Fiem Industries Limited (FIEMIND) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and welcome to Fiem Industries Limited Q2 FY '23 Earnings Conference Call hosted by Monarch Networth Capital. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital. Thank you, and over to you, Mr. Sanghvi.

Good afternoon to everyone. Thank you, Tanvi. On behalf of Monarch Networth Capital, I welcome you all to the Q2 FY '23 Conference Call of Fiem Industries Limited. We will start the call with the initial comment about the results and the future outlook of the company, and then we will open the floor for question and answers. So without much delay, I now hand over the call to Mr. J.K. Jain, Chairman and MD of the company. Over to you, Jain, sir.

Thank you. Good evening, everybody. I welcome you all to the Q2 FY '23 earnings call of the Fiem Industries Limited. Joining me on today's call are Rahul Jain, Director; Rajesh Sharma, Director; Sanjeev Kumar, Senior VP, Finance; Arvind Chauhan, Company Secretary and other member of the finance team. Results and the investor presentation for Q2 FY '23 have been uploaded on the stock exchange and the company website. I hope you all have gone through the same. I am pleased to report that the company has delivered a strong performance in Q2 FY '23 with revenues growing by 25% year-on-year and profit growth of over 42%. Now I would like to talk a little bit about the 2-wheeler industry's performance. The 2-wheeler industry in Q2 FY '23 recorded production volumes of 5.6 million units, which is an 8% growth on year-on-year basis and 17% on sequential basis. This growth has been driven by good monsoon and grading firm activities and positive consumer sentiment. The festive season has also contributed to the positive momentum. Other key drivers for our industry growth in the electric vehicle space. For H1 FY '23, the EV volume has grown by 550% to 2.77 lakhs. We continue to strengthen our position in this segment and the increased penetration of the EV should help to grow volumes going forward. Now let me talk about the performance of SMT in Q2 FY '23. We continue to outperform the industries and have achieved a total income of INR 527 crores, which is a growth of over 25% over the same quarter last year. Sequentially, the revenue have grown 18%. EBITDA and PAT has also grown to INR 70 crore and INR 39 crores, respectively, reflecting the strong operational performance of the company. LED share as percentage of the total automotive lighting has struck 47% this quarter, reflecting the trend towards the faster adoption of the technology. We have maintained that this is heading towards 50% and higher. Our key customer like Honda, TVS, Yamaha and Suzuki continue to grow, and we are closely working with them on several new projects, including sales lift of the existing model. Overall, as we move forward, I feel optimistic about the industry's trend. The easing of commodity prices and also the semiconductor availability should help the industry to achieve good growth in the future. With this, I hand over to Mr. Sanjeev Kumar and the finance team to update on operational performance.

Thank you, sir, and good evening to everyone. I will present the quarter 2 number for FY '23. The company registered a total sales of INR 521.32 crores in Q2 of current financial year against reach INR 416.26 crore in corresponding quarter of FY '22 and reassuring a growth of 25.24% on a year-on-year basis. On a quarter-on-quarter basis, this is an increase of 17.95% from a base of INR 441.98 crore. The EBITDA was INR 70.46 crores, translating into an EBITDA margin of 13.52% as compared to an EBITDA of INR 51.95 crores that is 12.48% in Q2 of the previous financial year. EBITDA margin reflected by strong operational performance of the company. PAT increased by 42.51% to INR 39.12 crores as compared to INR 27.45 crores in corresponding quarter of FY '22. On quarter-on-quarter basis, PAT is higher by 28.47%. During the quarter, the company had made a CapEx of INR 10.32 crores. We continue to be a net zero debt company. With this, I end the financial brief, and now the floor is open for question-and-answer. Thank you very much.

[Operator Instructions] The first question is from the line of Aashin from Equirus Capital.

Congrats for the great numbers. Sir my first question is that you are seeing a very strong sequential growth in plastic [ parts ] and where you see that growing. So could you please highlight that what has led to that growth?

Actually, the increase in overall sales, and accordingly, this growth is also reflecting in the plastic as well as the rear view mirrors.

Okay. So actually, they have grown 30% sequentially. So is there something which is there apart from our normal sales?

