Carraro India Limited — Q1 FY26

Carraro India Ltd Q1 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=M-o8Z7ACbEg Published: 9 months ago

0:02 2 seconds Ladies and gentlemen, good day and welcome to the Garo India Limited Q1 FI26 earnings conference call. As a 0:10 10 seconds reminder, all participant lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation concludes. Should 0:19 19 seconds you need assistance during the conference call, please signal an operator by pressing star 10 on your touchstone phone. Please note that this 0:27 27 seconds conference is being recorded. I now hand the conference over to Mr. to Dr. Balaji Gopalan, managing director of Karo India 0:35 35 seconds Limited. Thank you and over to you Balaji sir. 0:39 39 seconds Yeah, thank you very much. Uh a very good morning to all of you and thank you for joining us today for Karu India 0:47 47 seconds Limited quarter 1 FY26 earning call. I am joined by Mr. David Broi our whole 0:55 55 seconds time director and CFO. Mr. Manika, full-time director and COO, Mr. Ashok 1:02 1 minute, 2 seconds Fry, director sales and marketing along with other members of our leadership team and our investor relations partner, 1:11 1 minute, 11 seconds strategic growth advisors. Let me start by giving you an overview of the quarter gone by. FY26 has begun on a very 1:21 1 minute, 21 seconds positive note. In Q1, our revenues from operations grew by 4% yearonear, largely 1:29 1 minute, 29 seconds driven by volume growth across both domestic and export markets. On the 1:35 1 minute, 35 seconds domestic side, we saw a 3% increase led by strong demand in our four-wheel drive 1:42 1 minute, 42 seconds axle segment. Exports also grew 5% yearonear showing early signs of 1:49 1 minute, 49 seconds recovery after two relatively weak quarters. 1:53 1 minute, 53 seconds Even though indirect exports of agriculture guidelines continue to remain soft, overall volumes were 2:01 2 minutes, 1 second supported by strong demand from domestic market. I am pleased to report that we maintained an AITA margin of 11% during 2:11 2 minutes, 11 seconds the quarter and this reflects our continued focus on cost efficiency and operational discipline. 2:20 2 minutes, 20 seconds Let me touch upon some segmental insights and trends. Both the agriculture equipment and construction 2:28 2 minutes, 28 seconds vehicle segments showed stable performance this quarter. 2:33 2 minutes, 33 seconds In the construction equipment segment, we continued the export ramp up of our new teleoom handlers or TBH axles which 2:43 2 minutes, 43 seconds we introduced in Q4 of FY25 for a major international OEM. that's 2:51 2 minutes, 51 seconds progressing well and has helped drive export sales. On the domestic front, we 2:57 2 minutes, 57 seconds have secured a new penny boom handler axle project which is expected to be completed by Q3 of financial year 26. 3:08 3 minutes, 8 seconds In back loaders, we witnessed a softening trend in domestic demands compared to last year. However, this was 3:16 3 minutes, 16 seconds partly set off by increased traction from a couple of Indian OEMs who are gaining market share in exports. 3:25 3 minutes, 25 seconds The agriculture segment continues to benefit from increased adoption of four-wheel drive axles. In fact, we hit 3:34 3 minutes, 34 seconds a new milestone in May 2025 where nearly 4,000 units of four-wheel 3:41 3 minutes, 41 seconds drive axles were produced, our highest ever in a single month. A key highlight 3:48 3 minutes, 48 seconds for us was the successful completion of a prototype for our high transmissions 3:55 3 minutes, 55 seconds for an export customer. Series production of this high horsepower transmission is set to begin in Q2 of 4:04 4 minutes, 4 seconds this year. In addition, we have secured two new projects in the high horsepower 4:11 4 minutes, 11 seconds category. One with an export OEM and another with a domestic tractor manufacturer. 4:19 4 minutes, 19 seconds Both of these are for transmissions of vehicles above 105 horsepower 105 4:27 4 minutes, 27 seconds horsepower with production starting in FY2627 and FY2728 respectively. 4:37 4 minutes, 37 seconds Coming to gears and spares business, this saw a marginal decline and we expect that part of the portfolio to 4:45 4 minutes, 45 seconds remain stable with limited upside in the near term. 4:50 4 minutes, 50 seconds On the engineering services front, we have seen growing demand especially for high horsepower and more tech enabled 4:59 4 minutes, 59 seconds platforms. A significant development this quarter was the conclusion of a commercial agreement to design an 5:08 5 minutes, 8 seconds electric tractor transmission. The formal contract is being worked out and expected to be signed shortly. This 5:17 5 minutes, 17 seconds opens up the possibility for Karo India to eventually supply the electric transmission to all the markets creating 5:25 5 minutes, 25 seconds a new and consistent revenue stream from this segment. 5:31 5 minutes, 31 seconds On the operational enhancement side, we achieved several milestones. 5:37 5 minutes, 37 seconds We successfully completed the pilot batch of CVT or what we call continuously variable transmission 5:45 5 minutes, 45 seconds gearboxes which marks an important step towards potential commercialization. 5:51 5 minutes, 51 seconds CVT transmissions basically are related to automatic gearboxes. 5:57 5 minutes, 57 seconds We also commissioned a new 800mm pallet Mazak machining center in June this 6:03 6 minutes, 3 seconds year. This will significantly improve both throughput and flexibility in machining supporting our ongoing capacity enhancement. 