Endurance Technologies Limited (ENDURANCE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '23 Earnings Conference Call of Endurance Technologies Limited, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishit Jalan from Axis Capital. Thank you, and over to you, sir.

Thank you so much. Good morning, everyone. Welcome to Q4 FY '23 Post Results Conference Call of Endurance Technologies. From the management team, we have with us Mr. Anurang Jain, Managing Director; Mr. Ramesh Gehaney, Director and COO; Mr. Massimo Venuti, Director and CEO, Endurance Overseas; Mr. Satrajit Ray, Director and Group CFO; and Mr. Raj Mundra, Treasurer and Head of Investor Relations. I'll now hand over the call to Mr. Jain for his opening remarks, post which we can begin the Q&A session. Over to you, Mr. Jain.

Thank you, and good morning to everyone. I would like to share details of how we have done in the fourth quarter of FY '23 and in the whole financial year of FY '23. In India, in the fourth quarter of FY '23, as per the SIAM data, the 2-wheeler industry sales degrew by 4.15% compared to the previous financial year. Scooters grew by 11.9% and motorcycle degrew by 10.1%. The automotive industry in India had a degrowth of 0.5%. In Europe, in quarter 4, there was an increase of 17.9% in the European Union automotive sales. On the financials, I will briefly talk to you about the fourth quarter of FY '23 and then the financial year FY '23. In quarter 4, our consolidated total net income grew by 7.8% and was INR 22,551.54 million as compared to INR 20,914.76 million in quarter 4 of the previous year. Consolidated EBITDA grew by 13.5% and was INR 3,062.1 million as compared to INR 2,698.12 million in quarter 4 FY '22. Consolidated EBITDA margin was at 13.6%. The net profit grew by 0.2% and was INR 1,364.67 million at 6.1%. This includes the Maharashtra State Mega Project incentive in quarter 4 of INR 3.71 million. In quarter 4, our stand-alone total income grew by 6.1% and was INR 16,595.76 million as compared to INR 15,640.65 million in quarter 4 of FY '22. Stand-alone EBITDA degrew by 0.3% and was INR 2,058.34 million as compared to INR 2,064.65 million in quarter 4 of FY '22. The EBITDA margin was at 12.4%. Stand-alone net profit degrew by 8.9% and was INR 1,045.11 million at 6.3%. This includes the Maharashtra State Mega Project incentive in quarter 4 of INR 3.71 million. For the financial year FY '23, our consolidated total net income grew by 16.6% and was INR 88,494.73 million as compared to INR 75,901.78 million in FY '22. Consolidated EBITDA grew by 7.6% and was INR 10,816.93 million as compared to INR 10,056.76 million FY '22. Consolidated EBITDA margin was at 12.2%. The net profit grew by 4.1% and was INR 4,795.76 million at 5.4%. This includes the Maharashtra State Mega Project incentive of INR 589.27 million. Our subsidiary Maxwell Energy had a sales of INR 180.29 million with an EBITDA loss of INR 118.51 million. In FY '23, our stand-alone total income grew by 18.8% and was INR 67,957.07 million as compared to INR 57,214.81 million in FY '22. Stand-alone EBITDA grew by 7.2% and was INR 8,074.34 million as compared to INR 7,530.52 million in FY '22, with an EBITDA margin of 11.9%. Stand-alone net profit grew by 7.1% and was INR 4,089.17 million at 6%. This includes the Maharashtra State Mega Project incentive of INR 589.27 million. There was no net debt, and there was a consolidated positive cash available of INR 4,193 million. The detailed financials are available with the stock exchanges and on the Endurance website. I would like to share key points for the financial year FY '23. In FY '23, 77% of our consolidated total income including other income came from Indian operations, and the balance 23% came from our European operations. In India, in FY '23, INR 9,350 million of new business was won from OEMs other than Bajaj Auto, which included HMSI, Hero MotoCorp, Ather Energy, Hero Electric, Mahindra, TVS and Tata Motors. This new business will -- included INR 7,800 million of new business and INR 1,550 million of replacement business. The total business win for EVs till date is INR 6,004 million. This includes INR 3,765 million new orders for EVs, mainly from Ather Energy, Hero Electric, Greaves Electric with Ampere and Aptiv in this financial year. This INR 6, 004 million of EV business win at Endurance does not include INR 1,290 million of new EV business win at Maxwell Energy. In FY '23, EV business wins was 42% of the total business won at Endurance and Maxwell. I would like to mention that we have INR 25,668 million worth of request for quotes from OEMs . Since FY '20 in India, INR 28,880 million of business has been won out of which INR 21,060 million is new business and INR 7,820 million is replacement business. Out of INR 21,060 million new business, INR 4,410 million happened in FY '23 and a further INR 6,920 million will happen in FY '24 and the balance INR 9,730 million will happen in the financial years '25 and '26. Some of the new business wins, which will start in this financial year are, TVS INR 402 million suspension business, which will start at our Kolar, Karnataka plant, from November 2023. Hero Electric suspension business of INR 489 million, which will start at Halol, Gujarat plant, from June '23 onwards. We have won the CBS Brakes business of INR 273 million