Gabriel India Limited (505714) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Gabriel India Limited Q2 and H1 FY '22 Earnings Conference Call. 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. Manoj Kolhatkar, Managing Director, Gabriel India Limited. Thank you, and over to you, Mr. Kolhatkar.

Yes. Thank you. So good morning, everybody, on the call. And I hope all of you had a wonderful Diwali. I think it was definitely a welcome change after the last Diwali, I think a little more bright, I must say. Now that the country is witnessing, I mean, a sustained down trend in COVID cases. However, we need to be very cautious still because after the festive season, it is expected, it may spike so we'll all have to be cautious. But nevertheless, a very happy New Year to all of you before I start. So we have uploaded the investor presentation for the quarter. I hope you all had a chance because we did -- we had our Board meeting on Friday. And since it was the weekend, we had to take the call today. And of course, with me joining today on the call is Rishi Luharuka, our CFO; and Nilesh also our Company Secretary; and our Investor Relations Advisors, SGA. So first and foremost, I would like to share that the Board of Directors declared an interim dividend of INR 0.55 per share of face value of INR 1 for the year '21/'22 -- I mean to 2021-2022. And with this, I'll now get to the update on our operations in the quarter that has gone by. The company did face disruptions in the first quarter, as you all know, in particularly the month of April and May due to the second wave. And it was -- yes, it was quite bad. And of course, this time, it affected many of us, as you all know. However, after this, the recovery was strong. From June onwards, we witnessed a continuous recovery and all our facilities are running quite smoothly now. Yes, of course, the recovery was not as steep as what we saw after the first wave of COVID. It has been a little muted to that extent, but nevertheless, the recovery has been strong. Before we delve into the numbers, let me provide you with an update on how the current environment is shaping up. The auto industry, as you all know, is facing challenges due to rising fuel prices and the biggest challenge of all, which all of you will be reading is a shortage of semiconductors, which is resulting in delays of production or even rescheduling or reducing the demand of many of the car makers particularly. This is not only in India. In fact, globally, it is even worse. In India, I must say, it is a little muted. High upfront costs caused by production issues, which increased the waiting period for popular automobile models and high fuel costs combined with inflationary pressures has dampened the sales momentum. And normally, the festive sales season account of 40% of the annual vehicle sales. I mean, this is right from the month, I would say they start around the Onam and Ganapati and Ganesh Chaturthi they gone right up to post Diwali. This has been definitely a lesser than comparative festive period last year. Passenger vehicle dispatches to dealers were affected mainly because of the supply issues, which I did mention already to you. But the good part here is that the consumer demand is very strong in passenger cars. It has been positive across all the segments, 2-wheeler wholesales also have improved month-on-month. And again, one more bright spot is the commercial vehicle sales are also witnessing a gradual recovery. 2-wheeler entry-level sales did not pick up due to the rural distress, rising fuel prices and generally, the masses is trying to save money, then making high-value purchase. Because as you all know, this time, the COVID-impacted rural areas quite significantly. So that effect is clearly coming out in terms of the 2-wheeler demand mainly. In terms of CV segment, small commercial vehicles are picking up due to the demand for intrastate movement of goods. Of course, the rise in e-commerce demand is also fueling this. Few carmakers have halted their production schedules because of semiconductor shortages. I mean they range from 30% to 40% cut in production schedules, which is quite significant for passenger cars. During Q2, auto sales was impacted due to these constraints in PV segment. The prevailing shortage of semiconductors and recent lockdowns has impacted, as I did mention on the volumes. The situation definitely is improving and we'll have to keep a close watch on the same. The other challenge has been the prices of major commodities, steel, aluminum. In fact, every commodity that we speak has really gone up significantly over the last, I would say, 6 to 9 months. But we are seeing just -- I mean, some ray hope that over the last 2 weeks, we are seeing a little -- I mean, a little mellowing down of prices, both in steel and aluminum. So let's -- we'll again have to keep a close watch on this. The availability of ships for material transportation is adding to the problem with the current supply constraints and logistical challenges, vehicle prices may take some months to adjust. With the pandemic going on, we have been taking utmost care for safety and well-being of employees. We have shared that in the presentation as well. We have ensured that the vaccination rate for the first dose was 100%. And the second was based on, of course, people getting affected. The second dose vaccination is not 100% due to -- I mean very genuine reasons, but even that will touch 100% very soon. We have set up a dedicated COVID care helpline, and we continue to maintain all the precautions in our operations across all our plants for Gabriel as well as the ANAND Group and ensure that this is monitored very, very closely. Now moving on to the numbers. This quarter, we had our highest sales ever for a quarter. In fact, we reported a top line growth of 29%, which is almost transferring into value of INR 590 crores, which is clearly the highest by a big margin. The earlier highest we had reported in the month in Q4 of last year, which was INR 580 crores. So now we have beaten that and we have moved to INR 590 crores. We have recorded a 21% year-on-year growth in EBITDA in Q2 at about INR 43 crores. Margins stood at 7.3% for the Q2 FY '22. I did mention there has been a significant increase in raw materials over the last few quarters and which is just sustaining month on month on month. So this has definitely put a significant pressure on the margins. We have been able to pass through a large part of the input cost increase. However, part of it will happen in the subsequent months as well. Our supply chain was definitely better. We did not face issues. We were geared up much better this time for the festive season. So we did not face issues of supply chain in this -- in meeting the festive demand this time. Our focus on the Core 90, which is cost reduction 90 days, which has now become a very strong initiative. That's why we are continuing with the name of Core 90 across the company for cost optimization and productivity has been very closely monitored, reviewed and being implemented across the company. It has enabled the company to partly offset the part of the price increase due to the commodities and limit the impact on EBITDA. We reported PAT of about INR 25 crores for Q2 FY '22. Our profitability in terms of PAT was affected due to onetime adjustment of deferred tax. Moving on to the balance sheet and cash flows. We continue to maintain a robust balance sheet position with net cash of INR 