Pitti Engineering (NSE:PITTIENG) Q2 2027 Earnings Call

0:01 We welcome you all to the Q2 and H1 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 expectations of the company as on the date of this call. These statements do not guarantee the future performance of the company and 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.

0:46 I now hand the conference over to Akshay S. Pitti, Managing Director and Chief Executive Officer from Pitti Engineering Limited. Thank you, and over to you, sir. Good afternoon, everyone, and thank you for joining the q two h one f y twenty seven earnings conference call of Pitti Engineering Limited. Along with me are members of the senior management team and our investor relations partners from SGA. Our financial results and investor presentation and related doc... Disclosures are available on the stock exchanges and on the company's website. I hope you have had the opportunity to go through the same. The global economy continued to face inflationary pressures and supply chain disruptions amid the ongoing conflict in The Middle East. With geopolitical uncertainties likely to persist, we are also in...

1:34 Witnessing price increases across our raw materials. Despite these challenges, demand remained robust. India's investment led growth and rising demand for value added engineering solutions continue to provide a favorable long term outlook for our business. At Pitti Engineering, we have evolved from a manufacturer of electrical laminations into a broader engineering solutions company with capabilities across laminations, castings, machining, and other value added components. This evolution has been driven by our focus on understanding customer needs, expanding our manufacturing capabilities and building long term relations with leading global OEMs. Looking ahead, we believe three structural forces are shaping the demand for engineering industry and creating opportunities for us.

2:20 First, the sustained investment in infrastructure and manufacturing, ongoing public and private investment in railway, power, and manufacturing is expanding the installed base of rotating electrical equipment. As infrastructure and industrial activity grow, so does the need for motors, generators, and precision engineered components that go into them. This creates opportunities for us to support customer across wider range of applications. Second, the growing electrification and digitalization of economy. Driven by AI data centers and infrastructure, The shift towards a more electrified and digital economy is increasing the need for efficient motors, generators, and reliable engineering components as these applications evolve and customers are looking for products that deliver greater efficiency, precision, and performance.

3:09 Our expanding capabilities across lamination, casting, and machining positions us to address this broad range of requirements. Third, the consolidation of global International OEMs are increasingly looking to work with manufacturing partners that can offer scale, consistent quality, reliable execution, and wide range of capabilities. This creates an opportunity for integrated companies like us to deepen existing customer relationships and increase our share of business and participate in new platforms. Together, these trends provide a favorable long term demand for our business. Our focus on converting these opportunities into sustainable growth by expanding capacity in a phased manner, strengthening our engineering capabilities, and continuing to deliver on customer expectation.

3:59 A few months ago, we had announced the first of our major cap... Capacity expansion for a greenfield facility in Hyderabad covering the casting and machining. The project was to be commissioned in a phased manner through FY thirty. This investment was backed by strong order visibility for marquee customers across high growth sectors such as data centers, mining of highway vehicles and railways. Building on this, now we are announcing a new capacity expansion in lamination and machining. The objective is to consolidate our lamination operations in Bangalore and progressively increase our sheet metal capacity to 160,000 metric tons per annum and machining capacity to 1,310,000 hours by financial year thirty one.

4:44 This expansion will strengthen our ability to serve existing customers, pursue new opportunities and support long term growth. The total planned CapEx for this project is INR $4.50 crores, comprising approximately INR 125 crores towards land procurement and the remaining INR $3.25 crores towards infrastructure, plant and equipment. The new greenfield facility will provide a platform for consolidating the Bangalore operations and creating capacity for the next phase of growth. The entire investment will be incurred in a phased manner till FY thirty one with capital deployment linked to project milestones and capacity requirements. This approach will allow us to align investment with business needs while ensuring that capacity comes on stream in a timely manner. The project will be funded through a combination of internal accruals and debt.

5:36 Coming to the operational and financial performance. In terms of segment wise revenue, you do FY twenty seven traction motor and will be con... Components continue to contribute the highest share of the revenue at 27%. Our generation accounted for 16%, followed by industrial and commercial applications at 12%, mining, oil and gas at 10%, special purpose motors at 8%, and data centers at 7%. This diversified mix reflects the range of applications we serve and multiple demand drivers supporting our business. Among these segments, data centers have emerged as a strong near term growth opportunity. As we have highlighted on multiple locations before, the demand remains robust, driven by significant power requirements of AI led data center infrastructure.

6:22 The need for reliable primary and backup power generation. We are seeing strong demand from customers such as Cummins, Marathon and Nitek in this segment. We are also developing new opportunities with few additional marquee customers in the same segment. Beyond data centers, we continue to see strong demand visibility across railways, metros, mining off highway equipment and specialized industrial application. In railways, the modernization of North American infrastructure along with investments in rail networks and mobility solutions is supporting demand for our products. Similarly, increasing mining activity and demand for off highway equipment are creating opportunities for our machine component segment. Overall, our diversified end market presence allows us to participate in multiple growth opportunities.

