Gala Precision Engineering (NSE:GALAPREC) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Gala Precision Engineering Limited Second Quarter First Year twenty twenty seven Earnings Conference Call hosted by Arihant Capital Markets Limited. 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.

0:33 I now hand the conference over to Kushi Solanki from Arihant Capital Markets Limited. Thank you, and over to you. Thank you. Good afternoon, everyone. On behalf of Arihant Capital, I welcome you to this earning call of Gala Precision Engineering Limited quarter two FY twenty seven conference call. From the management side today, we have mister Gala Precision, full time director mister Satish Kotwani, full time director

1:04 mister Srinivasan Girita, chief financial officer. We welcome the management of Gala Precision Engineering Limited on this call. Now without any further delay, I invite mister to begin with opening remarks. Following, which we will open the floor for q and a. Over to you, sir. Yeah. Thank you. Good afternoon, everyone, and welcome to our earnings call to discuss the performance of second quarter and the first half year of the financial year 2027. In the interest of those who are new to the company, let me first give a brief overview. Gala Precision is a preferred manufacturing of the high quality precision components. We serve sectors like renewable energy, industrial, and mobility. And we are geographically diversified across India, Europe, and USA market.

1:53 We supply to OEM, Tier one, and channel partners, manufacturing customized products of over 800 SKUs for almost one seventy five active global customers across 25 countries. Our facilities are fully equipped with the advanced technology and integrated capabilities for design, development, and manufacturing. We achieved a four year revenue, EBITDA, and PAT at a CAGR of 22%, 28%, and 52%, respectively. We have also established a new faster manufacturing facility at with an installed capacity of 4,600 metric tons, focused on high and side partners including holes. The capacity for this facility was 31% in FY twenty six last year and expected to go up 70% in FY twenty seven current year. The facility complete...

2:40 Complement to our existing portfolio and offers strategic location advantage through proximity to our customer across local job work vendor and near file raw material supply, thereby supporting operational efficiency and customer. Additionally, in alignment with our future growth plan, we already account 10% land parcels in Varan near to the current plant location. Coming to the quarter under review, we delivered a healthy, highly, healthy performance supported by strong order book growth and continued progress across all strategic initiatives. Order book grew by 44% year on year, crossing 100 crore for the first time in a single quarter, reflecting a healthy demand across all key end user industries.

3:27 On the revenue mix for the first half, DSL remained our largest segment at approximately 53%, SFS contributed 31%, and CSS remained 16%. By end user industry, renewable energy contribute 42%, industrial 32%, and mobility 21%. Export accounted for approximately 36% of the revenue. On product development front, we received a GALAP, the customer approval for critical application in railway safety, offshore wind, and mining equipment. We continue to make progress in the new product development across emerging applications, including offshore wind, electrolyzers, and radio safety. These developments represent an estimated annual customer potential of approximately 100 crores supported by the healthy development pipeline.

4:17 On operational front, we commissioned over 1.2 megawatt AC open access solar power plant at Nande, Maharashtra on 10/30/2026, which is expected to general... Generate annual cost saving of approximately 1.3. We also successfully implemented SAP HANA across all our manufacturing plants with the system going on... Go live on 10/07/2026. Additionally, we secured a bank finance of 58 crores comprising the 15 crores funded working capital, 10 crores non fund working capital for LCVG factory, and 28 crores for term loan. For all, we remain focused on the handling of manufacturing capabilities, expanding our portfolio, product portfolio, deepening customer engagement across existing and emerging application.

5:11 Our group strategy include identifying opportunity for Gala, existing products in emerging tech... Technologies like hydrogen, value chain, electrolyzer, electric vehicle, high speed chain. Second, expand product range in fastener and spring to address larger market size. Third, increase presence in export market by hiring locals and having warehouse leadership tariff in the Europe and USA market. Fourth, moving up the value chain by offering advanced materials, getting solutions, smart partners, etcetera. And fifth, focus on application engineering, deploying the customer engagement by offering the customized solution. With that, I would like to now hand over to our chief executive CFO, mister S.