257 crores as of September 21. We are continuing our thrust on collections and working on inventory levels. But yes, I have to mention here that inventory -- managing inventory has been a little challenging, again, owing to fluctuating schedules and demand cuts -- schedule cuts by customers due to the semiconductor shortages. So they are also continuously correcting their schedules based on the amount of semiconductors they receive. But still, overall, this has led to a healthy cash generation to the tune of INR 29 crores for H1 as compared to INR 110 crores of outflow in FY '21. Our working capital release was significant compared to the previous period. Our net working capital stands at 17 days as compared to 28 days for the same period last year. Our debt equity ratio stood at 0.02x I mean at a good level. ROE stood at 10.2%. ROCE at 20.2% on an annualized basis. The CapEx that we incurred during the quarter is about INR 35 crores, which included the backward integration effort that we have done to reduce our dependence on China. This strategic decision we had taken post the steep recovery we saw in last festive season last year. And we implemented the augmentation of our casting and machining facilities, which included some expansion in Hosur plant and also some automation and some, of course, balancing equipment expansion at even our Chakan plant. Coming to segment-wise performance. We've changed the product mix in 2-wheelers, Gabriel continues to gain market share. We hold 25% share -- market share in this segment. 2-wheeler and 3-wheeler put together forms almost about 65%, 66% of our total sales in Q2. We reported growth of 24%. Our growth was driven mainly in terms of bringing market share with our customers, high efforts in terms of developing new products and good acceptance of end products in the market. Here, I'm, of course, quite delighted to share that we have received a new order for a new motorcycle from Honda, and this is on a 100% share of business. So this is the first time that Honda has awarded possibly business on a 100% basis, and I'm glad to share that this has been awarded to Gabriel. Now coming, of course, to the hot topic, which is EV. We all are seeing a lot of news about EV daily and the numbers are also improving, particularly, of course, in the 2-wheeler and 3-wheeler segment. People are clearly making a shift to EVs for cost saving. And individual governments also signed -- have declared many incentives to promote this particular adoption of EV by everybody. So we are -- as I had shared, we are a very well entrenched player. I mean, you have also seen the slide in the presentation that we are with all -- Ola, of course, on single tool basis. We have with Okinawa, with Ampere, with Ather and of course, in 3-wheelers with Piaggio, with Bajaj, with TVS on 2-wheelers, with Mahindra Electric for 3-wheelers. We are very, very well entrenched on the EV space, and we are, of course, seeing an improvement in numbers month-on-month on EV. On Ola Electric side, which, of course, all of you will be very keenly following. We have started supplies in the month of October. The ramp-up schedule is -- I mean is being -- again, corrected by Ola. I mean, of course, there are some ramp-up challenges and -- but we are meeting the demand as per their callouts. On passenger vehicle side, again, we have witnessed an improvement in volumes. And as I told you, while the sales may not be reflecting the true story, the demand is very solid. The inventory levels in passenger car segment are only as low as 10 to 15 days or even in some cases, even lesser run there are a huge waiting list for many models in the market, as you all know. So this clearly augurs well for future demand whenever the chip shortage problem is solved. Of course, it will take some time as they say. But what is more important is we are delighted to report a year-on-year growth in this segment. We grew by 42%. And our market share also has improved significantly. We now have a market share of 21%, which will go up further because we have won some more new models. Like I had mentioned last time, we had won the Maruti Jimny model. And also added to that, we have won a new model which is going to be made in Maruti as well as Toyota. So this is christened YFG and YXA. There is a small SUV, which will -- it will be a replacement of the Brezza and S-Cross. But this time, it will be made and designed also to make higher volumes in Toyota, and we have got that order completely. There is also an electric vehicle based on this platform for which also Gabriel has got order. As per SIAM database, the sale of vehicle grew by 8% in Q2 for the same period of last year. We have now commissioned our new tech center charter where we'll be able to offer much better product design and value proposition to our customers and increase our market share further. Moving to CV space. As I mentioned, the good news is the volumes have started picking up even the M&HCV is now growing. And we -- our market share, of course, continues to be the dominant market share, and we sustain the market share definitely. We are seeing growth coming back in -- from October onwards. And I think this should continue til the March end. Aftermarket, which Gabriel, of course, is quite strong in this segment. It continues to remain strong. We have had some really record sales of aftermarket in almost every month from July and we are focusing on developing more and more new products for the core segment, increasing sales through national channels, focusing on B and C class towns and expanding presence in export markets with strong focus on Latin American and African markets, of course. We generated revenue to the tune of INR 91 crores in Q2 alone in 1 quarter, which is again, I mean, definitely, this is the highest aftermarket revenue that we have clocked in a quarter. And as you can see, our aftermarket percentage of our total revenue has now gone up to 15% in Q2. Another very good aspect, which I would want to share is on the export side, which we have been sharing continuously on several calls. And now you can see all those efforts that we took almost 4, 5 years back are fructifying and we have had the highest export quarter. We did INR 30 crores of exports which is a 142% growth year-on-year. And in fact, again, this is the highest export that we have done in the quarter. And we are hopeful of receiving some more new orders. We are working on it. Of course, we don't have anything to share as of now. But the good part is exports is increasing quarter-on-quarter. We, of course, currently exports to OEMs form 72% and aftermarket is 22 -- 28% of the total export pie that we have. So this is all that I wanted to quickly share with all of you. But with large-scale vaccinations, as a country, we've been able to safeguard ourselves against the third wave. We are confident that we should not see a third wave again, hopefully not, and I really pray for it. We have established a significant presence across all automotive segments with strong technical capabilities and our relationships with our customers. And with EVs being the new trend, we are strategically focusing on strengthening our basket of offerings in the evolving EV space locally as well as globally. So let's -- I mean, hoping for a continuous improvement on the market side. And on that note, I would come to the end of my opening remarks. I would now request the moderator to begin the question-and-answer session. Thank you.

