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Edited Transcript of AIAENG.NSE earnings conference call or presentation 31-Jan-20 11:00am GMT

Q3 2020 AIA Engineering Ltd Earnings Call

Ahmedabad Feb 6, 2020 (Thomson StreetEvents) -- Edited Transcript of AIA Engineering Ltd earnings conference call or presentation Friday, January 31, 2020 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kunal D. Shah

AIA Engineering Limited - Executive Director of Corporate Affairs

* Sanjay Shaileshbhai Majmudar

AIA Engineering Limited - Independent Director

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Conference Call Participants

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* Anupam Gupta

IIFL Research - VP

* Ashutosh Tiwari

Equirus Securities Private Limited, Research Division - Research Analyst

* Bhoomika Nair

IDFC Securities Limited, Research Division - Security Analyst

* Kirti Dalvi

ENAM Asset Management Company Pvt. Ltd - Analyst

* Ravi Swaminathan

Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP

* Renjith Sivaram

ICICI Securities Limited, Research Division - Assistant VP

* Sandeep Tulsiyan

JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst

* Shreyas Bhukhanwala

Canara Robeco Asset Management Company Ltd - Equity Research Analyst

* Srinivas Seshadri;Mirabilis;Analyst

* Varun Ginodia

AMBIT Capital Private Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good evening, ladies and gentlemen, and thank you for standing by. This is Janvi, the moderator for your call today. Welcome to the post results conference call of AIA Engineering Limited. We have with us today the management team of AIA Engineering Limited. (Operator Instructions)

I would now like to turn the conference over to AIA Engineering management team. Thank you. And over to you.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [2]

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Yes. Thank you so much. As always a very warm welcome to everyone to spend time to hear us on this call. This is Kunal. I also have Sanjay (foreign language) here with me. I'll start with a few highlights of the quarter. We've done 60,000 tonnes for the quarter, and 185 for the full year at par with what we did in 9 months to December '18, previous fiscal year. So we are at flat volume growth 9 months to 9 months. But that's outside -- without the large iron ore customer, which would have accrued 10,000, 12,000 tonnes by this time, so we would have still added 5%, 7% of tonnage.

That, as far as top line challenges are concerned, from a value standpoint, we did INR 670 crores and INR 2,061 crores for the period to date. I think key highlights from a number standpoint, currency benefits and raw material reduction both have played into the bottom line for this quarter, as was expected with softening on both sides. So that tailwind will remain for a quarter or 2. But as explained in the past, we are agnostic to currency and raw material, either way, there is a pass-through. Of course, there are lag effect either way, where in we prefer this way, where, obviously, we'll be passing on over the next 2, 3 quarters.

But having said that, weakening rupee is something that gives us that tailwind. Our EBITDA, which is including all our other income was at INR 218 crores. This included about INR 17 crores of currency gain. And some part of that -- most part of that is on a realized basis. So approximately INR 17 crores of the other income has played into the EBITDA margin.

Profit after tax is at INR 156 crores and 9-month PAT is at INR 448 crores, which compares to about INR 355 crores for 9 months last year. From other income standpoint, operating income is export benefits, which stood at about INR 23 crores. And the other income, which is treasury, which is totally about INR 25 crores and ForEx is totaled at INR 20 crores. So that is -- so the other income -- the other income is INR 45 crores, of which INR 20 crores was foreign exchange and the rest was -- majority of that was treasury income.

Moving on from a working capital standpoint, we remain flat. Stocks are little higher -- WIP in finished goods, so raw material is a little lower. Net-net, we remain at about 120 days of working capital, 4 months is where we are at. Receivables are also largely flat.

From a sales standpoint, mining volumes continue to be at flat as you would have seen in the notes that we have also uploaded in the vicinity of 40,000, 41,000 tonnes. So the -- for 9 months, our mining volume is at 122 outside of the total volume of 185 and 62 is non-mining volumes.

I think key -- other key financial metrics. Tax is lower on account of the new tax regime. We expect full year tax as a percent of PBT to be at about 22%, 23%. And obviously, the first -- second quarter, we had some amount of reversals from the previous period. So there's a little higher tax adjustment in this year. But overall, tax as a percent, should be 20%, 22% -- 22%, 23% of PBT.

From a volume standpoint, I know a lot of you have questions on what's happening with volumes. Where does -- what does the strategy the company has? And I think -- so besides the large mining contract, which would have been 18,000, 20,000 tonnes this year, we also lost copper plant. The mine is shut on account of other issues at the mine site. So both of these, we're broadly losing 25,000 tonnes -- 23,000, 25,000 tonnes this full year on account of reasons outside of our control.

Notwithstanding that, we continue to pursue strategy of deeper and wider engagement with the clients and increasing our wallet share with more products, continuing to offer services that lead to tangible value addition at their end. And broadly, that -- we hope that, that keeps us in good state with the client, and we continue to add more volume. This year, 185, depending on what the next fourth quarter is, will be at flat or a little lower than last year, but with a clear context of having lost 25,000 tonnes of volume, which would have -- which was accruing to us for the past few quarters or past few years actually.

So with that context, I mean, we would have -- still been higher in quantity terms, had that volume continued. Going forward, while we are still not giving out a guidance, we expect 20,000 to 30,000 tonnes of volume should be possible. I mean, we are prospecting far more. Our strategy, where we started from wave cost, benefits to down process, benefits for gold and copper. And lastly, our collaboration with EEMS, where we are bringing around through mining -- mill lining product, we are looking at improving throughput and reducing power consumption and improving recovery on account of better grind size as a large value addition to the customer.

So as a combination of all of these things, there's a clear value that AIA as a company leaves with the customer, a quality product, delivered on time, and helping contribute to the bottom line in a material way. So having said all of that, we remain bullish about making further inroads. A lot of that just takes time. There are a lot of moving parts that we have to deal with. And we are dealing with clients across the world, across geography, across ore types, and while that's a good thing, it also means that every customer has their own cycle of going through evaluation, comfort, dealing with the incumbent who will be replacing, so that just takes time. And I think that's all we have to say, that it's well on a quarter-to-quarter basis, it does look a flat volume, but we are hopeful of making good on that volume as -- in coming few quarters.

