Gabriel India Limited (505714) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Gabriel India Limited's Q3 and 9 Months FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation 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 would now like to hand the conference over to Mr. Rishi Luharuka, CFO of Gabriel India Limited. Thank you, and over to you, sir.

Thank you. Good morning, and a very warm welcome to everybody present on the call. I hope all of you and loved ones are keeping well and are safe in these unprecedented times. Unfortunately, today, Mr. Manoj Kolhatkar, our Managing Director, is not able to join the call owing to some family emergency. But we have with us today, Mr. Atul Jaggi, who is our Deputy Managing Director, joining us to give the business perspectives. We also have Nilesh Jain, our Company Secretary as well as SGA, our investor relationship advisers. We have uploaded our results and investor presentation for the quarter.

Members of the management, are you able to hear us? [Technical Difficulty]

Hello?

Sir, you may please go ahead.

So sorry, I'll repeat what I said. [indiscernible] the third wave of COVID in the emergency of emergence of new strain of Omicron from mid-December 2021 onwards. However, we have not [ seen ] any material impact of ongoing [indiscernible] on our business. All our manufacturing facilities are running smoothly. I hand it over to Atul [indiscernible] forward.

Yes. Good morning, everyone. This is Atul Jaggi. So before we go into the numbers, let me provide you with an update on how the current environment is shaping up. [indiscernible] constraints are impacting retail sales. Semiconductor availability has indeed improved as compared to the previous quarter, but the situation remains dynamic...

Members of the management, this is the operator. Are you able to hear me?

[Technical Difficulty].

Sir, I am so sorry to interrupt but your audio is not clear, sir. We are [ unable ] to hear you.

Is it better?

Sir, please allow me a minute while I reconnect you. [Technical Difficulty]. Ladies and gentlemen, thank you for patiently holding the line. We have the management reconnected.

Yes. I hope I am audible now.

Sir, yes you are. You may please proceed.

Yes. Sorry for this glitch. So I was talking about the current situation with the [indiscernible] where the demand is healthy. But the supply chain constraints primarily on the semiconductor availability are still impacting these situations. It has definitely improved, but structural improvement is expected only in the next 2 to 3 quarters. In terms of the domestic 2-wheelers, the demand is subdued. There are multiple reasons for that. The frequent price increases by the OEMs with festive demand. And increasing all-time high steel prices. [ I think ] they are restricting the pace of recovery and consequently driving customer interest in each [indiscernible] supported by -- which is again supported by the subsidiary. CV industry volumes grew strongly on a low base of the last year driven by the government's [indiscernible] and pickup in the economic activities. Improving demand in the infrastructure and construction sector and improving sales availability along with increasing demand for e-commerce and last mile delivery should support CV volumes going forward. Export markets also witnessed a sharp uptick in sales volume. Across the [ Automotive ] segment inventory level remained slightly higher than the normal level, except for CVs at the end of this quarter. Demand continues to remain quite robust, both in terms of inquiries and looking for the passenger vehicles. [indiscernible] availability is an issue now and waiting periods have gone up for the passenger vehicles. Prices of commodities, such as aluminum, lead, copper has remained firm and on the higher side, whereas steel and precious metal prices have declined in the last quarter and should ease of the raw material cost pressure on margins in the quarters to come. Many OEMs have undertaken certain price hikes to pass on the cost increase to the customers. Commodity prices are expected to soften from quarter 4 FY '22 onwards. So I hand it over to Rishi.

So now moving on to the numbers. Quarter 3 was great [indiscernible] quarter with strong performance. This was on back of the new programs, as we mentioned in the last quarter, along with many CV players introducing new models and increasing demand on the momentum side of the CV [ side ]. We are delighted to share top line growth of 13% Y-o-Y and 3% quarter-on-quarter growth to INR 6,061 million in the third quarter of FY '22. Our company has reported a 12% Y-o-Y growth in EBITDA in third quarter to INR 420 million. Margins stood at 6.9%. Margins were impacted due to increased raw material prices. This challenge has been faced by companies across any industry and we are no exception to this. There has been significant increase in raw material pricing over the last few quarters. The inflationary trend in raw material prices have been monitored and our company has been [indiscernible] the core 90, as we've been discussing for a couple of quarters now, having [indiscernible] core 90 cost optimization and productivity improvement program in order to offset part of this price increase. Our company has been able to pass through a large part of this input cost increase. However, part of it will happen in the fourth quarter of FY '22. Our company has reported a PAT growth of 4% Y-o-Y and 3% quarter-on-quarter to INR 257 million in third quarter of FY '22. With this, I come to the end of the opening remarks. I will now request the moderator to begin the question-and-answer session.