[Operator Instructions] Our first question is from the line of Nikhil from SiMPL.

First of all, sir, congratulations on a good set of numbers. I think except for the gross margin, most of the places we have done a great job. So congrats to the whole team. 2, 3 questions. On the aftermarket export, you mentioned that we've seen a strong growth. So what is exactly helping us with this growth? So what are the efforts which we've been putting? And do you see that this is now a journey which can sustain on this number? Just some sense over 3 to 5 years, how do you see this evolving? And similarly, on the new orders in the export for the OEM business, other than DAF and Volkswagen, are we seeing any new customers which could start contributing in next 1.5 years? Or where are we in terms of new platforms getting added? That's on the exports. And secondly, on the gross margin. Now if I look at our current year -- current quarter gross margin at 24% and even first half at around 24%, 25%. It's like almost 18, 20 quarters low gross margin. How do you see the evolution from here going forward? Because [indiscernible] would have come up for us. So what kind of profitability trajectory do you see we can come back to the 25%, 26% or just some sense on this?

Thanks, Nikhil. So several questions. So firstly, thanks for the compliments. Of course, we are helped by the customer schedules, so thanks to our customers. On the export aftermarket, yes, it's a low base. So obviously, you'll see an improvement in numbers. Our focus remains on, as I mentioned, Latin American and African markets. We have developed some new customers as well in Latin America, particularly. So that is helping us increase these numbers. But having said that, our exports aftermarket as an absolute number is not really very high, and it will continue to grow. I mean, it'll continue to grow in healthy double digits, for sure, for some time. What is more important is the exports OE orders that you mentioned about. There, we had won the Volkswagen Russia rare which started -- the story started when we were asked to supply only for a limited quantity. And then because of our engagement with Volkswagen India as well as global and, of course, the performance of our product, they gave us -- awarded us the 100% business for rare. So that is steadily -- every month, we are sending the same. However, yes, they are also affected by the semiconductor shortage. So they have corrected in these months, a bit of schedule in the month of October, November. But know that it will, for sure, come back. It's a temporary phenomena. The second good development was the DAF of Netherlands, which is a very, very good and strong brand in commercial vehicles. So we had started with 1 order and we have already supplied the initial samples for the second order and there is also a third product in development. So that clearly is gaining good traction on the DAF as well. So we are seeing with these 2, 1 in passenger car and 1 on commercial vehicle, especially of a good label opening up, I'm certainly seeing some more opportunities coming our way. But yes, having said that, we need to also keep in mind that these orders take a long time to develop and to convert into start-up production. So exports, definitely, if you see our quarter performance has been INR 30 crores this quarter. So definitely, we are on track to cross the triple-digit in terms of crores this year. Now your last question was on gross margins. Yes, certainly, we have seen immense pressure and it is not -- I must say, it's not Gabriel that is singled out. The entire industry has been really suffering on this. OEMs have take -- themselves, if you see their performance for quarters has been under stress. They have taken price corrections in the market. So they have definitely passed almost, I would say, 85% of our raw material is completely indexed with the customers, maybe with a lag here and there. But having said that, that does take -- that does hit the percentages because we only get the compensation for the raw material. So that's the formula with -- again, with generally everybody. So we'll have to wait for the downturn. I mean, this has been unforeseen and the longest ever escalation trend that we have seen in raw material commodities. And certainly, as I said, in the last 2 weeks, we are seeing that trend tapering off at least in 2 commodities, aluminum and steel. Let's hope that continues and we should be able to get back our profitability margins. And I mean, our target remains for EBITDA level of double digit. I mean, I certainly don't want to lose focus on that. We certainly -- we will continue to aim at that.

