Carraro India Limited — Q4 FY26

Carraro India Ltd Q4 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=vy1ATwKO7Uc Published: 3 weeks ago

0:01 1 second Ladies and gentlemen, good day and welcome to the Q4 FY26 earnings conference fall call for Karo India Limited. 0:10 10 seconds This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company 0:18 18 seconds as on the date of this call. These statements do not guarantee the future performance of the company and it may involve risks and uncertaintities that 0:27 27 seconds are difficult to predict. As a reminder, all participant lines will be in the listenonly mode and there will be an opportunity for you to ask questions 0:35 35 seconds after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on 0:44 44 seconds your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Dr. Balaji 0:51 51 seconds Gopalan, managing director. Thank you and over to you sir. 0:57 57 seconds Okay. Thank you and uh very good morning to all of you and thank you for joining us today for Karo India Limited's Q4 and 1:05 1 minute, 5 seconds FY26 earnings conference call. I am Balaji Gopalan managing director Karo India Limited and I am joined today by 1:14 1 minute, 14 seconds Mr. David Graci our wholetime director and CFO. Mr. Sudendra Manika our full-time director and COO 1:23 1 minute, 23 seconds Mr. Ashokai, director sales and business development along with other members of our leadership team and our investor 1:32 1 minute, 32 seconds relations advisor strategic group advisers. We appreciate your continued interest and participation. 1:40 1 minute, 40 seconds FY26 was an encouraging year for the Indian offhighway industry particularly for the agriculture equipment segment. 1:49 1 minute, 49 seconds The Indian tractor industry crossed the 1 million unit milestone during the year supported by favorable monsoon 1:56 1 minute, 56 seconds conditions, improved rural cash flows, healthy reservoir levels, and continued momentum in farm mechanization. 2:05 2 minutes, 5 seconds The GST narrowing of the price gap between two-w wheelel drive and four-wheel drive tractors further 2:13 2 minutes, 13 seconds accelerated the structural shift towards higher value four-wheel drive platforms. 2:20 2 minutes, 20 seconds On the construction equipment side, the domestic market remained relatively soft with industry volumes declining by 2:28 2 minutes, 28 seconds approximately 2% year on year due to slower infrastructure execution and delays in project activity during parts 2:37 2 minutes, 37 seconds of the year. However, exports from India remained robust, growing by nearly 32% 2:45 2 minutes, 45 seconds reflecting improving global demand for Indian manufactured construction equipment and strengthening India's 2:53 2 minutes, 53 seconds position as an export hub. Against this backdrop, Karo India delivered a strong 3:00 3 minutes operational and financial performance during FY26. 3:06 3 minutes, 6 seconds Revenue from operations grew by 25% yearonear to over 2,255 3:13 3 minutes, 13 seconds cr supported by healthy growth across domestic and export markets. Domestic 3:20 3 minutes, 20 seconds revenues increased by 19% yearonear driven by strong demand for agriculture drive lines particularly four-wheel 3:28 3 minutes, 28 seconds drive axles while exports grew by 37% yearonear led by sustained momentum in construction equipment applications. 3:38 3 minutes, 38 seconds Importantly profitability improved in line with the guidance we had shared during the year. 3:46 3 minutes, 46 seconds Epida increased by 33% yearonear to 2,475 3:53 3 minutes, 53 seconds million rupees while PAT grew by 48% yearonear to 1,36 4:00 4 minutes million INR. Epidab margins improved to 10.8% in FY26 4:08 4 minutes, 8 seconds compared to 10.2 in FY25 despite changes in product mix during 4:14 4 minutes, 14 seconds the year. Margin expansion was driven by operating leverage, disciplined cost management, localization initiatives, 4:24 4 minutes, 24 seconds and execution efficiencies across operations. 4:29 4 minutes, 29 seconds The consistency of execution across both growth and profitability reflects the strength of our business model, customer 4:38 4 minutes, 38 seconds relationships, and operational discipline. 4:42 4 minutes, 42 seconds To give you some business segment updates, we look at domestic agriculture business. This has continued to perform 4:51 4 minutes, 51 seconds strongly during the year. The transition from two wheel drive to four-wheel drive tractors accelerated meaningfully 4:59 4 minutes, 59 seconds following the GST reduction which reduced the effective price differential between the two categories. This 5:07 5 minutes, 7 seconds structural industry shift has resulted in higher demand for technologically advanced drive line systems and larger 5:16 5 minutes, 16 seconds axle platforms. As a result, the domestic four-wheel drive axle market witnessed robust growth with four-wheel 5:25 5 minutes, 25 seconds drive tractor growth significantly outpacing the broader tractor industry. 5:31 5 minutes, 31 seconds In anticipation of this demand trajectory, we are continuing to ramp up capacity and strengthen manufacturing 5:39 5 minutes, 39 seconds capabilities to support future growth requirements over the medium term. 5:45 5 minutes, 45 seconds Now looking at construction equipment business, the ramp up of the new range of Teleboom handler or PLB TBH axles, 5:55 5 minutes, 55 seconds Teleboom handler axles for a major international OEM progressed well during 6:02 6 minutes, 2 seconds the year. We continue to witness healthy traction in this program and maintain strong visibility for structural growth 6:10 6 minutes, 10 seconds over the coming quarters. In addition, projects with domestic customers including both Indian and global OEMs 6:19 6 minutes, 19 seconds for the TBH Axel family are progressing as planned. 6:24 6 minutes, 24 seconds In the back loader segment, our performance remained resilient despite broader market weakness. Sales of drive 6:33 6 minutes, 33 seconds lines to Indian construction customers increased by approximately 9% during FY26. 