Please note that this conference is being recorded. I now hand the conference over to Mr. Nikhil Kale from Axis Capital. Thank you, and over to you, sir. Thank you, Faizan. Good evening, everyone. Welcome to the Q2 FY 2023 results conference call of Harsha Engineers International Limited. From the management team today we have with us, Mr. Vishal Rangwala, CEO and Whole-time Director, Mr. Sanjay Majmudar, Consultant, and Mr. Maulik Jasani, VP Finance and Group CFO. I will now hand over the call to management for their opening remarks, after which we can move to the Q&A. Over to you, gentlemen. Thank you, Nikhil. Hi, this is Vishal Rangwala, and good evening to everyone. Thank you for joining this Harsha Engineers International's first investor relations call. Considering this is the first call, I would like to talk a bit about Harsha Engineers to begin with. Harsha Engineers is the largest manufacturer of precision bearing cages in India. We supply three major materials of cages, namely steel cages, brass cages, and polymer cages in the size range of 20 mm to 2,000 mm diameter. We serve the global market through four of our facilities, two located in India, one in China, and one in Romania. All low-cost manufacturing locations. We have a very strong global customer base, names like Schaeffler, Timken, SKF, ZF, Flender, JTEKT, and NSK. We supply bearing cages, precision stamping components. These across variety of industry and automotive applications. Very vast range of end user application we are covering through our product portfolio. We have a very strong tooling design and process design capability through which we become a partner to our customer in their precision product needs. This is a little bit of background about Harsha Engineers. Let me start talking about first half of FY 2023 results. We continue to see a strong result for first half in FY 2023. We are on track on our expectation of our top line growth as well as a strong bottom line growth. We are seeing actually sequentially, you know, we don't look at sequentially, but we look at year-over-year, considering there are a lot of seasonalities also involved in the four quarters. Our actual focus is, you know, annual basis. Specifically on the second quarter side, you know, we saw material prices significantly reduce towards the end of first quarter. That had an impact on the second quarter. Specifically, we had a significant price pass-through mechanism customer. So those came into picture. Ultimately, however, we saw the EBITDA margin maintain and as a percentage they actually improved. That shows the strength of, you know, our customer relationship and pass-through mechanism. Also, you know, from our original projection, considering material situation, we are still considering about 10%-15% annual growth this year. However, considering, you know, material pass-through, we are expecting to grow our EBITDA as a value in the second half, and as a percentage it will remain strong. Quickly in quarter two, we saw some impact of energy crisis, and war situation in Europe, demand as well as, you know, demand in Romania facility. And some impact related to ongoing lockdowns related to COVID in China. We are closely monitoring those situations and hope very turnarounds. While India remains a very strong position for us. Talking about some of the long-term growth drivers for us. We are continuing to grow outsourcing projects, getting more outsourcing projects from our customer. Another growth driver, bronze bushings, they are continuing to grow for us. We faced some execution challenges in first half and, you know, we have overcome those and expecting that will add a significant growth in second half, as well as continuing to grow our wallet share with Japan-based customer. We are very cautiously optimistic about our continued future in the second half of this year. With that, to explain more data in detail, I'll hand it over to Maulik. Yeah. Thanks, Vishal. Good evening, everyone. We have already uploaded our financial results as well as the earnings presentation on the exchanges and our websites. We believe that you have gone through the same and you have received enough information on our quarterly performance. Let me walk through the key numbers of our quarterly and half yearly performance. In the Q2 September 2022, our consolidated revenue is around INR 322 crore with an EBITDA of 52 crore, while our profit after tax at consolidated level stands at INR 28 crore for the quarter 2. Our half yearly performance at consolidated level is with a revenue from operation at INR 720 crore, with 14% growth over last half, and with a EBITDA of 108 crore, with a 22% growth over last year first half. Our PAT at consolidated level for the first half, six months is 59 crore, and with a growth over growth of 34% over the H1 of the previous year. At the engineering level, at a consolidated level, our engineering business has performed for the half yearly at INR 677 crore with a 14% top line growth over last year first half, and with an EBITDA margin of 15.8% resulted into INR 107 crore EBITDA. While our Harsha India engineering business has a top line of INR 507 crore for the first half of FY 2023 with a 23% growth over H1 of the FY 2022. We have achieved a EBITDA margin of 19.7% at Harsha India business with a EBITDA of INR 100 crore. We have received and we are thankful to all the participants on our IPO and with our IPO listings on 26th September. We have utilized the IPO proceeds primarily for the repayment of the debt amounting to INR 236 crore approximately. Balance utilization is as per the prospectus provided, and we are utilizing in the quarter. At the end of quarter two, our utilization has been mainly used for the repayment of debt only. With this, we open the forum for Q&A. Over to the operator. