AIA Engineering Limited

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

qa

Kunal Shah

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Shipping costs are volatile particularly trending downwards.

— Kunal Shah

It's difficult for us to exactly pinpoint where those margins will ultimately reside.

— Kunal Shah

We believe that going forward we should be able to, we might see of decline in terms of average realization though it is a bit difficult for us right now to predict exactly how much it will be.

— Sanjay Majmudar

I don't think that looks too much of a challenge as of now.

— Kunal Shah

The exact number may be difficult but definitely higher than what we did last year.

— Sanjay Majmudar

While now of late we have started seeing the correction in commodities and trade costs, etc., would it be possible to see obviously in the second half there will be a decline in realizations because of this same aspect.

— Bhumika Nair

We have been always cautious about this that in our business it always takes more time for us to convert the customer because the mind is more concerned with the cost controls rather than the benefit alone that can come on table hence therefore it is taking time.

— Sanjay Majmudar

Now the cement part of your business, as we all know last few years cement industry has undergone very difficult times, as well as it is a cyclical business as well.

— Amarnath

Q

Yes, hi thank you for the introduction. Very good evening to everyone. This is Kunal and I also have Sanjay bhai with me here, pardon my voice today. I think Sanjay bhai will do most of the talking. We are very happy to report probably one of our best quarters ever in this quarter with 78,500 tons sales over a production of 80,000 tons. That's up from about 69,000 tons of sales second quarter last year but also up from 68,000 tons sequentially from first quarter of this year. Most of the pass-throughs in terms of cost inflation has now been factored in into these numbers with a netted average

Sanjay Majmudar

Thanks Kunal and good evening to all of you. So, as we can all see it was a fairly satisfactory quarter, both in terms of the volume growth as well as the overall margins. But as Kunal has cautioned yes going forward, we believe that the peak level pricing has already reached, so probably there could be a little bit of softening as the raw material prices rate has already gone down, started going down. We believe that going forward we should be able to, we might see of decline in terms of average realization though it is a bit difficult for us right now to predict exactly how much it will be.

Q

Firstly, on the volume side we almost had done almost 1 lakh ton in the first half in mining. Is the growth driven by new mine additions or ramp up at the older mines only? How should one look at it?

Kunal Shah

This is new mines. The growth is coming from new mines. Any particular minerals are doing very well for any other let’s say gold or copper or something which is doing very well for us in the first half? 15,000 in this growth is not that large to really draw patterns from. But clearly gold and copper remain metal of interest. Gold? Copper and gold both. Finally, now that probably you have done 146,000 tons in the first half. We probably are on track of delivering 30,000 tons incrementing this year right? Yes. You obviously mentioned, so like realizations have gone up because of this whole commo

Q

Just a couple of clarification from the last question. You said the mill lining volume will be 10,000 metric tons this year.

Sanjay Majmudar

No, orders will be 10,000 invoicing maybe… We are just trying to give him answer directionally that he asked the question that because the mill got started now, you will go out and take orders. I said we've already started to get orders of more than 10,000 tons, invoicing may not happen this year. Some of it will spill into the next year. So, Dhavan just to elaborate. We are already selling mill liner. Now we have shifted to this dedicated plant and volumes should go up. It will be definitely higher than annual what we did last year. The exact number may be difficult but definitely higher than

Q

Sir, sorry to just harp upon this realization bit. Very accurately you said that we are clearly seeing the benefit in terms of the better pass through, which is reflected in our realization. While now of late we have started seeing the correction in commodities and trade costs, etc., would it be possible to see obviously in the second half there will be a decline in realizations because of this same aspect. But as things stand today on spot basis what would be the gap in terms of the pass through versus what today is in terms of spot of ferrochrome or in terms of scrap or logistics cost, etc.

Kunal Shah

Bhumika, which is where we've already shared our long-term margin of 20%-22%. And things ultimately even out at that level, right? It doesn't serve any purpose to tell you this quarter I've got 15 crores extra or in our next quarter it could, correct? I mean the math we can do but it does not help us because in any case our pricing is going to be a function of my cost and we aspire, and we work to make sure we keep a margin like Sanjay explained at 20%-22% margin. It does us no good to know whether next quarter will be 155 or 140. Yes, my absolute margin can change with that but it's fait acco

Q

Hi sir. Congrats on a very good set of numbers ahead of what we have expected from you. Of course, the market condition has helped you as you explained. I have two questions on this. First of all, you said that you aspire to grow 30,000 a little bit here and there, on a year-to-year basis. So, for the next two to three years if we assume that this is going to be the case, do you have the adequate capacity to execute that kind of growth for next two-three-four years?