7:12 On the volumes front, total lamination and assembly volumes for the quarter stood at 21,600 tons, a growth of 26% Y o Y. H1 lamination volumes increased to 41,000 tonnes, up by 22% compared to H1 FY 'twenty six. Total raw casting and machine components volume for Q2 FY 'twenty seven was 3,086 tonnes, growing by six percent and six thousand five hundred and fifty four tonnes for H1 with a growth of 1.6%. Coming to our financial performance. Before discussing the numbers, I would like to highlight that in September 2026, the company merged its two subsidiaries, Pitti Industries Private Limited and Dakshin Foundries Private Limited with the parent entity, Pitti Engineering. Accordingly, the financial results for q two and h one have been reported on stand alone basis with previous numbers restated to ensure comparability.

8:08 For q two FY twenty seven, our total income stood at 581 crores compared to rupees 499 crores in q two f y twenty six, suggesting a growth of 16.3%. For the half year, revenue grew by approximately 15% to 1,110 crores compared to INR $9.63 crores in H1 FY 'twenty six. Adjusted EBITDA for the quarter stood at INR 91 crores compared to INR 80 crores in Q2 FY 'twenty six, a growth of 13%. The EBITDA margin stood at 15.8%, impacted by an increase in ForEx loss, increase in consumable and packing costs, and along with increase in fuel and power costs. Adjusted PAT for the quarter stood at INR 36 crores compared to INR 43 crores in Q2 FY 'twenty six. It's important to note that in Q2 FY 'twenty six, we had INR 21 crores of other income from Maharashtra's comments for the package team of incentives that we enjoy for our facilities investment.

9:09 We have decided to defer this claim of incentives in the current year to the next financial year with the objective of maximizing its cash flow. To conclude, we remain focused on strengthening our market positioning and building capacities to support long term growth. Our diversified end market presence and strong customer relations provide a solid foundation for future opportunities. We continue to remain focused on operational efficiency, cost management and disciplined capital allocation with our ongoing expansion plans. We remain confident in our ability to deliver sustainable growth over the coming years. Thank you. And now we can open the floor for the Q and A session. Thank you very much. We will now begin with the question and answer session.

10:06 The The first question is from the line of Praneroop Chatterjee from Bowman Capital Management. Please go ahead. Hello. Good afternoon, sir. Am I audible? Yes, sir. Yes, We're audible. Yeah. My first question was obviously on the margins. You mentioned three things, FX, packing, and consumable inflation, and fuel and power cost inflation. Do believe they were to quantify how much was the FX loss portion and how much was the same loss or gain recorded in the previous quarter?

10:58 Just one second on that. Apart from these, also, the raw material prices have gone up. That would have anyways, you know, reflected in a lower EBITDA margin as a percentage. So they are actually also on the RM front. The forex loss in the quarter 4.61 crores. And what was it in the last quarter, like, in q one f y twenty seven? Q one FY twenty seven. Just hold on. I don't have that number over here. I think our partners can get that across to you from next year. Sure. Just to be sure, this is recorded in other expenses, which is above EBITDA?

11:46 Yes. Got it. And... Okay. Fine. This is something I would expect would be sort of one off in nature. Coming to the other costs, right, how do you see those evolving? Obviously, crude has not come down at all. On fuel, packing and consumables and also the raw material inflation, Any sense on if you're able to pass on and hence, could margins recover to the 16%, 17% range? Or we should expect similar level for the rest of the year? See, I would say that the fuel and power cost is going to be passed on from January onwards. Typically, during the year, we don't, you know, go into the consumable level because of a small percentage of overall cost. This is a unique situation where due to global supply chain issues and the oil prices due to Middle East have remained consistently high.

12:41 So, like, I would say that by quarter four, you should see that coming back because those are annually readjusted. The steel price inflation is a quarterly pass through. So those we are able to pass through as per normal contract terms. Understood. My last question is on casting volumes actually dropped quarter on quarter. And this quarter, I think your capacity is also came in around August. We had a guidance of about, if I recall, 16,000, 17,000 tonnes for the year. Are you still on track to meet that guidance? Because that will mean substantial pickup in the second half. The line that you see at 6,054 tons for the half year, these are casting and machine components going as pure vanilla machine components.

13:32 To do the comparison vis a vis the overall sales, you also have to add the other machine components going into the lamination assemblies Okay. Which is just above the total lamination and assembly quantity, which is 2,185 tons. Like, 2,024 tons. Got it. So your your 17,000 number is after you add both of this, the target for effort, mister? Yes. Okay. And if you could just confirm one number for me, what is the incentive per year you would realize from Maharashtra? Because I think I was slightly confused. There was two different terms, nine year and seven year. So basis whatever term is agreed or finalized, what would be the incentive per year you will actually be able to book from next year, not the cap?

14:23 So we are eligible to receive up to 400 crores of the incentive. If we take it over seven years, the eligibility would come to 57 crores. If we take it over nine years, it would come to 44 crores. However, having said that, based on the local Maharashtra sales, we don't estimate that we'll be able to recover more than 40 crores per annum irrespective of the eligibility, at least in the near term. Okay. So... But that's still bulk of the cap. Right? It's a reasonable part of the cap. Yeah. Yeah. It's a it's a good chunk of the capital, which is why we are trying to work and increase the recovery period to nine years instead of seven years so that we can maximize the recovery. And obviously, as time progress, we'll be able to recover more than 40 per year also.