from Okinawa, the EV scooter maker, and this business will start from October '23 at our Waluj, Aurangabad plant. The Greaves Electric or the Ampere suspension business of INR 155 million will start from our Kolar, Karnataka plant, from August '23. Also, the Greaves Electric Ampere brakes business of INR 290 million will start at our Waluj, Aurangabad from August 2023. The Ather suspension business of INR 150 million will start in June '23 from our Kolar plant at Karnataka. The Ather brakes business, we have won a very large business of INR 1,591 million. Supplies have started, and this will reach peak in the next financial year of FY '25. Apart from the INR 9,350 million business wins, we have received an additional INR 1,200 million order from Hero MotoCorp for supply of front fork shock absorbers from our plant at Halol in Gujarat. This business has started in April '23, which is last month. The ABS capacity is being now ramped up to 600,000 single and dual channel ABS assemblies by July 2023. This, of course, will be at our Waluj, Aurangabad plant. We have the new 35 dia air suspension forks for supply to KTM, Austria, will start by end of this financial year with the help of KTM Technology from our Waluj, Aurangabad plant. The value of this business will be INR 400 million per annum and will be directly exported to KTM, Austria. Our battery management system assembly line, that's the SMT line, will start operations from July '23 at our Waluj, Aurangabad plant. The value of the business when it reaches it's peak will be at INR 800 million per annum. For the EV scooters, we are ramping up our capacity to 240,000 per annum for the battery pack at the motor housing EV aluminum castings. The total value of this business won is INR 1,000 million per annum which will start in this financial year and will reach the peak in next financial year. For Ather Energy, we have started fully machine side channel aluminum casting Vallam plant with a full business volume of 200,000 per annum and the value of INR 410 [billion]. This business will peak in this financial year. For our aluminum forging business, which we started with our collaboration with FGM Italy, we are increasing the capacity from 280,000 parts per annum to 600,000 parts per annum at an additional business value of INR 750 million from our Waluj, Aurangabad plant. This business -- this additional business was started this year and reach peak in FY '25. At our Chakan plant near Pune, we are installing machines for structural aluminum castings like swing arms, subframes and structural bearings for both EV and ICE models, which are going in for lightweighting for Bajaj Auto, KTM, Piaggio and TVS. This business starts in this year and will peak in next financial year of FY '25. The Suzuki scooter front fork business of INR 1,398 million, which we won in the last financial year will start from our Waluj, Aurangabad plant, in the next financial year of FY '25, and we are installing a 1 million front fork numbers new line for the same. Apart from Bajaj Auto and RE, we have now added TVS for supply of inverted front forks. The supplies will start in quarter 1 of FY '25 and the business value is INR 212 million. I would like to mention that our customers now recognize Endurance as a trusted and capable partner in the value chain in terms of both technical and financial strengths. The electronic vehicles market continues to offer significant opportunity for growth to the auto component industry. It's estimated that the Indian EV market will touch INR 150 billion by 2030, growing at a CAGR of 90% in the next decade. Therefore, at Endurance, we have taken a major step towards the same to harness this opportunity by executing a share subscription and purchase agreement of acquiring 100% of equity share capital of Maxwell Energy Systems Private Limited in a phased manner. We have concluded the acquisition of 51% stake in Maxwell in July 2022. Maxwell, as you know, is in the business of advanced electronics particularly in the battery management systems or the BMS for 2-wheeler EVs and automobile and 2-wheeler battery packs. We are happy to inform you that we have won INR 700 million order of BMS from Hero Electric, and INR 495 million of business from Greaves Electric or Ampere. These supplies will start in July '23 and September '23 of this financial year. We have won new BMS business of INR 1,290 million in FY '23 and INR 496 million till date in financial year 2024. And we have a pipeline of RFQs of INR 1,310 million. Till date, since FY '22, INR 3,286.2 million business has been won by Maxwell, which is expected to fully realize in the financial year '26. With the current order book, order pipeline and technical strength between Endurance and Maxwell, we are confident of achieving our goals in the embedded electronics space. In FY '24, we are focusing on a substantial sales growth and a positive EBITDA. To help our overseas operations to grow in the European 2-wheeler component profitable aftermarket business, we have acquired an Italian company Frenotecnica on July '22. This company is involved in the business of friction materials and components for braking systems, like brake pads for 2 wheelers. Also, in November '22, we acquired the Italian company New Fren SRL. New Fren is engaged in the business of brake discs, centrifugal