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Steel Strips Wheels expects margins of over 20% on new MOU; says order value could go up to $130 million

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Steel Strips Wheels expects margins of over 20% on new MOU; says order value could go up to $130 million

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Dheeraj Garg, MD, Steel Strips Wheels is of the belief that the $100 million MOOU with Western Hemisphere has the possibility of getting extended after three years and the order value could go to $120-$130 million going forward.

Steel Strips Wheels has signed a memorandum of understanding (MOU) for over $100 million with Western Hemisphere. The company is also set to hold a board meeting on September 3 to consider a stock split.

“The margin on the business would be plus 20 percent and the sales are likely to start this month. Going forward, the aluminium wheels sale would start sometime in December. The volume would be close to about Rs 800 crores and all raw material costs would be passed through as it was a part of the agreement,” specified Dheeraj Garg, MD, Steel Strips Wheels, in an interview with CNBC-TV18.
According to him, the best thing about this MOU is that it would be extended. “Every three years, when we finish the MOU, and if we perform well, it would be extended for another three years. So it's long term, not a short term business. This is our biggest customer in the western hemisphere, which buys both steel and aluminium wheels,” he said.
When asked to break up the $100 million order win into steel and aluminium business and how much of the order win would flow into FY22, FY23 and FY24 since it was for a period of three years, Garg said, “The majority of the flow would happen next financial year onwards because we would develop all the wheels by then. But I can only tell you that the aluminium wheel business is going to be about 35 percent of the total business. This 35 percent is the minimum number and it can go up depending on how we perform and the number could very well be 50 percent as we go forward and the $ 100 million number could also go up to around $120 and $130 million also.”
“I would say, if you have to divide this year by one-third, this would be close to about 25 percent of the total $100 million,” explained Garg,
For the entire interview, watch the accompanying video
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