15:14 Got it, sir. Thanks a lot and all the best. Thank you. Thank you. The next question is from the line of Mohit Jain from D. R. Chokshi Sansof Private Limited. Sir, on the EBITDA margin Yes. Mostly the first participant asked the question, but my question is more more of a follow-up. You said this 100 bps decrease was mainly due to fuel and power cost, and raw material. I'm seeing gross margin was impacted 60 bps. So I'm thinking that raw raw material impact would be 60 bps, and other fuel power would be around 40 bps.

16:00 Also mentioned that Full power and ForEx also. And ForEx. Yes. Right. You also mentioned that... So probably you're saying this 40 bps improvement can be seen from January onwards, but the 60 bps raw material inflation can be seen from this quarter itself. Can you just clarify? The raw material inflation is not actually impacting in that way. The gross margin reduction is not a factor of the increase in raw material costs alone. Okay. It's the inflation. Even if we pass it on to the customer, the margin as a percentage would go down. See, my selling price would adjust from one ten to, say... 100 to one ten if the cost increases by 10 rupees. But the cost also would go up by 10 rupees.

16:49 So the percentage margin would look lower even if you are passing it on. So there would be a possibility to recover it. So if the inflation is here to stay, let's say, for the next three, four, six months, you... It's very hard it is very hard for us to get the margin levels to 17%, or you are confident to be there? See, if the if the steel price increase by another, say, 10,000 rupees, I'm just giving as a illustration. Do you pass that on to the customer? With the increase in selling price, the customer won't give you a margin on the inflation. So the margin And the absolute margin will not go down. Okay. Got it. And my second question is on the working capital. Can you just clarify the straight payables increased INR $4.70 crores from INR $2.36 crores?

17:43 This has positively impacted our cash flow this semiannual. So is it here to sustain? Can you just clarify on this? Yeah. It is here to sustain. We will be looking to work more on the trade table side than, you know, leverage our cash provisions to buy materials going forward as we are going into a CapEx cycle over the next four years. Alright. And, Ashish, sir, lastly, on the CapEx side, so this newly announced $4.50 gold CapEx, which you which you bifurcated between 01/20/5325, line 01/25 and infrastructure 03/25. Can you just give the split between how will it be funded? I'm pretty sure it must be from internal and debt. So can you just provide a clarity... Not clarification, but to have a touch on this?

18:34 See, this CapEx is going to be a very long term implementation. So apart from the INR $1.25 crores, which will be spent for the land acquisition and the building, the remaining is going to be linked to the increase in requirement from the customers, and therefore, you know, quarter on quarter, we'll be adding capacity. This $4.50 will be spent approximately in a split something like 150 crores in the first year, which would be FY '28. And then towards FY '29, '30 '31, the remaining amounts. Again, to what the requirement and demand from the market is coming. I believe that over those years, we should be able to fund it entirely with the internal approvals. However, we have put a a point out there that we are going to fund it through a mix of both.

19:22 All right. All right. Thank you so should be funded entirely from internal approvals, if that clarifies. Till FY '31? Yeah. Yeah. Okay. Thank you very much, sir. All the best. Thank you. Thank you. The next question is from the line of Mayank Chaturvedi from HSBC India Limited. Please go ahead. Yes. Hi, Akshay. Thanks for the opportunity. On the CapEx side, the integration for lamination manufacturing that you're doing in Bangalore, so would... That would entail entire Aurangabad facility to be integrated into Bangalore. Right? No. No. So see in Bangalore The lamination the lamination part of it.

20:07 No. So Aurangabad will continue to have lamination going forward. I think even in the... Even when the full CapEx is implemented, I believe Aurangabad will be our largest lamination facility overall. The idea to integrate is that in Bangalore, when we acquired Bharatiya Chetra Industries, they were operating two units encompassing around six... 80,000 square feet of factory built up areas. And subsequent to that, we had expanded into two additional lease facilities owing to the increasing demand from our customers in that region. What we are seeing going forward is that there's additional growth coming in Bangalore, and we would have to again go and lease more facilities. The idea is that now that we have significant lamination manufacturing presence in Bangalore to consolidate not only the existing lease facilities, but also what we will grow into future into a single location.

21:00 If I were to give a a background, I think between now and when the Bangor facility will come up, we will actually have to go to a fifth and a sixth lease facility before we can move into our own facility. So the idea is that, again, we don't want to have this manufacturing distributed across six, seven sites. It's quite enough efficient. Economies of scale don't come in and your, you know, overhead costs go up. Mhmm. Okay. Okay. Because I was wondering if that is to be done, then the... For in the bulk is to be shifted to Bangalore, then there will be a disruption in operations for some time on the lamination side of it, but that's not going to happen. No. So so the increase in capacity is not only in Bangalore. From 108,000 to 160,000, we are not saying that 52,000 will be the increase in Bangalore. This will be an increase including.

21:53 Okay. The 325 crores is going towards the capacity increase, and the 125 crores is going towards consolidating the Bangalore factories into a single location. Got it. Got it. Got it. And and another piece on CapEx is, is there any plan to add copper winding to all of this? I mean, I not discussed it. But We have not discussed it to bring it in house, but we are exploring to get it outsourced to start with and get into that segment slowly. Okay. Okay. If we see enough demand coming and margin profile being strong enough, then we could consider bringing it in house. Alright.