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

Congrats on a good set of numbers. Yes. 2, 3 questions, sir. One is on the 2-wheeler side, if we consider our revenue and the [ breakup ], it seems like we've grown while the whole industry has seen a de-growth. So if you can just share, is it like the better mix from the EV has supported us in better numbers in the 2-wheeler side? Or what has played out there? If you can just help us understand. Hello?

Requesting all the participants, please see on line while we have the management reconnected to the content. [Technical Difficulty]. We have the management reconnected. Sir, we have a question from Mr. Nikhil, you may please go ahead.

Should I repeat the question?

Sorry, Nikhil we have a technical glitch [indiscernible]. Can you please repeat the question?

Yes, sir. Sir, my question -- first question was that if you look at our 2-wheeler mix in our total sales, while the industry has seen on de-growth, we've shown better numbers. So what has exactly played out for us, as a result we've been able to grow while the industry has see a de-growth?

Yes, Nikhil. So I think there are a couple of factors to that. [indiscernible] the most important is the new launches that has happened especially with [ TVS ] and there has been couple of new launches in [ e-Scooters ] segment and then in the [indiscernible] segment. So that has [ helped]. Similarly the new model, which on the [ Resi platform ] has given some initial numbers which are [indiscernible] and I think some of the customers where our presence is very strong, like in [indiscernible], I think their numbers have been better as compared to some of the other [indiscernible]. So the combination of, I think, these 2 aspects, I mean, new launched as well as in some of our customers [indiscernible] quite well as [ it has helped us ].

But in this [ summer ], the proportion of EV would still be very small?

Nikhil, we are not able to hear you. Can you speak a bit louder?

Mr. Nikhil, we're unable to hear you, sir. Requesting you to please speak a bit louder. Your question is not audible. Nikhil, if you can hear us, your audio is not audible to us, you are in the question to queue. May I please request you to...

Hello?

[indiscernible].

My question was that is EV still a very small proportion for the 2-wheeler sales? Or has it started becoming meaningful for us?

So yes, as compared to the total sales, it is still a small number. But it is -- I think month-on-month and quarter-on-quarter, this number is improving.

Okay. Secondly, sir, like for last 2, 3 years, if you look at the auto industry and auto ancillary industry has been working on -- have been seeing a very limited volume growth. And volumes have been constantly under pressure, and we've been focusing on this cost 90 (sic) [ core 90 ] program where we've been focusing on reducing our cost structure. If you can just help me understand how our breakeven points would have reduced now say, over the last 2, 3 years from where we were to where we are today?

So Nikhil, again, 2 componenets to this; one is the [ fixed cost element ] and the other is the [ contribution ]. Now given that there are now margin pressures because of the commodity the contribution, that you've seen in the result as well has taken a bit of a hit. Having said that, under the core 90 program, we have been able to significantly manage our fixed costs as well as the manpower cost optimization. So currently, again, [indiscernible] in the range of 68% to 70-odd percent.

Sorry, sir, I couldn't get it, the last line which you mentioned.

The [indiscernible] as a percentage earlier, we used to be above 70%, now it's a little lower than 70%.

Okay. And last question, sir. So in our previous calls, we had mentioned that we used to pitch for business with KYB. And we had lost Wagon R because KYB has launched the business for Vietnam and Indonesia. As a result, we had to give up on it in India as well. But now subsequently, like in last 6 months, if we think KYB has told they are taking Gabriel. So is there any change in association or we still go with them for new business or now we can independently go for businesses which we had lost earlier. How does the association change now?

So in terms of the association with KYB, I think on a working level, nothing has changed. I think we continue to work together on the new platform. Rather all the Maruti platforms that we have lost -- we have won in the last few months, where we are working on, they are all along with KYB.

[Operator Instructions] The next question is from the line of [indiscernible] from ProfitMart Securities.

And I just want to ask is what is the outlook for the mix segment [indiscernible] quarters moving on. Can you share your cost for the [indiscernible]. I'm not -- hear some updates from you?