Sure. Just 2 follow-ups, sir. One is when you said the whole platform of rare has been given to us. So is it still only Russia? Or is it -- is this product launch globally also?

2 No, this is only Russia, of course. This is only Russia. And we have got a several RFQs for global vehicles from Volkswagen as a group, which includes Audi also. So we are bidding on several fronts. And there's 1 more big OEM that we are -- a European OEM, which we are in very advanced stages of discussion for an export order. So we'll have to see -- I mean, hopefully, by next quarter, we should be able to share either way. I mean whether we get it or we don't, but we'll be able to share something on that as well.

Sure. And lastly, if you look at the fixed cost for the quarter, in terms of the employee and operating costs, that was pretty flat even though the sales grew significantly, would you guide that this is the kind of fixed cost structure which will sustain as we cross INR 600 crores of top line? Or is there going to be some more inflation around there? Or -- Because sequentially and year-on-year, that cost has remained around INR 80 crores, INR 90 crores even the sales growth was pretty strong.

Yes. Yes. So if we can see -- that's what I said. So the good part is we have done INR 590 crores. And I mean if you can see, we can do -- definitely, we can squeeze out much -- I mean, more from each of our plants at the current cost structure, okay? So see, I've always told in all the calls that we are built for volumes. So if volumes come our way, definitely the -- I mean the other costs will -- you will see an improvement in terms of percentages, and that is what is reflecting. Only issue is currently the commodity. So the fixed cost structure is going to be around the same. Even if it is INR 600 crores or even a little bit more also, it remains -- definitely it'll remain in the same region. I did mention on the Core 90 exercise, which the whole idea of Core 90 is to reduce mainly focus on the fixed cost. Of course, raw material, no doubt. But mainly focused on the fixed cost as well. So that has finally you are seeing the results in terms of ready -- sustained absolute number, which results in to lower percentages.

[Operator Instructions] Our next question is from the line of Amar Kant Gaur from PhillipCapital.

Congratulations on record performance. My question is on the EV side. So we see there have been a lot of smaller electric vehicle manufacturers, which were primarily importing from China, assembling here and now they are looking to localize and they are looking for local partners. I'm talking about suspension in this particular case. However, they do not have the kind of volumes that may be necessary for a player like you to make good money on it. So how are you looking at that kind of a conundrum that they would maybe require 2,000 or 3,000 kind of a set of suspensions that they will need for their own production? So how are we looking at that kind of a conundrum as lower supplies currently, probably greater potential for entry at this point of time? Or are we waiting for them to grow into a much bigger size, which is substantial enough for us and then start supplying to them?

Yes. Amar Kant, it's a valid question. So in fact, again, this also I had shared. We are addressing EV as a very strategic segment because we believe, like all of us now -- I mean we have done this 2 years back. That's why we are sitting on orders with -- every customer that I'm telling, let's say, Ampere, Ather, Okinawa, they started with exactly the numbers that you told, 2,000 in a year, 3,000 in a year. And there are several others. We are also with Tork with some other very low volume EV makers because we don't know who is going to actually click in the market. So we are not closing our eyes to even small orders. We are limiting our risk by ensuring that the development cost that is needed for these is recovered from them. So at least on cost plus, let's say, in the worst case, that particular company is not able to pick up, we are covered. And second, we are trying to sell to them products which need the minimum modifications. So we are trying to sell them a standard product. So our development cost remains very low. Our development effort remains very slow. So we are ensuring that it's a low-risk option. But to answer your question, we are definitely looking at each and every EV maker. The good part is most of them contact Gabriel because that's the only name that comes to their mind. They contact us, and we have set up a very elaborate mechanism of getting into which is this company, what is the funding, what are the chances of success of this company in the market. Looking at the management, looking at their technical expertise, and we jointly take a call, okay, fine, even if this is low volume, we'll still supply to them. So that's the structure we have built.

All right. I was asking the question because I -- from our interaction with some of these new age OEMs, we heard that there is some pushback from suppliers in terms of volume requirements. So that's why I asked that question. That was my question.

