Tube Investments of India Ltd (NSE: TIINDIA) Q2 2025 Earnings Call dated Nov. 05, 2024
Corporate Participants:
Vellayan Subbiah — Executive Vice Chairman
Mukesh Ahuja — Managing Director
Anurag Vohra — hief Operating Officer
N Govindarajan — Chief Executive Officer – 3xper Innoventure Limited
Analysts:
Anupam Gupta — Analyst
CA Garvit Goyal — Analyst
Jinesh Gandhi — Analyst
Ajox Frederick — Analyst
Abhinav Ganeshan — Analyst
Niket Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Tube Investments Q2 FY ’25 Earnings Conference Call hosted by IIFL Securities Limited.
As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anupam Gupta from IIFL Securities Limited. Over to you, sir.
Anupam Gupta — Analyst
Yeah. Thanks, Luke, and good morning, everyone, and welcome to the second quarter call for Tube Investments of India.
From the management, we have Mr. Vellayan Subbiah, Executive Vice Chairman for TI; Mr. Mukesh Ahuja, Managing Director; Mr. AN Meyyappan, Chief Financial Officer for TI; Mr. Shivdeep Singh Jammu, VP, TPI; Mr. U. Rajagopal, Senior VP for TI Cycles; Mr. N Govindarajan, CEO for 3xper Innoventure Limited; Mr. Anurag Vohra, COO for the Clean Mobility business; and Mr. S Gopalakrishnan, CFO for the Clean Mobility business.
To start-off, I’ll hand it over to Mr. Subbiah for the opening remarks and post that we can have the Q&A. Over to you, sir.
Vellayan Subbiah — Executive Vice Chairman
Yeah. Thank you. Thank you so much. So I will just go through stand-alone results for the quarter and then we’ll open it up to Q&A.
So revenue for the quarter was at INR2,065 crores compared with INR1,970 crores for the same period last year. PBT was at INR225 crores, which is lower than what we were last year at INR245 crores. ROIC annualized is at 45% for the quarter compared with 67% for same period in the previous year, and free cash flow for the quarter was at INR60 crores. In terms of the individual businesses, Engineering revenue was at INR1,323 crores compared with INR1,274 crores in the corresponding quarter of the previous year and PBIT for the quarter was INR162 crores as against INR169 crores in the corresponding quarter. For Metal Formed Products, revenue was at INR404 crores compared with INR400 crores in the corresponding quarter of previous year and PBIT was 46% as against 53% in the corresponding quarter of the previous year. For bicycle business, revenue for the quarter was INR168 crores compared to INR177 crores in the corresponding quarter and loss before interest and tax was at INR0.36 crores as against INR3 crores in the corresponding quarter of the previous year. And all other businesses revenue was [Technical Issues]
Operator
Mr. Vellayan, the line for the management seems to have disconnected. Please stay connected while we reconnect the management. Thank you for waiting participants. The management is reconnected. You can continue with the presentation.
Vellayan Subbiah — Executive Vice Chairman
Hi, sorry about that. So for others, the revenue for the quarter was at INR243 crores compared with INR207 crores in the corresponding quarter previous year and PBIT was at INR9 crores as against INR17 crores in the corresponding quarter of the previous year. And TI’s consolidated revenue for the quarter was at INR4,925 crores as against INR4,306 crores in the corresponding quarter of the previous year and the profit for the quarter was at INR426 crores as against INR499 crores in the corresponding quarter of the previous year.
CG Power subsidiary in which the company holds a 58% stake, registered consolidated revenue of INR2,413 crores as against INR2,002 crores in the corresponding quarter, and profit before tax was at INR294 crores as against INR303 crores in the corresponding quarter. Shanti Gears registered a revenue of INR155 crores as against INR135 crores in the corresponding quarter and PBT was at INR34 crores as against INR30 crores in the corresponding quarter of the previous year.