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to withdraw 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. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Harshit Patel from Equirus Securities. Please go ahead. Thank you very much for the opportunity, sir. Sir, we have heard from many industry participants that the wind exports from India, they are slowing down, so the gearbox export as well as the turbine export. Do you think that can this affect in any way our ramp up of the bronze bushing facility? No. Currently, no, we are actually behind schedule on that ramp up. That's related to internal execution. In terms of demand, we don't see any challenges there. For us, we don't see that as an impact factor for us. Harshit, just to add, there's enough headroom available, so that the saturated level. If there is technically some slowdown, doesn't impact us right now. Sure. Understood, sir. Understood. Thank you very much for the response. Sir, my second question is, could you update us on the CapEx plan as to what kind of CapEx we are planning to incur in the second half of FY 2023, and what would be our full year FY 2024 CapEx? This CapEx would be towards which production line? I believe you are planning to acquire a proper new greenfield capacity. Where are we in that stage? That third facility, land acquisition is in process. It's not yet completed. It is in process, and we'll soon finish that. In terms of CapEx, you know, we are gonna invest about, you know, INR 44 crore in various capacity and in some infrastructure this year. We are also investing about INR 28 crore in actually wind and solar power generation project, basically to address long-term sustainability as well as reducing or addressing the power related cost. That's what for this year, the three major heads in CapEx are. For next FY 2024, we are approximately projecting that we will do about INR 100 crore of CapEx, but we will have a little bit more specific number as we come near to. Understood, sir. around 40 in second half and about 100 next year. That's the current plan for capacity. Yeah. Understood, sir. Just one last question from my side. Do you see that any kind of bearing manufacturing relocation which is happening from Europe to India, given that Europe could become uncompetitive in producing many kind of industrial equipment? Do you think that bearing could be one of those equipment and more amount of bearing manufacturing itself might shift to India from the European location? Do you see that happening? Yeah, we see that as a strong ongoing trend, where a lot of our customers have indicated that to be the case. I'm not at liberty to kind of share those specific details, but as a trend, I confirm that that is a significant ongoing activity by our customer. And this is happening across the board, that India is becoming a preferred location for manufacturing bearing, and we will definitely indirectly benefit through that. Understood, sir. Thank you. Thank you very much for answering my question. Thanks, Harshit. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead. Yeah, very good evening, everyone. Good evening, Sandeep. Yes, the first question is pertaining to the engineering business growth. I think consolidated growth is 5% and, you know, the India growth is about 12%. You did mention there's a pricing correction. If you could share the breakup between volumes and value, how the volume growth at least has been, because of course the value expected pricing would have come down. Sure. Sandeep, as we mentioned in the initial speech, the quarter two has been impacted because of the metal price reductions, and that has impacted on the growth of quarter two. If you see the H1 over H1, the growth for India engineering is 23%, and that consolidated engineering is 14%. The quarter two impacted number is mainly on account of the price reduction, partially on account of low volume demand in Europe. Effectively, if we see the growth over the volume, the overall growth of H1 over H1 broadly represents the volume growth percentage also. I see. Which is, 23% at India and 14% at first. Okay, I've got it. All right, second question is pertaining to these new products, you know, bushings and castings. You did mention there were some technical challenges internally because of which you couldn't ramp up as the expected pace in first half. Do we still expect these to double from FY 2023 base to FY 2024 and meet that INR 100 crores run rate by next year? Or would that get pushed because of this little delay? No, I think we continue to have those expectations. You mentioned delay, that's more of a one month or about a month and a half of delay. That much impact we may have this year. Right now we are back on track on that ramp up. Very hopeful of achieving those numbers, maybe with minor correction. Got it. Third part is on the Japanese OEM conversion. You did mention that the talks are still ongoing in place. Can we expect some revenue booking from fourth quarter from