Ladies and gentlemen, good day, and welcome to Pitti Engineering Conference Call for discussing the acquisition of Bagadia Chaitra Industries Private Limited. Joining us on the call today are Mr. Akshay S. Pitti, Vice Chairman and Managing Director, along with the senior management team of the company. Before we begin, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risk and uncertainties. For a list of such considerations, please refer to the earnings presentation. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Akshay Pitti. Thank you, and over to you, sir. Good evening, and a warm welcome to everyone on the call. Before we move to the Q&A session, I'll walk you through the acquisition, touch upon the highlights of the entity being acquired and the synergies it will bring to the consolidated business. Pitti Engineering signed the definitive agreement to acquire 100% of the equity share capital of Bagadia Chaitra Industries Private Limited on 11th March, a historic day for our industry, as this is the first such M&A in the lamination space. The entity's enterprise value was INR 124.92 crores as of 31st March 2023. The consideration payable on the closing date shall be the enterprise value, adjusted for net debt and net working capital changes from the agreed baseline of 31st March 2023. Further, the purchaser shall compensate for the capital expenditure incurred at the time of closing. The entity operates out of Tumakuru District, Karnataka, where it set up a greenfield and modern manufacturing facility in 2019. The facility's installed capacity is 18,000 tons per annum. The acquired entity supplies its products to various end-user industries, including alternator, motor and pump. Majority of its sales are the smaller size laminations and assemblies. It achieved a turnover of INR 264 crores, earned an EBITDA of INR 14.11 crores and a PAT of 6.19 crores for the year 2023. As you know, we are in the process of reorganizing Pitti Engineering's manufacturing capacity, concentrating all of our 72,000-ton motor and generator components business capacity in Aurangabad. Furthermore, with the impending merger of Pitti Castings, Hyderabad will become the vertically integrated center for all our machine component business. This acquisition will give us a strategically important manufacturing base in Bangalore, one of the largest consumption centers for motor and generator components in South India. Further, its proximity to Coimbatore, Chennai, and Hubli will result in lower logistical cost and improve customer serviceability in the region. The entity is estimated to end with sales of 14,000 tons for FY 2024. As part of our realigning of production, we will move approximately 4,000 tons of annual production from Bangalore to Aurangabad and about 6,000 tons from Aurangabad to Bangalore. This will help significantly lower logistical costs on a consolidated basis. Typically, in the lamination industry, material costs are about 80% of total costs. Any savings here have outsized positive impact on the margins. As you're aware, Pitti Engineering predominantly manufactures large-sized lamination. The addition of smaller sized products from this acquisition will enable better raw material utilization on a consolidated basis. This concludes our brief on the acquisition and the synergies it brings. We will now move to the Q&A session. Thank you. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue settles. Participants, you may press star and one to ask the question. Ladies and gentlemen, you may press star and one to ask a question. The first question is from the line of Piyush Jain, individual investor. Please go ahead. Yeah, thank you for the opportunity. Just want to understand, Piyush, may I invite you to go ahead with your question, please? Yeah. Am I audible? Yes. Yeah. Yeah, hi. Thanks for the opportunity. I just want to understand the objective behind this acquisition. Is it something the facility of the target company or the client customer, as we have said in the, that we will get to, penetration south market? So just wanted to understand the whole idea, because when we see this company is having an EBITDA margin of around, let's say, maybe a very, suboptimal level as compared to the Pitti. So just wanted to understand the thought. Yeah. So there are multiple reasons that, this, acquisition makes sense for us. If you see, as you rightly noted, the company's EBITDA margins are vastly lower than our margins. With the addition of this company in our product portfolio, the improved raw material utilization will enable us to significantly increase the EBITDA margins of that entity. In addition to that, since we are moving our entire lamination manufacturing base to Aurangabad in Maharashtra, we wanted to have, still have a presence of manufacturing in South India to lower the logistical cost. So you will see the, 10,000 tons of, relocation of production base. That is in another significant saving in terms of logistical costs. So on a consolidated basis, this acquisition makes a lot of sense and will be extremely margin accretive. When a company is having a very suboptimal EBITDA, I believe it is around, something around, the EBITDA number is something around maybe 5-6% or something, then aren't we paying a valuation high? Because I believe we are paying some 8-10x EBITDA something number. See, for the year 2023, the raw material prices are higher, therefore, the EBITDA margin looks lower in percentage term. If you see historically, that company has been able to achieve between 7 to 6, 6.5 to 7% EBITDA when the raw material prices were normal. So as the raw material prices normalize, we'll get back to that level. We are paying capacity and the volume of business that they are doing, which is about 14,000 tons of ready business, and the type of business that they are doing, which is complementary to our material utilization. Okay. As I understood, they have a capacity of around 18,000 metric ton, correct? Yes. How much revenue can this 18,000 metric tons generate? So this 18,000 metric tons will typically generate about INR 300 crore of top line on the current raw material price basis. Okay. So, and any idea, in the current year, 6 months or 9 months number, if you can just give some information related to... Because as you said, the 13, 2013, 2023 margin was subdued. So any color on the current year EBITDA number or something? So we have the H1 numbers of that entity. They are at about 6% EBITDA margin, and the EBITDA margin is continuing to improve as a percentage of sales as the raw material prices continue to decline. Okay. So as I understood from you, the