So let me stop with that, and we’ll be happy to turn it over to you for questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of CA Garvit Goyal from Nvest Analytics Advisory LLP. Please go ahead.
CA Garvit Goyal
Hi everyone, am I audible?
Operator
Yes sir. Please go ahead.
CA Garvit Goyal
Good morning sir. My first question is like, in last quarter you mentioned about double-digit growth that we are seeking at a consolidated level. So when I look at H1 numbers this year, we are up by 16% Y-o-Y in revenue terms, right? But if I look at the bottom line, that is declining due to fall in the margin. So can you comment like how do you look at this scenario? And do you see we will be able to improve our margins from here on and the top line as well in near to medium term. So that is my first question, sir.
Vellayan Subbiah
Yeah. So we do expect a better second half. So on the specific terms on margins, Mukesh, do you just want to walk us through kind of what we see and kind of what happened.
Mukesh Ahuja
Yeah. On the stand-alone business, in the Engineering business, the margin has grown, but particularly, we had the one-time expenses in this quarter, which is one time, and they’ll get corrected, like Mr. Vellayan said that H2, we expect it to be much better.
In terms of Metal Formed division, we are facing issues with the railway business, and there we have to take some cost correction in terms of product development for the cost control, which team is on the job. And hopefully quarter two and quarter three will be better from the railway division. Like in the bicycle business, you see the losses are under control, and we are operating at a breakeven. And we see now some export orders are coming in Q3 and Q4, and we expect those things will also be better going forward in the stand-alone business better.
As far as at a consol level, even CG Power has done pretty well, SGL has also done pretty well, and TIC angle, we all are aware that it’s a growing business, which we will have some losses going forward, but long-term basis, we are very, very bullish about this business also.
CA Garvit Goyal
That one-time expense you talked about, what is that? What is the nature of that trend?
Mukesh Ahuja
It is operational expenses, which are one-time. To just indicate numbers, it looks like a flat in the Engineering division, if we take care of those operational expenses one time.
CA Garvit Goyal
So are you saying in H2, we will be witnessing improvement in the margins from here on, right?
Mukesh Ahuja
Yes, that’s right.
CA Garvit Goyal
Fine. And secondly sir, like how many dealers do we have for electric three-wheelers right now?
Mukesh Ahuja
Currently, 83 dealers are operational.
CA Garvit Goyal
And I think we were having a target of 150 by the end of this year. So is the target in tact or are we facing any challenges?
Mukesh Ahuja
Yeah. We’ll be on target. Basically, the team is in the process of appointing dealers in north, east and west, the work is going on. We have also issued [Indecipherable] for a number of dealers. So by end of March, we’ll be reaching the target as we planned.
CA Garvit Goyal
And lastly sir, do you see any near-term risk in our segments like Engineering, Power and Metal Formed products?
Vellayan Subbiah
No, we don’t see a risk on those things. Rather, we are working on the cyclicity of the auto industry, places like this, like you’ve seen in this quarter, PV [Phonetic] and SCV both have not done well. So we are looking for maybe some initiative, how to further diversify in terms of non-auto or some other initiatives. So we don’t foresee any risks in Engineering as well as Metal Formed division.
CA Garvit Goyal
Understood sir. I will join back the queue sir. Thank you very much and all the best for the future.
Operator
Thank you. [Operator Instructions] The next question comes from the line of Jinesh Gandhi from Ambit Capital. Please go ahead.
Jinesh Gandhi
Yeah. Hi, thanks. Quickly want to check a clarification. For the Engineering business, you mentioned margins would have been flat, one-time expenses will not reflect vis-a-vis second quarter of last year at about 13.3%. Is that the right understanding?
Vellayan Subbiah
Yeah. If you see this year quarter-on-quarter, maybe flat. And if we compare with the last year quarter, maybe let’s see it’s slightly down because of the one-time [Technical Issues] and we are hopeful to get back in the next quarter itself.
