Ladies and gentlemen, good day and welcome to the Bharat Forge Q3 FY24 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Kalyani. Thank you, and over to you, sir. Good afternoon, ladies and gentlemen, and thank you for attending our Q3 analyst call. I'm going to hand over to our CFO, Kedar Dixit, and I'll be here to answer your question and answer your questions. Yeah, good afternoon, everyone. I'll just take you through the highlights for the quarter on the standalone as well as on the consolidated performance. So we had another quarter of strong performance registered in quarter three. Standalone revenues grew by 16% to INR 2,263 crores, and EBITDA grew by almost 31% to INR 645 crores. EBITDA margins are at 28.5%, which is an expansion of almost 330 basis points on a YOY basis, driven primarily on account of favorable product mix and cost optimization. PBT and PAT grew by 31% to INR 504 crore and INR 378 crore, respectively. The balance sheet continues to remain strong, with surplus cash net of long-term loans now stands at almost INR 1,000 crores. At a consolidated level, also, the revenue grew by almost 15% to INR 3,867 crores, and EBITDA grew by 56% to INR 673 crores. For the 9-month period ended December 31, 2023, sales have grown by 19% to INR 6,640 crores. EBITDA grew by 29% to INR 1,815 crores, and PBT grew by 30% to INR 1,385 crores, which is more or less equal to what we have achieved in this entire year of FY23. During the quarter, the company has secured new business worth INR 550 crore on an annualized basis across various segments, including automotive, industrial, defense, aerospace, and casting, and out of which 90% are export-driven. In terms of so the total exports out of Indian manufacturing operations now stands at $200 million for the quarter, which is 36% up on a YoY basis. In terms of overseas subsidiaries, European operations have posted EBITDA of INR 22 crore, while the U.S. operations have achieved break-even at EBITDA level in the last quarter. The phase two CapEx of about $100 million in the U.S. is on track. Current capacity utilization on aluminum business is about 50% for U.S. and about 70% in Europe. As far as the aluminum operations are concerned, in Europe, the operations have been stabilized, and now we are working on getting price increases from the customers, which is underway. U.S. operations are yet to be fully stabilized, while there is a continuous improvement in operations quarter-over-quarter. Now I will hand over to Mr. Amit Kalyani for the comments on the outlook. So I would say that the near-term outlook remains positive. It's a mixed bag. We have a stronger outlook in the passenger car sector and in our industrial and defense sector. On the truck side in Europe, we expect to see a small tapering, and in the U.S., it should be flat. Medium term, I think we will continue to accelerate our growth going forward. We have many new growth drivers for our business, especially our industrial business, our casting business, also moving from components into systems and subsystems. New export opportunities that we are getting across our verticals, such as aerospace, etc., will provide adequate growth momentum for our company to sustain a strong double-digit growth going forward. There will be years when the growth is slightly less. There are years when growth will be slightly more, but I expect that on an overall basis, profitable growth and profitability will be maintained, and we should continue growing in a healthy manner going forward as well. We also should see in the next 18 months or so, our e-mobility and aluminum casting business should start growing and generate solid contributions to our bottom line and our top line. Additionally, once our European and US operations, especially our European operations, which is now on an operational basis performing well, get their price increases under control, we will have a very good performance and a very good contribution to bottom line coming from there. Similarly, as we get fully stabilized and ramp up our US operations, that too should provide a favorable contribution to our top and bottom line. So I think that's really all I have to say. I'm happy to take your questions now. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from the line of Kapil from Nomura. Please go ahead. Yeah, good afternoon, sir. Congratulations on the strong performance. Sir, there were a couple of segments during this quarter which had soft performance. One was the. Can I hear you? I'm sorry. I think you're far away from the phone. I'm sorry. Is it better? Yeah, yeah, much better. Okay. So I was saying that there are a couple of segments here which had a decline. One was the non-auto exports, and the second was domestic PV business. So could you just share what was the reason for that and what is the outlook for these segments and also domestic CV business? Okay. So the non-automotive export, which was down, was oil and gas. On the PV side, we had a couple of programs that got over, and we will have strong growth on the PV side overall because we have a lot of new programs that are starting and ramping up over the next two to three quarters. On the domestic CV, there has been a quarter-on-quarter slowdown or flattish nature of business. It's actually flat. Next quarter, which is typically the strongest quarter of the year, should see a better performance. And I think Indian CV on a secular basis should be positive because there is good demand coming from the overall infrastructure build and the Capex build taking place in India. Okay. And sir, what is the traction you're seeing on the defense business? Are there more programs, both in the domestic and export, where we can win orders? How is the progress there? If you could just talk about that. Yeah, we have a lot of new programs that we're working on defense. As you know, there are programs which are both on the artillery side, programs on the vehicle side, and programs both in naval, air force, as well as components and MRO, which we're working on, all of which are starting to yield results. We have good, healthy export order books, and we will continue to build this and continue to execute against the orders that we already have. We are participating in new development programs which have very, very large business potential, both within India and globally. As these reach some amount of finality, we will talk about them more publicly. Sir, any update on the ATAGS guns order? Are you expecting it in the current financial? Expected to be coming out anytime soon. So let's see. Okay. Sir, just one question on the margins, please. We had a very good improvement in gross margins. So if you could just talk about what exactly in the mix was there that drove it, or were there any other factors? Sir, if you see our product mix, we now have a higher share of contribution coming from both subsystems and systems, both in industrial and in defense. This is really what's helping our margins. Additionally, cost control and efficiency improvement is also working well. Great, sir. Thank you. I'll come back to you. Thank you. Next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Yeah, hi, team. Thanks for taking my questions. My first question is a follow-up on the defense business itself. Can you talk about the order book? Because I think last quarter, you all had mentioned somewhere around INR 3,000 crore, and what I picked up in the media was INR 2,000 crore. So just trying to understand what is the difference between the two numbers. And also, broadly, if you can talk, given the visibility that you're seeing from the new programs you're engaging in, how should we think about this business scaling up in terms of revenues over the next two, three years? So we expect our defense business to grow to a very meaningful size of our overall business in the next two to three years. In fact, already, we expect this business to be over INR 1,000 crores this year. When we had talked about the INR 3,000 crore order book, we are already executing INR 1,000 crores out of that. So what is remaining will be about INR 2,000 crores. So the number of INR 3,000 crores was correct. We are in the bid for some very large new business. And as this comes through, that will add significantly to our overall order book as well as our revenue quarter annually. I think to look at us getting towards INR 2,000-INR 2,500 crore annual business in defense as the first milestone and then grow from there is a realistic target in the next, I would say, 2 to one-half years. Okay. Got it. And I'm just trying to understand the margin that you typically say around 20%+ on the defense. How do I read it? Because the subsidiary business does have a mid-high single-digit margin. So a part of that margin of entire defense vertical is captured and standalone. Is that the way to think about defense revenues? Yes. I mean, you have to think of defense revenue and margins on an aggregate basis. Okay. Got it, which I assume even now would be close to in the double-digit absolute. Oh, yeah, yeah. Absolutely. Strong double-digit. Yes. Okay. Got it. My second question is on the Class 8 truck outlook. Now, what you mentioned in the initial comments where you're looking at U.S. Class 8 being still flat, and some of the third-party industry estimates talk about a meaningful decline this year given the order book is running down or general weakness in macro. Is that something that you're picking up in your engagement with the customers? Is it going to be a decline year at all the way you're engaging with the customers? So I think the U.S. order book will be strong. I think U.S. will continue to remain strong. I think Europe is where there's a bit of a question mark. Okay. So U.S., you're still looking at flattish for the year given that there is some