No, we are well aware of that. And we are trying to, as I said, meet every demand of even new EV makers and trying to force -- I mean trying to at least force them into accepting a standard product.

[Operator Instructions] Our next question is from the line of [ Shrimant Dadoria ], an individual investor.

Sir, the first question is I wanted to understand based on your interactions with the various OEs and the delivery schedules that you have. What are they guiding on the semiconductor issues? And how long do they see this volatility in terms of supply of the chips being there and then the situation will ease out. What is the guidance which they are giving?

Okay. Yes, Mr. Shrimant thanks for the question. So semiconductor issues it's -- I would say, we can split in 2 parts. One, there was a temporary issue in terms of one -- I mean, there's a huge demand increase due to COVID, due to people adopting home offices and telecommunication and laptops and mobile instruments. The demand really peaked big time. And at the same time, what happened was there were some key facilities, one caught fire in Japan. There was the Texas storm that happened then followed immediately almost by the COVID in Malaysia, which forced one of the key semiconductor makers to shut the factory for quite a long period of time. So this temporary setbacks have now all been resolved, okay? But however the larger story of a huge increase in demand not being able to meet supply at global level still remains. So I mean -- again, I'm not from this field, but definitely, we've been talking to all the OEMs and also to whoever knows more on this industry. I would say the best estimate is it will continue till the first half of 2022 calendar year.

Okay. Sir, the second question is on our overall sales to the EV manufacturers. Now as you mentioned in your opening remarks that the supplies to Ola Electric have started in the month of October, and this is going to be ramping up gradually in the coming months. If you look at the second half of this year, what portion of the overall revenues should be sales to electric manufacturers, including the various manufacturers that you are supplying 2-wheelers and 3-wheelers and even the passenger cars?

Okay. Well, I don't have a figure upfront, but I can just tell you on the volume front. Currently, the EV in the month of October, EV 2-wheelers both low speed and high speed. So some are registered some are not registered. Low speed is not registered. It did about 38,000 sales total, 38,000 units. Compared to the total 2-wheeler sale in a month, which is, let's say, at least close to 18 lakh. So there's still a very, very small percentage of total even if you take the total demand put together. If you add 3-wheelers as well, demand might be a little bit better, but the numbers are still small. So just to answer your question, it still is not a very significant part of our revenue. Ola surely is poised to change that story. Even if, let's say, Ola does like they say, even if, let's say, Ola does 30,000, 40,000 or 50,000. It still is far lesser than the IC engine demand that is there for all other players, which we service. So in terms of percentage, it will still be very low. But yes, I mean, for sure, the longer-term story, if you see this 38,000 units that they did in the month of October was probably 200%, 300% growth compared to the same month last year. So it's bound to grow. So I don't have a number which we can share with you separately in terms of what is the percentage of the EV sales in our revenues. But we are looking at it from a longer term, for sure.

Sure, sir. And specifically on Ola, the bookings which we got in the first window, are you looking to supply for the entire bookings in the second half of the current financial year?

I mean, actually, Shrimant, that is Ola's call. We'll only be meeting whatever callout they send to us. Their plan is -- as I did mention, their plan is quite aggressive. And it is also -- let's also be fair to them. It's not easy either to ramp up so steeply. But for sure, the product is good, offers the best value in terms of everything that they're in range, looks, in terms of speed, in terms of reliability, definitely, the product is bound to do well.

Sure. Finally, one clarification on the balance sheet side. If I look at in the current -- noncurrent asset, there is a steep increase in other financial assets to about INR 154 crores as on 30th September. So just wanted to understand that line item better.

Rishi, do you want to?

So Shrimant, this is in the nature of the investments which we do to part our surplus cash.

Okay. This would be in what -- fixed deposits or?

Yes.

[Operator Instructions] We'll take our next question from the line of Saurabh Shroff from QRC.

Congratulations on a very good set of numbers given the circumstances. As you ramp up your aftermarket business, I just wanted to get a sense for what it means for margins overall. Because obviously, this is something that has done well, like you mentioned, and will continue to grow. If you could sort of help us understand that better, please.

Yes. So on this aftermarket, yes -- firstly, thanks for your compliments. Aftermarket numbers are doing well and it obviously does a better profit percentage, better margins, no question. But even let me share with you, even that is under pressure because the commodity prices are increasing continuously over the last 9 months. And they've gone 80% to 100% to even more increase that you have seen. And in aftermarket, we cannot keep going to the market with a price correction every month or every quarter. It's -- the market dynamics doesn't work that way. However, we have taken price increases. So we have to take it very cautiously. We also cannot be upsetting the demand. So yes, certainly, the margin pressure is being felt in aftermarket as well. Having said that, it certainly still remains at a much better percentage than OE.

Understood. So if I understand correctly, as and when commodities stabilize, I think you will continue to have that as a potential support and addition to margins assuming we get back to some sort of normal times?

