Wheels India Ltd. (WIL) has decided to reduce capital expenditure (capex) for FY23 by 25% to ₹150 crore following rising interest rates, increase in input costs and a huge inventory pile up on cancellation of orders by some overseas customers, said a top official.
“We are deferring some of the earlier planned capex and cutting down the inventory to manage the interest burden,” Srivats Ram, MD, told reporters.
“The RBI has been raising the interest rates which, in turn, has increased our finance cost. The interest cost took us by surprise. In the last six months, it went up from ₹28 crore to ₹42 crore and the raw material costs from ₹1,193 crore to ₹1,718 crore,” he said.
Earlier, WIL had set aside ₹200 crore for capex. This would be scaled down to ₹150 crore, of which ₹86 crore was incurred in the first half.
According to him, WIL faced logistics issue in the first quarter. It spilled over and some overseas customers cancelled their schedule for four months from August.
“We can’t keep the factory idle for this period. It is only a temporary one. We hope to do well in CY23 and CY24. We also see pent up demand for passenger vehicles and commercial vehicles,” he said.
“Over the last 15 months, input costs have gone up by 40-50%, while it was down by 10% in Q1. It is expected to go south. We are trying to solve the issue by factoring debts, reducing inventories, cutting down capex and improving free cash flow,” he said.
Talking about exports, he said that last fiscal, they did about ₹1,000 crore. This year, it would be a tad lower due to recession in the U.S. and European markets. Export contribution during the first half was 23% to overall revenue of ₹2,166 crore.
WIL, meanwhile, reported a 29% contraction in its standalone net profit for the second quarter ended September to ₹15 crore. Revenue from operations were up 22% to ₹1,109 crore.
“The revenue growth was driven by a good recovery in the domestic CV market. Exports have been impacted especially in retail segments in the U.S. & EU,” he said.
The auto components manufacturer commenced production of machining of large castings for the Windmills at its Thervoy Kandigai plant.
On the outlook, he said, “We expect air suspension business to do well in the second half on the back of the recovery in the bus segment. It is expected that Q4 revenues will be decent across segments.”
Recently, WIL showcased its newline of products at IAA Transportation Expo and received good response from a number of customers. “We will develop these products and expect to roll out in December/January timeframe,” he said.
On Tuesday, WIL appointed P. Ramesh as CFO.