No, this is a little bit increase in the plastic, you're actually right. Yes, this is because of addition of some parts.

Okay. Which volumes?

This is mainly for Honda. Honda and Suzuki.

Okay. Okay. And sir, you talked about that you're working with our existing customers for the new ATH and new market. So firstly, talking about Yamaha. So we are the -- last time we said that we are working at 10 models for them. So if you could tell us how is the launch pipeline is Yamaha especially business to exports?

Yes. These new models will be launching by next financial year and for export as well as for domestic, both.

So what sort of revenue can we expect and how many models can you expect in the next 1, 2 years?

On those volumes, we are still expecting from our customers. It will be ramp up, but how much production will be there next year, that will be definitely be given in the next quarter only.

Okay. Okay, sir. And sir, thirdly, the Hero, we have said that we've launched with them from FY '24. If you could give us an update on how is that progressing ahead?

Yes. This development is in progress right now. So next year, few models will be launched and it will be continued respectively.

The next question is from the line of Suruchi Parmar from NX Wealth Management.

Congratulations for the results. Sir, I want to know 2, 3 things. What is our EV contribution for this quarter?

What is our EV? So EV is still in that range of 4% to 5%. I think what is critical to see is how many new customers are being added and how much development is happening. Volumes are still small. So I think our -- in terms of percentage sale, it will not exceed much.

Okay. And can you give a fair bit of idea maybe in a 2-year time period? What can be the share in EV we can see?

It will really depend on a number of factors, including government policies. EV Sector is going through a lot of dynamic changes in terms of the regulation around battery, the same subsidy. So while I think the consensus view is clearly there that EV will become very strong but what percentage of the total market, it will take and consequently, our share will really depend on a number of moving parts. But I think over 2 to 3 years, if you see till 2025, our penetration of 15-odd percent, 20%, that is completely possible.

Okay. And Harley-Davidson -- how much sales we are doing in Harley-Davidson? Because we see this H1, there is a 3%, 4% of export is there.

No. Actually the export is reducing because of the lower sales in the European region. Otherwise, the Harley-Davidson sales has increased. And you know Harley-Davidson we are exporting to Thailand as well as to USA.

U.S., okay. So that sales for H1 was strong, correct?

Yes. correct.

Sir can you give that quarter-wise volume as well as realization bifurcations. What is the volume growth we've seen and realization?

This is the mix of the value and the volume. So it is difficult to give you the exact volume increase.

But can we say there were a volume growth also during the quarter, can we say that?

Yes, yes. You can say.

Okay. Sir, 2 things. We are not having a presence in replacement market. It is a specific strategy something that maybe other -- maybe other smaller players are doing it, but we are not doing it because of some specific reason of the management or we have any plan to penetrate the replacement market?

So basically, as you know, in our case, we are supplying to the OEM, and we are benefited by the OEMs not to supply in the aftermarket. So that is 1 of the reasons that our -- moreover, we are not doing the trading like other people are doing. Whatever we are manufacturing, we are selling. We are not doing trading like other people are doing. So that is a difference.

Okay. And any other plans to move from 2-wheeler cycle to 4-wheeler or EV or we will stick to 2-wheeler only?

We are open, and we are working on those fronts also.

[Operator Instructions] Next question is from the line of Ashutosh Tiwari from Equirus Securities.

Congrats on very good numbers. Firstly, on this Hero models from next year, are these existing models of Hero or new order launches that we are going to supply to?

These are all new model launches.

Okay. And obviously in a combination of LED and halogen or both?

These are all LEDs.

Okay. Okay. And basically, in terms of -- we probably have in the earlier calls as well. Can you provide some perspective on whatever models are in the development right now on lighting side. What proportion of that would be LED up now?

Total -- you are talking about the total number of the projects and how much is the percentage of the LED in there?

Yes. Yes.

I think it's almost 100% the new projects are there with 100% because most of them are AVs and EVs are all LEDs.

Okay, okay. But let's say, existing OEMs like Honda Motorcycle or TVS or Suzuki and all, with them there must be a mix of elegant LED, right?