Jinesh Gandhi
Okay. Got it. So sequentially, it would be flat margins, one-time expenses out there? Secondly, if I look at the Engineering business revenue growth, that seems to be much lower than what we have seen growth of underlying industries which would caters to two-wheelers and PVs in that context? Any reason why growth has been muted. I believe exports also have seen a recovery. So what is that I’m missing over here?
Mukesh Ahuja
So Jinesh, let’s say, let me go segment by segment. Exports has done pretty well in this quarter. We have very high double-digit growth have happened in the exports business. And two-wheelers also has done pretty well because even the industry was supported. But as you are aware, PV and SCV industry didn’t do well. So those segments because of the market issues, which were beyond our control, but exports as well as two-wheelers we have even gained shares as well as exports we are bullish about it going forward.
Jinesh Gandhi
Okay. So exports for Engineering are now close to 20% of Engineering revenues or still lower than that.
Mukesh Ahuja
That is right. It is 20%.
Jinesh Gandhi
Okay. Got it. And similarly for Metal Formed business, how big railway business would be now? I believe that business has been non-growing for some time now. So the share of railway now quite small for Metal Formed?
Mukesh Ahuja
So railway basically, maybe we are facing issues on the pricing side. So that is why margin is coming under pressure. But other parts of the business, whether it’s auto chains or fine blanking, that is doing pretty well. So railway now we are controlling it. There’s no point in quoting for the tenders, which are going to have an impact on the margin. So that business, but it is not very large, but we can say about 15% of the [Indecipherable] revenues are coming from that division and which we need to take some actions going forward.
Jinesh Gandhi
Okay. The reason I’m asking it again, this segment has seen a muted growth and primarily this would be largely because of PVs being weak. Would that be right understanding?
Mukesh Ahuja
Yes, like PV is weak. That’s why we are doing well in MF auto also, which is doorframe business. But like you said, that because PV was almost leading to a negative growth, but margins were very well maintained in doorframe business, issue was basically railways.
Jinesh Gandhi
Right. Got it. And third question is on the electric mobility segment revenues, which grew 25% vis-a-vis first quarter. If I look at the volumes electric three-wheeler, they have gone up by more than 2 times on a sequential basis. So is that beyond electric two-wheelers revenues have declined substantially in 2Q and hence, overall e-mobility business growth is just 25% despite E-three wheelers also growing more than 100%?
Vellayan Subbiah
Jinesh, can you just repeat the question, please?
Mukesh Ahuja
Your voice is not clear. Can you repeat?
Jinesh Gandhi
Is it better now?
Vellayan Subbiah
Yes.
Jinesh Gandhi
Yeah. So if I look at our electric three-wheeler wholesales in 2Q were close 3,800 versus 1750 in 1Q. Despite that, our like e-mobility business revenues have just grown by about 25%. So is that business beyond electric three-wheelers declined on sequential basis by a material manner?
Vellayan Subbiah
No. Sequential basis, there is a growth in the three-wheeler business.
Mukesh Ahuja
See, in Q1, in three-wheeler, we sold around 1,763 vehicles. In Q2, we did around 2,033 numbers. So sequentially, if you look at the turnover went up actually from INR68 crores to INR79 crores in three-wheeler business. In IPLTech also we sold around 29 vehicles in Q1. In Q2, it was 42 numbers. So there also now the turnover went up INR33 crores to INR46 crores. So overall, if you look at the consolidated turnover has gone up from INR117 crores to INR146 crores in Q2.
Jinesh Gandhi
Got it. And any update on the existing markets in South India, how our market share has been spending on the electric three- wheelers in the markets that we have been present for some time now, how is the market evolution, how has been our market share evolution in those markets.
Vellayan Subbiah
Anurag, you would like to answer?
