JTEKT India Limited ($520057)

Ladies and gentlemen, good day, and welcome to the Q4 FY 2025-26 Earnings Conference Call of JTEKT India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Chanana, Director, JTEKT India Limited. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. Let me introduce the team here from JTEKT India site. We have with us Mr. Yosuke Fujiwara-san, he is our full-time director. We have Mr. Damin Rao. He's a technical adviser and part of the MT office. Mr. Ashis Singh is Divisional Head Strategy Division, he is responsible for sales and marketing as well. Vikas Goel, he is Chief Financial Officer of the company; and I'm Rajiv Chanana, full-time Director. I will hand over the call to Mr. Fujiwara-san for the opening comments. Thank you.

Good afternoon, everyone, and welcome to the JTEKT India Limited Annual Earnings Call. My name is Yosuke Fujiwara, full-time director of JTEKT India Limited. I would like to thank all participants for joining this call and the organizers. For the FY '25-'26, Passenger Vehicle segment achieved sales of 5.54 million units compared to 5.07 million units sold in FY '24-'25, thereby achieving an annual growth of 9%. This was an unexpected achievement, particularly considering the fact that during the first half of the year, the passenger vehicle segment registered a growth of only 1.6% in September '25. The Indian government announced a major in taxation reform which lowered the GST rate from 28% to 18% for smaller vehicles and from 50% to 40% or lighter ones. This change improves vehicle affordability particularly for the small size segment in the second half of FY '25-'26. The passenger vehicle segment registered a growth of 16.7%, which was quite significant. Now I'd like to discuss with you the company's financial results. During the financial year, '25-'26, JTEKT achieved a sales growth of 11% compared to passenger vehicle market growth of 9%. Growth in sales of JTEKT was supported by SOP of EBITDA and victory by Maruti Suzuki, where we are supplying demand for the certain vehicle like CPS and CVJ. Due to reduction in GST rate, there was an increase in demand for the certain vehicle like Auto Jeepney, [indiscernible] where JTEKT supplying components to Suzuki. Okay. Further, our sales to Mahindra Mahindra and Tata also increased by 17%. With the improvement of tariffs, the EBITDA margin for the second half to a level of 8.4% compared to 7.71% achieved last year. Despite this improvement, we are shopped by 0.1% as the full year margin declined from 7.60% last year to 7.5% in the calendar FY '25-'26. JTEKT continues to exercise strict control of fixed cost. In the category of the employee cost and administration costs, we achieved a saving of 0.28% of sales. Variable cost was higher by 0.38%, mainly due to product mix, increase the rate of state electricity power and reciprocal tariff paid on export to the U.S. As we conclude, I wish to convey my best gratitude to our shareholders, U.S. rep and support have been instrumental in making our median life issue during the year a great success. Our promoter JTEKT corporation Japan and Marutisuki participated free in the life issues and the participation from our public shareholder was overwhelming with appreciation exceeding twice the number of the share offer. With this, I'd like to thank you for your participation and open the conference for questions. Thank you.

[Operator Instructions] The first question is from the line of Tushar from Peace Wealth.

My first question is regarding the gross margins. So we see the gross margins from last 2 years, we have been continuously declining from 29%, 27% now. Can you just highlight what are the key factors behind this? And how should we see the gross margins from here on? That is my first question.