Yes. Nowadays, the trend is towards LED only.

So as we have shown this year -- by next year, we are affecting more than 60% converting to LED.

Okay. And when you say that this is probably is always in terms of revenue in terms of volumes, will still be much lower, right? As of now broadly -- broadly I'm asking what would be the content increase when you go from the headline of halogen to LED in most of the models that we're applying to?

[Technical Difficulty] Ladies and gentlemen, we have the management line reconnected.

I was asking that like broadly moving from halogen to LED has been in most of the models, you said high-end model. What is the content increase in terms of value?

This will be around 50%.

Sorry. It will be around? I didn't get the number. Sorry, what you said?

Sir, are you able to hear me? Okay. We'll reconnect you?

No, we can hear you.

[Technical Difficulty] Ladies and gentlemen, we have the management members reconnected. Sir, you may continue now.

Yes. Sorry, apologies some technology issue. Please go ahead with the question again, please.

The participant is not in the queue. We'll move to the next question. The next question is from the line of Jatin from RTL Investments.

A couple of questions. So one, if I look at your margins over the last few years, we've been very close to -- been very consistent at around 12%. Now this quarter with the volumes moving up in what is I assume a seasonally strong quarter, we have seen margins move to 13.5%. Now are the margins can we sustain here? Or as this a seasonally strong quarter and for the full year, we should expect around 12% every year.

So you're right. We've always guided to 12.5-odd percent to 13% this quarter, significantly beaten that number and we hit more like 13.5%. Now that is obviously clearly driven by the significant volume jump that you see in the overall base volume, which actually helps in adoption of the full operating cost. So I think for us, we will continue to guide around 13-odd percent range going forward. But you've seen our intent quarter-over-quarter, I think operationally, we like to do the best and get the best out of the old margin. But I think from overall guidance, it still remains around 13-odd percent with minor fluctuations every quarter.

Sure. So if the 2-wheeler industry, which now seems to be on a recovery path, if we continue to see strong volume traction, then there is no reason why costs will go significantly higher. You will maintain a control on costs and then volumes will really hike.

Absolutely. What -- I mean the controllables, which are with us, they will be well within the range, the uncontrollable, which is the overall industry as you highlight, if the industry goes well, then there's no reason why we are not able to sustain these higher margin. So it could be -- that we could beat this margin, yes.

Sure, sure. And I know this is the OEMs kind of decide. And -- but your sense on where -- when the 2-wheeler industry could hit its previous peak of FY '19 from what you speak with your OEM customers?

So what you've seen this year is an encouraging trend. The first -- at least the time whether sequential growth or Y-on-Y growth, you're seeing that the industry is recovering because of all the onset that were there. And as you rightly mentioned, it was at peak just before COVID. So it will take a while to get back to that peak level. But I think we are firmly on that path to get to that level. So there is no reason why we should not get there.

Sure, sure. And could you share the share of business numbers with different customers like you share usually on your calls?

Yes. So we are giving the share of business with our core customers. HMSI, this headlamp, it is actually, 40% because this is on the full year basis. And tail end with 76%. Winker is 85%. The rear view mirror is 100%. We have 4 suppliers. Even for RR and cohesion lamps, we are 100% with HMSI. For TVS, the head lamp is 73%, tail lamp is 69%, winker is 82% and rear view mirror is 55%. For DRL and we are 100% with TVS and lamp share is 50%. Yamaha for head lamp, it is 91%, tail lamp 64% and winker 5%, rearview mirror is 32%. Yamaha position lamp is 50%. For Suzuki, our head lamp share is 80%. Tail lamp is also 80% and winker is 23%. Rearview mirror is 100%. We are sourced as planned. And same reflects -- reflector 100%.

The next question is from the line of Saurabh Savla from Multi-Act.

Sir, I wanted to ask on the LED mix. We have been guiding that the LED mix will gradually improve. So based on the current interactions with your customers and the order pipeline that you have, the 50-odd models which are working plus the EV customers. So 2 years down the line, what could be the level of LED mix in our total lighting revenue?

Yes, around 60%, we are expecting in the next 2 years.

