Ladies and gentlemen, good day and welcome to the APAR Industries Limited Q1 FY 2023 earnings conference call. As a reminder to all participants, line 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 conference 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. Nihar Mehta from Essential Technologies. Thank you, and over to you, sir. Hi, a very good afternoon to everyone. This is Nihar Mehta from Essential Technologies. On behalf of the management of APAR Industries, I would like to thank all of you for participating in the earnings conference call for the first quarter of FY 2023 for APAR Industries. To discuss the business performance and outlook, we have from the management side, Mr. Kushal Desai, who's the Chairman and Managing Director. Mr. Chaitanya Desai, who's the Managing Director, and the CFO, Mr. Ramesh Iyer. I would now like to hand over the mic to Mr. Chaitanya Desai. Thank you. Good afternoon, everyone, and a very warm welcome to the Q1 FY 2023 earnings call of APAR Industries. I will start with an overview of our performance, followed by a quick industry update, and then get into details on the segmental performance, post which we can open the floor to questions. For Q1 FY 2023, the consolidated revenue came in at INR 3,093 crore, up 71% year-on-year, driven by both volume growth and price increases from commodity values across segments. Export revenue is up 76% year-on-year, contributing to 42% versus 41% in the previous year. EBITDA is up 73% year-on-year to INR 239 crore at a margin of 7.6%. PAT came in at INR 122 crore, up 97% year-on-year with 4% margin versus 3.4% in Q2 of FY 2022. All three divisions contributed to the performance, which is the highest reported quarterly profit till date. I will now cover a few industry highlights. Total outstanding dues owed by electricity distribution companies, the DISCOMs, to power producers rose by 4% year-on-year to INR 132,432 crore in June 2022. On a sequential basis, total dues in June increased from INR 130,139 crore in May 2022. India is poised to add 27,000 circuit kilometers of interstate power transmission networks by 2024, as it has already added 6,500 circuit kilometers or almost one-fourth of the target. The power transmission network expansion has been planned keeping in mind the ultimate goal of having 500 GW of non-fossil fuel-based electricity generation capacity in the country. The power ministry official also said that in addition to 27,000 circuit kilometers by 2024, India would need to build transmission lines to evacuate 180 GW generation capacity, which will ultimately help the country to realize its goal of having 500 GW of renewable energy by 2030. According to the latest report released by the Central Electricity Authority, the overall target for substation transformation capacity addition for FY 2023 has been set at 95,659 MVA. This is 17.3% higher than the comparable target of 81,545 MVA for FY 2022. In terms of voltage class, the bulk of this target, 44.5%, will come from 400 kV substations. The 765 kV class will account for 28.2% of the target, whereas the 220 kV category will make up the remaining 27.3%. The current geopolitical environment has forced India to further expand its defense capabilities, and it has cleared the purchase of indigenous military hardware worth INR 76,390 crore to sharpen combat capabilities with next-generation warships, wheeled armored fighting vehicles with anti-tank guided missiles, radars to locate weapons, and tanks to lay bridges. All these infrastructure investments will lead to increased demand for our products and services. I would like to now cover segmental highlights. Conductors revenue in Q1 FY 2023 grew 128% year-on-year to reach INR 1,548 crore with 64% year-on-year growth in volumes, mix improvement and increase in commodity prices. Exports grew 120% year-on-year, contributing 42% to revenues. The premium product contribution increased to 47% from 44% in Q1 of FY 2022. The EBITDA per ton post adjustment was at INR 21,933. This is a historical high, and it contributed due to an improved mix of premium products. New order inflow came in at INR 2,017 crore, up 30% year-on-year. In Q1 of FY 2023, our oils revenue was INR 1,068 crore, up 28% year-on-year. Exports contributed 43% to revenue. The EBITDA per KL post adjustment came in at INR 9,712. Margins were elevated in this quarter as the weighted average cost of inventory was comparatively low. There had been supply chain issues with the higher price-based oil deliveries getting delayed by several weeks, resulting in lower cost basis in Q1, but will be followed by a very sharp increase in Q2. This will affect margins in Q2 for sure. Lubricants revenue was INR 217 crore, up 36% year-on-year, driven by volume growth in industrial oil business. In Q1 of FY 2023, our cables revenue reached INR 638 crore, up 60% year-on-year with strong growth across all sub-segments except optical fiber cable sales, which were impacted by muted telcos business. Power cables revenue was up 60% year-on-year, and elastomeric cables revenue was up 84% year-on-year. Exports contribution at 43% versus 19% in Q1 of FY 2022 was the main contributor to the increase in power cable sales. Sales into the renewable energy installation, railways for both locomotives and coaches, and increased purchase by the defense factories all resulted in the higher sale of elastomeric cables. We are running all three E-beam machines at full capacity. The fourth E-beam machine and new plant to produce windmill cables are at an advanced stage of installation, with commercial production in both units likely to start in Q3 of FY 2023. These expansions are well timed and will increase overall sales in H2 of FY 2023. The EBITDA post Forex adjustment came in at INR 49 crore with 7.6% margin, up 95% versus Q1 of FY 2022, with improved order and product mix. Overall, we remain optimistic on our conductor and cable business as the level of infrastructure is expected to be high both in India and overseas. However, our oils volumes may be affected from high product prices in Q2. For the company, our growth drivers remain strong. With this, I come to the end of my comments. I would like to thank everyone for joining our conference call and open the floor for questions. 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 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 assembles. First question is from the line of Poojan Shah from Congruence Advisors. Please go ahead, sir. Hello, sir. I'm audible? Yes. Yeah. Sir, first of all, congratulations for great set of numbers. My first question revolve around this, our conductor business, right? Our conductor business has made a high EBITDA margin of, you can say roughly around close to 22,000 metric ton. If we say, we have improved, you can say product mix, which is a better margin product, from like say 44% to 47%, so which is a 3% incremental change in the revenue side. My question is key, what can be the alpha between the normal product EBITDA and the high EBITDA generating EBITDA? It's a difference between thousand or like something like that? Can I assume that? It's difficult to have a straight answer to this, because, you know, it's not one conductor that we have in normal and one conductor that we have for the premium product because it's mostly a make-to-order business, and there are a lot of variables that come into play in order to determine the margins. Also, the price is also influenced with the commodity prices that keeps on changing, and therefore, there's no kind of a thumb rule that we can establish between the normal and this conductor. The other reason is that in addition to the commodity prices, we see a huge impact from the interest costs also. One of the reason why we have high EBITDA is of course due to high proportion of premium products. In addition, as interest costs increases, it gets factored into our customer pricing. Your EBITDA, which is your earnings before interest, captures that sales price, but the cost appears below EBITDA, which is on the interest line. Okay, sir, got it. Sir, I was going through your annual report, and actually I just noticed something like we are expanding into batteries for three-wheeler, two-wheelers, and specifically car products and such like that. Can you just give me a broad outlook on why we made such a decision to diversify in such businesses? What encouraged you to get into such a business, like what is the perception in, let's say, 3-4 kind of years horizon? You know, the whole target is to actually get a higher wallet share of the mechanic. All of these products are very influencer driven. By selling through the same channel, which is distributor, retailer and mechanic, we are in a position to actually leverage the total business that is being done in terms of sales to the influencer, which is the mechanic. The primary product will remain lubricants, but they also buy these products. We have on one of the previous earnings calls last year, we mentioned that we also launched a mechanic loyalty program which runs quite successfully. These products have been added to the mechanic loyalty program. You know, as the mechanic buys more products from us, their loyalty points increase, and this whole system is completely seamless. It's a paperless process. Automatically the credit of these points go into the distributor's wallet, and the distributor can then encash those points. In short, the answer is that we're looking at basically improving the whole supply chain and getting a larger portion of the mechanic's wallet. Also, you know, over a period, if you see, you know, some of the lubricant demands could fall as electric vehicles increase. Having access to a range of batteries and wheels, they are agnostic to whether it's an IC engine or a electric engine. That's how we've looked at adding these. The sales team remains pretty much the same. It's really a leverage in terms of the whole thing. There will not be much of an extra spending cost on developing and selling this product, but it would be an add-on advantage to offer, right? That is my- Yes. There's not a huge amount of product development cost. There is a certain amount of operating cost because we have a warranty program. Again, it's the first digital warranty program that was developed in India two years ago to run along with MRP for batteries. We've used all that, you know, sort of technology and it's slowly continuing to grow. There's no real separate, you know, major thrust as yet, but as we deal with the mechanics and as we engage them more on our platform, all of these products are starting to increase. Okay, sir. My third question would be, if I squeeze in, we are developing a brand on lighting, light wire cable, which is Anushakti brand. So, any views on that, like how much we need to spend or any sort of glance over this Anushakti brand to develop in a stage scale of, can just give a ballpark number of revenue contribution in, let's say, 3 to 4 years, any such odd ballpark