Rolex Rings (NSE:ROLEXRINGS) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Rolex Rings Limited q one FY twenty seven earnings conference call. Before we begin, a brief disclaimer. This conference call may contain forward looking statements about the company, which are based on beliefs, opinions, and expectations of the company as of the date of this call. These statements are not guarantees of future performance and may involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will begin the listen only mode, mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Please note that this conference is being recorded. I would now like to hand the conference over to mister Hidev Roshi, chief financial officer from Rolex Rings Limited. Thank you, and over to you, sir.

0:53 Thank you, Tim Corus. Good morning, and a warm welcome to everyone present on the call. Thank you very much for spending your valuable time and showing keen interest on the... Our con call request. Along with me, I have mister Manish Malika, chairman and managing director of the company, and team SGA, our investor relations advisers. I hope you have all received our investor deck by now. Those who have not, they may check it on the website of stock exchanges where we have already uploaded. We entered in fiscal twenty seven having delivered a quarter that tells couple of stories at once.

1:46 Production that run below its full potential for part of the quarter. And demand environment underneath that stayed firm and in some market, it got strengthened. Allow me to take you through the mood this story in a brief. Coming to quarter one of current fiscal, that is FY 'twenty seven, we'd like to inform that revenue from operations recorded came in at INR304 crores, which is up by 4.3% precisely compared to quarter one of fiscal 'twenty six.

2:32 Though this looks short of our guided growth, our order book through the quarter was healthy and the constraint what we faced was not demand. It was an execution. A shortage of labor on the shop floor meant we could not convert that order book into output at the pace we wanted to. We have already informed the seed factor in our last call also, and it's a general phenomena in the first quarter or maybe in the month of particularly in the month of April, May and till mid of June. We are glad to report that the situation improved from June onwards, June 26 onwards.

3:20 And by the quarter start from quarter two, that is FY '20... The quarter two of FY '27, our operations were back to running normally. I would like to inform or pleased to inform that in month July 26, we recorded highest revenue since inception of our operations. In quarter one, revenue from auto components grew by 13.5 percentage, 13.50, compared to quarter one of FY 'twenty six amounting to INR 163 crores. While revenue from bearing rings, it got declined by 6% for comparing with the quarter one of fiscal 'twenty six amounting to INR118 crores.

4:19 The bearing ring softens was softness was concentrated in industrial business or in industrial segment, particularly in the domestic and European market, an area where we have flagged our broader industry wide stagnancy in the past, and it reflects same labor driven output constraint that affected the quarter two. Auto components on the other hand continue to gain share within our overall mix and shift towards higher value added process products is a trend we expect to continue over the coming quarters. Looking at the geographical segmental...

5:07 Geographical mix rather within each segment, our bearing ring remains predominantly a domestic with export accounting for about 27% of the segment, means 77, 78%... 72, 73% of our bearing ring business is from the domestic round. And it was the domestic facing portion that saw the softness this quarter. Here also, I would like to mention that is mainly in this segment of industrial segment and high volume, bigger size of components. There, we face a bit softness over there.

5:54 Auto components by contracts... Contrast is now a predominantly export oriented business with exports accounting for close to 72% of that segment's revenue, say 28% in the domestic front. That is the part of our portfolio that delivered the strongest growth in this quarter. And it is meaningful validation of the strategic shift we have been making, deliberately building out a higher value export facing, precision machine components, business alongside our traditional rings and traditional ring... Bearing rings franchise. What stand out most in export is a change in customer behavior.

6:43 Buyers who had been bit cautious and holding back through in fiscal twenty six with an, you know, a wait and watch mode as tariff uncertainty and certain adverse market factors played out. I'm now placing orders again with confidence. That shift matters because it tells us that demand overseas is genuinely picking up and that the relationship we have built with these customers, these multinationals over the years remain intact and are now translating back to the order flow. As we had flagged and informed previously also, we have not lost single customer through the tariff description or even the war impact in European markets in the last year or even previous to last year.

7:44 And what we are seeing now is those very relationships beginning to convert back into meaningful volumes and revenues. Coming to margin side, as you must have seen that gross margins for the quarter has came compared to has came up compared to fiscal 'twenty six or on a quarter of quarter one of fiscal 'twenty six, reflecting both a favorable shift in product mix as well as disciplined raw material management and scientific production measures cost control areas at our plant level. EBITDA for the quarter was INR 69 crore.

8:30 I'm not considering other income, which is up by 12% on comparing with the quarter one of fiscal 'twenty six. With the EBITDA margin at a percentage of 22.6, which is up by 100 basis points, again, with comparing with the Q1 of FY 'twenty six. Profit after tax grew by 22% year on year to $2.60 crores with PAT margin at 19.8%, again up by two ninety basis points year on year basis. I want to emphasize that these margin expansion came through even in a quarter where our production was constrained because of labor and certain other matters. As volumes normalize and our order book converts fully into output, our margin trajectory should hold and in fact, we expect it to strengthen further.

