Endurance Technologies Limited (ENDURANCE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q1 FY '27 Results Conference Call for Endurance Technologies. [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 Q1 FY '27 Post Results Conference Call of Endurance Technologies. We are pleased to host the management team of Endurance today. We have with us Mr. Anurang Jain, Managing Director; Mr. Massimo Venuti, Director and CEO, Endurance Overseas; Mr. Rajendra Abhange, Director and COO; Mr. Raja Gopal Sastry, Group CFO; and Mr. Raj Mundra, Treasurer and Investor Relations. I'll now hand over the call to Mr. Anurang Jain for his opening remarks, post which we will have the Q&A. Over to you, Mr. Jain.

Thank you very much. So good morning, everyone. As we close quarter 1 of FY '27, the business scenario presents a mixed picture with a steady domestic economy set against a more challenging global environment. Domestic industrial activity held firm through the quarter. The index of industrial production grew 5.1% in May 2026 with manufacturing at 5.5%, indicating continued growth in the industrial sector. The global environment has become more difficult. The prolonged conflict in West Asia has kept energy prices raised and added to supply chain and freight costs. In August 2026, the RBI held the repo rate at 5.25% and retained a neutral stance. Earlier, RBI had raised its FY '27 inflation forecast to 5.1%, citing energy prices, West Asia conflict and monsoon uncertainty. Now RBI has lowered the inflation forecast to 5% as quarter 1, actual number was below the earlier estimate. In the Indian automotive sector as per SIAM, 2-wheeler sales reached 7.18 million units in quarter 1 FY '27, up 23.5% (sic) [ 23.6% ] year-on-year with motorcycles at 19.3% growth and scooters at 32.4% (sic) [ 32.7% ] growth. Passenger vehicle sales increased by 23% to 1.5 million (sic) [ 1.79 million ] units, while 3-wheeler sales rose 39.8% to 0.36 million (sic) [ 0.37 million ] units. In the European Union, new car sales saw a year-on-year rise of 7.4% in quarter 1 FY '27 with each country recording high single percentage sales growth and Italy leading with 9.9% growth. In quarter 1 FY '27, new car volumes in Europe, there was a 21.9% share of battery electric vehicles, 10.1% share of plug-in hybrids and 36.1% share of hybrids. So roughly 2 out of every 3 vehicles being sold in the European Union are either electric or hybrid. In Europe, the operating environment was perhaps even more challenging with sharp increase in energy costs, uncertainty around policies regarding electrification and localization and rising presence of Chinese OEMs. In our Indian operations, is to look at our core capabilities, including manufacturing, technology and innovation and accordingly look at new products through greenfield projects or through M&A, which meet the criteria of being technology intensive, having a strong scalability of growth based on our OEM customer requirements and most importantly, helping us to increase our margin percentage as compared to now. Our focus is on 2-wheeler proprietary products, 4-wheeler aluminum castings and forgings, EV and 4-wheeler proprietary products, including suspension, braking and driveshafts. In the non-auto products, our immediate focus is on solar suspension dampers and actuators as well as on electronic products, including for auto and non-auto battery management systems, motor controller units, DC-DC converters and our battery packs, which plant we have just started SOP in June 2026. You will recall the draft guideline by the government in June 2025, extending ABS requirements to lower engine CC vehicles. We welcome the intent behind this move, which will meaningfully improve rider safety across the 2-wheeler segment. In line with this, we are adding 9 lakh ABS units per annum. Earlier, we had announced a figure of 12 lakh units per annum to our existing ABS capacity of 6.4 lakh units per annum. The reason for the decrease from 12 lakh to 9 lakh units of ABS is due to the strong demand in the brake assembly system business, we had to shift certain machineries from the ABS lines to take care of the large increase in the brake assembly orders from different OEMs. Our brake assembly share was 34.5% and our brake disc share in India was 42% in FY '26. I would like to mention that the brakes business in the last 4 years has grown with a CAGR of more than 30% -- though the government is yet to issue final guidelines, our ABS as well as our CBS hydraulic brake expansion is progressing as planned with SOP expected in September or early October 2026. For the dual channel ABS, SOP for Bajaj Auto with 120,000 units per annum is scheduled for this quarter, the SOP for a second program of 120,000 units is expected to start in quarter 3 of FY '27. We are enhancing our ABS product offering with new features. We have already started the ride modes, and now we are adding the traction controls for improved stability. This will help in our sales value and margin growth in our ABS business. In view of our plans to manufacture electronic control units for ABS and with higher volumes of battery management systems needs indicated by our OEM customers, we had ordered a new surface mount technology line with its SOP is expected from next month. It may be noted that our civil infrastructure is in place not only for this new SMT line, but also for further potential expansion. At a new Chennai plant for disc brake assembly systems, civil construction is at its final stage. This new plant is in close proximity to certain prominent OEMs, enabling us to serve them