I think that's all from my side. I'll ask Sanjay (foreign language) to share his inputs and then we can get into Q&A.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [3]

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A very good evening to all of you, and thank you, Kunal. And just to add a couple of points. As Kunal elaborated and as we have been repeatedly telling on the calls. Now we believe that as a company, AIA has all the necessary wherewithal to do a very sustained growth in this business and take a lion's share in this huge 2 million to 2.5 million tonne opportunity, which is offered by mining. Just to be a little more specific, as we speak, as Kunal explained, maybe this year is flat.

I think, but if you look at a 2 to 3-year horizon, as we speak, at least 30, 40 mines are very actively under trials across the most important geographies under this common agenda of EEMS plus the rare advantage that we offer on the grinding media side and also the DP.

With the result, in fact that 3 projects have already gone on stream based on the EEMS platform. As we have discussed in the past, the gold field project and then the Jindal Steel and then one more -- the mine in U.S.A., 40, 50 mines are under trials in several locations. The results are very gratifying in terms of the cost savings or in terms of the tangible benefits that we are able to demonstrate, thanks to this multiple approach.

However, as Kunal explained, the factor that is really beyond our control is the elongated time that we have to go through to ensure that we pass through the risk management processes and approvals and all their queries that will obviously come when they are taking such a crucial decision. That is the only factor which is perhaps deferring or postponing the volume growth that we were able to predict that should come -- that should have come. Nothing else has changed.

And in fact, internally, we feel very, very excited as we speak on the medium to long-term prospects, with this...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [4]

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Sorry, I just -- before we end and go into Q&A, from a proper CapEx standpoint, we remain at 390,000 tonnes. We're adding 50,000 tonnes of mill lining. As you all know, on track to get commissioned by December 2020, which will take the capacity to 440. The last phase of 50,000 tonnes for grinding media, as we have discussed and announced last few quarters, we are -- we've run into an issue with the molding line, where the -- one of the few suppliers who supply this equipment had financial issues. And on account of that, we're having to redo some bit of that.

We expect to have better clarity on that next quarter. So the commissioning for that plant moves from December 2020 to sometime in March, first quarter of next calendar year.

We are on track to add that capacity. We just need to fix the issues with the production line, and we'll get going with that. We already have the land, we have the power connection, we have the environmental clearances. So I just -- we need to firm up the supplier, and we'll get going with that.

From a CapEx, the spend on these initiatives. The mill lining plant and the grinding media plant will be about INR 500 crores, INR 550 crores, another INR 50 crores to INR 75 crores on maintenance CapEx.

So broadly, about INR 600 crores is our spend in next 2 years. We've spent about INR 50 crores on the mill lining and some more in the fourth quarter. So end of next year, we'll have the exact number on what will be the balance spend in 2021. Should be about -- in next 2 years, broadly about INR 350 crores to INR 400 crores in all and upwards is what's projected.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [5]

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But this year, I think it will be about INR 200 crore.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [6]

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This year, we should be about INR 200 crores, assuming ...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [7]

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Last quarter, heavy CapEx.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [8]

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Exactly. Last quarter for the mill lining project, which is in full steam. So that should come along -- come around between next -- a large part of that in this quarter and progressively reducing thereafter.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [9]

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Just to conclude my submission and then quickly moving on to Q&A. So from a medium to long term, we remained extremely bullish and comfortable. We do not see any reason why a very decent volume growth should not come from a structural and business standpoint.

The only reason we've said that we still don't want to give any guidance is that we want things to start moving and things to become clearly evident rather than making statements. But as Kunal mentioned, a 20,000, 30,000 tonnes minimum growth next year looks to be very, very possible.

And in fact, our internal target would be still higher. I think with this, I request the moderator to throw the house open for Q&A. Moderator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We take the first question from the line of Ravi Swaminathan from Spark Capital.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [2]

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Sir, just wanted to check with you regarding the mill liners. So basically, you had mentioned that we are trial testing in some 30, 40 mines. What could be the addressable potential volumes, which can be there?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [3]

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So there's already 300,000 tonnes of annual market, consumption market each year with 4 incumbents. So that's the addressable market for the time being. Only for the -- 300,000 tonnes of annual consumption.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [4]

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Annual consumption addressable market that is across all this 30, 40 mines you are saying?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [5]

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That's the total metal mill lining consumption each year. But Ravi, the strategy is not only to look at liners, but to enter the mill and then do a lot of other things.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [6]

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That's a volunteer strategy, right? That we are going in there. We're controlling the whole system right from wave cost of mill parts to throughputs, to power consumption, to recovery. So mill linings becomes that anchor point of strategy for getting in with the clients, right. But to answer your question (inaudible) 300,000.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [7]

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Got it. Any other product potential is there apart from mill liners? Or any service income, which can be -- we can get...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [8]

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Not really. I mean, this itself is large enough to keep -- we will need to keep the eye on the ball. So I think for now, that's where our focus would be on.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [9]

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Got it, sir. And this incremental 25,000, 30,000 tonnes is a combination of both grinding area and mill liners?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [10]

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Yes, yes, yes. Total tonnes. Yes, yes, correct.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [11]

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And how much of it will be mill liners any sense, sir? Or is it like...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [12]

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Not really. I mean, there's so many conversations going on. See, the mill lining volume, today, we still don't have the plant that's come up, right? So we don't want to be just going out and committing quantity, but there will be reasonable volume.

It's strategically fitting into what we are trying to do more than just volumes, right?