these customers? If you can give some sense, you know, what can be the quantum and what can be the size that you can achieve in FY 2024 from the newer customers in Japan. You know, just coming back to that first half, you know, we have grown significantly even in first half to the tune of, you know, about 40%-50%. Just compared to? The previous year first half. Basically, what we have talked about, I think that is continuing trend, and that growth is happening. Yes, there are a lot of further discussion happening, so we expect that fourth quarter will see a further supporting jump in that area. Okay. 40%-50% growth from Japanese customer in first half, right? Yes, correct. As compared to the previous comparative first half. First half. Understood. Of course. Last question is, I agree, the domestic growth is 12%, international growth is 5%. If you could share separately the growth numbers for China and Romania entity, that would help. The major challenge has been in Romania because there is a volume softening challenge. China is still on growing basis, but China also have a trading portion. With that trading portion, the China growth is around 22%, which gets eliminated at consol completely. While Romania has been degrowth around quarter-over-quarter is around 20%. Twenty percent year on year- H1 over H1 is 6%. Sorry, 20% year-on-year decline in FY 2022 and 6% decline in H1. Did I hear that correctly? Is a 6% decline and quarter two over quarter one is 20%. Okay, got it. Thank you so much. Thank you. Thank you. The next question is from the line of Aejas from Unifi Capital. Please go ahead. Hello, am I audible? Hi. Yeah. Yeah. Thank you for the opportunity, sir. Sir, my question again is on your broad levers, the large bearings and bronze bushings, outsourcing from customers. Can you please help us with the quantification of these? How do I gauge if outsourcing is working or if bronze bushings are actually doing very well? What numbers can I use to quantify the same? There are two parameters that we want to talk. Okay. One is if you compare what I did in bronze bushings in first half vis-a-vis what I did last year, we have done a higher sales in first half as compared to entire previous year, if that's a yardstick. Okay. Perfect. Second. Yeah. Second is Vishal indicated there were some bottleneck issues in terms of execution because capacity creation was not happening the way we wanted. Mm-hmm. For a delay of about 1.5 to 2 months, we believe that second half should start catching up. You know, very, very broadly, we should see at least a 200%-300% growth in bronze bushing business this year as compared to previous year. Now, if that yardstick makes you happy, then that probably answers your question. Yeah. That's really helpful. That's wonderful. On the outsourcing- Similarly, on the large size bearings, there is a lot of traction. The problem is, see, you can't force these things to happen. You are dealing with large companies. They take their own sweet time. We are internally very bullish about large size bearing cages. That is also showing a very positive growth trend. I don't have the exact quantification number available. Okay. Okay. Sir, on the outsourcing from customers, the share of business, any number from there, probably, the pie growing up? No. Specifically difficult to answer a number on that. Okay. You know, we are continuing to win more and more business, when it comes to outsourcing, from our customer. Our customers are still continuing to look for outsourcing, and there are multiple projects of outsourcing under discussion, with our customer, and some are under execution or like product development and then execution. Various stages are there to actually realize it. We are actually seeing acceleration of that trend, specifically, due to China plus one. Mm-hmm. as well as, you know, challenges in Europe. We are actually seeing positive acceleration there. For India? Okay. Yeah. Yeah. Sure, sir. The other question I had was on the margins. I'm assuming the new businesses and even the bronze bushings, large bearings will be at a very strong margin versus what the company is reporting, right? No. If you talk of margins, I think Maulik will explain first India and then how it is a function of a consolidation. Just on your specific question on the new product line of bronze bushings, our margin is at par or slightly better than the India engineering margins. Okay. which we historically have. Which is around 20%. Which will be 20 on P+ in case of bronze bushing. Okay. Understood. Well, that's very helpful, sir. Just a final question on the pricing. I'm assuming that it's there is a metal price reduction. You have to pass it to the customer, and therefore the top line will look muted. However, you will be holding the margins. Is that right? We will be actually reporting a better margin in percentage terms. Oh, okay. Oh, got it. percentage will be better, and you're right, absolute will remain inflation better rather than that. Okay. That's very helpful, sir. All the best for your future. Thank you for that. Thank you. Thank you, Aejas. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Sonal Gupta from L&T Mutual Fund. Please go ahead. Hi, good evening, and thanks for taking my question. Sir, could you sort of tell us about the, what percentage of Indian business is exports in this quarter? Sure. In India business, give me a moment. Maulik. Yeah, yeah. Indian engineering, I mean. Yeah, yeah. Out of India engineering, our export is around 50% for Q2, and in Q1 it was around 52%. And, uh- From- Okay. How much is dollar denominated and how much would be euro denominated, or just if you could give some broad sense there. On an average it remains 50/50, Sonal. Sometimes, it goes on either side, but on an average it remains 50/50. In that sense, do we hedge these impacts? Just trying to understand. Our policy is, we attempt to hedge around 50%-60% of our open exposures, for the receivable in a forward, plain forward terms for next 12 months. Balance we keep open. Sorry, hedge 50% of the receivables. 50%-60% On a rolling basis. On a rolling basis for 12 months, we hedge it in terms of forward contracts. Got it. As of now, we would not have been impacted by the rupee depreciation or we have seen some positive or negative impact as a result of that? Yeah. Again, it depends on the exposures we have, but on an average, due to 50-60% exposures has already been taken care of in terms of forward. In case of rupee appreciations, we remains. On an average, we remains neutral or positive in the long run because then structurally it remains positive. From that we also have a small amount of option which we take for a longer period, year 2 to year 6 as a strategy. That option is premium paid option only. Got it. No, I'm just trying to understand, like, on euro hedges you would be gaining, on USD hedging. As of now, yeah. As of now, on the hedge side, on the euro we are gaining, and then USD, we are getting a lower realization. But for the open exposures, it is reverse. USD is giving us a better realization and on euro we are getting a lower realization on the open exposures. That's how the strategy of 50%-60% hedging works in positive way. Got it. Overall for the quarter, would we have a sort of, I mean, that would be included in other operating income or in other income? It is part of other operating income. For the last quarter, September 2022, the impact is around INR 3 crore positive, both put together, the impact of concluding forwards as well as the open exposures realization and MTM. Got it. Of the year. Got it. Just lastly on the export side, I mean, out of this, like you indicated, roughly 50% is exports. How much of this export is really to China and Romania, I mean, like, to your subsidiaries? India to China exposure as of now is around 12%. To subsidiary. Yeah, India to China subsidiary. Sonal, I will come back to you with these numbers. I don't have it handy at hand. Got it. This last question from my side, I mean, like. Exports are on direct basis, huh, Sonal? Yeah. This is very small amount. China would not be more than INR 20 odd crores. That's my assumption, but we'll work it out. Correct. Yeah. It should be lesser. Got it, sir. This last question in terms of the, I mean, like, clearly, like you mentioned, you're seeing lower volume demand in Europe and, I mean, clearly, the geopolitical as well as the economic scenario seems to be worsening in the developed world side. I mean, in terms, what sort of visibility do you have? Like, what is the lead that you have in terms of orders? I mean like lead time for orders. Sonal, basically, no, we are seeing overall slight softening, as I mentioned, in Europe. You know, overall India remains strong. U.S. and, you know, rest of Asia, including China, has remained strong for us. Sure. in terms of visibility right now, that's what we see. This is, you know, future is a little bit of developing, so difficult to exactly say how it is, flowing. Right. No, no, what I was trying to understand is, like, given the shipping time, et cetera, I mean, like the customer is ordering from you for the next quarter currently or for, I mean, like how much in advance would they order from you, right? Yeah. Now the shipping times have started to normalize, at least going forward. Customer, you know, part of this, you know, demand reduction or whatever softening what we call it could be because of that as well, because, you know, they are also seeing that supply chain stabilizing and now they are also keeping a lot less buffers in place. In general, we are seeing them ordering about month and a half to two month ahead, in general. Little bit less than a quarter. Okay. Okay, great. Thank you so much. You see, we have long-term contracts, but the orders, they keep on coming. If you look at the actual order book which has the visibility, we have a very decent visibility at India level. Got it. Yes, sir. No, I understand that. I mean, the thing is that the customer, the volumes will fluctuate based on the near-term orders that the customer places. I know you have longer term contracts, but, the volume and your revenues will fluctuate as per the short-term orders that they're giving you, right? Right. Sonal, just to respond to your last point of sales done from India to Harsha China, intercompany. For the first half it was around INR 15 crore. Exactly. That's what I told. Less than. Yeah. Oh, okay. Is there any export to Romania? No. No. Got it. Great, sir. Thank you so much. Thanks. Except some tools, yeah. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Prolin Nandu from Goldfish Capital. Please go ahead. Yeah. Hi, team. Congratulations on a successful IPO. A couple of questions from my side. One is that, if you look at the growth drivers in your India business, right? I mean, if you look at the natural growth that the bearing industry will probably grow at, and then there are three drivers which I can probably list down. One is more outsourcing from the existing customer, the second is the largest bearing, and third is some of the Japanese customers which we have been able to, you know, probably get into, and that will grow. In terms of size of the opportunity that we have, you know, which one of these. I mean, how would you categorize in terms of the size opportunity in terms of number one, number two, and number three among the three? To begin with, you know, another fourth one I would add to this is, you know, bronze bushing as a product line is a significant growth opportunity for us. Now, I think it's slightly difficult to properly quantify the opportunity. From a size of the opportunity, I would rate that the bronze bushing, if the whole market trend as we understand happens, is a very large opportunity globally. We are an early entrant to this, we're feeling very confident of, you know, getting a big chunk of that. The one I would rate is kind of parallel is outsourcing opportunity with Japan-based customers where, you know, our share is very small. Taking that to even a respectable percentage is a great opportunity for us. Similar to that is still, you know, pending outsourcing from our customer, where we were projecting about last year that still about 40% of their cage needs, they are insourcing. I think our top three would be this. Now, with the large size, there is an overlap with outsourcing and the large size. Because you know, big chunk of insource opportunity is also the large size cages. Large size is also a significantly large opportunity which has some overlap with the outsourcing. Just to sum up, if we talk of cages, if the industry, bearing industry is growing at, say, 7-8%, we believe that our cage business has enough depth to grow at least anywhere in the decent range of about 15%. That's where our is. Then, of course, the bronze bushings, et cetera. You get my point. Yeah, I get your point. Just to follow on some of the points that you have raised. On this bronze bushing side, while you mentioned that there have been delays, just want to understand, have these delays been from a customer end or from our end? In terms of this whole, I mean, what I understand from bronze bushing is this is a story of penetration, right? I mean, there is an existing product which we are providing something which has better efficiency or better yield, right? You know, in windmill, for example, or lower power consumption. So that trend is still strong, right? Or as it further strengthens, have you got more confidence on that trend, you know, from your customers? Yeah. We first addressing the execution part. It is a challenge. What I mentioned was about execution. Our customers are pushing us very hard on supplies of this. Part of this they are importing. They've selected us as a partner in India for this. This is quite a complicated product requiring lot of engineering, lot of new capacity we have added and ramping that up. There was a delay on that front. That's what I meant, not related to the order or demand situation. The bronze bushings, we are actually, this is driven by wind as an end application by windmill companies as well as the gearbox companies. They are redesigning their windmills and gearboxes to change the design such that instead of a bearing, a bushing can go in, which has its own weight, size, and other advantages. We are still continuing to see that as a strong trend. We are working on next generation of bushing also closely with our customers. That's an ongoing situation. Sure. A second follow on the Japanese customers. Is it fair to say that typically Japanese will start slow and once they ramp up, the ramp up can be very fast and the scale can be quite large. Is that a fair way to look at this, opportunity with the Japanese customers? Correct. We also think that actually, if you look at our last two years growth with them, we are seeing a very strong number of growth. They tested us for a while initially. We have grown slowly with them, and then now we are growing significantly with them. Further, we expect acceleration to happen. Also, part of this is that you know, we have to develop each product. It is not just one product, and they switch on once they agree, they switch it on. There is a whole timeframe needed to do the product development for that bearing. There are a lot of custom products ultimately going into it. There is that whole time lag which takes place, which goes through approval process and all that. That's what is, you know, constraint on moving from 100 to 1,000 in a single day. I think that would come in, but we see a very strong growth, as I mentioned, about 30%-40% growth year-over-year we are seeing and continuing to see on that segment in last 2-3 years. Sure. One more question, last one from my side would be, so the previous participant asked question how, I mean, what sort of a opportunity do we see when some of these production bases of these bearing companies move from the rest of the world to India? Now, I mean, I believe that you are not at liberty to share some of these developments which are happening. Just to understand from our end, again, the size of this opportunity will require us to put in some additional CapEx and that would be the