6:16 6 minutes, 16 seconds During the quarter, we also secured new orders from major OEMs in both construction and agriculture segments, 6:24 6 minutes, 24 seconds further strengthening our forward pipeline. 6:28 6 minutes, 28 seconds Coming to projects and investments, during Q1, we deploy deployed INR 101 million in capital expenditure. 6:40 6 minutes, 40 seconds This was mainly to support three areas. 6:43 6 minutes, 43 seconds Number one, new telescopic handler axle production. Number two, high performance 6:50 6 minutes, 50 seconds new transmission range for agriculture applications. 6:55 6 minutes, 55 seconds And three, grant incremental capacity for FY26 sales. This capex is aligned 7:03 7 minutes, 3 seconds with our strategy to support the expected growth in FY26 and beyond. 7:10 7 minutes, 10 seconds customer trust and recognition. 7:13 7 minutes, 13 seconds Our relationships with OEMs continue to strengthen. I want to highlight that despite short-term weakness in some 7:21 7 minutes, 21 seconds markets, we haven't lost a single customer or contract. That speaks to the trust our clients have in us. We also 7:31 7 minutes, 31 seconds received several recognitions during the year. In April, Bull Machine awarded us the best supplier award for strategic 7:40 7 minutes, 40 seconds excellence which is a testament to our customer centric approach and consistent performance. 7:48 7 minutes, 48 seconds Coming to FY26 outlook, looking ahead for FY26, we are confident about delivering 7:56 7 minutes, 56 seconds results as guided in our Q4 FY26 earnings call. 8:02 8 minutes, 2 seconds We expect Airy 26 revenue growth in the range of 8 to 12%. 8:09 8 minutes, 9 seconds On margins, our goals remain to move towards adding incremental 1% AIDA that 8:17 8 minutes, 17 seconds is 100 BPS every year for the next two to three years. While quarterly margins may 8:25 8 minutes, 25 seconds fluctuate due to product mix, we urge stakeholders to focus on full year delivery. 8:34 8 minutes, 34 seconds Our growth drivers for the year include strengthening domestic demand in both agriculture and construction sectors. 8:43 8 minutes, 43 seconds Number two, ramp up of teleoom handler axel volumes. 8:49 8 minutes, 49 seconds Three, revenue from engineering services. 8:52 8 minutes, 52 seconds Four, recovery in gears and spare parts and finally higher localization where we 9:01 9 minutes, 1 second are targeting 86 to 88% localization over the next 3 years. In short, Karo 9:09 9 minutes, 9 seconds India is well positioned for sustained profitable growth. Our foundation is 9:15 9 minutes, 15 seconds solid, our pipeline is strong and our focus is clear to deliver innovative 9:22 9 minutes, 22 seconds value added solutions while growing in close alignment with our OEM partners. 9:29 9 minutes, 29 seconds With that, I now hand over the call to Mr. David Grai, our CFO to walk you through the financials. David Grai, please. 9:39 9 minutes, 39 seconds Thank you, Bajin, and good morning everyone. I will now take you very quickly to the highlights of the quarter 9:46 9 minutes, 46 seconds and then uh we have the list some of Q&A of course. Um so when we look at Q1 of 9:53 9 minutes, 53 seconds 526 uh our total income is INR 4,999 million almost 500 crores with a growth 10:02 10 minutes, 2 seconds of 5% yearonear. Our income from operation grew by 4% yearonear to INR 10:10 10 minutes, 10 seconds 4,929 million. This was driven by domestic volume growth by a partial early 10:18 10 minutes, 18 seconds recovery in export and by the progressive ramp up of the new third business. As already mentioned, our 10:25 10 minutes, 25 seconds other income primarily uh doubled on back of increased export incentive for 10:31 10 minutes, 31 seconds 42 million rupees and 19 million of oneoff effect for a reversal of all the 10:38 10 minutes, 38 seconds provision that was previously made in the past years. IA uh came at INR 548 10:46 10 minutes, 46 seconds million almost 55 crores translating translating to an EIA margin of 11%. 10:53 10 minutes, 53 seconds We also recorded the profit after tax for the quarter at 299 million 29 crores. In addition, we continue to 11:02 11 minutes, 2 seconds maintain a strong balance sheet and this allow us to fund our operations, support our strategic investment and to remain 11:10 11 minutes, 10 seconds agile in responding to opportunities in the market. Looking ahead, we remain optimistic. Our financial output for FY26 is supported by growth in high 11:19 11 minutes, 19 seconds value product line, increasing contribution from engineering services and continued gains from modernization. 11:27 11 minutes, 27 seconds That's all for the moment and I'll give it back to you. Yeah, thank you David. Now to summarize, FY26 11:37 11 minutes, 37 seconds has started well and is aligned with our fullear growth guidance. Strategic bets in teleboom handler axles, high 11:46 11 minutes, 46 seconds horsepower transmissions and engineering services are beginning to yield results. 11:52 11 minutes, 52 seconds We thank all our investors, partners and customers for your continued support. We deeply value your trust and are excited 12:00 12 minutes about what lies ahead. We now welcome your questions. 12:07 12 minutes, 7 seconds Thank you very much sir. We will now begin the question and answer session. 12:12 12 minutes, 12 seconds Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you 12:20 12 minutes, 20 seconds may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll 12:28 12 minutes, 28 seconds wait for a moment while the question Q assembles. 