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [13]

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Got it, sir. And current mill liner volume, how much we would doing, sir? I mean...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [14]

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Yes, sir. We will do -- full year, we'll do about 15,000 to 18,000 tonnes.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [15]

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15,000 to 18,0000 tonnes, okay. And the realizations, sir, kind of double that of grinding media? Or how is it?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [16]

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Ravi, (inaudible) number of amount of math (inaudible). Ravi, (inaudible) we will not share.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [17]

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Okay, sir. Got it. Got it. And the Vale volumes, when is it likely to get back? Or is it likely to get back at all?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [18]

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Next year.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [19]

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Yes. I mean, good question, very little visibility on it. So we'll just have to wait and watch. We'll share as we learn more about it. Yes.

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Operator [20]

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Next question is from the line of Ashutosh Tiwari from Equirus Securities.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [21]

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Firstly, what was the realized rate of USD-INR in the quarter and also in for 2Q, the same number?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [22]

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Realized was about INR 71.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [23]

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And in Q2, how much it was?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [24]

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Yes. Q2 was a INR 70.20, INR 1 lower in Q2.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [25]

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Okay. So going ahead, INR 71 will remain there, INR 71 plus.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [26]

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Should.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [27]

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It will be that and higher, right, depending on what (inaudible), we do -- we expect INR 71 for the full year, yes.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [28]

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Okay. And also, like we discussed last time that we are probably in the final stage of getting some large gold mine orders. So any update on that?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [29]

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I think that from a mill lining stand point, yes, we have gotten this thing for grinding media, that's in progress. We've got a reasonable sized order from a mine that does gold and copper. So we have -- full volumes will play out in the next year. But that's on track, yes. The one that we are -- that we were mentioning was...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [30]

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Yes. We have got.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [31]

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We got that. Yes.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [32]

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This on the grinding media, not liner you are talking about?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [33]

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No, grinding media.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [34]

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Okay. Okay. So you'd mentioned last time around 10,000 tonnes kind of mine size?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [35]

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Correct.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [36]

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Okay. And also, like, I think, over time, what we have seen is that, I mean, we've got a lot of big gold mine orders. So is it like now gold is quite large in our overall mining sales mix?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [37]

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Not really, not really.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [38]

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Gold, copper and iron. And I think all of that's on the volume that we do, I mean, there's no one that's very, very large. I think we are -- the focus is on all. We are agnostic to the over time, right? We are...

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [39]

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No, we got. But I think the winning that we've seen over the last 2, 3 years? I mean, we hear more of gold mine, that's why asking this question.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [40]

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I think the lower-hanging fruit is which is where it's a little more conversions happening over that side. Our focus is on all 4 ore types.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [41]

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Okay. And with this gold prices rising over last many months. So are we also seeing a trend that the gold miners are increasing production, our customers are -- there are obviously some limitation for them also to increase beyond...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [42]

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No. Exactly, exactly. So the -- so what's happening is that if somebody has ore on the ground, in the ground, and their ore grid has worsened, that's where EEMS conversation becomes much more interesting, where we can help them improve throughput, which they can grind more. You understand? So because otherwise, they're constrained by their equipment in terms of what they can produce. In fact, EEMS is a very interesting solution in such cases.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [43]

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Yes. So we supply this liners as well per lifter in that case, right?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [44]

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So I mean, that depends on what solution we are offering.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [45]

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Okay, okay, okay. And Barrick, orders will be at full potential next year? I think last year, you mentioned they are still running at 70%, 75%.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [46]

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Yes. It should be. That's true.

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Operator [47]

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Next question is from the line of Renjith Sivaram from ICICI Securities.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [48]

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Congrats on good set of margins given the overall environment. Sir, if you look at the margins and all the EBITDA per tonne, that has improved. So what is the trajectory you're seeing in that? Will this continue? Or...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [49]

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As we explained before, the margin improvement is a function of a lot of things. But over the last 1 year, we've seen the rupee weaken. Like we explained, even Q2 to Q3, there's a rupee, INR 1 of weakening vis-à-vis dollar, and raw material prices fell. So that's -- but the model is where we're agnostic, we're passing through, right? We're not a IT company selling into the U.S. zone where weakening rupee only means more profits, right?

In our case, the importing currency, while the transaction currency maybe U.S. dollars, but the importing currency, maybe are plenty for the customer in which he pays.

So we do have to reduce our dollar pricing to become -- to make good -- any weakening that we may have. So broadly speaking, current margins are a reflection of where the currency and raw material are. And over the next 2, 3 quarters, with the lag effect, they will get passed through.

EBITDA per tonne is not a metric that we look at.

So I'll not be able to comment on what happens on a EBITDA per tonne in that thing. It's a gross figure, when you divide and you get a figure, but that's not something that we target as a business to achieve.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [50]

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Okay. And sir, this 15,000 to 18,000 tonnes per annum volume addition, you are expecting under mill liners for next year? Is that...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [51]

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Not really. We are saying, we'll add 20,000 to 30,000 tonnes of volume next year. As a broad, we're not giving the guidance. We're just saying that there are enough tailwinds, there are enough value addition that we are bringing as a tangible outcome to the client, to the customers. And that gets us confidence that we should be able to do enough business next year. And 20,000 to 30,000 tonnes, is just a broad ballpark on where this can be.

As the year progresses, we'll have better clarity on whether that's 20,000, 30,000 or 40,000 tonnes.