number, if you can give, sir. In the LDC, which consists actually of the building wires as well as light duty cables, because there's a range of them, with the building wire being the largest, you know, single SKU in that particular group. Our target is to get to INR 500 crore, you know, three years from today, in that product category. We were INR 20 crore, then the next year we did INR 60 crore, last year we crossed INR 100 crore. This year the operating plan is to look at INR 200 crore. The product that we have is an extremely unique product. Nobody else offers the product. It has two fundamental advantages, which is what helps it differentiate against everybody, including Havells, Polycab, and you know, all the other major established players. One is that it has a much higher current carrying capacity. It can carry 50% more current. Secondly, the insulation is such that it's very highly short circuit resistant. The short circuiting will not happen quickly. When you combine these two aspects, it really has a technical performance which is much superior. Most of the investment which we're doing today is, you know, in frontline sales people who are going and demoing the product to various influencers as well as to small builders, projects, et cetera. The spending that will be there on advertising and promotions, et cetera, we'll pretty much capture that within the margin of the incremental scale that is coming on. Sir, as I read your call, in that you have told us that in defense, there is a difficult to get the entry, but once we get the entry, we get a scale up in the business. As I think we have get something like INR 70-INR 80 crore of revenue from defense, I think last year also. Are we seeing any traction in defense side getting, you can say, doubling the revenue in defense or we are still pretty much the similar line on the defense? Our expectation this year on the defense side is that you know, fundamentally today still a very large portion of the defense equipment is still made by the government facilities, especially with, you know, our main area within defense is really warships submarines, you know, and reconnaissance vessels. It's mostly with the Navy. There is a steady growth that we will see. It's just that it takes a fairly long gestation period to completely build and wire, you know, one of these carriers. For example, if you had read in the papers in the last few months, and it's there on our social media and LinkedIn, that two of the warships, the frigates which got commissioned in the last few months, both of them had a significant portion of wiring from APAR. We expect that this year we will probably get closer to INR 100 crore, but it all depends on the manufacturing schedule that comes out finally from, you know, Mazagon Dock and GRSE and all these players. The trend, as Chaitanya Desai mentioned, is that the trend is absolutely positive because more and more is happening locally. There are also shipyards which have come in the private sector. L&T has one, significant, shipyard out of the south near Chennai. They are also starting to get more business. You know, usually the wiring goes in towards the second half of the ship's preparation. We will see continuously this defense side increasing. There are more competitors coming in, but then there are more and more requirements coming in. We are ahead of the curve, and therefore we expect that the total volume coming in from these type of cables will continue to rise. Okay, sir. I will get back to you. Thank you, sir. Thank you. Thank you. Next question is from the line of Riya from Aequitas Investments. Please go ahead. Thank you for the opportunity here. Pratiksha here. My first question was with regards to conductors. We've seen some different realizations here on QoQ basis, despite which we've got EBITDA certainly increasing. Just wanted to understand if there's some amount of inventory gains in this segment as well. Inventory gains are normally not there in conductor as a lot of these back-to-back are order-based. As I said, one of the reason is definitely its premium products and also there are multiple products within the premium product that, the mix of it, changes in the mix of it can increase a little bit. One of those things has happened in this particular quarter. The second thing is that, as I was explaining earlier, there has been increase in the interest cost. Therefore, if you look at the Q1 itself, the incremental interest cost has also been built into EBITDA. When you look at the earnings post interest, it will be slightly less than the INR 21,960 number there. Understood. If you look at Q4 to Q1, the amount of interest cost in the conductor business has risen by about INR 2,000 per metric ton. Okay. INR 2,000 per metric ton is just the interest cost increase? Incremental interest cost from Q4 to Q1. Okay. Generally, with commodity prices increasing, do we expect our realizations to decrease in coming quarters, especially for cables and conductors? The realization will actually depend on the commodity prices, that the commodity price come down, the realization will come down at the same time. Conversely, if the commodity price goes up, our sales will go up, but it will not impact the bottom line in terms of a per unit level. Therefore we kind of measure our business also in terms of per unit, because if you look at percentage, then it will be too much varying depending on how the commodity prices go there. Just I can just add to what Ramesh has mentioned here, that the both aluminum and copper are down between, you know, 25%-30% from their all-time highs. Right. There will be obviously an impact in terms of, you know, the per kilometer cost or per ton cost of the product. However, we will also see, you know, steady revenue coming in on these products. As Ramesh has mentioned that, you know, we calculate an EBITDA per ton for operating costs, and then we adjust that for interest. The interest costs also will marginally come down, you know, because the billing value will come down. Right. Over the years, I don't think you will see. Yes, you will see some movement on the top line, but I think the bottom line will continue in this, you know, with this sort of level. With you know, the last time our commentary mentioned that we probably expect the share of conventional conductors to go up, but with 54% of our order book right now being high margin business, do we expect these EBITDA per ton level, per unit level to sustain? We expect our EBITDA level to be in the range of about, you know, INR 17,500. That's, that's the kind of number, we expect around INR 17,000-INR 17,500. Of course, you know, the quarterly numbers will actually depend on the level of execution that happens because these are all make-to-order business, where sometimes it takes longer gestation period to manufacture, and then there's a lot of inspection involved. We look at it from a long-term perspective. Three-month perspective may be very short to kind of conclude that whether a particular level of EBITDA will continue. We do expect that if our high premium products have more than close to 50% share, the EBITDA are likely to be on the range of about INR 1,700-INR 1,750 per metric ton. Understood. Also, if I can add to what Ramesh is saying, that the gestation cycle for the execution of the orders is getting a bit faster. Even the HTLS, which is reconductoring jobs compared to what, you know, the cycle was pre-COVID, and then, of course, during COVID it got really messed up because of various project-related issues. Going forward, the gestation cycles are also getting better. And then- that should also help improve, you know, some of the ratability that we have. Okay. What would be the execution period for our current order book of INR 3,600 CR? It should be about a year, close to about a year. Okay. Seven. On cable division, the new EB machine that we are commissioning, expected to commission in Q3, so if this were to run at optimum capacity, what would be the revenue potential from this one at current scenario? You know, I don't have a straight answer for that. But the product really goes into You know, it depends on the product mix that we have because it will be used both for you know, the railways, locomotives and railways as well as for some of the bigger cables that are required in the ships. But our expectation is that you will probably get somewhere in the range of around INR 5-6 crores on this front and then certain other cables will be manufactured on this at a faster speed, opening up our services revenue. Probably somewhere in the range of around INR 7-8 crores per month. Per month. Okay. Okay. It also depends very heavily on the mix of cables because, you know, for some of these specialized cables, the insulation is very, very different. Even though the copper and aluminum, most of them are copper, that copper is standard in terms of its performance requirements. The insulation is very, very dramatic. Okay. Essentially what will happen is that most of the cables which we make are made. 2.5 machines are used for cable and 0.5 machine is used for services. When you add the third will become equivalent to 3.5. Our sense is that within a year we will be completely loading this machine up. Okay. Also we make solar cables on this. At the moment, we have not been taking a lot of solar orders because the three machines are running flat out, and solar cables compared to railway and defense, you know, are lower margin. When this machine comes up then, you know, we'll be able to do that. We've also started exporting solar cables into Europe, and that's a big opportunity that's opened up, you know, given the very high cost of power there. More and more European manufacturers are looking at supplies coming from India. How do we look at OFC market? Like, are we seeing any, you know, improvement in near future? Do we foresee the demand to pick up, especially because prices seem to be rising? Yes, recently the government has made some announcements where they will recapitalize BSNL and MTNL. You know, as they roll out more networks, there could be a possibility of this growing. The OFC order book will probably grow in the next, you know, two, three years from today. But our major thrust is actually on, you know, export of power cables and on the elastomeric cables, where we are actually, you know, moving faster away from the rest of the pack. Okay. For example, in the North American market we have 18 UL approvals, which is the highest among all manufacturers in India. Without a UL approval it has to be marked on the cable. You cannot supply it. We've focused on, you know, those markets where we think, you know, there will be a steady demand coming up, you know, year- on- year. The optical fiber, you know, it's a completely separate unit. It has a separate team. They'll continue to push for as much business as they can get. The fortunes of the company will not depend on what happens to OFC. Okay. Last question. What is the