6:40 6 minutes, 40 seconds Even as the domestic construction equipment market declined by around 2%. 6:46 6 minutes, 46 seconds Similarly, sales tobacco loader customers recorded positive growth despite the broader DHL declining by nearly 10%. 6:57 6 minutes, 57 seconds This performance highlights the strength of our customer engagement, product relevance and market positioning. 7:06 7 minutes, 6 seconds Coming to higher horsepower transmission business, the export market for these higher horsepower tractors is gradually 7:14 7 minutes, 14 seconds recovering which should support transmission of uptake going forward. 7:19 7 minutes, 19 seconds Our higher horsepower transmission projects with customers in Turkey and customers in India continue to progress 7:27 7 minutes, 27 seconds well. We expect SOP start of production for the Turkey program during FY27 7:35 7 minutes, 35 seconds while the Indian customer program is expected to enter production by FY28. 7:42 7 minutes, 42 seconds We believe higher horsepower transmission platforms represent an important long-term growth opportunity 7:49 7 minutes, 49 seconds as farm mechanization trends continue globally. 7:54 7 minutes, 54 seconds Gear business remained relatively subdued during FY26. 7:59 7 minutes, 59 seconds However, we continue to strengthen the business pipeline and diversify the customer base. During the year, we 8:06 8 minutes, 6 seconds secured a business nomination for a major OEM for bullgeears valued at approximately INR 150 million annually starting FY28. 8:18 8 minutes, 18 seconds We are also working on two additional customer programs which we should support gradual recovery and improved utilization over the coming quarters. 8:30 8 minutes, 30 seconds Engineering services business continued to gain traction and reported revenues of approximately INR 100 million during FY26. 8:42 8 minutes, 42 seconds Encouragingly, we are witnessing increasing customer inquiries for higher horsepower and advanced technology 8:50 8 minutes, 50 seconds configurations, reflecting growing confidence in our engineering capabilities. During the year, we signed 8:58 8 minutes, 58 seconds an engineering services agreement worth approximately INR 175 million with 9:06 9 minutes, 6 seconds Mantra Electric for the industrialization and supply of electric transmissions for tractors. The project 9:14 9 minutes, 14 seconds is progressing well and we have already received prototype orders for field validation. In parallel, discussion with 9:23 9 minutes, 23 seconds another customer for engineering services are progressing positively and we continue to pursue additional 9:30 9 minutes, 30 seconds opportunities in this segment. Over time, we expect our engineering services and future ready drive line technologies 9:39 9 minutes, 39 seconds to become an increasingly meaningful contributor to growth and profitability. 9:47 9 minutes, 47 seconds On the manufacturing front, we continued to invest in technology capacity expansion and operational efficiency 9:55 9 minutes, 55 seconds improvements. During FY26, we deployed Capeex approximately of INR 10:02 10 minutes, 2 seconds 417 million towards new telescopic handler axel production, high 10:09 10 minutes, 9 seconds performance transmission programs, incremental manufacturing capacity expansion. We also continued to 10:18 10 minutes, 18 seconds strengthen our aftermarket ecosystem through the expansion of authorized service centers which should support 10:26 10 minutes, 26 seconds customer experience, aftermarket growth and stronger engagement over the long term. Localization remains another 10:36 10 minutes, 36 seconds important strategic focus area. Raw material localization stood at approximately 78% during FY26 10:46 10 minutes, 46 seconds and we remain on track to increase this to nearly 86 to 88% over the next 2 to 3 10:53 10 minutes, 53 seconds years. This will continue to support supply chain resilience, cost optimization and margin improvement over time. 11:03 11 minutes, 3 seconds outlook. 11:04 11 minutes, 4 seconds Looking ahead, we remain positive on the medium and long-term opportunity landscape. The momentum built during 11:13 11 minutes, 13 seconds FY26 validates the strategic investments and business initiatives undertaken over the 11:20 11 minutes, 20 seconds last few years. We believe Karo India is entering its next phase of growth with a 11:27 11 minutes, 27 seconds stronger business foundation, increasing localization, enhanced engineering capabilities, a growing export business, 11:36 11 minutes, 36 seconds deep customer relationships, and expanding opportunities in advanced driveline technologies with improving 11:45 11 minutes, 45 seconds industry sentiment. expanding opportunities across domestic and export markets and strong execution momentum. 11:53 11 minutes, 53 seconds We remain confident of achieving revenues of around 3 3,500 to 4,000 cr 12:02 12 minutes, 2 seconds INR by FY30 exceeding our earlier target for FY27. 12:10 12 minutes, 10 seconds We are concurrently maintaining our revenue growth to be realistic and 12:16 12 minutes, 16 seconds cautious but we are supported by healthy underlying demand. However, we are closely monitoring the evolving 12:25 12 minutes, 25 seconds macroeconomic and geopolitical situation particularly developments in West Asia. 12:31 12 minutes, 31 seconds Any sustained raise in energy prices or supply chain volatality could lead to 12:38 12 minutes, 38 seconds some production and supply related impact especially in H1 FY27 12:46 12 minutes, 46 seconds and potentially extend to H2 if the situation persists longer than anticipated. 12:53 12 minutes, 53 seconds on profitability. We continue to target AIDA margin improvement during FY27 13:00 13 minutes supported by our continued focus on localization, operating efficiencies, value accelerated product mix, and disciplined cost management initiatives. 