clutches, pads and brake shoes for 2-wheelers. The acquisition of our past Italian collaboration with Adler and Grimeca for clutches and brakes in 2020, Frenotecnica in 2022 and now with this acquisition of New Fren in November, we are creating a center of excellence in Italy for the business of premium components in the 2-wheeler segment, giving profitable growth opportunities for the Endurance Group. Last year, we had sales of approximately EUR 15 million and we want to double this in the next few years. As this brake assembly business is growing with addition of Bajaj, TVS, Royal Enfield, Yamaha, Hero MotoCorp, Ather and HMSI, our second plant in Waluj, Aurangabad has already started operations. With this new plant, our disk brake assembly capacity has increased to 6.2 million numbers per annum and the brake disk capacity has increased to 8.1 million numbers per annum. As you're aware, the supply of 2-wheeler ABS assemblies to Bajaj Auto and Royal Enfield have started, we have reached a run rate of 400,000 ABS assemblies per annum. As you are all aware, competition is mainly from Bosch, which controls the major market share in this Indian ABS 2-wheeler market. We're also in the process of supplying a dual-channel ABS also by quarter 2 of this financial year, and we have scaled up additional assembly lines by 200,000 ABS assemblies per annum, which will take our capacity to 600,000 ABS assemblies per annum. We are further planning to increase the volumes to 1.2 million, both single and dual channel ABS assemblies per annum by the second half of the next financial year, which is FY '25. We have in March '23 also started manufacturing the ABS valves, which is an import substitute, which is not only a technology component, but will help us in substantially lowering our costs. Also due to increased orders from Bajaj, Yamaha India, TVS and Hero Electric, we have added a new plant at Chakan to help increase our supplies and volumes to 4.5 million wheels per annum from 2.8 million wheels per annum. This plant has already started in July '22. We will reach peak supplies in quarter 2 of this financial year. As far as Europe is concerned, in FY '23, we have won EUR 83.87 million new business, mainly from the Volkswagen Group, Daimler and Stellantis. In the last 2 years, EUR 158 million business has been won. I would like to point out that Endurance, both in India and Europe, is actively pursuing its focus on gaining access to new technology and focusing on new product organic and inorganic growth. As mentioned earlier, Endurance has also entered integration product areas versus aluminum forging axle plants for inverted front forks with the help of collaboration with FGM Italy. We have already started supplies to Bajaj Auto and directly to KTM. We have also won orders for stem assembly and under bracket aluminum forging from Hero MotoCorp and we are actively engaged on new business wins with other OEMs for supply of aluminum forgings other than inverted front forks. As you note, this is used by EVs for lightweighting also, and that's why the capacity is being increased from 280,000 parts per annum to 600,000 parts per annum in this plant at Waluj, Aurangabad. The second product, of course, is the wire steel braid hoses for the ABS application for mid- and high-end bikes, these supplies already have started from last year. Both these projects are helping us in our profitable growth. In FY '23, aftermarket sales grew by 2.91% from INR 4,189 million in the previous year to INR 4,310.9 million in financial year '23. We are now exporting our aftermarket parts to 31 countries and aftermarket growth is a large focus area for us. In FY '23, our export sales for India's stand-alone business, degrew by 5.6% from INR 2,241.19 million in the previous year to INR 2,116.23 million in FY '23. The major impact was due to lower export sales in country -- in the regions of Africa, South America as well as our neighboring countries. On the environment front, I would especially like to mention Endurance is striving to be carbon neutral in its plants by effective use of solar power and wind power, creation of carbon sinks by driving tree plantation and thereby creating dense forests and also by driving use of natural gas and LPG gas in place of electric power and furnace oil. As mentioned earlier, the use of furnace oil has been completely stopped at Endurance. We achieved a carbon-neutral percentage of 22.6% in FY '23, and our aspiration is to reach 50% in the next 3 to 4 years. We're also focusing on lowering hazardous waste generation to achieve zero waste to landfill. At Endurance, it will be a continuous endeavor to grow through organic and inorganic growth with a focus on technology upgradation, quality improvement cost, environment, health and safety. We will do our best to fulfill our stakeholder expectations by following our 5 values of customer centricity, integrity, transparency, teamwork and innovation. We at Endurance are very positive. We have a very positive outlook based on our new large business wins, including for electric vehicles, both in India and Europe. With these opening remarks, I would like to invite questions from all of you. We have one of the Maxwell founders, Mr. Akhil Aryan and our Maxwell CEO, Mr. Vishwas, also on the line for taking your questions on Maxwell. Thank you.