So [indiscernible]. As far as the next quarter since we don't issue forward-looking guidances, we will not be able to show information on that side. But in terms of the demand, I think, I think I give you a brief [ synopsis ] to on how we've seen all the 3 segments. Yes. So I think as I mentioned earlier, I think in terms of both the commercial vehicles and the passenger vehicles, the demand is quite positive. Yes, 2-wheeler, we are all seeing the numbers that are there, the market numbers we have all, I think, we're seeing a significant de-growth here, but the new model and growth would be on the IT side as well as the...

Members of the management, we are able to hear you. [Technical Difficulty] We have the management reconnected. Sir, we have the question from Mr. [indiscernible] from ProfitMart securities.

We are sorry about this happening again and again. So you were mentioning for the demand forecast. Could you hear the answer to Atul or should we repeat?

Sir, I'm not able to get that answer.

In terms of the demand forecast, I think as I mentioned earlier also in terms of the commercial vehicle and the passenger vehicles, we are seeing a very positive demand forecast coming from the customer. In terms of the 2-wheelers, yes, there is a challenge in the current market situation. But as far as Gabriel is concerned, I think the new models that have been launched recently, along with the EV ramp-up that is happening will be very helpful for us.

[Operator Instructions] The next question is from the line of Laxmi [indiscernible] from ICICI Prudential AMC.

Two questions. First is I see that in the presentation you have -- you are working with WABCO, there is a new logo, which you have actually won. Can you just help me understand what exactly we are doing there? And because WABCO is a pre-eminent player in braking system and [indiscernible] for commercial and there is also reorganization that are [indiscernible] right? How this relationship can actually help us to grow even faster -- even further? I just want to understand that part.

So let me answer the question, which slide are you [indiscernible]?

Something on client wins and commercial vehicles. You have mentioned that for the suspension programs, you are actually working with them. Sir, slide #18.

Okay. So this is -- so let's say, this is on the damper for their Air Suspension. These are the dampers that we will be supplying for their Air Suspension.

Okay. And is this -- is this a new account to you altogether? Or this is an ongoing business for you?

So in terms of damper for the Air Suspension, yes, it is an ongoing business. We work with multiple OEMs, Tier1s on that. In terms of working with WABCO, it is a new development.

Got it. And how large can this become like significant lasting for us?

So Laxmi, this is -- I mean large [indiscernible] but it would be a critical customer for us. In terms of volume, we don't anticipate it to be in the top 10.

Got it. Another question is just are there any -- we have a -- we're part of a large conglomerate. Are there any other conflicting product, which is there in the parent organization, is it either in the commercial vehicle or in passenger vehicle for us?

You would be aware that in the parent entity or in the group, all of the organizations are JV and the products that they produce under the JV legal entities, they don't have any conflicts with Gabriel.

Got it. So all the products, be it passenger car or commercial vehicle or 2-wheelers, all the suspension-related products [indiscernible] only in Gabriel India?

Yes. So yes, they are with Gabriel India. I think the only -- in the passenger car segment, as you know, that we have -- at Anand Group, we have a JV with Mando, which is, I think, for Mando there is one product line is the shock absorber and with their primary customer being Hyundai and Kia.

So which means that for Hyundai and Kia, we will not be supplying from this entity. Is that the right assumption?

Yes. So yes, they are with Gabriel India. I think the only -- in the passenger car segment, as you know, that we have -- at Anand Group, we have JVs with Mando, which is, I think, for Mando one product line is the shock absorber. And with their primary customer being Hyundai and Kia.

And so for Hyundai and Kia, we will not be supplying from this entity. Is that right assumption?

That is true. However, we are a supplier to Mando for their different boards. So that...

Sorry?

We are a supplier to Mando where we act as a Tier 2. We supply the [indiscernible] to Mando.

Sorry, sir, I can't hear you. You said you supply to Mando, but then your voice got little muffled. Can you just repeat it, sir?

I said we work with Mando. We supply piston rods for their shock absorber and struts to Mando or some applications.

Got it. Got it. Another question is that if I just look at your Slide 26, where you actually put the strategic manufacturing footprint, right? So I see that also looking at your balance sheet over the last 5 or 6 years, there is no major incremental capital expansion that has actually come in, right? So my question is that is the business as in -- is the quality of the business is that it doesn't require a lot of CapEx? Or you are actually running at a low utilization? How do I read it?