12:41 12 minutes, 41 seconds A reminder to all participants, if you wish to ask any questions, you may press star and one. We have our first question from the line of Shiram an individual investor. Please go ahead. 12:53 12 minutes, 53 seconds Thank you for the opportunity. Uh so what is the contribution of OWD to our numbers and if you can give some color 13:00 13 minutes on the market size because in the in the last call I think you've mentioned that uh you'll be able to give the numbers so it's possible uh please do that. 13:10 13 minutes, 10 seconds Yeah thank you for the question. Um I will request our sales director uh Ashok Ray to throw some light on the market 13:19 13 minutes, 19 seconds and our four-wheel drive journey. Uh as we uh indicated in the last call also uh that the market the pie of the 13:27 13 minutes, 27 seconds four-wheel drive tractor in the domestic market is increasing. uh last year in the financial year it was in the range 13:34 13 minutes, 34 seconds of 20 to 22% of the market was uh in the four-wheel drive segment and the way the quarter has started in this financial 13:43 13 minutes, 43 seconds year we are expecting that this should be around 23 to 25% of the market will move to the four-wheel drive now as a 13:51 13 minutes, 51 seconds caro we are maintaining the almost uh 60 to 65% market share in the non-captive segment so both the captive and the 13:59 13 minutes, 59 seconds non-captive segments are growing And uh our volumes are also growing in the similar range that means almost 10 8 to 14:06 14 minutes, 6 seconds 10% volume we are growing it. And uh when it comes to the uh revenue contribution uh we are talking about 14:15 14 minutes, 15 seconds almost uh uh Karo India's 20 25% of our turnover is now uh will be in the four-wheel drive segment. 14:26 14 minutes, 26 seconds Uh so just one clarification so when you say 25% it's 25% of overall numbers or 25% of domestic uh 14:35 14 minutes, 35 seconds uh it should be overall total number but domestic uh uh will be almost 35 40% of our turnover will be coming from the 14:44 14 minutes, 44 seconds four-wheel drive because as you know we operate in the uh construction as well as the agricultural segment and agricultural and construction segment is 14:53 14 minutes, 53 seconds 50/50% of our uh total uh as a share of business between the agriculture and construction domestic market and within 15:01 15 minutes, 1 second the agricultural uh out of that we'll be around total domestic would be around 35 to 40% of our turnover is coming from 15:09 15 minutes, 9 seconds what we drive okay that's helpful sir just a followup so uh if I include the captive and non-captive what will be the market size 15:18 15 minutes, 18 seconds currently the the tractor domestic market last year was almost 950 50,000 tractors. So this year we are expecting that it 15:27 15 minutes, 27 seconds should cross 1 million. So if 1 million tractor are crossing with the way the monsoon is going well. So I'm expecting 15:34 15 minutes, 34 seconds that. Of course I don't have the there's no formal number available. It is only the uh trend we are seeing it. It should be around 240,000 to 260,000 tractors 15:44 15 minutes, 44 seconds should be converted into the four-wheel drive which was almost uh 7 8 year ago was hardly 2% or 3% of the market. 15:53 15 minutes, 53 seconds Okay. And and and as a value, can you give some ballpark value? 16:00 16 minutes Value is because it's very very difficult because we are talking about a this market which is between 20 16:08 16 minutes, 8 seconds horsepower or 15 horsepower up to 75 80 horsepower. Putting a value would be very very unjustified and not a right 16:16 16 minutes, 16 seconds way to portray. the numbers is is there which is uh which talks about the number of tractors which are getting converted into the four-wheel drive. 16:26 16 minutes, 26 seconds Okay. Okay. Thank you. I'll join back in the queue. Thank you. 16:33 16 minutes, 33 seconds Thank you. A reminder to all participants if you wish to ask any questions you may press star and one. 16:40 16 minutes, 40 seconds Anyone willing to ask a question you may press star and one. Now we have our next question from the line of Prrenav Dhi from Arao Asset Management. Please go ahead. 16:51 16 minutes, 51 seconds Yes, thank you for the opportunity and uh so I have a couple of questions. 16:56 16 minutes, 56 seconds First is that we've observed quite a bit of volatility in our gross margins for the last three quarters. So can we just uh like break down the specific costs 17:04 17 minutes, 4 seconds and the effects of the product mix and pricing factors behind the volatility and like more importantly with uh you know our upcoming strategic SOPs as well 17:13 17 minutes, 13 seconds as new product launches uh how will they stabilize and potentially lift the gross margins over the next 6 to 12 months. So yeah that is my first question. 17:27 17 minutes, 27 seconds Okay, on the gross margin, um I would say volatility was probably seen in Q3 of 17:35 17 minutes, 35 seconds last year. But if we enlarge a little bit the horizon, we will see that we do not have a major volatility. We are 17:43 17 minutes, 43 seconds talking about always variation in the range of one to two points um quarter by quarter and this is actually 17:53 17 minutes, 53 seconds quite uh let's say common in our business consider that our gross margin is really much the effect of the 18:02 18 minutes, 2 seconds different mix that we see quarter by quarter and we have seen also in the past that is happened and it will keep 18:08 18 minutes, 8 seconds happening also uh in the future. So um there is no specific uh reasoning that 18:18 18 minutes, 18 seconds justifies this other than a variation of the M of sales from the quart from quarter to quarter. Having said that, of 18:26 18 minutes, 26 seconds course, we uh are looking for a structural improvement of our gross 18:32 18 minutes, 32 seconds margin that uh will happen and will be uh you will be able to appreciate it when you look at the full year results. 