9:32 As value added process products continue to grow as a share of our revenue mix. This is the third consecutive quarter of a year on year margin expansion for us, and it reflects a structural improvement in our businesses. On a capital allocation front, we followed through this quarter on a commitment what we made back in April 26. Would like to inform that our rupees 180 crore buyback of 1 crore equity shares concluded during the quarter with the promoted group choosing not to pass...

10:17 Participate so that the full benefit flowed directly to nonpromoter shareholders. As of today, we are fully debt free and clear of all legacy CDR obligations. Moreover, we are carrying cash surpluses. We see this buyback as the first of many steps in returning value to our esteemed shareholders. In a business that today carries a far cleaner capital structure than it has at any point in its history. Looking ahead to the fiscal twenty seven for the remaining part, the trends we spoke about in May are playing out largely as we expected.

11:04 With the labor situation now fully normalized, we expect Q2 FY 'twenty seven to reflect better strength of our order book without the execution constraint that held back these quarters output. The US market is coming back with the customers reengaging after a prolonged period of cushion. Europe continues to fire on the back of our expanding automotive components presence there. And our domestic business, while soft this quarter in the industrial bearing ring segments, retained strong underlying momentum in the bearing links with an end use of automotive application.

11:50 The bearing links, what we are supplying for... Within end use of automotive application, we have we have holdover positions and accept one customer, other customers have increased their wallet share and continues to add incremental volumes and the new components from our existing customers with a steady pace of existing program. Both this thing taken together, we remain confident in the mid teen revenue growth guidance what we have given for fiscal 'twenty seven. This quarter's headline number does not fully reflect that trajectory for the reasons I have just walked through. But the fundamentals underneath is a healthy order book, improving product mix, expanding margins, reengaging export customers and a clean debt free balance sheet gives us the confidence in the year ahead.

12:52 We are also continuing to build for the medium term. The new customer programs onboarded over the past year are progressing well, and we expect these to ramp up further as the year progresses. Fiscal twenty six, we got a lesson or rather it taught us that no business is immune to external disruption. But that a business built on strong fundamentals, deep customer relationship, and operational discipline can absorb the disruption and come out stronger. Q1 of FY 'twenty seven has in its own way reinforced the same lesson from a different angle.

13:39 Even an internal operational constraint like a temporary level shortage, it did not dent the underlying strength of our order book, our margins, our capabilities, and our customer relationships. We resolved it, and we moved on. As I look ahead to the rest of fiscal twenty seven, I see Rolex Rings as a company that is well capitalized, well positioned, and well prepared for the next phase of growth. Our ambition remains unchanged to be the most trusted precision forging partner for the world's leading bearing and automotive tier one, tier two, and OEMs too. We are well on our way.

14:26 With these words, I would like to pause on my comment. Again, I would like to thank all the participate participants who have joined. I request, Tim Curtis and, Tim SGA that we can open the session for q and a. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question is given. We have our first question from the line of Jason San from IDBI Capital. Please go ahead.

15:21 Yes, sir. Thank you for taking my question, and congratulations on a healthy set of numbers. So, sir, first question just pertains to, you know, in terms of the numbers, the split which you normally give the export and things, export out of domestic bearing, just wanted to translate for the for Q1 and Q and Y o Y, Q1 FY twenty six as well. So, Jason, kindly note down. Domestic bearing ring for the q one FY twenty seven, it is 86 cross. Domestic auto components rounding up to 45 crores, export bearing rings, it's 32 crores, export auto components, 118 crores, with the scrap and export incentive of 23.2 crores.

16:23 Same for the... You need same for the q one of FY twenty six. Right? That's right. Yes, sir. Okay. In domestic bearing ring, it was 86 crore in Q1 of sorry, it was INR 90 crore in Q1 of FY 'twenty six. Domestic auto component, it was INR 53 crore. Export bearing ring, it was 35 crore, export auto component, it was 90 crore, and 21 crore of scrap and export incentives. Sure. Thank you so much for that, sir.

17:11 The next question just pertains to... Just wanted to understand, sir, any reason for the shortage of labor on the shop floor? Just wanted to know what would the exact reason be for this? No. There there is no specific reason because it's a general phenomena, and it's a hot summer in our region. And we do have, you know, outstate labor... Good amount of outstate labor force also. And it's a... You you better know it's a vacation period as well as Wedding. Wedding season. And, you know, it's an agriculture, what you say, coke season where these people used to visit their native, and they took more than fifteen, twenty days, thirty days, or something like that. But these are the quite common phenomena in our industries or rather overall in this thing. And while we are facing temporarily because of that, these all are our semi skilled workers and spend a good amount of time with the company.

