reduced the ebit. I think it was September quarter if I’m not mistaken. So there was a sharp increase in freight cost. We had discussed this also in our investor call. So that also has made some impact. So combination of these things would have been there. Depreciation was the most significant part. That’s why I mentioned it. The others have been there.
Rahul Kumar
Okay, okay. And so for the Drum Closer division for the, let’s say month, for the May, is there any impact on your, I mean is there impact on because of the tariffs on your margins for the Drum closer Division, currently there is.
Ashish Kumar Saraf
No impact because like I said, the tariffs have not come into effect yet. So currently there is no impact. We have to see whether going forward there will be. But currently there is nothing.
Rahul Kumar
No, I think there’s a 10% baseline tariff which has been implemented.
Ashish Kumar Saraf
Yeah, but that 10% has not made any impact.
Rahul Kumar
Okay, okay, okay. Thank you.
operator
Thank you. A reminder to all participants, you may press star and one to ask questions. The next question is from the line of Shri Ram, an individual investor. Please go ahead.
Shri Ram
Just one clarification. When you say your margins will be 20% next year, is it for scaffolding business, a whole or only for macro?
Ashish Kumar Saraf
This is the average. Average.
Unidentified Participant
So for the whole segment. Okay, okay. And okay, fine sir, got it. Thank you.
operator
Thank you. A reminder to all pass with CMA in one, two ask question. The next question is from the line of Rahul Kumar from Makirona Capital. Please go ahead.
Rahul Kumar
So for the scaffolding business, I think we got the approval in the Europe as well. What are the developments over there?
Ashish Kumar Saraf
Yes, we got the approval and accordingly now we have started ramping up our distribution facility in Poland where we have started also keeping inventory of system scaffolding for which we got approval to sell. We’ve made some breakthroughs, although I would say substantial progress is yet to be seen. The market in Europe is still quite soft, so the demand there is still quite muted and it’s still reeling from the Russia Ukraine crisis. And so I think once the construction markets improve there, which we are expecting in the latter part of this year, then we’ll see, you know, more momentum.
But at least now we are fully approved to sell. There are no barriers for us, which is good. And we are waiting for the markets to pick up and demand to pick up.
Rahul Kumar
Okay, and is the leadership team finalized over there?
Ashish Kumar Saraf
Yes, absolutely. We have. We’ve already got that in place.
Rahul Kumar
Okay. And sir, do we have a scaffolding business in India as well for the industrial segment and are there any positive developments over there?
Ashish Kumar Saraf
We do have, although it’s quite a small part of our overall portfolio. Unfortunately in India there are no regulations for scaffolding in even on the industrial segment. But that is changing. So what we’ve done is we’ve embarked on a distributor program and we’ve already got two distributors in India now who basically sell, lease as well as erect our scaffolding systems to industries like Reliance and Tata Steel and other petrochemical companies. Except, etc. We are pushing that and I think in the next couple of years we do See some good traction happening in India as well.
Currently it’s a small part of the business.
Rahul Kumar
Okay.
Ashish Kumar Saraf
But there is good potential for that. Okay.
Rahul Kumar
And so just on back one, I think the old capacity at Murbad, right. You also trying to consolidate that business in one. So is that consolidation happen or.
Ashish Kumar Saraf
No, not yet. We actually don’t plan to consolidate it this year as well because right now we are in the ramp up phase in the new facility in Aurangabad until, unless, you know, until we get to where we want to be in Aurangabad and that stabilized, then we look to consolidate and shift it there because so we are not in any hurry right now. The Murbad facility is still running in addition to the Aurangabad facility and it will continue for at least the next 12 months or so.
Rahul Kumar
Okay. And the capacity of the Murbad facility is similar to what we have in.
Ashish Kumar Saraf
Aurangabad, It’s a little lesser. So Murbad, we are doing Murbaad, actually there are two units. The two units combined we are doing 45,000 square meters a month. And Aurangabad, the capacity that we have is 50,000. So it’s a little more than that. Okay.
Rahul Kumar
Okay, thank you.
operator
Thank you. The next question is from the line of Sriram, an individual investor. Please go ahead.
Shri Ram
Thanks again. I mean you mentioned that China startup is at 70% and we are at 20. So that’s a lot of advantage for us. So what is the tariff level at which we become uncompetitive and let’s say tariff becomes equal, what will be our plan B like? Are we open to look at near shoring or things like that?