18:42 18 minutes, 42 seconds Okay. Um and this will be the result the result of the increased level of 18:49 18 minutes, 49 seconds localization that we are targeting as we already mentioned. And uh in addition to 18:55 18 minutes, 55 seconds that the strategy of Teraro is of course to add products that will be uh 19:04 19 minutes, 4 seconds gradually margin creative for the company. So those are the two major 19:11 19 minutes, 11 seconds um let's say uh ways in which we plan to structure increase our marketing over time. 19:21 19 minutes, 21 seconds Okay. Great. Uh and uh next other question would be that let's say if you can help us understand the strategic 19:28 19 minutes, 28 seconds importance of uh Indian units within our wider group portfolio and like what are the specific actions or frameworks that 19:36 19 minutes, 36 seconds we put in place to ensure that any incremental business routed through India not only drives our topline but also sustains or possibly enhances the 19:44 19 minutes, 44 seconds profitability of uh the Indian subsidiary. 19:49 19 minutes, 49 seconds Uh uh sorry but your voice cracked in the beginning so we could not figure out the context and the question. Can you please repeat it please? 19:58 19 minutes, 58 seconds Yes sir surely I'll repeat my question. 20:00 20 minutes So my question was uh that I wanted to understand the strategic importance of the Indian unit within the wider group 20:07 20 minutes, 7 seconds portfolio and so what are the actions or the frameworks that are being put uh so that you know uh whichever the incremental business that is rooted 20:15 20 minutes, 15 seconds through the Indian subsidiary not only drives the topline but also enhances the profitability uh of the Indian subsidiary. 20:23 20 minutes, 23 seconds Yeah. Uh see uh Karo India is one of the largest plants within Karo group uh in 20:32 20 minutes, 32 seconds terms of the industrial footprint that we have and uh it is a strategy driven 20:38 20 minutes, 38 seconds by our group that we have created India as a center of excellence for 20:45 20 minutes, 45 seconds agriculture transmission. So any transmission product connected with agriculture 20:52 20 minutes, 52 seconds uh the possibilities are very very high that it will be passed on to India. That is because we have the supplier network, 21:01 21 minutes, 1 second we have done the vendor development, we have the infrastructure, we have the test benches. So the whole 21:07 21 minutes, 7 seconds infrastructure, the industrial layout has been made favorable for uh agriculture transmissions within our 21:15 21 minutes, 15 seconds group. So there is a natural uh choice to send it to India. This is number one. 21:21 21 minutes, 21 seconds Having said this, in the last two and a half decades, we have established ourself as a reliable and credible uh 21:30 21 minutes, 30 seconds manufacturing base within Karu Group and we have lot of laurels to our credit to the extent that we have the Caterpillar 21:40 21 minutes, 40 seconds global excellence award which is given only to the top 1% suppliers of the 21:46 21 minutes, 46 seconds Caterpillar global supplier network. So this is not even present in many of our other facilities. So these kind of 21:55 21 minutes, 55 seconds recognitions from the customer because the customer also is now very very uh proudly I can say that they are opting 22:04 22 minutes, 4 seconds for uh products to be rolled out from the India plant considering the infrastructure and competencies that we 22:11 22 minutes, 11 seconds have. So uh looking at the uh Karo perspective we are contributing close to 22:19 22 minutes, 19 seconds about 20 to 25% of the global revenue and we have become very very important in the business strategy of Karu Group. 22:28 22 minutes, 28 seconds So there is no doubt about it. Secondly, we are uh already in receipt of IPS which very rarely you will find 22:37 22 minutes, 37 seconds headquarters passing it on and around 154 IPS for all products that are being sold in India has been passed on to Karu 22:46 22 minutes, 46 seconds India because we have the technical competence in our R&D center to manage all the design and the product life 22:54 22 minutes, 54 seconds cycle of those IT products. So this further strengthens the resolve that Karo group is focusing on India. Now we 23:03 23 minutes, 3 seconds are even looking at expanding our R&D and engineering services to make it a global competence center and to that 23:11 23 minutes, 11 seconds effect we have already shifted the PLM platform of product life cycle management under Winchillin for the Karo 23:19 23 minutes, 19 seconds group to be operated from Karo Technologies in India. Now all these things are feelers and uh indications 23:28 23 minutes, 28 seconds that India is uh the pivotal point. It is a point of focus where everything in 23:34 23 minutes, 34 seconds future uh we will get an opportunity and we can ask for the business to come into India. So uh this is where the 23:43 23 minutes, 43 seconds importance of the Indian operations is there with respect to the group. Uh have I answered your question or you want any specific clarification? 23:53 23 minutes, 53 seconds Uh yes sir you've answered my question. 