13:12 13 minutes, 12 seconds While the near-term operating environment may remain somewhat volatile, we believe these structural initiatives will continue to support gradual margin expansion going forward. 13:24 13 minutes, 24 seconds With that, I would now like to hand over the call to Mr. David De Graci, our CFO to discuss the financial performance in 13:33 13 minutes, 33 seconds greater detail. David Graci, thank you Balaji [clears throat] and good morning to everyone. I will now take you to the financial highlights for Q4 and the financial year 2026. 13:45 13 minutes, 45 seconds Starting with the Q4 revenues from operations for Q4 FY26 to that 6,67 13:53 13 minutes, 53 seconds million 606 crores representing a strong growth of 37% yearonear. The total 14:01 14 minutes, 1 second income grew by 37% yearonear to rupees 6,142 14:07 14 minutes, 7 seconds million. Aida for the quarter stood at rupees 710 million reflecting a growth 14:15 14 minutes, 15 seconds of 45% yearonear while edita margin improved to 11.6% compared to 10.9 in Q4 14:24 14 minutes, 24 seconds FY25 our profit after tax for the quarter increased by 76% yearon year to rupees 14:31 14 minutes, 31 seconds 417 million with pat margin improving to 6.8% 8% versus 5.3% in the corresponding 14:39 14 minutes, 39 seconds quarter last year. From a segment perspective, agricultural vehicles revenue increased 14:46 14 minutes, 46 seconds by 37% yearonear to rupees 2784 million while construction vehicles 14:54 14 minutes, 54 seconds revenue increased by 36% yearonear to rupees 2,613 million. The quarter benefited from 15:02 15 minutes, 2 seconds strong export momentum, healthy domestic and agricultural demand and improved operating leverage. When we look at 15:08 15 minutes, 8 seconds financial year um at a full financial year 26 performance revenue from operations to that 22,555,22055 15:20 15 minutes, 20 seconds crores up to up by 25% year on year. Our total income increased to rupees 22,840 million. 15:31 15 minutes, 31 seconds Uh of the total other income during the year, approximately 83.8 million pertain to reversal of a provision previously 15:38 15 minutes, 38 seconds created for vendor payment. Eida increased by 33% yearonear to rupees 2,475 15:46 15 minutes, 46 seconds million translating into aida margin of 10.8% compared to 10.2% 2% in FY25. 15:54 15 minutes, 54 seconds Profit after tax increased by 48% yearonear to rupees 1,36 million with the fat margin improving to 5.7%. 16:05 16 minutes, 5 seconds Segment wide agriculture vehicles revenue stood at 10,192 million up 19% yearonear and 16:13 16 minutes, 13 seconds construction construction vehicles revenue stood at 9,837 million up 31% yearonear. Uh 16:22 16 minutes, 22 seconds geographically our domestic revenue stood at 14,430 million contributing around 64% of our 16:29 16 minutes, 29 seconds total revenue. Export revenue stood at 8,125 million contributing around 36% of total 16:39 16 minutes, 39 seconds revenue. Uh if we look at our balance sheet and cash flow, we can say that our balance sheet position strengthened 16:46 16 minutes, 46 seconds farther during the year. Debt to equity improved to 727 16:52 16 minutes, 52 seconds um x as of March 2026 compared to 42 in March 2025. Our return on capital 17:00 17 minutes employed improved to 29.2% while the return on equity increased to 25.5%. 17:08 17 minutes, 8 seconds Working capital days reduced to 38 days from 45 days in FY 2025, reflecting tighter working capital management and 17:16 17 minutes, 16 seconds operational discipline. Cash generation during the year remained healthy and continue to support both growth investment and balance sheet strength. 17:26 17 minutes, 26 seconds On the dividend front, the board of directors has recommended a final dividend of rupees 6.75 per equity share 17:34 17 minutes, 34 seconds for FY26 resulting in a payout ratio of approximately 30% subject to shareholder 17:41 17 minutes, 41 seconds approval. Uh the proposed dividend reflects strong financial performance, healthy cash regeneration and continued 17:49 17 minutes, 49 seconds commitment towards delivering sustainable shareholder return while supporting future growth investment. 17:56 17 minutes, 56 seconds Overall, we remain financially well positioned with a healthy balance sheet, improving profitability profitability 18:04 18 minutes, 4 seconds profile and sufficient liquidity to support strategic investment and future growth initiatives. With that, we would like uh now to take your questions. 18:15 18 minutes, 15 seconds Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. 18:25 18 minutes, 25 seconds If you wish to remove yourself from the question queue, you may press star and two. 18:30 18 minutes, 30 seconds Participants are requested to use handsets while asking a question. 18:34 18 minutes, 34 seconds Ladies and gentlemen, we will wait for a moment while the question queue assembles. 18:45 18 minutes, 45 seconds Our first question comes from the line of Ragu Nandan NL with Noama Research. Please go ahead. 18:54 18 minutes, 54 seconds Uh good morning team. Uh congratulations to Balaji sir and David sir on a strong FI26. 19:02 19 minutes, 2 seconds Uh first question for FI27. 19:06 19 minutes, 6 seconds Can you please indicate the exports outlook as underlying industry expectations are turning positive and 19:15 19 minutes, 15 seconds even the tariff seems to have moderated in US. In FI26 there are supplies to 19:23 19 minutes, 23 seconds major global OEM. How much was the PBH and BH revenue uh to this OEM for FI26 19:32 19 minutes, 32 seconds and how do you see the expectation for FI27. 19:38 19 minutes, 38 seconds Yeah. Uh thank you very much. Good morning and thank you for your compliments. Uh a question I think Ashok 19:46 19 minutes, 46 seconds Ray is the most competent to give an overview. So please Ashok. 