5:57 GRIGAN, who will take through the financial performance. Thank you. Thank you, mister Gala. Good evening, everyone. Let me take you through the financial performance for the second quarter and first half of the financial year 2027. For the quarter, consolidated revenue from operations stood at around 94 crores, representing a growth of 31% year on year. EBITDA stood at 16 crores, up 43% year on year, with the

6:23 margin at 16.76%, an improvement of 135 bps. Net profit stood at 11 crores at 26% year on year with cash margins at 11.31% and minor decrease of 45 basis points. Our earnings per share stood at rupees $8.8.00. For the first half, revenue from operations stood at around 169 crores, a growth of 26% year on year. EBITDA stood at 28 crores, up 35 percent year on year with margins of 16.46%, an improvement of 110 basis points. Net profit stood at 19 crores of 26% year on year with tax margins at 11.06% and earnings per share of rupees 14 rupees 30 rupees. With this, we can now open the floor for question and answer session. Thank you.

7:13 Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants have requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from Aditi Apal with MSA Capital Partners. Please go ahead.

8:12 Hi. Thank you so much for the opportunity. Sir, congratulations on the great set of results. I hope I'm audible.

8:21 Yes, sir. Yeah. Thank you. So so I wanted to understand. So if we say we are looking three years out, how should I look at the business in terms of capacity? Because this current capacity, both at Vara and the other side, should be enough for for us for this financial year. And we've signed an MOU for expanding our capacity. When should that come up? One is when when does the fine... Final deal we send, and from the final deal we sign into civil construction to commercialization. How should we look at that? So that is my first question, sir. Yeah. Hi. I'm Gala. I will answer this. So basically, at present, we have a $4.50 crore capacity.

9:07 And this year, we will be meeting the current year turnover with the same capacity. Number two, we are in process of increasing the phase two capacity at Chennai. And plus, there will be some line balancing, which we'll be doing at Wada. With that and FY twenty eight quarter four, we are internally targeting to be some of this new land capacity, part capacity. With that, we are targeting 100 per room capacity we'll be creating. Because this $4.50 per room capacity will take to $5.50 per room, so that we can use the FY twenty eight number with this capacity. And then that's the plan. In case there is any further delay in any government approval or completing the capacity.

9:58 So we will have a backup plan to have some small capacity and then take the matches for some period. Understood. Because over the last con call and over the last discussion, they were saying that you were looking at the capacity which is which is enough to double your revenues from you. That is $4.50 per revenue Yeah. Plus another $4.50 per revenue of capacity that you're right to me. Correct. So that is intake. So basically, we signed the MOU that BARDA can occur in June 26, and that that legal business is almost finished, and we have to share the draft agreement with the seller.

10:35 And we... There was some delay because of some legal delays. It took more time than expected. It'd be... This generator will be sufficient for next $4.50 crore capacity. So broadly, this can... Which will be doubling the current capacity to $4.50 to a 900 crore with this technical landing parcel in in in our control. And we'll be developing this four fifty capacity in case manner, maybe at least two to three phase manner, what we plan. Understood. Understood. Sir, on the on the product and product capabilities, so we are we are there in renewable energy that is the the the wind segment. And we are there... Some some bit of business is there in the electrolyzer segment. Some bit of business is there in auto.

11:29 And in... Over the last

11:31 few meetings, we had also discussed about us making these advanced metals, like, in codel, del v and copper. These these decisions to manufacture for now. So how are we thinking about that? Because a lot of these these products are finding a lot of users in aerospace, defense, in critical spaces. So how are you trying to enter those spaces, sir? Yeah. Sure. Yes. Yeah. So I will answer this. Satish Kotwani here. So, basically, Gala has been already working with these exotic materials like Inconel seventeen seven p s in our DSS facility.

12:16 And we have been supplying materials used for our manufacturing of the spring and precision stand part for turbocharger application where there are high temperature applications. And going forward, of course, we are strengthening this business opportunity for our other products like partners, RaceLock watchers, and, of course, this thing that we are doing. To start with, we are focusing on gas turbine as a segment where they use also this internal materials, stainless steel material partners and GALAPREC industry. And as a business development team, we are focusing on finding such more opportunity for our existing products with this exotic material. So as a capability, we already demonstrated this for this spring category of our product. And going forward, we will be offering our other products also from this material.