It's just a broad directional indication, and that's including all products, not just mill linings.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [52]

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Okay. And does that assumption includes Vale coming back or this copper mine, which we have lost coming back? Or it doesn't include that?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [53]

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I think...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [54]

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You don't try to...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [55]

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(inaudible) answer, right? I mean, it will be -- which is why between 20 and 30. I mean, we don't know what will happen to Vale. We have considered some volume in that, for sure, yes.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [56]

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Let me give you the answer you like. So if Vale comes, this can go up.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [57]

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Okay. And this copper mine, which we have lost, what was the major reason for that?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [58]

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There's a -- the environmental issues at the mine site.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [59]

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That's also in Brazil ore?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [60]

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No, no, that's in -- I mean, we're not getting into more details, it's just a local issue at the plant site.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [61]

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Okay. Okay. And in terms of this 40 mines, which we have in the testing phase of mill liners. So can you give some clarity then what will be the size of this mill liner market, if not next year, 2 years down the line? What are we expecting this size to be?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [62]

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Let me answer this. Yes. See, as we explained, the -- technically, if I talk of only mill liner market, then it is about 300,000 tonnes as we speak today, okay? However, from a strategic standpoint, what we are saying that, suppose I'm targeting 50,000, 60,000, 70,000 tonnes of this market, I'm already doing 10,000, 15,000, today as we are adding another 50,000, 60,000. What is more important is that we are not addressed single customer only from the point of view of just taking a part of that mill liner.

What we are saying that given our technological edge and the product solutions that we are offering, it is a combined selling proposition of apart from mill liners also. We say that if you use my liners, you are saving significantly in terms of improved throughput, reduced power costs, et cetera, et cetera.

Added to that, my grinding media, which are anyway, adding 10%, 20% in terms of the savings in the cost. And add to that, the DP benefit that we are bringing on the table, which can improve the recovery by, say point, x or y percent, whatever. As a package, it is a significant benefit to the customer, and therefore, it is a parallel marketing strategy rather than a product marketing.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [63]

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Yes. So we understand that. I just wanted to get some numbers, like the 50,000 tonnes per annum will be through from December 2020 onwards. So...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [64]

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No. We will give you those numbers.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [65]

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I'll explain. The question is that capacity of 50k is coming up December 2020, you are saying what sort of utilization ramp-up we expect?

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [66]

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Yes.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [67]

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I think 4 years, we should be fully utilized from there.

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Operator [68]

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Next question is from the line of Sandeep Tulsiyan from JM Financial.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [69]

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Sir, first question is pertaining to the profitability. We have seen a decent contraction in the production that we are doing. So we're down, say, 10% Y-o-Y in first 9-month period versus a flattish kind of a revenue. I just want to understand what is the approach over? Is it more towards flatter control over your costs?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [70]

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Not really -- it's not a cost driven outcome. It's a -- we built stock last year because when we get -- we grew last year from 228 to 265, right? So whenever we grow -- we -- in many -- most cases, when we -- for customers, we added last year. We had to keep stock for them. And that becomes the onetime stock that you invest in. And the invoicing happens after 3 or 4 months, right? So we produced more where which became stocks for the most part of last year, which is not the case this year, and which is why you see higher production last year.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [71]

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Okay. So as and when volumes go back to growth path, again, the differential should be between production and...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [72]

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Correct. Correct.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [73]

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That's the working capital, that's the nature of the structure that we have, right? Make in India, and we supply across the world.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [74]

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Basically, number of mines would keep on getting added. So more inventory would be required?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [75]

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[We can't stock] all of that, right? Not just stock for the client, but also transit stock that gets built up onetime and then it goes into rotation.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [76]

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Got it. And the second question was pertaining to this ferro chrome prices like the price that we're seeing now, INR 60, INR 62, whatever, per kg. This is almost at a 4-year low. And last, when we had seen such prices, we had seen the margins seeing an abnormal jump of about between 28% to 30% range.

And as you guided, it may normalize in 2, 3 quarters. But in previous cycle, we have seen this continued over at least 8 to 10 quarters before coming back. Do you foresee that such kind of situation can probably...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [77]

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It's difficult to assess. So as a company we'll be aspired to do better and book more, yes. But we are also in this growth phase, right? I mean, we would love to be more competitive. We would love to go out and lead more tangible value for the client. So it will be difficult to (inaudible) whether it will be 2 quarters or 10. But as a philosophy, we are not trying to profit here from this movement either way, right?

And in terms of the customer, the thing is change soon and then you are in front of the customer asking for a price increase. It was more fair and square, it has to work both ways, right?

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [78]

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Right. So probably, the market is not in the same situation as where it was also at (inaudible).

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [79]

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But also as a philosophy. So now if it remains, see the thing is that it's not an exact math, right? You may have price adjustment clauses that come up at a certain time. So it's a little more circumstantial as well. But our philosophy, we're not intending to keep this, right? Well, that may continue for maybe 2 quarters more than what we imagined. This is a directional answer, not a mathematical answer, right?

So as a concept we will be passing through to become 3 quarters great. 3 becomes 4, even better. But I mean, that's something that's some total of a lot of moving parts. So difficult to find whether it will be -- how long that period would be. But there will be a lag effect and from 2, 3 quarters to a little more.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [80]

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Got it. And last question is, if you could provide us with some time lines as to which quarter onwards, the first iron ore mine went off and copper is, I'm presuming 3 -- third quarter onwards, it went off, right? Just to look at how the base -- in which quarter was the base volumes impacted?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [81]

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I think it will be difficult, and that doesn't help. No. I mean, broadly, we are saying this year will be flat to a little lower. And next year, we should be hoping to add 20,000, 30,000. We're just sharing. See the thing is that we can't have 300 customers and 2 go away, we start mapping that, right? We just -- that will happen, right, if we become larger, if you go to wider, you will have a customer or 2 move away for different reasons, right? It's very difficult to go back and calibrate.

We just give -- the point is that even if you are little lower than last year, there's a large chunk that went away. We're just trying to directionally explain that if you take that off, which was not in our hands, we've still grown this year. I think it was just to explain that, rather than...

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [82]

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I just want to, like, so probably both of this have at least got impacted in FY '20 only, it -- nothing got impacted at the end of FY '19, right?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [83]

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No, no, no.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [84]

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And lastly, one more question on this EEMS. Out of this 15,000 to 18,000 tonne mining liner volume that you're expected to do this year. This entire thing is EEMS or some of the part of this?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [85]

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No, no, it is conventional and EEMS, both.