19:50 19 minutes, 50 seconds Yeah abu uh Ashok here uh see uh when when we talk about uh the export market there are two aspect one is the 19:58 19 minutes, 58 seconds agricultural and other is construction and in agricultural segment as you rightly mentioned the uh impact of the 20:06 20 minutes, 6 seconds duties seems to be stabilizing but still the uncertainty remain that there could be a slightly increase on the export 20:13 20 minutes, 13 seconds side especially in the US. This is what we are anticipating based on the forecast we have received from the OEMs who are who are exporting to the US. 20:21 20 minutes, 21 seconds This is first suspect. Second, we were expecting that the Turkey market which started showing some kind of improvement in the last 6 months is again showing 20:30 20 minutes, 30 seconds some kind of a stabilization or downturn. But nevertheless, it will be also will be a subdued uh in term of the agricultural export. But when it comes 20:39 20 minutes, 39 seconds to the construction segment, we are seeing the positive side of the order book. We are frequently getting 20:46 20 minutes, 46 seconds additional orders for the subsequent quarter and the next in the 6 months the visibility is there. We are getting the order for the export market. So that is 20:54 20 minutes, 54 seconds on the positive side. In the domestic market knowing the inflation and the way the subsidies are being given for the 21:01 21 minutes, 1 second fertilizers, we don't know how much the money will be left for the investment in the infrastructure projects. Depending on that the construction market is 21:10 21 minutes, 10 seconds expected to come back or remain at the lower level as the previous year. As you know the construction market has declined in this year in the domestic 21:18 21 minutes, 18 seconds market. So we have to see whether how much investment remains with the government after all these subsidies and the cost increase. On the agricultural 21:26 21 minutes, 26 seconds side, there are of course the monsoon is expected to be not to be good but at the same time the reservoir in India are 21:33 21 minutes, 33 seconds full and they are in a better shape and depending on the rain distribution how the tractors the the the uh farming is done. It will define the tractor growth. 21:46 21 minutes, 46 seconds Now the expectation from industry is the single digit somewhere in mid team there will be a growth that too when the industry has peaked this year to around 12 12 or 1.2 2 million tractors. 21:57 21 minutes, 57 seconds Nevertheless, since Karo is in the four-wheel drive transition phase, we expect that even though market will moderate, the transition of this two 22:06 22 minutes, 6 seconds wheel drive to four-wheel drive remain more than the uh market growth. 22:16 22 minutes, 16 seconds Uh thank you sir for the details. uh can you indicate uh for FI26 how much was 22:23 22 minutes, 23 seconds the revenue to the major global OEM uh for TBH and backo and uh how do you 22:30 22 minutes, 30 seconds expect for FI27 uh based on the orders received uh when we talk about the export 22:40 22 minutes, 40 seconds customer the the guidance remains same level so we are more or less on the track especially on the TBH we mentioned 22:48 22 minutes, 48 seconds flat in the next 2 to 3 years we'll be in we'll be almost we'll be growing by 10 million 8 9 then additional 18 22:55 22 minutes, 55 seconds million like that so that is happening in the subsequent year and maybe by 29 uh we will have that 30 million revenue 23:03 23 minutes, 3 seconds from the PBH business so that is in track at the moment and uh when it comes to the back loader exports uh at this 23:12 23 minutes, 12 seconds point of time the order book is is good I will say good news It's not bad but we have to see how it remains 23:20 23 minutes, 20 seconds knowing that the inflation and uh every 6 months, every 3 months, every two months there's a change in scenario in terms of the uh geopolitical situation. 23:34 23 minutes, 34 seconds Thank you sir. Thank you for the details. Uh my second question was on the RN cost in Q4. Uh there is some 23:42 23 minutes, 42 seconds increase in raw material as a percentage of revenue and uh is this due to commodity inflation, higher freight cost 23:51 23 minutes, 51 seconds on imports or is there any aspect of product mix also and generally how much 23:58 23 minutes, 58 seconds lag is there in pass through of commodity inflation to customers would be 3 months. 24:06 24 minutes, 6 seconds So uh hi here. Um so regarding Q4 I would say that the 24:14 24 minutes, 14 seconds major driver of uh that increment of uh the material percentage on total sales 24:23 24 minutes, 23 seconds is actually the adverse mix that we have faced during the quarter. Um so it's not 24:30 24 minutes, 30 seconds a a major uh issue in terms of increase of the material cost or uh 24:36 24 minutes, 36 seconds transportation and so on. Uh as of now um the second thing you ask uh regarding the commodity recovery. 24:44 24 minutes, 44 seconds Oh yeah yeah yeah. So um usually as majority of of our agreements with 24:50 24 minutes, 50 seconds customer uh foresee an adv an adjustment over a period of 3 months. uh then there are of course some exceptions here and 24:59 24 minutes, 59 seconds there but you can take 3 months as a uh most common and average timing for that. 25:07 25 minutes, 7 seconds Yes. Uh noted sir thank you. Uh uh can you indicate for SI27 25:15 25 minutes, 15 seconds how do you see the growth outlook uh would you maintain that range of 8 to 12% growth for revenue and how do you 25:23 25 minutes, 23 seconds see the margin expansion uh if you want to give a range uh in terms of how much expansion we can expect. 