13:08 Also, we have been supplying critical coil spring made from internal materials for total wall application of heavy commercial vehicles, which are used in b s six commercial vehicles category. Understood, sir. Understood. And just to add, immediately, we are not looking for aerospace for any new development because there are lot of opportunities already there in which we are operating. But other segment, we are open and we will see at appropriate time, we may add to... We understand is also very good area. And if required, there is appropriate time we will this one, but there are other critical areas of inquiry exotic matters. And because it is so difficult to manufacture, that is why it would be a sticker.

13:57 That is why I have... But which is on the very best. The other space basically need a long gestation period for approvals and all. So we got the... Before that, there are a lot of opportunities out there. So why not to catch that where we are already seeing 25% growth year on year in next three, four years. So that's why as of now, but we are seeing here too soon, we may rethink and decide for adverse events. Understood. Understood. So we wish you all the best. Thank you for answering all my questions so patiently. Thank you. Next question comes from Devianj Kuppel with Galaeton P and S. Please go ahead. Hi, sir. Good afternoon. The first question was, I think in the last con call, we mentioned that we have held back delivery of some items to the customer.

14:50 So wanted to understand in this current 94 crores of revenue, how much is, let's say, just the contribution of that order that was held back so that it becomes a very like to like comparison of growth? Sure. So that amount is approximately 3 crores, which we also clarified at that time the amount was there, which was held back. And this quarter includes that 3 crores revenue, which was held back in quarter one. Understood. Understood. Then it's a good growth, which leads me to the second question is that how should we understand this revenue growth? Is it... Does it have a component of a price rise plus volume mix or this is purely a volume growth throughput?

15:40 You can... Yeah. And the initial thing that what would be the inventory gain in the gross margin, if any, Because we sit on around two seventy days of inventory. Yeah. So I'll answer for the first question, the first part of the question. I think this growth, which we have come, is mainly from the volume growth. And as we discussed in the past, we have three pillars of volume growth. One is organic growth, which is happening. Second is we are getting lot of new components from the existing customers, and third is a totally new customer. And these three pillars contribute approximately 10% each, which is resulted in approximately 30% growth.

16:25 So I think how to see this growth, I think we are on a track to grow 25% this year. Quarter one, as you rightly mentioned, that there was some held back of dispatches, which resulted in little lower growth. And I'm sure with current momentum in the order booking and dispatch is what we are doing, we are on track to grow 25% sales in this year as well. And that is a question... Answer from my side for the growth. Can you repeat the second part of your question? The question was that given that we are sitting on almost two seventy days of inventory. In the p and l, what would have been the contribution of inventory gain?

17:11 Seventy days is something wrong in your calculation, or I don't know. I think so inventory days are around 100 or something. So, Gidi, can you confirm that? What is the inventory days in quarter two? So I was looking at annual in... Inventory divided by annual COGS for the year. Anyway, the question is more what what would be the inventory gain? So I can just simplify. Basically, if you see the... Whichever way you calculate, there may be different way. The inventory levels have recently reduced as compared to last quarter or the last two last year quarter. A. B, considering the business model, where we... There is a lot of imports out there, a lot of... More than 800 SKUs out there. There is a domestic sale, but 36% is the export sale.

18:01 There, the inventory line in in the ship also is a part of the inventory. We call it goods and transit as an inventory, which we have to account as an inventory. But then all of these things, as of now, this is the inventory level we are we are... And second sector, which is a there is a growth of more than 20%. If you see, 30% we are delivering. Reduce this monthly level at least further by 10%. So these are the only of the marks about the inventory available. Got it.

18:47 Should I ask all the questions or should I join back the queue? Moderator need to decide what what to do. Yeah. Please go ahead. Yeah. Please go ahead. Hello? Yeah. Please you can go ahead and ask your follow-up question. Sure. The sec... The third question was on the Chennai phase two go live. Is it on track for q four? And second part to the same CapEx is that in the last con call, you mentioned around $40.45 crores of CapEx will happen in FY '28. So the question is that once this $40.45 crore of CapEx is done, how should we think about the future growth? Is it that every year there will be a continuous CapEx or this is 45 will supply for, let's say, two years and then we'll do another next stage of CapEx in Madhav? Yes. I have not Okay. One only. You can just put on your end.

