Automotive Axles Limited (505010) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon. And welcome to the Automotive Axles Limited Investor Call, organized by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the conference over to Mr. Sailesh Raja. Thank you, and over to you, sir.

Yes, good afternoon, everybody, and thank you for joining us for Automotive Axles Limited Fourth quarter of FY '21 Earnings Conference Call. So during this call from the management side, we'll be hearing from Mr. Thimmaiah, MD and CEO of Meritor India; Mr. Muthukumar, Executive Director of Meritor HVS; Mr. Kumaradevan S., Senior VP and the Whole-Time Director, Automotive Axles; and Mr. Ranganathan S., CFO, Automotive Axles Limited. Now I would like to turn the call to Mr. Thimmaiah for the opening remarks, followed by Q&A. Sir, you may begin now.

Okay. Thank you very much for joining in today. And I know it is very difficult time. I presume that all of you are in good health. And I also request you to be safe, you and your families. With that, I would go into the Slide #2. Maybe I will ask Ranganathan to talk about the Slide and then I'll come back in the last to take question and answers.

Yes, very good afternoon to all. In the mid of COVID, we are having this meeting. I hope all of you are safe and good. As most of you might have seen the presentation. As you see, Slide #2, the overall revenue for the 2021, we did about INR 913 crores with an EBITDA at 8% that's INR 73 crores. And PBT at INR 30 crores at 3.31%. The great rebound of the market and improved performance of us in the Q4 really accelerated the results for the whole year. Of course, the general information, most of them must be knowing about running the [ COGS ] regularly, the manufacturing locations are at Mysore, Jamshedpur Pantnagar and Hosur. The joint venture, an equity share partnership by Meritor and Kalyani each by 35.5% and general public institutions by 29%. [Audio Gap] one shift and another shift, we ensured that we have a 30 minutes gap so that the existing people can go and entry is very smooth and clean. And strict adherence, especially with the temp check [Audio Gap] is also another point, we ensured that -- ensuring they are wearing masks and also the social distancing and continuously advising them and counseling them. Also, we've been very meticulously been doing in the last 2 to 3 months. And also, the communication to the employees are happening through bulk SMS, video messages, through mails and all the mass communications. Just about the broader approaches on the initiatives as a corporate, we have been doing for the last few months to cope up with the COVID. I think we're largely able to control it and things are well in control. And some of them who have seen the presentation would have seen that in some of the pictures we have loaded where the COVID Care Centers, 100 beds what we have created. It has been operational now. So it has got ICU beds, 26 numbers; semi fowler beds, 60 numbers. It has monitors, ventilators and syringe pump, all the facilities and stretchers, crash cart, everything is available. So we fully fitted medical facility to cope up with the current situation, you've seen, now up and running in Mysore. You can see the pictures in the presentation, unfortunately, I can only run it through. With this, I finished the introduction. With this, I give this to Mr. Kumaradevan to take up the next few slides.

Okay. Thanks, Ranga. I think the next few slides, indicating the market and customers, I think all of you are already familiar with. We -- our products cater to diverse end markets, catering to trucks, buses, trailers, off-highway vehicles and military vehicles. And our major customers include people like Ashok Leyland, Tata Motors, Mahindra, Daimler and also people like Volvo and Caterpillar. So going forward, in terms of the product range, again, I think all of you are familiar, I need not dwell on this. And going forward, I think a few slides on the kind of facilities what we have created, the kind of initiatives what we have taken up internally in order to improve our efficiency, quality and long-term performance. One other initiative which we have taken up recently which we completed is the installation of a new axle assembly plant, which is Industry 4.0 enabled. So this plant is equipped with robotic painting and the complete factory and start to end is enabled with Industry 4.0 infrastructure. The capacity of 20,000 axles per month is available with this new facility. And the paint shop, as I mentioned, is the robotic paint shop and all the equipments and the paint shop, they're all connected. They're all traceable in terms of both performance parameter as well as process parameters and quality parameter through Industry 4.0. And also, the digitalization in terms of online decision making is enabled through the kind of digital MIS that we generate with this 4.0 environment. Issues related to hourly production, our quality, our breakdowns, they're all traced, tracked and digitally informed to the respective people, so that the decision making is very quick, online. And also, we have rich bank of data, which can get accumulated, which will be used for long-term performance analysis and improvement actions. Going forward, apart from the NX plant, the final assembly plant, which we installed with Industry 4.0, we are also in the process of installing other new lines. Meaning, Diffcase assembly line is one new, such new line, which is getting installed, which will accommodate some of the new models what we have recently launched as part of our NPD. Similarly, the Pinion assembly line, the Drive head production line and also the Diffcase machining line. So all these lines are all automated lines. Some of them are semi-automated, some of them like Diffcase machining line is fully automated. And all of these lines are capable of accommodating all the new models and variants as part of our new model strategy. And all of these lines are also industry 4.0 compatibility. And Industry 4.0 initiatives are already taken up in all these lines as part of the overall initiative. Apart from that, I think you all know about the technological capabilities of Automotive Axles. All our key activities, whether it is welding, machining, gear cutting or assembly, so they're all equipped with latest contemporary technologies and infrastructure. So all the lines are equipped with state-of-the-art machineries, state-of-the-art measuring equipment and monitoring systems. So this particular legacy, we continue to drive in all of our areas. So these are all the few points, which we thought we highlight in terms of our in-house initiatives in order to drive our efficiency and quality. Going to financial results, I would like to again request Ranga to take it forward.