Sure, Tushar. Thank you for attending this conference call and asking the question on margins yes. we are equally concerned about that. So let me take a little time to explain the change point which has happened over the last 2 years. I will not be restricting myself to the current year. I will try to correlate it with a year before that also. So you are aware that 2025, '26, it started with a weak growth. We saw passenger vehicle market growth just 1.6% in the first half. Now this is lower than expected, sales and EBITDA margin for the first half of '25-'26 declined to 6.3% compared to 7.6%, which we achieved first half of the previous year. So as the sales improved due to reduction in GST rates in September 2026, the margins also started improving and the second half was 8.48% compared to 7.71%. Despite this improvement, like we're touching 8.48%, still when we look at the full year margins, they were down by 0.1% from 7.5% previous year to 7.6% in '25, '26. Now let me start my explanation with analysis of the fixed cost. JTEKT, we always mentioned, continues to exercise split control on fixed costs. The employee cost as a percentage of sales declined by 0.18%, almost 0.2% compared to last year. Similarly, admin costs as a percentage of sales declined by 0.1%. This reduction in admin cost was particularly important for me to mention because during the year, we had a rights issue and the rights issue expenses were also booked, which was about a good amount of 8.2 million. This extreme management focus on exercising strict control on costs, which are controllable at our end, and thus, fixed cost reduced by 0.28% as a percentage of sale. Now coming to variable cost. There was an increase compared to a reduction of 0.2% in 2.8% fixed was, 0.38% was increase in the variable cost. And this includes, as you said, margins, material cost was up by 0.18%, manufacturing 0.1% and selling 0.1%. And that altogether, this resulted into a reduction in our EBITDA margin by 0.1%. So let me explain the change point in the variable cost segment. Material cost, high average said, was high by 0.8%. So there was a mix of positive and negative factors, which resulted into the net change of 0.18%. So let me explain the positive factors first. The positive impact was as high as 0.38%. And this was due to improvement in our business conditions, which impacted us very badly in the previous financial year, which we have -- I'm 'talking about '24, '25 in where the margins are very, very high margins, about 1.4% was decline in our margins when we compare last year '24-'25 vis-a-vis the previous year. So 1 major improvement point was increase in exports during '25, '26, we were able to increase our export sales by 20% from 551 million to 664 million. And this improved our margin by 0.15%. However, when we compare these export sales with '23, '24, which I'm trying to compare 2 years back, 2 years back, our exports were 867 million, so we are still below our benchmark level of 867 million by as high as 22%. And this is still impacting our profitability during '25, '26. We expect this should improve in the future. So now further, there were some other sectors which were positive -- like which impacted us in '23,'24. Like inner trade costs. You recall we mentioned about the rates issue. There was a lot of testing happening because we were moving into several weeks like EBITDA, Vitor and 1 more MPV, which is under launch, so we were doing a lot of testing jobs for our new growth development and the new lines were being installed. So we 2 manual gear line installed at our 2 facilities, CPS lines, CV lines, so all these lines are getting established. So the testing charges were very, very high. And then the settlement of provisions, which we mentioned last year, so these improvement gave us during '25, '26 compared to the previous year, we improved by 0.23%. So overall, there was an improvement in margins by 0.38%. Now coming to the negative factor about which impacting our profitability -- sorry, the positive was 0.23%. Now coming to the negative factors. These negative factors was about 0.56%. There were 2 major reasons for these negative factors, which we faced during '25, '26. The first reason was change in the product mix due to major decline in sales to fund which was about 33%. Sale to Renault Nissan for the export models, which was about 16%, and it's all declining toward about 4%. So the profit margins for these customers are better for the sales which we do to them. On the other hand, we saw a lot of change business mix, the sale of steering systems to make Suzuki forecasts like Alto Jimny, Baleno, Ertiga and Brisa have increased primarily because of the GST cuts, which gave them a positive impact. Margins in these borders are slightly lower when we compare with Honda, Toyota, Rennison for export models, I think the margins are slightly lower. And this change in mix costed about 88 million, which is approximately 0.33% impact on the margin. So we expect that the Honda sales in the future years will improve. We are waiting for the launch of another vehicle, which is an SUV EV by Honda, which will be launched from the top plant during -- maybe around December '26. Now, just to reconfirm, I think the point which is relevant for you to note is that the raw material price settlements with customers are back to back. Albeit with some time gap. So the reduction in gross margins happen only when we have a product mix which is negative for us or then there are some other factors like inner trade changes or there is an increase in the new product development costs. The neutral development cost is taken as part of the material cost, like counting norms, we do -- we add -- just simply added to the material costs. So this is 1 major reason, which impacting our profitability during '25, '26. The second reason which is more of an accounting issue. If you look at my financial results, which we have published, you will notice there was a big foreign exchange gain of about 26 million or so -- 62 million. So this -- when we realize this positive ForEx deal at the time of payment to our overseas suppliers. So when the effective payment for our imports were actually lower compared to the liability that we booked at the time of purchases. So what happens is that when you record the liability for imports, you record it at a certain foreign exchange, and when you meet the payment, you pay at the actual rate. In fact, the material cost should be booked as the actual ForEx rate. Unfortunately, that's not the accounting practice, which we have to follow. We need to record any ForEx gain on purchases the other income. So therefore, imports were booked at a slightly higher price, which costed at about 62 million, 0.23%. So 0.23% of ForEx and -- which is -- and 0.33% of product mix. These 2 together costed 0.56% as a negative factor, which offset our improvement of 0.8%, which we achieved compared to the previous year. And therefore, there were net negative impact was 0.1%. These factors, both the factors, which I've just mentioned are looks, in my opinion, are temporary, and we should not be getting hit by the same kind of a drastic product mix change next year or we will not get any ForEx even though it was an income -- getting added into income, but we'll not have this kind of an accounting issue in future. So considering that, these are the temporary factors. Now coming to just to explain a little bit on the other category of variable cost. Maufacturing cost was higher by 0.1%. This was mainly because of the forward tariff change during the year. And then another major factor was that increasing power utilization for the new production line, which are under trial and implementation. Again, this is 1 time factor, so once we -- once our lines are ready we don't have to incur additional power cost in trial and implementation of these lines. Coming to -- this was an impact of 0.1%. So coming to last impact, which is selling cost, again, 0.1% in fact, and this was mainly -- so there -- again, there was a positive and a negative factor. The positive factor was that we had a positive warranty cost change. The warranty cost was down, just to sell just to inform you again, we had a recall situation in the earlier year. This year, the warranty was much under control, so warranty cost was almost down to half, and that gave us a positive of 0.15%. You are aware about the U.S. tariff, the receivable tariff and penalty tariff, which U.S. imposed on our exports, that costed us about 63 million, which was 0.24%. So together, a positive 0.1% and negative 0.24%. There was a net negative of 0.1%. Again, this is one-time factor. You are aware that the order of Supreme Court, this tariff has been not withdrawn in U.S. So future step a little bit. We expect some improvements in these situations. Number 1 is that a reduction in U.S. tariff from 50% to 10%, we expect U.S. exports will increase and further these exports will be at a lower tariff and thus will help improve profits as well. Second, we expect sale of new models of Martial where Jim has started supplying during 2536 will increase. Suzuki is expected to launch another which is EV from Gujarat an expected in October '26, and we expect that we -- this will help us to increase our revenue and improve margins. Again, for this model, we are supplying all complete sharing MSG, CPS as well as CVG. Cost of testing, as I just told you, will reduce in future, and this will help us because most of the SOPs will now start. Export to Brazil will start. We told -- we informed in our previous meeting is that we got in a purchase order from Brazil. And this -- I'm happy to announce that we will be starting dispatch from this month, from May month, we'll be starting dispatch. And this volume will continue to grow up to maybe 5 lakh unit we expect this will grow. And lastly, our efforts to continue to maintain fixed cost retro. These are the greatest thing where Meriten will be working to continuously improve the margins in future years. I hope I have been able to answer your question.