23:55 23 minutes, 55 seconds So just one part on the royalty part. So royalties I think given that the IPS have been transferred they would be staying minimal right they will be zero. 24:04 24 minutes, 4 seconds We will only pay for the brand royalty that is in a decimal. So 32 24:12 24 minutes, 12 seconds 4 it is in that range but earlier the royalty that we were paying uh that has become zero. 24:20 24 minutes, 20 seconds Okay. Perfect. Perfect. And uh just one question that uh let's say for the FIA 26 we are guiding for 8 to 12% uh uh 24:28 24 minutes, 28 seconds growth despite a weak uh let's say domestic growth and like uh even the export recovery has been at an stage. So 24:35 24 minutes, 35 seconds let's say beyond FI26 what are the uh livers which you know could realistically lift our growth into mid teams and like how is our capacity and 24:44 24 minutes, 44 seconds the capeex aligned to manage the incremental growth that we are seeing in the future. 24:49 24 minutes, 49 seconds Yeah, see we have a target uh which uh we will call it the business journey and in the business journey we are very 24:57 24 minutes, 57 seconds clear in a very realistic way we are looking at touching 315 million euro by 25:05 25 minutes, 5 seconds 2029 which uh translates to roughly 3,300 cr to 3,400 cr. This is the 25:12 25 minutes, 12 seconds business we are having a clear visibility for and as I have explained in the past we are estimating not based 25:21 25 minutes, 21 seconds on how the market is moving. That is one uh element in our projection but we are driven more by projects that we are 25:30 25 minutes, 30 seconds working on and prototypes that we are building for the future projects of our customers. Now that is the bell weather. 25:38 25 minutes, 38 seconds If I am submitting a proto because we don't make protos without proper orders from our customers. So it's not a 25:46 25 minutes, 46 seconds catalog kind of an item that we are developing products and waiting for customers. It is a co-designing activity and to that reason a proto becomes very 25:55 25 minutes, 55 seconds very important indicator for our future revenue stream. So considering the protos and the projects that we are 26:02 26 minutes, 2 seconds working on realistically these numbers have been arrived at. To give you an example, we I explained to you that we 26:10 26 minutes, 10 seconds are signing a contract for the electric tractor engineering services for which the work has already started. It is already ongoing. And if you remember in 26:19 26 minutes, 19 seconds the past we had even done their feasibility study and then we had said next year we will get the agreement for 26:26 26 minutes, 26 seconds the final configuration and supply of transmission which we have got it. So uh we are consistent in what we are saying 26:34 26 minutes, 34 seconds but the volumes of this electric transmission is not considered in my projection of 350. So we are very very 26:44 26 minutes, 44 seconds realistic in the numbers that we project. What is there in my pocket is what we are projecting and to that reason 3,300 is very clear number one. 26:56 26 minutes, 56 seconds Number two, we were looking at some capacity enhancement in this year itself. Probably towards end of this 27:03 27 minutes, 3 seconds year, we are very very cautious. We put one foot in the water to ensure we are stable and we are not making any 27:12 27 minutes, 12 seconds mistakes. So our there is a slight deferment I would say of the expansion which now we will be doing in a 27:19 27 minutes, 19 seconds step-by-step way instead of going in for a major expansion in one shot and putting all our money in capex. So we 27:27 27 minutes, 27 seconds are doing a very very cautious studied and reliable expansion of our activities 27:34 27 minutes, 34 seconds so that we are able to absorb our fixed cost and have some benefit of economy of scale also. If my top line is growing 27:43 27 minutes, 43 seconds and my capex also is growing, my other fixed costs are growing, then that's not a real efficient way of doing business. 27:50 27 minutes, 50 seconds So, Karo is very conscious of these things. We are ensuring that every pony has a payback period and we are ensuring 27:59 27 minutes, 59 seconds our margins should improve as we are growing and to that reason we are looking at a 1% enhancement in Eida year 28:08 28 minutes, 8 seconds on year. We have a clear visibility. We have a clear plan based on localization and uh cost efficiency measures in 28:16 28 minutes, 16 seconds operations that will lead us for sure for the next two to three years. We don't want to commit something beyond. 28:23 28 minutes, 23 seconds It is very easy for me to say we will continue similar actions beyond also but unless we are sure of delivering Karu 28:31 28 minutes, 31 seconds does not believe in making an announcement. So that is the reason Eida plus 1% guaranteed from our side. We are 28:39 28 minutes, 39 seconds looking at it as a target which we will achieve and we have the motivation and the plan and strategy to do it. So 1% 28:48 28 minutes, 48 seconds for the next two to three years is what we are uh optimistic and confident of achieving. 28:55 28 minutes, 55 seconds Great sir. So just one clarification here that uh Mr. Prana may please request you to rejoin the queue. Sure, sure, sir. 29:04 29 minutes, 4 seconds Thank you. 29:07 29 minutes, 7 seconds We have the next question from the line of Sonel Gupta from HSBC Mutual Fund. Please go ahead. 