Pitti Engineering (NSE:PITTIENG) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, we welcome you all to the Q1 FY 'twenty seven Earnings Conference Call of Pitti Engineering Limited. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions and expectation of the company as of date of this call. These statements do not guarantee the future performance of the company, and it may involve risks and uncertainties that are difficult to predict. 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. Please note that this conference is being recorded.

0:47 I now hand the conference over to Mr. Akshay S. Pitti, Managing Director and Chief Executive Officer. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and thank you for joining the Q1 FY 'twenty seven earnings call of Pitti Engineering Limited. Along with me are members of senior management team and our Investor Relations partners from SGA. Our financial results, investor presentation and related disclosures are available on the stock exchanges as well as the company's website. I hope you have had an opportunity to go through the same. Let me begin with a brief overview of the broader operating environment and growth drivers. The first is localization in China plus one opportunity. Historically, China has been the largest capacities across industrial areas such as electrical steel laminations, casting and machining.

1:39 We are seeing customers increasingly look at India as an alternate manufacturing and sourcing base. This is particularly visible in mining equipment, data center generators as well as specialized industrial applications. Second important trend is a shift of manufacturing from Europe to India. The sharp increase in energy, labor and material costs in Europe has impacted the competitiveness of European manufacturing. In motors and generators as well as casting and machining, customers are increasingly evaluating India for sourcing and manufacturing. Importantly, this opportunity is not limited to direct exports as an increasing portion of what we supply to the Indian operations of our global customers are eventually getting exported, creating an indirect export opportunity for us as well. The third driver is electrification.

2:25 Electrification is creating structural demand for electrical steel laminations at both sides of the consumption spectrum. That is the energy generation as well as consumption. We believe this is a long term trend that will support our growth of lamination business in the future. Within this environment, we are particularly well positioned because of the breadth of our capabilities. We have progressively expanded from lamination into casting, machining, shaft manufacturing and integrated assembly. What differentiates us is our ability to provide multiple components and processes under one roof. This becomes particularly valuable in complex applications such as railways, wind power, specialty motors or highway equipment, where customers increasingly prefer integrated solutions rather than a smaller supply base.

3:12 Importantly, our capacity expansion has historically been gradual and closely linked to customer demand. However, the level of demand and opportunities that we are seeing today require us to undertake larger capacity additions. We have recently commenced operations of the previously announced 150 crore CapEx, which was announced last year, increasing our sheet metal capacity to 108,000 tonnes and augmenting our casting and machining capacity. We are now progressing with the INR $2.90 crore investment for our greenfield casting facility in Hyderabad. This facility will help consolidate our foundry operations and provide the infrastructure required for the next phase of growth. Our objective is to build capacity ahead of the demand curve. Speaking of sectoral demand and growth opportunity is broad based. Our data centers have emerged as a strong near term opportunity, giving the significant power requirements for both primary and backup power generation.

4:08 We are seeing strong demand from customers such as Cummins, Marathon, Nidec and are also developing opportunities with a couple of more marquee customers at the same time. We remain mindful that the pace of AI data center investments may not be sustainable indefinitely. Therefore, we are confident about the underlying growth in regular data centers, driven by the cloud adoption and data localization. We remain measured in our approach to the overall data center opportunity. Beyond data centers, we are seeing strong visibility in railways, metros, mining and off highway equipment and specialty end use applications in industrial sector. Modernization of North American railways and increasing mining activity are all supporting demand for our products.

4:54 Over the longer term, we are also seeing automotive and electric mobility as an important opportunity. While our presence in automotive is currently limited, we are actively looking to participate more meaningfully as India's automotive manufacturing ecosystem expands and electrification creates new opportunities. Overall, we believe Pitti has an important stage in its evolution, the combination of global supply chain realignment, India's manufacturing competitiveness, electrification and expanding capacities and capability across lamination, casting, machining and integrated SMDs provide us with a strong platform for sustained growth. Coming to the operational and financial performance for the quarter. Our revenue mix of traction motor and railway components remain the largest contributor, accounting for 28% of revenue.