capacity utilization in Hamriyah this time, this quarter? We've just gone through with an increase of almost 30% in terms of the bottlenecking storage and some of the blending, the bulk blending there. As I said, Pratiksha, you know, the capacity utilization for transformer oil and white oil, et cetera, you know, one can speed it up. We don't run the plant on three shifts. It's run currently only on two shifts. There's a lot of room there. It's really a function of getting the right customer and order flow. Okay. Currently it's just the transformer oil where we are confident of demand sustaining, right? Yes. The transformer oil side, I think everywhere there is a resurgence that's happening even in countries in the GCC, where they are a very large producer of crude and petroleum products. They are also putting in extremely large installations, being part of this whole ESG, you know, pledges which have been made. Most of these countries have a lot of sunshine. Right. The solar installations are, you know, coming up, which will be very large in size. Our sense is that, you know, the requirement for transformer oils and, you know, cables mostly are produced locally will continue to increase in that region. In the case of white oils, as we mentioned, you know, in some of the comments of our investor update is that, you know, all commodities have come down between 20% and 40% pretty much. Your petroleum products have not come down that much. Diesel has just corrected in terms of premium over crude by about $100 odd. Base oil prices haven't come down. Today, substitute products to base oils have gotten cheaper. You can in certain formulations reduce the amount of white oil and increase the amount of hydrogenated veg oil. Veg oil has become cheaper than white oil. There will be a little bit of adjustment that happens there. We are quite bullish on the transformer oil side going forward. Both domestically now, you know, we are seeing increases happening, as you heard in the opening remarks also. A lot of transmission capacity is coming in and is right down our back alley, which is 400 kV, 765 kV. Right. Understood. Okay. Lastly, do we expect our interest cost to remain elevated, given that we have such, basically, you know, high volume prospects ahead? Yes. Expectation of interest remaining high, yes, because if you compare it to a year ago, there have been multiple hikes from the Fed. The whole oil business and even to some extent the conductor and cable business does have a component of U.S. dollar funding because customers open 90 days or 180 days letters of credit, or in some cases, you know, the transaction is on a DDP basis, where you have to deliver the product to the customer. There are lines of credit by which, you know, you can discount your documents and get the money, but then the discounting rates also have gone up. I think interest costs are now here to stay. The periods that we had in the last few years was at an artificially low level. They're now getting to a level which is actually what we had seen prior to COVID, you know, kind of coming in. They are gonna be here to stay. That's why Ramesh here mentioned that, you know, it's an integral part of the EBITDA. We have been adjusting our prices considering the number of days outstanding as well as the rate of interest that will be associated with that type of business. Essentially this will more or less become a pass-through cost for us on a monthly- Well, it's not a pass-through, but it'll be negotiated in. Fortunately, most of the competition that we have also around the world, everybody is being subjected to that. It's not a unique cost which we are picking up. Okay. How about freight costs? We had a serious concern about it. How do we look at it in, you know, next few quarters? Freight costs have started coming off for containerized freight. I think, you know, most of the hit on freight has been pretty much absorbed by us other than one or two contracts. In some cases, there will be a small freight gain because when those orders were taken, you know, now the current freight is a little lower than the previous freight. Overall, we don't see freight today on the containerized cargo actually being a big hit or a drag on earnings. On the other hand, bulk freight rates have gone up very, very substantially. The reason for that is that we buy directly from refineries, and refineries get into long-term contracts with the shipping companies. Most of this increase happened in 2021, and they already had signed contracts, so that limited the amount of increases that the bulk shipping companies could you know make. Now when the contracts are got renegotiated, they are at a much higher level. That has also added actually to the landed cost of you know base oils, not only in India but everywhere around the world. To your point that you know whether it's going to actually affect the conductor cable side, which is where we were more concerned in the previous calls, we had specifically highlighted that. I think we are kind of over the hump on that one. Perfect. Okay. Thank you. Thanks a lot. Thank you. The next question is from the line of Maulik Patel from Equirus Securities. Please go ahead. Thanks for the opportunity. A few questions have already been asked. You've given the guidance on the conductor side, you are mentioning that EBITDA per ton will be in the range of around INR 17,000-INR 17,500. Especially the last two quarters we have been consistently doing better. Is that a bit of fear coming back why you are guiding the INR 17,000-INR 17,500 is likely due to any inventory loss you may have in the coming quarter because of the correction in copper and aluminum prices? Or is it that you want to be more conservative, which has always been the case as far as our management and you want to continue to follow the practice? Here there is no element of inventory loss because we are completely back-to-back hedging the contract. You know, every order is backed by a proper, risk managed framework of hedging strategy. We don't expect price falling down in any way to kind of hurt our EBITDA there. The only thing is that as the execution and inspection period takes time, it really depends on the mix of the product that is finally getting sold and accounted as revenue in the financial statements. That is what will determine the EBITDA for on a multi-ton basis. You expect to execute large amounts of HTLS and copper conductor in overall volume going forward compared to what you've been doing since last two quarter? The proportion possibly can change. If the proportion changes, our EBITDA will change. Secondly, as I mentioned that this also has a factor of interest cost there. Depending on the interest cost, this EBITDA can go. For instance, if the aluminum price and copper price comes down in this quarter, your interest component may come down and therefore your selling price may be lower and that means at the EBITDA level it may be coming down. It depends on multiple factors in terms of interest cost, in terms of your proportion now for premium products getting sold, depending on the level of execution and inspection that happens, and the consolidated view of that will determine your EBITDA. If you look at a larger term period, that would be a proper indication of the EBITDA that is there in the business. On the CSO segment, you have this huge jump in EBITDA per KL, largely because probably because of the supply chain disruption. You also mentioned that the upcoming cargoes, which will come at a much higher price and which will normalize your EBITDA per KL in this segment. Is this a similar situation what you had a year and half back when the raw oil was in a shortage and that led to the 2, 3 quarters of on a very high EBITDA per KL, and subsequently it came down to the range of around INR 5,000-INR 5,500 per KL. Are we in a similar situation? To some extent, Maulik, that is the case. You know, typically what you would do is that you take a weighted average price based on the commitment that you have of delivery coming in for the quarter. Because there's been supply chain issues, bad weather around Korea and with the lockdowns in China, the vessels which have called on China has automatically got delayed, you know, then they do the rotation and come back. There is a little bit of that element. What you're saying, fundamentally the trend will happen. The INR 9,700 per KL will come down to equalize in the first quarter, you know, somewhere in the 6,000, between INR 5,000-INR 6,000 per KL. Then hopefully it should start getting steadied going forward. On the cable side, we have been using this about this retail business, Anushakti wire, right? Yes. The investment we have made in terms of, you know, building a brand, building an team which executes the project, and in particular this one. What kind of a product launch we have? Some highlights on that will be really helpful. you know, at the moment, most of our expense has been in terms of getting people on the ground, because as I mentioned earlier, you know, it's a very unique wire, and the best way to sell the wire is through demonstrations. Mm-hmm. If any customer brings a wire and puts it on a machine where you increase the current, the Anushakti wire will remain standing much longer than after the insulation on any other wire has melted. Most of our work right now has been focused on that. We signed up Sonu Sood as a brand ambassador. You know, towards the second half of the year, you'll see, you know, some limited advertising going on. Really it's pegged to making sure that certain prerequisites are met, you know. Your distribution is in place, et cetera, then you can step up advertising. The margins which are coming out of that product line are pretty much feeding into, we are recycling that entirely back into, you know, distribution and brand building. Mm-hmm. The cable business otherwise, you know, given the way we expect business to increase, you know, on the elastomeric side, as we've already seen on for windmills, for solar, for defense, et cetera, that will take care of, you know, ensuring that the cable numbers, both top line, bottom line, will remain good. You won't see really we have a runway of a couple of years where at least these other products growth will not really impact the amount that you spend on the LDC side and the wire side. It should help us. As I said, our target is that last year we did a little over INR 120 crore. This year we are targeting over INR 200 crore, and next year between INR 400 crore and INR 500 crore. Okay. This, I think that's a pretty large target, and I'm sure that you will achieve it. This is the second launch of Anushakti, right? We did one launch probably 4-5 years back. No, we have not really launched the product. It was really being sold only into the projects segment. Right. We hadn't really focused on doing a retail offering. We then took on a target market, which was Kerala two years ago. Mm-hmm. To see whether on the retail side, we