19:52 Sure. So broadly... Okay. But in my phase two is in... As per the plan, and by November end, we will be completing the 10,000 square foot of the management floor. We will be shifting some of the machine and some of the operation. And so then we can be ready for phase two capacity at Chennai. And this will be ready for last quarter, we have the plan. So point number two, for FY 2020, we plan actually $4,540.45 crore. That is still as per that plan only. Number three, broadly, if you see my historical number on the way we operate, when there is a land to need to acquire, so then there is a higher number of CapEx CapEx in that particular year because we are acquiring land for three to five years, then we do normally. We do a CapEx year on year to meet the demand for the next year. That's how we operate.

20:46 We should have putting a big CapEx for three years at a time. Yeah. So for this 4045, we'll take care of approximately 100 crores plus turnover. So this type of CapEx, we are seeing this should happen year on year to meet the next year demand or to meet the growth of 25, 30% year on year. Understood. Understood. The six and before the... Next question is, you mentioned that we have received approval for a term loan. Is it... And that is higher than what we saying for the land. So what is the purpose for this term loan? Is it purely CapEx or something else? Yeah. So basically, bank don't use term loan for land at all. So we will be using our internal accrual or general corporate funds for the for the last. For the CapEx, which are incremental CapEx, which we are doing at Wada, and some of the CapEx, which means start doing for the new plan, that we have planned.

21:45 And more and above, we will be needing more CapEx. As I mentioned, there will be additional capital for the 45 crore plan next year. If required, we may have today some more term loan in next year, depend upon or fund flow position and all. Understood. Understood. The next question was that, in our deck, you mentioned utilization of DSS, DSS, FSS, but I assume this is the annual utilization. Yes. Is it possible to give the utilization for this quarter or, let's say, h one? Broadly, at company level, the inflation is approximately 80 to 85% as a mix, where the CSO maybe slightly lower side and DSO maybe the highest.

22:31 And number two, as we mentioned in earlier call also, there's a engineering company subject to the space ability. We keep on adding the line balancing equipment or machines so that we can debottleneck to some extent and increase the capacity. So as of now, four fifty per hour is something that annual capacity where some machines are already considered, some machines will be in pipeline, which will be ready. So that is the annual capacity. It could come within the Wara and Chennai plant. Got it. And just the last question, the auto business that we had gotten the approval from the European client, has the, let's say, commercial production or shipment started and any traction on any other clients that we were reaching out?

23:20 So, basically, you talked about auto business in Europe? Yeah. There was this European client that whom we had gotten the approval. Right? And Yeah. Customer is based in India. That is basically European customers in manufacturing in India, and we are at the the stage of supplying them pilot slots where they need multiple pilot slots, which we will be doing in quarter three and quarter four. Got it. The customer is actually... We have to make the supplies in India. It's a global company with only from Europe. Got it. And any traction with any other OEMs for the same product? We already started with certain... With similar applications with other tier one companies. Basically, this for tier one application. And we already started getting the interest from them for sending the inquiry in the RSQ in this quarter.

24:09 Got it. Understood. That is on my side. I'll join back with you for any other questions. All the rest. Thank you. The next question comes from, an individual investor. Please go ahead. Am I audible? Yes. Yes. You are. Thank you for this request. This... So... Unfortunately, our company has secured its first well commercial order from a leading electrolyzer manufacturer in Q1 and has identified an estimated annual customer potential of 100 processing in... For the emerging application.

24:55 How is this important pipeline progressing, and what could be the potential revenue contribution from electrolyzers, also wind, and or aviation over the years of two to four years timeline? Yes. So I think for this electrolyzer, auto which we received in June this year, we are looking at approximate sales of 2 pro rupees in this financial year. We already started this purchase to this customer in last quarter. And as far as the potential... So on the electrolyzer front, we are already in discussion with all the electrolyzer companies in India as well as global level. Apart from the company where we got the order, we are already in advanced discussion for temporal development and approvals with other two electrolyzer companies. One is for export and one is a global company with manufacturing in India.

25:50 As far as the potential business opportunity of electrolyzer, railways, safety application and offshore, we are looking at approximately 40 to 50 crores revenue over a period of next two to three years considering the approval and ramp up happening with the customers at the India as well as global level. Got it. Got it. My second question is, the h one operating cash flow, it has remained relatively modest as compared with the reported profitability. While the inventory and the trade receivables increased during the same period. Just wanted to know what are the key drivers of the working capital assumption, and what improvement targets has the company set following the appointment of AT and T for its working capital optimization study.