Anurag Vohra
Yeah. So as far as the three-wheeler is concerned, South was the markets where the first launch was done, and we are growing on the market share, we are still sustaining this high market share also in the southern region, which is almost close to 24%, 25% plus. So that’s how it has been. And beyond southern markets also, the volumes are now going across the [Technical Issues].
Jinesh Gandhi
Okay. Sorry, I missed that number. You are saying in certain markets, our market share is 40%, 45%. Did I catch that properly?
Anurag Vohra
24% to 25%.
Jinesh Gandhi
Okay, go it. Great. I have few more questions. I will come back in queue.
Anurag Vohra
Yes.
Operator
Thank you. The next question is from the line of Ajox Frederick from Sundaram Mutual Fund. Please go ahead.
Ajox Frederick
Hi sir, thanks for the opportunity. Sir, my first question is on exports. So can you help me understand the share of exports apart from Engineering sir, like Metal Formed and others? Engineering, I understand it’s 20%, apart from that.
Vellayan Subbiah
Overall, it is 16% for this quarter. On the overall sales, 16% is exports.
Ajox Frederick
On overall sales. Okay. And sir, what’s the outlook like as we are hearing some softness across multi-brand players. So what is your sense of export outlook?
Mukesh Ahuja
So we are participating more and more on the geographies. But like you rightly said that Europe is going through a little bit, those markets are softening. So we are alternatively trying in the South Asia and the US markets, and we hope to continue this momentum going forward.
Ajox Frederick
Okay sir. Got it. And sir, the second question is on subs, so on medical CDMO. What are the plans for scaling this up because it has been sequentially where it has been. So just some thoughts on the plan going forward.
Vellayan Subbiah
So just to share on the Medical business, like you are already aware, CDMO, Govind you will take, right? Govind?
N Govindarajan
Absolutely. Are you able to hear me?
Ajox Frederick
Yes sir. Very clear.
N Govindarajan
On the CDMO, we have commissioned our lab, and we have already started working with the customers. So far, we are serving around 30 customers and we would have served around 44, 45 projects so far. And so far, most of the customers are continuing with us, I mean coming with more and more number of projects. These customers include certain innovative companies directly, certain innovative companies through Scientist.com apart from certain specialty chemical customers as well.
As far as the plant is concerned, our Kilolabs profile is already commissioned. And as far as the semi-commercial plant is concerned, we are planning to start our batches by end of November. And if everything goes, we are also waiting for one permission from the government in terms of environmental clearance. If that also happens within time, we’ll be able to find one or two products by the end of first quarter after three months of stability.
Ajox Frederick
Got it, sir. That’s helpful sir.
Operator
Mr. Ajox, please continue.
Ajox Frederick
Can you hear me?
Operator
Yes.
Ajox Frederick
Got it sir. That is helpful. And sir, the final question is on the domestic growth outlook. We understand railways is under pressure and PV and SCVs are also under pressure. So apart from this, what gives us the confidence of generating the volume growth you’re expecting from the growth side, sir?
Vellayan Subbiah
So one of the things, maybe, let’s say, for TI, particularly Engineering division as well as MFPD, we are fully diversified for all the segments of the auto industry, and parallelly, we are working on the non-auto obligations like large diameter [Phonetic] and all these things. So this gives us a confidence that maybe — if it keep on happening if some segments will not do well, some segments will do well. But totally diversification for all the segments in the auto industry and push on the non-auto as well as export side of the story gives us the confidence we will be able to do going forward.
Ajox Frederick
Got it sir. Probably I will fall back in the queue. That was very helpful. Thanks.
Operator
Thank you. [Operator Instructions] The next question comes from the line of Anupam from IIFL Securities. Please go ahead.
Anupam Gupta
Yeah, good morning sir. So the question first is on the Clean Mobility business. So while you are expanding your dealerships, what we have also seen is that in terms of the overall landscape, clearly, Bajaj has emerged very strong and they are now like almost leading with Mahindra and Mahindra. So what is our plan, at least, especially in the three-wheeler side of it to accelerate the sort of volume share there and what can actually support that sort of volume growth to compete with the two large incumbents who are there?