growth opportunity with this 18,000-ton will be limited because the company is already doing INR 260-odd crores, and you are saying 18,000 tons can do INR 300+ crores or maybe three something, something. So the growth from here will be limited. So I didn't understand exactly how this will help the Pitti or somewhat synergy this can bring. As you said, this entity's margin will improve, but what it will bring a synergy to Pitti, I am still unable to understand. See, if you... So first is dealing the turnover and the tonnage. The turnover which I'm suggesting is in the looking forward basis. If you see in terms of tonnage, we have done about 14,000 tons of production, and we have a capacity of 18,000 tons. So we have about 4,000 tons of surplus capacity available in that particular location in Bangalore. We are doing two things. One, we are reorganizing the business to the right location. From our Aurangabad facility, we ship about 6,000 tons of material to Bangalore and its surrounding regions, which has a great logistical cost. So that will be relocated to Bangalore. And vice versa, each entity that we have acquired ships about 4,000 tons to Maharashtra and further north. So by relocating these two businesses to the right location of consumption centers, it will reduce logistical costs, which will enable margin growth. Secondly, the type of products that this company makes, which is a smaller product, it helps us in better utilization of raw material at a corporate level. We make larger laminations wherein the five splits are scrap for us, so that scrap will become the raw material for this entity's production. So your overall material cost will go down. On a consolidated basis, which will increase your margin. Okay. So this target entity is, sales will not be a captive goods for Pitti, correct? This will again be sold to the end customer only, correct? Yeah, it will be for the end customer only. Okay. We believe this margin will be expanded in line with what the Pitti is doing, maybe around 13, 14%, 15% type of margin in a year's time. See, our margin is also a factor of the machine component. This entity does not have machine component, neither does any other lamination manufacturer have. So it will not come in line with something like what our margins are. They may improve to maybe about 10% EBITDA margin on INR 300 crores of sales, roughly about INR 30 crores. Okay. So they don't have a machining capacity. They don't have a lamination capacity. They have a lamination capacity, they don't have machining capacity. Okay. Machining is typically used in the bigger assemblies and more complicated products, not in the simpler type of laminations and assemblies that they do. Okay. And, and one more thing, I think we have already approved this, the merger of Pitti Castings also, correct? So where this stands now, and how much is the, top line or the EBITDA perspective say that can be added to the Pitti Engineering's balance sheet in the end? The timeline for the merger is as follows: On 22nd March, we have a shareholder meeting to approve, to consider and approve the transaction. Post that, I believe it takes about 2, 2.5 months for the final effect to be given, depending on the approvals. As far as what we expect, it will add to our profitability, for current year, for FY 2024, we are estimating about INR 20 crore EBITDA in that in Pitti Castings. Okay. And just last question, because of this acquisition, are we getting into any client base acquisition or something? Is there anything else we are getting in other than the capacity and the regional, what you said, the saving on logistics cost and so on? ... So if you see, we don't cater to the pump industry today as an end user market, so that will give us a presence into that. The company that we are acquiring, about 35-40% of the revenues come from the pump segment, and that's a huge business segment that we don't operate in. So that segment will further add going forward, more sales to us. Okay. And the last thing, do we want to do any expansion in this segment where we want to cater to pumps, home appliances and EV segment, and to increase this capacity from 18,000 to maybe whatever X number? I know it's too early to ask, but still, is there any vision and thought process behind this? Most certainly, most certainly we'll be doing that. So if you see the 72,000-ton capacity that we are creating, we estimate full capacity utilization in FY 2026. Something similar will be there in the Bangalore location, where we are currently doing 14,000 tons. As a result of these tonnages moving around, maybe that capacity will be at full utilization by middle of FY 2026 itself. So around that time, we should be looking at expanding into a new facility, a large facility in Bangalore, and think about something like a 30,000-35,000-ton capacity in Bangalore. Okay. With a focus on the lower product segment, such as pump and home appliances, which are very, very strong consumption centers in Coimbatore and in Bangalore port. Okay. And, what is the thought process on this debt? Because our debt is increasing, and we are still in the CapEx mode, which then also we are doing, and I think we are infusing, and further in with, I think, because of EV of INR 120 odd crores, there would be some debt which also come into our 50. So what is expecting our peak debt for 2024 or 2025, and then what is our plan to reduce the debt to reduce the interest cost? So if you see with this acquisition, we are going with debt to fund this acquisition. Our peak debt will be about INR 450 crores-INR 460 crores as a result of this acquisition. After that, we are not having any additional CapEx plans till middle of FY 2026. So the cash flow in this period should be, in my view, sufficient to ensure that we are nearly debt free in that same time period. Debt free by? By twenty-six. Are you saying INR 450-odd crore debt we will reduce in two years' time? I don't think that we have that much of cash flows happening. Almost, it will be. If you see, from Pitti Castings merger itself, like I said, we are doing about INR 20 crore EBITDA. That company has no debt in its books, and therefore no interest cost. Similarly, the entity that we are acquiring now, this Karnataka company, we are estimating the EBITDA to go towards INR 30 crore. And organically, the growth that we are seeing in our business, we should be generating about INR 200 crore of cash flow annually. So in the two years' time, we should be nearly debt free. Okay. So then just last one thing, do we have any pending CapEx in current year or maybe FY 25 or something, which is ongoing or that we are about to