scale of this or will we be able to cater to that kind of an opportunity from our existing facilities? In some cases we will have to add additional capacity. In some pockets we have capacity already in place. Some cases we will have to add those capabilities specifically if I, you know, talk about very large size bearings. You know, those right now on the brass cage, we can deliver 2,000 2-meter diameter cages out of Romania. Now, those kind of product are needed in India, then obviously we will have to add capacity here. On the steel front, we are doing about 1.1-1.2-meter diameter cages. Again, we are working on a project with a customer where they're in need of 1.4-1.5. There we'll have to add capacity for. Great. Very clear. Thanks a lot for answering the question. Thank you. Thank you. Thanks a lot. Thank you. The next question is from the line of Dhiren from PhillipCapital. Please go ahead. Yes, Dhiren. Dhiren, your line is in talk mode. Please go ahead with your question. Yeah. Good evening, sir. Thanks for the opportunity. Sir, as you said that outsourcing opportunity in Europe for low cost, India manufacturing is increasing day by day. Just wanted to know, sir, how big is the European market in terms of bearing production? Europe for bearings globally? Yes. Yes. I think if I remember correctly from the report, basically Europe is about 30% or so of global market when it comes to bearings. It's very large vis-à-vis when you look at India. I think it's hardly 7%-8% of global market. Again, these numbers I'm just trying to remember from memory. I'm not 100% sure about these numbers. I would say fairly large market. Yeah, at least 20%-25%. Yes. Okay. Got your point. Sir, lastly, when you say that, you know, we are targeting almost 15% kind of a growth, so are you looking at across the sector or any particular sector, which is giving you that confidence? Overall. Across the sector, which would include automotive, you know, industrial application, rail, windmill, multiple segments we supply into. Considering our product portfolio in terms of size range as well as, you know, material capability, we address almost everything our bearing customers are looking for when it comes to cages. Sir, just last one thing, sir. With this debt reduction, how much overall finance cost will be reduced? For India side we will be net debt free, and we will continue to have some debt in our foreign subsidiaries. Annually, we foresee reductions of around INR 15 crore-INR 16 crore. Okay. Thank you so much, sir. Thank you, Dhiren. Thank you. The next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead. Yeah, good evening. I had a follow-up question. So these new conversions, which are under discussions, is it possible to quantify some value that we have converted in first half, which is entirely new business, that we'll do in FY 2023, which was not there in FY 2022, and the potential pipeline, which is still there, out of which, you know, some X% conversion can happen next year as well? Sandeep, very honestly, you know, that is. Some data, we generally internally we want to keep it with ourselves. But let me try to take this a little offline. Okay. Sure, sure. No worries. I just wanted some color because, you know, some of the other, bearing component suppliers, you know, they do share, that, you know, this particular product line is under discussion without, of course, specifying the name and what can be the peak potential. Can it be INR 100 crores, the peak potential for that? Okay. You know, generally, as you know, about 300-400 products are generally under development. Now, you know, there are many customers who do not want us to share this data because it is all internally competitive with other customers. Correct? Mm-hmm. I think it's better we keep it at a macro level, but we will see. Okay. No, no, fair enough. Secondly, for these brass cages, you know, where you mentioned, of course, a bulk of the manufacturing capacity lies in Romania. Of course, incrementally, this is the part that was getting done in-house and will be outsourced, if you go, down, you know, say two or three years down the line. What kind of CapEx building would happen over here in India or whatever outsourcing will happen, we'll continue to do it from the Romania facility. What's the thought process over there? Yeah. Actually we have a very good capacity in India. Actually Romania, what actually maybe you might be thinking about is that there is a very large casting capacity because Romania facility has two product line. One is semi-finish, basically supplying casting, and the other is cage. The Romania facility's focus being larger size cage. That is continuing to grow in Romania. Casting or the semi-finish is something which will remain stable or may reduce depending on the situation. In India, we are continuing to invest in, you know, brass cage capacity. Depending on, you know, how our customers are looking at what product to manufacture in India, we may support that by adding capacity in India, even on the ultra large size rather, which are currently supplied out of Romania to most, mainly our customer base in Europe. We see that there is a certain portfolio of product which is extremely competitive out of India. Most of the investment for the growth will happen in India primarily. Answering your question, I think next year about INR 30 crore CapEx is lined up. Great. Actually. In India. H2. Sorry, in H2. Sorry. This year. Okay. No, sorry. I had the numbers. INR 40 crore was H2, and balance was INR 40 crore is this year. We already discussed that this in the previous questions. As Vishal said, around INR 40 crore is planned for this year. Of that maximum is on the brass expansion, brass and bronze expansion. 