Thank you, Kumar. We appreciate it. On the financial results, all of you know, the last quarter, we rebounded with good results of INR 426 crores of revenue compared to last year, INR 171 crores, close to about 149% growth compared to the year-on-year. EBITDA stood at 10.8% as compared to 8.9% last year. In terms of absolute value, we have shown about close to about 200% growth in terms of absolute values. And when it comes to PBT, we are at 8.5% compared to the 3% in the last year. And close to about 500-plus percentage growth in terms of the PBT as far as this quarter is concerned. So overall for the year, we are able to manage the first quarter -- sluggish first quarter and a slight recovery in the second quarter. Largely, the performance was related to -- our normal level started only in the H2. So whole year, we did the sale of about INR 912 crores and as compared to INR 959 crores the previous year. It's close to about 5% lower than the previous year year-on-year. EBITDA, we were able to get about INR 729 million, INR 72.9 crores, which stood at 8% for the overall year as compared to 10.5% last year. It was down by 27% in absolute values. Also, the PBT about INR 30 crores as compared to INR 60 crores the previous year is close to about 49% down compared to last year. Another point, as we said and I already talked about the Q4 spring last year to this year. And if you really see the production in commensurate with the sales from Q1 to Q2, we did get 300%; and Q2 to Q3, it's about 80%; and Q3 to Q4, it's about 45%. We are expecting -- this quarter looks to be very, kind of guessing, at this moment of time, it's a reasonable estimate. We might be down about -- close to about 40% as compared to last quarter. But of course, we need to wait and watch how the OEMs going to respond by end of this month to the next month, it depends on that -- this might fluctuate plus or minus. As I said, the focus -- to drive the growth for this year, definitely our focus is on the margin improvement. Some of the pressures are obviously the Q3 and Q4. We had the commodity price increases. That is one of the factors influencing the results in terms of the -- especially in terms of the percentage, there is not a good base impact. And definitely, our focus is to continue on the revenue improvement, cost reduction and also new product development as part of our Mission 25 strategy and we'll continue to focus on growth -- on our bottom line. So as we continue with the no capital borrowing, of course, there is no interest on the financial at this moment of time. And as we said, as a closing, the COVID, as of now, largely affecting us in May in terms of the business and also the OEM is also not fully operational in the month of May, definitely, there will be some impact in revenue for Q1, but we have to wait and watch how the market reopens in the month of April -- in month of June, sorry. So with this closing remarks, I give next few slides to be finished by Mr. Kumaradevan.