spend some CapEx, so via debt? FY 25, for FY 25, I think about INR 40 crore-INR 45 crore of CapEx would be there, and that kind of CapEx would be ongoing on a regular basis. Those are small incremental CapExes. They are not large projects that we are taking out. Okay. To sum up on the debt and debt free status, are you saying the INR 40 crore, INR 45 crore, INR 50 crore CapEx will be there in the next two years? I mean, by FY 2026 also, there will not be much debt, much CapEx, debt-laden CapEx here, and with the debt... Hello? Yeah, your, your audio is not very clear. I'm sorry, I can't hear you. Yeah. Yeah, I'll, I'll repeat again. What I, I understood from you, by FY 2026, there is hardly much debt-laden CapEx is there. And with the acquisition also, we will be seeking out as our debt of INR 450 crore-INR 500 crore, which we expect the synergies with, with Pitti Castings merger, with this acquisition cash flow coming in, with INR 50 million whatever generating, maybe two years, two years timeline, we will be able to get debt free or maybe a type of INR 100 crore type of debt number. Is that understanding that I understood from you is correct? Absolutely correct. Perfect. Thank you. Thank you so much for detailing that. Thank you so much. Thank you. Next question is from the line of Ravindranath Nayak from Sunidhi Securities. Please go ahead. Hello. Thank you for the opportunity, sir. Actually, can you please tell me what is the volume number for FY 22 and FY 23 for this company that we are acquiring? FY 2022 was about 12,000 tons, and FY 2021, I don't have the volume numbers. 23, I'm talking of 23. 2023 was 12 crore, 12,000 tons. Okay. So that means, you know, the EBITDA ton is around INR 11,758. So you said about this year, you will be finishing this year INR 30 crore of EBITDA. That- Not, not this year. After the acquisition is completed and we get the synergy benefits of raw material utilization between our existing product and that company's product, we estimate the EBITDA to move to about INR 30 crore. There's two savings: There's one on the logistical cost, and the second on the better utilization of raw material. Okay. So, last year, we, they did around INR 1,400 crores of EBITDA, and we, we are expecting at least even INR 15 crores or INR 1,500 crores or INR 1,600 crores of EBITDA, then rest would be the savings- Sorry. Savings- Sorry, I can't, I can't hear you well. You are not clear. ... I'm saying that this year, you said about the volume would be around 14,400 tons for this year. If I say around, say, there is some increase in the EBITDA per ton, it, it is around, say, into INR 1,500 crore-INR 1,600 crore, sixteen crores, sixteen crores, then, the rest would be savings. Correct. Is it my- So that means, let me rephrase. They will do about 16,000 tons next year from their end user segment. That should give them about INR 16-17 crores EBITDA, and the remaining INR 12-13 crores will come from the synergy benefits. Okay, okay. And lastly, can you please tell me what is the, you know, the industry like per segment revenue, particularly if you mention about the pump industry, and what are the other industry? It is largely consumer durables or any other industry you are seeing? No. So, the 30%-40% is coming from the pump industry. Okay. About 40-odd% is coming from alternators, and the remaining 20% is coming from general home appliances, those kind of stuffs. Okay, okay, okay. Whether we're planning any further capital expenditure in this business, So we will review that. Like I said, we'll review that in FY 2026. So far, with the expansion in Pitti Engineering in Aurangabad and this acquisition, and the reorganizing that we have to do between Bangalore and Hyderabad facilities, we think we have enough capacity to see us through FY 2026. For FY 2027 targets, which we are, we'll start working next year, we may look at CapEx in FY 2026, if required. Okay, okay. So we are not going to go, do any QIP for this, acquisition, right? Right now, I cannot comment on anything like that. This acquisition primarily today has been funded by debt. Okay, okay. So there is no- On any fundraising, I'm not allowed to comment. Okay. Okay. Thank you. Thank you. Thank you. Next question is from the line of Akash Singania from Arch Venture Partners. Please go ahead. Akash, may I request you to unmute and go ahead with your question, please? Yeah, hi. Congratulations, Akshay, on this strategic acquisition. Thank you, Akash. Yeah, I have two questions. So first, let's say, if you would have acquired a greenfield facility in Bangalore, Karnataka, with the similar capacity, in terms of lamination and land, so how much would it have costed us? Just any ballpark number. Just the capital expenditure in land, building, and machinery would have been, at today's pricing, about INR 50 odd crores. If you see the company that we acquired, their figures are, gross about INR 50 odd crores as is. Okay. If you adjust it for inflation, to set up such a facility today would cost about INR 50 crore. Okay. Do we have land over there to, let's say, increase the capacity post FY 26, in case we intend to increase over there? So do we have infrastructure or land available for brownfield expansion? No. So this facility does not unfortunately have any land available for brownfield. If we have to expand there, we have to do a greenfield expansion, which we would anyways prefer, as you'd like to create a bigger, much larger facility going forward, beyond FY26. Okay. There's sufficient industrial land available in and around the same industrial park that this facility is located in. Okay. And, do we intend to put machining facility as well in this plant, or we'll continue with laminations only? We will transfer some of our machining facility from our existing Hyderabad and Aurangabad facility, which will complement the tonnage move from Aurangabad to Bangalore. Okay. There's no intention to do pure machine components in Bangalore as of now. Okay, okay. Understood. Thanks so much. I think it was very clear, and I think a brilliant acquisition leading to a consolidation of the industry. I think a first of its kind in the laminate industry, and, you know, any consolidation augurs very well. So congratulations, and thank you, Akshay. Thank you. Thank you. Thank you. Next question is from the line of Sanjeev from DreamLadder Investment Advisors. Please go ahead. Sanjeev, sorry, but there's a lot of static from your end. Sanjeev, if you can hear us, I'll request you to rejoin the queue, or kindly disconnect and reconnect the call. There's a lot of static from your end. We'll move to the next participant. Next