[Operator Instructions] The first question is from the line of Aditya Jhawar from Investec.

Congratulations for resilient performance. And thank you also for putting out a detailed presentation. My question is on the European business. Massimo, if you can highlight that what was the government contribution in Q4 for the energy prices. And considering the energy prices have come down, what is our expectation for support in FY '24?

Yes. So in the previous quarter, in the third quarter of 2022, '23, we closed with more or less 17.8% of EBITDA and we recovered 100% of the increase of energy cost considering the support from our customer and also the incentive from the government. Only for the fourth quarter of the previous financial year, the Italian government gave to the company 45% of credit assets. And certainly that -- thanks to this 45% plus of the contribution from customer, we offset the impact. For this reason, we came back to a normal, let me say, profitability for [indiscernible]. Starting from the frist of April, unfortunately the Government will reduce this contribution from 45% to 20% and so it means more or less an impact considering the same volume of the previous quarter of EUR 1.2 million. And so the expectation for the future months is, for sure, a reduction due to this reduction of contribution, but please consider that the energy cost is going down in an important way. Only to give you an idea today, in the market. Yesterday, the energy closed with 120 and the gas with 35. And so it means more or less 25% less compared to the previous quarter. And so my expectation is that we can try to offset this reduction of contribution from the government with the reduction of energy cost into the market.

Okay. That's quite helpful, Massimo. So overall, what is our expectation for margin in FY '24?

The expectation for sure is to improve their profitability compared to the previous year. This I can guarantee. We closed the total financial year with 14.5%, and please consider that with the same level of aluminum of the previous financial year, the profitability in terms of EBITDA should have been 14.9% and 5.1% in terms of net result. My expectation considering that in this moment, I'm [indiscernible] situation in terms of volume and also energy cost is to improve the profitability compared to the previous financial year, for sure.