better while also lowering our freight cost. The Phase 1 key machinery is being shifted from Waluj and the Phase 2 will be completed in quarter 3 of this year. The SOP for Royal Enfield is expected by next month with other OEMs following in quarter 3. This plant will have a capacity of 3 million disc brake assemblies per annum and 4 million discs per annum as a part of our total Endurance capacities of 9 million disc brake assemblies and 9.6 million brake disc per annum that we have planned by quarter 1 of FY '28. In the previous call, we spoke of setting up assembly lines for 4-wheeler passenger vehicle foundation brakes for Tata Motors. We are on track and SOP is expected next quarter. We have also increased our 3-wheeler brake assembly volumes from 0.6 million to 0.85 million per annum and are expected to increase the capacity to 1.5 million per annum by end of this financial year. I'm happy to inform you that with the new KTM brakes technology, we have started the SOP for the 390cc and the 790 cc motorcycles of KTM in quarter 1 of this financial year. These include export orders served from our brakes plant in Waluj. Also to meet increased demand from Hero MotoCorp and TVS, we are adding capacity at our Waluj brakes plant, increasing our volumes by 1 million numbers per annum with SOP is expected to be in this quarter. With our focus on increasing 4-wheeler casting business at our AURIC Shendra plant at Sambhajinagar, order wins have continued to build, taking cumulative bookings to a peak annual business potential of INR 513 crores per annum. These include orders from a large U.S.A. EV OEM for automotive and non-auto applications from Jaguar Land Rover as well as from Valeo for the electric platforms of Mahindra and Tata. SOP will start in September 2026, and we expect significant pickup in this business by quarter 4 FY '27. Also we are expanding our existing 4-wheeler casting operations at our Chennai plant, where we have secured orders for hybrid models of Isuzu, and we expect SOP in quarter 4 of this financial year. We have won orders from Hyundai and Kia for new parts with SOP already started in this month. The business value is INR 80 crores per annum and will reach peak sales in FY '28. The presence of multiple global OEMs based in the South India region enables deeper engagement, and we are in active dialogue with new OEM players for which the plant is undergoing audits. At our Chakan die casting plant, we are also expanding our 4-wheeler machined aluminum casting business for existing and new programs of Tata Motors and Mahindra with demand from these OEMs seeing a strong traction. At our AURIC Bidkin alloy wheel plant, SOP for Bajaj began last year in October. And for Royal Enfield, it is expected to start by end of this month with peak volumes expected in quarter 3 of this financial year. The total capacity across our Chakan and Bidkin alloy wheel plants is 48 lakh wheel sets of front and rear wheels per annum, and we will be serving Bajaj, Royal Enfield, Yamaha, HMSI, Ather, Suzuki and Piaggio from our alloy wheel plants in Chakan and AURIC Bidkin. Our battery pack plant, in Pune commenced SOP for Hero MotoCorp in June 2026. With this large order win, the plant is in a ramp-up phase to reach peak volumes by quarter 3 of this financial year. We've also announced our entry into 4-wheeler battery packs from the same plant with a CapEx of INR 62 crores, and we expect SOP by quarter 4 of this financial year. We will continue to leverage this capability to pursue opportunities across 2-wheelers, 3-wheelers and other high potential segments. The battery pack business will also help increase our battery management system and aluminum casting business as both these products are supplied from our plants. In quarter 1 FY '27, our wholly owned subsidiary, Maxwell achieved a 21% quarter-on-quarter growth with a total income of INR 56.5 crores as against INR 46.3 crores in the previous quarter. We have supplied more than 1 lakh numbers of BMS for scooters, 3-wheelers, tractors, e-bikes and construction equipment this quarter. We are also in close engagement with a key electric 2-wheeler OEM for a BMS opportunity. We have been asked to give the prototypes, and this program has a large annual business potential. At Maxwell, we have won INR 13 crores of new business in quarter 1, which has taken the total cumulative orders won to INR 238 crores per annum, which will peak in the quarter 2 of the next financial year. Further, we have a strong pipeline of requests for quotes of more than INR 300 crores for trucks and for 2-wheeler applications. Our suspension business continues to grow, led by inverted front forks and mono shock absorbers with wider adoption across OEMs and a steadily growing OEM customer base. With increasing offtake of inverted front forks by OEMs, we are adding assembly lines and are on track to reach a monthly 100,000 units by end of FY '27, which is in this financial year. At our Pantnagar plant, we have won new suspension order wins, including the mono shock absorbers and inverted front forks for Bajaj Auto, and we are investing to be able to start SOP of 25,000 sets a month from quarter 4 of this financial year. We are also happy to tell you that we will be starting SOP for our suspension for Hero MotoCorp and Suzuki in quarter 3 of this financial year. This total order value is approximately INR 120 crores per annum. The aluminum forgings has become an increasingly strategic part of our portfolio, serving both rising captive demand from our inverted front fork business and a growing external customer base. To