So I think the earlier statement that you may or may not be completely right because if you remember, in just a couple of years back, we have actually set up or expanded significantly this new facility in Sanand, which is a completely integrated plant for -- to supply to...

Sorry, sir, I couldn't get it. Sir, can you just repeat the last 2 lines, please?

Yes. So I said the first statement that you made about significant CapEx may not be completely true as -- if you remember that we have recently set up a new facility in Sanand. Just at the time when the COVID came to supply front folks to Honda motorcycles and scooters for their factory. So it was a significant investment that we have done in Sanand. So -- and to take your question on the CapEx side, we've seen sharing this in the past calls as well, that as and when a program comes, it may require a specific operation for which we may organize that capacity. It may require a full line of assembly which also we go and implement. On a leverage, we have been doing -- in the past, we were doing in the range of INR 50 crores to INR 60-odd crores of CapEx in the past 1 year and also we've been sharing. This year, we are proposing the CapEx in the range of INR 100 crores, INR 110-odd crores. So those all are in the nature of augmenting the capacity going to the new businesses that we have won. On capacity utilization, we remain consistent with what we have. Again, it's a little difficult to answer the overall capacity utilization given that you have to go by line and the operations into it and also take into consideration the supply chain solutions that we have around that. But with that, we've roughly maintained the finesse coverage ratio about 4.5%, and that's what we also look at how do you internally that we approve CapEx.

Is this a fixed asset turnover is something like 4.5% that's what you said, sir?

Yes, yes.

And you're saying that your average of INR 50 crore CapEx you are bumping it up twice to INR 100 crores. So can you just elaborate on what reminds the specifics in which you are doing it? Because this has been -- if you look at -- it will be the largest CapEx program in the last 5 years, you are doing something like INR 100 crores?

They are -- and totally shared in the past call, they are in the nature of import localization, number one. Number two, they are in the nature of increasing our capacity at our [indiscernible] facility. It is also in the nature of the new programs that we have won, for example, OLA. We have also been spending on the development side. And we have our new tech center now fully operational. So -- and we also are spending on automation and digitization in a larger width and we -- otherwise we are doing. So those form a part of the delta that you just mentioned.

And this year, FY '22, what will be the total CapEx you will do and FY '23?

We would continue with the number, as I just mentioned in that [indiscernible] itself.

So around 50 this year and 23 will be 100. Is that a...

We would be in the range of 100 this year and the same number for next year.

Got it. Sir, one last question, if I just look at your working capital cycle, right? So we generated a significant amount of cash flows last year that was by increasing payables, right? And we're able to maintain a strong working capital discipline even in the last 9 months. So how should one read about it? Is there been whether this characteristic of having a lower growth, I mean, better working capital cycle will continue or last year was one-off where the payables were very high? Our receivables are very low, and therefore, we could generate higher cash flow from operations.

That's a good question. We have been very, very sensitive and very aware about the need of cash, both in times of spending it and thereafter, given our growth aspirations. So we have been having a very hawk-eye on all of these under the CORE 90 program. Currently, we have closed the quarter with a 16-odd days of working capital, which has been fairly consistent this year. Yes, in the previous year of pandemic, because of lower volume and with the realization from the debtors and inventory, we were able to release a lot of working capital largely owning to lower volume. This year, we would like to maintain the current level, if not better than it.

What is the program you talked about? Some 90, can you just repeat it?

It's a program that we have been running for now almost 3 years. The program's name is CORE 90, CORE, C-O stands for cost, and RE stands for reduction. So we began this program as an outcome of being sensitive towards the profitability. And with the success of this program, we launched the second year and in this year as well, we have continued it. And this has now become a part of our operational strategy as well -- and year-on-year, we will wish to continue to bring in the efficiencies on various cost parameters, which you can see on the end as realized let working capital on the balance sheet side.

[Operator Instructions] The next question is from the line of Dhiral from Phillip Capital.

So I wanted to also what is the current revenue contribution from the EV side? And what is the content per vehicle in the EV segment as compared to ICE?

So the current revenue from the EV is not very high. It is around -- it has sort of improved to 1% now. I think the good thing is that, as I mentioned earlier, month-on-month and quarter-on-quarter, this is improving as the EV manufacturers are ramping up, this number is.