26:41 Could you provide an update on these suggestions or any plan of action that are given by the AT and Please, technically, we had the latest... Completed this diagnosis analysis and have the submitted that before very recently. The company, they they work on its recommendations, and we'll be forming an internal team and start the implementation sometime early in the 05/28. But it will take at least one point of that case for the benefit cost to the company. This is one part of the case. The trade is very little bit... The previous increase has happened mainly because one of the export sales... For the the... I'm putting between domestic and export sales.

27:30 Is still the 38% and the domestic sales is 62%. And compared to, you know, q one... Q four of last year, it was 3367%. And the the only because export data is big by almost five years compared to the end, that is the reason that inventory, the the receivable days has increased because of the transit time and the number of, you know, go go to ninety to a hundred days. It's got the double prices are at stake. Correct. Okay. Yes. Yeah. Understood.

28:24 Yes. That's it for that. Thank you for taking this opportunity, and happy Diwali to you. Our next question comes from with an individual investor. Please go ahead. Oh, hello, sir. My question was regarding EBITDA margin. So when talking about EBITDA margins have moderated from 19.16% in FY twenty four to 16.51 in FY '26. But while we look at the h one... FY '27, we have seen an improvement. So I would like to know the reasons that could you drive the sustainable margin expansion going forward. Yeah. So, see, basically, this improvement is couple of factors, Rajat. One is the one is the one it has actually increased due to the product mix. But at the same time, the manpower...

29:22 There's been a reduction in manpower cost and also the other expenses also as a percentage reduced by 2.27. And the primary user being last year, there was ForEx losses, which is in... Which is that in each one of... If I said this, which is not there in this in this part of this half, which one of 27. And this net in terms of the in the improvement in the EBITDA margin of one point to 1.3%. And going ahead to get the... Anyone we are saying to be confident that we should see some further improvement in that with our market. We are targeting around 70 to 90%. We should see the continued improvement market coming with the sales coming quarter.

30:11 Okay okay, sir. Got it. Yeah. That was it from my end. Thank you. The next question comes from, an individual investor. Please go ahead. Hello. Am I audible? Hello. Yes. Yes, you are. Yeah. First of all, congratulations on a great letter on this. I just just I would like to ask something regarding the VIN sector that you mentioned that the remember VIN sector converted almost 42% of the revenue. The the driver team. So the demand in the Indian wins, there is approximately like it was... The reported demand was approx... 3.1 gigawatts from the September 3. It just roughly flat growth as compared to last year's demand, but just in order for us to achieve the, you know, the previous guidance of of the 30% growth. So, like, I would like to...

31:14 In that conversation, I would like to ask that what is the client contribution, like, the order confirmation from the top three, you know, which you are supplying? And, like, how do we plan to increase the, you know, our share of revenue from those? Like, can you... If if you can take a night on this? Sure. I'll answer this question. So, basically, as you rightly mentioned, the first half of India, which was not growing at the rate before happening earlier. But for Gala, as we discussed in the past, our base is still very small compared to the demand of these wind turbine companies. And our share of business with most of the wind companies is between 5% to 25, 30%. So we have enough room to grow with these wind companies.

32:03 Second thing which happened, which is positive for Gala is we have also moved up the value chain. And most of our sales were happening in onshore wind in last year. But in this quarter, particularly, we also started exporting our partners, basically smart partners for offshore wind application. So it's the addition of segment for us considering the demand increase in offshore as well. Third, of course, we are continuing to focus on adding new customers in India and global. And fourth, very important is we started this journey of partners by addressing only some portion of market that is just, which we were supplying from and initially. But since last one year after successful implementation of our plant and approval of the new product category, which is gold, which is required by all the wind OEMs, particularly for tower applications. So this is additional product line, which is also driving this growth.

33:01 So we are very positive considering the current order book as well to grow the business of wind industry at least for next one to two years because of these factors. Okay. So I had another question, like, something like, saying the employee cost has increased, like, significantly, and, not commensurate with the revenue growth. So, like, is there any specific reason for it? Because it will be the same a client ramp up. Hello? Yeah. Yeah. Percentage, it does actually reduce for the this quarter even for the That is the reason.