Okay. Thanks, Ranga. I think moving forward, I think our key strategic initiatives to manage business is with 3 major aspects: one is to drive the growth strategy of the business with new business opportunities, with new markets and also with new products and variants what we can develop for our customers. So driving the product development initiatives, driving business like e-mobility and also digitalization in the product as well in the process, they remain as a key business growth strategy initiatives. Second is to continue to focus on enhancing the cost competitiveness of the organization. So all that cost reduction measures in terms of material cost through value engineering initiatives, through cost-reduction initiatives in the shop floor and also the fixed cost reduction, including the white-collar and blue-collar productivity. So all these initiatives are continuing to get driven relentlessly in order to keep enhancing the cost competitiveness of the organization. The third is to ensure that we have robust processes and systems in place, good state-of-the-art practices in place, which will ensure safe working environment, which will also ensure long-term stability and sustainability of the operating -- operations on the business. So these 3 will continue to remain as our focus areas. And all our sub-initiatives and projects will be revolving around this going forward. Now okay, coming to the last slide, which tries to depict what is the kind of growth that we had in the last 5 years. There is a correlation in the top graph to show the production volume in the M&HCV segment in terms of number and the kind of revenue that we generated at our end. And all the Mission 25 initiatives, which we explained in our previous meetings, like growing revenue, enhancing profitability, new business wins, driving operational excellence, creating customer value proposition. So all these key Mission 25 parameters are continued to get driven with appropriate projects and sub-initiatives in the entire organization. So all of them are on track, and the management team reviews it very closely in order to ensure that this long-term benefit is accrued for the organization. So that's all from our side as part of the presentation. I think now we are probably ready for the question-and-answer session.

[Operator Instructions] We have a question from Mr. Jay Kale from Elara Capital.

Congrats on a good set of numbers. Sir, my first question was on your revenue outperformance. You've seen that you've grown quite well on a sequential basis, around 57%, outperforming the M&HCV volume growth. Just wanted to get a sense how much of this could be because of the price increases that you have got -- you would have taken from the customers because of the raw material inflation? And how much would be some bit of content led and the business opportunity led? That would be my first question. And second question is on, again, on the raw material side. How do you see it going forward? How much of the cost pressures you recovered from the OEMs? And how much you would recover in the following 1 or 2 quarters?

Muthu, do you want to answer the second portion and then maybe Ranga can take the first one.

Yes. As far as to your question about how much the commodity influencing the top line, it'll be around 7% to 8%.

Okay. 7% to 8%. Okay. Okay. And on the outperformance?

Ranga, can I go ahead on the lead time of...

What's your second question, Kale?

So how much more cost inflation -- how much more price increases you would need to kind of offset the incremental cost pressure in the following -- coming 2 quarters?

So as we earlier said, as far as the commodity is concerned, it generally be the cost-to-cost and is fully compensated by the customer. And of course, as -- earlier occasions also when we discussed, we have mentioned this about -- in the commodity, generally, when it comes with one -- of course, it's only reimbursed the cost. Obviously, it will definitely come with some base impact. And second, of course, the settlement always generally happens with 1-month lag.

We have our next question from Mr. Sanjay Shah from KSA Securities.

Yes. Sir, we have remarkably done very good in our Q4. Q4 numbers really a good what we can understand from the going circumstances. Sir, can you -- and as you pointed out, cited out 3 points program whereby you believe to increase the -- decrease the cost and improve the margins. So can you highlight how you take this ahead? How you see the year going ahead this year and next year? Because in 2019, we did a margin of 12%, and we did a very good PAT. How fast we can see that glory coming back in spite of fall in turnover?

Okay. Maybe I will take this question. Maybe the earlier question, I think the second portion was not answered. We see that commodity -- let's just do that first, and then I'll come back to your question. In terms of the commodity, we see that there is [ so much of cyclicality ] is happening in the commodity. I think the escalation of commodity, mainly impacting our kind of product is probably not going to happen going forward. That's what we assume. Other brands, maybe have 1 more small increases coming up in the near future. Second portion, most of the cases, our commodity is being -- we have an agreement with our customers, that our commodity whatever escalation or deflation happens, there is the 100% pass-through agreement is there with our customer. More or less, it will be passed through. So neither we will get the benefit if the commodity goes down nor we will get much impacted in terms of absolute number if the commodity goes up. And coming back to the Q4 performance as well as what could be the outlook for this year. I think we started the year, I would say, very, very positively in terms of in April. So this quarter was looking almost similar to the last quarter, if not better, but unfortunately, then suddenly, the wave 2 hit us and we had to take the backseat. And we -- this quarter is going to be impacted because of the lockdowns happening in most of the states in this month as well as I don't know how much it will be spilled over to the next month. I think just to tell in last year, our -- even though the revenue number was more or less in line with the previous year, EBITDA dropped to 10.5% to 8%, one of the major reasons is the first 2 quarters of the year -- last year was almost like a war. So if you see the April, May, June quarter of last year, there was no revenue. We had all the cost sitting in our expenses and all the cost was there and we made loss. So I think that impacted the overall full year performance. So if you see reflection could be, if you see the Q4 performance, we were at around 10.8%, which is more than the full year performance of last year. I think that is the -- if the market stabilizes, and if the COVID situation improves, I think we could see that kind of a performance.