Sanjay Majmudar

Absolutely. So that is your first question. Should I answer that, or we will take question by question. Okay let me answer that. So, first as you would have seen my rated capacity today installed capacity today is 440,000 tons. I'm operating roughly at about 70%-72% average capacity utilization as we speak. We are also adding another 80,000 tons of brownfield expansion for grinding media which is our core volume-based product at the same location that is at GIDC Kerala which is close to Ahmedabad. And that will take me to about 520,000 tons. So, today assuming that today I reached somewhere ar

Q

One of my queries would be, can you just I think I have missed out the point. Can you just repeat that the secured line 125 crores of that SAL thing which we have been discussing at? It is a 3,000 tons in the incremental right from the SAL which we have been doing, backward integration?

Sanjay Majmudar

I'll just quickly explain. One, this company is manufacturing ferrochrome in Gujarat. They have a plant where their peak capacity can go up to 4,000 tons. What we have done we have entered into a contract with them whereby the entire capacity they are reserving for us with a minimum period of 3 years and therefore for us it's a raw material security. It's a raw material security and it's a very comfortable kind of an arrangement that we have entered into and since they have dedicated their entire plant, we have paid them a secured security deposit with is interest bearing of 125 crores at 10%

Q

Two questions. One, on the post opening up the travel restrictions were still there and the client conversions were delayed and all. If you can just highlight how are the things on the new client conversion, travels and all?

Sanjay Majmudar

Things are very much back to normal. Frankly we have all forgotten about COVID. So, traveling there is no restriction, our people are able to travel to most of the mining locations without any problem and that is the reason why over last 6 months we have been sounding a little more confident about going back to the growth we had incremental volume trajectory. One of the other elements was like on the competitive landscape because of this higher shipping cost and all we might have lost some volume to the competition with this current reduction in the shipping cost and all. Are you winning back

Q

Since this arrangement is there for ferrochrome will be having some benefit because of this on the gross margin also like let's say getting some discount from the market pricing and all those things?

Kunal Shah

I think this is the agreement, the purpose of the agreement is supply chain and that’s we will have to look at it from that standpoint. The annual capacity with this plant is 48,000 metric tons, correct? We can keep sharing more information not material to the scheme of things. I think all we are trying to say is that we would like to protect the supply chain by offering a secure loan. 3,000- 4,000-2,000 there are lot of variables linked to that and as a practice now we are not sharing more information around it. Secondly in terms of the other income like the current run rate of other income w

Q

I have three questions. So, should I ask all at one go or should I ask one by one?

Sanjay Majmudar

Whatever makes you comfortable. We have no issue. The first question is on the margin. Sorry to labor on that point. What I understand from the call is you are maxed out on the selling price. But how about the absolute EBITDA reported will be more or less protected and go forward the margin expansion will come more in terms of the volume and the mixed increase. Is that a fair understanding? Yes of course. I am making it clear disclaimer that as a matter of policy we are not giving any guidance about the margins but your understanding is broadly correct. The second question is that you have a s

Q

Actually, I missed one question last time. You said that you are going for an investment for this power plant and for your I think renewable energy. Can you elaborate a little on that, that by doing that are you going to save some of your electricity and energy costs? And second related question is how is your outlook as a company towards the ESG side regarding decarbonization related target and how much investments or something you are planning for that because the industry you are operating at, at an international level the foreign investors including us; we all look at that ESG compliant pa

Kunal Shah

Absolutely very conscious on the ESG footprint that a company has. It's a regular feature and conversation at the board level and which is where we started our journey for renewable power. So, end of ‘22, about 20% March ‘22 about 20%-22% of our power 23% of our power came from renewable sources. The idea is to take it up to 30%-35%. That's how the policy allows today. It was our choice. We would have done all possible. There's a limitation on how much captive renewable offsite one can set up. We will do all that is possible within the current regulation to migrate on the renewable side. In ad

Q

There is a news article that the government is trying to revive the Kolar Gold Fields in Karnataka. So, just wanted to know is that an immediate opportunity for AIA or it's like a long term and also what would be the potential?

Sanjay Majmudar

So, Mr. Raja frankly our market is actually worldwide. The volumes outside India are much larger. All our efforts are actually for mining concentrated outside India. Having said that if any such opportunity does in fact come, we will look at it.

Q

Thank you all once again and Sanjay bhai and I remain available offline for any further clarification. Thank you so much and have a great evening.

Management