That was very helpful, very detailed. If I can go to my next question, sir. My next question is regarding the Toyota DB plant. So as we know, they were putting up a third line in Baddi and that was to be commenced this year itself. And from what I have been reading in the public articles is that this has already commenced. So can you just confirm this, if that has commenced and if yes, then how should we see the revenue mix from Toyota order, which has been traditionally about 12%. In this go to 15%, 16% in the near term?

Sure. So let me tell you about the breakup of our sales. So Tata was 12% last year and was 10% this year. And 1 of the reasons why a slightly declined by 2% because market went up from 56% to 60%. Others were more on the same. Honda declined from 8% to 5%. Mahindra and Mahindra and Tata remained at together at 10% level, so -- and exports slightly improved from 2% to 3%. So these are the -- somewhat breakup of our sales to different customers. Turning to your question about Toyota. Toyota is -- you are aware is that part of the group of JTEKT. They hold about 20% equity in JTEKT corporation in Japan. And JTEKT corporation in Japan is the largest promoter of JTEKT India Limited. So we are connected with them. So in India, most -- we are involved with most of the developments like, for example, like all the current manufacturing is happening using our steering systems. And 1 of the reason our moving to reason is to -- because we are aware that Toyota possibly will be setting up new facilities in Maharashtra. We are hoping that these facilities set up as early as possible because we will be ready for that. And that was the main reason for our setting up a plant in Gujarat primarily to support Suzuki which already has a plan and we are expanding in Gujarat. And we will -- we expect Toyota to expand in Maharashtra, but these are all new things. We do not have the exact information at this point of time. And no, we will launch -- even if this happens, this will happen sometime in '28, in '29, our understanding about the Toyota thing which you are saying will happen sometime in '28 and '29 as per...

In mode that the DB plant, which is the existing plant where they were putting in the third line with an investment of 3,300 per where they were increasing the capacity by another 1 lakh. I think that has already commenced.

Correct. That has not already commenced. The new facility in our understanding is that we began in the first half of '29, which will increase their capacity towards old-line vehicles per year. This is our understanding.

Yes. That is for Maharashtra, but add where their existing plant is housed, there also they expanded that capacity by 1 lakh. So I'll maybe check on that later on with you.

The most important thing is that we are attached with Toyota for all their stem requirements. And you are aware that we are supplying for hydride, et cetera, for CVG. So we are already supplying to them. So we are the only supplier at this point of time for them, and we hope that will continue to be the only supplier for Toyota, in future as well.