could end up getting good traction on it. We found that moment you do the demo, especially to any independent house owner or someone who is redoing their own apartment, it is absolutely a no-brainer to use this. Because the amount of electrical intensity in any house is just increasing. You know, you don't know today, after five years, how much power you're going to consume. The worst thing for you to do is to rewire the house because it will be a complete mess. You know, all the paint and everything will get peeled off and all these things. Basically, literally like a wire that you take and forget, you know, for. The life on the Anushakti wire is already tested to be 50 years because it uses the same fundamental technology as goes into locomotives and ships. Okay. It's basically a wire and forget kind of application. I think I would not, you know, think that growth of the Anushakti will make a huge dent, you know, in terms of the cable's profitability. On the contrary, you know, the brand will continue to get built. I was not worried about the profitability part. I'm more interested in knowing that how much, how fast you can scale up. That's what I wanted to know that, the people who you have hired, the product side, on the branding side, the distribution side. We've taken the help of a top management consulting firm to, you know, sit and work out the entry strategy and stuff. All that's already done, and this is being rolled out. Okay. That's how the numbers, you know, we expect them to show some good growth. In terms of the people hiring, who you have hired to drive this? We've hired people who have primarily been in the trade, not necessarily just from wires, but in the electric trade. You know you've got a whole slew of products which include switches, lighting products, you know, switchgear, et cetera. We have, you know, obviously worked on selecting good people and, because without investing in that, nothing can actually grow. Sure. Very true. There are seven states in the south which we have already started. The people are on ground and, you know, the business is starting. Mm-hmm. Which are the four southern states, and then to that is added Maharashtra and Gujarat? Mm-hmm. In the north, we've basically started in UP, and then we'll be adding Haryana and NCR. The NCR area. Sure. Just in the last question and it's a bit leading question. What kind of CapEx we are looking for this financial year, and in which area which we will spend? Total CapEx in this year, we expect about INR 150 odd crores. Roughly about 230 expect to be in the cable division. A lot of this is actually a carry-forward of projects which were announced earlier. Like so for example, if you take the fourth E-beam machine we have and the CCV line, which is a state-of-the-art line for making these cables for windmills. Mm-hmm. Those will get commissioned this year. You know, all kinds of part issues were there. You know, all machinery delivery also running six months behind schedule because of electronic parts and things like that. It's really a carry-forward of allocations which were done in previous periods, which will get completed this year. Okay. That is the fourth E-beam machine, right? Yes. Yeah. That will come in which quarter? In the third quarter. The third quarter. Okay. Great. Thanks and wish you all the best. Yeah. Thank you. Thank you. Next question comes from the line of Pawan Nahar, an individual investor. Please go ahead. Gentlemen, congratulations. Kushal Desai, Apar, Chaitanya Desai. It seems we are pretty much on track for the 20% ROE number. Congratulations. Thank you. Second was, you know, I just wanted to understand how much would have the inventory gain been in this quarter for the oil business? You know, it's I would call it a margin gain. Okay. That the margin gain actually, you know, typically you would have had, you know, between 5,000 and 6,000. It's been a little bit, you know, the difference between the two, which is about 3,000 odd KL, is part of, you know, the lower cost structure being in place. In the following period, you will see a big step function increase. In some cases, you've already increased prices to or partly increased prices to customers. The unit margin is showing higher in the month of June. In the month of July, August, you know, that unit margin will fall until we are able to make another price increase to rationalize the whole thing. Yeah. We are looking at a levelized number, you know, in the range of typically, you know, INR 5,000 a KL. As Ramesh mentioned, you know, we've been quite cognizant of adjusting that, taking interest as a variable cost. Okay. The rest of it is like pretty much a pass-through, right, in terms of blending and other areas which you refix from time to time. As the interest rates move up, we've been factoring that in, you know, to the cost which we have. In fact, that would be a lovely way to look at it because I was myself wondering if we could look at both the oil business, the conductor business, EBITDA after the oil, the interest cost. Like to simplify it for us as outsiders. We have that working, which is there. Ramesh was contemplating, you know, introducing that as an additional measure. It's just that, you know, most analysts, you know, and most of the people who are on this call, they're used to a certain metrics, but we can obviously provide both. It will be really very nice because, you know, I right now in the screen I have data for the last 13 years in terms of spreads for each of both the businesses and margins for cable. Okay, before I get there, I mean, I wanted to ask you now, what would be the volume growth outlook for the oil business for the full year? Last year it was 460K. Earlier, I think you spoke about 6.5% volume growth. So would you say that ballpark 490, 500 thousand KL will be the number volume? Our expectation is, and the business plan that we've made is, you know, looking at almost constant volume over the previous year and this year, simply because there has been you know, so much of increase in diesel. If you see in terms of the mix of products that's coming out from a petroleum, from a crude barrel, it's just diesel and aviation fuel, which is above the watermark. Even gasoline is right at the price of crude oil, in some markets even slightly below that. Naphtha is $25 below. You know, it's been a standout and not come down whereas all other products have come down. Wherever you have substitution, like in white oil. That volume will get affected. You know, we mentioned in our comments also. Sure. that the white oil business has grown very substantially over the last couple of years. In that case, Kushal Desai, I mean, given that I would imagine white oil would be less in terms of the spread versus the other businesses, the big businesses, then we should be looking at a higher EBITDA per KL number for this year. Pawan, not necessarily, because the last couple of years, we made very good margins on white oils, both technical grade and pharmaceutical grade, which we are seeing, you know, kind of tapering off right now. We are seeing even demand falling off. Like, you know, Africa is a very large market where they use these products, and there is an affordability issue. The beauty of the Third World is that, you know, people are very elastic in terms of how they adjust demand. Sure. Sure. We've gone with a conservative plan on this front. You know, the oil business has done a lot of heavy lifting in the last, Years ... few years. I think our conductor and cable business will actually, you know, come into their own now over the next few years. I guess that is the beauty of having this mix of businesses. So, so- It's not that the oil business will not be profitable. It will. The profit increase or the delta coming from conductors and cables will be much more sizable as we go forward. Sure. Right now, let's say we've done INR 9,700 per KL in the first quarter. For the full year, do you still want to say INR 5,500, which means that, you know, it will be much lower than INR 5,500 in the remaining three quarters? That wouldn't be the case. Our target is to still do between INR 5,000 and INR 6,000 a KL for the year, you know, weighted average for the whole year. Weighted average for the whole year. Okay. In that case, I'll just take 6,000 maybe. The second thing- You can take 5,500, which is the average. Which will be lower than last year's. Yes. -26 KL. There is every effort to, you know, sell more premium products, sell it into more premium markets. There is a little bit of leeway that you have. It's not that you can't do anything. You know, to factor in that, before it happens is I think a little non-conservative, you know? You can. Sure. The second thing was, Chaitanya Desai, I mean, congratulations on the conductors business. Now, two questions here. One would be the full year volume number. Like, I think we had 130,000 is what we had spoken about for the full year. If you could just revisit that and the spread for the full year. Yeah. Basically, we are looking at a similar kind of volume because our concentration has been more how to push for a more value-added product, premium products. Our concentration has been more, rather than tonnage, it has been more in terms of adjusting the, you know, product mix so that we can optimize our bottom line. Should we stay with the INR 130 thousand number for the full year? Maybe a little more than that because things are looking up right now. What number would you like to? Between INR 130 thousand and INR 140 thousand is our sort of expectation for this financial year. Sure. You know, if I were to ask you, like you said that about INR 2,000 is the higher interest cost per ton. You know, when you talk about INR 17,500, fall back 17,000 to 17,500, this is again only marginally higher than last year's INR 17,000. Given that interest is now INR 2,000, which is below the INR 17,000-INR 17,500. Would you like to, you know, just clarify maybe that. The INR 2,000 what we have mentioned is an incremental interest cost from Q4 of FY 2022 to Q1 of FY 2023. Sure, I understand. What I was saying was INR 17,000 was the EBITDA per ton last year, full year, and we are talking about INR 17,500. Given that interest itself has gone up by INR 2,000 per ton, right? Yeah. Wouldn't we be like, you know, given that overall, even after the interest numbers are so buoyant, wouldn't the, you know, EBITDA per ton be higher actually than INR 17,500, given the high interest cost? As of now, we have visibility for Q1, because now really this number of interest will depend on whether the interest percentage will pan out during the rest of the year, as well as the price of this commodity prices. If you see, aluminum in the last one month has come down by about 20%-30%. It depends. The interest will actually depend on the value of the products. This is an indicative range that we have, and typically 1,750 has been our average in the last four quarters. As I said, a larger period of time once it