meet this demand, and as we have shared earlier, we are adding a fifth forging press with SOP expected in the next quarter. Execution across our programs is on track with supplies to Royal Enfield in quarter 2 and for Jaguar Land Rover in quarter 3 of this financial year and SOP for a leading German OEM towards the second quarter of FY '28. Together, these programs deepen our presence with global marquee customers and widen the base of our aluminum forging business. In the nonautomotive segment, our state-of-the-art solar damper plant at Sanand is ready now and our SOP for our Spanish client for this plant has started earlier this month. For the U.S. client, our internal validations have been completed and the validation at customer end are in progress. The SOP for the U.S. client is expected in the second half of this financial year. We are also gearing up for the supply of solar actuators and the SOP is expected in quarter 4 of this financial year. The total business won is INR 118 crores for the solar dampers and INR 227 crores for solar actuators, totaling INR 345 crores of business. In the Transmission segment, we introduced our new technology, the assist and slipper clutches from our Italian subsidiary, Adler in the Indian market, which supplies to Royal Enfield and Kawasaki already started. For Bajaj Auto, SOP is expected in the next quarter. In our 4-wheeler driveshaft program, SOP for Tata Motors is expected also in the next quarter and the peak business will be reached by October 2026 itself. For 3-wheeler driveshafts, SOP has started for Bajaj, Mahindra and TVS, and we remain on track to close INR 100 crores of business for these 3 OEMs in this financial year. We also are seeing an uptick in our Bajaj EV driveshaft program with volumes expected to grow for which additional balancing equipment will be installed in September this year. A key focus area of our FY '27 CapEx budget is automation. We are undertaking these targeted investments across existing plants to enhance quality, improve consistency and drive operating efficiency. Our India CapEx in FY '26 was approximately INR 800 crores compared to INR 611 crores in the previous year, driven by investments in new growth areas. We expect capital expenditure in FY '27 to remain similar to the FY '26 CapEx of INR 800 crores. Under the Maharashtra Package Scheme of Incentives 2019 scheme, we have received an addendum taking our incentive from INR 600 crores to INR 858 crores. These incentives will be availed through the industrial promotion subsidy by way of a state GST refund broadly over a 7-year period. We are well placed to avail more incentives with several of our plants located in Chhatrapati Sambhajinagar and serving OEM customers within the state of Maharashtra. Let me now give you a gist of orders won during this quarter. Please note that the business value for new orders is without including new orders of Bajaj Auto. The overall order win in quarter 1 FY '27 in the India business was INR 391.6 crores, of which INR 26.1 crores is new business and INR 365.4 crores is the replacement business. The EV business won was INR 11.3 crores and the remaining INR 380.3 crores was the internal combustion business. Similarly, INR 18.6 crores business wins were for 4-wheelers, while the remaining INR 373 crores was almost fully for 2-wheelers. We've also won a total of -- we also have a total of INR 4,526 crores of requests for quotes in hand. In quarter 1 FY '27, out of this INR 391.6 crores business won, INR 336 crores of business was from HMSI in this quarter. And out of this, INR 219.6 crores was at HMSI suspension facelift business, which has better margins. Also in quarter 1 FY '27, INR 35 crores of TVS and brakes business was added, taking our total TVS brakes business to INR 250-plus crores per annum. INR 10.5 crores of business was won from a leading U.S. EV OEM for our Shendra plant, taking the total business win to INR 223 crores per annum. The cumulative India business wins for electric vehicles in the conventional product areas now stands at INR 1,496 crores without Bajaj Auto. This reaches INR 1,806 crores per annum of orders if we include Bajaj Auto. The overall total orders won now in products other than Maxwell and battery packs since FY '23 stands at INR 5,720 crores (sic) [ INR 5,270 crores ], out of which INR 4,241 crores is new business. In Europe, the industry continues, as mentioned earlier, to operate in a challenging environment shaped by the Middle East crisis, high energy costs and interest rates, duties imposed by U.S.A., increased competition from Chinese OEMs and muted automotive market growth. In spite of this backdrop, our European operations have continued to sustain profitable growth through both the existing business as well as through M&A. In our Europe business, we have booked orders worth EUR 13.9 million in quarter 1 FY '27. This includes a large order from Mercedes for their hybrid program and an order from Stellantis for their internal combustion engine program. Our aftermarket in India remains a strategic priority for us with ambitious growth goals set out till 2030, guided by a comprehensive capability-focused blueprint built around the voice of our team, our channel partners, retailers and mechanics. We are deepening our long-term partnership with distributors aligned to Endurance's vision while driving secondary demand generation with retailers and mechanics. Our mechanic loyalty program continues to gain traction through certification trainings from BS IV to BS VI, electric vehicles and product fitness training, health camps and scholarships