Okay. And so this is based on the existing models, which we are working? Or this is a ballpark number that you are...

Overall.

Okay, okay. And sir, when we say that LED mix would increase to 60%, does that mean that at an absolute level the non-LED lighting will see a degrowth from this level or even that will grow but at a slower rate?

Yes. Basically, you see the trend is going towards EV and more and more EV will reset for LED lighting. And similarly, the higher model itself is there for lighting. So the growth is going towards LED. So there will be more and more users of LED in future.

Okay. So sir, my question was whether the existing revenues that you are getting from non-LED, will that sustain or even that will go down on an absolute basis?

That will absolutely -- basically you have to see the percentage. When the total overall lighting is 100%, that increase in LED so that conversion will go down. But it is not on the -- our company side. It is the industry trends we are talking even not only the conventional. Conventional is also been listing in the near future, and those will be converted into LED. LED, yes.

Okay, okay. Got it. And sir, second question was on Yamaha. In previous 2 quarters, you had indicated that there will be some slowdown in Yamaha because of the export revenue. So any outlook on that? Like is there anything changed on that or whether we'll see a further decline in Yamaha revenues? Or have you won any new models for the current year?

Yes. This year, we don't see any drop in the overall volume and revenue wherein new models will be launched by the first quarter of next year.

Okay, okay. And sir, lastly, on Honda. When I compare last 2 quarters, Honda's production growth versus our revenue growth with respect to Honda. So there is some -- we are lagging somewhat the production growth. So is that because of a particular model or particular segment as scooters or bikes where we are not present because of which our growth is lagging Honda's production growth?

Overall this is in line. Overall, if you see it is in line with the Honda growth.

You see the current quarter, our major contribution is -- and the growth is from Honda. And even when you see the volume growth of Honda, we are growing very good with the Honda.

Yes. Okay. Okay. Yes. And lastly, on the current interaction with customers, how do you see like after the festive season is done, like how do you see the numbers panning out in, say, October, November? Are you being able to kind of sustain some of the numbers? Or what's your outlook on that?

See, these are the industry thing, and we don't disclose about our interest in the OEM customers.

The next question is from the line of Akash from Narnolia.

Just I wanted to get a clarification on the -- [ further ] numbers, a very good October, 15,70,000-odd 2-wheeler vehicles sold out. Sir, I wanted to know because most of the supplies of these October months were done in prior to the months. So in Q2, that they got rejected in your sales comp. We wanted to know what -- how sustainable is the current run rate of the actual ground reality of 2-wheeler sales because somewhere other places we are hearing the rural by distance [indiscernible]. So I wanted to get a sense about what is in the coming months or how we see the 2-wheeler sales happening because once the festive season gets over, what is the scenario you think is on the [ revenue platform ]?

I think you will have to see the commentary of the OEMs who are actually tracking at the dealer level. From our perspective, we are guided by how their production should be looked. And obviously, effective season, quarter 2 is generally better. So that is always the case that cost-effective season, Q3 is slightly lower, but it remains to be paid how it plays out over the next couple of months.

Okay. Okay. And one more question regarding your [Technical Difficulty]. So I wanted to know what your diversification towards the 4-wheeler side because still you have majority of your revenue coming from the 2-wheeler side. So by when can you see a significant revenue coming from the 4-wheeler side because you know and you have been talking to a lot of players. When can we see something coming out of 4-wheeler side in a group perspective?

We are very closely working with the customer, which is totally dependent on that work model which we get. So we are hopeful and will very soon will inform once we'll get into the business.

Okay. Okay. And sir, last question. Sir, in this [indiscernible], in case -- have you seen raw material pricing issues, do you pass on to the players on an absolute basis of keeping the margin impact as part of it? Like I want to know when you pass on the increase on an absolute basis or you do you see the margin intact and then pass on that revenue?

Yes. We see it that way, which is why if you see our margins have been stable. So I think there have been -- quarter-by-quarter things change. I think we look at the overall 12 to 24 months outlook.

The next question is from the line of Anubhav from Prescient Capital.

Sir, firstly, like in the 2-wheeler space, what market share will we -- like have -- like do we have a sense of that?