29:13 29 minutes, 13 seconds Yeah. Hi, good morning sir and thanks for taking my question. Uh, so just on the I mean the growth this quarter right 29:21 29 minutes, 21 seconds like this quarter domestic if I look at domestic tractor production has grown about 10%. 29:27 29 minutes, 27 seconds And uh so I'm just trying to understand in that context and like we're saying that the share of four-wheel drive is sort of going up as well. So I would 29:37 29 minutes, 37 seconds have thought that I mean like given that a strong tractor quarter should ideally be good for us. So if you could just sort of tell us a little more on how the 29:46 29 minutes, 46 seconds seasonality works for you so that we can better understand on that side. 29:51 29 minutes, 51 seconds Yeah. Yeah. Uh Ashok would like to uh uh Sunel uh see in as you know as you rightly mentioned that there is a 30:00 30 minutes seasonality of the tractor market. So uh right now we are entering into the peak season. Okay. So normally uh December 30:09 30 minutes, 9 seconds January those are the period which is a lean period and uh this quarter because of the monsoon good monsoon and because 30:17 30 minutes, 17 seconds of the positive environment around the rural economy it's pulling more tractors today and we are expecting that this 30:24 30 minutes, 24 seconds market is expected to touch at least 7 to 9% it will grow this year. This is one. When it comes to four-wheel drive 30:31 30 minutes, 31 seconds traction within the uh same se within the same basket, the pi of the four-wheel drive is increasing. When it 30:39 30 minutes, 39 seconds is increasing, so we are expecting that this volume will grow moving forward in the next quarter also. But at the same 30:46 30 minutes, 46 seconds time, we our OEM do the indirect export also. So this increase the indirect export especially to the US market or to the European market is not that great. 30:58 30 minutes, 58 seconds It is not in the same level as it used to be around 3 years ago. We are still at the bottom level. So that is affecting the growth in the total 31:07 31 minutes, 7 seconds revenue which is given by the four-wheel drive domestic market with the drop in the export market. So that is where the 31:16 31 minutes, 16 seconds total revenue growth in the uh agricultural market is not same as what is happening in the tractor industry 9 31:22 31 minutes, 22 seconds to 10%. However, however with the way the four wheel drive is growing and we are expecting at least it should be the 31:30 31 minutes, 30 seconds export should be stable. So we we that is where we are seeing a conservative kind of estimate that we will grow 31:36 31 minutes, 36 seconds around 7 to 10% this year in overall uh revenue. 31:43 31 minutes, 43 seconds So it's a mix of decline and increase. 31:46 31 minutes, 46 seconds No, I was basically I was just trying to understand for this quarter itself, right? Like so what sort of agri domestic growth would you have seen 31:54 31 minutes, 54 seconds right like your overall agriculture is down 3% but I guess that's because exports have declined but the domestic 32:02 32 minutes, 2 seconds agree revenues would have grown how much? 32:06 32 minutes, 6 seconds Okay, if you if you talk about our uh as a growth we would have 32:14 32 minutes, 14 seconds because see quarter on quarter what happens I'll tell you it it all it's a very short I'm looking at year on year so year on year 32:22 32 minutes, 22 seconds year yes if you talk about the year our guidance we maintain what Dr. I'm talking about Q1 this quarter. I mean 32:30 32 minutes, 30 seconds your agri equipment revenues are down 3% year on year. Uh if you could split that into export and domestic, right? 32:42 32 minutes, 42 seconds Yeah. I'll ask David to come in over here. Okay. 32:49 32 minutes, 49 seconds So you want to understand the split by application market of our um of our first quarter. 32:57 32 minutes, 57 seconds Okay. So if you look Q1 versus uh Q1, 33:03 33 minutes, 3 seconds okay, my um agree was uh actually increasing by five%. 33:15 33 minutes, 15 seconds Um I think we did this data. Yeah. 33:20 33 minutes, 20 seconds Uh we have 83 million increment. 33:25 33 minutes, 25 seconds uh on the agree uh segment on the domestic market. Okay, which includes 33:33 33 minutes, 33 seconds the pure domestic as well as what we call indirect exports. And when we look 33:40 33 minutes, 40 seconds at the construction equipment, we are flat. We lost 10 million but 33:47 33 minutes, 47 seconds substantially we are flat. So as a shock was uh was mentioning when you read this 33:54 33 minutes, 54 seconds uh agriculture uh segment for the domestic business you ideally uh should 34:02 34 minutes, 2 seconds try to split it in pure domestic and indirect export. This is an exercise which is a bit complicated. We try also 34:10 34 minutes, 10 seconds ourself to do it but uh we do not have any official number that's why we do not give a lot of disclosure on this but the 34:18 34 minutes, 18 seconds concept that the logic that shock has mentioned is also what we see in our unofficial data the pure domestic 34:27 34 minutes, 27 seconds business is actually growing with the percentages that you have uh pretty much 34:33 34 minutes, 33 seconds mentioned but this growth is partially offset by the cooling down that we see on the indirect export front. We see 34:43 34 minutes, 43 seconds that our customers which are typically exporting are suffering a little bit uh 34:50 34 minutes, 50 seconds here and the overall growth gets uh diluted on the domestic market. When we 34:56 34 minutes, 56 seconds talk about the construction business, um as we said we are flattish uh with 35:06 35 minutes, 6 seconds the deco loader segment which is which has slowed down during this quarter. uh 35:12 35 minutes, 12 seconds at the same time Axel's phase uh went quite well with uh a bit of uh let's say 35:20 35 minutes, 20 seconds reshuffleling of the mix of volumes because again we in this case we have the opposite dynamic we have seen that 35:28 35 minutes, 28 seconds the pure domestic sales in construction have uh degraded a little bit mostly due 35:37 35 minutes, 37 seconds to the introduction of the strength five regulation And what the OEMs have done 35:44 35 minutes, 44 seconds they have tried to push more the export side at their end. So overall it's 35:50 35 minutes, 50 seconds pretty much even uh but the uh internal mix of those volumes has changed a little bit in this quarter. 