Ashish Kumar Saraf
So you know, we don’t look at tariff as a competitive advantage. We don’t think that’s a good healthy business model to have. In fact, in 2021, 2022, when the Biden government had come in, there was a period of time when they had actually paused the 25% tariff which Trump had introduced on China in 2018. So there was a 12 month period where we were actually at par and we were able to sell, we were able to compete. Our sales really didn’t drop or drop decline, even though steel prices in India are 15% higher. So, you know, price is not the only determining factor.
What we are focused on doing in the US is build our brand, build our distribution network. Having a good quality product available locally when the customer needs it is actually the most important factor that influences buying decisions and then the confidence in the quality of the brand, in the fact that it is all Manufactured by one company because other distributors that we compete with, they don’t have their own manufacturing facilities. They are buying from multiple vendors all around the world. So over the last seven, eight years we have focused very heavily on making ourselves well positioned and known in the market.
Market which we now are. So you know, while yes, right now we have that tariff advantage and that’s you know, a good great commercial advantage to have. But we are, you know, we have built the business in such a way that tomorrow if the tariffs were to be equalized or something, we don’t want that to affect our business. And I think the last 12 months experience during the Biden administration validates that theory. So we are quite comfortable that way.
Shri Ram
So basically we are prepared, right? Prepared for the worst?
Ashish Kumar Saraf
Yeah, absolutely. We are prepared for the worst.
Shri Ram
Thank you sir. All the best.
operator
Thank you. The next question is from the line of Lakshmi Narayan from Tunga Investments. Please go ahead.
Lakshmi Narayan
Thank you. This is regards to your engineering designing services. Want to understand what kind of clients you have in that particular business? Is it domestic or international? And what percentages of projects are time and material and what is based on fixed price contracts there and what kind of visibility you actually have in this particular business.
Ashish Kumar Saraf
It is a 100% export oriented business. There are no domestic clients. We are servicing four verticals. Verticals are transportation, industrial machinery, plant engineering and high tech. And so within these verticals, companies who are, let’s say making machinery, heavy industrial equipment like cranes, earth moving machinery, consumer product manufacturing companies, pharma companies. Those are typically the kind of companies that we are servicing. Territories are US, UK, Western Europe and all the work is 100% time and material based. We don’t do fixed price projects. So because of that these are you know, long term contracts with good visibility.
Because once we sign a contract we have dedicated teams working for that customer over multi years. That’s all.
Lakshmi Narayan
How many customers you would actually have for this particular business?
Ashish Kumar Saraf
So we would have close to about 80, 85 active customers at any given point in time.
Lakshmi Narayan
Got it. And I assume that these projects are smaller in size because if I have 85 customers and you have total revenues of 210 crores. You know, just want to understand there are like, there are like less than 1 million 5 million projects. What kind of project contours you have?
Ashish Kumar Saraf
So yes we, we are targeting mid sized companies. Our strategy in this business thus far has been to target mid sized companies doing revenues of 250 to $500 million a year for such type of companies. The engineering Budgets tend to be a million dollars to $2 million a year. Our average customer size engagement therefore tends to be under a million dollars a year, let’s say half a million. So therefore, yes, we do have multiple customers, divided business. Now having said that, in the last two years we’ve also changed our strategy wherein while we continue to service this segment, because this was a niche segment that was not touched by some of the big players in India.
So we found that attractive to enter and develop our company from that. But after we developed a good sized team of close to 1,000 people with multidisciplinary capabilities in the last two years, now we started targeting larger multibillion dollar type of customers. That is where we’ve made the investments that I talked about last year in sales and marketing and new verticals. And now this year we’ve actually signed up some good logos of companies like Pepsi and Henkel and Kimberly Clark which are all multi billion dollar logos and their engineering budgets are 10, $15 million a year.
So we expect now, you know, once you sign up with them, what happens is that the first year or two years it tends to be very small because they are testing you and you know, they are working with 1, 2, 3 people kind of thing. And then it gradually ramps up. So we expect that next year and the year after ramp ups will start to happen in these large logos. So that’s how it is.
Lakshmi Narayan
And what kind of growth you actually expect in this vertical? Because last year has been little underwhelming, right?
Ashish Kumar Saraf
Yes. The year before we grew at 38% and you know, and that was because of what I, as I explained to you that it takes two years for new logos to ramp up. This year obviously the growth has been about 10, 15%. But because of the investments we’ve made this year, next year, that is FY26, we should see a much higher growth.
