LMW Ltd

V Senthil- Thank you. Good afternoon, everyone and thank you for joining the LMW earnings call for Q1 FY 2024-2025. We will have a brief about the overall performance of the company for the quarter ended 30th June 2024, followed by an interactive session. I would also like to clarify that certain statements made and discussions at the conference may be forward-looking in nature. To begin with, let me explain the overall performance of the company. Then we will proceed to the segment performance and then consolidated performance.

Now I move to LMW China, with respect to the wholly owned subsidiary we have clocked a turnover of Rs 6.24 crores in the quarter compared to Rs 7.4 crores during the quarter ended June 2023 with a loss of around Rs 3.6 crores. The challenge in China has been that we are rebuilding the organization, and re-establishing the new products there and we anticipate this will be done during the current year.

Now we are moving on to MTD and foundry division, the revenue for the division for Q1 stands at Rs 206 crores compared to Rs 243 crores during the quarter ended June 2023. The division’s profit stood at around Rs 6.5 crores as against Rs 17 crores for the quarter ended June 2023.

Now, with respect to the aerospace division, the revenue in this division was Rs 39 crores in Q1 compared to Rs 40 crores during the quarter ended June 2023 and ATC has clocked in a profit of Rs 1.5 crores as against Rs 4.39 crores in the previous quarter. Exports contributed to more than 90% of this turnover and the metallic divisions turnover within this is around 80% is export

turnover. With this, I conclude my initial speech and we can now continue with the interactive session. Back to the moderator.

Moderator- Thank you so much, Sir. We would like to go ahead with the interactive session. I would request the attendees to please raise your hands if you would like to ask questions after communicating your name and unmute status. And we would request people please go ahead with raising hands. Attendees, please raise your hands. Sir, till now none of the attendees raised their hands, so we will wait for a few more minutes. V Senthil- Sure.

Moderator- So once again, I would request the attendees to please raise your hands if you would like to ask questions after communicating your name and unmute status.

The first question is by Mr. Chirag Jain.

Chirag Jain- Hi, Sir. Thanks for the opportunity. I was just figuring out how to raise hand before the timing, so that was the issue. Thank you for pointing it out. So, coming back to the question, I had few questions from the start. So, we have approximately invested Rs 200 crores in a UAE subsidiary. So, what's that planned for?

V Senthil- Okay, we will go ahead with all your questions. I will consolidate and answer it. Please go ahead.

Chirag Jain- The second question was on the Rs 1500 cr cash that March 2024, Balance Sheet reflects on. So, cash includes investments and cash-in-hand plus fixed deposits, that was updated in the annual report. So, what's the planned use for that? Third question, you mentioned about something re-building and re-establishment of Chinese subsidiary. So, what's the change you are trying to do to bring the revenues back to the old state that were around Rs 300 crores per year level? So, the fourth question was what is the current capacity utilization and the current number of working days in the plant? The next question is any update on the Autoconer and the Airjet that you planned to launch in FY 2026. Then the last question is on the spreads. It currently has improved in the cotton. So, do we foresee any orders that we have in hand?

V Senthil- Okay. Thank you for your question. Let me answer the first question, the plan for the UAE where we passed the resolution last time is the fact that we are looking at export business as one of the main drivers, because having a dominant market share within India, our focus is more on exports and being nearer to the customer counts a lot in the current situation. And we had explained this as well when we went in first establishing the subsidiary LMW Global with an assembly facility out of Dubai and now, we are bringing the subsidiaries because now we are sitting on multiple subsidiaries that is both China and Dubai. We are trying to bring in a consolidated structure for holding subsidiaries under the Dubai entity. That is the substance for the investment plan of the holding company.

With respect to LMW China, I think we have to put this in perspective. We could not go to China from 2020 onwards up to almost January or February of 2023. So those years what we had done was we were able to execute those orders. But as such, we used to have 11-odd people there for expats and we used to have closer to 100 Plus local Chinese, but unfortunately because of the issues we were down to only 1 person. So, we were really not able to get that part of the newer models and the latest machines out there to the Chinese customer. And the gap what we have noticed that those years are the one which is reflecting now, because the orders what we had we have finished executing that and now we are rebuilding the team. So, we now have a team which is there, a very experienced team which we have been able to send only in the last 12 months. So that was what I was mentioning that our team right now. This is not only re-building with the latest machines, but you know we have to rebuild the confidence with which we are continuing to stay there. We will continue to send people there as things become easier. So, there are a lot of

challenges which we faced and have overcome, that's what I meant when I mentioned about LMW China. The current capacity utilisation of the plant for textile machinery is closer to around 45%- 50%. We currently have a layover of one day so we work five days right now for the textile machinery and Foundry division. For machine tool division, of course, the other divisions we are working 6 days.