for the children of our top mechanics. We remain the first in the industry to deploy an AI-enabled tech platform to drive secondary order maximization. For aftermarket exports, we understand the voice of our stakeholders in each country and have translated into a unique value proposition. Our customized offerings provide us a competitive edge in each geography. Our teams are based locally, close to our key stakeholders and able to build capabilities as their requirements evolve. Now coming to our financial performance. The information has been uploaded at the stock exchanges last evening, along with our presentation explaining the numbers. I will, however, highlight some key numbers. During quarter 1 of FY '27, the company recorded a stand-alone total income of INR 3,194.15 crores, a year-on-year growth of 35.9% from INR 2,350.7 crores in the previous year. EBITDA grew 17.1% from INR 305.61 crores to INR 357.78 crores with a margin at 11.2%. The PAT grew 17.4% from INR 165.82 crores to INR 194.62 crores. The PAT was at 6.1%. In quarter 1 FY '27, it has been a challenging quarter due to the geopolitical situation. This has led to huge increase in commodity prices like aluminum, steel, copper, rubber and oils and fuels, including diesel, PNG and LPG gases as well as consumables such as cutting tools. The commodity increases led to RMC percentage to total income going up to 68.4% as compared to 64.8% in quarter 1 FY '26. You must keep in mind that this commodity increase has no value add and passed on by most OEM clients to us. If we remove this non-value-add commodity increase and then EBITDA margin, it is at 13.33% as compared to our reported 11.2% in stand-alone financials. In spite of the conversion cost increase of fuels, gases and cutting tools in quarter 1 FY '27, we could still post a healthy EBITDA amount increase of 17.07% at INR 357.77 crores compared to INR 305.61 crores in the previous year. And this was due to better operational efficiency and various cost controls across our plants. I would like to mention some of the key factors in quarter 1 on raw materials, most purchase order amendments not accounted in quarter 1 and will get effective in this quarter. So the raw material base in quarter 1 has been considered mostly on the quarter 4 FY '26 raw material rate base. In this quarter, we will get the raw material rates of quarter 1 average. As far as the aluminum alloys are concerned, which are 60% of our quarter 1 raw material purchase, we are seeing softening of the aluminum alloy rates in this quarter, which will be a gain to us in this quarter. Other raw materials, including steel, plastic, rubber and oils are in the final stages of settlement. On the quarter 1 gas, fuel and manpower rate increases, we hope to settle these rate increases in this quarter with each of our OEM clients, and we should see these rates being effective in this quarter or in the next quarter of this financial year. Also, our alloy wheel plant at Bidkin and the battery pack plant at Mindewadi are still at a ramp-up phase and have not reached optimal sales, which should happen in quarter 3 of this financial year. I would like to mention that in quarter 1 FY '27, the commodity increases of approximately INR 380.06 crores was paid upfront by Endurance as most commodity increases come with a quarter lag. We still closed the quarter for a stand-alone net cash balance of INR 415.7 crores. In quarter 1 FY '27, our consolidated total income grew 29.6% over quarter 1 of the last year from INR 3,353.54 crores to INR 4,348.28 crores. The EBITDA grew 18.7% from INR 479.51 crores to INR 569.21 crores. Our margin was at 13.1%. The consolidated PAT grew 8% to INR 226.35 crores to INR 244.52 crores at 5.6% PAT margin. I would like to mention that our subsidiary Maxwell for the first time achieved PAT positive in quarter 1 FY '27 with an 85% growth in total income from INR 30.53 crores in quarter 1 FY '26 to INR 56.51 crores in quarter 1 FY '27. I would like to inform you that our electric vehicle sales in India stand-alone for quarter 1 FY '27 grew by 87.4% from INR 69.2 crores in quarter 1 of last year to INR 129.7 crores in quarter 1 of this year, while our overseas EV and plug-in hybrid sales increased by 14.4% from INR 701.4 crores to INR 802.2 crores in quarter 1 of this year. The consolidated growth of the electric vehicle and plug-in hybrid sales was 20.9% -- I mean, it grew was 20.9% from INR 770.6 crores in quarter 1 to INR 931.9 crores, so 20.9% growth in EV and plug-in hybrid sales in the first quarter. We are happy to inform you that CRISIL has upgraded our ESG rating to a strong score of 68 from FY '26, up from 59 in the previous financial year. Our progress on ESG is being recognized consistently also across other agencies. Earlier, our FY '25 ESG score for SES and NSE had also improved year-on-year to 74.9 and [ 69 ], reflecting our company's continued focus on ESG. Endurance continued to receive recognition from industry forums for quality, innovation and sustainability. We won the Economic Times Autotech Innovative Right Technology Award 2026. We also won the Platinum Award for Sustainable Materials and Supply Chain at CII's National Excellence Practice Competition, along with Platinum and 3 Gold awards at the CII National Competition on low-cost automation and Industry 4.0. With these opening remarks, I would now like to invite questions from all of you. We will first take the questions from the European management team as they will be traveling. So we can start with questions for the European team. Mr. Venuti is on the line. Thank you.