Okay. That's quite helpful. My final question is that how is the outlook shared by the OEMs in Europe? Are you seeing a higher level of wholesale dispatches to replenish the inventory? How is the situation in terms of the consumer sentiments on the ground?

Unfortunately, the sentiment is not so positive, as you can imagine, due to the high level of inflation, we are waiting a recession, because this is the situation to the market, not only in Europe, but it's probably also in United States. The previous quarter closed with an increase of registration of 18% and the total financial year with an increase of 2.9%. But we are so far from the volume -- normal volume pre-COVID situation because considering the 2019, the market closed with minus 24% compared to 2019. The positive aspect is that also [indiscernible] was positive, more or less the market in Europe closed with 17% of increase. An important impact is due to the increase of production in Germany, only to give you a view in January, the market closed with an increase of 29% of production, in February 24%, in March 67%. So from my point of view in this moment, we had a benefit in terms of registration due to the delivery of the car stopped in the last 18 months for several problems, as you know, a supply chain, for semiconductor and so on. Now the OEM is increasing the stock, waiting the situation in terms of demand. But in this moment, the same thing is not positive due to the inflation.

The next question is from the line of Mumuksh Mandlesha from Anand Rathi.

Congratulations on a good performance. So you indicated the new orders for both stand-alone and Europe that will be ramped up in the next few years, so this would be a gross addition, right? And can you indicate on net basis considering running down of old orders, what kind of growth outperformance you see over the industry in both India and Europe?

See, as far as India is concerned, it's very difficult to know what will be phased out and we know what is going to be added. And that also depends on the volumes which are mentioned in the LOI or in the purchase orders. But I can only say that we will always outperform industry, which we have done, if you see even last year, the 2-wheeler industry sales were 8.3%, automotive industry sales were 11.8% led by I think passenger cars. But Endurance sales growth was 18.8%. Europe also, the EU industry sales last year was 2.9%. We have grown 12.7% in euro terms. So I can only say that we will outgrow. There would be -- it's very difficult to say the impact of sales going down because of, I mean, on existing. That's why I always say there is a replacement business and there's a new business. And also in my opening remarks, I mentioned that the new business, which we have won, how it is going to increase in the next 2 to 3 years. So very difficult to say. I can only say we will grow higher than industry. And that's why we are taking a lot of orders and that's why I emphasized on that, both total order ways as well as EV business with both India and Europe.

On the EV specific components. So we have made inroads into BMS. And what are then plans to look at other EV specific components going ahead, sir?

See, right now, we are looking at other electronic components also. But right now, our major focus is to consolidate and grow and become profitable in Maxwell. And that is our focus. So that's the reason we have won a lot of new business since FY '22. And this year, we want to be positive at the EBITDA level with a substantial growth. So we need to see that we really strengthen Maxwell and make it a very financially strong company with the customer strength in this company. So that is the focus of -- of course, Mr. Akhil Aryan, Alex Collet, the founders, our CEO, Mr. Vishwas, as well as all of us at Endurance. So right now, I think focus is -- Europe is a huge opportunity. The way the 2 large orders we won, we have a pipeline of orders, I mean, RFQ. So we are just going after orders, many things I have not mentioned, but we are really focused on really growing this company. So other electronics, we are -- it is there in our mind. So if a good opportunity comes, we will take it side by side. But right now, the focus is on the BMS.

Just last question. How do you see the 2-wheeler industry growth for this year? How is demand picking up, sir?