5:44 This was followed by power generation at 15%, industrial and commercial applications at 12%, mining oil and gas at 10%, special application motors at 9% and data center at 5%, renewable energy at 3%, other segments at 17%. This diversified revenue profile reflects the broad based nature of our business and presents across several structural growth segments. Moving to volumes. Total lamination and assembly volumes stood at approximately 19,200 tonnes, adjusting a healthy 18% year on year growth. Importantly, within lamination, higher value added assemblies, including integrated rotor shaft and stator assemblies grew faster than loose lamination.

6:30 This reflects a continued improvement in the product mix and increasing contribution from value added offerings. Total casting and machine components volumes stood at 13,191 tonnes during the quarter, a growth of 4.2% Y o Y basis. On capacity utilization, we witnessed meaningful improvement across our operations during the quarter. Shield metal utilization increased to 73% in Q1 FY 'twenty seven compared to 70%. Machining utilization also improved to 86% compared to 82%. Casting and fabrication utilization stood at 72%. Turning to the financial performance. Revenue from operations for Q1 FY 'twenty seven stood at INR $5.29 crores compared to INR $4.57 crores in Q1 FY 'twenty six, a growth of 16% Y o Y. Adjusted EBITDA stood at INR 89 crores compared to INR 78 crores for Q1, that is representing a growth of 14%.

7:33 Adjusted EBITDA margin was 16.8% for the quarter. Adjusted TAC was INR 32 crores compared to INR 26 crores in Q1 FY 'twenty six. As the recently concluded CapEx comes on stream, we are confident of achieving significant growth in the remaining year. And therefore, we are revising our annual target to 82,000 tonnes for lamination from 78,000 tonnes as previously stated in Q4 conference call. Overall, we remain focused on executing our expansion plans and deepening our relationships with existing customers and capturing new opportunities across both domestic and global markets. With that, I will now open the floor for Q and A session. Thank you. Thank you.

8:20 Ladies and gentlemen, we will now begin the question and answer session. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Take the first question from the line of Bala Subramaniam from Aryans Capital. PITTIE is on mute your line and proceed with your question. Sir, I'm audible?

9:07 Yes. Please go ahead. Yeah. Good evening, sir. Thank you so much for the opportunity. Sir, I'm looking at high radio stator and rotor assembly. The volume growth is nearly 37%, which is outpacing the loose lamination growth of 16%. So which are the applications factors we have supplied especially for high value stator and total assemblies? And secondly, earlier call mentioned about Rakasking's EBITDA per ton, it's around 30,000 to 35,000, while machine castings around 80,000 to 100,000. So if you could mention about the high value added assemblies and integrated assemblies EBITDA per ton also?

9:57 So the growth in high value added lamination assemblies is primarily driven from data centers. It's driven from special industrial use, mining of five a and rail base. So these are the areas where these higher value added SMBs are typically used, and that is the sectors, as you can see, which have grown in the recent past. As to the EBITDA per ton of the integrated SMEs, it's very difficult to say because it depends on the kind of casting and machining, which has been integrated into the lamination assembly. So the margin, you cannot literally go on an EBITDA per ton basis there. It's a mix of all three verticals, which is machining, casting and lamination. Sir. Sir, data center side, you mentioned our revenue share is around 5%.

10:50 Like if you look at most of that demand is coming from U. S. And Europe market, especially for data centers. So whether majorly we are supplying to domestically or we are also getting lot of traction from exports market side. So we could share like is there any new customer additions across geographies and whether it's primarily for high value stator rotor assembly for cooling and power packer system for any other components we are supplying? So what we currently classify as data centers in our revenue mix is primarily the power generation side of data centers. Anything that we may be supplying for cooling application, we would not have that distinction given by the customer to us. So it would still be classified under industrial use.