Yes. Just a follow-up question on that. That means parts also putting up plant in Maharashtra, they officially announced this -- so on the driveline segment of JTEKT, as I understand, there are multiple products that are there and not just CVT or opened bearing we do how is something that we will do. But other than that, also there's a whole catalog of different items like driveshaft, drive plate and LSC, IDC and plates. So -- is there any plan for JTEKT to give these products also under detect India on the line? Do we have any intent of doing that other than PBC or hub unit bearings? .

So these new products, like, for example, when we introduced CVJ constant velocity joints into the Indian market, that's correctly a step towards company aspiration to increase product portfolio. You're rightly so. And we always wanted to gain the share of important driveline segment auto component, so while steering, we have the complete assembly complete system supplier, but we are a system supplier when it comes to driveline products. So our aspiration is to keep increasing our capacity in this particular segment and introducing more projects. However it takes time. We need to see that we first reached to a certain level of growth in CVG. We told in the last meeting is that our first level target is to touch about 15% market of CVJ. So just to give you a little bit more information on CVJ, so during the current financial year, we -- the second CVG line came into operation from November '25, and this has increased our production capacity by 7.54 lakh units per annum, which is equal to 3.8 lakh vehicles because CVJ is supplied in sets. And '25, '26, the total sales was about 1,300 million only. That was just about 67% or 65% of the total capacity utilization, so what's happening is that the third vehicle of Marketo, which will be launched now and we will start supplying, and we expect that the capacity utilization for that will increase to 90%. And this sale will touch about, say, 250 crores or more than that. Currently, we're only supplying for Grand Vitara and Toyota. And then in August '25, you are aware that we started supplying for EBITDAR and Victors, which ratio introduced. And -- so the -- so the idea is that we need to capture the market of -- which is a huge market and can be bigger than an MS gear market, which you are currently steering in the steering category. We are -- competition is there. MTN and other people are already there, they already have more or more than 60% of the more business. So we need to enter that area. There's a huge competition, and we are targeting that business. We need to a level of at least 15% to begin with. The third line will be -- will start working now. So CBD online will give us about a production capacity, which can help us to touch about 15% market share. And then when we move to Gujarat, yes, we will expand for the -- in the CBD category. So this is one area where we have just introduced and we are still working very hard because there are various worsens and various specifications, which we need to get over a long -- bigger, weaker and a smaller tail -- we call it a long-term technology. So many, many things we have to do in this particular area, so give us some time. I think you will be the first person to know whenever we plan a similar activity in the future. Yes, we have inside a few things, but nothing at this point of time, which has this line because we need to do a lot of work on CVJ first and maybe then move to another segment.

Okay. My last question now is about the JTEKT order that we got was the first of its time from Jethro -- do we -- are we in discussion with other tech entities also, do we have a plan in future to cater to other tech entities? .

Yes. So if you recall during its presentation to investors, while announcing its financial results were '24, '25 JTEKT Corporation in Japan, they expressed its intention about strengthening Indian sites. -- by promoting India as a global side. This was not just a statement because in JTEKT Corporation in Japan is informing something to the investor, they have a lot of weight behind it. And we expect that to strengthen our operations to meet the expectation of our group prices. So this activity is a start. And we expect that about 70,000 units will be supplied during the year. The first shipment will happen this year. This month itself, we will start supplying to them. And this can be used. We already set up -- as we informed you, we already set up a line Manager line, recontinue line at Aba Chennai unit with an installed capacity of approximately 4 lakh units. And this will -- I mean, this business will go very fast. That's per our understanding because there will be many, many variants which will be launched by Stellantis in Brazil on the same platform, and we have to detail that this business can rise up to 5 flag units per annum. And once we are able to establish ourselves with the group entities, by performing well, supplying 1 time, supplying the best quality products at the right cost, once we are able to establish ourselves, I think there will be more business waiting for us. We just have to be a little patient, keep working hard and then see that the next order will turn.

That's great. Very heartening to know before I wrap up, are applying to investors also are we applying for testers? Or not? .

No, we are not supplying to us. Most of the borrowers which we are supplying to Renault, Nissan is on the export orders, sunny and all those models. That's where we are mostly.

The next question is from the line of Aman Hora from Premier Capital.

Yes. First of all, many congratulations on a strong fourth quarter performance. I actually just wanted to get some understanding from you on a revenue trajectory, so in the previous quarter, you had explained that by F '27, we would look to add about 1,000 crores to top line because of these -- all the new capacities that we have commissioned in the last 6 to 9 months. So given -- so could you just update us on that? Where are we on that guidance? And also, given all the initiatives around the new capacities from all our clients, the opportunity of export to the promoter group as well as the CV ramp up. Can you move to double our revenue in the next 3 to 4 years? .

