Craftsman Automation

“We are on a growth path and we will be continuing this growth path into H2 as well as in the next two financial years.”

“I would say that this sort of growth will continue if you look at an year-on-year basis for quite the next two quarters, three quarters.”

“I do not want to give a forward-looking statement on EBITDA but you know the EBITDA you can reverse calculate it for H1 and definitely H2 revenue will be more and H2 normally the EBITDA also is better.”

“But Q4 we might not do much CAPEX for the simple reason that our other CAPEX are little more long-term and that will be pushed into subsequent years in a phased manner.”

“Yes, you can assume like that and second phase will not be capital intensive because our infrastructure is already in place for the foundry as well as the fundamental machine shop.”

“And infrastructure also has been, basic infrastructure has been put. So, additional equipment will not take too much CAPEX.”

“So, overall the CAPEX, we have done significant CAPEX in the first half.”

“One good thing about Craftsman is we have been continuously doing CAPEX and bulk of the CAPEX has been even before the big rise in the capital goods cost has increased.”

“Practically, no new segment but we are vigorously expanding the powertrain capacity, the Aluminum casting capacity and machining capacity and we have done bulk of it.”

“The DR Axion Plant-2 has started at least trial production I would say and the order book is also strong there.”

“Second thing is we are looking at broad basing the value-added subject that hereafter we are trying to build up facilities which are little more flexible in nature to cater to various customers looking at the global market outlook.”

“So, we weathered all these situations, we have put up a lot of capacity, still capacity is getting created as we speak, not all capacities have come into production and some of the pipelines are not full yet.”

“We have got orders from multinational companies who are going to do aggregate exports from India.”

“Q3 and Q4 will be looking better for Sunbeam and next financial year I think we will be also getting new orders from new customers while we are leveraging the capacities for newer products which will give better benefits.”

“So, overall, the exit of certain smaller customers is mostly complete, but the bigger customers we are handholding. So, our top line may reduce, but our absolute margins will improve because some of them are negative on the EBITDA itself in general.”

“Of course, tractor we will see some contraction in the next two quarters.”

“The growth in Powertrain is expected to continue and also strong growth in Aluminum.”

“4% of our revenue is coming from our subsidiary and if you look at the gross net block of the investment also, it may be hardly 2%-3%.”

“So, as we speak, we are getting inquiries for the next level of capacities. Most of it is on the same products, what we are already developing that is welcome that means gestation period to market will be improved.”

“There is a huge bottleneck for supply of capital goods across the world so we are in a strong position to win more orders and also we are winning more orders as we speak.”

“We have not factored too much auto growth, but I feel that auto growth will continue in a way quite a strong way, especially on the passenger vehicles as well as two-wheelers because of the inflection point of per capita GDP.”

“The trend in the future will increase for outsourcing. Many of the OEMs are still manufacturing a lot of Aluminum components in-house, but we see the trend slightly starting to shift now.”

“For example, if a hybrid vehicle comes in, there will be more transmission parts which are available. If BS-7 comes in, then the new engines also will come in. All this gives an opportunity for us.”

“And also across all customers and all product lines especially the legacy products, we are in contact with customers for the price rationalization or price reset in cases of legacy products and this has to be done for almost all suppliers is what we feel because of the sharp rise in manpower cost, energy cost and all other associated costs.”

“So, with the price increase what we are negotiating with the customer or correction or compensation for the Aluminum price correction also which will play out in the coming two quarters. I think most of the customers are open to that discussion.”

“We had increased our inventory because of the shortage of raw material and also the prices which were increasing dropped suddenly so we had an impact of that.”

“Yes, the Aluminum, some of it we are still in discussion with the customer for the corrections on the matter. Until we come to a conclusion, we cannot book the differences, number one.”

“But as I said earlier, bulk of the margins also will come from the price correction which has to happen across almost all the OEMs.”

“The net debt is only around Rs. 3,000 crores because we have got a lot of cash available and some capital advances which we have paid.”

“So, working capital has ballooned and also the other say GST credit has ballooned and some of the pipeline we have added more lines or more plants.”

“So, that pipeline inventory is yet to materialize into revenue on the matter. So, yes, and we are also carrying some safety stock of material which now will get diluted in the coming quarter.”

“After that we will be able to be self-sufficient for funding our CAPEX as well as the maintenance CAPEX.”

“You know that we have invested around Rs. 100 crores to Rs. 130 crores, something like this, in the German subsidiary.”

“I want to make one very clear statement is, we are not a fan of investing outside India in a big way because we understand the risks which are associated.”

“So, we will be extending our services on high pressure die casting, low pressure and gravity, and also sand castings wherever applicable.”

“There is a one-time impact, but it does not go into impact on the longer term. Yes, on Q2 especially, yes. And in Q3, there will be very marginal and Q4, there will be nothing there.”

“Number two is the steep rise and there is a panic in the market of the availability of material itself. Added to that is the Middle East crisis.”

“If the fairness is not there, I think it is very difficult to accommodate any customer, who is not allowing a pass-through, especially on the commodity.”

“There are some headwinds on the new plants where we have to put in the working capital in and we have to start up the plants which is also happening as a suboptimum as of now.”

“So, I said today that one thing is that our growth on absolute terms has been say 50% but I would discount that with the commodity side. But on an overall base if you look at it as a standalone, the real terms itself we have grown 35% on a larger base.”

“I think the critical mass or critical size Craftsman will be reaching in this financial year. This will help us for almost next 5-10 years for being a very stable and growing company.”

“In the Q4 the exit rate will give a very clear indication of what are the things to come in next year. So, we are in the build-up stage now.”