22:38 And on this Maharashtra incentive that we're deferring to next year, can you provide some context to it why we would not want it this year? Oh, see. Right now, our sales support a recovery of roughly about 35 to 36 crores per annum. When we are initially applied for this scheme, we were expecting to receive a nine year recovery period. The investment that was eligible for incentive claim was 400 crores. So that worked out about 44 crores per year. Now, typically, as you ramp up your capacity and sales, the 36 recovery potential per annum would have increased. So we were we were quite comfortable, you know, come... Claiming this. However, the approval and sanction that we got was for seven years. So that means that, you know, we had to recover 57 crores a year. So we are trying to work with the government to get this back to nine years so that we can recover a larger portion of the investment.

23:32 And, anyway, by deferring it by a year, I'm pretty confident, like I said, by next year, we should be running at a rate of about 40 crores recovery per year. So, you know, that increased sales would help us recover more even if we don't end up getting the nine year claim period from the government. Okay. Okay. So you won't be able to cover any in the twenty seventh, but to recover the whole amount, have to defer it and then just start recovering again from the '28? Yes. Okay. Okay. Got it. And any CapEx incentive, state incentive for the new new CapEx that you're putting up? In Bangalore? Yeah. No. In Bangalore, there won't be any incentive available. Alright.

24:18 Okay. Alright. The only That's land at a concessional rate. I think that would be the only support that you would get. Okay. Sure. Sure. Yeah. Alright. Thank you so much. Yeah. Thanks. Thank you. The next question is from the line of Pratek Jain from Solidity Investment Managers. Please go ahead. Hey, Akshay. Thanks for the opportunity. Actually, I have three questions. First is, you know, looking at the next three years with the visibility you have today, what kind of growth do you think is achievable? And if it's possible, can you break it down little granularly? See, if you talk of by FY thirty one when this whole CapEx is done, And obviously, this CapEx is extremely modular in nature.

25:14 Assuming that it's at full utilization by FY thirty one, we should be having a revenue potential of approximately 3,800 crores as a company, of which around 850 odd crores would come from machine components, plain vanilla machine components, and the remaining would come from the lamination part of the business. And and what will be the levers for, you know, for Pitti to set this capacity out? So, see, apart from the land and building of a 125 crores in Bangalore, we are not committing to expand anything today. As we keep getting orders, see, we have got strong visibility and forecast from customers. We are developing the products for them. But, obviously, these things take time to pick up in the end markets.

26:05 Our idea is to, you know, announce this CapEx, get the approvals in place, and only expend the money as we see the demand coming in from the customer. The lead time on the equipment is barely six to eight months, so we can be, you know, very tactical in deployment of this capacity. Got it. Got it. And, I mean, this was one of my question also. Given you mentioned that it is modular, are we confident that, you know, if we get the demand, given lot of these new CapEx will be coming on stream by FY thirty, if, you know, if there is a free demand jump before FY thirty, you know, we... The CapEx won't be about bottleneck here for growth. So so then we'll have to dip into probably debt. See, like I said, when someone asked me about the funding structure, the reason that we have put debt and internal approvals is that we don't want to get tied down. And it's like you rightly said, the demand comes ahead of our expectation.

26:58 Then that flexibility is available to us. And similarly, we are not going to restrict ourselves just because our facility in Bangalore is not available. We are already operating in three leased premises apart from the one fully owned facility for lamination in Bangalore. And till our facility comes up, we are not averse to taking more facilities on lease, implementing the CapEx, securing the business, and then reshifting it back to a single location within Bangalore. Got it. And lastly, on margins, you know, if I take a slightly longer term view, right, I mean, you guys are doing more of a machining value added products. Right? So margins should structurally improve here. I mean, can you give me some sense around it? Like, if you set up 3,800 crores capacity, right, by FY thirty one, what will be the steady state margins of the business?

27:50 See, on a blended basis, you should be looking, I'm I'm talking of current raw material prices. When I say current quarter two raw material price levels, steel prices are obviously increasing and decreasing every quarter. But if you take a q two price level, your sustainable blended margin should be in the vicinity of 17 plus percent EBITDA. But has you moved to f I thirty one with more value added mix? Or shouldn't be it to the range of 18 plus? I mean, I'm I'm... I don't want to get involved in this quarterly fluctuations because because it will eventually get passed on to the customers. But if I get longer term view, I'm a steady state basis, can it be 18%? See, again, it depends on the mix of the machine component to lamination.

28:39 Obviously, we are practicing in a higher growth in lamination as well. We are suggesting that lamination would do closer to 2,000 plus core revenue on it. Sorry. 3,000 crores revenue on a stand alone basis. So that would bring the overall blended margin profile lower. Got it. You have to see both combined. Right? So if you talk of just the machine components, you should have a EBITDA margin in excess of 25%. But if you talk of a lamination, it then depends on how much is going as loose laminations and how much is going as value added SMBs. There are already, you know, multiple drivers for the overall lamination within itself. Got it. Potentially, 18% is available. 17 would be pretty much a very comfortable number to hit with this mix.