Lakshmi Narayan
Got it. Thank you. I’ll come back in queue.
operator
Thank you. The next question is from the line of Rahul Kumar from VA Karo Capital. Please go ahead. Yes, Mr. Rahul, go with the question please.
Rahul Kumar
Yeah. Hi. This whole tariff uncertainty which has been caused, how has been the demand environment over upfront in May and moving to June? Has there been any uncertainty or deferral of orders during this interim period or it has been largely business as usual.
Ashish Kumar Saraf
It has been business as usual. As I said, the tariffs have not created any kind of uncertainty right now, as of now.
Rahul Kumar
Right. And if you look at the end market for which way your products go, maybe you can go by product by product, how are they placed? Is it more industrial, more construction when you look at us. And I think for drum closure it would be more about oil and gas.
Ashish Kumar Saraf
So for drum closure, the end markets are industrial products, industrial chemicals. Basically drum barrel manufacturers are the ones who use drum closures. Barrels are used to fill oil, chemicals, even pharma products, food products. So wide range of industrial as well as consumer goods. So drum closure, the end segment is actually very diversified. For scaffolding it is industrial services, which includes refineries, power plants, petrochemical plants, steel plants, cement plant, ship, buildings. Then it includes commercial construction, which is buildings, infrastructure projects, then events. So these are some of the NDO segments.
Rahul Kumar
Right. And drum closure, how much of the volumes are going to us? Was it outside us?
Ashish Kumar Saraf
30%. Roughly about 30% goes to the U.S.
Rahul Kumar
Okay, that should be to like the Middle east and rest of the world widely distributed.
Ashish Kumar Saraf
I mean Europe is a big segment, you know, Europe is about 26%, Asia is about 24%, you know, so China is about 10%.
Rahul Kumar
Right. In your engineering business, do you work on an order book basis or PCB basis the way IT companies work or it’s a bit different in terms of business?
Ashish Kumar Saraf
No, it’s time and material based, dedicated resource. Time and material based. And that’s how most IT companies work. So that’s. We don’t work on fixed price projects.
Rahul Kumar
Right. And you mentioned about various kind of engineering work you do under this. Roughly which are the largest segment, like maybe X percentage going to that segment kind of work. Any split you internally monitor?
Ashish Kumar Saraf
Our largest, yeah, out of the four verticals currently, transportation and industrial machinery is our largest segment. This includes companies that are, you know, making heavy equipment, special purpose machines, specialty vehicles like buses, coaches, tractors, luxury vehicles, etc. So yeah, those are. That’s the largest segment right now. And plant engineering is a new segment that we started last year and that I think in the next two to three years will also become a dominant segment because we’re seeing good traction there.
Rahul Kumar
And this transportation segment, is it seeing some sort of a softness or weakness? Because that’s what we are hearing from sort of auto exposed companies in general.
Ashish Kumar Saraf
We are actually not in the passenger car segment, we are more in the specialty vehicle segment. And actually that’s not going through slowdown, that’s actually increasing because electric mobility is a big thing. Smart vehicles. Those are all the factors that are driving innovation in that segment. And we work with a lot of companies that are in that ecosystem. Suppliers, component suppliers to the OEMs and all of Them require digital product development services.
Rahul Kumar
And what is your value proposition compared to these large ER&D companies out of India which basically have a larger team strength and all kind of capabilities.
Ashish Kumar Saraf
So how do you win business?
Rahul Kumar
What is your USP to drive the regions?
Ashish Kumar Saraf
Frankly, nothing really. I mean we don’t have some unique USP compared to like a Larson and to grow technology services or a science. In fact, our portfolio of Technosoft is very similar to Larson and Tubular Technology Services. We compete with them in the US And I think it’s just that the demand environment is very strong and there is therefore need and space available for more vendors to come in and that’s where we fit in.
Rahul Kumar
Okay, and your margin structure in this segment, you think that it normalized at some level or you’re already at that normalized level which you are right now?
Ashish Kumar Saraf
We are close to that level. We have always, in this business we have always been at 20% but you know, it varies. This year it was 14% because you know, we made investments in capacity increase and SGMA and that we could do in a growing company year on year. So I think at a steady state basis this is a 20, 22% margin business. But it could vary between, you know, 15 to 20% year on year.
Rahul Kumar
Right, right, right. And amount of investment of talent you require to execute on your plant, you have already done that. More is required to be done in fiscal 26.