elapses, then we'll be much more confident in terms of the EBITDA that can be given as a guidance going forward. The sense is clearly that the profitability for the year in FY 2023 will be higher than FY 2022. You know, adjusting for all this interest, all this, you know, you'll still be at that INR 17,000 kind of range. The bottom line for this year will be equal to or better than the previous year. Sure. Basically, the INR 17,500 is after the interest cost. Did I understand it correctly? Yes. You know, Pawan, what happens is that where we get into a little bit of trouble is that the premium range of products includes HTLS, it includes OPGW, it includes different types of products that go into railway electrification. It goes into copper transport conductors, you know, a whole range of stuff. So when that mix changes, then this automatically kind of gets a little bit affected. I think it would suffice by saying that this year the bottom line for the conductor business will be higher than what it was for the last year. Yeah, yeah. Now this is much more clear. We basically are saying INR 17,500 after factoring in the interest cost. No, no. We want to clarify that. Yeah. 17.5%, it will not be after factoring the full interest cost that we have. Of course, some part of the interest cost we would be factoring that. It may not be right to say that we would get INR 1,750 post 100% of the interest cost. We can share with you some of the working which you have suggested, that is the. EBITDA. EBITDA, that is coming close to maybe INR 14,000. That slide actually can be added to the investor deck. Yeah. You know, in the next week and put up there. The working becomes relatively clear in terms of what happens. You know, it can be an additional slide. Yeah. To give you an idea in terms of, what happens post, you know, this. Sure. On the cable business, we should just continue to assume INR 2,400 crore of revenues for the full year and about 8.5% margin? No, our expectation on the cable side is to grow by 30%. Last year was about INR 2,000 crore net sales. Right. This year we are looking at 2,600 +. 8.5% margin is a okay number for those? Yes, it should be in that range. Okay. Sorry, but if you can guide a little bit on the interest cost. You know, it's INR 60 crore this quarter. It was, you know, 108 or 54.6 prior to that. What should we assume as a full year finance cost? Should we like, you know, assume 20% drop next quarter and then, you know, maybe like INR 200 crore-INR 210 crore of interest costs for the full year? Actually, what happens in this interest cost, there are basically two components. One, what drives is the pure interest rate, which is so far based on our LC. That gets factored into our interest cost. The second component is that since we have import creditors, a lot of mark to market on our overseas creditors also get factored into interest costs because that's the way the accounting regulation need to show you there. Therefore, if you see our EBITDA numbers, we have two kinds of EBITDA. One is the EBITDA and one is the EBITDA post adjustment that we call post Forex. There are multiple variables here, and I think, once we put up this slide on EBITDA, it should be clear in terms of after adjusting for all sorts of interest costs, what is the net margin that we have made in Q1 of FY 2023, as well as possibly the trailing four quarters of FY 2022. Sure. Otherwise, because of multiple variables, it becomes difficult to project that interest, because it's not only the interest rate, it also depends on the price of oils, aluminum, as well as the exchange rate that's happening. It's difficult to give a particular number as to how this interest line will be. No. I got it, Kushal Desai. Thanks for clarifying. Basically, if I were to look at finance cost after removing the adjustments which get knocked off from the EBITDA per ton or unit calculation, how much would that be? 60 would drop to how much if I remove those adjustments? Because that is captured in the EBITDA line. You know, we've reduced the EBITDA per unit. Out of 60, about 20 would be your Forex adjustment, which we kind of report EBITDA post Forex. Out of the 40 would be your pure interest cost on LCs, which is suppliers credit. Got it. What we do is that when we put up this annexure, we'll give a breakup of INR 60 crore across the three categories, which will clearly show you how much is the EBITDA, and then the interest cost and also the total finance cost. That you can measure on the EBITDA number. Because all our interest costs are actually factored into the pricing, so that will move up or down depending on the interest rate movement. Got it. For today, as we stand, INR 40 crore is the number for Q1, and commodity that we deal with are down about 20%. We can assume maybe like, you know, let's say around INR 30 crore, if we were to just simplify it for a moment. Going ahead. Yeah. Yeah, I think we'll have to do the math of it. Once this slide is put up, then possibly then we can re-engage to see how that number goes. Okay. Thank you so much. All the best and congratulations once again. Looking forward to that 20%+ ROE now. Yeah. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the queue. Next question is from the line of CA Garvit Goyal from Enmus Research. Please go ahead, sir. Hello. Am I audible? Yes. Okay. Basically my first question is, what are your views on the sustainability of this transformer oil segment in long term? What would be the impact of basically the renewable energy on this particular segment going forward? You know, in the case of transformer oil, as the renewable energy increases, the number of transformers and the transformation capacity will increase. It's a linear function. It will continue to grow. In fact, earlier in the call, I mentioned that over the next few years, transformer oil seems like one of the product lines that we would expect to grow not only in India, but also overseas. What kind of period do you expect going forward for this particular segment in the revenue and profitability term? It just depends on the rollouts. You know, all governments around the world have thrown up very aggressive numbers. You know, when you have such an aggressive number, it's anybody's guess what the final delivery will be like. There will be a steady growth on the transformer oil. That's all I can say, and it will continue for a few years as the infrastructure, you know, gets built out. There's no real substitute for mineral-based transformer oil, especially in the transmission networks. Okay. Understood, sir. Understood. From our conductor side, basically, I was going through your previous conference call transcript, and it was mentioned that you will be having a volume of around 130,000 by financial year 2023. At that time you were giving somewhere between 14,000-15,000. Now, is there any revision in this kind of guidance for financial year 2023 for the conductor business? As was discussed earlier, just now, by another question, he said that we are hopeful to improve the quantities, so it should be between 130,000 and 140,000 this year. With regard to the EBITDA, as was also clarified, since these interest rates are going up, we are adjusting the EBITDA per ton, so that at least the profit after interest is remaining intact. I hope that clarifies. Okay, sir. Understood. Basically, I can assume, going forward also, in spite of the fact that the commodity prices increases or decreases, we are on the growth track, for all the segments, right? Yes. Okay. Understood, sir. Thank you. Thank you. In fact, you know, we have been talking for several years about the U.S. infrastructure market opening up, and finally it has opened up. If you look at the mix of exports that are there and the growth in the exports which has come for the cable business and for the conductor business, the U.S. is the single largest end market now. If you take the aggregate of these two, it is by far the largest market where, you know, product is starting to go. Okay, one more question from your production, which you are talking about. Actually, in the last quarter, I think you were mentioning that, in this particular quarter from conductor business side, there shall be growth more from the conventional conductors. Right? Am I right? To clarify, actually, you know, last few years due to COVID, there was a big dip in the volume. What we had mentioned is that we are expecting the business on the conventional conductor to come back on pre-COVID track, you know. Because of that, ratio of the business which had, you know, happened last few years may get slightly modified. There will be a growth in all these new products, but at the same time, whatever dips that had happened on the conventional side will get sort of, you know, changed and come back on track. I hope that explains. Okay. Yeah. It's right, sir. Thank you. Thank you very much, sir, for clarification. Thank you. Next question is from the line of Praveen Agarwal, an Individual Investor. Please go ahead, sir. Hi. Congratulations on excellent set of numbers. Most of my questions have already been answered. I have just a couple of questions. One, you mentioned that for your cables division, you know, you kind of, we're looking at 30% growth this year. So if we were to go, you know, over the next 2-3 years, are we still on track? I mean, will you maintain these growth levels? Next, you know, in some of the previous calls, our aspiration was to get to double-digit EBITDA numbers, which we used to do earlier, some, you know, 2017, 2018. Will we get to double-digit EBITDA numbers from that? Okay, let me answer both of them. One is that, in terms of growth going forward, this year you will see at least a 30% growth because also the base was affected from, you know, some of the COVID-related issues, freight issues, et cetera, et cetera. Our plan is to continue to grow at. I think we have multiple growth drivers in the cable business, which is the export. You have, if you keep a track of all the railway expansions which will happen in terms of locomotives and coaches, there's an upgradation that's happening in terms of speeds that will take place. There's a whole lot of things which are going on. I think the growth will be there. As these plans are announced, you know, we will continue to keep on ensuring that, you know, the products and all those things are available. There's also a step function that has happened this year in terms of business that's in the US market. The US market has two parts to it. The larger portion of it is the infrastructure side. The smaller portion of it for us is the home building side. The home building side will probably take a taper off a little bit. The infrastructure side will grow. Without hazarding a number of, you know, whether it will grow 30% a year, et cetera, we see that for the cable business we will have a steady growth taking place over the next few years. As the electric vehicle rollouts happen across the world, there will be more