29:29 Very much clear. Thanks, Akshay. Thank you. Thank you. The next question is from the line of Vivek Ganguly from TGS Asset Management Company. My first question is on the CapEx. So the new CapEx that you all the planned CapEx that you have announced is over and above the earlier CapEx announced? Or is this inclusive of that? No, over and above. The CapEx announced earlier was INR $2.90 crores. The current CapEx amount is INR $3.50 crores, and the cumulative CapEx for the two announcements is INR 7,000,000. INR $740,000,000. And of this, about INR $350,000,000, which is going to be much more modular depending on how the orders come through. Okay. So if you want to look at it in that manner, I would say out of the INR $740,000,000, $2.50 to $2.60 would be kind of a committed CapEx because in Hyderabad also we are doing the land and building, which is of a similar scale and value.

30:34 The remaining is modular. Right. Got it. So approximately, then you all will end up, if this entire thing goes through as planned, about INR 150 odd crores every year. So see, with the INR $2.90 crores, the Hyderabad land and building in current year is also going to be there. So the first year will be something like 300 or $2.50 to 300. Right. And thereafter, it would be, you know, $101,125,150. It's all going to depend on what demand comes in and how quickly it comes in. Right. Got it. So in so this $2.50 to 300 for land and building, what is the schedule for this? Like, we'll buy it. How much of that is will be incurred this year and how much the next year?

31:24 I think if you take the start date as July 1, I would say that in eighteen months, you should see more than 90% of it being expended. Okay. Got it. Eighteen months. Right. Okay. That's all from me. I'll again come back into the queue. Yes. Thank you. The next question is from the line of Balasubramanian from Aryehant Capital Markets Limited. Please go ahead. Sir, the volume of byproducts and scrap, it's almost increased to more than 60% this quarter. Is the result of increased production activity? Or we are seeing higher scrap generation due to new manufacturing process or lower yields in the initial ramp up phases? How do you understand, sir? See, there are a couple of things. There's a higher production.

32:25 Obviously, being half year end, we were not able to dispatch many of the products. So there is a little bit of an overhang from last quarter in terms of inventory of finished goods, which will get liquidated in this quarter. Apart from that, if you see the high value added SMD volume has significantly jumped in this quarter, and that also yields into a lower utilization of the side slits. So if we are not able to use those side slits, we prefer to liquidate them. Sir. Sir, I think that presentation on the broader strong profitability from market customers like Caterpillar, Siemens Mobility, etcetera. If you look at three, four years back, our fifty-sixty business came from the top five customers.

33:15 How that will change current? So I would say that even if you look forward, would say the major revenue will still come from the top five, top seven customers because when we do the grouping, we would take the beneficial ownership level. So for example, if you are going to do business with Progress Rail, we would still consider as a caterpillar owned entity and therefore quantified there in terms of customer concentration risk. Similarly, if you talk of Siemens Mobility, we would say that Siemens Gamesa and all of these companies are also Siemens owned, and therefore, we would regroup it there. Okay, sir. Also, last question, data center data seen a double increase in contribution in this quarter.

34:06 So how do you look at those emerging sectors? And what kind of mix we can expect over the next three to five years? I would say we are looking at it cautious... Cautiously optimistic on data center. The good part is that I would say not all of our data center business is linked to AI. They're also linked to regular data centers. So we see sustained growth coming from that segment. However, I would not look at it, you know, increasing more than probably nine odd percent of the overall revenue as a segment. We see that other segments like mining and special purpose motors, power gen in general will also grow and overall mix should remain similar. Got it, sir. Thank you.

34:57 Thank you. The next question is from the line of Rahul Kumar from Bankaria Fund. Please go ahead. Yes. Hi. Congratulations on a strong quarter. Can you in light of the strong volumes in this quarter and in the previous quarter as well, do you want to revise the FY 'twenty seven volume numbers in FY 'twenty eight? FY '27, I think we'll still hold on to the upgraded guidance given last quarter. Execution will be a challenge. Quarter three was always a little bit of challenge considering the holiday season in India and Europe. We have the Shira, Diwali, then Christmas for our European and American clients.

35:43 However, quarter four, I think we should see a strong volume growth. For FY twenty eight, yes, definitely with this CapEx coming in and modularly expanding our capacity from quarter two of FY 'twenty eight, we should see again a stronger volume growth. Okay. Okay. And the second question, I... I used to give the split of the machine components and the raw costings. So can you give the same for this this this quarter as well? Just give me a minute. Can you just pull that out if that's there? Yeah. Yeah. So machine component is about 16, 1,700 tons, and raw costing is about thousand tons.

36:30 Okay. K. So the reason why I was asking was, if I look the percentage wise, obviously, it gets deflated because of the steel prices. But if you look at the consolidated EBITDA per tonne figure as well, I think that's seen a 10% decline over the q one quarter. Not sure it's 100% explained by the the, you know, the cost increase. So is there anything else in terms of product mix or something which is like this? It's all EBITDA per ton. Yeah. I don't think I mean, the denominator is the lamination volumes, obviously. You see, that would not be the right way to look at the company. So that's why we have stopped giving that metric. If you see the volume in quarter two, the loose lamination and low value added assemblies are almost 14,500 tons.