With respect to Autoconer as mentioned by our Chairman yesterday, we have placed around three machines with customers and two on the way. By Q4, I think it will start, it is a soft launch at the moment. So as and when further information we will be sharing and like you mentioned yesterday it will be post Jan 2025 and Airjet, yes, it is in the works. Again, yesterday it was mentioned that during the year 2025-2026, it will be out. It is a technically complicated machine from what we currently do, and we are working fairly well and advanced in that particular machine. With respect to spreads and the related order flow, you are right. I think the customers have started seeing better spreads now, but as you know, being in a Capex Industry and this is something which we are used to. And this is something which we have actually. It is not a surprise to us. It's only the fact that we have over the last 3-4 quarters seen the order flow coming down and we know that this kind of situation would come and that's why we have taken action even in last quarter itself to cutting down and as much as what we could do internally, we are trying to strengthen internally.

V Senthil- The next person is Mr. Ritwik Sheth.

Ritwik Sheth- Good evening, sir. So, there is one question from my end, you know, on Machine Tool Division, what kind of visibility are we looking, say that for the next three years, because, if we look at the last 12 odd quarters, we are in the range of Rs 200 crores to Rs 250 crores on a quarterly basis. So, you know, we are not able to break out of this range for the last few years, you know, wanted to understand, I believe we have commissioned another factory in this segment as annual report mentions. So, you know, what I wanted a sense of how are we looking at this business of the next three years in terms of capabilities and in terms of increasing the utilization?

V Senthil- As far as MTD is concerned, yes, you are right, we have kind of put into one additional facility that we have brought in for supporting this division. We are at a capacity utilization of somewhere from 64%-70% today, so, there is enough possibility for us to scale the business of what the current investments what we have already done. So, I will not be in a position to put a number. We don't generally put out a number there in terms of what we will do, but with the existing capacities, existing assets what we have, we have headroom for 30% within this particular division and with respect to the markets and segments, it is a constant need for innovation in this particular business and wherein you have to come up with specific products for specific segments.

And we have done that. We were able to bring for specific EMS, specific products. So, that is a constant part of the process. So, apart from this, we also have a policy where they say if you are reaching closer to 90% of capacities, then we go ahead and put in additional capacities for this facility. So as of now, like I said, since there's enough headroom, we don't see much of investment required till we go to the scale up turnover here and we are doing all that is required because this is a business which requires literally thousands of customers, both big and small. So, what is required is to reach out to customers and all that is being done in this particular division, as we believe that engineering going forward with all the schemes which the government has announced, I think this is a long-term positive trend for the Indian economy as well. So, I think we are very positive about the future prospects of this particular division. Thank you.

Back to Moderator.

Moderator- Okay Sir. We are moving on to the next speaker. Mr. Nirav. Please mute yourself.

Nirav- Good afternoon, Sir. This is Nirav. So, gentleman, my query was pertaining to Textile Machinery Division. So, currently the order backlog is of Rs 3380 crores as stated in the opening remarks. Can you tell me in volume terms, what would this order backlog be? Wanted to understand the kind of visibility that we have for dispatch of the machinery under Rs 3380 crores.

Second thing, what and how well are we placed for the automation part of the spinning and yarn machinery? Because that I believe can be a very crucial and differentiating factor and can those solutions be offered to existing asset base which is there for us? The third part is how do we foresee the implications of Production Linked Incentive as proposed for textile? Can that be a big volume driver for the industry as a whole and which can percolate down to strong demand for spares and machinery? With regards to the Machine Tool Division, how well where are we placed with the EMS i.e. Electronic Manufacturing Ecosystem in India, because that ecosystem in India is growing very rapidly and outlook is very strong. And especially if you can give some comments on the semiconductor part, because the mega capex is going to be done in India for semiconductor manufacturing. Can we be on trusted vendor for any of the vendors for these? These are some of my queries.

of supply chain, it will pull demand from us as well. Coming to the Machine Tool Division with the EMS system and the semiconductor part, with respect to EMS, yes, we are very much there. We have machining centers for this particular segment. And I was just mentioning to the previous person, Mr. Ritwik said in his question that the entire onset on machine tool business is to bring in the latest. Look at the segment, which is doing well and build machines for this. That is what we are we are in, so, the segment is fairly fragmented. Of course, the auto segment is a large part of machine tool business, probably consuming closer to 50% of the machine tool, but then you have a whole host of other segments of this business. We can talk about engines, aerospace and defence. Like there is a whole host of things which consume these machines, and these machines are not standard machines in a larger sense. It's not standard. What goes over pipe and fitting manufacturer would not fit into aerospace and defence or into a general engineering. In that sense, we have an EMS machine, but we should also be aware that today one aspect of it is that since we have got a very good relationship with Japan. We do understand that with Japanese currency being devalued a bit, so, there is a very strong competition from the imported machines, and we are not talking about Chinese or things like that. We are talking about a strong competition from good Japanese machines as well. Always this market had almost closer to 50%-60% in value terms of imported machines. But the fact that it has made it a little bit cheaper, I would say, for it to get imported and with the fact that the duties are non-existent in these cases, it is going to be a very interesting scenario going forward. But having said that, still this is a segment which is bound to grow. Engineering segment for the country is bound to grow and we are going to be part of that.