25:32 25 minutes, 32 seconds Yeah. Um I'll come in uh for this. Rabul city uh the the whole situation today is 25:39 25 minutes, 39 seconds a bit volatile. Okay. Uh we in normal condition and the way we are launching 25:46 25 minutes, 46 seconds our products and the response we are getting from the OEMs very clearly uh reinforces our earlier guidance of 8 to 25:56 25 minutes, 56 seconds 12% that is still the situation if things return back to normal. Okay. But in current situation it is going to be a speculation to say what we will land in. 26:08 26 minutes, 8 seconds So we have to wait and watch. Certainly we will have a positive growth that will happen this year. 8 to 12 can become 26:18 26 minutes, 18 seconds probably 4 to 8 but these are all speculation. We are looking at a very strong uh uh demand that will come up. 26:26 26 minutes, 26 seconds OEMs are all cautioning us to keep our capacities and supply chain intact. So 26:33 26 minutes, 33 seconds it's a matter of time when that kickoff is going to happen. I guess time will tell. But to answer your question, we 26:42 26 minutes, 42 seconds are not looking at shrinking our revenues or going down the current levels that we have reached. It will be 26:49 26 minutes, 49 seconds positive. How much? 4% 6% 8% that time will 26:58 26 minutes, 58 seconds yeah that's thank you sir uh that's very helpful I'll fall back to the queue 27:05 27 minutes, 5 seconds thank you the next question comes from the line of Sonel Gupta with HSBC asset management India please go ahead 27:14 27 minutes, 14 seconds yeah hi good morning sir and thanks for taking my question and many congratulations on uh uh seller performance in SI26. 27:23 27 minutes, 23 seconds Uh I mean really after the first half you're not sure if you're going to meet the margin target but I mean you have so congratulations on that. Uh so just uh 27:32 27 minutes, 32 seconds on margin itself uh wanted to understand like last year you talked about that we will be improving our margins by 100 27:39 27 minutes, 39 seconds basis points every year and while you indicated a positive outlook you sort of refrained from saying that we will sort of be able to do that sort of an 27:47 27 minutes, 47 seconds improvement. So just wanted to understand the push and pulls here and in what scenarios can you improve by 100 basis points right? 27:56 27 minutes, 56 seconds Yeah. Uh thank you very much again for your uh uh you know recognition of the results that we have brought in in line 28:05 28 minutes, 5 seconds with the guidance we have given in the past. Um our endeavor and our philosophy has always been to say what we can do 28:13 28 minutes, 13 seconds and do what we have said. So that that consistency is very important. So when it comes to questions like uh the EIDA 28:21 28 minutes, 21 seconds guidance in a situation like this very honestly I feel a little uncomfortable to give any number because it's not 28:29 28 minutes, 29 seconds really in our hands to defend it at a later time. But having said that all our 28:36 28 minutes, 36 seconds initiatives are giving us the desired result that we were looking at. These disruptions do have an impact on 28:45 28 minutes, 45 seconds marginality because sometimes we have to ensure that the customer uh gets the priority they don't lose their market 28:53 28 minutes, 53 seconds share. So it becomes important for us to sometimes uh stretch ourselves to meet customer needs. So this kind of uh 29:01 29 minutes, 1 second turbulent time, uncertain time uh it's very difficult to give a guidance but nonetheless I would surely say that we 29:10 29 minutes, 10 seconds reach 10.8 we will move upward we are not going to slide backward um whether 29:17 29 minutes, 17 seconds we reach 11.5 11.7 11.2 that is again dependent on the revenue that we will 29:25 29 minutes, 25 seconds get the product mix that will happen. So lot of things getting into it. The pricing of uh uh the uh energy costs and 29:33 29 minutes, 33 seconds others the uh transportation cost. So many things are involved. Even labor availability has become a problem. 29:40 29 minutes, 40 seconds Migrant labor have all gone back. So the labor cost has also gone up. If all these things stabilize then we are back 29:48 29 minutes, 48 seconds to our original guidance. But when this uncertainty is there we would like to be cautious and not put our foot in our 29:56 29 minutes, 56 seconds mouth. But at the same time I will confidently uh uh give a message to the 30:03 30 minutes, 3 seconds shareholders that profitability will go up for sure. We will not decline. We will not go back in the margins that we 30:11 30 minutes, 11 seconds have reached till now. Have I answered your question not to your satisfaction but I tried my best? 30:18 30 minutes, 18 seconds No no no no it's fine sir. I understand from a shorterterm view, but I just wanted to understand like from a medium-term perspective, do we still 30:26 30 minutes, 26 seconds maintain our trajectory on the margin improvement side? Yes, the uh margin improvement side is parallelly going on. 30:36 30 minutes, 36 seconds Once this disruption, the cost of disruption that is absorbed, then we are back to the normal uh highway speed. Now 30:45 30 minutes, 45 seconds we are you know uh maneuvering the potholes that are there in front of us but we will catch up we will make it up. 30:52 30 minutes, 52 seconds See the larger picture if you see if you talk of uh next 9 months to 12 months to 14 months surely all these things will 31:00 31 minutes get covered up. We will not be going downwards at any point. It will only be upward. How steep it is and where we 31:08 31 minutes, 8 seconds will end depends on how soon the normaly comes to us. That is more important. As it prolongs then you know the recovery 31:16 31 minutes, 16 seconds also gets prolonged by that much but recovering is there end of the tunnel we can see we know what to do to get back 31:24 31 minutes, 24 seconds to the original guidance that we have given. We are on top of things. We have a control watch tower at a group level 31:32 31 minutes, 32 seconds and at every regional level. The watchtowwer interacts with each other every day to assess situation, collect 31:41 31 minutes, 41 seconds data, crunch the data and anticipate our actions. With all these things, we are confident that we will come out quite 31:50 31 minutes, 50 seconds comfortably with our best foot uh in front. 