37:21 And therefore, you know, the... That business is obviously a lower EBITDA margin. Right. So that that change between the, you know, segments and the percentage of machining revenue will not actually give you a right metric. EBITDA per ton, you do not take lamination as a tonnage. Okay. Okay. Okay. But, actually, if you if you just see the value added products share as well, you know Yeah. That share also is is sort of, you know, flat. It hasn't deteriorated. The machine component percentage also has actually increased. Right? So Yeah. So so So the should I put it? When we say high value added SMBs and low value added SMBs, Within the high value added assemblies, like I mentioned in the past, there's no there's no metric to say that one ton of high value added assembly will give you x EBITDA.

38:21 It is a very wide brand because... But it's a very wide bank on the amount of value that you do and therefore the margin that you want. Okay. Okay. And secondly, also, if you see... While while we discussed the EBITDA is down because of the inflationary pressures, you'll also see that the manpower cost is significantly significantly higher higher on on a a q o q basis. And that is mainly because the new capacity that has come in, we have, you know, geared up our manpower side to take care of the increase in capacity while it is not giving its full effect yet. So from quarter four, you should see that margin further gaining. Understood. Understood. Understood.

39:09 Perfect. Thank you. Thank you. Thank you. The next question is from the line of Kanantha Raveedi from Guruswani Wealth Private Limited. So firstly, I wanted to ask, are we still on track to our previous quarter guidance of INR $3.70 crores for the full year? Yes, I think we are pretty much on track. If you look at the current quarter and simply extrapolate this, we should be getting there. And my second question was on the exports front. So if I see from FY 'twenty three to FY 'twenty six, there is a bit reduction as a percentage of our total revenue.

39:58 Now this may be more because we are more on the domestic front in recent years, but how do you see this standing out in next, let's say, three to four years? Yes. I think overall I think overall exports will remain stable or slightly downward as a percentage of overall sales. As a standalone number, exports will grow, and they will grow significantly, but the domestic business is going to grow faster than the direct export business. Okay. So can you provide some color like what's the various reasons for the same? See, the direct export opportunity would be limited to the business that we can do to sell the product components to the customer. What are... What is the trend that we are seeing is that most of our customers also have a manufacturing presence in India.

40:48 And rather than importing components and doing the manufacturing in, say, Europe or US, they would be happier to make the product in India. So we cannot actually, you know, how to put it, quantify what are our deemed exports or what portion of the revenue that we supply to our domestic clients eventually gets exported. So Okay. That actually misrepresents the overall potential of our products, which are eventually getting exported, if that makes sense. That's it from me. Thank you. Yeah. Thank you. The next question is from the line of Saksham Khyagi from Devilado Advisory.

41:35 Go ahead. Am I audible? Yes, sir. You're audible. Okay, sir. Thanks for the opportunity, sir. So my first question is, in first quarter, you outlined an ongoing $2.90 crore Hyderabad expansion and also mentioned a potential INR 400 crore Bangalore CapEx for FY 'twenty eight and 'twenty nine, right? In quarter two, the Board has already approved a new INR $4.50 crore CapEx phase through the FY 'thirty one to expand the sheet metal capacity, right? So how does this $4.50 crore project fit into your earlier CapEx timeline? And how will it be funded given the total borrowings currently stand at $6.40 crores? So if you look at it, what we are... What I've, you know, given in a conversation, the last investor called 400, the board has just approved four fifty instead of 400.

42:25 It's just, again, an estimate which I had given that time. So it is exactly what we discussed in the last call. In terms of timeline, it's going to be done by f y thirty one. And like I already mentioned in the previous query, about... If I take the entire $742.90 plus $4.50, roughly about $2,652.60 crores would be the committed CapEx in terms of land building infrastructure. Apart from that, everything else is modular. So if the business materializes faster than our expectation, you would have to dip into debt. Otherwise, we believe that we should be able to support this CapEx from internal approvals through this period. Okay, sir. Understood. And sir, my second question is related to the previous on call. Like you revised the FY 'twenty seven lamination volume target from 78,000 tons to 82,000 tons, implying approximately around 1718% growth for the year, right? And given that quarter one lamination and assembly volumes were around 19,200 tons. So could you update us on the volume achieved in quarter two and the cumulative first half performance? Like, what quarterly run rate will be required in h two to achieve the 82,000 tons target?

43:39 Like, are you still confident about meeting that target? Yeah. If you see, x one numbers is about 40,889 tons. So if I just double this, you're at 82,000 tons. If if you if you take quarter four, it's going to be similar to quarter two, maybe slightly stronger than quarter two. Quarter three volumes might dip a little bit on lamination owing to the festivals. Okay. So the target can still be met, sir, this year? No, no. Tonnes 2,000 for the year. The next question is from the line of Vijay Madhur from Innoise Alpha Investment Management.

44:26 Please go ahead. Hi. Am I audible? Yes, sir. You're audible. Yes. Thanks. Thanks for taking my question. Just to sort of get, you know, understanding, So you are... Say, your your volumes for total castings and machine component is around 3,000 tonnes. Now if I look at the capacity for castings, it's around 24,600 tonnes and the utilization is 52%, right? Yes. Fastings volume for the quarter. And out of this $3,198.10 59 would have gone into other machine components, you know, which is essentially going through and assembly.