11:42 As far as the data center that is classified into PPT, which is for the power generation side is concerned, we have direct exports to U. S. For one customer. And for a couple of other customers, we are supplying this product in India, which is both used for local market as well as the export to other countries. Okay, sir. So my third question, the plan, the CapEx of INR $2.90 crore, if you could share the breakup between machine components facilities and like castings or assemblies? And if you could share the road map, I think it's planned to commission by Q1 FY 'twenty nine. So how much CapEx by FY 'twenty seven and FY 'twenty eight? Can... We have already incurred about INR 60 crores of CapEx from that INR $2.90 crores CapEx announcement.

12:34 It's a greenfield and expansion. So we have started with the land acquisition. I would say that as you can see in the PPT Slide five of Q4, we have given the breakup between machining and machinery and infrastructure investment. Infrastructure investment is about 3270% is going towards plant and equipment. I will not have a quarter or year by year expenditure plan, but the capacity is expected for commissioning by Q1 FY 'thirty, as we had mentioned in the previous call. Okay. Got it, sir. Thank you. We take the next question from the line of Mohit Jain from Divine Jockey, PMS.

13:29 Sir, I have just this question on exports. So in absolute terms, exports were roughly flat. Year, we did about 137 crore, this year INR 139 crore vice versa. And you've been highlighting this sign up this one and tariff driven sourcing ships as a tailwind for you. So and on the other hand, domestic grew 23%. So is this export flatness just below the order phasing within the year? Or you are really seeing customer delays? See, exports will again pick up in Q3, Q4. And the direct exports are remaining kind of steady, registering nominal growth. What's the bigger opportunity for us is the indirect exports.

14:19 Like I said in my speech, we are seeing increasingly a situation where we are supplying to the local operations of our global customers, and those products are getting made in India and then exported all over the world. Okay. So you're thinking in the second half, you'll see a surge in exports? Yes. I think Q2, Q3, Q4 quarter on quarter, you should be seeing improvement in direct exports as we ramp up the new capacity. Got it. And just lastly, we said that we had some LPG issues, not only the entire industry because of the war. So has that issue subsided?

15:05 And we were also planning to do some electrification there. So what's the status there? So we are currently doing the electrification. A lot of it is already done. And right now, there is no LPG issue. So we have steady supplies of LPG coming in. Whatever is the incremental cost, obviously, is being incurred by the company, and it's being compensated by the customers as well. Got it, sir. You. Thank you, have a nice day. Yes. Thank you. Thank you. We take the next question from the line of Rahul Kumar from Vicaria Fund. Please go ahead. Yeah. Hi. Thanks. Think congratulations on the great set of numbers actually.

15:52 Just one question on this margin. Actually, if you see the, you know, the value added product mix has actually improved for the lamination as well as the machine component also have improved as a share of overall business. But if I look at the margins, actually, they are more or less flat. So what would have driven that? So if you look at the cost in the P and L, manpower cost is slightly higher when compared to the previous time, and that's primarily because for the CapEx that we have incurred, we have putting all the manpower and expenses in place. As we start using the capacity and the operating leverage kicks in, the margin will improve. Okay. Okay. Okay.

16:42 Is there also a case that the traction motors, which you supply out of higher margin versus a company average? And given the fact that I think this quarter, there is some more softness in the traction motors. Does that also lead to some margin softness? No, I would not say that would be the case because if you see the other three segments, which have really grown very well in this quarter, namely your mining and oil and gas segment as well as the special purpose applications, these typically have a superior margin when compared to even railway products in certain cases. Okay. Okay. So it's just that the operating leverage needs to kick in because we have finished the CapEx of INR 150 crores, and obviously, the staffing and variable costs have all come in, and the leverage has not come in in terms of the operating leverage.

17:37 Understood. Got it. Got it. Got it. So I think you have I think you mentioned in the opening remarks of upgrading the volume guidance for this platform to 82,000. So just extending this, let's say, to FY '28 and '29, what's... What are the targets for that? And, you know, do we have the capacity or, you know, you will decide to expand, let's say, at the end of FY 'twenty eight or something like that. So if I to look beyond FY 'twenty seven towards 'twenty eight and 'twenty nine, like I had mentioned, I think in one of the previous calls, we are strategically, we would look to have a fully owned facility in Bangalore akin to something like a facility that we owned in Authentabad today.