And sir, is the content per vehicle remain same?

Mostly, yes. But again, it purely depends upon the kind of technology that is being used in different models. So as an example, OLA would use a different kind of tech brand and NPR or PACCAR. So the content per vehicle depends upon the technology.

Okay, please. And sir, you said in your opening commentary that we are going to pass on the RM installation in Q4 in current quarter. So are we able to fully pass on the RM installation till date, and this will help to recoup our margins still maybe 9% to 10%, which we used to do earlier?

So look, the way it works is different customers has different index elements and different procurement cycles. One of our OEMs, we have an indexation clause and entertainment cycle. What you mentioned on account of quarter 4 was largely owing to timing differences where in some cases, we will recommend it but the recovery from the customer will come in quarter 4. And there will be some differences owning to the mathematical calculation of different indexes, some volumes of different -- because it's different quarter, you may have a different multiplier. But volume-wise, we have been experiencing a very different [indiscernible]. And that is also reflected in the margins that we have been barely able to maintain. [indiscernible]

So our margins again would emulate around 7%. Is that understanding correct?

Well, we have always undergo to the double digit and that thing would continue. There is, obviously, a denominator impact even if we do a 100% recovery of commodity, if you do mathematics, in this case, there would be at least a 2% impact of the nominator coming to the margin. So we'll have to see where the commodity cycle plays out. We could -- if it remains the way it is currently this would be start point for us to...

Okay. And sir, you said CapEx for FY '22, FY '23 would be around INR 100 crores range each. So how much this would be utilized for the capacity expansion and [indiscernible] suggestion?

I mean yes. So In terms of the capacity utilization, it would be around 30% to 35%. And primarily for the new programs and balance, as Rishi earlier had mentioned, I think, it's more on the automation, digitization, quality improvement and import localization. So the balance would be distributed between these 4 heads.

And so what is the current capacity utilization as far as the plan?

It's very difficult to answer because all plants there are multiple lines in each plant. So -- and so normally, looking at the current volume, we will be around in the range of 70%. But again, line to line, it may vary and [indiscernible] the location also.

The next question is from the line of Viraj from Securities Investment Management.

Congratulations for good set of numbers in the challenging environment. I just have 3 questions. First is on the export part. A quarter or 2 back, we kind of also talked about us engaging in RFQs for global players in the PV segment. So any kind of color you can give where are -- at what stage we are in? And any update on the overall export business pipeline?

So in terms of the overall export, yes, on the PV side, I think, as you would remember that I think we started with half, so that got expanded to the newer models there. So we are already -- we have started for a couple of other models for DAP. And also, some small exports to DAP in Brazil. So yes, on the PV side, these numbers have improved. In terms of EV, we started working with Volkswagen for the Russia business. And in the -- in Europe, we have been sort of working on a very important RFQ, a little larger RFQ here, but it has still not been finalized. So we are in negotiation on that particular business.

Okay. Got it. A related question is also we were waiting for clarity on the PLI scheme and some status out. How should we understand our play in respect to that because we have a sizable cash on the balance sheet and us and the group as a whole also is quite a significant player in the automotive space. So I just want to understand what role Gabriel India will play if at all any, with the PLI scheme and financing.

So Viraj, our product is not within the basket of the scheme currently. Having said that, as ANAND Group, we have gone away because they are different entities and the INR 250 crores turnover to CapEx requirement that is a sizable one. So the internal application at a group level for the various entities within that [indiscernible] is also a part of it. Right now, we are working out what can be done with that. Until then, 2, 3 mature for us to see or to take into consideration what the benefit out of that would be. So that as of now we are waiting for the -- for it to be awarded and thereafter we will be able to share some more clarity on it.

Okay. So sir, what I really meant is I understand the product category process is not really eligible under PLI. But given the kind of surplus balance sheet position, we have significant cash position, is there any thought versus at the parent level in terms of further adding new product categories or because it also helps in terms of utilizing the cash to new growth opportunities? So just trying to understand, would it purely -- we will continue to be focused on the current product category and there's a thought process adding and capitalizing on new growth categories as well?