18:13 So that was the only reason. Okay. Sure. Sir, next question is pertains to... I mean, you know, we've been speaking about the slowdown in the bearings business. We spoke about industrial. Some slowdown in the industrial and the large size business. So just wanted to know how do you see it going ahead? Do you see the slowdown continuing? Or do you see any improvement going ahead for this business, for the bearings I'm talking about in particular? Yes. Yes. As I told you, in the month of July, it has been improved. And as I told you that because of certain this production floor constraints, were not able to execute to some extent also. But the guidance what we are getting from our customers in the particular industrial segment, for the next couple of quarters, it would be having a marginal growth.

19:05 But on the other side of the bearing rings, that is automotive bearing ring business, we are getting good amount of positive turnaround. Okay. So then okay. Got it. And sir, again, in terms of auto components, you've been doing very, very well. That's very I mean, that's tremendous performance. So I just wanted to know what are the clients saying, let's say, Allison JetRINGS, and what is the feedback from their side for increasing sourcing from Rolex? How is that... How's the outlook for that? See, as I told you, you named couple of our customers. One of our customer, which was gone down by almost 35, 40% in the fiscal 'twenty six compared to fiscal 'twenty five.

19:54 That is again on the track or rather recovered by almost more than 30%. So we are almost on the track of fiscal 'twenty five numbers with that U. S. Customer. So that is definitely covering back. And for the other customer where we got a new order for the new plants, incremental order for the existing programs also and certain programs what we have started gradually in the last quarter of last fiscal, that is also being ramped up in this quarter and further in next three quarters. Maybe one or two plant again in the third quarter, we are going to start the supply.

20:41 So we are getting quite positive and very much confident on these particularly customers. And we are getting good response, they are offering additional volumes, new programs, so on. That's that's that's good. Okay. Okay. And, sir, just in terms of the revenue mix in the presentation, there's a 8% others component. So you have bearing and bearing ring of all auto components and 8% of an others. So what does that 8% pertain Eight... That is my scrap revenue. That's your scrap. Okay. Okay. Yeah. Which is the domestic scrap. Yes. Sure. And, sir, also, in terms of... You would... Speaking about the tariffs, the duty drawback, you know, some refunds going to come in from The US with the HS codes and everything. Has something come in this quarter? How is that... What's the status of that?

21:37 Yes. It has already started, and we successfully registered with the U. S. Customs Authority. And though it has not started in full swing, some marginal amount what we have received from the as a U. Custom Duty refund, which has already accounted in this number. But the major changes yet to receive. Okay. Okay. And just finally, sir, I wanted to understand in terms of I mean, of course, you spoke about a lot of improvements, tariff changes behind us, macro, etcetera, which is improving. So sir, any guidance for 27%, 28% margins as well as revenue? You did speak about mid teen, but I wanted 2728% in margins as well. And margins, when you speak about core margins, not including other income.

22:25 Yes. As we have already mentioned that we are not while telling numbers, operating numbers to you people, we are not considering this other income. The EBITDA margin what we have recorded is 21.5% in this particular quarter June 26. We expect, let me tell you conservatively, we expect that would be in the range of 21% to 22% in the fiscal FY 'twenty seven conservatively. And we will be having even a marginal growth subject to our increasing our operations, then it will have a significant positive upward mark on our margins. On the revenue part, as I have indicated that mid teen, we are a bit confident till now for the fiscal 'twenty seven and maybe more than mid teen or coming to near to the 20% number for the fiscal 'twenty eight.

23:31 Sure. Thank you so much for taking my questions. Thank you so much. Thank you. Thank you, Jay. We have our next question from the line of Varun Jayant from Solar Capital. Please go ahead. Yes. Hi, sir. Good morning. Congrats on a strong set of margins. So on the auto component export side, so, sir, our business wasn't declining across the past two, three years because of Allison. So right now, has... Will Allison reach, you know, two fifty CR levels in FY twenty seven? Because I think it fell down from two ninety, 300 in that range. So how much recovery will happen? And secondly, we had this Alexion acquiring Dana. So we expected that because we didn't supply to Dana before, but now we wanted to supply. So has that started?

24:31 See, on the first part of your question, you asked me about this revival of Alyssa. Let me tell you the numbers what you have told. Tell in these four months of business, if we... I... If I'm going to annualize that thing, it has already crossed the number what you have mentioned. Right? So we are almost touching to the number what we had in fiscal twenty five. Right? On the direct position, as far as Dana business is concerned, we are... We had a very senior level meeting with the Dana management along with the Allison, and they are very much eager or rather they are very much inclining to explore the potentials for the higher size or a higher volume kind of product with Rolex.

25:24 But the development and all these things, it has gradually started or other initial discussions, initial dialogues have been initiated. But on the revenue front or other coming the same on the on the paper, it will take maybe from now, maybe twelve to eighteen months minimum. So in FY '27, can we touch 500 CRN auto component exports? Is that is that on the cards? FY '27. Yeah. 500. Even I I I had an auto component export in the March 26 only. It would be more than that. Okay.