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Sandeep Tulsiyan, JM Financial Institutional Securities Limited, Research Division - Senior Research Analyst [86]

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What is the split between that right now?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [87]

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That's -- again, these are [women], it doesn't help, right? The idea is that -- just that we are doing meaningful volumes. It's not that we're doing 200 tonnes and we're setting up a 50,000 tonne capacity, right?

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Operator [88]

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Next question is from the line of Adit Makhijani from IDFC Securities.

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Bhoomika Nair, IDFC Securities Limited, Research Division - Security Analyst [89]

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Sir, this is Bhoomika here. Yes. Sir, one is, I just wanted to understand a little better in terms of the copper volumes, that you said that there was a 10,000 [cancelling]?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [90]

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No, I didn't say 10,000 -- no, no, no I didn't say 10,000. We're just saying that between 2 mine sites, this was a 20,000, 25,000 tonne reduction that we'll see between last year and this year. Just directional, we're not taking any more questions on that. It's just becomes too detailed, but it doesn't help the big picture, right? Where we are at 250,000 tonnes, volume of 10,000, 15,000 tonnes going away is not a big deal. It will be a routine occurrence as we move forward for various geopolitical reasons, reasons beyond our control.

That's all. I mean, it's just a directional answer, so to speak.

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Bhoomika Nair, IDFC Securities Limited, Research Division - Security Analyst [91]

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Okay. So on one hand, we are quite confident of our value proposition, which is continuing to drive savings for clients and which should drive market share gains and conversion to us over a period of time. If I go back a year or 2 ago, we were quite confident of about 40,000, 50,000 tonnes kind of an incremental volume on an annual basis for 2 to 3 years.

And even if I look at it, yes, it has been a 25,000 geopolitical related issues. But on the balance, still we are not seeing a growth as such. And even if we go ahead, were you very confident on our value proposition, but we are still shying away from kind of giving a very aggressive or some kind of a positive guidance. And I would assume that this 25,000 would, at some point, also start coming back, right?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [92]

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Listen -- I mean -- so again, all things equal in that coming back, will just be a biased answer, right? Because something else would have changed.

Question is, Bhoomika, that fundamentally, it's taking time, right? And that's not in our hands. We're not -- it's not a market where there are 4 players, we can show aggression, right? We cannot be a Swiggy where there's a cost to acquiring [one] money and just grow, right? The idea is that there has to be growth, but it has to be balanced with what we are adding, because once we -- once the customer migrate, there's a high level of stickiness, right? So it takes time to get a customer on board, there's a lot of effort one does, but then we keep that client for a long period, right? So when you're building a business that's going to run another 100 years, the modes are deep and strong. From our standpoint, when we look at it, a year or 2 when it goes, the volume moves here and there, per say, doesn't bother us, doesn't change any tectonic direction that the business is in.

The fact is it's taking time. That's not something that we look at as a challenge. That just simply what makes the business even more charming because that was more difficult for anyone else to come in pierce that mode that we have.

Yes. In our hands, we have -- what we have is to keep making sure we are deeper, wider, the value addition is more pronounce, it's more sharpened, right? We're trying to do the whole value stream now from the linings to grinding media to recovery. So we added a lot more conversations with the clients, right? The weaker currency and the raw material regime right now is helping us become more competitive.

So all said and done, I mean, from our standpoint, there's no reason why we should not be adding 30,000 or 40,000 or 50,000 tonnes. But we've learnt -- because as we are also learning, right? We've been into this 265 and lost 20, we didn't know that this can also happen. These are just learning that accumulate over a period of time. So whether -- and which is that we've learned also that it doesn't add up linearly, right? There will be some system issue that creeps in and something else changes. So from a proposition standpoint, we are well on the way to go up the ladder as far as value addition is concerned. We just need more time to have those volumes play out.

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Bhoomika Nair, IDFC Securities Limited, Research Division - Security Analyst [93]

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So sir, in that scenario, can you tell us what is the kind of percentage of increase in the -- if not in absolute terms, what is the percentage kind of increase in trials that you're having or ongoing conversations. So what kind of potential volumes this can translate into?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [94]

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What is in our hand is to go out in prospect, correct? Demonstrate value in terms of trials or engagement points. And we are doing more than 100,000, 150,000 tonnes as we speak. It's not 20,000, 30,000 tonnes, is looking 100% hit, right?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [95]

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Additional.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [96]

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Additional 100,000 to 150,000 tonnes potential client base is what we're targeting. But each has its own set of issues, right? We're looking at a lot of countries in Eastern Europe. We're looking at much more work in South America, in North America, in Australia, in some parts of Asia, in Africa. So the point is that, I mean, we've got strategy. We are doing all that effort, but it just takes time. So -- and yet, it appears seeing if it's so compelling, why volume is not coming up? But please understand, this is a very conservative industry. There is a large amount of resistance to change. Whatever that we are doing is also ground breaking work for an Indian company to go out, have the wherewithal to go take on these clients, which make a few billion dollars of profit in a year, tell them that I'll save you money, right? Not because I'm cheaper, but I can change your process, do all that.

We are really punching far above our weight in that standpoint for a basic industrial product. So yes, we are prospecting much more. Our confidence on our value addition ability is at a high right now. We are absolutely confident that there's a great runway that we have. It's taking time. It's uncharted for us, and that's something that is difficult. It's easy for us to go out and say, we'll do this much.

But the confluence of factors that will lead to that conversion may not be straightforward for us to get.

We just need a little more patient on the tonnage standpoint, that's all.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [97]

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So let me give you a very small example, in one case the mine manager is gung ho, he is absolutely flat about the solution. He has recommended, but the risk management team of the global headquarters are evaluating it.

Now these are like large, very large government, semi-government organizations. We have to go through all of their queries and everything to satisfy. And it's a very major decision for them to migrate. You see that's the only point I'm trying to make, actually, Bhoomika.