So Viraj, this is something that is a very valid question. And we have been watchful and aware of the cash balances and utilization. The 2 are -- 2 aspects to that. One is what is required for our organic growth, which obviously, as we are seeing that we are investing into the future technologies, we are investing into future capabilities. We are also investing into optimization [indiscernible] and automation. So that's one part, which obviously will require some more in money [indiscernible]. Second is the organic feed that we have been pursuing it and that would essentially also require a contribution from our side. And to that extent, we would like to retain the gas ban for it. Together also on this product category, we are open to look at various product categories in the mobility space, but we have to be mindful of it not being upon clip product with the additive companies...

Okay. Just last question. In the presentation, we have a slide on EV, and you kind of highlighted the clients we cater to. So majority of these clients would we be a single source supplier? Or I mean, how does our competitive position kind of is in EV currently? I know it's still quite nascent and early days. But compared to ICE where we kind of cater to few players in EV for all these players, are we the single-source supply? Or how does the competitive deposition [indiscernible]?

Viraj, as of now, with most of the EV player, we are at a single source.

The next question is from the line of Shashank Kanodia from Kodak Securities. [Operator Instructions]

Yes. Sir, I want to get a clarity on the tax rate. For the last 2 quarters, it seemed to me in the range of 30-odd-percent. So is it a new normal for us? Or what should the tax rate we should work with going forward?

25%, Shashank.

So sir, for the last 2 quarters, was it in [indiscernible]. I mean why was that merit higher?

Shashank, also, we have to be mindful of the budget on the education [indiscernible] not being out of an expenditure. So that is something that we would be taking into account in Q4.

Okay. Okay. And secondly sir, I know -- if you can share some kind of what the volume ramp-up happened in [ Volaris ] because you were given to understand through media articles that the production happens quite slow. So what are the kind of schedules are we working with the present target for this quarter?

Shashank, I will not be able to share the schedules with them, but I can only share that, yes, month-on-month, the numbers are better than the previous month. And I think the ramp-up is happening. So what are the -- the exact numbers, I may not be able to share because of the confidentiality agreement with them.

Okay. And sir, lastly, in terms of Q4, so how is the quarter shaping up since last quarter, since we're almost halfway through? So it's kind of improvement is something that you are witnessing quarter-on-quarter basis?

So I think in terms of the numbers, in terms of the top line, yes, we are anticipating a good quarter.

Okay. Okay.

It also depends upon how the two-wheeler sort of go into February and March. But as I said that, fortunately, the new models and the EV part is supporting us. But -- so we are anticipating a good quarter.

The next question is from the line of Pankaj [ Vobri ], an individual investor.

Well, sir, I have been invested in this company for almost 5-odd years. And -- but I'm a bit skeptical about the growth part, which we had. We have been more or less a single product company in a single segment. But we have not seen unlike other peers who have been growing leads and bonds [indiscernible] segments and product segments and -- just wanted to understand what is our growth path going forward given that EV is still an intense industry and which offers us lots of opportunities. We have been trying for inorganic position, but it has not -- has happened for last 2 to 3 years, if I'm not wrong, despite us being a cashless company.

Yes. So in terms of you mentioned about the segments. So just a little maybe correction there. I think we are one company, which is nicely spread across all the segments, although I think we are into a single product. But unlike most of the competitors who work in the shock-absorber domain, we are quite nicely spread across 2-wheeler, passenger car, commercial vehicle, railway and obviously, the Gabriel brand, a good aftermarket also. So I think that is something which is a trend. In terms of the growth, yes, I think, we have very clearly specified in our vision that we would like to be one of the top 5 global shock-observer manufacturer and all the actions in terms of technology, in terms of our pursuit of business in terms of improvement, share of business, investments, they are all in line with the same. In terms of inorganic growth, yes, you are right. I think Rishi just mentioned it minutes back also. Yes, we have been working on it for quite some time. We have been looking at a good product where we can build some synergy and we can also add value. So we would not like to jump into something just for the sake of doing it. So wherever we can add value and we can build some [indiscernible] definitely, we are exploring a few other systems. And I'm very sure that the [indiscernible] will materialize.

So what I mean to say that we are slightly lacking in our aggression -- our peers have grown multifold over the last 5 to 7 years, though we are present across the segments, only 2-wheeler or 3-wheeler and CVs is what is working for us. CVs as a cycle is not working, so I cannot blame you for that. Runways, it depends on government. And the last, I suppose, the construction equipment that too has not been doing well. So what I wanted to put forward, this -- when can we see aggression from the management? I understand we are one of the many companies, the management holds. But as a listed entity, as a -- I would request you to put -- to look into putting more aggression so that we grow going forward.