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

Congratulations on great set of numbers. Massimo, my first question is on our order win. So at about EUR 14 million for this quarter, the run rate -- quarterly run rate is quite encouraging as compared to last few quarters. If you can talk about the quality of the order win, what are the different types of orders we are getting in terms of powertrain as well as customers?

Yes. So this was a very important acquisition in this moment because we are speaking about a component for hybrid vehicle in the transmission. And I said the sink to assign the business to Endurance due to the fact that we have already in our 60% of the total volume 40% was with a competitor of us that unfortunately or fortunately, let me say, went in bankruptcy. And so the decision was to move the production capacity 100% to Endurance, and we will have the start of production in January 2027 with more or less EUR 14 million. But we are talking about a component that we know very well. So it means that this was the only component in the transmission hybrid Mercedes where we have a second source, but this company will stop the production at the end of the year and we will take 100% of the business. So very important, let me say.

That's helpful. Secondly, if you can talk about it, how is the integration of Stöferle progressing? We understand that the core strength of Stöferle was on machining, but clearly, the backward integration with Endurance would mean that there could be significant value that we can generate. So how is the integration progressing with Stöferle?

Okay. I could say that the integration of 100% speaking about, for sure, the managerial activity and also the commercial activity because now we are moving considering the production capacity available production from Endurance aviation define making synergy and considering only the contribution margin of the part. Regarding the part, as you know, machining has certainly in low part from the market and hoping in the next few months to give you positive news about the process of integration because we are looking for production capacity available into the market. And as you can imagine, in this moment, is production available, but we are considering to integrate a specific component in bigger pressure die casting machine for Stellantis I hope within January 2027 to reach this agreement but the integration with the company are solely positive and also for the next quarter, probably will have the positive in foregone business in several.

That's good to know. So the full impact of this positive integration would be seen in FY '28?

Absolutely, yes. Starting from, let me say, September 2027.

The next question is from the line of Arvind Sharma from Citigroup.

On the European business, if you could just let us know the revenue and EBITDA and PAT in euros. That would be first question. And if I could just add the second part to it as well. What is the demand outlook now in Europe? Mr. Jain alluded to some challenges in the first quarter. But now given the order wins specifically for Endurance, how does the outlook look in the European business?