45:20 Rest would be a mix of, you know, raw castings and, you know, your machine components. If if if there's a breakdown, broadly, it's it's it's the breakdown. Yeah. So about about thousand or tons, like I said, is raw castings, and the remaining would be machine castings and 300 tons of machine castings going into assemblies. Right? Now when we talk of capacity utilization, historically, in the past, the foundry used to give its own utilization. So we need to probably work a little bit on that metric because we are taking the sales and, you know, defining the utilization. If you see the casting that is going into machining, there will be an input output ratio. In machining, we are basically shaving off the metal to get the finished dimensions.

46:06 And typically, about 30 to 40% of the weight is reduced in the machining or from the raw castings level. So if you kind of equate it to a production of casting, that would be closer to 4,900 tons of casting produced. Understood. The utilization is calculated on sale basis historically, so we didn't want to change that metric for comparative purposes. Okay. Okay. And is also the hours are also given. So you use the utilization and divide it by total start engine that's... You know, that is... That is just a number of that ran to get the output required. Yeah. But then then this this... You know, for example, in this quarter, have run it for one lakh seventy two thousand hours, probably, or one lakh seventy two thousand hours.

47:01 So against that against that, whatever would have gone into your machine costing and machine components put together, the machine costing is going into because that's the figure what we are getting. Actually, like, machine companies, you have to divide by that to get the hours of, you know, machine that's costing for this managed to get the One can say that about six six hours per ton of machine output is utilized because the thousand tons of other machine components going into assembly plus 2,000 tons of machine components in total, 3,000 tons of machining was done, and hundred and seventy two thousand hours were utilized to get that machining done. Understood. Understood. So you... Since the value added I for the quarter is around... I mean, you get around fifty four hours per ton.

47:48 That's the the is six hours ton, roughly. Understood, ma'am. Got it. Good. The time spent. You. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of from Bank Securities. Please go ahead. Good afternoon, sir. Thank you for the opportunity. So two questions. One is, you know, this traction, you know, for sales, particularly traction motor sales, it is set up for the one of the the largest business contributor.

48:37 It is declining. So what is the outlook then? That is one question. And the second question regarding the realization, you know, our overall realization has almost reached around 2 lakh rupees per ton, but, you know, in a consolidated basis. But if you see the EBITDA per ton, it is one of the lowest in the last six to seven quarters, EBITDA per ton. It... I I understand that is another right measure, but how to look at this, you know, in coming periods? And secondly, you mentioned about the scrap. You know, there is a significant increase scrap with previous participants that asked this question. And if you re... You know, see the realization of scrap is also one of the lowest. So how to see these things, you know, in a totality basis? Can you please guide on this? And the second question and the the first question regarding the traction motor sales.

49:31 Thank you. Okay. On the traction motor share of overall revenue, I would say that earlier, the overall reliance on traction motor as a segment was very high, and our focus was very high there. Obviously, we are seeing good demand coming from other segments like data center and mining of highways, special purpose, wind power, etcetera. So if you look at it on an absolute number, the mine... Traction motor has not really been known at a alarming rate. Out of 580 crores of revenue, about 27% is about 156 crores for traction motor and railway related components. If you see last year, it's about 32%. So on an absolute number, it is still, I would say, segment for us.

50:17 The other segments are growing faster. Now coming to the EBITDA per ton, like you rightly said, that is not the right way to look at it, but if I can provide some guidance and color. Unfortunately, I cannot because if you look at the lamination business and if you're only doing lamination, an EBITDA per ton could have been a metric where you can, you know, blend everything and measure the business. But the minute you get into machining, it becomes slightly different. On the EBITDA being lower for the overall output in this quarter, definitely, are two contributing factors. One is your forex loss, which I have mentioned, which is booked in the other expense. And the second is your employee cost. It is significantly higher because we are gearing up for the higher level of operations and the capacity that we are commissioning.

51:04 So those will get spread over a larger base going forward. That's just the way it is going to be in the initial period as we set ourselves up to grow. Okay. Okay. Okay. And regarding this other income, I know... So for this around 70 crores of the approval for the Maharashtra incentive is already done or it is still in the process? Sorry. 70 crores? No. No. The the receivables from the Maharashtra government, it is already received or it is in the process? No. It's in the process for disbursement. Okay. Okay. So that will, after some action, help us with CapEx going ahead. Is it correct?

51:51 It will help us definitely, but we are not linking that to our CapEx plans per se. It will help in managing the overall debt level. Okay, sir. Thank you, and all the best, sir. Thank you. Yeah. Thank you. Thank you. The next question is from the line of from Zenflow Finance. Please go ahead. Hello? Thank you for giving me giving me the opportunity. My only question was, like, which sector in the next two to three years do you see, like, growing the fastest in your business model? In terms of fastest growth, over three years, it's very difficult to predict.