18:27 So eventually, that would is something that we should start working on. If I look at the capacity side with this 82,000 tonnes being the target for current year and 108,000 tonnes being the capacity, we only have a headroom to grow about 8,000 tonnes at the current facilities, assuming the 80% operating efficiency. So definitely, for FY 'twenty eight, there will be some incremental CapEx to increase the capacity, but we will do it closer towards Q3, Q4 time frame because we can still modestly expand in some of the facilities. Or Okay. Maybe '28 and '29, we should be looking at doing the CapEx in Bangalore for that facility, which I mentioned. Okay. Understood.

19:12 Understood. But we are tracking it very closely with the market trends and how the demand is shaping up because we don't want to be exposed on making the investment and not having the business. Okay. Okay. But in terms of volume growth, let's say, if we are looking at 17%, 18% growth for this year, for the next two years, do you also want to look at similar kind of a growth or because If of all I just look at the outlook and the demand forecast from the customers, we do see that kind of a growth over the next three years. But it's coming from segments which are, I would say, can change very quickly. So like mining and oil and gas are segments which go up very fast and can correct very fast. And data center is obviously a very new segment, and it's growing very, very fast. So it's something we don't want to invest ahead of time too much for.

20:15 Understood. Understood. Understood. Okay. And I think we had we have done the expansion of facility also in this quarter. I think that is finished. So if I remember, right, the last time you had mentioned that the volumes for the costing target would be somewhere around 16,000 for this this fiscal. Right? And I think that currently the share of your machine components is is, I think, 5050% plus. So do you want to... I mean, do we want to maintain a there's a pretty sharp jump actually, almost 60% kind of a jump over the last year. So do we have the demand visibility for that? And two, I think, what will be the share of machine component in that?

21:09 Yes, I would say that both the product categories are growing, casting and machine components. Obviously, the growth in machine components is higher as more and more customer wants machine components rather than just a raw casting as a supply chain solution for them. We have very strong visibility in the machining space. So part of the CapEx that we announced, $2.90 crores, taking the machining capacity to 10 lakh 80,000 machine hours, will be progressively implemented over the next few quarters. I mean, every quarter on quarter, we'll be having capacity addition. So you should see machining volume increase. Casting capacity has gone to 24,000 tonnes. We would be upward guiding the casting numbers to about 17,000 tonnes as well.

21:56 And out of that, what will be the share of machining would depend on how quickly our machines come in and we are able to put them to use because the current capacity utilization on machine is almost 86.33%. And that is the biggest bottleneck for us in terms of ability to grow the machine components. It's not the order book, the ability to get machines fast enough. Understood. Understood. So in summary, I think we can see a casting volume sharp jump over over this year. And depending upon the machining capacity, we can also ramp up the the higher value and machine component as well. Yes. Okay. Okay. That's great.

22:44 Just last question on the debt plans. Right? I think last time when we discussed, the debt was a bit elevated because of the higher inventory situation there. So what is the situation now? And where do we want to where where the debt settle over, let's say, next one year or two years? So right now, the net debt is somewhere around INR $4.91 crores as of last quarter end. And we have already incurred, like I said, about INR 60 odd crores of expenditure out of the INR $2.90 crores. So despite that, we've been able to meaningfully reduce the net debt. And I think there's still potential to further rationalize our working capital to get tune over INR 25 crores, 20 crores.

23:33 Okay. Okay. Okay. Okay. But actually, our interest cost hasn't actually gone down. I think it's even though the debt has actually reduced. Yes. So that's the finance cost. Actually, quarter, if you see the dollar has moved quite sharply due to the West Asia crisis. And there's a ForEx impact of about INR 2 odd crores, which is accounted in the finance cost. The interest and bank charges are about INR 19.6 crores and the ForEx impact is about 3 crores, not 2 crores by mistake. Okay. Okay. Understood. Understood. Okay. So that is more related to the currency translation rather than actual interest cost. Yes. Okay. Understood.