I think if you look at the overall number of EV, we just highlighted the first H1 number, it's still very, very small. I think the overall EV market itself is so small. So it is kind of at this point of time to calculate market share may not be something that will achieve much. But what we do want to tell you is that I think it's been highlighted in the past that there are more than 20 EV OEMs that we are working with in terms of development, in terms of actual supply. So that is a significant number. And if you -- even if you look at the top 10 EV players right now, we will be present in a number 1 in a majority of them. So we are -- we have significant amount of traction in this space. But I think overall market share will allow a couple of quarters or perhaps another year before this market matures for us to be able to point a certain number.

And sir with the EV 2-wheeler volumes like moving up, have you seen any like new competitor coming in or the OEMs themselves trying to diversify the vendor. So how has the competitive landscape be?

Lighting is a fairly technology-intensive industry. And this is not an industry where if the market expands or it is more attractive new players can get into easily. And which is why you see the landscape is limited to a handful of players, and we are the builder in this segment. So we don't think anybody can break through. It requires lot of technology, a lot of investment, a lot of number of years of criteria before you can actually break through. So no, answer is no competition we are seeing right now.

Sir get back to -- my question was from the point of view of existing competitors, like Lumax is there or [indiscernible] is there in lighting. So from an incremental point of view, have you seen like them -- like any competitor getting more market share or turn over? And sir -- sorry for interrupting.

Go ahead.

And sir, the EV 2-wheeler, you mentioned that it's on LED lighting. And so like-to-like product comparison, winter realization be better in EV 2-wheelers or compared to your conventional OEMS or like lower?

Yes. In the LED lighting, all the customers are paying the tolling cost. So the overall development cost is not being paid by company. And realization will also be because it is totally depends on the volume, and that will definitely be realized by the industry.

And on your previous question on competition, clearly, there will be existing players who would continue to fight. I mean, the names you mentioned, there is competitive [Technical Difficulty] -- and we continue that leadership position that we are going to.

Sir, last question is that what has been the trend of realization in like the LED auto lighting? Has there been a form of realization? And like in general lighting, I think the realization over the year has fallen significantly. So do you see that kind of a trend where realization in auto LED, I think can also fall significantly over the years or that -- yes.

So to answer about this -- your question, actually, there is no comparison between the luminaries and this thing that the realization is increasing because of the new technology and the improvement in the optical sensor. So revenue is keep increasing significantly.

And that has been the trend also historically?

Even the more complex product is the headline for the big model, the realization is even higher. .

The kind is -- of course, future trend is towards LED.

The next question is from the line of Sahil Sanghvi from Monarch Networth Capital.

Congratulations for a very, very good results. Sir, 1 of the line items in the financials, the employee benefit costs has been higher Q-on-Q also and from the trends that we are seeing for the past few quarters. So anything one-off over there or this trend will be continued, if you can explain on this?

See, if you see our employee cost is 12.08% in this quarter. And as the sales volume has grown. So definitely, there is an increase to it. So it depends on the sales. Otherwise, there is no one-off kind of thing in this employee cost.

Okay. Okay. And on the trend of the raw material costs and the realization, if you can explain anything, I mean how are they moving? Any price hike for -- I mean...

You're asking about the price size of what?

Yes. So raw material cost trends or the realization, I mean, how are you moving anything on that?

See, there is softening in this raw material. As this is always pass through. It is not a problem for us. There may be a lag of 1 or 2 quarters, but it is always pass through.

Okay. Okay. And is [indiscernible] customer for us now? I mean do we have a present from them in the electric vehicle?

No, we are not with [indiscernible]. We are not with [indiscernible].

The next question is from the line of Vinayak Mohta from Stallion Asset.

Sir, congrats on a great set of numbers. I had majorly 2, 3 questions. So could you give me an update on what kind of capacity utilization we are running on currently? And what kind of additional capacities are we looking to put maybe in the next 1 year, 1, 1.5, 2 years?

See, currently, almost 80% plus capacity working in this quarter. And...