Right. Right. So even if we see a fall -- 10%, 20% fall in revenue, we'll be able to sustain that level of margin, 11%, 12%?

No, again, fall in revenue compared to -- see, last year comparison is a little obscure because if you see that INR 957 crores revenue, INR 425 crores has come in 1 quarter, right, half of it. And the other half has come in 3 quarters. So it's a little bit of not a right comparison because of this abnormal pandemic situation. But if the quarters are a little bit evenly factored and if we hit the INR 1,000 crores kind of revenue is what probably we should be able to do even with difficult, pandemic situation. And I think we should be able to hit 10% to 11% kind of in EBITDA.

My second question is, which are the green shoots area you see that demand can come up in next, maybe, post COVID, maybe in the second half. Even this scrappage policy is working from that...

I think one of the areas, maybe Muthu can also add a little more into it. What we are very anticipating is tipper segment. The Tipper segment, which is like a tandem axle, we were started seeing last 3, 4 months, very good outlook, the peak construction activities were coming back. The mining activities were coming back. So we saw a very good outlook in terms of the tipper segment. Tipper segment is good for us because it's a tandem axle. One vehicle goes with 2 axles, 2 axles of power, so I think that will continue to push our penetration more in overall realization of our revenue. Muthu, you want to add anything? What could be the segments you see, which is coming back?

Thank you, Thimmaiah. Good afternoon, ladies and gentlemen. Yes, like what Thimmaiah said in the last 2 quarters, maybe from -- I would say, from October to March, the market went up very high on the tipper segment because a lot of construction projects were released. And all of you would be seeing the road construction project and also mining gets heaved out. Also, what was happening in February, March during the time, the long-haul vehicles are also getting influenced and there was a good amount of sales that started the business with positive sentiments came in the market. But post COVID second wave, it's coming down. What we believe going forward is while the tipper segment will come back, the ICV segment, which is used for the last mile connectivity and also the -- used by the e-com business that business is going to grow much where you all know that Meritor has penetrated a lot, and we are getting into that business, too, that axles for ICV business. So we are upbeat about growing in tandem, which is what the tipper segment and also ICV where Meritor has penetrated now.

We have our next question from Mr. Sunil Kothari from Unique Investment.

Congratulation for such a very controlled cost environment and very profitable performance during this whole year and last quarter, particularly. Sir, my question is broadly, we are listening a lot about outsourcing from India, manufacturing exports from India becoming very lucrative and successful from companies like MNC, parent, global presence. So would you like to talk something more on the -- for the next 3, 5 years, how you see this opportunity from Automotive Axles point of view?

Yes. Okay. Sunilji, thank you. So I think this is, as I always say, during these conference calls, export is one of our primary focus. However, there are some complications in terms of export because our product is very bulkier and the logistic cost is very high. That is number one. Number two, if you really see export, there are 2 kind of exports we are talking about. Number one, we export back into our parent company, and then they in turn sell it to the end customer. Those are all mostly the subsystems. In our case, whether it is in-housing [indiscernible] as a subsystem we export. The other is a full axle export. So I think our focus is for both to enhance our export opportunities we are working on. We are seeing some opportunities coming from Europe and North America to some of our product lines. But again, as I said that because these are all very bulky items, and there are so much product fluctuation, demand fluctuation happens. And the customers like these to be supplied from the local factories, which we have all over the world. So we are trying to see what those kind of products, which can -- we can operate like a layered capacity for the world, so that the fluctuation in demand will not come back because of a longer lead times. This is one of the focus area. But unfortunately, we don't have an opportunity kind of a small components where the logistic cost is not significant. We are not like that. So that is one which is impacting us always. But there is a lot of focus we have to enhance our overall export to directly to the end customer as well as to our parent company.