31:54 31 minutes, 54 seconds Yeah, sorry. Yeah, thanks sir. And just one more question on the domestic four-wheel 32:02 32 minutes, 2 seconds drive tractor market. Could you sort of tell us what is the uh sort of size of the market? I understand now it's like 32:08 32 minutes, 8 seconds 20% of the domestic industry and uh uh what sort of growth has the industry seen and what sort of growth have we 32:16 32 minutes, 16 seconds seen and how much outsourcing is there now and how much is being done inhouse right like if you could just give us a sense on that. 32:23 32 minutes, 23 seconds Yeah sure. Uh Ashok will deep dive into it. Yeah Ashok. 32:27 32 minutes, 27 seconds Yes. Ashok here. Uh see this year again after the GST uh in September when the government reduced it the transition 32:35 32 minutes, 35 seconds from two wheel drive to four-wheel drive has accelerated especially above 40 horsepower and uh as you as you rightly 32:42 32 minutes, 42 seconds said around 2 years ago or the last year it was around 20 22%. So this year it is we since we don't have a formal data as 32:50 32 minutes, 50 seconds I always tell you we collect it from the OEM and we just estimate it and our estimate tells us this this year we have closed almost by 24% as a four-wheel 32:59 32 minutes, 59 seconds drive market above 40 HP because we operate in the 40hp and above segment. So the market has touched around 24%. 33:07 33 minutes, 7 seconds Now moving forward even today the market is at the peak in terms of total number which is almost 33:14 33 minutes, 14 seconds 1.2 2 million and market is expected to grow almost two or 3% or 5%. But within this the four-wheel drive segment will 33:21 33 minutes, 21 seconds go up because customer will not go back to two wheel drive whosoever has bought the four-wheel drive like the earlier power steering nobody goes back to the 33:29 33 minutes, 29 seconds manual steering. So that expectation is there and even the demand indication as well as the capacity requirement by the 33:36 33 minutes, 36 seconds OEM also indicates that the transition of this four-wheel drive is on and uh we expect that another 3 to 5 year it should be almost 40 45% of the market. 33:49 33 minutes, 49 seconds Got it sir. So, so my just follow up on that was that how much is uh of this market on the four-wheel drive axles is 33:56 33 minutes, 56 seconds being outsourced to external players like you and how much are OE doing in-house just guess as I said I don't have the f 34:05 34 minutes, 5 seconds formal data but it is 60 65% is outsource and 30 35% is with OEMs today. 34:14 34 minutes, 14 seconds Okay. Okay. And uh sorry and uh I I I think you mentioned on the domestic agriculture so four-wheel drive we would 34:21 34 minutes, 21 seconds have grown like uh overall uh 30 35% right on the in the Yes. Yes. Yes. Yes. Yes. You're right. 34:29 34 minutes, 29 seconds You're right. 34:32 34 minutes, 32 seconds Okay. Great sir. Thank you so much and wish you all the best. Thank you. 34:37 34 minutes, 37 seconds A reminder to all participants you may press star and one to ask a question. 34:45 34 minutes, 45 seconds The next question comes from the line of Ashok Sha from Aklavia Invesco family office. Please go ahead. 34:53 34 minutes, 53 seconds Uh thanks for allowing me. Uh sir uh uh four-wheel drive and three-wheel drive. 34:59 34 minutes, 59 seconds Uh so currently there is no incentive to increase or the incentivize four-wheel drive. So how we would be able to grow 35:07 35 minutes, 7 seconds over next few years and what would be our size over next two to three years due to the deputy uh point. 35:19 35 minutes, 19 seconds Okay sir I'll first come to the uh two wheel drive versus four-wheel drive in tractor. Okay. We have explained in the 35:28 35 minutes, 28 seconds past very well that two wheel drive is a very very basic mechanical equipment and two wheel drive tractors were introduced 35:37 35 minutes, 37 seconds 50 60 years back as part of the green revolution and to save the bulocks and 35:43 35 minutes, 43 seconds ox animals being used for farm we know thanks to him. So it was a replacement for bulock a very basic uh mechanical product was launched at low cost. 35:56 35 minutes, 56 seconds Unfortunately that technology because of low cost and the Indian culture to retain old products we continued with it 36:04 36 minutes, 4 seconds for a very very long time. The world moved ahead and in developed countries nearly 95 to 98% is four-wheel drive. 36:14 36 minutes, 14 seconds They don't sell two wheel drive tractors at all. Okay sir, for you also uh I will take two more minutes. If you see 36:22 36 minutes, 22 seconds farmland, farming area is a wet area and even a car if it is slushy, if there is mud, water, a two-wheel drive car gets 36:31 36 minutes, 31 seconds stuck in it. So can you imagine where the work of the tractor is in a wet land to operate on a two-wheel drive is the 36:40 36 minutes, 40 seconds most I would say uh unfavorable condition to operate. So naturally you need four-wheel drive. Now India has 36:47 36 minutes, 47 seconds realized it and for food security and farm efficiency we need these kind of four-wheel drive tractors not just to 36:56 36 minutes, 56 seconds operate but also to operate implements that are required for mechanization in the farm. Farm mechanization is driven 37:04 37 minutes, 4 seconds by tractor. So it becomes very very important to have the appropriate equipment in the farm and that is where 37:11 37 minutes, 11 seconds India is moving. Five years back four-wheel drive was hardly 2 3%. Today we are talking in the range of 20 to 25% 37:20 37 minutes, 20 seconds and moving to 40%. What is the incentive? The government indirectly has given incentives in the last year one 37:27 37 minutes, 27 seconds and a half years in certain pockets in Hana and Punjab for higher horsepower tractors or four-wheel drive tractors to 37:35 37 minutes, 35 seconds