So let me explain you where are we now. Future, I will leave it for you to decide. So I will explain you where we are, so let me start with '25, '26, that's just completed financial year. So JTEKT India, as Fujihara and in his opening remarks mentioned that we touched a growth level compared to the passenger vehicle market segment growth of 9%. So we performed better than the market. So now out of this 9%, when we look at the overall passenger retail market growth of '25, '26, the share of marks toluene was 5%. So when we say that the passenger market, we grew by 10%, markets to -- it grew by 5% -- so this taxation reform, you are aware about GST reduction, et cetera, et cetera, at least part optimism and we saw a significant increase in demand for several models of Martire we are present, like Alto Jimny, Malino Vatika, Prisa. Because of our presence in these models during the last 2 quarters, we were able to get a huge business from these, and therefore, as I told during my previous answer in the previous question that our share with marquee increased from 56% to 60%. Again, the new business of Martizuki, Vitara, with Doris, they gave us an additional sale of 173 crores -- 174 crores because we are supplying almost every product, like we are supplying manual gear, we are supplying CPS, and we are the prime constant we lastly CVie. Still, this was not good enough because there was a huge delay in the SOP of these models, we expected these models to start from June and then they finally started from August, and then mainly for export models and then launch in Indian market was further delay until possibly October, November. So what we expected for these models, we did not achieve that. But still, despite that, just a few months, and then we touched about 200 crore kind of a sales turnover from these 2 models. And now we are waiting for the third model, which Markus Suzuki will be launching. This is a MPV EV from Gujarat. And we are, again, a complete supplier for all the 3 products, manual gear, CPS and constant velocity drives, so we expect that this can give us good reaches. Now coming to the negative points. We had a negative growth of approximately -- if you look at the impact on the market side first, that gave a 1% negative growth to the market like Honda and Nissan, these people. So when we look at Honda stand-alone, we have business in the passenger vehicle segment declined by a massive 30%. And we are almost 100% supplier to Honda and this negative growth impacting our overall sales. However -- and that was the major reason, but otherwise, our sales could have been even where we could have touched 12% to 13% compared to 11%, which we actually touched. Now, again, for the Honda, we are optimistic is that once they will be coming up with their new SUV, which is an EV, and we expect that they will be able to capture part of the market, which people have lost. This business is expected to be around -- on the optimistic side, about 40,000 numbers, which Honda is planning, and this can be 100 crore bidders for us. If everything materializes is good, it can be a good business for us. Now coming to CVG. We -- as I said, we've been supplying to Vitara to at a high rider. We will not -- we started supplying to -- sorry, we were supplying to Grand Vitara and Tata hydrate. We'll start supplying to EBITDAR. And this sale, which is about 130 crores this year, we'll touch about 250 crores on a full 2 line capacity, which we are very hopeful that once MTV EV of Matsuki will be launched in October '26, we'll touch 90% capacity utilization of over 2 CVJ lines, and we are now working on the third line. We already started working on the third line. Now coming to Brazil, this is a start and a small 70,000. And we will start touching about -- next year, we will touch about say, 150,000, which can be about 50, 60 crores to big and then you can touch 5 lakh units over a period of time. So this is something the direction of export. Like 1 thing is that we are getting witness where we are now supplying -- not only sharing, we are supplying driveline products as well. Our exports will continue to increase. We expect U.S. exports to improve, we expect exposed to Brazil to improve. We expect Honda business to come back to some reasonable levels. They have actually lost a lot of market share. I think they should come back. And the product mix will be positive. Maybe you have seen the presentation, which we filed on stock exchange yesterday. We have put in our new capacities, which we have set up, and we mentioned about the capacity in '25, '26. So if you look at CVG Line 2, which was set up in November '25 with a capacity of around 370,000, is just 27% utilized today. CVGLine1, which was installed previous year is about 83%. MFG Line 5 Darra, which we installed in last year is already closed 106% capacity utilization. However, the new sixth line, MSL line is just 21% utilized at this point of time. Similarly, MSL Line 4, which we have set up at Jamai for export business is SOP has yet to start, so practically not utilized. 50% net. So when you look at the capacity which we already created in the last 1 year, over '25, '26 because most of the motor by Vitara and Iara and Victoria started in between the financial year. Therefore, these lines could not be fully utilized. So over a period of '25 '26, the utilization, for example, the CP time was just -- but now with the new models coming in and now for the full 1 year production of EBITDA and victorious, these production capacities will be fully utilized, so we expect that whatever capacity we have set up will be 100% utilized over the next 1 year or every 1.5 years, depending upon the market. So I have given you all the data, which I already have. What I'm trying to tell you is that we are the market growth. At the end of the day, if the market grows, we will grow better than the market. And that's what we have demonstrated over the last 3 years. So let's see if you have projections about the market at 20%, I can assure you that we'll have to grow by 20%. But let's wait for the market to shape up in the next 3, 4 months, I think we'll have a better picture emerging, and you can link my growth with the market growth very easily because I have production capacities, which are not fully utilized, we have already committed for additional production capacities and we are already now to capture any new share of business, which we will get from our customers.