34:06 I think yeah. I think so even the year half yearly. In half yearly, it increased marginally by point seven percentage. And, yes, we have added the quite high number of people, particularly market development in Europe market or US market, and we will see the lower percentage as we progress in second half. Okay. I'm sorry. If I can ask another question, you're down. You just... Can I ask another question? Yeah, please. Sure. You can go ahead. Yeah. Like, I wanted to know that, because he told the... This this quarter the the new what thirty days, the 53 was an SFS 31, the 53.

34:57 So, like, I'm seeing the pattern that the excess demand has been rising over the last quarter from, like, 50 to 53%. Like, has been consistently rising. I mean, the excess demand, like, as a share of revenue, as a percentage of revenue has been decreasing. With this in, like, with this context, like, I would like to know that, like, as you know, the DSS facilities are at 85% capacity utilization. So are there any plans regarding expansion of the DSS capacity? Then, like, how do we, you know, plan to tackle the increase demand in the DSS sector? So in DSS, we are continuously increasing capacity in the given space, and this will debottleneck some of the process plus some outsourcing facilities out there, like, machining can be outsourced or heat treatment can be outsourced, number one. Number two, going forward, we have planned to put the DSS as well as SFS faster capacity in the new facility which we'll be setting up.

35:59 So both the growth area, we are seeing the capacity will be added in FY twenty eight. Okay, sir. Thank you, sir. I'll I'll get back in the queue. Thank you. Yeah. Thank you. As a reminder, if you have a question, please press star then 1 to rejoin into the queue. Our next question is a follow-up from with Latent PMS. Please go ahead. Hi, sir. Just one question. What would be the revenue this quarter from our Chennai phase one plant? Approximately, 15 CR which we are targeting from q three.

36:47 Got it. And this is running at optimum capacity? We are. Yes. Yes. There is some scope, honestly speaking, because part of the capacity of pay to also getting operational by November end, so there can be some additional sale which may generate in November or December month. So sorry. One basic question. In the deck, it's mentioned that it was thirty percent and twenty five. We are looking at 70% and and by '26. So the... So this 15, let's say, just limiting it to phase one capacity right now. This 15 is running at the max capacity that it can run or is there a scope on just this also? This is 50... Yeah. So 5 crore per month or 60 crore per annum is a phase one capacity, and we are running at almost that high, that phase one capacity.

37:41 Phase two will be operation by January, and we will try to... If we can keep on that by one month, and then we can get some additional revenue from that. And phase two capacity, approximately 50 crore, which will take it to a 110 crore, and that will be available in quarter four. Got it. So let's say, fifth... 50 crore is about 12 crore. 12 plus 60, 72. 72 plus 70% is 50 crores, which this is anyways will cross. So then it's 70% sort of underestimating the utilization? That... Honestly speaking, once we start this, particularly some machine, we'll be getting more clarity. But, yes, this 70 can be slightly higher based on the the current order for what we are seeing as of now.

38:32 Got it. And does the phase two capacity also need to go through the whole testing approval or just... Or it does not require any additional No. It doesn't require any additional approval because already the third and bolt facility already been approved. So they are the incremental capacity which we add on the... So in the plan. So they don't need any separate approval. Got it. And how then should we think about the ramp up of phase two overall? Should it be then 60 immediately in f y twenty eight? Oh, 50. Sorry. Yeah. Very much. I don't see there will be any big, like, gap or, like, effect. Subject to order flow, we should be able to start using capacity, you know, fifteen days to one month time.

39:24 Understood. And given that Chennai would then, let's say, hit full utilization because phase one is at 60 and phase two is 50 very quickly for that run rate, how should we incrementally think about from the phase one, phase two capacity only revenue ramp up, Pallavi? Is there an inflation link number that one should just assume the... If nothing else, then this much growth should keep on coming? Yeah. So broadly, Vara and Chennai put together where Vara phase two will be operation, Bharat where we are putting some incremental CapEx. With that, as I mentioned, I'm thinking next year, again, we are targeting 25% growth. And for quarter one and two of next year, we see we will be able to meet with the current capacity or Chennai phase two capacity.