See, to be honest, from what the customers tell us, it can be 10% to 12%. But having said this, question is very difficult because there are so many uncertainties in the future, very difficult to say whether what the growth will be. So as far as we at Endurance are concerned, what is in our control is to take new order wins, and that's what we are doing. We are just going after orders in both India and Europe, which is I've been mentioning it also the last 1 year, and we have been very fortunate to get very, very good business wins, both for EV as well as brake suspension, castings and so I can only say that.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

Quickly wanted to check on a couple of things. One is on the European business, this quarter, 17.8% margin, which we have reported. Obviously, there is some bit of seasonality to it. But is that -- are we now back to normalcy or the energy side related compensation as it reduces, we will see some further moderation?

Okay. I will request Mr. Massimo Venuti to answer that.

Can you repeat the question because I didn't understand, sorry.

For the EBITDA margins in this quarter is 17.8%...

Sorry to interrupt, sir. Mr. Gandhi, your voice is little muffled, I would request you to use your handset, please?

Is it better?

Thank you. Please continue.

My question is on European margins. The 17.8% EBITDA margin for fourth quarter. Any sense on how it would have been without compensation from the Italian government and in that context, how do we see the trend over the next couple of years on the European margins?

Yes. So first of all, regarding the incentive from the government, as I told you before, in the first quarter, we received 45% of the total energy cost only for the previous quarter. Starting from the first of April, this incentive reduced to 20%, okay? This was the incentive from the Italian government. In Germany, they fixed a price cap with EUR 150. And so it means that in this moment, we are not receiving nothing from the Germany government due to the fact that the price of energy is lower compared to the price cap, okay? So the profitability in the last quarter of this financial year with the previous financial year, it was more or less normal considering the stand-alone Endurance overseas because we have been able to offset 100% of the increase of energy cost. Regarding the future, our expectation is to increase the profitability compared to the previous year due to the fact that in this moment the energy cost is going down in an important way. The gas reached in this moment is more or less EUR 30 compared to EUR 15 of the pre-COVID situation in 2019. And the energy is EUR 120 compared to EUR 50. So it's completely another world compared to the previous financial year. If you consider that in the previous financial year, the leverage of electricity was EUR 280. Today, we are seeing about EUR 120. Speaking about gas, the leverage was EUR 120. And today, we are seeing about EUR 30 and so if the price will remain more or less the same with the stability of volume and from my point of view, we can come back in the normal profitability.

Okay. So this 17.8% is near normal margins for us going forward...

Normal margins in the previous quarter we closed with EUR 67 million of turnover, okay, EUR 68 million of turnover, plus 8% compared to the previous year. And certainly with that in our profitability, compared to the previous year, you have to consider a good impact on volume and also an important reduction of energy cost. It will depend from the volume in the next month. If the volume continues to be higher compared to the previous year, I'm pretty optimistic on staying the same level of profitability.

Okay. Got it. And Massimo, can you talk about what was the PAT fourth quarter profits, net profit?

That in the previous quarter, we closed with EUR 4.5 million, 6.7%. And if I speak about the total financial year, we closed with EUR 12.1 million, 4.9%.

Got it. Second question for you, Mr. Jain, with respect to the India business on the aluminum die casting, we have started to get good orders on the scooter side as well. So any sense on the electric scooters, the content now what it is vis-a-vis the ICE scooters. In the past, you've indicated it is broadly similar, now but since you've got the orders, is it in line with what we were looking at earlier?

So definitely, orders which we have got from, say, Ather Energy, in fact or from Hero Electric, Okinawa, definitely, Greaves Electric. So the thing is definitely the orders for brakes, suspension, mainly brakes and suspension, some of it has been casting, and Ather has also given us the side channel casting. So the question is, of course, whatever we are taking is in line with -- it is in line with the value of business win or I would say, per vehicle content, which should be for brake, suspension and castings. It is there. But of course, this is only a start because we really got into the market for taking new orders just about 1.5 or 2 years ago maximum. We were a bit late in the fray. But now we are really, like I said, 42% of [indiscernible] has been for EV last year. So we are now going very, very aggressively. So I would say it takes time to really add castings to all the OEMs. So it's just a start of a journey. We have a long way to go including for BMS also. We have done good order wins, but still a long way to go.