Okay. So I'll start from the near term, as usual, with the result of the previous quarter of this financial year, we closed with EUR 104.3 million other compare EUR 103.2 million of the previous financial year with an increase of EUR 1.1 million, 1.1% in terms of EBITDA, we closed with EUR 18.9 million compared to EUR 18 million of the previous financial year. In terms of percentage, we closed with 18.2% compared to 17.4% of the previous financial year. We grew 5.5% in terms of EBITDA. In terms of net result, we closed with EUR 4.4 million, 4.2 % compared to EUR 6.4 million in the previous financial year with a reduction of 31%. This is due to the fact that we increased the depreciation from EUR 8.5 million the previous financial year to EUR 11.6 million this financial year. The decision is linked to the -- we decide to in way to depreciate 100% of the residual fixed assets linked to a specific project or the internal combustion engine that we're going to is out in the next 18 months. The demonstration of the positive effect of the EBITDA in the quarter compared to this year, without considering the depreciation is that the cash profit reached in the quarter EUR 16 million compared to EUR 14.8 million over the previous financial year with an increase of 7.9%. Speaking about the market, as Mr. Jain told you, the market in Europe closed with 7.4% of increase compared to the previous year. We reached a peak of 22% in the BEV registration but please consider that the production compared to the previous year go down 5%. What does it mean that in this quarter, there was an absurd an exceptional performance of the Chinese OEM only to give you an idea, SAIC grew 32%, Geely, 157%, Geely, 7%, Chery 272%, Leapmotor, 500% compared to the previous year. And so if I offset the registration of the Chinese brand, the market was absolutely stable. But I repeat, there was a reduction in the production capacity. And so at the moment, they are reducing the stock to the dealer. The situation continues to be very difficult because as you know, in all the newspaper, they are thinking about important restructuring plan, Mercedes, Volkswagen, and then we close a specific platform because we want to close the plant. But to be honest, in this moment, we don't see important reduction in volume, and we continue to see as in the first quarter to grow compared to the previous financial year. In that for sure is Endurance. On top of this, the acquisition of the last few months components that are not new, but that are moving from company bankruptcy to Endurance from a point absolutely positive.

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

So my question is on India. Starting with the margins. Now this quarter, clearly, we had a commodity headwind. Now you mentioned that some part of that would be covered as a negotiation from customers in the subsequent quarter. Is there a way to quantify that? That is #1. #2 is that incremental cost inflation in Q2, how much of that you think is on the cards? And number third is that what are the offsetting factors for these commodity headwinds?

No. So Aditya, one is that we are surely going to get all the raw material increases from every OEM in this quarter. Okay. So basically, we'll get the quarter 1 FY '26 (sic) [ FY'27 ]. Rates in this quarter. As I mentioned, we are seeing softening of the aluminum alloy rates, definitely not the quarter 4 base. But of course, lower than maybe it could be INR 12 to INR 17 a kg is what we are seeing as of now in this quarter, which will be a gain to us for sure, because 60% of our quarter 1 raw material purchases was this was this alloy. So basically, we were operating in the quarter 4 base in quarter 1 largely now will be operating on a quarter 1, in quarter 2, we'll be operating on the quarter 1 base, which is definitely much higher than the quarter 4 base. And definitely, that should improve the EBITDA margin and percentage. to be honest, I don't know what that percentage is because right now, we have done the aluminum alloy, this thing -- I mean, those have been like settled like I mentioned, the steel, rubber, plastics, this is being talked to all the OEMs. We will conclude in this quarter, which will also be effective in this quarter. So that will be a gain for us. And third, like I mentioned, is on the conversion cost increases also. We are in touch with every OEM, and we hope to settle these conversion cost increases also in this quarter. We may get partly this quarter, partly next quarter. So definitely, we see a much better quarter 2 and the quarter 3 for sure. But if you tell me to give an amount, to be honest, there are so many variables around it that I cannot give a figure. It won't be fair to give a figure right now. But I can definitely tell everybody, it will be better than quarter 1.

Sure. That's good to know. Second question is on the 4-wheelers. I think if you can give us some sense that last few years, how has been our journey in the 4-wheeler die casting part? In this, you can also give some color on the Shendra facility that we have set up for 4-wheeler die casting that also includes some of the exports. So how has been the progress in the last few years, which are the OEMs that we have started engagement with and where we are seeing a good acceleration that will also include exports and EV. So yes.