26:13 No. It wouldn't be the same for another I'm I'm testing to only export of auto components, not the bearing wings. Without bearing wings, only auto component is closing at $5.26 plus $3.50 CR. So this So you're talking only for the exports market, not overall auto components. Yeah. Auto components exports last year '26 made $3.50 CR. So will it will it so can it touch 500 CR in '27? Not 500, but I'm a bit confident to cross 425 or in between $4.25 to four fifty. But, sir, you have already done, like, close to 117 CRM this quarter. So even if I just analyze this, that that only will take you about four fifty. Yes. Four four fifty. I'm I'm I'm telling four fifty as of now.

27:05 Okay. Got it. And, sir, due to this labor impact, how much revenue was lost? And was this revenue lost, or was it deferred? No. No. No. It's a temporary hold or temporary, you know, not even discontinue, but the lesser amount of production output is there. It's nothing what we lost or what we... The thing. It might be deferred by month or something like that only. There is no loss of business, and and we try to manage much of the things with the extra labor by, you know, managing the situation. But because of environmental front and all these things, even the output capacity of human being, it being... It was bit less in the... Particularly the... In the month of April, May, which is very hot in our region.

27:57 Yes. And, sir, on the domestic auto components business, business has fallen close to 13% year on year. So why is this... Is this because Stellantis is going to a slowdown? Or... And and how how are... Is that business with Mahindra? What is the outlook for this portion for this year and next year? See, domestic auto component, what it was there with me in the last year, it was somewhere about 52 crores. And here, it is 45 crore in this q one of FY twenty seven. That is mainly because of the differing of certain production plan of couple of OEM of automotive. And talent is no again, they started with these revenue though it has not at that level what we had in last year, but gradually it is picking up and it will be on track what we had in '25 or even better than that.

29:00 Got it. And, sir, since this year I'm expecting that export auto or, like, auto component exports will be a higher share. So... And the the margins there are the highest to... Can the margins be, like, closer to 22% for this year and and and going forward next year, they could increase by 50 bps or so. Is that something that is possible? Definitely. The second portion, 50 basis points up on the FY 'twenty seven number would be there in FY 'twenty eight. As I indicated earlier also that I would like to be on a number in between 21% to 22% because there are certain abnormal factors also affecting which will as you better know because of this hormones and because of this Europe, Iran, U. S. Missing, the ocean freight and the availability of the solution freight to U.

29:57 S, etcetera, has gone up more than two times or 2.5 to three times. So for the time being, it may impact to some extent also. So that's why conservatively, I would like to be there in between 'twenty one to 'twenty two. Got it. Sir, on the bearing rings export side, we like this quarter, business fell by close to 10%. So is this that Timken continued weakness is affecting us, or is it something else? Major factor is that. And and when do we expect this to rebound and, you know, at least start growing or staying flat because it it has been falling for quite some time now. Yeah. What we are doing or rather what we... You know, our strategy is to develop new customers, and we don't want to depend on a particular group or a particular plant as far as this business is concerned.

30:51 No doubt, it was a huge business. And unfortunately, customer at the customer level, their business has also significantly reduced. So our strategy is to develop new customers for the bearing ring segment, whether it is in auto or in industrial segment in overseas market, particularly because in domestic major players are already there in my customer basket. So we are trying to expand our base in U. S. And Europe, particularly in Europe where we had a good strength on auto side that we would like to develop further on the bearing ring business also. But I don't want to be dependent on a one particular customer or group of customers like that. Got it. So just last bookkeeping question. Can you for Q1 FY twenty twenty six, can you give us the scrap revenue, export incentive and end user mix?

31:49 For which period you have asked for? For this quarter. This quarter. I I told you it is 23 crore or something. No. I was asking the breakup of the scrap and export. Scrap is somewhere about 20 crore and export incentive is near to INR 3 crore. And the split in terms of end application, 50 odd percentage is there towards passenger vehicle segment, 20 odd percentage is commercial vehicle and heavy duty vehicles, then 14% to 16% it is there on the industrial segment, seven odd percentage is there in EV and hybrid and so on.

32:42 Okay, sir. Got it. Thank you and all the best. Thank you. Thank you. We have our next question from the line of Disha from Sapai Capital. Please go ahead. Hello. Yeah. Am I audible, sir? Yes. Yes. Thank you so much, sir, for this opportunity. Couple of questions. Firstly, sir... So, obviously, you mentioned conservatively because of the ocean feed and the geopolitical situation currently. But going ahead, sir, with our export mix increasing and our production mix shifting more towards auto components, what sort of steady state margin are you targeting internally? Going ahead. See, first of all, I would like to tell you whether it is auto component or a new bearing ring business. Wherever the more value added processes are there, even in the bearing ring business also, 13 bearing rings for the EV hybrid vehicles or our new critical bearing rings, we have a same kind or similar kind of margin.