question is from the line of Bala Subramaniam from Arihant Capital Markets. Please go ahead. Congratulations. Congratulations, sir, for this acquisitions. My first question is like, current status for this company, sir? Sorry, Bala Subramaniam, your voice is not very clear. Like, what is debt and cash levels? So, the debt as of 31st March 2023 was about INR 29 crore in the entity. In terms of cash, I think we had about INR 8 crore of cash and cash equivalents in the entity. Okay, sir. So like you talked about INR 12-13 crore comes from synergy benefits. So what kind of synergies we have in terms of raw material and others? So it's basically from the utilization of the coil. If you see the raw material, it comes in the form of 1200 millimeters with standard coil. We make the larger lamination, wherein if you're making any lamination more than 800, you cannot typically use the remaining size fit for anything equivalent to 800, obviously. So this company makes laminations just smaller in diameter, so we can utilize these raw material coils in a much better way to derive synergies on the overall material cost. Okay. Any other synergies, sir? Yes, sir. Second thing, like I already mentioned, there are synergies in terms of logistics cost. We, from our Aurangabad facility, typically ship about 6,000 tons of material to Bangalore, which after this acquisition, will be produced in Bangalore and sold in Bangalore. Vice versa, the company that we are acquiring ships about 4,000 tons of material towards the north, that would be made in Aurangabad, and the logistical cost saving should be significant also in that. Got it. Got it. So these are the two major financial synergies. Apart from that, obviously, you know, the economies of scale kick in, the purchase benefit comes in. If you are buying a significant quantity of raw material, you have a outsized impact on the supply chain side, thereby reducing material costs. You have faster product development cycles, so the non-financial synergies also are many in nature, which we cannot quantify right now. Got it, sir. Got it. Sir, this current capacity, 18,000 tons, post FY 2026, like we are adding 30-35k tons, it's a nearby place, right, sir, that factory? See, we are not adding. I'm saying if the market supports us, we may choose to then expand the Bangalore facility rather than the Aurangabad facility at that particular point of time. Okay, sir. We got it. Thank you, sir. Thank you. Next question is from the line of Sanjeev Zarbade from DreamLadder Investment Advisors. Please go ahead. Yes, sir. Sir, I think you have already answered about the nature of the small motors market. I just wanted to know how large... Sorry, I lost you there in between. I can't hear you. The line for the participant dropped. We'll move to the next participant. Next question is from the line of Prathamesh from Motilal Oswal. Please go ahead. Oh, hi, I'm audible? Yeah, you're audible. Please proceed. Yeah, yeah. Hi, Akshay. So my question is, first you've mentioned that some of the machining expertise would be transferred to Bangalore. So would it be fair to assume that there will be improvement and realization per ton for the Bagadia facility? So, see, we will be moving our business to the Bagadia facility and Bagadia's business to our facility. At the end of the day, this will be a WOS. So the right way to look at it as a consolidated basis, what is the margin? It's not like we are improving the margin of his business by moving some machining. Okay. His business does not require any machining. We are moving those products which is being manufactured in Aurangabad, which require certain amount of machining, to Bangalore for better cost optimization on transportation. Okay. Okay, so, like you mentioned, that 6,000 tons would be moving from Aurangabad, so the big laminations would be moving there, and small lamination would be moving from Bangalore to Aurangabad. Is it fair to assume? Yes. So we- Uh, okay. It's not just about size, it's about where the consumption, eventual consumption of that particular product is. Oh, okay. So those would be realigned to save logistical costs, and whatever, complementary facilities are required to do the production would be moved. It may be that some machines may move, if required. Okay, understood. So, you've mentioned RM costs as well as logistics costs being one of the levers towards EBITDA improvement. Would, let's say, salaries, employee benefits would also be a lever going forward which would improve EBITDA margins on the company level or at Bagadia level? So, see, obviously with the more business, the overhead will be spread wider, so that indirect benefit we'll anyways get. As far as, you know, any employee cost rationalization at the Bagadia entity level, I don't see much potential there, as they are very lean operation, as I had mentioned in my introduction. Okay. So, there's not much scope for doing that there. Okay, understood. And could you please give us more around the type of clients, like you've mentioned, that these are basically small laminations, but, are the clients... Who would the clients be, if you were to give a couple of names that Bagadia caters to? Yeah. So they are smaller in size, but in terms of end application, they mostly going to the alternator space, the motor and the pump. So on the pump side, Texmo Pumps is one of the large clients. Then they have a company called Nidec Leroy-Somer, which is a major client, and to some extent, with about 20 or 25% of their revenue overlaps with our clients as well, on the smaller end of their production, product requirements. Okay. So, would there be a client concentration at Bagadia's side, if you were to see? Pumps at 30%, but then on the overall level, as far as clients are considered. Sorry? As far as client concentration is considered, customer concentration, how would the top five or top two customers account for Bagadia? So for FY 21, top three accounted about 57%. Okay. In FY24, H1 FY24, top three was about 70%. Oh, okay. And top, top most would be 30% again, if we were to see? Yes. Yes. Okay, understood. That's all from my side. Thank you. Next question is from the line of Sanjeev Zarbade from DreamLadder. Please go ahead. ... Yes, sir, my question was regarding the market size of the small motors. Could you take us through that, sir? Small and large motor put together, let me say, is about a 700,000-ton RME per annum market. With this acquisition, we should be, reaching somewhere around 90,000-100,000 tons of e-steel consumption. So both these acquisitions from the small and large, both put together, we are around 12%-13% of the