RACL Geartech Limited

The call transcript from RACL Geartech Limited’s Q1 FY 2024-25 Earnings Conference Call, held on August 23, 2024, discusses several key points related to the company’s performance and outlook. Here is a summary:

Participants:

• Mr. Gursharan Singh (Chairman & Managing Director)
• Mr. Jitender Jain (Chief Financial Officer)
• Mr. Prabh Mehar Singh (Vice President, Finance & Operation)
• Ms. Neha Bahal (Company Secretary & Compliance Officer)

Key Discussion Points:

1. Global and Market Challenges:

• The management acknowledged global challenges, including economic slowdown, high inflation, and geopolitical tensions, which are impacting performance across the industry. The company expects these challenges to be temporary.

2. Q1 Performance:

• RACL’s revenue grew by 18%, but there was a decline in EBITDA and profit before tax due to various factors, including increased raw material costs, product mix changes, and customer inventory reductions.
• The company faced unexpected order cancellations and inventory adjustments from European customers, leading to underperformance compared to internal sales targets.

3. Operational Adjustments:

• The company has implemented measures to improve operational efficiency, including reducing third-party manpower, optimizing equipment usage, and renegotiating payment terms with suppliers.
• Investments in green energy initiatives, such as a 4 MW solar power plant, are expected to reduce power costs and enhance sustainability.

4. Outlook and Strategic Moves:

• Management anticipates a stronger H2 compared to H1, expecting a 20-25% increase in performance, driven by stabilization in customer demand.
• Despite the current challenges, the company remains focused on long-term growth, with ongoing investments in capacity and technology to meet future demands.
• New business opportunities are being explored, including potential orders from European and US markets, as well as growth in the electric bicycle market.

5. Financial Health and Debt Management:

• The company is aware of concerns regarding rising debt and is taking steps to manage working capital and reduce long-term debt. The focus is on balancing growth investments with financial prudence.

6. Domestic Market:

• The domestic market, though traditionally lower-margin, is showing growth potential. The company is engaged in discussions for a significant business opportunity that could positively impact performance.

7. Investor Queries:

• Investors raised concerns about the impact of deferred customer orders on growth and the company’s strategy to manage debt. The management reassured that these issues are being actively addressed and that RACL remains on a growth trajectory, albeit at a slower pace than in previous years.

Conclusion:

RACL Geartech is navigating through a challenging period with a focus on maintaining growth, improving operational efficiency, and exploring new business opportunities. The management is confident that the current global challenges are temporary and that the company is well-positioned for future success.