check a pilot on how the efficiencies are improving. The results have been good. What is again the financial motivation for a farmer to go in for it? 37:45 37 minutes, 45 seconds GST reduction by the government came in at the right time. So the differential between the cost of a two-wheel drive uh 37:53 37 minutes, 53 seconds tractor and a four-wheel drive tractor has now almost uh vanished because the cost differential was more or less the 38:00 38 minutes same as the GST reduction. So that gave a boost and that is the reason this quarter we saw a higher uptake of 38:09 38 minutes, 9 seconds four-wheel drive and we expect that it will continue as well. Technology absorption initially is short but once 38:16 38 minutes, 16 seconds people experience it and social media and other community cooperative activities they start pushing for uh a 38:23 38 minutes, 23 seconds better vehicle that is available. So this is in short about the trajectory of four-wheel drive and why we are uh 38:31 38 minutes, 31 seconds pitching for it and uh working on it. Uh fuel efficiency there is an ROI that happens because two wheel drive there is 38:39 38 minutes, 39 seconds lot of slippages. You keep accelerating to get out of the pit or the sludge. 38:44 38 minutes, 44 seconds Whereas in a four-wheel drive you don't need to keep accelerating and making the vehicle jump out of the slush. So there 38:50 38 minutes, 50 seconds is fuel saving. cost of acquisition has more or less become same as two wheel drive. The world is moving. Technology 38:57 38 minutes, 57 seconds is better. Uh awareness of our Indian citizens have improved. All these things are fertile grounds for the product to 39:06 39 minutes, 6 seconds uh penetrate into the market. So there will be a structural shift into four-wheel drive right which is visible now. I hope I have answered your question sir. 39:14 39 minutes, 14 seconds Yeah. And my sec uh second question is regarding as a good corporate governance we are holding a physical annual general 39:21 39 minutes, 21 seconds meeting. So if it is possible please hold the annual general meeting in the plant. So plant vit can be also simultaneously completed and cost can be saved for the fivestar hotel also. 39:32 39 minutes, 32 seconds That's all also. Thanks from my side. 39:36 39 minutes, 36 seconds Okay sir. We'll we'll consider your uh input. Certainly it is it has a valid point but logistically we'll have to see 39:43 39 minutes, 43 seconds because the plant is about 1 and a/2 hours and there are lot of uh construction work on the highways going on. So we are open for a plant visit 39:52 39 minutes, 52 seconds that is not an issue. We can always arrange for people who want to visit it after attending the program but we will 39:59 39 minutes, 59 seconds also reconsider looking at the time that takes to travel to Ranjang now. We can do it. It will save time plus we'll be proud to show our facility. So in any 40:08 40 minutes, 8 seconds case you're most welcome to visit the plant on that day or even separately we will arrange for plant visit for any of our shareholders. 40:18 40 minutes, 18 seconds Thank good sir. Thank you. Yeah thank you. 40:23 40 minutes, 23 seconds A reminder to all participants you may press star and one to ask a question. 40:30 40 minutes, 30 seconds The next question comes from the line of Ragunan NL with Noama Research. Please go ahead. 40:38 40 minutes, 38 seconds Uh thank you sir for the opportunity again. Uh [clears throat] uh firstly on FI27 KEX uh can you indicate uh uh how much is the plan? 40:50 40 minutes, 50 seconds Would it be in that range of 130 to 140 crores? 40:56 40 minutes, 56 seconds Yeah, we we confirmed that uh that amount more on 130 than 140 but uh we 41:03 41 minutes, 3 seconds will be in that range as of now everything is confirmed. 41:08 41 minutes, 8 seconds Uh thank you for that sir. And one clarification uh the other income in FI26 41:16 41 minutes, 16 seconds uh uh within that amount can you indicate how much was the export incentives like other income was uh 41:24 41 minutes, 24 seconds about uh 285 million how much was export incentive within that? 41:32 41 minutes, 32 seconds Uh okay I do not have the exact number with me but you can uh uh derive it. So 41:39 41 minutes, 39 seconds we said that out of the 285 rightly 83 were uh uh a provision that we have 41:49 41 minutes, 49 seconds reversed. So out of the 200 which are remaining more or less 75% is 41:56 41 minutes, 56 seconds uh export incentives. So roughly 150 42:02 42 minutes, 2 seconds understood. Thank you. uh and uh also uh for the exports uh can you uh please 42:10 42 minutes, 10 seconds broadly indicate the geography mix like we supply to US, Europe, UK, China, 42:16 42 minutes, 16 seconds Latan uh approximately if you can indicate what can be the uh mix between uh various uh uh key regions. 42:27 42 minutes, 27 seconds Uh see here is a bit more complicated uh also because u but there are two level 42:34 42 minutes, 34 seconds of complication. The first one is that as you know um we operate as a contract manufacturer. So um we invoice 42:43 42 minutes, 43 seconds everything to our headquarter and then the goods go uh in different geographies. 42:49 42 minutes, 49 seconds But a second layer of complication is that even if we ship something uh to a specific country often this is the 42:58 42 minutes, 58 seconds country where our OEM uh has an assembly plant and then they distribute all over 43:06 43 minutes, 6 seconds the world. So uh it might even me be kind of misleading if I give you uh any 43:13 43 minutes, 13 seconds number but roughly you can say that Europe remains our uh main market when 43:20 43 minutes, 20 seconds we talk about uh export. Uh Turkey has become more and more relevant. China was also quite um relevant this this year. 43:32 43 minutes, 32 seconds Latin America um is also another 10% if I use 9 to 10%. 