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Operator [98]

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(Operator Instructions) We take the next question from the line of Varun Ginodia from AMBIT Capital.

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Varun Ginodia, AMBIT Capital Private Limited, Research Division - Research Analyst [99]

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So a couple of questions. Number one, on this 30, 40 mines that you are targeting, is it possible to share how big these mines are? And how does that compare to the mines that you have been targeting before? So that like the scale of mines that you're targeting is this going up?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [100]

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The only mines that we targeted last year. We've been doing work for the last 2 years. It's not -- see these are the new mines we will be doing next year, right? This is a continuous process that -- it takes 2 to 3 years for a mine from the time we start engagement to a order, commercial orders. So it's been various stages of that process.

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Varun Ginodia, AMBIT Capital Private Limited, Research Division - Research Analyst [101]

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Okay. Got it. And on the realization side, is it fair to assume that the run rate that we have seen in the 9-month FY '20, 110,000 and around those levels, will that level sustain going forward? Or how do -- how it looks?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [102]

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It looks like.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [103]

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Looks like.

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Operator [104]

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We take the next question from the line of [Anirudh Shetty], individual investor.

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Unidentified Participant, [105]

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You earlier mentioned the grinding media market is 2 million to 2.5 million tonnes. So is that a realistic market opportunity? Or there are certain categories that high chrome would not be suitable to or certain geographies be consciously would not want to participate in. How should I look at the...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [106]

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There will be slices of the market that fall in either of those category. Unfortunately, there is no empirical evidence data points available in a manual that will tell us that this is what will work and this may not, right?

So the fact that we're at 200,000, and there were 10x market, we believe there's enough market that will allow us to grow for foreseeable future. We're not looking at adding 100,000 tonnes each year. So -- but you're right, there would be slices of the market. We don't have a clear data point to say 20% may not be addressable. But there will be some part which will fall in that category, for sure.

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Unidentified Participant, [107]

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Got it. And just to continue with the earlier participant's question, you guys are focused on mill liners grinding media today, which is the right strategy. But given that you guys have the relationship with your customers, a lot of technological capabilities, strong value propositions. So going forward, is there a possibility that there are new products that you guys would come up with? Or we should just look at the business model as we used to broadly?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [108]

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I think, see, the thing is that the biggest value we bring as a business is that, we focus that we have on a very narrow set of products and services, right, which is where that allows us to become the largest in all of that.

Nothing outside of what is our core competence. So which is grinding and crushing for cement plants and mines. Cement plants, we've done most bit. The rest of the parts that would accrue would be more where there is already -- it's a commodity product, right? We would not want to go into things which become a commodity product unless it's a strategic angle to it, right?

So short of any strategic aspect to considering some of these interventions, I think our focus is on grinding media and mill liners, which in itself is a large market, right? We don't want to squander that by taking our eye of the ball and doing other things.

So very clear, no distraction, blinders on our face and doing just grinding media and mill liners. We believe there's enough runway in front of us to allow for decent growth.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [109]

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And if you infer whether there is any disruptive technologies that can change the landscape of consumption? No, we don't think so.

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Unidentified Participant, [110]

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Got it. And just one final question from my side. Over a longest period, we should -- how should we look at your business, there should be a volume growth, but should the EBITDA per unit volume also go up because you guys are doing mill liners, say, bigger balls. And plus, once the customer sticks to your business, the ability to price better also should play out. So how does one think about that?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [111]

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I know, but -- which is where EBITDA per tonne is some total of very complex parts for different industries across countries, across customer groups. So that some total is something that, as I explained before on today's Q&A, it's something that we cannot track, it's just physically impossible. And from a margin standpoint, for an industrial basic metal producer, a 10%, 12% EBITDA margin is generally what the world does, right? We are saying, we'll do 20%, 22%. That's the guidance, there's a number that we believe will -- that there's enough value in the business to defend. Having said that, we've done better. We've done better for longer periods. But again, that's on lots of shifting sand, lots of variables and some total of where all of that stands, right? We do competitive pricing at times when -- where the customer gets into a sling match on prices, right? Raw material cycles turn where we may not be able to get the price increase that we need in the time frame, it takes longer than that.

Currency, rupee may not always weaken, it will appreciate also, there will be a cycle or a phase of that -- in that nature. So considering all of that, what's in our hands is to make sure we keep adding value, and there is a value that our customers ascribe to that value addition. And we try and maximize that value to the customer. I think that's what's in our hand, 20%, 22% broadly is our guidance with levers to do more and better, but difficult for us to say whether it will be 25% or 28% or 30%.

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Unidentified Participant, [112]

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Got it, got it. And sir, did you say 4 years -- in 4 years' time, we'll expect full utilization of the expanded capacity, did I hear that correctly?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [113]

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Yes, yes. 4 -- so 50,000 tonnes of capacity that we commissioned end of this year, calendar, we would hope that we should be fully utilized in 4 years from now, easily.

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Unidentified Participant, [114]

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Okay. So -- okay. On the first phase, not the second phase?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [115]

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No, this is 50,000 one phase plant.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [116]

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Only the liner.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [117]

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The mill lining you're talking about.

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Unidentified Participant, [118]

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Okay. Not the media that's coming out in -- by March '21?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [119]

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The question asked was for mill lining, the answer was in response to that, 4 years, full utilization of mill lining capacity. For grinding media, I mean, the same we'll add -- that's a longer term, right? The utilization will take time. That depends on all these other things we talked about, the migration, the conversion from [coach] to chrome and all of that, right? That will determine how fast we have.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [120]

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(inaudible) I think in 3, 4 years, we should utilize...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [121]

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We should be at a decent utilization in the next 3, 4 years, for sure.

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Operator [122]

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We take the next question from the line of Anupam Gupta from IIFL.

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Anupam Gupta, IIFL Research - VP [123]

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Just 2 questions.