So the point is taken and noted. Yes. And thank you for the feedback.

The next question is from the line of Lakshmi Narayanan from ICICI Prudential Asset Management.

Two more questions. Sir, if I just look at your other expense of schedule, there is a legal and professional fees of around INR 39 crores, INR 40 crores, which has been recurring over the last couple of years, right? Now [indiscernible] expense or it's variable. I mean should it be -- look at as a quasi employee expense? I mean how do we think about it? Because it is quite large for the size of our company, right? Can you just throw some light on that?

I'll take that question. So before [indiscernible] was a little bit variable in nature, yes, it's largely variable in nature, almost to the extent of 95-odd-percent. What is a part of that the management fee that Gabriel is paying to its parent. On various accounts, one is the user's brand. The other is the support that we receive on marketing side, on technology side, on HR side, on finance, legal, compliance, there is a host and bouquet of services that we take from that. So to that extent, we have a pre arrangement with them, which forms a part of the legal and professional fee.

Sir Lakshmi Narayanan, does that answer your question?

Yes. Just a follow-up on that. So if we pay to the parent, most of it [indiscernible]

I'm sorry to interpret but your audio is not audible.

Is it better now?

Yes, sir.

Yes. So you need to say is variable and most of it is to the parent, right?

Parent, yes.

Okay. Sir, my other question is that if I just look at your EBITDA profile over the last couple of years, there has been we are operating at like 9.5% plus or 9% plus, right? If it does come to something like lower driven by various factors, so what is the band you aspire to operate in not now, but maybe 3 years or 5 years out, right? Is there a particular band you'd like to operate like you have a core program to talk about? What is EBITDA margin you target?

We have been pursuing double digits, and that pursuit continues. Yes, there are market conditions, yes, there are external conditions and there are things like pandemic that has come in between but was have put -- it continues towards the double digits.

Got it. Sir, one last question with respect to your market share. I mean, of course, there have been some segments like -- some other things like what you cannot supply to Hyundai or Kia. Similarly, you don't supply to Hero, right? So if I just exclude that in the market you operate in, which is where there is no capital involved or a specific JV involved. What is your market share? Because the market share, which you gave 25% in 2-wheelers or maybe 23% in passenger car is like including everything under the denominator, right? So if I just carve out at Hyundai, Kia, if i carve out Hero, what is the market share? And how large is the second person in those [indiscernible] out of the world, right? Can you just elaborate on that?

Yes. So in terms of 2-wheelers, so obviously, Hero give and take although I think the numbers are fluctuating but give and take 30% to 35% they own this year. So we are currently operating around 65% of the market. So yes, considering that if you extrapolate that this number would go up to maybe around about 37%, 38%, 40% in 2-wheeler. But while we are saying so, we -- I think, there is no challenge in terms of the sort of the parent or the joint venture like in case of passenger car where we can't operate there, okay? We can always -- we continue to try to work with that customer also. In terms of the passenger car, again, it is just mathematics. So Kia and Hyundai would be of 50-odd percent. Yes. So 30-odd percent growth, so 23% of 100. So again, mathematically is around 35%. The positive here in case of passenger car is that this number will grow because of the business pipeline that is there, which we have already shared in the past, the Maruti models and one Toyota model. So there are 4 significant models in -- which are under development. So this number anyway is going to grow to INR 23 crores.

Got it. And how is the number 2 in our case, like if I just take the 70% of the denominator, right? So we are certified, what is the next person there in the market share-wise?

So in terms of passenger car, the competitor is Tenneco there. So -- and they are larger than us currently. Yes. And in terms of the 2-wheeler -- in terms of 3-wheeler, I think, we continue to be the #1 with a very high market. And in terms of 2-wheelers, the competitor, again, I think, there are multiple players in 2-wheeler, as you all know. So I think Gabriel, Endurance, Mundial, so these are the 3 large players. And then there are other Japanese players who are also there.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments. Over to you.

I take this opportunity to thanks everybody for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with us or SGA, our investor relations advisers. Thank you. Stay safe, stay healthy. Thank you. Thank you so much, everyone.

Thank you very much on behalf of Gabriel India Limited. We conclude today's conference. Thank you all for joining. You may now disconnect your lines.