We don't make anything specifically for semiconductor industry. These machines do not go into that. So, there is no play for us in the semiconductor machine manufacturing space. Thank you. Back to you, Mr Shiva.

Moderator- Next speaker is Mr. Chetan Doshi.

V Senthil- Mr. Chetan, we can't hear you. Chetan Doshi- Am I audible?

V Senthil- No, Mr. Chetan. Not audible. Can you be a little bit louder? Please go on. I will try and work with what you got. Please go on.

Chetan Doshi- My specific question is regarding the ATC. ATC, your turnover for last year i.e. 2023, first quarter and current year, it is almost the same. And as far as profit is concerned, it has dropped significantly. So, the reason behind this is to why it is normally is a high profitable business for us, but how come this time it has dropped by almost more than 60%? And second question is, how we are going ahead, which will be our growth driver in coming days? Because this textile machinery is the division what we are banking on. At times it performs well, at times it doesn't perform well. So, what will be going ahead, and which segment will perform better, and that will be our growth engine in coming years. V Senthil- Any other questions? Chetan Doshi- No, thank you.

V Senthil- Okay. I think the ATC, the turnover is similar, but the margins are not there because ATC has to be looked at in terms of composite and metallics. I think we are doing well in the metallic segment and decent margins, but we are also investing in the composite. And as what was mentioned yesterday, even in the AGM speech, we are building the composite division, and the composite division is incurring cost at the moment. After a long time, we have been able to stabilize the metallics, and that's giving us good returns. But we will take some time to get the product mix, the component mixes right in the composite division. That is the reason you see that dip in the profit and that is the cost which is taken up by composite division. With respect to the growth driver question, textile machinery , We are engineering, and we are in Capex, take it both

the textile and machinery tool division are in Capex business. Textile is a lot more dependent in terms of both the domestic and depends also in the export market. And that is the reason we see the ups and downs, what we have seen. And like I mentioned already, we are able to anticipate.

We are experienced in handling this. So, we do move fast when we see such type of issues. But however, having said that, even machinery tool division, and I was just mentioning in the previous questions also, machine tool definitely is a growth driver within the domestic market because of all the reasons what we have already spoken about. And with respect to the textile machinery, it is definitely a growth driver with respect to the export business. And that is one of the reasons, and I was just explaining at the start for one of the questions as to how we are looking at doing more, being closer to customer, trying to establish that export business for textile machinery division. Normally, the way we see things wherever we operate, different countries keep growing at different speeds at different points in time, and that is a positive thing for us in the textile business. So, I think that is also a growth driver for us in the textile division. Of course, the ATC requires investment, and again, that's what we are doing. So, we are invested in the composite division. We had metallics, we have invested in composite, and we are trying to build that as well.

So definitely, MTD, exports in TMD, would be the larger chunk of it, and to some extent ATC as well. Thank you. Back to you, Mr. Shiva.

Moderator- Thank you, sir. Next speaker is Mr. Chirag Singh. Mr. Chirag, you are unmuted.

Chirag Singh- Hi, sir. Thanks for the opportunity. Sir, I had two questions for you. So, what's the current team size in China post the increase, that's the first part and the second part is what can be the peak revenue from our international and the Indian business? So that's the two questions I have.

V Senthil- With respect to people, we have close to half a dozen people right now or expats in China. And thanks to all the efforts by the embassy on both sides, we have been able to get visas last year and they are all gone there. Of course, within China, we also have the local people we have closer to 100 odd people is what we employ there. The second question was with respect to the international business, our general export turnover, if you add up over the last couple of years, I think would come closer to Rs 1,000 odd crores across the divisions and also across these companies. Thank you. Back to you, Mr. Shiva.

Moderator- Thank you, sir. The next speaker is Mr Pradeep Singh. Mr. Pradeep, you are unmuted.

You can just ask a question. You are audible.

Pradeep Singh- Thank you sir for the opportunity. I have a few questions, what is the future focus on EBITDA margins and how you see the company's growth and future prospect in revenue?

So, could you throw some light on its sir?

respect to margins, we look for better margins. I mean we have the history. You can obviously go back and see what margins we were having on machine tools and textile machinery. For us, the current situation depends on what it is, and to what extent. For the machine tools business, we are under price pressure because of the global scenario where the currency has, Japan has depreciated and that is making it cheaper for imports. So, definitely, we need to be aware of this and having said that, in taking a reference to as it is, our AGM call where our management has also very clearly indicated that we should have a good bottom line. I think the focus would always be topline but we will also focus on the bottom-line. Thank you. Back to you, Mr Shiva.