33:40 So it's not the only auto components where we'll be having this margin. So margin trajectory, as I indicated and replied in our earlier questions also, that considering all the inflationary trend in entire or other in fuel market than the straight portion and other things, which having a cascading impact on our production cost structure, Sometimes it is not feasible, possible or practical to approach customer for each and every price hike or something like that because our contract price or our programs, commitments is generally not on the value add part. It is always on the raw material and ForEx what it is fluctuation is passed through or to recover.

34:28 So that's why conservatively I would like to be there in between 2021 to 2022 because the simple reason in the month end of June or mid of June, the ocean freight has started shooting up. We have a good amount of exporting to U. S. And that ocean freight has significantly increased. And even at this level by paying that much amount of availability of container for a particular vessel is a bit difficult. So that's why our standard towards margin is maybe near to 21 and up. Okay. Okay. Fair enough, sir. Just, sir, my next question is on what are what are our current utilization level?

35:16 We are at the same 65% u... 63 to 65% utilization, you can say. What what are we targeting by this year? We target to touch somewhere about 72%. 70%, 72. Yes. Okay. Okay. So I'm just giving our mid teens also even if I do 15% sort of growth, it should be around 1,300 top line. What mix are you looking at? And how will be the contribution from the auto segment from the to provide some? Sorry. Your voice was not proper. Can you come again? Yeah. Can you hear me now? Yes. Yes. So for a mid teens also, assuming 15% sort of growth, if we do for this year, so it'll be around INR 300 crores. Out of that, could you help me with how much will that mix be between from the auto segment and from the bearing segment?

36:11 For this particular fiscal, 65% to 70% would be from auto components. And out of that, can you give me a percentage of how much would that be from exports? Again, of that 70%... More than 75% it is from exports. And and, sir, this mix, will we... Will this be this... Will this be the steady state level or we'll want to? So what is the ideal steady state mix that we target between these two segments? See, my target... We don't have specific target that whatever the new order where my facility suits to product, I do have available capacity.

36:56 If I'll be getting a good quantum of the order, program size of five to seven years with a desired level of margin, I would... I'll happy to accept whether it is bearing ring or auto components because my capacity or other the facilities, equipments are very much fungible, and we are able to produce auto components as well as the ring sports. Mhmm. And what is the CapEx, sir, or the target for this year to the next year? In the range of 30 to 40 crores. For On an annual basis. Yeah. On the... No. No. On the annual basis, like, year on Mhmm. Okay. Okay. Okay. That is it, sir, from my side. Thank you. Thank you.

37:43 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 only two per participant. Should you have a follow-up question, we request you to. You. We have our next question from the line of Salil Desai from Marcellus Investment Managers. Please go ahead. Thank you. Hidden by, you know, one question on the labor shortage. Given that this is seasonal factor that happens every year, maybe this quarter, it was a little worse than usual. So any permanent fixes that you are thinking of what can we do to mitigate that business or surprises in the future? As I mentioned earlier, the labor force what we have, what we developed or rather the age of these labor or service age with the company is quite at length. And we don't want to lose such, you know, skilled or other team or a labor which is very much acquainted with our... This thing. So we don't want to, you know, lose them. And we are trying to manage or to mitigate this situation by adding some temporary extra labor at a reasonable cost or sometimes even on these part.

39:03 So... And let me tell you, this is a scenario for maybe two, two and a half months where we try to, you know, manage by working three shift, by giving something extra or overtime, or maybe hiring a extra temporary lever. But I don't want to lose my, you know, trained lever who are there with me for good amount of time. Right. Yeah. Okay. So so so this does not come at a cost is what also I'm trying to understand. The sense that if you're paying extra, is there a margin impact? But Yeah. It is. It is coming out with some additional cost. But what I'm looking on a long term way because the other people who went or rather who will be coming back that they are able to give me more quality output and efficiency of them are quite better with compared to the temporary level.

39:59 I see. Okay. Thank you very much. Yes. Thank you. We have our next question from the line of Anuj Shah from PhillipCapital. Please go ahead. Congratulations for steady set of numbers. My first question is, sir, the company was facing a vessel and container shortage on the export side, which is triggered by geopolitical conflict in Middle East. Does that still persist or it has been resolved? See, availability of container at proper cost is an issue. So... But we as we are committed to our customers, we are just trying to get the...

40:46 As many as containers that are reasonable. But as I told you earlier also, that ocean freight is shooting up, and it is more than double or two and a half times what generally it is. But still we are able to, you know, trying to manage the availability of container. But sometimes availability of container in a particular vessel isn't big issue as of now because we got a remark or comment from shipping line that they are not getting vessel back to India because of certain other geopolitical reasons. But I think it is... Okay, sir. That means, sir, the issue will persist, you mean, sir, and that can be lower to Q2? Is that correct? To some extent, yes.