and more of this cable required. Because if you take any building in Mumbai, for example, and if every alternate car park requires you know an electric charging system, then the entire locality will have to be rewired, it's not just the building. It's a little difficult to say you know what speed it'll happen at, but the direction is very clear. On the second front, where you're talking about the EBITDA percentages. Yes, our aspiration is to get into double digit. The more we get into some of these elastomeric like wind and defense and all these things, those carry fundamentally higher margins. This year we are targeting this 8%-8.5%, but the aspiration is to get into double digit. That's great. Would it be fair to say that of the three segments, the cables is the one which is more faster or likely to grow the fastest? Absolutely. Because the addressable market is multiple times the size of the conductor market and even if you take the entire specialty oils, you know, segment. The domestic market is over INR 60,000 crore. With the largest company, Polycab, you know, being below INR 10,000 crore if you look at just pure wires and cables on a net sales basis. That's good to hear. In terms of our capacity, current capacity, what would be the roughly capacity utilization at a very broad level for this segment? What I'm trying to look at is what is the incremental CapEx you would require to, you know, grow, let's say 20%-30% per annum for next 3-4 years. Most of the growth which we are expecting, you know, in FY 2023 and FY 2024, we have 65-70% of it has already been committed. You know, equipment ordered, they're coming in, et cetera, et cetera. It's wrapped around the number, it's wrapped within the number that Mr. Ramesh has given. About INR 100 crore coming on the cable side. The formats which go into the US market also are a little bit different. Some equipment have been ordered for that. Because that business also we continue to see, you know, growing as the infrastructure needs get added up. If the freight rates come down, then it makes India that much more competitive also. Which they will come down because you're already seeing that consumer products are slowing down in the US. They carry a huge amount of, they hoard a huge amount of the container inventory which is there. One thing is container inventory, but it's also the ability to take the containers from the port and deliver it, you know, because it's a large country. When that comes down, then automatically it opens up for other products and hopefully the pricing also should improve. That's great to hear. One of the related question to this is, in one of the earlier calls when you were mentioning, you know, on the conductor side, I remember, when we were dealing with Australia, there was a double taxation issue which, you know, Chinese companies used to enjoy and we, you know, we had a 5% disadvantage compared to them. How does that compare for the US market? Are we at par with our other countries or counterparts from a double taxation treaty perspective, or we are still at some level of disadvantage? Europe does not have any special tax advantage to the Chinese cable suppliers. We are at par with everybody. It's a very level playing field on that front. In Australia, it's still the Chinese products are still at a lower tax level than Indian products. There's a conscious move to reduce the amount of product which is being purchased from China to increase the spread of the supplier base. In the US at the moment, it's completely inverted, where the Chinese duties are more than 20%, the Indian duty is 5%. That's great to hear. Nothing more from my side. Thank you. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant and not more than five minutes. Should you have a follow-up question, we would request you to rejoin the queue. Next question is from the line of Guneet Singh from CCIPL. Please go ahead. Hi, sir. Am I audible? Yes. First of all, I would like to thank the management for answering all the questions of all the participants, very with all details. I would like to go ahead with my questions, and most of them would be forward-looking. If you look at the margins have been quite stable at around 6%-7% since the last 10 years or so, I would say. I see that we achieved margins of around 9% in, I think, FY 2017. Is it appropriate to say that we have, we are past any inefficiency improvements or any improvements in terms of improving the margins? Is this a peak margin that we can achieve or, the company is consciously taking steps to improve the margins or anything of that sort? What kind of margins can we expect, like, going forward for this year or maybe down the line 2, 3 years? In terms of, I wouldn't say that these are peak margins, but you know, given the large product profile and the relative complexity of, you know, different product lines that we have, our endeavor has been to improve premiumization, and that, you know, is now evident across, you know, all three businesses. This premiumization is both in terms of products and in terms of geographies. I think what we've achieved here is, the EBITDA margin is 7.6% for the quarter. The endeavor will be to grow that. It all depends finally which products, which markets, et cetera. I think the number that we are really focused on is the return on equity, which we think we have a better handle on in terms of being able to deliver. We are still focused on delivering 20% ROE. We are right now in the 17% range. All right. For this financial year, can we expect, like, to maintain the margins of around 6, 7.6% or around 8%? I think we'll be able to maintain these margins. There will be a reduction in whatever is seen on the specialty oil and lubricant side. There will be some improvement that comes from the cable side because of the increase, you know, in terms of the volume that will come. All right. I think overall you may still see something in this range on a higher volume number. Perfect. In terms of growth drivers for the company, likely you mentioned that you're working two shifts right now. Would there be any capacity expansion or do we require that? Assuming across all our segments, if we run on full capacity, that is say three shifts, what kind of revenue can we reach in that sense? If you have any plans for capacity expansion, can you please point those out as well and how they will impact our revenues? I had spoken about the two shifts running at the Hamriyah facility in the UAE, and that theoretically can be scaled up. As a consequence, just volume is not a constraint if we actually have, you know, the product in the business coming in from customers. The oil division is not going to have any very significant, you know, CapEx because we do have capacity in place. It's just debottlenecking, the investment going on with this industry for auto, you know, in terms of improving digitalization and all those sort of things. They are not very heavy ticket, you know, CapEx items. It's really the cable business that, you know, as we continue to grow, most of these projects which are going in will take care of what we want to achieve in FY 2023 and, to some extent, FY 2024. If the market continues to remain strong, then that business we will continue to invest in. Thank you. The next question is from the line of Akshay Kothari from Envision Capital. Please go ahead. Yeah, thanks for the opportunity. So I wanted to know that you did mention that we got solar cables order from Europe and there was a good traction from that side. Despite that, our margins in cables business have been on the lower side, whereas other players are doing somewhat close to double-digit margins. What would be the reason for this? Players that have a higher margin profile are largely selling product in the branded wire segment. Okay. In fact, if you look like to like for the kind of margins that they carry on the B2B products that they have, I think we are ahead of them with the mix of products that we have. I think, you know, that comparison is not a fair comparison. It's not an apples to apples. I would look at, you know, our the business mix that we have and then measuring ourselves year-on-year in terms of top line, bottom line on that. Okay. Sir, I wanted to know regarding the capital allocation, you did mention in the start about the battery business which we are doing and, the dealer network which we would be having in terms of mechanics. Going forward, how do we plan to scale our distribution network in terms of cables and Anushakti? Could you give a sense of that? Most of it is actually an OpEx cost by increasing the feet on the ground to recruit more mechanics. Then parallelly, you know, as we reach critical mass, we will launch an electrician loyalty program on similar lines. It's not very capital intensive. It's more OpEx related, you know. The beauty of this is that you do need to invest ahead of the curve, but you can phase out your investments keeping in mind the amount of business which is coming through. Okay. We've been maintaining that sort of pace, you know. As the moment the productivity of the sales force goes up, then we're bringing in and moving to the next step. Okay. Sir, lastly, on the hedging strategy, could you elaborate more on how we are hedging? Is it through some embedded derivatives or how is that? It's a plain vanilla hedging for the products that qualify for hedging, basically aluminum and copper. We do the hedging base. Once we get an order from the customer, immediately we do a back-to-back hedging at the LME and that's how it happens. Just to add to what Ramesh has said, the conductor business, because it's a made to order and each order is of a certain size, you pretty much hedge everything back-to-back other than in the case of steel where there is no hedging mechanism. Fortunately, steel has also started coming off. In the cable business, the larger orders which are there also we actually hedge back-to-back. For example, Siemens Gamesa places an order on us or Nordex or any of these windmill guys, we would only go back-to-back on them. Whereas, you have a little bit of openness is when, you know, you are servicing the dealer distributor market, where it's not possible to predict, you know, how much quantity will be involved. To a very large extent, the requirement is hedged. There is a small portion which remains open because of the lack of being able to assign a customer, you know, to the, you know, to the metal. Thank you. The next question is from the line of Poojan Shah from Congruence Advisers. Please go ahead. Sir, thanks for the follow-up. I just wanted to ask because Mr. Shah, sorry to interrupt, but your voice is breaking up. May we request you to move to a better reception area? Hello. Am I audible now? Yes, sir. Clear? Yeah. APAR is a pioneer and been leader in conductor and conductor and cable, actually cable. I just wanted to ask one thing, like in the previous, like, I think three years back the con call you have said, we always been