Vinay Sahane Vice President Finance of the company addressed the call.

Highlights of the call

The company enjoys a strategic global presence and sells its clutches under LIPE a world renowned brand.

Sales grew 21% on yoy basis and 8% on qoq basis.

Sales of Rs 145 crore December 2017 quarter along with optimization of operating costs have resulted in significant improvement in EBIDTA.

PAT jumped 279% to Rs 11.27 crore.

Generally the momentum in the market is correctly reflected in H2 performance.

The company will continue to dominate the OEM and after market segments.

December 2017 quarter witnessed strong growth in volume as in previous quarter post GST implementation.

The management expects the trend to accelerate in the next quarter as well as coming year.

Investment of Rs 42.65 crore in preference shares has been fully redeemed.

The company has 2 manufacturing facilities in India and 1 each in the UK and USA.

It is the 3rd largest clutch manufacturing company in the world by volume and commands around 85% of the OEM M&HCV clutch market in India.

For Lava Cast Pvt. Ltd, after stabilizing operations in H1, H2 performance will be better. Q4 performance will also reflect the positive trend. Lava Cast is 80% subsidiary of Setco.

Business development with OE CV manufacturers are progressing satisfactorily.

Lava Cast Pvt. Ltd will see initial orders in next 2 months. This business will have significant impact on revenues and profitability during FY19 on consolidated basis.

Lava Cast installed capacity is 27-28000 tons PA.

Q4 will be best quarter for Lava Cast because it will be on a very low base.

Lava Cast Pvt. Ltd could clock sales revenues of Rs 90 crore in FY 2018, out of this 90-95% will be to Setco.

Average cost of borrowing currently is 10.25%. With improved performance and credit rating this should come down.

OEM accounts for around 1/3 of total revenues. 60% comes from auto market and the balance comes from International market.

If the government is able to scrap vehicles older than 15 years, then there is less capacity to replace these vehicles. So it will be a good problem for the company. Also the OEMs are augmenting capacities to meet the demand. How the new Auto Policy will be implemented is a different question.

US is seeing better than expected pick up. Also there is traction in Russian market.

American subsidiary has started making profit. British Subsidiary is close to breakeven but is not making profits yet.

The company meets almost 100% requirement of Tata Motors, Bharat Benz and Eicher Volvo and around 65% demand of Ashok Leyland.

The company controls major share of the organised replacement market through OEM and own distribution networks.

MHCV production during the quarter increased 19%.

Over last 2 years the company has developed range of products required to meet international market.

Production / sales of these new range of products have started early in FY 2018 which enabled exports to record 18% growth.

The growth in exports is further likely to accelerate in the next financial year.

There is increase in OEM demand.

Exports as well as sales of new products in the Tractor segment will further drive the growth.

Sales during Q4 is likely to grow in the range of 15-18%.

With increase in sales, improved operational efficiency and effective control over costs, EBIDTA in Q4 will be protected in spite of increase in commodity prices as well as customs duty.

The rise in commodity costs will be passed on to the customers effective April 2018 which will ensure increasing trend in EBIDTA during the next year.

Its balance sheet and cash flow have significantly improved, because of redemption of entire preference shares investment of Rs 42.65 crore.

In FY 2018 OEM sales growth will be driven by improved outlook regarding growth of Indian economy and strong demand for MHCV.

Mining segment, infrastructure, road construction, housing will drive further growth in FY 2019.

Restrictions on overloading as well as much awaited policy on scrapping of old vehicles will further boost demand for MHCV.

The company hopes of acceleration in sale of clutches to farm equipment segment (Tractors) from FY19 onwards.

It expects to receive approvals from 4/5 OE customers in next couple of months in the farm equipment segment. These orders will further improve the volumes. This could add around Rs 150 crore to sales.

In FY 2019, international business will see significant acceleration in sale of clutches developed over last few years in North American market.

The company's development and marketing efforts in Middle East, Africa and South East Asia will expand its market through consolidation and deeper penetration

Driven by better utilization of capacity, improved operating efficiency due to Lava Cast Pvt. Ltd., cost optimization and better working capital management, will significantly improve EBIDTA margin in FY 2019.

The management is confident that the company is well poised to achieve consolidated sales of Rs 1000 crore by FY 2020.

Working capacity requirement is around Rs 120 crore and the company will try to tighten it.