30-odd. Yeah. Yeah. Okay. Understood. Of that 30 is brass. Got it. Okay. Thank you. Thank you. The next question is from the line of Amit Anwani from Prabhudas Lilladher. Please go ahead. Hi, sir. Thanks for taking my question. My question is with respect to the guidance which we have given about 15-odd% revenue growth FY 2023 and FY 2024. Any expectations on how the Romania will contribute with respect to revenue profitability and on the bushings also, what contribution we are expecting from bushings? Amit, on the Romania side, we are practically assuming that Romania would, in absolute terms, be either equal to or maybe a little degrowth as compared to last year because Romania, actually internal target is a little higher, but on a conservative side. When we are talking of, as Vishal said, top line growth of anywhere between 10%-15%, that is assuming that Romania's contribution is practically nil or insignificant because of process. Second, in terms of margin, we explained that actually margin growth would be in percentage terms higher than last year. As you'll appreciate, given the significant volatility and overall uncertainties, it's a bit difficult to quantify, but definitely the bottom line growth will be better than top line. That's for sure. That's a shift in the H1 also. Okay. Sir, about bushings, what contribution we are expecting? Bronze bushing, as I explained in one of the previous questions, it's already H1 is higher than the entire last year. We believe that bronze would be a significant contribution. Quantification anywhere between INR 40 crores to maybe INR 50 crores. In FY24 or FY23? In both. Correct. Okay, sir. Sir, my question about the margin. What kind of margin expansion we are looking for? It's not possible to quantify. No. We are working at it, but definitely, we will try to, you know, come a little closer maybe in Q3. As of now, I think we will happily say that we are on track for a significant margin expansion this year. Okay, sir. Thank you very much. Thanks. Thank you. The next question is from the line of Prolin Nandu from Goldfish Capital. Please go ahead. Yeah, just a follow-on, sir. With the gross block that we will have at the end of this year, assuming INR 30 crores of CapEx that you mentioned will be spent in H2, what's the kind of optimal top line that we can report or that we can do, based on the current commodity prices? On average, our gross block fixed asset turnover remains around 2-2.1. Okay. We had INR 800 crores of gross block in FY 2022 at the end of I mean, in March 2022. Is that number correct? What could be this number? I don't have the September number right in front of me. Would it be close to INR 850 crores-INR 860 crores and then on that 2x would be close to INR 1,700 crores of top line? Is that a fair kind of number broadly? Yes, at optimum level, yes. At optimum. Great. Thank you. Thanks a lot. Thank you, sir. Thank you. The next question is from the line of Sonal Gupta from L&T Mutual Fund. Please go ahead. Hi. Thanks for taking my question again. Just on the solar business, I mean, could you guide us as to what sort of revenue run rate will this business have? I can see this year we are sort of not at least EBITDA positive. Could you, I mean, because this is a more project-driven business, any lumpiness that you see and any risk of because of cost escalation, et cetera, some Sonal, you are talking, sorry we missed you. About which business you are specifically referring to? I'm talking about the solar EPC business. Solar. Oh, okay. Right. Yeah, can you continue? Yeah. I was just asking for the outlook there. I mean, what sort of revenue run rate and margin trend do you see for that business? For this business, There's one specific thing happened that there is a duty on the panel which has created a bit of challenge for us. First quarter was very positive, but the second quarter in terms of revenue- Was still positive. No, but in terms of revenue we dropped. The second quarter is still positive in terms of bottom line. Ultimately, we expect that it will be doing breakeven or better. We are right now reporting a very good number for first half and hoping to continue that trend. However, there is a lumpiness as you rightly mentioned, that the second quarter revenue has dried up because of all this import duty, and this will again pick up in quarter three, and hopefully quarter four is usually high because of the, you know, CapEx-driven projects in this. Some lumpiness for sure. Bottom line point of view, we are expecting to breakeven or do much better. Overall, around INR 80 crores-90 crores, as we had earlier anticipated, more or less in that line, and marginally positive on the bottom line. That's it. No major capital allocation at all. You still expect a significant revenue in the second half as well? No, we did about INR 40 crores in roughly about the same in second half, more or less. A little lumpiness, maybe INR 10 crores here and there, that's all. It's materially very small compared to the bigger scheme of things, so it's not going to impact. Got it. One