41:34 Okay. Understood, sir. And my second question is in the domestic bearing market, the automotive industry as a percentage of revenue has gone up and the industry has gone down. So what is the growth that we have seen in the automotive side and in the industrial side? In terms of bearing rings, you're asking for us? Yes, in terms of bearing. See, think as I already told that particularly bearing rings in the industrial segment, we are getting some soften or rather some stressed or reduced demand. But in automotive application where the bearings are being used, there we are getting good response and few of our domestic customers are facing good amount of incremental numbers.

42:30 So I don't foresee any downward or any kind of view. On the contrary, it would be on a positive side. A portrayed in the Baring Ring segment two in automobile segment. Okay. Understood. Thank you so much, sir. Thank you. I remind you to all participants, please limit yourself to only two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. We have a next question from the line of Abhishek Jain from Crisp BIMs. Please go ahead. Thanks for opportunity and for a strong set of numbers, sir. Sir, my first question on domestic auto corporate side, where we have seen a decline in this quarter despite that very strong industry growth.

43:20 So just wanted to understand, is it because of the losing some business or is there any some production constraint? None of these things are that losing the business or any production constraint, except that small portion of labor force, etcetera. Otherwise, there is no constraint. And it's not that what we lose the business. It is the OEM of automotive who are changing their design or maybe their production has gone down to some extent in this first quarter. That's why it is a bit on pressure. But we expect that a couple of Tier one, Tier two customers to whom we are supplying, in turn, they are supplying to their principal debt overseas.

44:10 That will gaining up. So in the second quarter onwards, we would be having a better numbers as far as domestic auto component is concerned. Got it. And is this how is just wanted to know how is the current business update with the team plan? Are we started to recover the some set of business from the team can or still we are in the same place? No. There is no much change as far as the business with the particular customer is concerned. But as I again indicated in I again to telling you that as indicated that we are trying to get the new customer, get the new distinct, which will be giving better numbers on... Which will giving better conversion on getting the part for the domestic as well as overseas.

45:04 And we are also approaching or rather certain plants of our existing customer who are yet not on in my customer basket. That also we are exploring and the things are moving on. But we will be getting that response maybe down the line couple of quarters. Thank you, sir. That's all from my side. Thank you. Thank you. We have our next question from the line of Manas Jain from Sanjay Jain Family Office. Please go ahead. Hello, sir. Good set of numbers.. I had a question. Actually, the point was, I think, mentioned due to the fact that there's ocean freight and transportation cost due to this current environment. I wanted to understand, is there a scope for us to move the exports to a x works model where logistics are going maybe by the customers?

45:56 I understand we have a presence and warehousing in The US, but is there scope to restructure this to reduce this cost and protect the margins? No. It is difficult to, you know, change the current program terms from, say, DAP or DDP two x works or something like that. But what we will be doing or rather what we are confident that in certain kind of abnormal situations, our customers are helping us. And in past, it was also there when these kind of significant price increase on ocean freight was there, which is more than three times, four times. At that point of time, our customers have turned out and they helped us and they reimburse or rather one customer has already changed the import delivery terms for the time being.

46:49 In here also, we have already started approaching our customers and they are also showing their positive indication that they will be consider our request as far as this ocean freight hike is concerned. And I'm a bit confident to getting back certain reimbursement of these kind of high expenditure and what we've incurred in the first quarter or maybe June onwards. And to some extent, I'll be able to pass it in the coming quarters. And that kind of positive response we have already got it from our customers, where majority of our one customer group where we are paying this ocean freight in US, which is a major chunk. Europe, it is still under control, but we have already initiated these dialogues with the customers also.

47:40 Got it. Got it. Sir, and second question was, I mean, our passenger exposure is great. I just wanted to understand the CV exposure. I mean, this is then... I'm assuming there must be a very good opportunity there also. But as a percentage of the sales, that's almost level... I mean, it's not that high. So is there scope, are we working there to get some business opportunities in the city area? Yes. See, as I mentioned earlier also, one of our customer has acquired a good amount of or other acquired a division of one particular global multinational of this commercial vehicle heavy vehicle segment where we are expecting good turnaround because with that particular customer, we have a very good repo or other business association for last twelve to fourteen years. And year on year, we are getting some kind of incremental.

48:33 So definitely commercial vehicle and off highway heavy duty vehicles is the segment where we are approaching with that customer as well as couple of new customer. One customer is already almost on the verge of finalization in Europe and another one with in U. S. Also we are talking with. So we expect there also some kind of growth. Yeah. Okay. Okay. Thank you. Thank you. We have our next question from the line of Jyoti Singh from. Please go ahead. Yeah. Thank you for the opportunity. So, sir, just wanted to understand on the industrial side that our end market has shrunk around 26% of revenue in '22 to 18% in '26.