With respect to the cash balance, whatever you mentioned in the amount, it is closer to, Rs 330 cr would be customer’s. That is what we initially spoke about, the order book. So, that basically comes from that, where we have confirmed advances from customers. Back to Mr Shiva.

market share in that division and from what I have understood is the turning centers are at the import threat is very less compared to the overall machine tool industry where, maybe around 40% of the machines are imported. But regarding the turning centers which are basically in the starting or low realization or the basic machineries, where the import threat is less. So, if you can throw some light on how is the import scenario in the turning centers? What is our market share and how is the competition intensity that is rising in that space? So, my first question is regarding this. And Sir, as compared to other players of similar scale, like a Jyoti CNC or other peers like ACE Micromatic, how are we comparable based on capabilities with those players? If you can throw some light, because even we make those high-end 5-axis machines and even those players make those 5 axis machines, which are going into the EMS side. So, if you can throw some light on how are we focussing on those higher application machinery? What is our focus going forward, because as India as a country grows, it's manufacturing part, machinery demand would increase. So, what is our focus area, if you can throw some light on that? A similar question is regarding what are the import trends in those kinds of machinery. So, are Indian players willing to choose an Indian peer who supplies these machineries? Is there a trend towards an Indian supplier? So, is the market moving towards that direction? That is more of what is happening in the industry, overall, in the machine tools industry? So, if you can throw some light and how it is for the next 3 or 5 years? So, that will be a great help.

With respect to the international competition, currently, I would say it is a very dynamic and changing landscape. I think you have also got your numbers right. There, where you are saying close to 40% in terms of numbers, are imported, in terms of volume, but I think I am perhaps repeating it for the second time, but the fact that we have imported machines, many machines from Germens, Japanese, the Chinese, everyone is part of that segment. I think it is a fast-changing landscape, like I said. Perhaps quite different 5 years from now. We internally are also trying to see how we can give our best product because ultimately the challenge here for the customer who buys this machine, is that he needs per piece of the product to be the lowest. And when we talk about per piece, we are talking about the entire life during the life cycle of the machine, how he gets the best value, because, like I said, the maximum of these machines going in the auto sector.

It is a very competitive landscape. So, our customers are going there, bidding process, manufacturing parts, they have to be L1. So, they have to be, these machines have to give them that ability to bid for projects that let us say, are L1. So, the cost per piece matters a lot during the lifetime of these machines, and that is what everyone is competing for to give the best to the end customers for them to produce. But intense competition from foreign players, a lot of them are establishing here. They are putting up facilities here, because PLI mentioned, with support from the Government for MSMEs, I think it is going to be a very happening sector over the next few years.

Thankyou. Back to you, Mr Shiva.

We have a speaker, Mr Amit Shah. Mr Amit Shah.

Our current order backlog is Rs 3380 cr. If you can just highlight what is the execution timeline that we intend to complete this particular backlog. Secondly, out of this Rs 3380 cr, pardon me if it’s a repetitive question as I have joined the call slightly late, what is the active order backlog in this Rs 3380 cr. There has been a sharp dip in this particular quarter on the TMD revenue side.

What has been the reason behind this, given that the order backlog suggest that we can do far better execution and even the current utilization levels are very low. So, what is the reason? Is there any delay in the dispatch or the clients are suggesting a slight bit of delay from their end?

My other question was on the MTD side because we are quite optimistic about that particular segment and we have recently expanded the capacity. There has been a decline in revenue in this particular quarter. Is it more of a one-off kind of thing that given the first quarter was more like an election quarter? Is it because of that we have been facing challenges? Or is there some sort of slowdown in that? Secondly, with regards to 5-Axes machine, have we done the commercial launch for that? How has been the response for that? And what is the kind of opportunity this 5- Axes machine provides? These are a few questions that I have.

In terms of by when this will get executed, that is what we try to classify as active, which we expect to get executed in the next 12 months. Off-course, this is subject to, see, we don't manufacture until, we manufacture once there is a commitment. These are all capex machines.

We can not have them on hold. So, yes, we have capacity utilization in the range of about 40%- 45%; (45%-50%) and I think we have to, this business is in terms of capex. So, we are doing a lull. We prepared for it. We are experienced in handling it. So, we are handling it and doing all that is required to sail through this tough time. Having said that, at least last quarter, the margin seems to be a little bit better for the customers. So, we hope that in the next two quarters, this would revive back. With respect to MTDs, yes, for us also, it appears to be, we do not see that this would, we are assuming based on all the inputs that we get from the market that the last quarter dip was a little bit of one off. The 5-Axes is not commercially launched as of now. So, when we launch, we will definitely keep you informed about that. I think that covers all the questions. Back to you, Mr Shiva.