Sir, when you mentioned that over the next 12 months, we will move to full capacity utilization on these new things that are added how much revenue can we get on full utilization from the current capacity? Like it's difficult to pinpoint 12 months or 18 months, but once this current capacity fully utilized, how much revenue would be able to get, would it be 1,000 crores of incremental revenue, 800 crores to 1,200 crores...

300 crore increase this year. So from 2,300 crores to 2,600 crores, 300 crores, we already got in this year. export will be additional. So whatever market growth next year, say, let's talk theoretical. Let's not talk what my numbers will get me. I give you a different way of calculating my growth is that suppose the market grow by 20 -- by 10%, okay? So we will be able to grow by 400 to -- and if we are able to grow our export by say 100 stores, we can get another 500 crores. We got 300 crores this year, 500 crores next year. So we will be touching about 800 crores additional. You are saying 1,000 crores, I'm seeing conservative 800 crores. I would not be able to share my next year's business plan. I'm sorry for that. We don't share that continue some way of calculating media.

Yes. So if you see our financials, our return on capital employed was 16% in F '24, which is now down to 10%. This is because we've done about 800-odd crores of CapEx in the last 3 years. At the same time, our fixed asset turnover is down from 4 plus to about [ 2.2 ]. So we have added significant capacity in the last 3 years. Now if we have to improve our ROCE, which is the mode of adding these capacities or get back to where we were originally, we have to have a revenue ramp up and as well as improve margins. So that is where I'm coming from. How we see this ROCE trajectory moving back to our historic levels of F '24 where you were doing 16%, 13% which will be a factor of revenue growth as well as margin improvement. That is where I'm coming from. Not a specific guide for next 12 months or maybe for the next 3 years that will be 3.

So we are 100% aligned with what you are saying. We have exactly the same thinking, which you have. We have a capacity and we need to utilize that. And I think, as I said, we expect that our capacity will be 100% utilized within 1.5 years. That's what our understanding is based on the new orders which we have, so just coming to your return on capital employed thing, maybe you do not have the balance sheet with you at this point of time. It will be published in the next few days' time. Our CWIP, which is the assets which are not yet operationalized, is about 411 crores. So if I simply remove it because these assets are at this point of time, not generating any revenue. So if I remove that, the return on capital employed improved to more than 11% from whatever number you just told -- so that's where we are in that -- but then yes, once the full capacity utilization is achieved, this return will further improve because the profit will improve, numerator will improve, denominator will remain the same. So this will, again, touch back to the same numbers as we talked about 2 years, 3 years back yet. One thing which you must keep in mind. So you are in an analysis, so I would always request you that whenever you read my balance sheet frees continuously read the CW, that will continue to impact my ratios for the next maybe 1 year or 2 years, yes.

Right. Got it, sir. Sir, just last question for me. So this year, you've done close like a INR 400 crore-plus basis. What would be our guide on expected CapEx for F '27? We've seen a slight increase in debt also. So -- any guidance on the CapEx for F '27? .

So definitely because most of the expenditure on line setup has already been completed. The 1 activity, which is currently going on is our setup of our Gujarat location plant, where again, we have already -- we have committed about 250 crores for that particular unit, and we have already spent about was from the rights issue and there be some money from our own pocket. So maybe 130 , we have already strength. So overall CapEx for that particular location is about 250 crores. So maybe another 100 crores for that location and then other normal capital expenditure. It will not be as huge as we have done in the last 2 years. But yes, Gujarat is 1 location where we need to spend some money going forward over the next 1 or 2 years, yes.

The next question is from the line of Manan Poladia from MKB Securities.

I have 2 questions for you. One on -- again, following up on what the previous participants were saying -- if on the driveline side, you could give us some more color on what other products are in the near-term launch pipeline? Secondly, how are margins or when you say picture set turnover, how does that differ? And as to the 750 crores of CapEx that you've done, I understand that your previous assets were well depreciated, so I just want to understand what sort of FT you can look forward to going from here when you make new investments in.