backlog still to execute. There was this mention of emission that you spoke about. Can you? Emission norms changes happen next year in 2027. So there will be a pre-buy in 2025 and 2026. So I don't think the next two years we will see a slowdown in the U.S. Okay. Got it. And my last question is anything to call out on the EU European subsidies margin trajectory? You mentioned 12-18 months. How should we see it progressing from current low single-digit? Do we see them getting significantly better in FY 2025, or it's going to be a few more quarters of time? I think it will get significantly better in 2025. But U.S. will probably take a little more time. That is where I talked about the 12-18 months. But I think in 12 months, we will see also a significant improvement there. But I think we'll see a higher improvement in Europe. So overseas subs would still be in the range of mid to high single-digit in F25. Is that a fair way to look at it overall, not just Europe, just the entire overseas subs? I would say yes, maybe higher single-digit. Okay. Got it. I'll join back with you. Thank you so much. Thank you. Next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead. Hi. Sir, can you talk about what was the defense revenue in this quarter and how much of that would be from the guns order on the export side? We're not giving you any breakup, but overall, our defense business for the quarter was about INR 350 crore. 350 crore. Got it. And secondly, you talked about U.S. Class 8 to be strong for CY24 as well. But if I look at the commentary of some of your customers, it is indicating towards 10%-15% decline from high base of CY23. So is that indication what you're also getting, or that's something different? See, what is happening is that because of the 2027 emission norms, earlier, as long as the engine was made before 2027, you got the emission bypass. Now, the vehicle has to be rolled out in 2027. So the pre-buy is going to be preponed to more like 2024 and 2025 rather than 2025 and 2026. So that is why we expect a little bit of that volume to move back into 2024 and moderate in 2026. So 2024, 2025, and 2026 cumulatively should be somewhere in the region of the three years put together should be about 1 million vehicles. Okay. That's fairly strong number in that case. Okay. Got it. And you talked about oil and gas revenues declining. So what is the level now for oil and gas? Because it seems there is a reasonable decline given nine months. X of oil and gas growth was about 35%. I can say that it's about down two-thirds over what it was at our peak. So currently, it's down two-thirds. Wow. Okay. Got it. Right. And lastly, JS AutoCast revenue growth still seems to be impacted by the attrition order going away. Is that still correct, or? I understand what you're saying. I'm sorry. Can you just—I don't know if you are very close to the speaker or very far. I don't know. Not so clear. Is it better now? Yeah, yeah. Please. Yeah. So the JS AutoCast revenue growth still seems to be impacted by the Russian business going away. Is that still impacting our performance? No, Russian business. We don't have any Russian business. Oh, Vestas, you mean? Sorry, sorry. Vestas. Okay. Yeah, Vestas was a big customer. So that has reduced. But we are getting a lot of new business. We've already got more than INR 200 crore of new business across sectors, across customers, and largely exports from our global customers. Okay. Okay. And. After having acquired AS, that. Indo Shell. Indo Shell, we will also have a lot of capacity addition for high-volume business. Got it. There is a good improvement in margins for JS AutoCast. Now we back to what it was earlier. You expect this to sustain at current 14% level? No, we expect these margins to go up. Okay. That's good to know. Thanks and all the best. Thank you. Thank you. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead. Yes. Hi. Thanks for the opportunity. I just wanted to stay with the oil and gas segment. Is the slowdown because of a general weakness in the category, and can that change if oil prices go up, or is there something else which is happening? Are you getting out of some products here? No, it's a combination of de-stocking and, yeah, inventory correction at the customer end, basically. Okay. Okay. So. Significant increase in interest costs. Okay. Understood. Understood. So would you be able to share if the de-stocking is largely done and we could see an improvement, or this is a new level where we could be stuck in the oil and gas specifically for now? I think right now, the volumes we are projecting are at this level. But hopefully, in the next two quarters, it should start improving. Okay. And just on what you mentioned about that India CV 4Q should be a seasonally stronger quarter. But as we are looking into, say, the next financial year, do you think that India CV could show growth, or do you think that the cycle is