Absolutely, absolutely. And the normal times, just to share with you, I remember having calls with absolutely the top people. I mean, I'm talking about ACMA level, at industry level, we had -- we are on several vendor councils as well. So with several OEMs, everybody was projecting a drop in steel prices. They have projected graphs, I remember very clearly showing drop in steel prices, drop in commodity prices. So this has clearly been completely unforeseen and unpredicted by everybody. So it is bound to happen. These prices are bound to come down, no question. So when it does, yes, we will certainly see that tailwind in terms of margins.

Great. And I guess, similarly on exports, as that business starts to grow, obviously, right now, it's 5% of sales. But the orders and the work that we've done, what does it do for our working capital cycle and cash flows in general? And are we commensurately getting compensated for it in margins?

So Saurabh, currently, we are working at 17-odd days, and obviously, because of the fantastic quarter, a couple of days here and there. But this is the kind of level that we would like to operate. Again, it also depends upon the volatility of demand essentially on account of inventory. But as regards, the debtors and as well as creditors, we would like to maintain the current number of days.

Okay. And export margins are also sort of commensurate to company-level margin?

Yes, a little better. Of course, as you know, one -- a little setback there has been -- the earlier export incentive was actually better when it was MEIS scheme. The refined -- the renewed RoDTEP scheme that benefit has gone down a bit. That's been a bit of a dampener. So also I just want to -- if Shrimant is on call, that number is -- I mean, I'm just sharing the rough number in terms of our EV sales is -- I mean 2-wheelers is just about 1%. It's still very, very small.

[Operator Instructions] Our question is from the line of Amit Shah from [ Ace Securities ].

Sir, I have 2 questions. Sir, firstly, what is our CapEx plan for next 2 years?

I'll take the question. Essentially, while we stated that in the previous calls as well, in the previous strategy discussion, we charted out in the range of INR 70 crores to INR 100 crores of CapEx each year. That trajectory we'll anyways look into in our -- in this quarter when we have our strategy discussions internally. But that's the broad-based number that we do every year.

Okay, sir. And what is our long-term guidance for replacement and export market?

See, that remains the same. I mean we had shared earlier that exports, we want to grow to 10%. So it was actually getting difficult for us to maintain that. But now we are seeing finally 3% has become 4%, 4% become 5%. So clearly, we want that to be 10% of our total revenues. Aftermarket, we definitely would want that to be close to 20%.

[Operator Instructions] We'll next question from the line of Jayesh Gandhi from Harshad Gandhi Securities.

Congratulations for a good set of numbers. So my question is, who our, our competitors in EV space, specifically domestic?

Jayesh, you're telling competitors in suspension in EV space?

Yes. Yes.

It's the same.

And the products which we are supplying to Ola and Ather, all the products, not only suspension, maybe others also.

Yes. So just to give you a quick snapshot on the EV. With Ola, we are 100%, which is the same story as with Ather and Ampere. With hero, of course, we don't have the order, as you know, that is with Munjal Showa. So generally -- and of course, Endurance has shared some orders. I mean Endurance has a Bajaj order, no question. We have the TVS order, 100%. So it's distributed right now. But the same set of players, there is nothing new. But I would say our entrenchment in terms of EV is certainly better.

Sir, will we be in position to share any market share? I mean, if at all, do you have any data on that?

For EV or?

Yes, only EV.

We don't have data because these numbers are evolving. The EV market numbers itself are, as you know, they are so rapidly changing. And also, the EV is a little -- still, I would say, a little unstructured because some are registered. Some are not registered. And in 3-wheeler space, numbers are even the EV association finds it difficult to get them. But nonetheless, we'll make an attempt and share with you, yes.

Sir, one last question. In your opinion, by, say, next 3, 4 years, can we see 10% of total sales in 2-wheelers would be EV?

Yes. We are projecting 2025, EVs -- I mean the general outlook is 10%, yes.

[Operator Instructions] Our next question is from the line of Dhiral from PhillipCapital.

So my question is pertinent to the passenger vehicle side. So as you said, your market share is increasing, right, in the passenger vehicles. So wanted to know what has led to this increment?

I couldn't -- can you repeat the question?

Sir, on the passenger vehicle side, you said, yes, our market share is now gradually inching up. So wanted to know what has led to this increment as maybe earlier we were suffering on the PV side, particularly.