[Technical Difficulty]. So what we are saying that we are adding the capacities in our south factories because we are feeling a little bit more business opportunity over there. And so depending upon the situation, we are increasing the capacity.

We'll move on to the next question, which is from the line of Suruchi Parmar.

Sir, in this quarter cash balance is around INR 150-odd crores, something. So do we have any plan to use for this? Because we were doing some INR 50 crores CapEx. So has this CapEx been done expense out?

Yes. So total CapEx is in the range of INR 50 crores to INR 75 crores. That is ongoing that we've already announced to South India and some of the other -- we are supplementing with the machinery. But no [Technical Difficulty] opportunities on within [Technical Difficulty].

This is the operator here. [Technical Difficulty]. Now we can hear you yes. Yes, sir, we can hear you. Please proceed.

Yes. So we've -- I don't know if you got the full sense of what we said. What we said was that beyond the organic CapEx that we've talked about, there are other opportunities which we are looking at. And if those materialize, they will involve an outlook from the cash that we have. So we are in the process of evaluating a number of opportunities.

Okay. And sir what would be our gross margin this quarter in H1?

The EBITDA margin is already reflected, this is 13.52%.

Yes, that is available. Gross margin, do we keep the gross margin?

We grew -- based on the EBITDA margin, this is our main benchmark actually.

Okay. Sir, what was the ROE for this H1 -- ROCE, return on capital employed?

See, ROCEs given in the yearly basis, this is given in 20% range, already in the presentation.

For '22, correct, not for H1?

Yes, FY '22, yes. Completed year.

The next question is from the line of Varun Arora from [Safe Enterprises ].

So you break the shares of your other like 4 customers like TVS, Yamaha, Suzuki. Could you do the same for Royal Enfield also?

See, we share this wallet share on a full year basis. So it is -- while we give only for our top 4 customers.

Sorry, would you be able to share that later?

Yes, we can.

And the second question is regarding -- I just wanted to understand how the margin profile of new products like rear view mirrors is different from our conventional lighting and LED lighting. How would the margins be different in new products?

See, please understand this even the rear view mirror, it is our old product line. And all the products goes to the similar -- I mean the same customers. So our margins are on the growth level is what we were 12% to 13% and now this quarter, 13.5%. It isn't overall. So we can say on all products, it is on the same range.

The next question is from the line of Vinayak Mohta from Stallion Asset.

Yes. I guess I got dropped off. So I was just continuing on the CapEx question. I wanted to ask how much of the total CapEx that you're adding South as a percentage of your total capacity right now?

It is -- in South, we are having 4 factories. So it is -- we are not giving in the factory-wide capacity. It is giving on the overall company wise and there is always an addition in the every factory. So it is very difficult to give factory-wise.

Okay. And as and when your LED share will be increasing, like you said, in the next 2 years, we will go to 60%. Do we expect a margin expansion on the back of LED as well? Does LED have a higher margin relative to other products?

See, as you know, the LED has the higher realization in comparison to the conventional, almost -- start from 2x and even go to higher. So higher sales will definitely give an overall improved margin. But as far as the product wise you are saying, it will remain in the same range.

But your company level margin will continue to move higher because the realizations are much higher in LED, right?

We will -- yes, we will definitely try to maintain at higher level.

Understood. And 1 last question. Can you give any growth guidance for the next 2 to 3 years about given how we are looking -- given your order book and how you given you're expecting that 2019 levels to be on the 2-wheeler volume and EV penetration is the reason as well. So any internal targets that management has set for itself with regards to growth outlook for the next 2 to 3 years?

We don't give specific guidance. However, we've said that in the past, and we have the track record, but we've always outperformed the industry. And given where the industry and the cycle is, we feel confident that I think a 15%, 20% growth is the growth target that we should set across for us.

So 15%, 20% is like you're expecting the industry to grow by. So given you are saying that we might...

From a company -- we're saying at the company level, we believe 15% to 20% growth is something that we should really get to.

Next question is from the line of [indiscernible].

What is your big railway business is all about and at the moment, how big it is as a percentage of your total revenue?

Members of the management, please confirm if you able to hear us? [Technical Difficulty] Ladies and gentlemen, we have the management line reconnected.