Vellayan Subbiah
Anurag, you will take it?
Anurag Vohra
Yeah. So Anupam, to answer this question, see, what is happening is, we are scaling up as we are growing across the geographies. The product acceptance has been quite good in the market, the feedback from the customers are exceptionally well. And we are today now looking at how do we keep increasing the numbers. So as we grow right now we are present, as we spoke about, close to around 80-plus leaderships are there across 60, 65 cities. But as we keep growing on an all-India basis, we are improving our numbers, and we hope to also improve our market shares. Acceptance is good from the market.
Anupam Gupta
Okay. And especially the three-wheeler side of it, how soon will you be able to launch the cargo version as well?
Anurag Vohra
So cargo version also would be coming in the next couple of months, it will be there. The protocols, beta testing, validation, customer trials are all going on. We will be also introducing that product in the next couple of months.
Anupam Gupta
Understand. Okay. And quickly, can you just update on the other launches. So let’s say, the SCV as well as the tractor which was scheduled for this year?
Anurag Vohra
So both the other launches, which is the small commercial vehicle and the farm tractor would also be coming in this quarter or next quarter. In the next, as I said in the next couple of months, both the products would be there. Both the products are — as I said, the testing part, the auto testing, the beta testing, the customer testing, the validation is in the progress and we hope in the next two to three months to bring both products in the market.
Anupam Gupta
And then just lastly in the Clean Mobility side, sir, last quarter, you had said that you have seen improving traction for IPLTech truck side of it. So any update there and also what we have seen is Ashok Leyland has also launched a competitor for exactly the same segment. So how do you see that segment scaling up in terms of customer acceptance as well as the competition coming in?
Anurag Vohra
Yeah, there again, it’s taken a while for the customer to, first, accept the truck, then realize the economics from the truck, right? And now the customer confidence is very high. We are sitting on a good number of orders to be fulfilled in this quarter and in next quarter. And it’s the segment-wise solutioning approach which we have taken up. And customer, when they themselves realize the benefits of using an EV truck, though it is an expensive truck, the high capex, but then they have seen the operational economics and also the environmental benefits once they have realized. So I think it’s a good confidence, which we are getting from the customers.
Anupam Gupta
Understood. That’s helpful, sir. Just one more question. Any update we have for Moshine business. We had mentioned that we were doing some trials for — with a few customers, any update there for Moshine and what’s the path ahead for that?
Vellayan Subbiah
Anupam, the trials were being done for the [Indecipherable], we are working on the, let’s say, capability building to a larger reliance on that and the work is in progress. We hope to finish it by next quarter and so that we are trying to do development of alternative customers in that business, and we expect it to get complete by next quarter.
Anupam Gupta
Okay. Understood. So you said that is for the optical lens business.
Vellayan Subbiah
Optical lens business. Coming to Moshine, we continue to make mobile camera business and there you are likely aware, the entire supply chain is controlled by China and there is hardly any control in the ecosystem, particularly in India. So we continue to operate as of now and we will let you know going forward [Indecipherable].
Anupam Gupta
Sure, that’s helpful sir. I will fall back in the queue. Thank you.
Operator
Thank you. The next question is from the line of CA Garvit Goyal from Nvest Analytics Advisory LLP. Please go ahead.
CA Garvit Goyal
Sir, my question is answered. Thank you.
Operator
Thank you. The next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead.
Jinesh Gandhi
Yeah. Hi, my second question is on the Industrial Chains new plant, which we indicated is operating at full capacity. So [Indecipherable] investment expanding the capacity now? How do you see that opportunity?
Vellayan Subbiah
So Industrial Chains, whatever greenfield plant we have put up, that is fully running, and we have capacity available to further ramp-up the business. Basically, we are targeting segments, agri as well as [Indecipherable]. So those development work is on, but the plant is fully commissioned and operational.