Okay. Good. So I think on the driveline product, which was your first question, I think we have already explained our CVG strategy. Our aspiration to touch market share, and maybe long term will include further increasing this capacity from Gujarat location. So currently, at our existing overall location we already have 2 production lines with a capacity of around 7.54 lakh units, which translate to about 250 crores kind of volumes of value, sales value. And we will be up about 90% capacity utilized when we will be -- we'll get the third EV model of Marticke, which will happen sometime in October '26. So this is where we are for our existing -- there are the 4 models where we are supplying as I said, [indiscernible] and then all the fifth model will be added. And we are up and running. The next challenge will be that moving to other customers once we are able to establish ourselves with [indiscernible]. The next challenge will be to move to other customers and establish our product with them. So this can be a huge builder. This is a driveline business and can be a huge business, which can be equal to more than our manual gear business, which we currently have. We have more than 45% -- 40%, 45% share of the manual gear business also in the same direction. Coming to other products, we will not be able to inform at this point of time because these 2 concrete plan, which has already been finalized along with JTEKT, this will happen, but not immediately. We will -- it will take time because we first need to stabilize in the CVJ market, which is a huge market, and we know that there are opportunities also to supply overseas also, to certain parts of CVJ, the force part, et cetera. There's a big opportunity that we can supply -- we can export to all group entities also. So -- this is a big strategy, which we have, and we will keep on reporting that to you as and when we take more actions on that. Give us say, 1 year, 1.5 years to complete our strategy on CV side, maybe then will be the right time to move to the next strategy. maybe introducing another product in the Indian market. This is 1 thing. So coming to your next question about investments, which we have done. So I think we have seen the -- I would request you to see the presentation which we submitted to Stock Exchange yesterday, which talks about all the capacities which we have built, so when you look at the turnover ratio, for example, if I just give you an example of CPS, the fixed asset turnover ratio for CPS can be as high as 2.5 to 3 times. When it comes to a manual gears, the ratio can be a 2 to 2.5x, CVG can be lower. CVG can be 1.5x, so it depends on the capital expenditure, which is required for setting up that kind of a line. So fixed asset turnover ratio will be different from product to product, but the target which we always take is 3x, so we've been doing more than 3 times in our past. And we hope that once these capacities are fully implied, we should touch a reasonable level, which should be upward of 3x. So that's what is about our estimations are, but then it will depend on product to product as we'll be having more CVG in our product line. The capacity -- the fixed asset turnover ratio, maybe slightly lower side compared to -- but that does not mean that the profitability will be low. So these products have good profitability. Just I think we informed last time also is that is CVJ 1 product where we have almost 100% localization. It's all local products. There is absolutely nothing which is imported at this point of time. We've been able to -- there were certain parts which are being imported earlier, but I think we've been able to localize all those parts. And so this can be a good model for us as that as we'll be moving towards lower depreciation over the period of few years, I think these can be very good profitable products for us. So this is where we are. I hope I have answered your question. If I missed any part of your question, you can repeat it, please.

So you've answered most of my questions, sir. Again, as far as the FATO is concerned, just 1 clarification I'd like from you. When you say FATO, what is the fixed effect number you are taking because you have a number that goes into the factory and there is a balance of materials, CPC, et cetera, is that...

Everything. I consider furniture and pictures, of equipment, I think this is a balance sheet number only. So I'm -- ideally, I should have removed CWIP because that is not generating any revenue at this quarter, but we don't do that. So whatever number we have published yesterday is on a gross asset basis covering every asset. Direct on the balance sheet.

Understood, sir. And just on the CVJ margins, if you could tell us how they're different from the control margins? .

So better than what we get on manual gear. Good thing is that, as I said, is a 100% localized products. EBITDA margins are better than even most of the MS gear product. MS gear over a period of time, there have been huge competition, and we feel that CDK is 1 product where we can perform that we can have a real competitive edge. It's a very good product, which we have set up with a lot of innovative design and a lot of quality parameters we have. I think the testing, et cetera, took almost 2 years' time to dwell these products for the Indian conditions. We are very sure that we will be able -- there may be a little cost a start for us and we are just maturing in this area. But we are very sure that over a period of time, we -- there are a lot of opportunities for backward integration also. For example, forging, et cetera. So many, many opportunities to keep strengthening our supply chain, strengthening our production facilities and performing better than other products, which we are supplying. So margins are good.

The next question is from the line of Kevin Darley from Capgrow Capital.

Sir, I hope it was about...

We are we are almost completed this time. So we'll take it as a last question, if you kindly permit.

Yes. Just wanted to understand that, sir, how much would be the total sales estimate to see potential once the entire capacities are utilized -- and just a follow-up on that question, like how much of the business that you're expecting from the Marotta which is going to be released. So that's the first question. My second question was that the CWIP of 40. So where would that be used for, like how many lines for CV and energy -- those are the 2 questions. And question I would ask a subsequent as a follow-up.