into this developing new programs and new products, which has been five years line the target, which is currently now we are seeing that OPGW is the product which is being currently into this stage. What are the current visions which are making, which can be lined up in next five years where there is a little bit ahead of the curve for the competition? That's my question. I'll take that question. You know, we've constantly been working on innovation. A lot of the conductor lines which you're talking about, we started working on it 7, 8, 10 years ago. Now OPGW is picking up because data is the new oil. Railways, we've developed a whole lot. You know, we've also developed a range of copper magnesium. The entire basic electrification is of pure copper. But the moment you start going to high speed, you need copper magnesium. APAR is the only company that has a full product line ready. You know, as customers, we are constantly in touch with customers and the planners that are there of these large customers to understand in which direction they're moving. Because there is regulation involved and all these things, it's difficult for you to determine when it'll come. We were ready with copper magnesium conductors three years ago. Now we see that, you know, as they start signing up higher speed lines, they will need that. We continue to keep on investing, you know, in terms of this. Generally, you will find that, HTLS type of conductors, OPGW, even the CTC, whatever products we have classified as premium, those products today are at the relatively cutting edge of what can be used by a customer and will remain for the next, you know, few years. Then as and when they keep coming up with more requirements, we will keep adding to it. It's like a moving target, you know. It's not something where you have an end destination here. You know, as time passes by, as requirements keep improving and changing. For example, with the Indian Navy, they themselves don't know the specification of what they want three years ahead. At any point in time, if you go to the APAR you will find, senior guys from the Navy there who are talking to our chaps to see how it can be redesigned and you know, different prototypes are being made, et cetera, et cetera. It's like a moving target. The key here is that, you know, if you are the first port of call for customers when they have new requirements, then that is the right positioning for the company to be in. Okay, sir. That, that's my answer. Thank you so much. All right. Thank you. Thank you. The next question is from the line of Amit Anwani from Prabhudas Lilladher. Please go ahead. Hi, sir. My first question is on the conductors business. As we have been seeing, there's good contribution increase from the premium products which is happening. Just wanted to understand what is contributing to this. I mean, largely between domestic and global market, what sort of contribution is there for the premium products? Overall, proportion of exports in Q1 was about 42%. Exports as a proportion to the total. As a percentage to premium products? You know, honestly, we don't want to get down to giving granular breakups of these. No, I just want to understand what actually is driving the premium products. If you could just highlight something like that. What is driving the premium products on the conductor side is as follows. The HTLS, which is a high efficiency and conductors with a low sag. What is driving that demand is increased transmission corridors. I mean, the transmission corridor needs to increase the amount of power that is transmitted on it. Hello. Yeah. Hello. Yeah. You know, it's being driven by the increased electricity requirement in urban areas or in concentrations. That's what is driving the HTLS business. But What's driving the OPGW is at all the railway lines and all the other lines, which are coming up today, instead of just having a plain vanilla steel core, there is a OPGW, which is a optical ground wire core, which is running so that it can transmit data. Today, the two companies that transmit the largest amount of data in India are the Indian Railways and Power Grid Corporation of India. All their lines, you know, they are starting to specify now with more and more of the core coming in. Then you've got the CTC or the copper transport conductors. That improves the quality and consistency of the core of a transformer. Slowly, customers have started specifying that because they want better quality. The core of the transformer determines finally the life of the transformer. If something goes wrong with the core, you have to take the transformer offline and then spend a huge amount of money to refurbish it. In the meantime, you need to have a spare one so that the circuit continues to run. There are different drivers to, you know, these product lines. What I can say is that each one of these is in an area where the utilization or the usage of these conductors is growing. That's the reason why we've classified that into the premium products. The conventional conductor has been around, from the time before I was born, which is in the late fifties, you know, from the fifties. Thank you. Does that address your question? Sir, the current speaker has got disconnected. Okay. We'll move to the next question from the line of Sachin Kasera from Swan Investment. Please go ahead. Greetings, sir, and congrats for a very good set of numbers. I just have two questions, and they are a little bit more from a medium to long-term perspective. You did mention that one of the key things that we are looking to achieve by doing all the premiumization is to try and target a 20% ROE, all right, from 17% plus right now. If you could tell us that, you know, I think the way we are going, I think we should do that in the next few quarters. Something like from a more medium perspective, say 3-5-year perspective, do you think that we are investing into enough new products, new premiumizations, new brands, new type of businesses where there could be life, where, you know, we could look at even maybe a 25% ROE, say 5 years down the line? Or you think the type of business we are in, the business model we have, we will make for a 20%? No, I think, aspirationally, obviously, we wanna go beyond 20, but, you know, realistically, you know, hitting that 20% number also has been a moving target. Because, you know, as we keep re-investing in the business, we don't dividend out, you know, all the profits, some of the profits. 65%-70% of the profits remain within the company. To keep achieving a 20% ROE also is a moving number. I think, we will probably want to comment on that once we've hit this. Anywhere between the 17 and 20, the company will have a very healthy, cash flow. That's something that we haven't been able to achieve after we bought the cable business and have been continuously investing to grow it. Just to put things in perspective, in 2008-2009, the cable business was an INR 100 crore business. Last year, we did net sales of around INR 2,000 crores. This year we plan to look at INR 2,600+. There's a huge amount of investment which has gone in. The opportunity there continues to remain looking good. What would you invest when, you know, your ROE actually does take a little bit of a knocking. The market is, according to our signals, the market on the cable side continues to look interesting. We have fairly good, you know, internal systems for asset allocation. Then based on that, you know, you're just seeing the turnover of the company going up and the ROE going up. I think first milestone is to get to 20, then beyond that, we'll, as we come closer to 20, we'll start brainstorming on taking it further. Sure. Second question was on the cable segment. You mentioned that the market is very, very large, INR 60,000 crore. Right now, you have 1% of the cable business. What would be your aspirations on this overall INR 60,000 crore pie, in the next five, six years? I'd just like to correct that. INR 60,000 crore is the domestic market. Mm-hmm. When you start looking at markets like North America and all, they are manifold larger than, you know, couple times the size of the Indian market, just simply because of the size of the country, you know, which requires to be wired up. We don't have a market share target as much as, you know, continuously wanting to grow. I think in the cable business, we want to play, you know, what Simon Sinek says is the infinite game. We wanna keep. Because there is a long runway to keep on working on new products, new markets, you know, keep investing in it, and it'll continue to grow. You did mention that probably this is going to be the fastest driver in terms of the growth and probably could also be one of the biggest contribution to your both top line and bottom line. Ultimately, I believe that in the next three, four, five years, the cable business will become the largest business. It's true only because of the size of the addressable market, both domestic and overseas. And- You know, we will want to continuously keep on making investments where it makes sense. You know, as I mentioned, you know, we have a good system internally of asset allocation. If the asset allocation doesn't deliver a certain level of return, then we would then hold back, you know, that sort of investment. I think in the next few years, the opportunity seems to be there. Sure. Just one last thing, regarding, you know, you mentioned that, you always aspire to become better, and you also focus a lot on premiumization and new products. We have always seen that, you know, for that becoming, we need to invest a lot in terms of R&D. You know, now that is once we achieve, we say, 20% ROE, maybe for the next leg of journey where you want, you have it, you are hungry for more. Do you think that as a company, we will need to substantially scale up in R&D, invest a lot in technology? If yes, what are the type of steps you are doing to, you know, do something like that? We have, you know, DSIR-approved, you know, R&D facilities in each of the three businesses. We have people who are constantly working on this. We don't capitalize, we just expense, our work, because in some of these cases, you don't know when, the products will actually, hit the market. I'll just give you an example. We've developed this, medium voltage covered conductors. We've been desperately trying to, sell those in the Himalayan region within India. Now some business has started coming up. We pitched this to the, to the Nepal Electricity Authority and the Asian Development Bank. They said that this is a number one problem that's there, because as the snow settles on conductors, it just, conductor snaps. Nepal is now converting 5% of its conductors every year into MVCC. We've got three years in a row we are supplying that. Of course, it's a competitive global bid, so Chinese companies, everybody bids on it. The bottom line is what? That, you know, as you keep developing products, you keep showing it to customers. You don't know