Okay. Great, sir. And sir, we talked about a key excellence to manage business successfully. In those segments, we are saying that we are talking about product development, launch of new products. Can you elaborate more on which type of products? Any -- like spend some -- we introduced last year, and I think we were very successful. So how going ahead, do you see opportunity for those products? And second is on cost measures. We are talking about some significant savings through M 2022. So if you can a little bit more details if you can provide us?

Muthu, you want to talk about new product introduction and our penetration in -- mainly from the bus segment and the ICV segment?

Yes. We are talking about business growth strategy with new product launches.

Yes.

Thank you, gentlemen. Like thanks, Thimmaiah. Meritor is working on 2 different areas in terms of the product strategy. The one is traditionally, you all know that we have not been presenting good in the bus segment and of course, in the ICV segment. Like what Thimmaiah said, we are working on penetrating into the bus segment with our largest customer, Ashok Leyland. And we have been very, very confident in the next 2 quarters, we'll be getting into the bus and also in the ICV segment. This will improve our shares. And more than shares, what it really happens is when the market goes up from one segment to another segment, the impact will be minimal and you will see a consistent our share with the customers. We already developed the product, which is the -- the competitiveness is very, very high in terms of buses and all because customers keep this as a commodity. And we have worked -- our Meritor Global Engineering worked out an innovative product, which is what we are going to launch for the buses and ICV, which we are confident that our penetration will go up. Having said on this, you know Meritor's always strength is on the high -- heavy commercial vehicles, where we are innovating and making our own products possibly for example, Thimmaiah was talking earlier about our tandem axles and the Meritor is working on the new tandem axles, which will make sure that even for the rugged performance or the demand from the customers with more performance, these products will work. So we are launching the product with the biggest size of the axles. We already have launched it with the customers, and we are working on the new tandem. We are working on axle for coaches, which even though it has not come in India in a big way other than Volvo, we believe that in the next couple of years, axles for coaches is going to come. So your company is taking proactive steps to ensure that these products are all available in India so that whenever the OEMs see the market and introduces, we'll be ahead by providing the product. So penetrating into the bigger commercial vehicle with the new tandem, bigger long-haul axles and penetrating into ICVs and bus segment is going to make your company penetrate more.

On top of it, we are also now introducing, as your Muthu was saying, 3 new products. One is it's a higher end products, one we call it as in our nomenclature, MS185 and 177. These probably could cannibalize our own product, but this is a little bit of higher-value products and also it will give you high performance and high durability to the end customer. So we are working on launching these 2 new products in the marketplace.

Okay. And sir, on these cost measures, we are talking about some significant savings. If you can quantify something, if possible?

Yes. Our cost actions are coming from various activities. Number one is our product design itself. Whenever -- in the last 2, 3 years, and also this is going to be the focus area, we are upgrading our own products to provide a better product to the customer. Now whenever we upgrade our product, our focus is to reduce the cost at design level. All those cost reductions may sometimes it probably we may not keep it 100% we may have to pass on to the customer as well. But obviously, we will keep some, we'll pass it on some. So one big area for cost reduction is from the design side, continues to redesign our product to make it more optimum in terms of performance as well as in terms of cost. The second one is continue to work on our sourcing strategy, which is what is the right sourcing strategy we should have, who the supplier we should buy from, how do we reduce the logistic costs that's the second strategy. The third one is our operation cost itself. How do we reduce our direct manpower, how do we reduce our conversion cost and this is the second one. And of course, we continue to work on the fixed cost as well. So this is -- we attack the cost in a prolonged, all around actions. And mostly, these are a little bit -- some costs like fixed cost action what we take when the market is down, some of them would come back, but some of them would really give us the benefit in the long run. And exactly if you compare our financials, see, when we were doing probably -- 2 years back when we did almost INR 1,800 crore, INR 1,900 crore revenue, if you see our EBITDA percentage versus even at half of it, like INR 950 crore is half of it, we're not dropping our EBITDA significantly. So the reason why we are able to maintain is all because of the cost actions.