35:59 35 minutes, 59 seconds Got it. Thank you David. uh and uh just on the I mean the point around uh non-captive so would what would be the 36:08 36 minutes, 8 seconds share of non-captive in the four-wheel drive segment for tractors domestically 36:16 36 minutes, 16 seconds uh I'm expecting uh almost uh I'm expecting almost uh in the total market 36:22 36 minutes, 22 seconds it should be around 35% should be the 35 to 40% would be non-captive 36:30 36 minutes, 30 seconds from 41 horsepower to 40 41 horsepower and above. Uh but in case of below 41 36:37 36 minutes, 37 seconds horsepower and all it's normally a captive 100% captive. 36:42 36 minutes, 42 seconds So that is why overall market to 30 but in our segment in which we operate uh 35 to 40% should be the kept. 36:53 36 minutes, 53 seconds Okay. So we're not operating in that uh 20 to 30 we don't operate. Oh okay. 37:04 37 minutes, 4 seconds Those are very small tractors 15 horsepower 20 25 in that range. So technology and technology is also very basic 37:13 37 minutes, 13 seconds right but I thought that I mean like some players like Mahindra Oja and all are also playing in those segments which are sort of a little 37:20 37 minutes, 20 seconds in doesn't have the legacy to work on small tractors. Our our strength is 40 and above because the challenge of 37:28 37 minutes, 28 seconds technology durability and the reliability from a engineering point of view increases as the horsepower goes 37:36 37 minutes, 36 seconds higher. So lower horsepower the duty cycles are much easier the technology is much simpler. So that is the reason Karo 37:45 37 minutes, 45 seconds focuses on higher horsepower. So we start with minimum 40 uh horsepower and we can go up to 150 170 horsepower. 37:56 37 minutes, 56 seconds Got it. So, and just last question from my side on the uh order wins that you've got especially on the high horsepower transmission systems and one you 38:04 38 minutes, 4 seconds mentioned that you will see a order starting Q2 as well. So, are I mean like just trying to get a magnitude or size 38:12 38 minutes, 12 seconds of these orders. I mean like is this something like that can really contribute a few percentage points of growth for us? Will that be the right 38:21 38 minutes, 21 seconds way to look at the order sizes here? 38:28 38 minutes, 28 seconds We have we we haven't actually uh bifurcated uh exactly between uh higher 38:35 38 minutes, 35 seconds horsepower versus the other products that we have because these are all product mix and that is why we have been uh struggling with convincing investors not to look at it from a quarter basis. 38:47 38 minutes, 47 seconds It has to be at an annual basis. So uh these fluctuations are also uh very very situational and it is not really 38:56 38 minutes, 56 seconds seasonal. We call it seasonal as a vocabulary but uh it fluctuates based on the situation and the context. So what 39:04 39 minutes, 4 seconds is a good quarter in 25 may not necessarily be a good quarter in uh 26. 39:11 39 minutes, 11 seconds So uh we have to look at it in totality and when we look at the entire basket we know that at the end of the year where 39:19 39 minutes, 19 seconds we will reach and what will be the numbers during that period because the order book changes based on what the customer needs, what is the season, what 39:28 39 minutes, 28 seconds is their pipeline, what is the inventory level. So there are many things that get into it even in terms of holidays, in 39:35 39 minutes, 35 seconds terms of working days. So there is a spillover that happens but within the 12 month period we are able to fill the 39:43 39 minutes, 43 seconds order book the commitment that OEMs have uh booked the capacities with us. That is the reason we look at it in totality. 39:50 39 minutes, 50 seconds Revenue growth like we said 8 to 12% is a very realistic number we are talking at looking at we are not uh uh uh 40:00 40 minutes doubtful about it unless there is a major disaster during the year that is a different thing out of our control 40:07 40 minutes, 7 seconds otherwise we should be crossing 215 to 220 million euro uh in terms of revenue 40:14 40 minutes, 14 seconds for this financial year. So we are confident on that. Maybe I just wanted to add one one point here. Uh when we 40:21 40 minutes, 21 seconds talk about uh higher power transmission usually we are not talking about gigantic numbers. We are not talking 40:29 40 minutes, 29 seconds about a boost in terms of uh size of the turnover or a game changer product in 40:36 40 minutes, 36 seconds that sense. But whenever we talk about higher horsepower transmission, we usually talk about products which can 40:45 40 minutes, 45 seconds help us to improve our overall profitability. So that's the point that 40:52 40 minutes, 52 seconds we want to uh highlight. Introducing more complex product, introducing more advanced products uh shows that we are 41:01 41 minutes, 1 second moving in a direction of improving the overall profitability of of our sales. 