where finally and which customer will actually end up observing it. Now, today, if you see Uttarakhand is in the worst shape in terms of power deliveries, you know, in the mountains. The solution is to use the same MVCC. Now I believe that they are in touch with us trying to figure out, you know, how much money is required, what allocation. It's like a moving target to do, you know, all these specialized products. We expense the development cost, and then we also expense the cost of actually the sales. People traveling, making presentations, pushing all that. It's all written off in the year in which it has been incurred. It also, our competition doesn't know how much money we put into these products, basically. Sure. Will you be able to quantify how much we spend in R&D every year in terms of OpEx? Any number that you can share with us? We don't want to share that number. Okay. You know, it's been increasing year-o n- year, and as you can see from the finished product. Because you know, by saying that we spent XYZ number, it doesn't mean anything. You know, our company motto is, "Tomorrow's solutions today." Unless the customer buys the solution, all this is an expense. Whatever it takes for us to find the right solution for the customer, we incur it and we expense it. Okay. Is it increasing? That's our philosophy. Is it increasing much higher than overall company? In the sense if obviously you're spending of revenue in R&D for a year. Absolutely. You know, as I mentioned, the R&D actually has two portions. There is one portion which is actually sometimes the lower portion, is to develop the product. The bigger portion, and what takes significantly more time, is to spec the product into. All these electrical companies are regulated. Mm-hmm. Finally, no matter who does it, if Mr. Adani wants to put something in, he will have to get approval from the Central Electricity Authority to use that format. It's, you know, difficult to put, you know, timelines to it, et cetera. That's why we end up, just expensing it and it's an infinite game. You know, we just keep on working on it. I'll give you another example so that it puts it in perspective. The Navy has something called pressure type cables, which they use. They started off with a PT 10, and today in six years, we are now graduating them to PT 72. Mm-hmm. That they can withstand 72 x the pressure of water. As submarines get larger and as, you know, requirements go up. This is something which is a work in, you know, the moment a Navy says I want to now graduate from 10 to 15 to 20, we just get to work and start working with them to figure out how that can be delivered. Sure. Sure. Got it. Thank you. Thank you. The next question is from the line of Guneet Singh from CCIPL. Please go ahead. Hi, sir, I would just like to know what is the standing today, what is the peak capacity revenue that we can expect, like if we are operating at a peak capacity with our current capacity? In our oil business, we can increase the lubricant side by running basically our entire lubricant complex on two shifts. We can run a third shift with the same equipment in place. As far as white oils and all the bulk oils are concerned, we can easily match, you know, that sort of a number or more by making debottlenecking investments. On the conductor side, as Chaitanya mentioned here, you know, we could probably, and of course, it depends very largely on the mix of product, but we have headroom to go from 130 to about 145, maybe 150, depending on the product mix that is available. You know, again, over here, our whole focus has been more not just on we'd rather drop some conventional conductor business and concentrate on, you know, the premium product. So in that sense, you can still increase your top line and your, contribution margins, et cetera, without really increasing capacity, you know, too much. So there is if you, if you say basically you've got a room of around, 10, 15%, 20% in physical volume, but in terms of mix of product, et cetera, it could have a larger impact on the top line. In our cable business, basically the power cable and the, elastomeric cable is running at the. The high tension cables are running at around, 40%-50% capacity. The LV cables which are going into a lot of the U.S. infrastructure, solar, et cetera, et cetera, that's running right now at 100%, and we have some expansions that are going in place. The elastomeric mix of cables, you know, when you put the E-beam in there, basically that will increase by 33% compared to now because that's the capacity increase that one more machine will bring in for the cable side. The optical fiber we have at least 50% capacity available with us, and that is just driven by market demand. Great. Sir, can you give me a conservative guidance for the year for 2023? There are a lot of moving parts there, but in short, we are looking at, you know, a 25% kind of increase over what we had in the previous year. You know, that's something that we think, you know, is possibly achievable. All right. My last question is, can you just throw some light on the INR 3,000 crore + other Sorry, which one? We have around 3,000 crores + of other liability items in the balance sheet. Can you throw some light on that? It should be part of trade payables. Which line item you are talking of? Which particular line item? I don't have it open in front of me right now, but. The liabilities are mostly trade payables. It's part of trade payables. If it's such a big number, it has to be part of the trade payables. Maybe you can let me know separately once you have which from which source you are taking, and then we can comment on that. Sir, do we move on to the next question? Yes. We have the next question from the line of Ritika Gupta, an individual investor. Please go ahead. Hi. I just had one question. Is there any update on the MoU that we signed with the Saudi Aramco base oil company? You know, there's a certain laid down process which exists in Saudi Arabia. It's at a very early stage. The reason why Saudi Aramco and its group subsidiary are talking to us is that we have the largest market share of transformer oil in Saudi Arabia, and it's part of their localization program. It's a fairly long drawn out, very formal process. You sign an MoU, then only will they entertain you to, you know, sit and eat and show you land parcels and stuff like that. It's a process that will take at least over a year before, you know, it can be closed. Do we have any like revenue targets that we expect in case this fructifies? Today we do business in Saudi. During this last 4-5 years, Saudi Arabian business actually was very badly affected. From its peak, it was down almost 60% because of infrastructure not going in. With the current price of crude and with the current and the ruler there. Yeah. Who is pushing these programs? We have some very ambitious programs in terms of setting up manufacturing in Saudi Arabia, which is hydrocarbon or electricity based. Depending on how that goes, you will see the beauty is of a transformer oil and facility is that it's not very capital intensive. Okay. Our strategy would be to secure and if once the MoU is done, then they'll go to the next step of allocating land and providing you on-tap utilities, et cetera. It will be right in the vicinity of the refinery. Okay. Nothing that you expect. It's a very advantageous situation to have if the business actually starts going up. Saudi Arabia has come up with a marking system that the local content ends up giving you a weightage in terms of the competitiveness of your price. If you're 100% import, then you'll have a penalty of almost 15%. It's like a very structured system to, you know, enable companies to come and start manufacturing in Saudi Arabia. It's, you know, it's. I think it's a strategically interesting step. It will take some time, and it's not going to skew the transformer oil numbers in a very big way. Then, you know, when you get aligned to the largest oil company in the world, then I think there are benefits that come out of it. Yeah. Okay. Thank you. Yeah. Thank you. We will take the last question from the line of Harsh Deokar from HT Investments LLP. Please go ahead. Yeah. Good evening. Thank you. First of all, congratulations to management for a good set of numbers, and thank you for taking all of the investors' calls patiently on a Friday. Question is regarding exports. You see, typically we start from an aspiration standpoint. Are we focusing our export more than percent of to, you know, get management. I think to sort of answer that question, our focus is actually not just in terms of what percentage of our revenue should come from exports. We want it to be something in the range of, you know, between 40% and 50%. Given the fact that many markets have opened up, you know, with this China Plus One, et cetera. If you wind back in time, five years ago, there was no cable really worth talking about going to the U.S. market or going to the Australian market. The European market was completely shut to Indian cables. Now, they are coming in here and, you know, a whole lot of approvals and discussions are happening, inspections, you know, after. In the last 3, 4 months, you've had people visiting who have not been able to visit in the last few years, you know, flying in from overseas, having meetings in the factory, et cetera. I think if you look at that, the quality of the companies that we or the countries we wanna focus on, those are now open for doing business. In fact, I mentioned earlier in, I think in the last plus earnings call saying, you know, all these countries are now open to doing business with India, which was not actually something that was, that easily available. If you see the destinations where the product is going, it's largely going to the United States, Europe and Australia, which are fairly advanced and sophisticated markets. Sure. Thank you, sir. We don't have a percentage, but I think we will strike the right balance between domestic and export. On power cables, we get better realization from U.S. market than from the domestic market, especially on the LV cables, low voltage cables. We are really looking at where you get the best netback, you know, where customers are laying an emphasis on quality, and accordingly, you know, we are targeting the different markets. Right. Thank you. I'll tell you one thing that you will see over the next few years that the export percentage of the overall pie will remain strong, and it'll be in this range or maybe slightly higher. Does that answer the question? It does. Thank you, sir. Thank you. I would now like to hand it over back to the management for closing comments. Thank you very much for taking time out from your busy schedules in joining us in the quarterly update call today. We wish everyone the very best of health and look forward to continued participation and interaction in future quarterly update sessions. Thank you very much. Thank you. Okay. Thank you. Goodbye. Thank you.