Yes, our apologies we're getting some -- please go ahead.

Yes. I just wanted to do 1 billion of your business is just supplying LED display panel to railways and buses and all those things. At the moment, how big it is? And what is the percentage of your total revenue coming from this side of the business?

See, our major business is coming from 2-wheeler segment, and we are -- yes, this -- all other segments are quite lower at this stage.

Sir, but do see the prospect on this? Because we are hearing that the mutual railways are now very aggressive in giving and modernizing different kind of stations and everything where your lights would be used. So are you getting the same sense?

The company has always been an automotive-focused company. So while we did get into this segment, but we didn't make much headway in terms of winning significant order. So I think our focus will remain automotive for the foreseeable future. And right now, the numbers on this segment are quite miniscule, probably under 1% type in terms of where we are on the total revenue. So we will remain a completely automotive-focused company.

Okay. Since now we are focusing on more on the EV side, can you give us a sense that out of your total revenue, how much we are getting totality from the EV and EV 2-wheeler or 4-wheeler manufacturing side? How much is the percentage in the total revenue?

Yes. So the percentages are still low. We are working with a whole lot of OEMs. But in terms of percentage, it will be around 4%.

So at the moment it is 4% approximately?

That's true.

And that segment is growing faster than your regular segment, right, in terms of growth?

Yes. On a very small base, it's growing like -- I mean it's grown 500% in H1. But that base is very, very small. What remains to be seen is how quickly it can go to a significant base and then grow from here.

Yes. The pulse of asking the question is I'm sure the margin of those side of the business probably is higher than your regular side of the business. So the more promoting -- the proportion of that business increased to your total revenue. Hopefully, it can contribute to our overall margin as well, right, not necessarily now, maybe 2, 3 years down the line?

I mean as of now, at least the margin is not higher. It is probably a similar range. But for us, whether it is EV or IR, our product line is kind of at a similar margin level across.

Okay. And sir, can you tell me that how many EV suppliers, you are the sole supplier? We know Ola, you are a sole supplier. Is there any other EV where you are the sole supplier?

Yes. We are, as of now supplying to Okinawa. We are supplying to Revolt. We are supplying to Bounce. These are all sole suppliers.

Okay. So 3, 4 suppliers you have, you are the sole supplier?

Yes.

Okay. Sir, 1 more side on the export. Now as of now, I think the export is very miniscule or mainly negligible. Now those OEMs who are present in India, do they ask you to supply to their production in other countries as well? And how much it is now?

Of course, we -- every OEM customers have their own CKD warehouses and departments. So all the products which they are exporting to other countries are buying directly by them. To their warehousing, they are exporting directly to their subjective companies for the stations.

Yes. But do you also have some share there?

It is difficult to give because their supply after getting from -- and we don't segregate it. But on some estimation basis, Yamaha's share of export is quite significant around...

Yamaha, TVS is for -- [Technical Difficulty].

Every company is exporting right now, but they are taking the material from us in their own names. And thereafter, they are exporting to their subjective companies.

Okay. And just in the present status, you say that the capacity utilization is already at 80%. And if I see your CapEx incurring almost in the last 6, 7 years, we incurred a heavy CapEx, and your gross was reached to INR 941 crores. Now if I assume 15%, 20% growth, what you are estimating for the next few years, that means very quickly which you have more gross block and CapEx to be added. So can you get a sense that what kind of CapEx you're planning for the future, expect that INR 20 crores, INR 30 crores generally you spend? Any major CapEx planning considering the growth outlook you are providing?

Yes. So we've already guided that INR 50 crores to INR 75 crores CapEx has been kind of already earmarked. There is work happening on that. That will definitely happen. Over and above that also, there are several opportunities, which we are exploring, which are more related to adjacent product lines or within our product line or within our customer base, what else can we do. Any of these that come up will involve a significant CapEx because there's a new factory land, building all of it to be set up. So besides the INR 50 crores, INR 75 crores, there could be a large number. I think the situation will become clear by the end of this financial year on the full CapEx plan.

So this INR 50 crores, INR 70 crores, I'm sure you are planning to fund through your internal equals, right? You have that much of cash?