Ashish Kumar Saraf
We have done that what we wanted to do this year. But you know, this is something that’s ongoing, right? I mean you are always front loading capacity increase, investment first before the revenue follows. So for a growing company, we will always be doing some amount of investment every year.
Rahul Kumar
Great, thank you. I wish you.
operator
Thank you. The next question is down the line of Anand Jean, an individual investor. Please go ahead.
Unidentified Participant
Thanks for the opportunity, sir. I have two questions. One, in the current presentation we haven’t mentioned anything about defense. But in the previous one we had mentioned about lrfam and the work that we have been doing in computer shell of elasam. As I told you, the partnership in the Glass conform also had mentioned about a partnership with the French and dryly different companies. Can you give some light on this as to what’s happening now on this?
Ashish Kumar Saraf
Yeah, Anand, basically there was one slide earlier on the defense because there was no development. So we thought that okay, let us wait for some time, let some development happen in defense side and then we will come back to the shareholder. Frankly speaking, defense as such takes a lot of time. We have developed the product and which has been informed to the shareholder earlier and we’ll definitely come back as soon as new products or anything comes back. From commercial point of view, as of now it is going at a slow pace. So hence nothing was covered in this, this presentation.
Unidentified Participant
Okay, makes sense. The, the second question I have is like on the textile in the yarn division, what you have seen is like across companies the margins have gone up in this division whether it’s a south based companies or textile commenting companies, slash, not this. What’s happened in our case, we don’t see that. So a, it’s been a tin point for the company for last, let’s say five years from the time we got into this and we haven’t made anything significant or we haven’t financially, we haven’t shown any significant improvements here. When do you think this division can turn profit in? I think in the yarn and the entire text.
Navneet Kumar Saraf
In yarn I don’t think the margins have increased in the industry last year they are still at single digits only from what I have seen. And we are also in the same single digits this year. In unit two we had a loss because of the low capacity utilization because we could not run the full mill at 100% we ran, we sold only about 60% of what we had budgeted to sell. So that is a huge loss to us Yarn. I don’t think you can expect very good returns. So it’s a very highly competitive business and I don’t see margins improving also much in yarn.
It can only get little bit close to double digit but not something substantial. So what we are trying to do is we are trying to convert all our yarn and fabric into the finished product. And so we are consciously trying to increase the garmenting business and take that up forward. Like last year also we doubled our sales but due to some inefficiencies in the operations we could not realize the profits which we are trying to plug now with some good operational efficiencies. So we were trying to consume more and more of our yarn and fabric and not sell that as a commodity and sell it as a garment.
This is our strategy going forward.
Unidentified Participant
Okay. But as of now we don’t. I mean I’m talking of yarn plus fabric plus garmenting that we are doing all three. I’m not specifically talking about yard division alone. And we also see a lot of, you know, this shift towards India, especially in the garmenting side. My question is that when I see all these three businesses combined, when can I see some kind of profitability, even better results from these three Divisions combined. Maybe this year, next year. Do you have any visibility around the same this year?
Navneet Kumar Saraf
We are bullish. We are bullish on the garment side this year because of two things. One is, you know, there is that India UK FTA has been announced. We don’t know when that will come in effect. But it should happen early. It should happen in the second half of this year. So that will give a big, big boost to the garment business in India and even from us. India as of now stands to have the highest advantage in terms of the duty. As compared to the other Asian countries that are supplying garments to us. India has the lowest tariff.
So at the moment this quarter is bad because the buyers in US are holding onto orders. They want to see what happens after that 90 days and what, what is the final duty announced? But chances are that India will stand to gain. So we are bullish on the garmenting side. We are not very bullish on the yarn side. Fabric we are trying to convert. We are trying to increase the garment capacity not by our own capex but trying to tie up with other units and create a kind of a joint venture and then thereby getting more orders of garment and utilizing our fabric.
So then we stopped selling fabric, you know.
Unidentified Participant
Okay, next question I have is on the scaffolding division. So last year we did a total sales of around 1 to 4,5 crores. Now with our increased capacity, what is the sales doing by current prices that we can do for the whole year?
Ashish Kumar Saraf
For March 26th. Yeah. So for March 26th considering that we will be having close to 90, 95% utilization average of the Aurangabad capacity, we should be able to do and some increase in the scaffolding segment we should be able to do close to 1,700 crores in March 26th.