41:08 41 minutes, 8 seconds As we said that when we started uh business 27 years back, the technology 41:14 41 minutes, 14 seconds that the market wanted uh was below what Karo was having his strengths on. In the 41:21 41 minutes, 21 seconds last five years there is an uptick in that technology because everybody is looking at food security, efficiency, 41:28 41 minutes, 28 seconds contract manufacturing, sorry contract farming. So these things are kicking in and the cream for caro lies in higher 41:37 41 minutes, 37 seconds technology products and higher horsepower products. So these are uh a kind of an indication the moment higher 41:45 41 minutes, 45 seconds horsepower is picking up these are positive signs for us. Similarly, electrification and hybrid in offhighway 41:54 41 minutes, 54 seconds probably five years back everybody said it is a distant possibility to come into the offh highway market. But in the last 42:01 42 minutes, 1 second 1 year, one and a half years we have seen lot of interest globally and locally for hybrid and electrification 42:09 42 minutes, 9 seconds even in the offhighway uh market and that reason is we are working on couple of projects globally also for uh a big uh French OEM uh for electric vehicles. 42:22 42 minutes, 22 seconds We are working with an Indian OEM for launching the commercial uh electric tractor. So these are places where uh 42:31 42 minutes, 31 seconds Karo will improve its margin and that is the way forward for Karo. So these are numbers like David said uh not very big 42:40 42 minutes, 40 seconds numbers but they are having good margins and that is the way forward for us. So in about five years 6 years we should 42:48 42 minutes, 48 seconds have a portfolio wherein all these high horsepower high-tech products are part of the portfolio that we will be deploying at that point in time. 43:03 43 minutes, 3 seconds Thank you sir. Thank you. 43:05 43 minutes, 5 seconds A reminder to all participants, if you wish to ask any questions, you may press star and one. Anyone who wishes to ask a question, you may press star and one. 43:16 43 minutes, 16 seconds Now we have our next question from the line of Mahesh Bendre from LIC mutual fund, please go ahead. 43:24 43 minutes, 24 seconds Uh hi. Uh good morning sir. Thank you for the opportunity. Uh sir sorry to interrupt you Mr. Mahes can you please be a little louder? 43:32 43 minutes, 32 seconds Yes. Uh I'm audible now. Yeah. Yes sir. Sir exports have grown in this quarter. 43:38 43 minutes, 38 seconds Uh so what is the outlook for uh for next year? I mean we have indicated that uh export has not picked up and might 43:46 43 minutes, 46 seconds remain soft during the current year but is there any possibility we see a turnaround in next year? 43:54 43 minutes, 54 seconds Yes. Sure. Uh see uh uh when we talk as you rightly mentioned that u uh the exports are softening but uh see uh you 44:03 44 minutes, 3 seconds have to understand when something is softening and we are also giving uh new products in the market especially when we talk about teleboom handler where we 44:11 44 minutes, 11 seconds have introduced the uh new product in the last quarter and uh some high horsepower. So collectively uh we should 44:19 44 minutes, 19 seconds be more or less even though dropping market we should be stable or slightly higher uh in the export side in the next 44:26 44 minutes, 26 seconds three to four quarters and uh depend assuming that the situation remains same if situation goes best probably it will 44:35 44 minutes, 35 seconds increase depending on how the global market uh performs and uh that that's 44:41 44 minutes, 41 seconds all in on this it's a mix of market drop and new product launches and uh increase in our market share in DBA in the sport 44:49 44 minutes, 49 seconds market. So the net effect will be we will have higher exports. 44:55 44 minutes, 55 seconds Okay. Answer given the new orders and the new products we are planning to launch uh FY27 will also be like a 45:04 45 minutes, 4 seconds double digit growth feasible in terms of uh sales growth. 45:10 45 minutes, 10 seconds uh it's very very difficult to predict uh because you know these the uh both geopolitical environment and how the 45:19 45 minutes, 19 seconds monsoon fair in the next year so there are many many variables which uh could it's very difficult to predict beyond 45:27 45 minutes, 27 seconds one year or beyond three four quarters but as as Dr. Bali said as a next three to four years we have a project in hand 45:35 45 minutes, 35 seconds which will take us to the growth which we are projecting as as a medium to long term. 45:43 45 minutes, 43 seconds Sure. Okay. Sure. Thank you so much sir. Thank you. 45:51 45 minutes, 51 seconds As there are no further questions from the participant I now hand the conference over to the management for closing comments. 45:59 45 minutes, 59 seconds Yeah. 46:02 46 minutes, 2 seconds So thank you all for your active participation and interest in Karo India. We hope we have addressed your 46:09 46 minutes, 9 seconds queries satisfactory. For any further questions, please feel free to reach out to strategic growth advisors, our industrial uh investor relations team. 46:19 46 minutes, 19 seconds So thank you very much and have a good day. Thank you. 46:27 46 minutes, 27 seconds Thank you on behalf of Karo India Limited. That concludes this conference. 46:32 46 minutes, 32 seconds Thank you for joining us and you may now disconnect your lines. Thank you.