49:24 So even as a PV has outgrown from 40 to 52%, and just wanted to understand, are we looking to increase more on the industrial side because compared to auto, we are having the better margin over there. And similarly, on the export side, what kind of opportunity we are getting on the industrial side side as well as on the OEM side? And what's your, you know, focus toward going forward? Like, will be more on the OEM side or will shifting toward on industrial side because of better margin? See, the loss or reduction of industrial segment of my overall business, it's mainly because of one customer group where at five or seven plants, I'm supplying these kind of components.

50:23 And there, they got a huge reduction at their own and the cancellation of order mainly in the Europe. So that is the reason why this number has gone down. We are in process, as I just replied in my earlier question also, that we are having dialogues with one of the very big auto customer in Europe for commercial vehicle and industrial segment products. As far as bearing rings in concern in domestic, one of our customers have specifically diversified their activities into industrial segment and therein. And there we got a good inquiry and certain samples have already been submitted.

51:11 And we are expecting turnaround over there also. But let me tell you, my concentration is to get the maximum or rather incremental utilization of my capacity in terms of product range, in terms of segment and territory volume of the business, overall revenue of the business, overall margin of the business. On that base, I'm very much concentrated. And definitely, are concentrated on industrial products also where the huge components are there. We are also exploring certain untapped area. We have initiated certain kind of government registration and approvals for certain areas where we are yet not. So that is also another segment in industrial where we are approaching.

52:01 Great, sir. Understood. And, sir, I just wanted to inquire about the raw material for the bearing from where we are taking it. It's a majority. It's... They're from Indian steel plants. Okay. And some of our competitor, are they are quoting in that way that we are exporting steel from better countries. So our quality of bearing is better than any other competitors. So we are getting higher price on the export front. So are we are we seeing any such kind of competition on the export front? See, competition is always there in all businesses. But here, my USP is my facility, my range of product, my precision level, the tooling department, what we do have, the yield of the product, and the customer association.

53:01 Okay, sir. And also last question from my side. Any plan to enter into the aero and defense side going forward? We have initiated certain steps or other certain registration as I just indicated for the defense era. Again, in aerospace, we explore, but there we got some kind of registration also, initial registration, initial approval certification also. But coming to the revenue, it will take some good time. But I am a bit hopeful for the defense, maybe down the line twelve months, we would be having something from defense. There, we are working aggressively with some third party.

53:50 Yes. Okay. Great. Thank you so much. We have our next question from the line of Krish Chera from Caprice. Sir, I just have one question. I would want to understand that, firstly, in the subsector, where do you see the highest bearing demand growth coming from? And secondly, is there a specific sort of shift in the types of products that they are demanding? No. In the bearing ring, the segment is passenger vehicle LCV, where we are getting good demand or good incremental demand. And the shifting, I am not getting your second part of your question.

54:37 So I've recently noticed a lot of companies start talking about that in the bearing ring... Bearing space overall. There is a demand shift towards large sized bearings. So is there some sort of growth behind it? The way it was expected, it has not there. It has not placed for. But definitely, the big bearing manufacturers, global bearing manufacturers are moving slightly towards production of bigger size of bearings. But that will not hamper or reduce the existing the automobile or the smaller size of bearing where we are. And in this segment, particularly, I am getting good amount of inquiry and, you know, trial and run process are going with my existing customer having global presence.

55:27 Okay. So what are, like, the applications of these larger size bearing rings? Like, where is the highest demand for these coming from? Those are mainly into industrial, into mechanical applications, windmills, and other critical equipments. Yes. And other margins on those rings are higher than what the general auto industry caters to? The margins on these kind of rings are better than the traditional bearing ring business. But having, you know... Because of having value added and critical processes, and it is in the... On the same line, maybe on the auto components what we are able to generate. Okay. Okay. That's it from my side. Thank you. Thank you.

56:16 We have a follow-up question from the line of Krishna from Electrum PMS. Please go ahead. Thank you for the opportunity. So my question was more on the strategy side. So what we are expecting is I think we'll be generating a lot of cash flow over the next two to three years. And since our utilization is still at 60% in this year, we're towards 72 and CapEx figures around 30 to 40 crores only. So what is the strategy? You know, how are we trying to use this cash? Is it, you know, some inorganic acquisitions or maybe in the different aerospace segments instead of planning to enter that? So just wanted some clarity over there. See, the first way what we are looking is to maybe certain distribution of profits to my shareholders, stakeholders.

57:06 Maybe as we we have recently completed buyback of 180 crores. Apart from that, may look for distributing dividend or maybe another round of buyback or something that is what we might be looking for. We are also looking for an inorganic growth or maybe a kind of, you know, association or some JV with the overseas player base... Overseas player to be based in India, wherein the base of, you know, the utilization of Rolex facilities will increase. And more value added processes where the third party is having some kind of expertise and ready market available. That kind of association, that kind of, you know, JV, what we are exploring, it is in the primary stage. We have already appointed one global, you know, agency to explore this thing. And maybe down the line six to nine months, will be having something positive turnaround on that front. So there also we need to have a good amount of investment, but our concentration or rather our intention to have to be based in India only as far as the production or rather the value that processes are concerned because of all cost reduction or rather the cost benefit as far as production process is concerned.