So I would say that almost INR 1,800 crores is our business -- sorry, almost INR 180 crores is a business for 4-wheelers in quarter 1, okay? Because our 4-wheeler share is 6%. This is largely for castings. Of course, AURIC Shendra sales are not in this because the SOP is starting next month. It's for the leading U.S. EV OEM for Jaguar Land Rover and for Value, like I mentioned. So that will add to the sales and the profitability, okay? Now here, we have in Shendra, we have won an order of almost INR 513 crores per annum, but that will reach peak in only early FY '28. So it will be FY '29 because these are long lead programs. And we have to be certified for these orders much earlier when it comes to the -- these foreign OEM players. So I think a large increase will be seen from, I think, quarter 4 of this year in Shendra, which I mentioned, then also, we are growing in a large way with Tata and Mahindra in Chakan plant, where we see a strong traction from both Tata and Mahindra. And as you all know, they are both going well. As far as I mentioned we won this new Hyundai and Kia order of INR 80 crores per annum, which is also starting -- which actually already started during this month, okay? And this will only increase. And we are talking to other South-based also OEMs with Isuzu, we have started for the hybrid model, hybrid this thing more model products. So there's a lot happening in this space. And if you ask me, our focus now will be more on 4-wheeler and non-automotive castings and not that much on the 2-wheeler casting space going forward because we are -- like I mentioned, we are very, very now focused on improving our margins. I mean I have no control on the raw material percentage of sales. That's not in our control. But if you look at absolute margins, definitely, we want to increase them. If the raw material percentage it goes lower, then of course, the margin percentage will go up. But we are very, very focused on the 4-wheeler auto as well as the non-auto casting space. So to just tell you, we did about INR 180 crores in the first quarter of business, and this will only grow. Shendra is not included in this.

Sure. That's very encouraging. My final question is on our battery pack business. We are seeing encouraging progress in the 2-wheeler battery pack. So the question is that how should we look at the profitability of this? And is it that we will be using our own BMS for the 2-wheeler as well as the 4-wheeler battery pack customer that we are engaging? Is it a high single-digit, low double-digit margin? Or is it close to company average margin, the battery pack assembly with our BMS or without the BMS?

So of course, this is, as you know, a very high-value business. We have started. We have started on a certain pricing. There is a lot of work to be done on the raw material and the BOM. Okay? And this is something which we are working on to increase the margin percentage. I'll be better positioned to tell you what kind of margin percentage we can do and reach in our next call, which we have. There I'll be much more clear. But definitely, the volumes are going to be very good on the 2-wheeler. In fact, our whole assembly line, which has got a capacity of almost, I think, 17,000 to 18,000 battery packs a month will be fully used up by October. This is a plan. Even for the 4-wheeler, the new investment we are doing, I cannot name the company, I'm not allowed to name the company. Of course, that will come with also a good margin. Now of course, our target would be to try and reach margins, which we are doing today on an average. That is our target. But you must keep in mind, this is very high-value business. When you talk for a car business, I mean, it can be as high a battery pack can be as high as about lakh of rupees. You know what I'm saying. So those are the kind of pricing you're seeing when we talk about a margin on that. So it's a very exciting space to be. It is related to electric vehicles. And as you all know, there's a lot of traction happening in 2-wheeler, 3-wheeler, of course, is the fastest. We are seeing in 2-wheelers and now we are seeing even in the 4-wheeler space, a lot of traction of EVs and hybrids happening. So this is the future. So for us in Endurance to be a part of this journey is very important. Sometimes you enter at a price, but we are very confident that we will be able to make good margins on this, and that's our focus. But we have to enter, and that's very, very important. And this, as you all know, was a forward integration from our battery management system. For the existing 2-wheeler order, the BMS is ours and the aluminum casting is us. So that also increases our business for that. And that has a separate margin on this business. So when we see battery pack, we also have a margin on our BMS as well as on our aluminum die casting business as a company. As far as the 4-wheeler is concerned, there also -- both these products should be ours only. I think that is almost finalized because we want to start by quarter 4 of this financial year. So step by step, we are finding other people also approaching us, but this is something we'd like to do step by step. We don't want to go so fast, but the opportunity is huge is what I want to say.

The next question is from the line of Ravi Gupta from InCred.

Congratulations on stable numbers. Firstly, on CapEx. So our key customers like Bajaj, RE, TVS are announcing very big CapEx. And some of them have upgraded their CapEx in some case in 1Q. So what's stopping us to improve our CapEx like we are giving a stable CapEx guidance. So where is the gap? I just wanted to understand.