Okay. Okay. Got it. And lastly, on the India business margins. So clearly, we have seen the good impact of commodity prices, along with lower volumes in the 2-wheeler side. With some recovery in 2-wheelers and commodity prices seeing some moderation, would it be fair to say we should be back in early teens now in the coming year and then moving towards 14%-15%?

I think it will depend a lot on the aluminum and steel prices, how they behave. In fact, aluminum prices are still going up. It's almost doubled compared to FY '21. And that's the reason, when in FY '21, RMC percentage in India was 62%. EBITDA margin, I think in that year was 15.57% we closed in that year. Now it is 66.7% in FY '23, 66.7%, 4.7% higher, and we closed at 11.9%. So I think a lot has to do with, I think, the RMC percentage also. On the cost front, of course, we are doing everything, whether it's other expenses, employment cost, in terms of efficiency of people. Of course, I mean, we are doing everything to see how we can sweat our assets, improve OEE's in our plant, in original equipment efficiencies. So there's a lot of work going on. But I'm told that the EBITDA margin amount in FY '23 has been the highest so far reported at Endurance. Not the percentage, the amount. The absolute amount, if you see. So that also indicated that we have done better in spite of challenging situation.

True. But going forward, at least the product mix will also be improving given that fully machined castings for EV's and ABS...

You're right. It depends on the volumes of the product mix, ABS, upside down front forks, brake systems which we are putting up. So all this will definitely help. So of course, we are very, very highly focused to increase these margins. We must come back to at least 13.5% to start with. So that is our focus, and we'll do our best to achieve that.

Sure. This is very helpful. And thanks to the team for putting up a very detailed presentation .

That was important, I thought -- we thought.

The next question is from the line of Pramod Amthe from Incred Capital.

First one is with regard to the after-sales parts where I think you indicated you plan to nearly double the contribution to sales to around 10%. Where is this confidence coming? What action you are taking up? Because your sales is organically growing and you plan to increase your contribution. So you're almost like 2.5x to 3x the current sales run rate which you want to achieve in 2 years. Can you give some color on that?

So aftermarket sales as a percentage to India sales is concerned, it is at 6.5%. Our mission is to go to 10%, for sure, as -- now the question -- and that was the plan for FY '23 to go step by step from 6.5% to 7.5%, 8% and then take it forward in the next few years. The -- which happened last year was which we made the budget in February and March of 2022. We didn't expect the issues which were in Africa, South America, Sri Lanka, Bangladesh, there were a lot of issues, that are related to available of currencies, their macroeconomic factors. So there were -- so there were many points like this where we -- where we could not -- I mean, the sales they don't happen to those markets. So we are definitely confident that this year, starting from, I think June, July already, things have improved in Sri Lanka, Bangladesh, we see. Africa also, we are seeing an improvement. So we feel that this year, of course, will be a much better year than last year. That's the plan. But -- and it's a very, very high focus area because this is a very important area for us. So we -- our target actually just to correct you was 10% of India sales by FY '26 is what we had mentioned, so by FY '26 reach 10%. India sales is also growing, as you are seeing, 18.8%. So every year, that's going to grow. So expression of that we want to reach in FY '26. But of course, exports forms a very important part also of our sales growth exporting to 31 countries. We want to add another 5 countries in this financial year. We're in the process of doing that. So I can only say it remains a very large focus area for profitable growth and we are doing everything. If you see our domestic sales that has really done quite well in this year. So I mean, I'm very optimistic that this year will be a much better year than last year.

Sure. So I thought -- I agree with you that you had focus there. I thought since there was a course correction in FY '23 and you again, you are citing the same. So is there a further concrete action on the ground to support those medium-term targets. That was a broader question.