24:18 If you have to take a comparative number for Q1 FY 'twenty six, it was, I think, about INR 1 odd crores, which was a ForEx impact. So rationalization of interest and cost and bank charges have taken place, but the ForEx is not allowing you to be visible on the P and L. Understood. Understood. Understood. And just a last question, I think on the other income part. I remember, we had done, I think, INR 400 crore of kind of CapEx. And every year, we are getting this incentive from the state government. And you were having some shift of this seven year plan to nine years plan. Just can you help us understand how would it pan out in terms of impact on P and L for this year and So the next you had done INR $2.20 crore CapEx, which was giving us the incentive in the previous years. From this year, we are supposed to move to the expansion plan, which we have done of INR 400 crores, which would have typically ended somewhere around INR 40 crores a year. However, the eligibility certificate that we had received is for a seven year reclamation period.

25:28 So the run rate for us to recover the money is much higher than what the current sales are. So we are evaluating whether to start claiming the incentive from current year or next year. So as to maximize the net cash flow. We are more or less coming to a conclusion that this year, we would not be taking the incentive income because we would not be able to recover a large chunk of the money that we can recover next year. Okay. Okay. So last year, I think we had some INR 20 odd crores in the quarter two. That was basis of previous CapEx. This will not reoccur this year. This INR 400 crores, you are actually discussing with the government for a nine year plan. So possibly the next year onwards, you will start accruing that. Is that correct? If you are able to successfully get the nine year plan, then you take it this year because then the required run rate to claim would be much lower. Otherwise, we'll try to defer it to next year so that the sales increase and then the opportunity to reclaim the money is higher.

26:30 Understood. Understood. Okay. Understood. Not We want to spend on the government's decision. So we may or may not do it this year. But definitely from next year, we shall be getting it. Okay. Okay. Okay. Understood. And then previous incentive is already exhausted? The previous one is already exhausted. In terms of cash flow, are... Get to receive roughly about 70 odd crores from the government, which is expected to come in the next nine to twelve months. Okay. Got it. Got We We take the next question from the line of Shrikanth from FinPoint X Capital. Please go ahead.

27:22 Thank you. We have capabilities in making the starter, floater and shop, whether we are supplying our motors to industrial robot making companies presently? If we don't make the motor, we make the components for motors. I'm pretty sure that some of our customers will be supplying these motors to many robotics companies. For example, we supply robots, machines, laminations to ABB, and they also make robots. We supply to CG, we supply to Siemens, and I'm pretty sure they supply to companies like and others for as well. Okay. Okay. Then next question is that we are increasing capacity. As we have presently wind energy customers, are we planning to provide some new casting components to the same wind energy company going forward? So wind energy for us is a lamination side business. We don't do much for wind energy in the casting.

28:18 On the casting side, our largest customers would be coming from the mining segment and the railway segments. The wind energy castings are very, very large. Now if you see nobody is making a one or two megawatt turbine, people are doing three, four, six megawatt turbines and the castings are 20 tons, 30 tons. So that is actually beyond our manufacturing capability today in terms of equipment. Got the point. So how is the traction from mining companies from U. S. And Europe presently or inquiry something like this? It's very good. I think that's one of the key sectors which we are seeing, which will grow for us in the casting and machining space. You can see in quarter one already mining as a segment has grown substantially for us from 5% of revenue to over 10% of revenue.

29:09 And final question, it is very helpful. Can you application of our components in the green hydrogen and marine applications? What do you say for components in industry, not two industries? So in the green hydrogen space, we make anode and cathode plates for hydrogen electrolyzers for a customer in Europe. These are basically stainless steel components, which are machined and supplied to that customer. It's not a very large business, if I'm not mistaken, it's about 2,000,000 odd kind of a business. It's a potential to grow. And I mean, this is something they keep saying all time that there's a potential to grow, but we obviously stuck at 2,000,000. Coming to your marine thing, we classify that under special purpose motors.