43:41 43 minutes, 41 seconds Yeah, US 9 to 10% of our export. Uh I think uh Europe represent 50% or less 43:50 43 minutes, 50 seconds Turkey include if we include Turkey 50%. Yes. Um I think China another 8 to 10 possibly. 44:01 44 minutes, 1 second China is also similar 8 9%. 44:04 44 minutes, 4 seconds Yeah. and 10% and another I think 10% could be Latin American but yeah even when produced in China it goes to Latin America for example that is 44:13 44 minutes, 13 seconds what uh Dave was hinting that any number we tell will be a misguiding 44:22 44 minutes, 22 seconds this is a uh understood sir but uh thank you for 44:29 44 minutes, 29 seconds the details uh uh that's all from my Right. I'll fall back to the queue. Thank you. Thank you. 44:38 44 minutes, 38 seconds Participants, you may press star and one to ask a question. 44:45 44 minutes, 45 seconds The next question comes from the line of Mustafa Arif with Nine Reverse Capital. Please go ahead. 44:52 44 minutes, 52 seconds Uh hi. Uh so congratulations to the team and and thank you for taking my question. Uh so I just wanted to ask that uh recently the the largest uh 45:01 45 minutes, 1 second domestic OEM sort of uh spoke about their new transmission platform in one of their subbrands and how they are rolling that out uh across the country 45:11 45 minutes, 11 seconds right so in in a staged manner so just wanted to understand how what has been our contribution over there and is this a sort of shift for us in our business 45:20 45 minutes, 20 seconds from in-house uh to sort of an outsourced uh model 45:26 45 minutes, 26 seconds uh sorry here see it's very difficult to comment uh on the ambiguous question because you have referred an unknown OEM 45:34 45 minutes, 34 seconds uh but there are various programs are going on with the OEMs so uh so many 45:40 45 minutes, 40 seconds OEMs are in yeah they we are also working with Savage we are working with many other OEMs on the on the new platform and as 45:50 45 minutes, 50 seconds you know we are we are in a specialized segment so if they are below 25 or 30 HP probably will not be there example I'm 45:58 45 minutes, 58 seconds saying it so uh it is very difficult to answer on behalf of the OEM but from caro point of view we can say that today 46:06 46 minutes, 6 seconds we produce up to 150 HP range of transmissions in caro in India and the Indian OEMs are having a design which is 46:15 46 minutes, 15 seconds up to 60 65 horsepower range for the domestic market whenever any technology shift is happening those technologies are locally available with cararo in 46:24 46 minutes, 24 seconds India because we are producing it for past more than a decade those new technologies which are not even taken inside the uh local market as a tractor 46:33 46 minutes, 33 seconds feature. So uh the programs are going on with the OEMs at at various uh platform levels. There 46:41 46 minutes, 41 seconds could be some platform they are making it themselves and some platform with us. 46:46 46 minutes, 46 seconds All right. Thank you. And also if you could give a little bit more color on the gross margin decline. Uh you know you mentioned that it is product mix. Uh 46:54 46 minutes, 54 seconds but do you mean product mix within uh uh you know your configurations or do you mean between agree and construction equipment? How does that work? 47:07 47 minutes, 7 seconds Is between our uh uh range of products our range of axles and mostly uh if we 47:17 47 minutes, 17 seconds [clears throat] refer to agriculture range. So this specific quarter we had a a boost 47:25 47 minutes, 25 seconds uh even that went even beyond what we were expecting of demand of a certain category of vacules that uh we wanted to 47:35 47 minutes, 35 seconds dispatch. We wanted to uh you know make the customer happy. Um but we have we 47:43 47 minutes, 43 seconds had to compromise a little bit on uh let's say the cost efficiency uh to maintain the you know the continuity of 47:52 47 minutes, 52 seconds the supply. So that led a bit uh down the gross margin but at the same time it helped us to absorb big cost in a better 48:00 48 minutes way. So all in all it was a beneficial for us. Okay. Thank you. That's it from my side. 48:07 48 minutes, 7 seconds Thank you. The next question comes from the line of Shirram, an individual investor. Please go ahead. 48:14 48 minutes, 14 seconds Yeah, thank you for the opportunity. So, I just have one question. Uh, can you please share the absolute uh sales figure of four-wheel drive for the quarter and also for the year? 48:27 48 minutes, 27 seconds It's this is a show here. It's very difficult in terms of informing because we have a mix of uh the turnover because 48:35 48 minutes, 35 seconds the transmission and access are sold together and normally we don't give the breakup as as as a guidance but for sure the numbers are like when 48:44 48 minutes, 44 seconds we said 30% we have grew in the previous question we said that 30% we have grew the last year when the market has grown 48:51 48 minutes, 51 seconds 20 22% similar way our revenue has also grown by those 30% and the numbers also similar Fine sir. Got it. Thank you. 49:03 49 minutes, 3 seconds Thank you ladies and gentlemen. As there are no further questions, I would now like to hand the conference over to the management for their closing remarks. 49:15 49 minutes, 15 seconds Uh thank you everyone for joining us today and for your continued support and trust in Toro India Limited. We remain 49:24 49 minutes, 24 seconds excited about the opportunities ahead and confident in our ability to deliver sustainable and profitable growth over the coming years. We hope we have addressed your questions satisfactoryy. 49:35 49 minutes, 35 seconds Should you require any further information, please feel free to reach out to strategic growth advisors, our investment relation advisers. Thank you once again and have a great day ahead. 49:46 49 minutes, 46 seconds Thank you. 49:48 49 minutes, 48 seconds Thank you sir. Ladies and gentlemen, on behalf of Karo India Limited, that concludes this conference call.