Kross: Strong Growth In Financials Over Last 3 Fiscal Years

NDTV Profit

Watch Kross: Strong Growth In Financials Over Last 3 Fiscal Years - NDTV Profit on Dailymotion

Transcript

00:00We are joined by Mr. Kunal Rai, who is the Director and CFO at CrossLimited, who joins

00:04us now.

00:05Welcome to the show, Mr. Rai.

00:07You know, overall, if we see your financial performance in the past three years, the kind

00:12of growth that you've seen is extremely, you know, impressive, but Q1 somehow has remained

00:17muted.

00:18Revenue growth was only 2% and net profit was down around 4%.

00:22So I want to understand as to, you know, how has Q1 performance overall been like and how

00:27is FY25 shaping up?

00:30Hi, good morning.

00:32So the last three years have been good.

00:35We've seen a CAGR of around 44%.

00:39But Q1 has been, you could say muted.

00:43But if you compare it to quarter one of the last financial year, you know, we've seen

00:50a 2% growth.

00:52And the MNHCV segment, you know, in H2 should be performing better.

00:58Not to forget, we had elections during the first quarter and the impact of elections

01:05were there probably on the infrastructural activities and there were a lot of apprehensions.

01:10So quarter two, sorry, H2 should be better than the H1.

01:16Namaste, Rai, good morning and thank you so much for joining us today.

01:20Firstly, many congratulations on, you know, listing and this is your first conversation

01:24post-listing as well.

01:25So many congratulations for that.

01:27I just wanted to take, you know, a step back from Q1 because you have mentioned that, you

01:30know, the first half has been very, you know, subdued for MNHCV as well as, you know, the

01:36tractor segment.

01:37So that will affect you as well and H2 is what you are targeting for a better recovery.

01:41I just wanted to understand the current split between, you know, the commercial vehicle

01:46segment and the tractor segment for you because the kind of components that you supply to

01:51the MNHCV side is much higher and please correct me if I am wrong, compared to the tractor

01:55segment.

01:56So what is the current split between them and is margin also largely stable between

02:00the 10 to 12 percent for both these segments?

02:03Yes.

02:04So the margins are quite same if we compare it to the MNHCV component business and the

02:10tractor business.

02:11The tractor business in H1 is doing well.

02:15I mean, you know, till the time the rains are there up to Diwali, the tractor OEMs are

02:22performing well.

02:23However, the MNHCV segment has seen a bit of a slowdown and degrowth in volume, especially

02:31in the month of July and August.

02:33But as far as our revenue split is concerned, within the MNHCV sector, we are also there

02:38in the trailer segment.

02:40That is with the tractor trailers, manufacturing trailer axles and suspensions.

02:45And what is happening in the industry is that there is a huge shift happening towards higher

02:52tonnage vehicles.

02:53The OEMs are seeing a requirement which is growing for higher tonnage vehicles, that

02:58is 40 tons and above.

03:01And that's where the volumes are increasing.

03:05And on the revenue split, we are still at around 44 percent of our revenue coming in

03:10from the trailer segment and close to 9-10 percent from the tractor segment.

03:15The balance is with the MNHCV OEMs and the large tier one companies in our component

03:22business.

03:23Right.

03:24So take a point, H1 likely slow.

03:29How strong is H2 going to be and how strong will FY25 full year be?

03:33Can you do 25 percent plus on your top line for FY24?

03:38See, as far as FY24 was concerned, the MNHCV segment didn't see any growth as such again.

03:46But our tractor trailer segment grew by around 38 percent and we saw growth of 27 percent.

03:54So even if there is no growth in this year, we'll still try to be doing better than what

04:01the last year has been.

04:03And H2, yes, the numbers which are being indicated are better from the OEMs, but we'll have to

04:10wait and watch how it pans out in the next six months of the year.

04:17Sorry, so slightly softer guidance coming in.

04:21I want to understand, will it be double digit at all in FY25?

04:25Is that something that one can expect?

04:28In the industry?

04:30For you in particular?

04:33As I said, yes, we would be trying to do a double digit growth.