Okay. So sir, as we go back to those numbers, INR 2,000 crores, INR 2,000 crore plus, should we expect 15% EBITDA margin? Or you would not like to commit anything?

No, definitely, we would not like to commit or comment on that because there are a lot of things will be factored. It's not a direct linear, we can try it and say that, okay, this is what my fixed cost is going to be, fixed, but no, it's not -- we can't do that because the factors involving is number one commodity. Even though customers compensate us 100% commodity, but percentage term we'll lose out because our revenue goes up, our EBITDA will be maintained in terms of absolute number, but in terms of percentage, it is going to influence our profitability. That's how -- unfortunately, that's how it works. That's number one. We are fortunate that at least the cost is compensated by the customers. The second one is, whenever we do some improvements, we also want our customer to be benefited. So we would like to pass on some of the -- so that will come back in the long run in the share increase and then fixed cost absorption improvement. It will help us in the long run. So sometimes we pass on to the customers as well. And then we have -- also have an inflation, which need to be offsetted every year, right? There is a salary rise keeps on happening. There's a cost escalation keeps on happening. We need to offset that as well. So this is actually a combination of all these things. But again, I reiterate the point that, which I keep on telling in every discussion, our endeavor is to continue to expand our margin in the like-to-like revenue scenario. Whether we will go to whatever the number, we need to see a lot of...

Hello, sir? Yes, please go ahead. Mr. Kothari?

Yes. No, I'm done. Thanks a lot for very detailed reply.

We have a question from Nikhil Rungta from Nippon India Mutual Fund.

And first of all, congratulation to extremely strong set of numbers during the quarter. Sir, 1 clarification and 2 questions. The clarification was you just mentioned that the customers -- on the commodity price inflation, the customer reimburse you or pays you, whatever is there, be it inflation or deflation. So is this ongoing context or it's a quarterly reset or half yearly? Just a clarification on that?

Yes. This is actually on a real-time basis because these are all doesn't happen on a quarterly basis, sometimes [indiscernible] swaps come in every month, sometimes 1 year no inflation. So normally, there is a small lag is there. Maybe a month's lag will happen from the effectivity days. But otherwise, it's as and when it happens.

Okay. Okay. And sir, on the question side. First is, what type of customers have we seen increasing share of business this quarter? And what's the status on the customer where we are working since last couple of years for a big share of business?

We actually don't give the exact number of share of business with each of the customers. But only thing I can tell you is we are increasing our share with majority of the customers. But also, we are working aggressively with 2 of our customers. One is Tata Motors and VECV to see that how do we gain more because these 2 people, they make their own axles. And I've been repeatedly been saying this, Nikhilji, in all my calls that it's not easy to for make them to outsource. So that challenge is always there, and we are continuous to work with them to see that someday, I'm very confident that they will see that working on an axle design and axle manufacturing is a noncore for them and they make a strategic decision and start downloading. That's the belief I personally have.

Got it, sir. Sir, just last question. If you can just elaborate more on this digital MIS thing in the Industry 4.0, which you have enabled so that would be helpful.

Kumar or Muthu, you guys want to take this question, please?

I leave it to Kumar sir. Kumar, go ahead.

Yes. Okay. No, see, the digital MIS what we are talking about, basically, to give the complete visibility and to enable the decision making of the operating people, operating manager in a shop floor environment. So in the line where we have implemented now, for example, the final axle line, which has also introduced paint shop. So all the critical machines, all the critical stations are interrelated. And the plan, which we do on a daily basis for the production is digitally communicated to all the people. It is also displayed. And against the plan, whatever actuals which do take place, it gets updated and people down the line, the operating managers, they get the MIS. They get the MIS in their email. They also get the alerts in their mobile. And in case, there is a line stoppage due to whatever reason whether it's a quality reason or breakdown, the alert immediately goes to the line engineer and after a specific time interval it goes to the manager. So we are talking about MIS, which has got 2, 3, I would say, categories. One category is, MIS related to immediate decision making. So whatever line issues, problems, concerns, which need to be addressed on on-time basis. So we have MIS, which has got triggers, mobile alerts and things like that. Second is, MIS related to the daily and weekly details where consolidated data with regard to the performance of the plant, with regard to the quality aspects of the products that we made, with regard to the efficiency of the plant, all these things are all captured. And we have complete data backup. And through the software we have developed, we have plenty of analytics which goes on in the background, which will enable managers to look at the data with a different perspective and we'll take medium-term and long-term decisions relating to the performance. So, to summarize, yes, it is to ensure that we keep improving in terms of quality, in terms of efficiency and in terms of overall cost competitiveness, both in terms of short term as less in the long term.