58:36 So there's just some follow-up on that. So this JV or some type that we're planning would be in some different segment or, you know, what are we missing in our processes as of now, which we No. It's not a missing. No. No. It's not a missing. It's something more value added on my existing product where the new party or the other party is already there and already market available with their OEMs where I'm not as of now, where I'm not directly contact to those OEMs because I'm not producing the components in a Spanish way or with those kind of value added processes. Now that coming party or the new JV party is having certain expertise, certain experience, and good amount of facilities for having these kind of value added process, which will give me a benefit of... It's a high precision level as well as the main thing is that readily available custom As you know that in our segment, even in certain other value added processes with the... Our products, it would be difficult to get a new customer or to start a business within fifteen to eighteen months time because of validation and all all these auditing activities.

59:58 So our concentration is to add more value added processes where third parties having better expertise and ready market available. And in certain part of overseas, you better know that because of their conversion cost and inflationary trend, they are not able to produce components or not able to manage the situation. So they are also inclined to going to... In a country where the low cost production is possible as their customers are readily available. Right, sir. And this is one last question on the defense side. Could you elaborate more on the type of products that we are planning to It is very much primary or rather it's quite... Well, it...

1:00:43 In advance that product segment where we are. We are closely working with one of the very senior consultant, and it has just recently started maybe one and a half month back. But whatever the components which suits to our facility or what we are able to produce in our existing facility where these agencies are going to approve on that business any round job product or hot forging product, are... We want to concentrate. Okay. Alright, sir. Thank you. Thank you. We have our last question from the line of Jason Sans from IDBI Capital. Please go ahead.

1:01:31 Sir, thanks for taking my question again. Sir, in this quarter, we logged in a very strong growth in auto companies, the export auto companies, which is a 40% growth. So sir, you did allude to a good number for this whole annual year as well. So, sir, just wanted to know what exactly are we different... What exactly are we doing differently here to log in such strong growth. One thing you mentioned that the Allison revenue has seen a strong recovery, so I'm sure that has played a part. So what else are we doing to basically, you know, sustain the strong? The new programs, what we won in previous year or rather in previous fiscal, it has started. The 13 program, which has started in last year, now it has ramped up further, and existing customers have increased their volume in a significant way.

1:02:21 That is why the export business or export auto component has grown up. And further, it will be as I I I told that it it is being ramped up further. Couple of new orders would be starting in third quarter of this fiscal. So further, it would be added. So you're seeing good traction for this for this segment? Definitely. Sure. Sure. Sir, in terms of this, the 1,750,000,000, we had placed a slide probably a year back or something for that those orders coming in. Sir, any update on that? How is that flowing through? Or have all the orders been recovered or some have been pushed back? What was the status on that? Except couple of orders from US, you know, because of tariffs and all these things, that entire project is on hold or rather OEM has hold their... This thing. Rest of the projects are coming back, not with the full traction, but it has already started with gradual improvement and others are in line. And even the new programs, what we have won in fiscal 'twenty six, that has also been started.

1:03:33 Okay. And sir, if this report duty, if anything comes through, you know, for the tariff, reduced tariff, etcetera, just a bookkeeping thing, I mean, will it be recorded in other income just to... Or just just give me some clarity on how it will be recorded. This refund You have refund of export duty? Yes. Yes. Yes. Yes. Yeah. That that would be added to revenue. That will be added to revenue, not other income, you're saying? No. No. No. It is not that part of other. It would be added to revenue. It'll be added to revenue. Okay. Yes. And, sir, just last... Lastly, one thing, just... You did speak about the JV. Okay? So that JV you're looking at to do in a allied area. It could be a different area as well, different aerospace. It could be anything, but it's too premature or initial stage to talk about it right now. Is my understanding correct?

1:04:24 Very true. Yeah. Okay. Okay. Sure. That's all from my side. Thank you so much, sir. Thank you. Ladies and gentlemen, that was the last question for the day, and I now hand the conference over to the management for closing comments. Yeah. On behalf of Rolex Rings management, I again thank you everyone for joining this con... Call. I hope we have been able to answer all your queries, questions, and concerns. We look forward to such interactions in the future, and we hope to meet your expectations in the future too. In case you require any further details, you may contact us directly or to our investor advisers, SGA, we will be delighted to revert.

1:05:13 Once again, thank you very much to all of you. Thank you. On behalf of Rolex Rings Limited, that concludes the conference. Thank you for joining us, and you may now disconnect your lines.