40:18 For quarter three, we will review and if required, we will have some temporary arrangement rented space or something. And for... By quarter four, we are targeting to be ready with the old new facility. No, sir. My question was only related to Chennai capacity. Right? In FY '20 I think... Yeah. So Chennai capacity in FY '28, I think so we'll be replaced almost 80 to 90% in next whole year. Got it. So then my question was that FY '29, then how should we think about Chennai or it will remain at this 100 Okay. So for FY '29, we already started our... Excluding the land parcel there. In last two last two months, we applied it the ZIP code two time online.

41:03 So they keep on releasing the new plot online, and then we apply that. Unfortunately, we couldn't get that. So we will keep on applying, and otherwise, finally, we started exploring through the private channel as well. So we would like to acquire one more land parcel of three to five acre or maybe five acre near to a plan so that we can start working for FY '29 capacity. Got it. Understood. Understood. This is helpful. Thank you. And... I just to add, the backup plan, do... In a new call also, I mentioned, as a backup plan, we have a possibility where we can set the third facility and a long lease basis premise, and we can add a whole facility within the... Our own premise.

41:50 And we already shortlisted some of the long lease premises, which are easily available. So we will wait for some poor period. Otherwise, at some time, if required, then we can finalize the long lease arrangement and move there in Chennai, new facility. So I... We don't see any big constraint in expanding in Chennai as of now. Got it. Understood. Understood. This is helpful. Thank you, sir, and wish you, you know, a very happy party. Thank you. Our next question comes from with an individual investor. Please go ahead. Yes. Thank you for the opportunity. So my question is with respect to segmental demand. Like, DSS contributed 53% in the first half of the revenue, while SFS and CSS contributed 3116%, respectively. But which segment is currently witnessing the strongest demand momentum?

42:47 And how do you see the segment mix evolving over the next two, three years? That is what I would like to know. So I think the Gala product segment point of view, DSS and SFS are driving the growth as you have seen in last few quarters also. And in both these segments, we are developing domestic as well as global market. And that's the reason the growth is higher than CSS, where we are mainly focusing on India market in CSS. As well as the industry segment is concerned, we are seeing major growth coming from three industries. One is renewable, where we are seeing growth opportunity will continue to be in wind and electrolyzers also going forward. And in the industry, we are seeing lot of interaction, particularly with electrical equipment, off highway equipment, even in India as well as the global level.

43:38 And, of course, we are adding continuously new customers in these sectors as well. Within mobility, think automotive, since we are focusing only on India, it will grow by about 15%. But then we are seeing lot of new opportunities coming at the company level, starting with GALAPREC, the spring, even for trial spring and partners going forward. At the next two to three year perspective, I think renewable energy, which will contribute about 35 to 38%. Industrial segment, which will contribute approximately 35, 37%. And mobility, which is automotive plus, they will contribute about 25. This is a broad level we are seeing. And in three to four years perspective, GISBREC and partner, both will be about 30, 42% of our turnover, and, CSS will be about 10 to 12% of our term.

44:31 Okay, sir. Got it. Also, my another question was with respect to the solar power project that has been established in Nandir, Maharashtra. So I just wanted to know, like, what were the key considerations behind selecting this location, and how will this project benefit the company in terms of power cost, energy efficiency or the long term operating margins? Yeah. So I will answer this. Basically, solar is a renewable power, which brings two advantage. One advantage only in the cost itself. And second one is in the renewable, we are exporters and see them and all calculation take place where we get the benefit of the renewable energy. And over and above, we also committed for the environment, and we want to work towards that. As far as the commercial sense is there, it's a CapEx cost of 6.2 crore.

45:19 And this is a place because it's a open access government of Maharashtra has a policy where if you don't have space near to you, then you can put this solar park in the remote place where the land cost is very cheap. And there, you connect with the grid. And whatever solar you generate there and connecting grid and supplying to the government of Maharashtra, you can take the advantage and you can take this... A flip from that power unit, what you are utilizing at your plants, which are there at Wara. So, Nandit, just because of the land was cheap and solar part, that's how they set up the solar part. The annual benefit already mentioned, approximately 1.35 crore after reducing the interest cost of 5 crore term loan, suppose we avail that. So overall, we've seen gross level. We will be getting the payback in full than half year.