We have our next question from Mr. Shashank Kanodia from ICICI Securities.

First question, just wanted to check -- sir, this Q4 performance does this have an element of inventory buildup at the OEM level because firstly industry growth was not so robust, right?

No. I think if I look into the industry, like the way we measure, M&HCV is January, February, March quarter was around 93,000 units, and previous to that, I think it was around 70,000 units. I think because of all these COVID-related activity happened in April, there could be some inventory buildup. But if I see up to February end, I think there was a huge demand in the market, the customer -- our OEMs were not able to cater to. They were not able to produce because of the various supply chain issues, one is, of course, because of the COVID as well as the sudden ramp up. I would say that there was really a big demand was there and OEMs were not able to meet the demand till probably end of February and even in March. But again, in March, they produced quite a good number and a small amount would have gone to the inventory because April, we started seeing a little bit of slowdown because of the COVID. But generally, if I ask, there was a really good demand was getting generated, just before we locked down.

Okay. And sir, in the last con call, you find that this industry will go at least 50%, 55%. But given there is second wave of resurgence, so in your best case estimates, what kind of growth can we see for the M&HCV industry this year?

I would sit to -- give me 1 second. I would -- let me just open up document. Just give me 1 minute. I'll just check exactly how it looks. In our estimation, last time I said, yes, it would be probably at around 40%, 50% kind of a growth. But after this pandemic, we are a little bit downgraded the growth. But even with the downgraded growth, I would still feel that at least 20%, 25% growth should happen very conservatively. Again, as I'm saying, last quarter was a 93,000 market, and we were expecting that the similar trend should continue for the full year quarterly. But unfortunately, this quarter, we have significantly downgraded the outlook and then moderated the future quarters as well. At least 20%, 25% is what I believe if the lockdowns are all started getting eased down from, say, 1st of June onwards.

Right. And sir, one last thing on Vision 2025 statement, sir, any tangible things to track or any development, new client additions or export order anything, product development?

No. I think I told the export earlier. I don't have a specific number to put around. But that's one of the key area we are working on to see that how to improve our export business.

We have our next question from Mr. Abhishek Shah from Valcore Capital.

And congratulations on really good numbers. Sir, one is, I understand Q1, there will be very low visibility and Q2 perhaps to some extent. But let's say, if we go beyond that and talk about the second half, do you think we could maintain the INR 425 crores revenue run rate that we had in Q4? Do you think that level of business could be possible?

If there is no pandemic impact, I'm very confident that's the number, yes.

Okay. So we could at least exit the year on a quarterly run rate of INR 425 crores? Or I mean, I was saying that good number, assuming there is no pandemic third wave or any of these issues that we are facing?

No, I won't say -- if there is no pandemic impact, I would say that this will be much, much more than what we have done last quarter.

Okay. Okay. Sir, then 6 months back, we were assuming that the FY '19 peak in terms of CV volumes at industry levels could now be repeated back in [indiscernible]. Do you think it could be much faster than that? It could be FY '23, perhaps, having the next peak -- I mean peak in those volumes?

No I think -- yes. Last time also I told, in our terminology, M&HCV [ '18 ] peak was 480,000 units. And I think we will see that 480,000 units probably in '23, '24 time frame.

Right. Right. No, I'm just trying to understand because when I go on the ground and this is all pre 1st of April. When we go on the ground, the optimism levels are substantially higher from even from a 3-year perspective, that last 6 months business done by a lot of fleet operators was significantly better and no price cutting. That is the context where I used to understand that, is this the same that you were also seeing at your end?

Yes. That's exactly -- that's what I said. If there was no wave 2, we would have probably seen some 40%, 50% kind of a growth structure. So that is the sentiment we were riding on even until April 15.

Right. Okay. Sir, my last question is you spoke on the export potential. Now this might be a little short-term base, but steel prices in India are currently at least 10% to 15% lower compared to global steel prices. Does that give you heads-up in terms of bidding for getting new clients or getting orders in the interim or maybe also from a long-term perspective?