Yes. So there are a lot of actions happening in Indonesia and Brazil. We have actually launched very special type of shock absorbers for Honda and other Japanese OEMs. And they are very different from the suspension or shock absorbers we supply in the Indian or the other markets. So we are slowly gaining entry into these large markets where we were not there. So that itself is an effort, it takes time for us to realize good volumes and good sales value. But there is a lot of effort, even going into Tier 2, Tier 3 towns focusing pan India for all our products to keep up good growth in all the 4 parts of India. So there are many, many initiatives happening on that front.

Sure. The second one is with regard to your transmission parts business. If I'm right, it contributes around 5% of your sales. Considering the transition to EV and the risk, what is your -- what are your thought process in terms of taking this business in the medium term? Are there any new products possible there to make it a substantial part of your business?

So, here, I think -- see, in this 5.5% of business, 80% is for motorcycles. There, we are not seeing any traction, much of a traction into EVs. So our transmission business, what we are planning is to get new customers in. And also, like we have done for, say, ABS, inverted front forks, we've gone into making aluminum forgings for that. As well as for ABS, we have started with steel braided hoses and now valves from March, we have started. So similarly, we are planning to even start a paper manufacturing plant by July '23, which will help us be more profitable and lower the, I would say, dependence on imports from the U.S. or from China. So this effort is going on as far as the transmission plant is concerned. So question is how we can increase the business, especially for motorcycles. And I would also say about 3 wheelers, though 3 wheelers we supply to everybody. So once 3 wheelers become fully EV, could happen by 2030 or maybe earlier, I don't know. But luckily 80% of this 5.5% business is for motorcycles where I don't see anything happening to be honest to be able to lower this business. In fact, we are trying to focus to get more volumes on the clutch business or more -- or adding more customers.

And the last question is to Maxwell Promoters. I wanted to check, after the Hero Electric win, we haven't had anything substantial one, even though the industry has moved on to new AIS standards. So I wanted to get your feel in terms of what is the actual changes the industry has taken post April 4 meeting AIS standard and what role Maxwell has played or planned to play in next 1 year? Because my sense was this was a crucial point for changing drastically BMS and part of the system and you could have play the role. So if you can explain that, that will be helpful.

Yes. So just clarifying that the question is how are we responding to the movement on the AIS standards and how we are using this as an opportunity to grow our order book and then business. Is that the question?

Yes.

Yes. So I think that you're absolutely right. The new AIS standards are, firstly, very important for the industry and secondly, an opportunity for us to enter into long-term contracts with significant OEMs. And like Anurang mentioned, we have won that business even from -- our focus, like I said, even on previous calls, is to become long-term partners, be meaningful partners with volume creators of 2025 and 2030. So that's the horizon that we operate on, meaning that, we are not trying to go after all of the OEMs that are making, say, a few hundred vehicles at month or so, basically focusing on the big business things that we believe are going to lead to really the EV revolution at the level. So if you see the win that we've had the Hero Electric, which is one of the significant players already on the road, they are making a big move with Maxwell transitioning even the vehicles that are currently -- their are current models that have been deployed in hundreds of thousands of units every year will moving forward be using Maxwell BMS. Another one is Ampere, again, like you know, one of the significant volume creators after the acquisition by Greaves, they have actually doubled down their capacity, their team, their plan for new vehicles and so on. And with both of these companies, not only are we working with them on new vehicles, but also helping them transition their existing vehicles to AIS-156 compliance standard along with localization of their BMS, which was previously being bought from another country. Over and above that, you already know we have significant business. We are the sole supplier to Hero MotoCorp on their VIDA platform. We are also currently in conversation with a few large OEMs on their new vehicle launches as well as helping them transition to AI-156. So I want to just sort of reemphasize on the fact that, as it stands, Maxwell is -- has been and is in a very strong position to enable OEMs to get a 100% localized BMS that is compliant with AIS-156 that is functionally safe. And the new products that we recently introduced, which has enabled us to win these businesses, which is CT-Lite is a product that is especially designed to be both cost and quality focused for the Indian 2- and 3-wheeler market. So I think that we are absolutely living up and exceeding our plan on new order wins using the opportunity of AIS-156.