overall Indian market. In value terms, how large would be the small motors market? In value terms, see, this is not just motors that this company is making. If you see the lamination that they sell to Midea, it's also for power generation generators. Mm-hmm. So, it would be very difficult, you know, kind of correlate that with this acquisition. As far as the small motors market is concerned, apart from the appliance and pump, I believe, based on whatever we understand from our customers, it's about an INR 5,000 crore-INR 6,000 crore market. That's a small one. Other than pumps, alternators, and home appliances. Okay, great. And, sir, is it possible for any outsourcing opportunities from, let's say, the established small pumps makers where we can, you know, deliver small motors for their pumps? Any such opportunity for scope for such opportunities there? I think it's too premature for me to individually comment on this, as we have just gotten into this acquisition. Once we get more interaction happening with the end customers and understanding their requirements, I'll be in a better position to comment on that. Okay, sir. Thank you. Thank you. Next question is from the line of Khushbu Gandhi from Share India Securities. Please go ahead. Yeah, so, one question from my end. How do we see ourselves in the next 2 to 3 years in the laminating capacity? Because right now we, we are extending 72,000 plus this 18,000. So any more expansion are we looking in this? So till FY 2026, which is the next two years, we are not planning any additional capacity. We first need to start utilizing this capacity towards most optimum utilization. For FY 2027, we will take a call next year how the market is rolling out and then look at investment requirements. Okay. In the lamination for the new acquisition that we have done, is this fully automated, like, what we have done in the Aurangabad facility, or this is semi-automated? So, I would say that 70% of their production comes from highly automated processes because we are smaller lamination. Little bit of the mid and large size lamination that this facility does do comes from manual operations. Okay. So any plan for revamping or for automations over there? Right now there's nothing planned. Maybe in the operational CapEx that we keep doing, like I said, 40-45 growth, we do have a budget for the next 2 years, each year. Maybe in that we may take up some of that. Okay. Are we going to do any of the sales of this pumps and alternators to exports, or this is purely domestic? The pump and the alternator that this company is manufacturing is purely domestic. They do have exports. I believe it's about 8%-10% of revenue is exports, mainly to Europe. Okay. So are we, do we have plans to, increase our exports over there? Or, this, this ratio will continue going forward? See, this entire term turnover will obviously get consolidated. It will become a WOS, and we will reorganize the business to its right location. So there is no inherent benefit in doing the exports from Bangalore. It would be most appropriate if that exports sales are moved to our Aurangabad facility, where we can utilize the raw material in a much better manner, and also help reduce our logistical cost by freeing up capacity in Bangalore to do our legacy Pitti Engineering business in Bangalore. So we will be doing those reorganizing between the facilities. We are not seeing these as two different companies. We are seeing these as facilities of the same parent company, which is Pitti Engineering. Yeah. So my, my point was that are we looking for exports in the, alternators and the pumps, to increase going forward, or the, the ratio will be the same for this? It will continue the same, I would say. It will be the same. Any idea on what is the order book currently, which we have for Bagadia, or? Just one second. I believe it's about INR 120 crores. INR 120 crore. Okay, so yeah, that's it from my side. Thank you. Thank you. Next question is from the line of Akash Jain from Money Cows Investments. Please go ahead. Yeah. Hi, Akshay. Thank you for patiently answering so many questions from investors. I think I just heard a small clipping on the news channel that you had given, where you had broadly guided that FY 2026 at 70% utilization for all three combined companies, you are expecting INR 1,700 crore revenue and around 17% EBITDA margin. So one is, broadly, does that number sound right? Also, I want to understand for FY 2026—not really a guidance, but if you achieve full capacity utilization across the three companies, what kind of revenues and margins are you expecting for FY 2026? Very broad guidance. That was part one of the question. Part two of the question was also, sorry, you can continue. Yeah. So if I could break it up, so that you can better understand what we are trying to say. If you see the INR 1,700 crore top line, that's a factor of the current sales price per ton of Pitti Engineering, multiplied by the guided sales tonnage for FY 2025. We are adding the turnover, which will accrue from the acquisition, as well as the merger of Pitti Castings. In terms of margin profile, if you would see, we have guided to about 48,000 EBITDA per ton in Pitti Engineering. So that into the tonnage, plus the EBITDA that will accrue with the synergy benefits from Bagadia, takes us to about 17% on a consolidated basis, EBITDA for FY 2025. Yes. Now, if you just extrapolate these numbers forward- Yeah. Yeah. If you just extrapolate these numbers forward for FY 2026, and again, this is a very basic and rough guidance, if I may call it that, would be that, you know, Bagadia business would kind of saturate at the INR 30 crore EBITDA post-synergy basis. And obviously, the machine components is growing in Pitti Engineering, and the tonnage in Pitti Engineering will expand to about 56,000 tons, which would be around the peak utilization of our capacity in Aurangabad. And at that point of time, we'll be looking at about 50,000 EBITDA per ton in Pitti Engineering. So on a consolidated basis of all three businesses, we should be looking at about INR 350-360 crore EBITDA. That's about thirty-five crores of the incentive income from Maharashtra State Government. Okay. And just one quick refresh question, Akshay. So post the merger with Pitti Castings, what will be the total outstanding new shares, because some dilution will happen for the Pitti Engineering shareholders. So just a refresh for us. Approximately it's about 22 lakh shares, which is being issued, and the total share capital should become about 3.42 crore shares. Okay. Thank you so much. Thank you so much. Thank you. Next question is