Alicon Castalloy hosted a conference call on Feb 13, 2025. In the conference call, the company was represented by: Mr. Vimal Gupta – Group CFO, Mr. Shyam Agarwal – General Manager (Marketing) and Mr. Rajiv Gupta – Head of Domestic Business.

Key takeaways of the call

In Q3 FY25, the company experienced a decline in demand and consumer confidence due to uncertainty surrounding tariffs and regulations. This was accompanied by some customer specific challenges.

Revenue growth was affected by weaker demand in major export markets like Europe and North America, as well as challenges in specific segments such as EVs and CVs.

In Q3 FY25, profitability and margins were affected due to an unfavorable product mix.

In Q3 FY25, Global Auto Industry witnessed 4.6% YoY degrowth in volumes. In contrast, the Indian Auto Industry reported a healthy performance with 6.4% volume growth, driven by the 2W segment.

PV inventory levels improved marginally, indicating a better supply-demand balance but still requiring close monitoring. The outlook for PV sales is aided by December purchases spilling over into January for a "2025 model year" advantage.

Growth in the 2W segment was driven by new model launches, strong wedding season demand, and improved financing options.

The CV segment is expected to benefit from resumption of infrastructure spending as well as from higher freight rates and strong passenger carrier demand.

In Q3 FY25, EV business contributed 18% to total sales.

Freight costs have risen impacting cost of doing exports. The domestic business continues to do well with slight slowing in larger vehicles offset by pick up in two-wheeler business.

The company is adding capacities to cater to demand.

Total order bookings stands at Rs 9500 crore, which are executable over 5 years.

In Q3 FY25, the company booked 7 new parts from 7 customers. This includes 4 parts from ICE, 2 parts from Non-Auto business, and 1 part from the structural business. In terms of geographical diversification, 5 parts are for the domestic market and 2 parts for the global market.

The company is Ready to tap opportunities arising from (1) Preference for Carbon Neutral tech such as hybrid, EV, fuel cells and hydrogen cells, (2) Staggered introduction of vehicle scrappage policy and (3) Thrust on higher fuel efficiency & light-weighting of products.

The company is building capabilities for new technology platforms in the automotive industry.

In Q3 FY25, Manufacturing facilities operated at utilization levels of around 72%.

In Q3 FY25, Auto business contributed 96% to total revenue and Non-Auto 4%.

In Q2 FY25, Domestic business contributed 76% to revenue and Global 24%.

In 9M FY25, Domestic business contributed 80% to revenue and Global 20%.

The company is not reliant on a single ‘anchor’ customer, as none of the customers contributes greater than 15% of turnover.

Management has guided a capex of Rs 20-25 crore for Q4 FY25.

Management commentary: Mr. Rajeev Sikand, Group CEO, Alicon Castalloy said, “In the backdrop of a challenging macroeconomic environment, Alicon Castalloy has delivered a resilient performance in the third quarter, recording revenues of Rs 393 crore. The quarter was marked by weakness in demand, softening of consumer sentiment and caution due to uncertainty around tariffs and regulations. Topline growth was impacted by softer demand in key export markets such as Europe and North America, weakness in certain segments like EVs and CVs as well as production shutdowns at customer facilities. While this was partially offset by improved demand for two-wheelers in India, the increased 2W business could not fully compensate for the overall revenue impact. Profitability and margins were affected due to an unfavorable product mix, as higher margin volumes from EVs and CVs declined, while the share of two-wheeler products increased. Additionally, an adverse geographic mix, coupled with some upfront investments has further impacted margins. Despite these near-term challenges, we continue to take strategic measures to mitigate cost pressures and optimize our operations, ensuring a more balanced portfolio across vehicle segments and regions. We believe we are nearing the bottom of this slowdown in the global industrial cycle. The long-term growth potential of our industry remains intact, and we are well-positioned to capitalize on emerging opportunities. Our strategic initiatives focused on product diversification, expanding market reach, and strengthening our leadership position, will drive sustained success and value creation for all stakeholders."