29:55 We do make components for marine propulsion, electric propulsion for marine ships basically. We make marine generators. Okay. Whether they scope to increase order book from these two segments going forward? So if I'm to think about it structurally, there are good tailwinds in Europe and most of the world has mandated that in the coastal waters, people should not use diesel engines. They should use cleaner electric propulsion. So there would be tailwinds. In terms of our ability to expand, it all depends on how quickly the market expands. We have large market share with the key customers who make these propulsion systems in Europe.

30:43 And as they grow, we will grow that segment as well. And one final question is that we have superior capability in machining. So we are planning for any gear segment machining concept such as this planning to introduce from new CapEx? Sorry, I didn't get that. You mean, are we planning to do gear machining? Yes, sir. So we have very strong capabilities in machining, and we have some industrial customers who need a gear. For a gear, we need to be a complex of machining. So we are targeting first type of customers. Because their machining machining copper is very critical. So we have some strong experience from last many years. That's not my question. No. So we are not trying to enter the manufacturing of gas per se. The industrial gas manufacturing would be capability that we have and we can do.

31:34 However, in terms of a margin profile, we find that the products that we are making for mining of highway vehicles and special purpose applications are far superior. But eventually, yes, that can be an opportunity to expand our business into. We take the next question from the line of Sai Shriyas from Scientific Investing. Am I audible, sir? Yes. I sir, thanks for the opportunity. So I have a couple of questions. The first one is, can you confirm whether the current utilization numbers are on the latest expanded capacity? If yes, given the company is operating at higher utilization, why is the margins in the same range?

32:24 And is there any meaningful margin expansion opportunity going forward? So if you look at the capacity utilization from 108,000 tonnes for lamination in Q1, So the higher utilization is on the higher capacity. Okay. So is there any chance of margin improvement and any guidance for FY 'twenty seven? Definitely, your overall margins will improve as the utilization percentage inches up towards 80%. How much it will improve quarter on quarter is something I would prefer not to say right now. Okay. And the question is, what would be the full year tax rate? Because in the last year, Q4, you had told us that it will be around 33%.

33:11 So is this the same or is there any difference? Sorry, I couldn't hear your line clearly. If you can repeat the question. Sir, what would be the tax rate for FY 'twenty seven? Because in the Q4, you had mentioned that it would be 33%. No, it will be about 25%, not 33%. Effective tax rate is about 25%. Quarter one, we have a lot of right of use assets for our lease assets. And that has incurred deferred tax. And therefore, we have a lower tax rate on the P and L for quarter one. But the full year tax rate should be closer to 25%. Okay. Okay. And one last question. So given that 150 crore CapEx project is completed, is there any target towards debt reduction that by FY 'twenty eight or 'twenty nine, we will retire the debt?

34:04 See, the debt number is going to be dynamic. We already have a INR $2.90 crore CapEx ongoing, of which INR 60 crore is spent. Like I mentioned to someone in the previous call that if I look towards FY 'twenty eight and 'twenty nine, definitely, there will be requirement to enhance capacity in lamination of the market continues to grow. And then towards FY 'twenty nine, definitely, there will be a need for a facility in Bangalore. So the CapEx needs of the company for growth will continue. However, there will be earnings. Now how that will impact the net debt year to year, again, will depend on how quickly we do the CapEx or we defer the CapEx. Okay. Okay. And the one last question is, is there any opportunity for the inventory reduction and lower working capital?

34:53 And do we expect the cash flows to better increase? So like I said earlier that about 2025 closes for the potential to optimize the working capital. And beyond that, there would not be any opportunity to further optimize the working capital from today. Okay. Thank you, sir. Thank you. Yes. Thank you. We take the next question from the line of Pulskit Singhal from Dalmas Capital Management. Please go ahead. Thank you for the opportunity. When I look at the business last three years, the return on capital has fallen from 19% to almost 15%. Obviously, there was a state of acquisitions also. But what were you saying in terms of FY 'twenty seven also, it does this business seems to be just around even for the future. So how do you see this trajectory? Would it change any particular initiatives that you're doing to raise the return on capital? How should we think about The large ticket CapEx will be behind us apart from the Bangalore CapEx. I would not see that there would be any large ticket CapEx required to invest in land and infrastructure.