from the line of Karan Khanna from Ambit Capital. Please go ahead. Hello. Hi, Akshay. Congratulations on the great acquisition. So I was, maybe this question is already answered, I don't really know. So, I would, what I wanted to understand is how would we grow to 17% or 14%, which we are guiding for Pitti? So, you see, Pitti Engineering, we are currently at about 15% EBITDA. If you add Pitti Castings, post-merger, that's for currently itself, we're doing about INR 20 crore of EBITDA. In terms of sales, if you cancel out the sales to Pitti Engineering, it will add about INR 50-INR 60 crore only to the top line. So that itself, you know, kind of takes you to a pretty high EBITDA number. And if you add Bagadia Chaitra along with its, synergy benefits, that will give about INR 30 crore of EBITDA. And for next year, we are talking all of this for next year. Next year, we also have volume growth in Pitti Engineering, as well as EBITDA per ton growth. All these factors put together, we are estimating about 17% EBITDA margin on INR 1,700 crores of top line. Hello? Hello. Hello. Yeah, I lost a little bit of the end of it. Sorry. Last part. So all the three factors put together, the merger of Pitti Castings, which will add about INR 20 crore on a FY 2024 basis in terms of EBITDA. The synergy benefits accrued in Bagadia Chaitra will add about INR 30 crore on EBITDA. Apart from that, the EBITDA per ton in Pitti Engineering also, we have guided at about 1 million tons for FY 2025, on about 50,000 tons of sales. So if you now kind of total these on a consolidated basis, that takes us to about INR 290-INR 295 crore of EBITDA, which works out to about 17% on INR 1,700 crore of top line. Okay, got it. So my question was more on the lines of percentage terms or EBITDA per ton for the Bagadia entity. Will it improve or will it get in line with the Pitti concern level, or will it stay at a lower level, like it, like it currently is for FY 2023? So it will continue to remain at a lower level. The right way to look at this would be, you know, if you take Pitti also, we have a blended EBITDA per ton. It's not like all of our businesses are hitting that same EBITDA number. Some are punching way above the average and some are punching below the average. So Bagadia legacy business should yield about fifteen odd thousand rupees per ton EBITDA. And then you have the synergy benefits on transportation, which will bridge the gap on the movement from seventeen odd crores EBITDA in Bagadia to about thirty crores on a consolidated basis. Okay, got it, got it. Understood. Thank you so much, sir. Thank you. Thank you. Next question is from the line of Pulkit Singhal from Dalmus Capital. Please go ahead. Thank you for the opportunity and congrats on the good acquisition. Just curious about a couple of things. One is, when I compare the working capital cycle of Pitti versus Bagadia, I see quite, quite a bit of difference, if you can help explain. So for instance, Pitti has 64 days, debtor days, whereas Bagadia is around 37, and similarly, inventory days is 85 for Pitti, whereas Bagadia is at 25. So can you explain what explains this difference? ... So, Pulkit, you have to see it in two ways. One, Bagadia doesn't have significant exports. Our exports actually require us to give longer credit time to customers, mainly due to the transit time. Secondly, the nature of business. We are predominantly into the pump and alternator business down south, wherein the credit cycles to the customers are around 35-40 days. So that explains the difference in the debtor days. Coming to inventory, they use about two different grades or three different grades of raw materials, which are pretty standard in nature. We have a highly complex suite of products, and we have to maintain inventories on multiple grades and types of raw materials. In addition to that, if you see, we are also doing the machining and machine components, which further adds to our requirement of inventories and the lead times that are there for procuring these materials and actually processing them. Okay. And to that extent, your debtor and inventory days, going ahead next two, three years, I mean, because your share of exports as it goes up and machining goes up, this will be on an increasing trend, or is there any guidance you can give for just your business side, let alone the- On the export side, if the ratio of export is to domestic, alters dramatically in favor of export, then it will mean a deterioration on debtor days. But if the exports go up and the domestic business in Pitti Engineering goes up more than the export, in fact, you'll see a reduction in the debtor days. As far as the inventory is concerned, with this acquisition, we estimate that we'll be able to in fact reduce our consolidated inventory days. Like I mentioned, one of the key factors on this acquisition is the better utilization of material. That's not only in terms of the utilization of the split raw material, but also in the utilization of the inventory that Pitti carries. Because today, I have to, you know, kind of store those split coils to be used for my smaller laminations, which are few when compared to my large. With this acquisition, we'll be able to flow that material through to this entity for immediate consumption. Okay. What is the consolidated inventory days you expect to happen for INR 1,700 crores of sales, sales that you're kind of picking up? It's too early to give you a definitive answer, but it will be a net positive only for us. Okay. In terms of the sourcing benefits, there are two aspects to it. One is that you are able to utilize the sheets better because of using the smaller lamination. But I'm also trying to understand the scale benefits, which is there. So as you're able to add, say, you know, if you're able to source larger number of lamination or electrical steel, does that... How much is that benefit that you get? Because you could have organically also grown at a certain rate of adding 8,000-10,000 tons. So, do we have much of benefit on sourcing as you continue growing or adding 8,000-10,000 tons, or that's just a minuscule amount in decimal? Our raw material pricing when compared to our peers and competitors is slightly better, and that will not further improve as a result of the acquisition, but most certainly our better price will be applied to any entity that we own. Therefore, we should be directly able to positively impact the earnings of the entity acquired. Understood. Okay. So the question really is, okay, so if you are at, say, 40,000 tons, and if you were to build a production of, say, 50,000 tons, and if you are going to say 