other thing I just want to understand. Most of the cost related to this business will show up in the raw material cost because I think the number of people employed, et cetera, is pretty low, right? Yeah, it's mainly. In case of solar, it is mainly panel cost. Yeah. That will come under RM, right? Yes. If I want to adjust for this business, then I should deduct that from the RM cost, right? Maybe. Or- Yes. At least 80%. Yeah, you can consider so, 80% of the cost, of course. Okay. Got it, sir. Great. Thank you so much. Okay. Thank you. The next question is from the line of Shirom Kapur from Prabhudas Lilladher. Please go ahead. Hi. Thanks for the opportunity. I just wanted to clarify the number you had mentioned on the absolute value of your bushing sales. You said something around INR 40 crore-INR 50 crore. Would that be? This year, the question was about what do I expect this year as a sales out of bronze bushings, and that was the number. INR 40-50 crores. FY23. My next question is regarding, you know, your wind and solar power generation project. How much of cost savings are you anticipating from this in the next one or two years? We are expecting to generate about. 20 lakhs kW. About 2 to annual savings by swapping the power generation. Exactly, based on the current market rate. Correct. Yeah. It roughly takes care of 30%-40% of my requirement. Forty-five. 45%. Yeah. Okay. What was the number you mentioned? Sorry, your voice broke in the middle. What was the number? Around INR 3 crore cost savings annually. Okay, got it. My last question is regarding your Japanese customer, where you're trying to increase your wallet share gain. What exactly is the process to increase it? Are you gonna be supplying them also with the larger bearing cages? How exactly do you plan on increasing the wallet share, and why exactly is Japan such a big focus? Are the margins better there? Is the market bigger there? What is the rationale behind this? Yeah. Let's talk about, you know, if you look at global bearing market and if you look at top six bearing players, the Schaeffler, Timken, SKF are already our very large customer. Our estimate is that our business share globally would be in a range of, you know, anywhere between 10-25, maybe 30 in some extreme cases, but roughly in that range. Now vis-a-vis the three big Japanese players in this top six, NTN, JTEKT and NSK. With these set of customers, you know, our business share or wallet share is roughly our estimate about 2%. The reason we are focusing there is obviously to diversify our customer portfolio. The fact that we see that there is a large opportunity just like these three we have significantly capture wallet share. There is an opportunity to capture wallet share with Japan-based customer. That's a-- that's the reason of focusing there. Second, you know, why we think this is gonna happen is because, you know, we have been working with them last 10- 15 years, and they have now accepted us as a, you know, a supplier of within this specifically precision engineering commodity. They have started actually taking supplies from us for their Japan-based facility. This Japan as a market is also very big. Japan-based customer brings us a lot of opportunity to further grow. All those are the reasons why we focus and track on that and becomes a great growth opportunity. Just to add quickly, number one competitor for us, NKC, is a Japanese player, and if I am able to supply in Japan from India, it's a credit. That shows that we have a tremendous cost competitiveness and acceptability even from Japanese customers for supplies in Japan. That's very important. Understood. Thanks a lot. Just a last question is, will you be competing with any of your customers when you are supplying bronze bushings because they are replacement of bearing? See, historically our customers have not gone into bushing as a product. If they decide to go, then there could be some competition. One of our customers has bought a company recently which has one of the small product portfolios is bushing in there. Again, a very difficult question for us to answer. Having said that, we feel quite confident about our bushing strategy. We bring to table competencies which are not available with our customer. Our customers', you know, strengths are bearing design, bearing grinding, and those kind of heat treatment, those kind of competencies. The bushing requires a precision machining and a casting of a non-ferrous material. These are very different competencies, so thereby we think that we'll not be for most part competing with our customers. Okay, understood. Madhur, if there are no more questions, let's close the call. Thanks. Thank you so much. Yeah. Thank you. Thank you. Should we close the call? Yeah, please go ahead. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Thank you very much. Thanks for patiently hearing us even so much later in the day. We'll make sure that for the next quarter onwards, we'll try to become a little more accommodative in terms of timing. Have a great evening, and thank you very much. As usual, we remain available to answer any other questions. We are quite very confident about the medium to long-term prospects, and we remain committed to what we have said. Thank you, and have a good evening. Thank you. Ladies and gentlemen, on behalf of Harsha Engineers International Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.