What has led to the increase? Okay. See, I mean, I told you we had a bit of a setback. Of course, the main player there is 50% is Maruti. So we had a bit of a setback where we lost the WagonR order and then 2 of the models that we are supplying that met the end of life. Maruti Omni was a very [indiscernible]. Maruti discontinue -- had to discontinue that model. So to that extent, that also was a big setback to us. But we had been working on the pipeline for last, I would say, 4 years. I'm glad to share with all the new models that is coming, you saw the S-Presso, which is in the market now that is with us. We have the YWD, the Jimny with us. We have the new Alto replacement with us, and we also have been awarded the Maruti and Toyota platform, which is a replacement for Brezza, even that is with us. So that has been one important development. Now why this happened is because we have been working on, of course, improving our field performance in terms of city performance to the extent where Maruti has -- in several forums of Maruti vendor meets we have been asked to share our story as a benchmark in terms of our practices, both on the shop floor or with development of Tier 2 vendors, we have been continuously doing that. So perception also has improved. With Mahindra, again, we have won all the new orders. The new car is with Gabriel. The XUV700 is with Gabriel. There's another new vehicle they're working on that is also with Gabriel. Tata Motors was not with us, so we have now managed to get a reentry in Tata Motors. So we are supplying to the Tigor. Supplies have just started. So that will also hopefully keep looking up. So these have been the main reasons why the market share is continuously going up.

Okay. And sir, in the opening remark, we talked about that you're also launching newer products. So if you can share some highlights over there, which is helping...

Launching new?

New product, which is -- again, is helping you to gain the market share.

Yes, yes. So just to share the XUV700 that we launched, which Mahindra launched is with our new technology called frequency selective damping. So that, of course, increases our realization per car by almost 20% and it's a new technology. It's definitely offers much better and ride quality. So that has been one development and which we are trying to share with others as well. We've also done several other product enhancements, which we are offering to Volkswagen. Now with that, we'll be offering it to others as well. With Maruti as well, we have done several product enhancements. So that has been a continuous effort. And with this new tech center being commissioned in Chakan, I think this would further improve. We are working on electronic suspension also. So hopefully, we'll be able to put something on the field in a couple of years' time.

And sir, lastly...

This I've shared of passenger cars. I mean, similarly, 2-wheelers also the same story continues. But since you mentioned about passenger cars, I shared about passenger cars.

Okay. And sir, lastly, on the cost part, as you said, we are working on the cost-related program. So where are we in that journey? And once it is fully implemented, what kind of cost, maybe benefit or maybe in terms of margin improvement we can see?

We are actually realizing those improvements. As I told you, raw material escalations have really hit -- would have hit the margins much more severely than what you're seeing if it was not for these cost reduction programs. So we are definitely seeing improvement like I just discussed about the fixed cost being maintained at the same level despite a significant increase in the top line. So we've been able to do that. The same we are able to do in the variable cost as well, the employee cost as well. So this certainly is even today, I would say it is helping us shedding off at least 1% of cost.

Our next question is from the line of Karan Kokane from AMBIT Capital.

Congratulation, sir, on a good set of numbers. Sir, I just started a clarification you talked about...

Sorry to interrupt. Karan, sir, I think you're on a speaker mode, if you can switch to a handset, please? We cannot hear you that clearly.

Yes. Can you hear me now? Is it better?

A little better. You may go ahead, please.

Yes, sir. Sir, just one clarification from my end. You talked about Ola Electric orders started in October. So if I heard you right, sir, you said a number of around 30,000 to 50,000 units. If you could just please repeat that number? And you also talked about that order getting revised downwards due to multiple challenges that the OEM is facing, so if you could also talk about what kind of orders are you getting right now from Ola?

Our orders remain, I mean, in the same range of 30,000 and gradually ramping up to even higher. I mean, orders remain the same. Yes, there's a calibration of the schedules based on their ramping up. But I see that clearly smoothing from, let's say, in the month of December.

Sir, this 30,000 to 50,000 units is the total orders that you have got? Or is this something that they're looking for on a monthly basis? I didn't get that, sorry.

On a monthly basis.

On a monthly basis. Right, sir. And sir, my second question is also on Mahindra. So in the recent conference call, the company has also talked about launching around 30 new products and of them around 8 will be on an electric platform. So how are we placed over this?

Well, yes, that's the announcement they made just a week back. In fact, not even a week back. Last week, in fact. So I mean, all I can say is those models are still yet to be shared with, let's say, vendors. But all I can say in terms of Mahindra, our share of business with Mahindra has been gradually going up. Our -- what you call engagement with Mahindra, relationship is extremely strong. So all the new models have come our way. And I'm sure once we are more clear on these plans of these 27 models that they announced. I mean, many of them are just platform. I mean, platforms should be lesser, models will be many. I'm sure we'll be on many of them, for sure.

[Operator Instructions] Our next question is a follow-up from the line of Nikhil from SiMPL.

Just one thing, sir. I think 2, 3 years back railways was a big business for us. And with the orders of this 800 new AC 3-tier coaches and a lot of things being done by railways on the coaches side, are you seeing any traction on that side of the business? Or it's still dull?