100,000 tons at some point, 2-3 years down the line, your current negotiation, how much better can you do on pricing? Is it like 0.5%, 1%, or that's just too high in this for the commodity? See, I think, based on where we already are, maybe 0.5% or so would be a fair assumption. It would be par for the course, but anything beyond that would be not possible, given where we already are in terms of raw material price. Understood. Understood. And, and lastly, in terms of the capacity of 18,000 tons, and you mentioning that you can go up to 16,000, but when we look at CFY itself, you only operated at 50% capacity. So how come in this case, we are talking about 90% utilization? So, if you have to see the type of product, Pulkit, we do those larger products which require multiple operations through those notching process and the stack sorting process, where the number of changeovers become higher and therefore your setup time increases. The number of setups and the setup time increases. This facility, like we said, is highly automated. They do most of the production through the progressive tooling, wherein you put the coil and you take out the finished product directly from the machine, as you have seen in our factory. So there, the utilization percentages are always much, much higher. What we see as the 80% is the average of all our different types of manufacturing processes. Understood. If you look at Pitti Engineering's own progressive line, the utilizable capacity is closer to 90%-95% in that, subject to not having too many models and setup changes. Understood. Understood. And, and this acquisition is allowing you entry into the lower end segment, smaller segment, and I understand you're consolidating the industry as well. But if I just ask you 3, 4 years out, I mean, are there any plans to get into higher technology segment or, or looking in that direction of the value chain, whether it be in terms of new products or, you know, where the, the kind of work it involves more R&D and technology? Is that something which you have as part of the plan? So, right now, Pulkit, once we finish this, if you have to look at the other end of the spectrum, it would be to, you know, kind of give a wound stator and ready-to-use rotors to our clients. And that is something which we are actively working on, but we are cognizant of the fact that we don't want to load ourselves with too much debt. I think this acquisition, I think, is where I'm max comfortable. I would not want to go beyond this. But once we, you know, kind of ease out our net debt position over the next couple of quarters, we will look at those initiatives. Understood. Got it. Thank you, and all the best. Thanks, Vikrant. Thank you. Next question is from Prathamesh from Motilal Oswal. Please go ahead. Hi, I'm audible? Yes. Hi, actually, so my question was, you've mentioned earlier that the acquisition has been funded with debt raise. Yes. As of September, latest balance sheet, which is available with us, we had cash sitting on our books of INR 114 crore. Why didn't we utilize some of that cash, or maybe to pay existing debt or maybe to fund this acquisition? So see, we have the cash on our books, but we also report the net debt numbers. If you look at the net debt, we were at about INR 300 crore of net debt. Yes. We had some CapEx that is still needed to be completed in the current quarter, plus the current quarter's earnings, and then the outflow that we make for this acquisition. So our net debt will balloon to INR 450 crores. After the acquisition also, we should be sitting at about INR 100 crores of cash available, but the net debt would have ballooned to INR 450 crores, and that's a number where I would like to kind of pause. I would not want to go beyond that number. Okay. So of course, the acquisition completes, the focus would be on de-leveraging the business, right? As you've mentioned. Correct. To reduce our net debt. Reduce the net debt. And so you've mentioned by FY 2026, we would be net debt zero or debt zero? Net debt zero. Net debt 0. It's the same thing. You'd have equivalent cash lying. Whatever debt you'd have, you'd have equivalent cash lying. Okay. Okay, understood. Would the Bagadia acquisition help us with entry into electric vehicles, two-wheelers or other moped that we see around in the market? I don't think that would additionally help us. Having a location in Bangalore may enable us to cater to those industries in the southern market. As it is, we have a strong, brand reputation in the country for laminations, and we are working with, as you know, many two-wheeler and four-wheeler companies on product development right now. Okay. So, if an opportunity presents itself for the Southern Indian market, we can use that facility to better service those locations. That's about it. Okay. Understood. So, like you mentioned, the laminations capacity for, let's say, the smaller components, is there any number in mind for Pitti's existing businesses? What would be the domestic, if it's a requirement for laminations across India and let's say three years down the line? I didn't understand your question. Sure. You, you mentioned in the call, right, the 700,000 tons per annum is required for smaller components, laminations for smaller components. It's not smaller, it is all components other than automotive. Okay. Including motors, generators, pumps, railways. The whole industry size is about 700 million tons other than automotive. Okay. Okay, understood. And how is it growing? How do you see it growing next, next three or five years? Each end user segment grows at a different rate, but at an overall level, we are looking at the industry growing at about 10%-15% CAGR. Volume CAGR, right? Yes, volume CAGR. Okay. Understood. And how much would auto be there? How much auto would account for? See, we have recently got into this whole automotive side of the business due to the push in EV. I don't have definitive data that I can today share with you. We are still trying to understand these numbers. Okay, understood. That's all from my side. Yeah. Thank you. Next question is from one of Ramchandran. Individual investor, please go ahead. Hey. Hi. Thank you so much. I hope you're able to hear me. Actually, congratulations, I think that's a fantastic acquisition and a bold move. My question- Thank you so much. My question actually to you is, you know, when you consolidate, the engineering, the casting business, and also now this recent acquisition, what do you expect the overall turnover to be by, let's say, financial year 25? For FY 2025, we are estimating about INR 1,700 crore of top line. If I heard you correctly