36:09 Beyond that, the investments would center mostly around equipment, and that will kind of again push up your ROCE. Currently, if you see the mix of CapEx, which was done and therefore, the increased deployment of CapEx, a large chunk of that has gone towards land acquisition and building creations. Okay. So the CapEx for next three years, what would they likely be? And what kind of incremental turnover can they provide? So if you have to really look at it, again, this is not something we are currently approved as a Board or announced. But if I were to assume that we go ahead and make a facility in Bangalore that would entail a CapEx of roughly about INR 200 odd crores.

36:54 And then in terms of another equipment, about INR 200 odd crores. So INR 400 crores plus the INR $2.90 crores, which we have announced, would be capable of taking us to a top line of closer to about INR 3,000 crores, INR 3,300 crores comfortably to that level. Okay. But since earlier, I mean, the business mix is also changing in terms of machining, etcetera. And that probably reflects better in terms of the margin aspect. So historically, your margins have been 14%, 15% and now closer to 16%, 16.5%. I mean how should we think about it three years out? Is it going to be closer to 18%, 20%? Or will it just be a very slow gradual increase from here on?

37:39 No, sure, it will be closer it will be upwards of 18% for sure with the CapEx on the casting and machining coming online and the value added products increasing as well as the core drop products increasing, your margins would be closer to 18%, 18.5% odd. But the casting CapEx would probably impact margins negatively first, I mean... That is unfortunately the case, Pulkit, as you are seeing, we are always having that CapEx, which is including the ROCE. And before the operating leverage comes from the CapEx done, the other CapEx kicks in. Right, right. And you... So if you think we have done the INR 150 crore CapEx and quarter two, quarter three, quarter four is the output of that CapEx. However, the $2.90 crore CapEx has kicked in.

38:35 Yes, yes. So what is the peak revenue, let's say, the current facilities, I mean, the current capacity, what do we have? From the current capacity, if I exclude the INR $2.90 crore ongoing CapEx and look at it, it should be about INR 2,500 odd crores. INR 2,500 crores and this goes to, let's say, INR 3,500 crores, 1,000 crores by incremental INR 700 crores of CapEx, which you talked about? By incremental INR 700 crores, but then that's not the full potential because you are investing in land and building in Bangalore as well as the foundry, which will be capable of much more. Okay. And lastly, project business also, we had some thoughts. Do we have some thoughts around? See, right now, if you look at it in terms of capital deployment, we are having a handful over here, and we are trying to manage the deployment of capital as judiciously as possible. So while that is an opportunity, which is quite enticing, I am more inclined to stay in my lane and do the business that we know well.

39:38 Right. Fair point. So last question, just so tax rates are expected to be 25%. Is that understanding correct this year and going ahead? Yes. But other income, we will not get for this year and it will start next year onwards, Yes. The incentive. Yes. Okay. Got it. You. We take the next question from the line of Rahul Kumar from Vicaria Fund. Please go ahead. Yes. Hi. Sorry. Can you just give us your guidance? I mean, your targets for EBITDA and part for next two years?

40:27 Like, what were your targets? Hello? Sorry. Think sorry. I think I was on mute. If I start from current year, I would look at the EBITDA of roughly $3.70 odd crores based on the current outlook. For the next year, we should be looking at a turnover of about INR 2,500 crores if we don't do the CapEx. I'm obviously going to talk ex of the incremental CapEx for lamination. So at a 90,000 tonne operating level, we should be looking at INR 2,500 crore turnover and EBITDA margin of about 17%, 17.2%. Got it. Understood.

41:18 Thank you. Ladies and gentlemen, due to time constraint, this was the last question, and we conclude the question and answer session. I now hand the conference over to the management for their closing comments. Thank you, everyone, for your time and joining us today. We appreciate your continued interest and support as we move into FY 'twenty seven. Our focus remains on disciplined execution and improving working capital, completing ongoing CapEx and scaling machine components, strengthening our position as an integrated engineering partner for customers across India and global markets. Thank you. Thank you. On behalf of Pitti Engineering Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.