Yes, Nikhil, we saw the traction. In fact, let's say, not 1 year, but in '19, '20. In '19, '20, we had a record year of railways and COVID has impacted railways very significantly. In fact, even if you see the rail traffic -- passenger traffic is -- of course, the good sign is it's increasing month-on-month, it's improving very well. So the demand has been muted. But for sure, that demand will come back. I mean they -- and they have made announcement clearly that they want to shift to LHB coaches for all passenger coaches. So certainly, demand will come back. It's only a temporary COVID impact that we are seeing. In addition, we are working with them for the locomotive dampers. So their people had visited our plant and it was a successful visit. We will shortly be getting a proto development order as well. So we are trying to increase our -- again, our presence in railways beyond coaches to even locomotives. But just to repeat, currently, yes, the numbers are dull, but it's purely a temporary issue.

And who would be our competitors there?

I mean, many -- Escorts, of course is a -- Escorts is a main competition. And then there are some other local players as well. There is a company called [ India Auto ]. There are some other companies as well. But Escorts is the main competition.

Okay. And lastly, sir, on Hero, I think 1 year back when we had discussed and you were pretty positive that on Hero, we were discussing with them in order to get empaneled and get more business. But we've not heard anything from you on that side. So have you been able to break in because I think they were looking at diversifying.

Yes. Yes. Nikhil, in fact, yes, I mean what do you call? I have nothing much to add there. We were -- as I said, yes, we are very hopeful. And then just before COVID, you know the 2-wheeler industry volumes went down significantly in the year '19, '20. So they had held back their plan of expansion. And at the time they told us, we are right now putting a decision on hold and then COVID happened. And now you are seeing the numbers of Hero particularly are significantly impacted. So obviously, we have to wait and watch.

[Operator Instructions] Our next question is a follow-up from the line of [ Shrimant Dadoria ], an individual investor.

Thanks for the opportunity and answering my previous question on the revenue contribution from EV 2-wheeler. Clarification on our increasing market share in the passenger car, which one of the big impacts in [indiscernible]. Now if I recall in the past conference calls you had mentioned, there are scope to improve on our technology and capability, especially in the passenger car segment, which seems to be very strong in the 2-wheeler and commercial vehicle segment. So 2 questions here. So one, I see the PPT now that you have launched products in the aftermarket for high-end cars, are you -- are we at a level that we aspired for to reach in terms of technology capability for passenger cars? And secondly, we were also looking for opportunities to grow inorganically in this space, are we still looking at this space?

Yes. So Shrimant, on the point of the technology, yes, certainly, we are there. That's why I said we were able to launch this new technology product and get the business. And you need 1 customer to anchor your new product and then it, obviously, flows into other customers. So that will surely happen. In terms of improving our technology progress, I mentioned on the tech center being commissioned just now. And in addition, we are augmenting technology with some select European niche companies. We are working on something with them to improve our offering, especially in the electronic suspension space. So we'll definitely be able to bridge the gap. Now having said that, we have a 21% market share, and we are, let's say, in the eyes of the #1 customer, Maruti, we are amongst their top vendors when it comes to reckoning of shock absorbers. So I think that's a fair -- what you call, fair recognition of where we are. So that's what I would want to share. You had also ask some more...

Yes. So I had this follow-up on the inorganic opportunities in this space.

So inorganic opportunity, yes, we had pursued -- we had evaluated one opportunity just to share. And well, it did not -- for whatever reason, it did not materialize. But yes, we are continuously scanning. In fact, we are right now also looking at, as we speak, a couple of opportunities. That will continue, yes.

That was the last question. I now hand the conference back to Mr. Manoj Kolhatkar for closing comments. Over to you, sir.

Yes. Thank you, and thank you, everyone, for your compliments as well as for your thought-provoking questions. Just to summarize, I can see a lot of interest as we all know in the market in EV. So while our revenue percentage for sales in EV, I mean, it's only happening in 2-wheeler mainly as of now, is very small, but our focus remains very strong. In fact, we have a dedicated team working on EVs to help EV customers -- to get more orders from EV customers. So that clearly remains our focus because we are convinced that in 2-wheelers, the EV will probably exceed even 10% penetration by 2025. Even on the PC, we are seeing if we can get orders on EVs. But yes, there at the moment is rather slow. There are only a couple of models doing very well. We are also working on how to get into those as well. So I just thought of mentioning mainly on the EV front because that's, let's say, talk of the town. Yes, and we are hopeful -- we are hoping that the commodity price trend starts reversing so that we all, as an industry, and not only as Gabriel, we all as an industry have a sigh of relief. Lastly, on the semiconductor issue, which is affecting mainly the passenger car industry that is what we understand is likely to continue well into the first 2 quarters of the calendar year. So we'll have to see -- again, we'll have to be careful about that. But otherwise, yes, the demand has been -- passenger car demand is very robust. 2-wheelers is a little muted, I'm sure it will come back. Commercial vehicle is clearly looking up and EV is increasing by almost logarithmically. So we are seeing overall a good market, and let's hope we don't see the third wave. And I wish everybody once again, a very, very happy and prosperous new year and a safe and healthy year ahead. So thank you so much.

Thank you. On behalf of Gabriel India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.