That's right.

And anything bigger come, probably that is the time you think about some kind of a debt if the cash is not sufficient?

I mean, we can look at that. But as of now, our cash flows are such that we can fund those bigger plans as well. But I think it's important for it to be crystalize first in terms of the quantum before we make that call.

Just one thing, relating this -- your pricing part of it. I understand it is simply pass-through mechanism that whatever cost increase or decrease is happening eventually it is passed on to the OEM. So I'm just trying to understand that in case you guys are becoming effective or very efficient and you reduce the cost side compared to your competitors, how the OEM is going to recognize that fact? And if it is a cost-plus model, so if you reduce the cost, they will always consider the reduced cost and plus your -- maybe some kind of an agreed margin and according to the sell price is fixed. I'm trying to understand how your efficiency in your organization is being recognized and as well as it is getting in terms of extra sales price from your OEM?

See, major point is because the raw material is well tackled and raw material prices are being controlled for all the supplies by the customer only. Process costs because since we are working since long within this industry and product ranges, which are injection molding or other processes, which are being wholly related with the lighting industries and our product industry are being well validated by the customer. And we have to focus on the customer specification, which is most important and prices are being converted based on that only.

So if you're efficient for example, efficient on your labor side, you are efficient on your productivity side, I'm not talking about the raw material side. I'm only talking about the profit side. So if you become efficient compared to the market, and I'm sure you will, as you grow and your capacity to increase, how that will be coming to the revenue side? Because the customers generally very sticky in terms of giving the price at a fixed margin overlay cost.

I think that efficiency is exactly what differentiates us, which is why we have industry-leading margins even for the product because that's not because we are getting anything different from the customer, but because we are able to manage our operations better.

So that is how probably your margin are better than others, that is reflecting that?

Yes.

Okay. And last one, probably. This inorganic opportunity, are you guys little serious about looking into some of the inorganic opportunities available in the market or you are quite silent about it?

I think for us, the levers are growth... [Technical Difficulty]

Management is reconnected now.

Yes. Yes. Sorry, again, the line got disconnected. Please go ahead. You were asking.

Yes, I was asking about this inorganic opportunity, you were saying something?

That's right. So on the inorganic -- I mean, clearly, we are open. There are a lot of opportunities which we are seeing evaluating. But what will result into a deal, it's difficult to say. But I think clearly, we are completely open to what is happening in the market. And beyond that, the organic start also is good. However, I think we are in a position where if the market presents something interesting, we'll be happy to take it.

I know you have a concept of kind of a content for data that kind of a calculation that all it is an individual. I mean like other OEM, other suppliers, they always have a kind of a [indiscernible] vehicle that whether that has been in an increasing trend. Do you have some kind of a calculation like that?

So I think what you have to see is that we have kind of restricted ourselves in our -- this journey over the years around 2-wheeler there because we wanted to make sure that we are a leader in this segment, which we are. Now within this, opportunities, as you rightly pointed out, weather content per vehicle, which is what we said product efficiency or other areas, those are some things which we are looking.

Yes. But sorry, sir, this part is not very clear to me. I'm trying to understand this thing that as the industry grows as you grow to more and more customers, the product you manufacture and supply to them is that for each vehicle, if your product is going, chain is going higher or it is stagnant or it is going lower in terms of the per vehicle you supply. So for example, if you take Yamaha or take anybody. So per vehicle year-after-year, what is supply for per vehicle that contained value is increasing.

Yes, of course, if we see some conversion to LED and the technology, which is being implemented in Yamaha is, of course, increasing the overall value.

So as it is growing, your content is also increasing. That is revenue per vehicle, what you're supplying to us, that is also increasing?

Yes, it's also increasing. Revenue per vehicle is also increasing because the revenue is increasing, the volume is increasing, it has increased on that area.

That was the last question for today. I now hand the conference over to management for closing comments.

Thank you, everyone, for participating in the con call. I do hope that we have been able to reply all your queries adequately. We are available for any additional questions you may have. Thanks and good day.

Thank you. On behalf of Monarch Networth Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.