earlier, you said the EBITDA margin is expected to be at around 17%. Is that correct? Yes, that's correct. Okay. All right, and also, you also said that you're reorganizing your business between Aurangabad and the one in Bangalore, where I think 4,000 tons you're planning to move to Aurangabad and 6,000 to Bangalore. That basically means that out of an 18,000 capacity, you would be, you would be doing about 16,000. Is that understanding correctly? Yes. It is yes and no, both, because, see, there will be certain equipment that we'd also have to move from Aurangabad to Bangalore to service that. So the capacities are fungible between the both end, both locations, depending on the type of product. The way we are actually looking at it is that we have a consolidated capacity of 90,000 and we'll be producing and selling roughly about 16,000-17,000 in Bangalore, and the remaining in Aurangabad. By reorganizing the equipment in the two locations to most optimally reduce our logistical costs. Okay, understood. Just one more question. You know, you're talking about from an industry size of around 700,000 tons, and you said, I know if you factor in the acquisition, you would be at around 90,000. You also mentioned that you expect the industry to grow at around 10%-15%. If I have to extrapolate that two years down the line, we're looking at about 1 million ton. Would, at 1 million, will it be 90,000 of 1 million, or do you expect that 90,000 to also go up to maintain a market share of around 12%-14%? So, see, from a mission and vision standpoint, we would like to firstly envision ourselves as about 20-25% of the industry. That is our aspiration, to become 25% of the industry, both organically and inorganically. The key lever to get to that number would be inorganic growth further in the future. So, let's see how that plays out. Definitely we will not be at 90,000. I can, you know, assure you on that. I mean, fair enough. I think that's, I mean, you inspire a lot of confidence about when it comes to the future of this company. The point being, you're also talking about, you know, you want to kind of manage your debt level at around INR 450 crores, yet you want to also want to expand beyond 90,000. How is that gonna play out? Because I expect in future, if you're going to, let's say, find another good acquisition, would that be funded from internal accruals, or would you be then considering to add on a little bit more debt? So, see, INR 450 crore is actually a number that comes as 1.5 times of forward cash generation. That is kind of the benchmarking that we are doing. 1.5 times of forward EBITDA is what we are comfortable as a net debt number. So today, that number stands at INR 450 crore. Tomorrow it can increase also. Secondly, we have very strong cash accrual happening in the company, more so once we consolidated the Pitti Castings with Pitti Engineering as well as with acquisition. We estimate about INR 200 crore of CapEx plus debt for next financial year on a conservative estimate, and of course, that number will grow in FY 2026. So, today, if you see our capacities, we are well placed in FY 2026 sales targets that the company has set itself. Now, beyond that, we would look at investments in FY 2026 or FY 2027 targets. So by then, automatically the net debt number would have come down due to the cash accrual, and also our appetite on net debt would have gone up as a result of increased cash, EBITDA per year. So combination of both of those would kind of enable us to go ahead with further acquisitions as and when the opportunity presents itself. Thank you so much, Akshay. Wonderful about this acquisition, and best wishes for more such acquisitions in time to come. Thank you. Thank you. Next question is from the line of Ankit Kothari, Individual Investor. Please go ahead. Hello? Hello, Akshay. I can hear you audible. Okay. Hi, thanks for the opportunity. Most of my questions have already been asked. I have just one question. You said there will be huge cost, huge saving in the logistical cost. So is there any number, how much the savings would be there in the Pitti's PNL, how much saving should be in the combined PNL? So see, I can tell you the number on a combined basis. If you take the transportation cost between Aurangabad and Bangalore, we should be able to save roughly about INR 3,000 a ton, and we plan to, at the gross level, relocate about 10,000 tons. So you can kind of get an idea of the logistical cost saving. Right. Okay. And you said there will be in the Aurangabad facility, the scrap would be used as a raw material for the Bangalore facility. So, any... How much saving could be there and then whatever you will realize from the sale of the scrap and, if Bangalore facility has to buy the same as in raw materials. So any number, I mean, if it has been worked on? See, it's not exactly scrap. It's basically what we classify as byproduct of our slitting process. When we take the full coil, which is about 1,200 millimeters in width, we have to utilize that full coil to the most optimum level. So today, if you see, we sell about 1,500 tons of byproduct slit coils, as we call them. So those byproduct slit coils, which are being sold in the market at a lower cost, would directly be used as a raw material in our target company, which is the Bagadia Chaitra. Okay. The cost difference there would be about INR 7,000-INR 8,000 a ton. Okay. So that can around gets you about INR 10 crore worth of money. So if you see INR 3 crore from the logistical and INR 10 crore from this, added to this, 17 crore of EBITDA, is basically the ballpark INR 30 crore that we had, kind of guided to. Okay, that would be the combined P&L of both entities? Yes. So the benefit would obviously incur once you consolidate both the entities. So we are not looking at these as two different companies, right? This is gonna become a wholly owned subsidiary. So at the end of the day, all the benefits on a consolidated basis. Some benefits will accrue on that legal entity's PNL, some would incur on our PNL. And see, eventually, our view would be again subject to board approvals and members' approvals, consolidate that company into the listco. You not want to have multiple legal entities operating. It is much cleaner to have one single corporate structure. Got it. Okay, got it. I got my answer. Thank you very much. I would now like to thank on behalf of Pitti Engineering Limited for joining the call. For any further information or visiting the plant, please be in touch with Mr. Raman Naidu from Mittal IR on 9920209623. On behalf of Pitti Engineering Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.