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Operator [124]

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Mr. Gupta, may I please request you to speak a bit louder, your audio is not very audible.

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Anupam Gupta, IIFL Research - VP [125]

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Yes. Am I better now?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [126]

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Yes.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [127]

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Yes.

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Anupam Gupta, IIFL Research - VP [128]

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Yes. So first is just very short term. So you said this year, flat volumes, which would imply close to 80,000 tonnes in the fourth quarter. It is likely or...

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [129]

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Maybe little less, maybe 10,000 tonnes may go down also.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [130]

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Yes. We'll do between 250 and 260.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [131]

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We don't know. We will know only as we go forward.

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Anupam Gupta, IIFL Research - VP [132]

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Okay. Understand. Secondly, just want to understand from your market perspective. So obviously, we have the macro number and how -- what the size of the industry and where the penetration is. But if you were to do -- look at it from each ore point of view, let's say, iron ore, copper, gold and platinum 4 for you. For each, what is the sort of difference in penetration for high chrome media at this point of time?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [133]

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I think big picture, we had 20% and 80% is (inaudible). It will be say, in platinum, it's much higher, but for the rest of it should be broadly that much, 20%, 25% range. Not material -- not materially higher than that.

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Anupam Gupta, IIFL Research - VP [134]

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So then iron ore, copper and gold is where opportunity still is fairly large for you, is this how you look at it?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [135]

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Correct, correct.

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Anupam Gupta, IIFL Research - VP [136]

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Okay. And just secondly, on -- well, we don't talk about cement much, it's been largely flat. But what's your view there in terms of -- so you said there's no technology change, which is happening, which can disrupt in mining. But is -- is that the same case in cement as well, where...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [137]

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Yes, yes. We've been at flat volumes for the last 8, 10 years now. So 6, 7 years. So nothing that looks to be on the horizon, which can disrupt or replace with another product. I mean, it's just a conventional industry doing its bit.

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Anupam Gupta, IIFL Research - VP [138]

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Right. But let's say, and I think it doesn't get utilized in vertical mills, right? So if vertical mills share keeps on increasing, do you see...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [139]

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No. We do verticals mills, we're the largest player in vertical mills, okay.

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Anupam Gupta, IIFL Research - VP [140]

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Okay. So vertical, you will see, it will not change your profile if that change as a shift given up?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [141]

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No, no, no, we do both. So we are present in the whole value chain. (inaudible) cement, right? We're doing as much of whatever comes our away, right? They still have to grind, that will still be there.

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Operator [142]

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Next question is from the line of Srinivas Seshadri from Mirabilis.

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Srinivas Seshadri;Mirabilis;Analyst, [143]

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The -- Kunal (foreign language), the 25,000 to 30,000 number which you gave for next year as a guidance. Is this a gross guidance number?

Or what should I take away from that number?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [144]

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So that's -- again, you're asking us to crystal ball to crystal gaze into what we will lose next year, we really don't have an idea. Broadly, which is why 20,000 to 30,000 tonnes, I mean, we should -- if we lose 20,000 and add 20,000, I mean, that's not what we're in the business for, right? So gross, net addition of 20,000, 30,000 tonnes is where we expect this.

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Srinivas Seshadri;Mirabilis;Analyst, [145]

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It's 20,000 to 30,000?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [146]

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Yes.

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Srinivas Seshadri;Mirabilis;Analyst, [147]

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Okay. Okay. And like this specific issues, right, where these mines get closed. And this year, we have had two, I think, I probably not remember this happening in a single year. So do you think that in this industry itself, there are certain underlying shifts in terms of environmental things, which are...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [148]

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No, these are routine things that keep happening. I mean, I don't know how many people follow global mining. Indian companies don't have a global mining exposure, right? To for us, to follow all these smaller things. I think these are routine things that the companies go for shutdowns, closures, all of that. It's just that as we grow bigger, we become sensitive to some of these changes, that's all. I think there is something that we'll have to take in our stride, right?

I think the world produces ore, I mean, they're not going to 10%, 20% lower production because of some of these, right? There are still some total changes, which are not material in the big scheme of things.

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Srinivas Seshadri;Mirabilis;Analyst, [149]

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So you still don't see a pattern of this sort at a overall level?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [150]

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No, no, no.

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Srinivas Seshadri;Mirabilis;Analyst, [151]

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Okay, okay, okay. Sure, sure. And then, yes, just a repetition of somebody asked earlier. The last year was quite exceptional in the fourth quarter where you did 80,000 volumes. So was it also probably a result of some bit of stocking up by customers and all that? Or...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [152]

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No, no, these are just invoicing and confluence of lots of factors. We just hope that this quarter is also better, but nothing, no particular reason. It just happened that way.

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Operator [153]

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We take the next question from the line of Ashutosh Tiwari from Equirus Securities.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [154]

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I have just one question. So this Samarco mine, which you were supplying earlier 2015 and closed down. It's supposed to start in later this year. So have you heard anything from them as of now? Or not?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [155]

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Not really, but we are supplying, I think, a large part of their requirement. So as and when they start procurement, we will be first to do, for sure.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [156]

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Hopefully, next year.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [157]

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Okay. Okay. I think mine is supposed to start by the end of this year.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [158]

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Yes. That's what we've heard as well. But that's subject to a lot of things environment, so we'll see. We'll share ASAP.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [159]

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Okay. On this liner thing, I mean, because we have currently limited capacity. So we must be only doing to add a limited number of customers as well. Is that correct? So only when the plant comes up, we will enhance the trials that we're doing with different customers or we approach different customers, more customers?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [160]

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For mill liners, yes.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [161]

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See, again, when you go out and make such claims, we think we will increase throughput that's also not -- I mean, yes, it's a great outcome, but you will not have customers come and say, they're queuing up and saying, let's do, right. They'll have their own sets of concerns and own set of validation exercise -- exercises to get their confidence. So I think we're doing enough work so that when the plant's up and above, we'll have business to feed out of that.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [162]

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Okay. So as of now, gold will be the main thing over there?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [163]

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Not really. All -- iron ore, everything.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [164]

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Yes, we did -- I think we discovered, iron ore as well in India, but I think gold is something where probably maximum benefit is there?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [165]

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Not really. Not really. So that's a benefit that's there for all plants, right. Ore is in a situation where they can benefit. I mean, that's what we should go after, right? So we are going after it strategically where there's could be a potential grinding media, fall out of that. But then we are going to customers who already know us and trust our ability.