peaking out? There are some customers who are also talking about 1Q at least being weaker because of elections. So how are you thinking about that? Yeah, I think 1Q being weaker is not a big thing. I think that is something that one has to get to live with. But I think if you look at our industry, if the country is going to grow at 7%, 8%, the commercial vehicle market has to grow at 1.5-2 times that. So overall, I think we're in a good position. Okay. Okay. And lastly, you also mentioned that the ATAGS order from the on the domestic side, you said that it should be coming anytime soon. Was that correct? I just wanted to. Yeah. I mean, the whole bidding process is at its final stages. So we should see something sooner rather than later. Okay. Okay. Understood. That's good to know. Thank you. I'll come back in the queue. Thank you. Thank you. The next question is from the line of Pramod Amte from InCred Capital. Please go ahead. Yeah. Thanks. Congrats for good set of numbers. Amit, first question is with regard to the. Pramod, Amit, your voice is very muffled. Can you hear me better? Yeah, a little better. Can you just, I don't know. If you're too close to the mic or what? I don't know. Pramod, if you're on a hands-free, request you to use the handset. No, I'm on the handset itself. Yeah, let me try the question. So basically, one of your customers had launched the EV truck. Wanted to know how is your content in the EV truck ICV which is launched. And I think the same customer is also trying with the tractor-trailer on the EV side. What is the content there versus your ICE truck? Currently, our content on the domestic EV trucks is largely power electronics, control electronics. But going forward, we will have the entire suite of products which we are already in, let's say, not in development but in testing with a couple of customers, which includes the motor, the inverter, converter, and the casting chassis components, etc. So the content per vehicle is significantly higher than the content per vehicle that we have today. The current prototypes which are running by the clients, do they have these components, or it will take you one to two years to reach them? No, no. Some of them already have the mature components. Some of them have still components at a prototype level. Also, the government seems to be pushing for, I think, LNG policy or even hydrogen policy. How does the content change there versus your ICE vehicle in trucks? See, in hydrogen, there are two possibilities. One is the Cummins model where hydrogen is used as a fuel in the combustion engine by injecting hydrogen into the engine. There, an engine is an engine. So you have a crankshaft. You have connecting rods. You have pistons, camshafts, and so on and so forth. Camshaft may be something that goes away if you have electronic timing or electronic valve lift. But the crankshaft, the pistons, a lot of those components still remain. The other source of using hydrogen is through fuel cell. But today, the fuel cell does not have the power density that one needs. So I think we're still a little far away from that. But immediately, hydrogen combustion engines are definitely something that will have adequate opportunity for us to supply components into. Any thoughts on LNG, or it is remain the same? LNG is the same as CNG or any combustion engine. The only difference is the tank that is used to store it. Any update on the retrofit kit which you had made for trucks? Any timeline for that to come to commercial end? We have now completed testing of more than 250,000 kilometers. We have got homologation certificates. We are now starting to build vehicles for sale to customers. I expect that in the next quarter, we should be selling vehicles to customers, starting with a small volume of beta testing. Then after that, we will be in series production. Sure. Thanks and all the best. Thanks. Thank you. The next question is from the line of Rakesh Roy from Omkara Capital. Please go ahead. Hi, sir. My first question regarding your defense business. Sir, recently, Indian Army have cleared for Made in India 155mm towed gun system. So sir, where does Bharat Forge stand apart from, sir, ATAGS? That is for ATAGS only. That program is for the 307 ATAGS. Oh, no. This is only for Towed Gun System, sir, apart from ATAGS. Yeah. So we have three other platforms besides ATAGS. We have Bharat 52, then we have Ultralight Gun, okay, both in titanium and in steel. And we have Bharat 45. Okay. So sir, both the guns have the weight below 15 tons, sir? Yeah, yeah, yeah. Right, sir. Sir, next question regarding your aerospace business, sir. Just want to hear if you are making, sir, you are seeing the growth from the landing gear, helicopter part, or jet engine. Can you like on this, sir, for landing gear or helicopter part or jet engine? In aerospace also, we are growing at a very high pace. We will continue to grow at very significant double-digit growth. We are almost every two years, we'll be doubling our business here. I expect that this business will be growing at a very high pace for at least the next three to four years. Sir, this business will be looking from the domestic market or export market? This is global, but more than 80% of it is export. Okay. Right, sir. Thank you, sir. Thank you. Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from the line of Kapil from Nomura. Please go ahead. Kapil, you may go ahead with the question. Yeah. Can you hear me? Yeah. Okay. Sir, just one follow-up. On these new products that we are building for electric vehicles, power electronics, and also inverter, etc., what kind of margin profile will be there for these businesses? Initially, the margin will be not as high as it potentially can. But I think that overall, the margin and return on investment will be very good. Understood. When we look at your. That our value per vehicle will be significantly higher than what we have today. Profit per vehicle will be very good. Sure, sir. When we look at your current margins, how much is the investment going into some of these new areas of development which potentially may not be generating revenues currently? Sorry? What did you say again? So our US plant is not generating any adequate return right now. Then our aerospace business also is not generating the kind of returns. Our acquisition in the casting space, that is, JS Auto, is not generating as much as because it has much higher capacity than what we have acquired it, than what we are generating today. It can easily double its revenue with the capacities that we have. Actually, sir, my question was more on the standalone margins because it would be having some investment-related costs for these new power electronics and other EV parts, right? So just was trying to get a sense how much investment is going into these standalone margins right now which may be affecting your standalone margins. Yeah. Look, to build any business, you have an overhead. So we have an upfront cost which is our revenue expenses to take care of the operations of this business which is negative rather than it's not generating any revenue. So as that switches, it will go from negative to zero and then zero to positive. But you're right. I mean, any business when you build, in the beginning, it has a negative margin because you're only investing. And we don't capitalize any of these. We charge it off P&L. Yeah, sir. That's the reason I was asking this question. Anyways, I'll take it off then. Thank you so much. Thank you. Thank you. Participants who wish to ask questions may press star and one. Next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead. Hi, sir. Hi, sir. Thank you so much for the opportunity. Sir, last 12 quarters, we have been growing in double-digit, very strong growth for the last three, four years. Now, in the press release that we have released, mentioned that the Q4 and FY25 growth is expected to be moderated. So is it meaning that instead of growing 20%, our growth could be moderate, maybe 10%-12% kind of growth next year? Is it right we will. Exactly. It's not that we're going to become negative growth. Growth will probably reduce for a few quarters from 20%. But again, after a few quarters, we will again accelerate. Okay. So only growth number will moderate? Yes, exactly. It's not going to degrowth. Okay. Okay. Certainly. And sir, the capital expenditure planned for next two years? Next two years, it's cumulatively between India and outside India, all put together, INR 1,000. Sure, sir. Thank you so much, sir. Thank you. Thank you. Participants who wish to ask questions, please press star and one. I think there's no one else. So maybe I'll just give a closing. Sure, sir. There are no further questions. So ladies and gentlemen, thank you for attending our call. I don't want to alarm anyone, but I hope that we didn't alarm you with our, let's say, guidance which was softer than what you may have expected. But I think that as a company, we will have robust performance. We'll have strong double-digit or we'll have strong growth, stronger than industry and stronger than market. But there are changes taking place in the underlying market. So I just wanted to highlight that. It's a great opportunity for us because a lot of weak suppliers will fall by the wayside and give us a lot of opportunity to move business to ourselves. So we expect growth to continue. We have plans of how to accelerate our growth going forward as well. I think that the future looks very bright, driven by our existing businesses, some of our emerging businesses, and some of our new businesses. That's all I wanted to say. I'd like to invite you to come and visit us to get a sense of what we're doing. Thank you very much. Thank you very much. On behalf of Bharat Forge, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.