04:38But also it depends on how the balance six months goes with the MNHCV segment, the tractor

04:46segment.

04:47The trailer segment, we are already doing well in it.

04:50As I said, it's constituting 44 percent of the total top line.

04:55And our focus is towards the exports as well, you know, with the customers in Sweden and

05:02in Japan, things have kicked off there.

05:05We're doing mass production for these two customers as well.

05:09And we are focusing on our projects.

05:11We're looking into getting into the axle beam extrusion soon, that would benefit our top

05:18line and margins as well.

05:19Right.

05:20So, Mr. Rai, as of now, your manufacturing capacity stands at roughly 60,000 trailer

05:25axles and suspension.

05:26I want to understand what is the capacity utilization like right now.

05:30And by the end of FY25, where will it be at?

05:35So, on the capacity utilizations, we are at approximately 70 percent, okay, and we plan

05:44to be getting into the axle beam extrusion by this year end.

05:50And that would take our capacities even higher for our trailer axle manufacturing.

05:58As far as the capacity utilizations are concerned, we really split it into two.

06:03We're investing in our forgings.

06:06We're getting a couple of forging presses as well from the IPO proceeds.

06:12And we already are in manufacturing castings as well, and we're setting up a new line in

06:19the foundry as well.

06:20So, from the forging and casting point of view, we're looking at utilizations of around

06:2565 percent, machining with around 70-72 percent.

06:30Now, just a couple of questions, Mr. Rai, on firstly, your manufacturing facilities.

06:35Now, you have all five of your manufacturing facilities in Jamshedpur itself, and we did

06:40speak about this in your pre-IPO conversation as well.

06:44How are you effectively competing with most players, especially in the southern market?

06:49Because we have seen that, you know, wild players in the northern market have been doing

06:53well.

06:54The western market has been doing well, much better in the western part of the country.

06:57So, just wanted to understand that you also are investing in a new plant with the IPO

07:03proceeds.

07:04What is the future plan to diversify away from, you know, the concentration of manufacturing

07:08plants in one, you know, in one part of the country as well?

07:12And how are you dealing with competition bases on this part?

07:16So, you know, since the beginning, we've been, we've concentrated on all the manufacturing

07:23being at one location, that is in Jamshedpur.

07:26Now, having a different forging setup and a casting setup, these are all, you know,

07:32very high asset valued, and it cannot be at different places of the country.

07:38So, we've basically got everything integrated at one place.

07:43Also, what helps us in being competitive is being backward integrated.

07:50We set up our casting unit in 2022 only to manufacture brake drums and hubs for our trailer

07:58axles segment.

08:00So, we are competitive because we've got everything in-house, right from machining and heat treatment

08:08and castings and forging.

08:10So, diversification of plants is not going to be happening out of the city.

08:17We've got warehouses close to our customers to serve them with deliveries.

08:23Right.

08:24Mr. Rai, you know, your top five customers right now contribute roughly 66% to your total

08:29revenue.

08:30So, I want to understand that how are you planning to diversify your customer base,

08:34you know, because this could be a bit risky, you know, top five customers, you know, contributing

08:40almost 66% to your revenues.

08:43So, it's not that we have a very large plan to change that, you know, we look at not that

08:51as a risk, but it's only opportunities.

08:55All these OEMs and big, large tier one companies, we've been associated with them for many,

09:00many years.

09:01Okay.

09:02It's been more than 20-25 years that we've been associated with them.

09:06And in our top five customer lists, it's not that there's only somebody from the MNHCV

09:12segment.

09:13We've got Tracto OEM in that, we've got MNHCV companies in that.

09:17And we also have trailer axle and suspension fabricators, trailer fabricators in that top

09:26five customer list.

09:27So, we've been quite diversified as far as our client base is concerned.

09:32Our top customers is just at 19-20% of our total top line.

09:37So, we're not looking at it as a threat from there.

09:41But going forward, we want to expand on our exports.

09:44Sure.

09:45Thank you so much.

09:46It's been a pleasure speaking, understanding CrossLimited better.

Category

Transcript

Recommended