No. See, I think steel price ultimately in -- we don't -- no customer will make a decision based on the short-term steel price or commodity variation in terms of pricing between 2 regions. So I think -- I don't think that would be a reason. Only way would be, we are also working on to do some product line. Can we just do it from India? I think we are really looking only long-term perspective. We don't want to do that in a short term because you don't want to block the capacity for that kind of a product when it will come and go.

We have our next question from Mr. Jay Kale from Elara Capital.

So just 1 question. You mentioned that you gained -- you are supplying new products to ICV as well as buses. If can you just give an indicative market share of where you all were earlier and where you all are now and what is target going forward? If maybe not absolute numbers, maybe relative to what your market share is in the -- in your core business of M&HCV?

We actually won't give -- will not be able to give the actual market share. But I would say with all the new product development work and penetration we are working with the customer, we are more or less, we are -- our penetration would be in line with our M&HCV segment, even in the ICV segment going forward.

Okay. And similar for buses.

Yes. Yes, correct.

Okay. Okay. And just on the EV side, Meritor has globally developed products for the e-axles in the Blue Horizon technology. Where are we as Automotive Axles in terms of the technology transfer or product development or technology transfer from Meritor side over here? Are we actively looking at customers in India or maybe exporting these e-axles globally from Automotive Axles? Any kind of development you can share from that perspective?

So on the e-axle side, there are 2-pronged strategy we are adopting. Number one is if you see India, probably 5, 6 years behind other countries in terms of the overall product development work from the OEM side, vehicle perspective, I'm saying. So the approach currently, what are most of the OEMs have we call it as a remote mounted motor, which means the motor is mounted instead of gearbox and engine and it will have propeller shaft and the current same axle or, say, small modification -- modified axle would be used. So this is a phase I activity the India is taking up it. So we are very well positioned there because all these electrical vehicles, we are working to see that if our axle can -- our normal axle can [Audio Gap] integrated e-axle, which what we are developing in globally. So I think that is little a few years away, and we are talking to the customer and we will be -- whenever the market is ready, Indian OEMs are ready, we will have that product ready for our OEMs as well. And in terms of discussion, yes, we are on with the discussion with all the customers.

We'll have our last question from Mr. Shravan Vora, an individual investor.

Many congratulations on the great set of numbers. Most of my questions are answered. I just wanted to get your outlook a little bit on how you see the M&HCV cycle going ahead with the government spend on this on infrastructure and post these COVID kind of abnormalities settle.

Okay. Your voice was bleak. If I understood, you're asking that how is the outlook for M&HCV market, right?

Yes. Yes. Yes.

Okay. No, I think from our perspective, based on all the data analysis we do, you know the -- again, I'm getting back that '18, '19 was peak year at 480,000 M&HCV market. Last year, in '20/'21, we ended up with somewhere around 180,000. So that is the kind of drop we have seen. So even though the market grows to, say, 30%. For next 3 years, it will take -- 30% every year, it will take probably 3 years, 4 years to reach up to 480,000. That is the reason I was -- I kept on saying that I'm very, very optimistic that the market will grow significantly in the next 2 to 3 years based on what we see: number one, the infrastructure activities; number two, all the retail activities are happening; and the number three, last 3 years -- the last 2, 2.5 years, the replacement cycle has not happened. So there is -- all the people are running their trucks and vehicles for prolonged period that will start kicking in. The scrappage policies will add up into an additional demand. And also all the infrastructure activities, which is happening. I think with all these, I am personally and my companies, we are very optimistic that they would -- if you take the pandemic out of the equation, the market would grow significantly for next 2 to 3 years.

There are no further questions. Sir, any closing comments?

I think thank you very much for showing interest in our company and joining in for the conference, and hope we -- normally, we try to keep the discussion very transparent wherever possible and make it like as open as possible. I hope you are able to appreciate that and I really enjoy talking to you, and it's all a lot of insights from the knowledge you all have for us as well. Thank you very much.

Ladies and gentlemen, this does conclude your conference for today. We thank you for your participation and for using Ijunction Conference service. You may please disconnect your lines now. Thank you, and have a great evening.