Unidentified Participant
Okay. So if I were to say that if we reach 90, 95% utilization levels March 20 in the March quarter of 26, FY26 and scaffolding should be like around 450 crore kind of a run rate quarterly.
Ashish Kumar Saraf
Is that like the fairest monthly. Monthly run rate? Yes. Sorry. Quarterly run. Quarterly run rate. Yes.
Unidentified Participant
Thanks for this and all the best.
Ashish Kumar Saraf
Thank you.
operator
Thank you. The next question is down the line of Lakshmi Narayan from Tunga Investments. Please go ahead.
Lakshmi Narayan
If I just look at the scaffoldings business, it is in scaffoldings formwork and Mac 1. Now this part of the business actually also has domestic element to it. It is only the scaffolding business is actually domestic or you also have formworks and Mac 1 is domestic, it’s reversed.
Ashish Kumar Saraf
Mac 1 is currently 100% domestic. Formwork is 100% domestic. Scaffolding is 95% export.
Lakshmi Narayan
Got it. And Mac 1, what kind of volume growth you actually expect in Mac 1? Is it already there is a waiting list for people to actually buy from you?
Ashish Kumar Saraf
Yeah. So because there is a waiting list, we have added this new capacity in Aurangabad. Our total sales, MAC1 is sold on square meter basis. So our total sales in this last fiscal year March 25 was about 4,70,000 square meters. And our targeted sale for next year is 9 lakh square meters based on the increase. So therefore that’s the volume growth we expect.
Lakshmi Narayan
And I think one of that people actually reuse it. Right. So Mac 1 or form work of scaffolding, which people actually reuse and where people are consumable and people cannot reuse.
Ashish Kumar Saraf
They don’t form work. Scaffolding are not all reusable. They are capital items that are reusable in Mach 1, you know, there are specific components. There are certain standard parts which get reused. Then there are. So it’s 50, 50. About 50% of the total supply to a particular project gets reused. And 50% is special. The special gets scrapped after the project is completed. The standard can be reused on another project or the it requires modification. Mostly the developers buy for certain project specific and after the project they like to scrap the whole system. Since the scrap the value of aluminum is quite good.
Lakshmi Narayan
Got it. Moving on to textile among the four verticals, can you just tell me what is the, what is the production numbers for spinning formative fabric dyeing and finishing in garments for the year FY25? And what has been the growth when compared to the year FY24?
Ashish Kumar Saraf
Yeah, I have the, I have the figures. Okay, so. So quantity wise, gray Yarn is around 13,500 metric tons in FY25 and dyed fabric is around 3,300 and the garments are around 62 lakh pieces.
Lakshmi Narayan
Okay, so knitted fabric and dyed here.
Ashish Kumar Saraf
Yeah, basically it’s a mix of both. 3300 is dyed and gray and gray fabric, both included. If you want to bring up that, we can dig out and give it to you.
Lakshmi Narayan
And also in this, what is your sourcing advantage in cotton? And do you actually import any yarn here?
Unidentified Speaker
No, no, no, we don’t. No, we don’t import any cotton. Cotton has that 10% import duty. No. So it’s not viable. We are actually having good advantage in the cotton purchase because we are in Amravati belt, which is in the heart of the cotton growing belt. You know, that’s mainly from where we buy cotton. So we have a logistical advantage in cotton raw material.
Lakshmi Narayan
And what do you actually export out of this entire thing? Like do you export yarn or do you export knitted fabric or garment?
Ashish Kumar Saraf
What do you export? Yarn, fabric and garments?
Lakshmi Narayan
Got it, got it, got it, got it. Thank you.
Ashish Kumar Saraf
Thank you.
operator
Thank you. As that was the last question for the day, I now hand the conference over to the management for closing comments. Over to you, sir.
Ashish Kumar Saraf
Yes, thank you very much. And thank you everybody for participating in this investor call. And it was a good, engaging Q and A session. I hope you all have all got a good insight on the company’s performance and future prospects. We would like to reiterate that like we discussed on the call, we are quite positive on the future prospects in spite of some uncertainties with tariffs in the U.S. but overall, the demand outlook is strong in the construction industry. And we expect as a result of the new capacities added in Aurangabad, the scaffolding segment is on a strong footing.
The engineering design services segment is also on a strong footing. And we do expect losses to come down in the fabric segment and growth in the yarn segment. So thank you very much.
operator
Thank you on behalf of Systematic Shares and Stocks Ltd. That concludes this conference. Thank you for joining this and you may now disconnect your lights. Thank you.