So we have to play very, very carefully. We don't have to get in the market and then we can't afford a failure, please. I mean, if we have then a failure, I mean, that puts a mark on a lot of future prospects, right? So we're going about very cautiously. But to go out and -- because wherever we have done the 3 trials, 4 trials, we have done the ability to bring along such material improvement is itself unheard in the industry, right?

So we just need to make sure we do firm and cautious steps. We don't do rash things just to get 10,000 more tonnes of volume.

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [166]

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And mind you, Magotteaux does not have EEMS.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [167]

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So we are the only one who can bring risk around this type of benefit.

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Ashutosh Tiwari, Equirus Securities Private Limited, Research Division - Research Analyst [168]

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I understand the part, I know the person's creditability, so I know that things.

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Operator [169]

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We take the next question from the line of Shreyas Bhukhanwala from Canara Robeco Mutual Fund.

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Shreyas Bhukhanwala, Canara Robeco Asset Management Company Ltd - Equity Research Analyst [170]

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So just one question. Last time, you spoke about some destocking done by...

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Operator [171]

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Sir, I'm sorry to interrupt, but may I please request you to, please, speak a bit louder?

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Shreyas Bhukhanwala, Canara Robeco Asset Management Company Ltd - Equity Research Analyst [172]

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Yes. Sure. Am I audible now?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [173]

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Yes.

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Shreyas Bhukhanwala, Canara Robeco Asset Management Company Ltd - Equity Research Analyst [174]

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Sir, last time, you spoke about destocking by some of our -- globally, basically, so how are things now? Are they -- are we seeing some improvement?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [175]

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Yes, yes. They look -- I mean, so we've not further heard of any reductions on that account.

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Operator [176]

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We take the next question from the line of Kirti Dalvi from ENAM Asset Management.

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Kirti Dalvi, ENAM Asset Management Company Pvt. Ltd - Analyst [177]

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Three questions, categorically. We have export benefits roughly -- we get roughly around INR 100 odd crores.

We have seen in many industries, lot of the semi IS and other export benefits being reduced or altered rates of benefits. Any take on that? Have you seen any impact or anything had changed for us?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [178]

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Yes, so you're right. So we've got about INR 80 crore, INR 90 crore exposure of export benefit. I think they're -- ever since I can remember, last 2006, we've got distant. Ever since, there's this hanging sort about what happens to export benefits if they go away.

Fundamentally, as I understand, having spent time on it myself and met people in the highest offices. The point is that this is not a subsidy, right? Unlike many of the countries, who get some or what is proclaimed in India, this is a remission of import duties, other taxes, right? You don't want export taxes and import duties.

So we're getting a total benefit of, say, 5% on our FOB price. We actually pay more than that in terms of net taxes and import duties and other things, that becomes a penalizing factor when you're competing in a global marketplace.

The government is just -- it's a remission. And to that extent, whether [5%] will become [4%] or it will become [0], we don't know. But I mean, this should continue. And that's the view we get when we talk to -- the government's intent is not to subsidize, it's to remit back the cost that exporters are penalized with. And to that extent, [80, 90] may become [60, 70], but not diminish -- we don't expect that to become 0 -- it cannot become [0 or 20, 30]. I mean, that's the broad view that we have as of now. And this is something we've been asked about for last 15 years and it's survived, right? But in a sense, conceptually makes sense.

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Kirti Dalvi, ENAM Asset Management Company Pvt. Ltd - Analyst [179]

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Sure. Second question, Kunal, you did mention that your effective tax rate for the current year would be around 20% to 23%, am I right on this?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [180]

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No. That is -- going forward, this year, it will be low because you had this onetime tax reversal that we have done on provision for other income, the deferred tax.

It will become a deferred tax line item. With that, you will still have -- we reversed the deferred tax, sorry. So the full year tax would be about 18%, 19% for this year.

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Kirti Dalvi, ENAM Asset Management Company Pvt. Ltd - Analyst [181]

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Okay. And so we are not opting for the new tax regime?

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Sanjay Shaileshbhai Majmudar, AIA Engineering Limited - Independent Director [182]

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We just have, which is why -- which is why it became 18%, 19%.

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Kirti Dalvi, ENAM Asset Management Company Pvt. Ltd - Analyst [183]

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And despite...

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [184]

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Gross effective is 28%, 29% or 27% last till now. It's become 18%, 19%, for this year, 22% to 23% going after normalizing for the onetime additional tax reversal we did this year.

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Kirti Dalvi, ENAM Asset Management Company Pvt. Ltd - Analyst [185]

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Sure. And the last one, if you could give cash figures, date and cash figure?

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [186]

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INR 1,700 crores. Sorry, I forgot to mention that INR 1,700 crores net cash.

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Operator [187]

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Thank you. Well, this was the last question in queue.

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Kunal D. Shah, AIA Engineering Limited - Executive Director of Corporate Affairs [188]

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All right. Thank you so much. Thank you, guys. Sanjay (foreign language) and I are available for any other questions. Feel free to reach out or we'll connect again end of May with the fourth quarter. And hopefully, some more guidance on where tonnages will flow here from. Thank you so much, and have a good evening. Thank you.

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Operator [189]

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Thank you very much. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Chorus Call conferencing services. You may please disconnect your lines now. Thank you. Have a great evening.