So the sales side, I think I've already answered that question to my -- to the previous. We should not -- there are 2 things. One is our capacity data, which are already submitted with you. This was part of my presentation, which talks about all the new production line, which we have set up. So for example, at Dawuan 2 facilities, we have set up the sixth manual gear line. So capacity is along 3.5 to 4 lakh per line. That's our overall capacity, which we have for the MS gear line. CPS, we have set up the third line or at Boel, capacity is around 5 lakh units for line. CVJ, we have set up the second line. So capacity is around 370,000 per unit. So these are the 3 main products that have given capacity number, and based on that, you can estimate a little bit on the sales side. But now coming to coming -- let me repeat the answer which I gave to the previous caller is that this year, we were able to achieve a [ 302 ] extra turnover which was coming from the new capacity which we set up, for example, the Line #5, which we set up at [indiscernible] and CV line which you set up at [indiscernible]. So mainly the production came from that -- the sales came from that. Now coming to the next year, what I told the previous caller is that suppose we consider a 10% growth, this capacity, which we already set up is good enough to cater to that 10% growth for the next year, which we see another 400 crores business if we add to our sales and another maybe 75 crores to 100 crores of export, we can start about 500 crore additional sales based on our existing setup. The production facilities already have at Chennai and [indiscernible ], we can cater to approximately of 500 crores, which means 300 crores this year and 500 crores of next year, we can touch -- we can easily cater about 800 crores of extra business from this. So my answer to the question, Mark, is that -- we just need to wait for the market to shape up in the next 1 or 2 months, I think we'll have more clarity as to where are we heading 20 looks good. there are good numbers for FL and they are good forecast for the month of May in terms of sales by passenger vehicle segment. And we expect that if the market continues to grow like this, this number is achievable what I told you on a theoretical basis. This is 1 thing. Now coming to your second question about Pura -- so we already have EBITDA, which was the first model launched by [indiscernible] and we got Dan system, which means Emisphere, CPS and CVD and the new vehicles, which Suzuki will be introducing some time in October, which is MPV, which is multi-utility vehicle, which is again an EV wow are again there. Again, we will be complying to compete like manual gear, CPC. So our line gain, the second line will be 90% utilized to 740,000 capacity which we have for the first 2 line will be fully exhausted once we have this new business. So this is where we are. So we are currently supplying 100% of multi EV business at this point of time. I hope we have answered your question.

Okay, and sir, just like once you kind of clarification. On the MS gear Line 6, there shall be utilized in the Maruti ahead, if I'm a state -- so in.

Which is set up, we -- this could cater only for a partial year because this we got this EBITDA and Victoria being started in between the year. It was not for the full year. So the current capacity utilization of this line, which is about say, 30% will increase to 60%, and then the new model will be added. So we'll be touching about 80% to 90% of this time.

Okay. So got it. And sir, my last question was that like what do you see like what is the company do we see the potential of expanding into the areas of U.S. and Europe? Because corporation in Japan, they are actually making losses there. So there might be potential of us supplying there or exporting there. So what is the strategy with company actually forecasting for those regions because that's a huge market as compared to India?

So yes, so we are moving in that direction. I think India has the capability to cater to the world market. we will be starting with Brazil. I think this is a big order, which we have bought, even though we'll be supplying with, say, 70,000 units this year and maybe like 50,000 unit next year. But it's got huge potential to continue to supply this talent, this model and talents will be supplying in Brazil as well as nearby country. And we expect that once we are able to establish ourselves as a good quality, delivery suppliers at a competitive cost. I think then we can expect another order coming up very fast from our other. So let's wait, we are going in the right direction. We've been waiting for this opportunity from the global entities for almost 2, 3 years, and now that has materialized. Now we need to demonstrate that, yes, we are the best supplier for the world market. I think we are very hopeful for that. And we have a brand-new Chennai line ready and people are emotional and people are very, very ready to take this challenge, and we hope that this will establish ourselves with our overseas other OEMs.

Yes, sure. Got it. And sir, just 1 last thing, sir. On the…

We are out of time. You just call me please? I'm sorry.

I'll take this offline. Yes.

Ladies and gentlemen, that was the last question. I now hand the floor back to the management of JTEKT India Limited for closing comments.

Okay. Again, I would like to thank everyone for joining this call. I hope we have been able to respond to your question adequately. We are really positive about growth in automotive sector and that would continue with our effort to expand to meet the industry requirements. Thank you very much. Stay safe, stay healthy, and thank you once again for joining us.

Thank you very much. On behalf of JTEKT India Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.

Thank you, everyone. Thank you so much.