Jinesh Gandhi
And it’s operating at full capacity or [Speech Overlap].
Vellayan Subbiah
Capacity ramp-up.
Jinesh Gandhi
Ramp-up in growth. Okay. Got it. And lastly, the medical devices business saw just about 4% growth Y-o-Y. Is there any challenge in that business or it’s more of a timing difference leading to just focus in growth?
Vellayan Subbiah
So it’s just a timing issue. We are doing pretty well in the domestic market, even the last quarter growth was high double digits in the business around 18% to 19%. And like you are aware, for exports market in the medical devices business, you have to follow a process of C-registration and all those process our own. We expect another one quarter, two quarter, that process will be over, then we see a good momentum going forward in the export business also.
Jinesh Gandhi
Got it. Great. Thank you and all the best.
Operator
Thank you. The next question is from the line of Abhinav Ganeshan from SBI Pension Funds. Please go ahead.
Abhinav Ganeshan
Well, good morning sir. Thank you for taking my question. I just have two questions for you specifically on the electric three-wheeler business. So just wanted to understand that have we received the PLI benefits for the — have we applied and have we got the PLI certification for our e-three wheeler that we have launched.
Vellayan Subbiah
We don’t have PLI. So we are really on the same custody. We don’t have PLI.
Abhinav Ganeshan
Okay. Second part is, sir, I am seeing that we are having a very good dominant market share in the south market. So can you give some more color on how we are going to look at non-home markets for you vis-a-vis east, west and north.
Vellayan Subbiah
Anurag, you will take this?
Anurag Vohra
Yeah. See, Abhinav, it is like this. You come out with a product which is giving one of the best range, one of the best headroom, legroom, comfort to the customer and to the owner of the three-wheeler. So what has happened in south, I mean, actually, that is something is also getting expected in the northern markets. So our ambition and our dream is to replicate what is happening in south, similarly in the northern markets. As we are expanding, we are doing so not only with the product, but with the complete customer servicing also which we are providing to the customers.
Abhinav Ganeshan
Okay sir. That was helpful. And can you give some more color on the cargo launch, indicative time line and how we would approach that.
Anurag Vohra
I just mentioned, here also question was there. In the next couple of months, the cargo version of the three-wheeler would also be there in the market. We are already in very close touch with the customers and the end customers for the product. Control trials have already happened, and we are confident to build volumes and market share and the product etc of the cargo version.
Abhinav Ganeshan
I think that was really helpful sir. Thank you and all the best.
Anurag Vohra
Thank you.
Operator
Thank ou. The next question is from the line of Niket from Motilal Oswal AMC. Please go ahead.
Niket Shah
Yeah. Thanks for the opportunity. I just have one question on the e-three-wheeler business, given the way the RM prices have been correcting on the battery side, assuming everything has been constant from a selling price standpoint, shouldn’t the profitability improve meaningfully over the next six months to one year for our EV business?
Vellayan Subbiah
I’d say two things Niket kind of obviously it varies by business, right? We see in three-wheeler basically the business continues to get intensely competitive on pricing with Bajaj and Mahindra. In fact it will potentially help things on the truck side.
Niket Shah
Okay, got it. So broadly, I think the scale benefits as and when it comes up, along with the RM benefit, you will start slowly and gradually seeing margin improvement rather than a far more quicker margin improvement because of RM decline.
Vellayan Subbiah
Absolutely.
Niket Shah
Got it. Okay. Perfect. Thank you.
Operator
Thank you. [Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to management of Tube Investments for closing comments.
Vellayan Subbiah
I think the Board perspective is that we do understand that it has been kind of been — we have not had basically profit improvement in this quarter. Our current outlook is that second half will be better and we will continue to basically stay bullish about our other businesses. [Technical Issues]
Operator
[Operator Closing Remarks]
Mukesh Ahuja
Thank you.