46:13 And the... This is a gateway benefit, which will add to the e p and l. Okay, sir. Thank you, sir, for the explanation. Just lastly, on the front of exports, I just wanted to know, like, it's contributing approximately 36% to the first half of the revenue. So how is demand evolving across Europe and The US? Are there any changes in the competitive intensity in this market? Currently, I think we don't see any major change in competitive intensity in last few quarters. Of course, the existing customer growth is not much, but I think because of addition of lot of new customers, which continuous initiative we are taking in Gala as a part of business development, and also adding resources in these countries. As we mentioned, we have added only persons in Europe. We are adding persons in US.

47:04 So by acquiring new customers and getting competitors here, our growth is sustainable at least for next three, four years in this market as well. Okay, sir. Thank you. That... Those those are all my questions. Thank you for explaining. The next question comes from a follow-up from with. Please go ahead. Hi, sir. Just a data check question. January, phase one went live somewhere in August of last year. Right? And did about 5 crores in q two of last year. Yeah. Exactly. No. No. My question is Chennai plant, q two last year was, think, 5 crores of revenue contribution, which this year is 15 crores.

48:01 So if I remove the base effect of Chennai plant and then look at the revenue growth in h one for Vada, it only comes to around 7%. Is that a fair estimate, or am I missing something? I think I'm missing something because the distribution itself is grown by 25 or 30%, and that's coming from 100% from the only. We're talking only for SFS division or company as a whole? I'm not clear. Company. I'm saying overall company. No. No. But something is missing here. You're talking h one to h one? H one to h one.

48:47 So h one to h one, the sales grew from $1.34... $1.35 crore to $1.70 crore, which is almost a 35 crore. 34 became $1.60 and $1.70. Okay. Yeah. 30 is coming from Chennai, which was five last year. So 20 crores of this increase is coming from Chennai. It's two Of 25. Yeah. Give me five. Last year in current year same? SFL last year in Chennai was only 64 lakhs and current year it is 22 crores, HR. And the government h n to h n comparison for Chennai. So Chennai was 7 crore last The last year, SFS Chennai was just 64 lakh because it's currently from August 25. Only two months were there, 64 lakh for the turnover.

49:46 And current year, it's showing up. H one turnover is 52 crores. Sorry. How much? 22 crores, currently. 22 Yeah. So 7 and 15 for, let's say, h one... Q one, q two in this year versus zero and point six four for last year. Correct. Okay. Then adjusting for it, then it's a 10%. Then is it a correct number? One seventy minus 23. Yeah. Yeah. Right. So, indirectly, your question is all the growth is coming Hello? Hello? Yeah. From the point of view, yes, the growth is coming from Chennai, 32 crore growth, and remaining growth coming from GALAPREC.

50:45 Got it. Understand. So that was my just data keeping question. Understood. Yeah. Plan by decision. Yeah. Correct. Yes. Got it. Understood. Thank you. And just one... And just to... I'm not realizing this first time and with your question. So in Chennai, last year, as I said, while I was delivering more because as of which Chennai was not ready, This year, because now, you may go ready, then to some extent, we have reduced that and up to the normal capacity. We cannot Got it. Understood. Understood, sir. This is it, sir. Okay. Thank you. The next question is a follow-up from, an individual investor. Please go ahead.

51:37 Thank you, sir. Sir, I would like to ask, like, with the, you you know, the new developments and the commissioning of the solar power plant, increase around the, know, it would be very, very helpful if you can give the guidance regarding the EBITDA margins for the coming quarters, like, the last month, the guidance you gave of 17 to 19%. So will it be, like, updated or, like, what what can be regarding from the... From August, like, regarding the EBITDA month? Think going forward also to... Our guidance, we still maintain that we are doing target EBITDA margin between 17 to 19%.

52:24 No major change in that, and that will still remain that the target will be between 17 to 19% only. Okay. Thank you, sir. Thank you, sir. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you all for participating in this earning call. I hope we have been able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, please reach out to our IR managers by... Well, in advance. We wish you a very happy and safe deposit to all of you, and you have delivered, sir. Thank you, all of you.

53:18 On behalf of Allianz Capital Markets Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.