52:38 But given the current outlook, I would say mining of highway for the next two years looks very, very robust. Power gen overall should also, from its current level, grow the fastest. Okay. And what about data centers? Like Data centers, again, if you talk of a longer term view, like I said, we are cautiously optimistic. Potentially, it can grow very, very fast, even faster than the others. In the short term, longer term, again, like I said, it's better to wait and watch. Potential to grow is there. Okay. Thank you so much. Thank you. The next question is from the line of from Chatterjee from Goldman Capital Management.

53:25 Please go ahead. Hello, sir. Am I audible? Yes. My question is... I'm actually slightly confused how to tie the two guidance numbers you gave, which is 17,000 tons of costings and 82,000 tons of laminations with slide six, which is the detailed sales pickup by volume. So q two f five twenty seven, I see total laminations is two zero six one two, 20,612. And then you have other machine components going in of about $10.59, and you get $216.71. So the 82,000 ton number is as against which one of this? Two zero six one two or two one six?

54:14 It's it's against the $216.71. Okay. So The total. So in in the past... Just to give you some context, sorry to interrupt you. In the past, we never gave the breakup of other machine components going to lamination assemblies. So there was a disconnect among people as to what was the lamination and what are the other stuff that is going into the weight of the product. So that's why we started giving this line as a separate thing so that people can clearly understand the quantum of lamination going for sale. Perfect. Understood. Now So we broke it up into this. Got it. Understood. Now when you say 17,000 tons of castings, you are Yes. Are not to just the $30.86 costing the machine components. Right? You are also adding in the $10.59, which is going into lamination. So total would be around 4,100 in q two.

55:06 No. So what we are doing is the 3,086, the number, like I said, right, about left thousand was the raw casting. Mhmm. Now the remaining is machine casting, which is getting sold, not related to lamination. Right? Okay. Now when we machine these castings, you have a scrap that is generated from those castings. The raw casting obviously goes as the finished product when we are selling it as raw. And the remaining is machined, 2,000 tons. So that portion, if I equate it to a casting output, someone had asked a question as to how do you tie this to your capacity. I was explaining over there that 17,000 tons of casting was produced in the... Or the casting we produced and then sold either as machine or as raw.

55:57 I hope I'm able to clarify or if you're following. So I'll I'll probably go back and read the transcript again. But in case it is easy to answer, when you say you will sell sell 17,000 tons of casting in the year, is there a number on this table against which it is comparable? No. You'll have to actually put a utilization factor. Like I said, when... In the past, we have just given the broadcasting sold and the machine casting sold. 17,000 tons will be the casting produced to make those sales. So if you take the thousand fifth... If you take the thousand 59, some part of those machine components are costing which are produced in our own company.

56:42 The remaining 2,000 tons of machine components are produced in our company. So if I take those machine castings, either going into the lamination assembly or as machine components and add the raw casting, that gives a utilization of what? 17,000 tons of castings. Got it. Okay. Let me then ask this question in a more simplified manner. At today's prices, in q two prices, if you were to achieve these targets, what would be your revenue for FY twenty seven? For which number? For 82,000 and the sales of machine conference and casting? You you do 82,000 and you sell 17,000 tons of castings. You do about $23.50 to $2,423.50 to 2,400 crores.

57:33 Got it. At q two f y prices... Sorry. At q two f y twenty seven prices. Right? Correct. That would be closer to 23, not $23.50, 2,400. That would be based on q three pricing. Okay. So basic q three pricing, $23.50 to 2,400. Is what you're saying? Yes. Got it. And how much CapEx do you foresee for the rest of the year, FY twenty seven, across all the programs? I think we did $2.50 crores in h one. We didn't do do $2.50 crores in h one. We capitalized 100 crores in f one... H one, but that was already pre spent, a large chunk of it. In terms of expenditure, I think about 90 odd crores is expended in h one in terms of cash flow.

58:21 So if you see the other noncurrent assets, that is predominantly the capital advances given in the balance sheet. In addition to that, maybe about 40 or 50 crores of land would have been purchased. Got it. Got it. So 150 crores cash flow cash outflow on CapEx. Understood. So if I can chip in one last question. Again, I'm coming back to the same costing thing. Against the 17,000 ton number, which I will figure out what it is, much was the number in h one against the 70,000 target for FY '27? I need to pull that out. I don't... Like I said, it's not there on the table here, so I'll have to get that number out. I think for the next call, we'll try to simplify this and give the out production numbers.

59:08 Earlier, what used to happen is that if you give the production number, people will not be able to understand if that much is produced, why so little is sold. Mhmm. Yeah. I understand that. So... But in trying to simplify it, I think it's oversimplified in one way to put it. So we'll probably try to get the production numbers in play. And like I said, the capacity utilization, unfortunately, in the past, before the foundry was merged in, we never gave the utilization of foundry. We only gave the utilization of our machining. So there are some issues in that as well. So we'll try and clean this one up. Got it, sir. Okay. So thanks a lot,. Thank you. You. You. Due to time constraints, we take this as the last question.

59:55 I now hand the conference over to the management for closing comments. Thank you, everyone, for your time and joining us today. We appreciate your continued interest and support. As we move into FY '27, our focus remains on disciplined execution, improving working capital, completing ongoing CapEx and scaling machine components, strengthening our position as an integrated engineering partner for our customers across India and global markets. Thank you once again, and goodbye. Thank you. On behalf of Pitti Engineering Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.