Lumax Auto Technologies Limited (LUMAXTECH.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Lumax Auto Technologies Limited Q1 and FY '26 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of the 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. Anmol Jain, Managing Director of Lumax Auto Technologies Limited. Thank you, and over to you, sir.

Thank you. A very good afternoon, everyone, and thank you for joining us for the Q1 FY '26 earnings conference call. It's a pleasure to welcome you all. I am joined today by Mr. Vikas Marwa, CEO; Mr. Sanjay Mehta, Director and Group CFO; Mr. Sunil Koparkar, the Managing Director of IIT ; Mr. Sanjay Bhagat, Head of the Aftermarket Business; Mr. Naval Khanna, Head, Corporate Taxation; Mr. Ankit Thakral, CFO of the company; and Ms. Priyanka Sharma, Head, Corporate Communications. We're also supported by our Investor Relations partners, Adfactors PR. Together, our leadership team looks forward to share our Q1 performance, along with key business updates from the quarter. The results and presentation have been uploaded on the stock exchanges and the company website, and I do hope everyone has had an opportunity to go through them. The automotive industry in Q1 FY '26 witnessed a mixed performance with demand flat across most segments. Within passenger vehicles, the strong growth of Mahindra & Mahindra, driven by the continued success of its UV portfolio and steady tractor performance provided a positive tailwind for our business. Premiumization across product categories contributed meaningfully, improving the revenue mix for both OEMs and suppliers. Additionally, diversification across passenger vehicles, 2-wheelers, 3-wheelers and the commercial vehicle segments helped cushion the impact of a muted domestic environment. The broader macroeconomic environment has also showed encouraging signs of improvement with inflation under control, GDP growth resilient and rural sentiment on the rise, aided by a strong monsoon. Urban consumption is expected to strengthen in the coming quarters, supported by personal income tax benefits and improved liquidity conditions. As per CAM data for Q1 FY '26, 2-wheeler volumes stood at 5.9 million units, up only 1% year-on-year. Passenger vehicles stood at 1.25 million units, up by 3% on a year-on-year basis and 3-wheelers at 0.26 million units, up 10% year-on-year. The combination of improving rural demand and supportive policy measures provides a constructive backdrop for the industry, particularly as we head into the festive season and expect a gradual revival in consumer sentiment across both urban and rural markets. Moreover, industry leaders believe the recently announced U.S. tariffs will have minimal impact on India's $7 billion auto component exports to the U.S. Since auto parts already attracted 25% duty effective May 2025, the new levy is seen as a reciprocal measure applied uniformly across countries and therefore, does not alter the competitiveness of Indian products. Moreover, India does not export vehicles to the U.S., further limiting any direct impact. On the company update, -- we have kicked off FY '26 with a steady performance both in revenue and profitability, which is in line with our internal operating budget. There has been certain price corrections from customers, which have not been realized in Q1 because of which the margins have seen a slight dip compared to Q1 of FY '25. These corrections, however, have been subsequently received in the current month. Hence, in Q2, we should be able to see this gain based upon the spillover from quarter 1. And for H1, the EBITDA margins will be in alignment with our strategic direction for the current year, which is between 14% to 15% EBITDA margins. The aftermarket business delivered a strong growth of 16% in Q1 on a year-on-year basis, in line with our midterm strategy. During the quarter, we also incorporated 2 new wholly owned subsidiaries, Lumax Auto Comp Private Limited and Lumax Auto Solutions Private Limited in the month of July in New Delhi, aligned with our vision to capture emerging growth opportunities in the automotive sector. The acquisition of the remaining 25% stake in IAC India was completed in May and as previously communicated, will be effective for profit attributable to the owners of Lumax Auto Technologies Limited from that date. Our recently inaugurated IAC India manufacturing facility at Chakan is now fully operational, gaining strong traction with key OEM customers and enhancing our ability to meet rising demand and advanced and sustainable manufacturing practices. We are also establishing a local engineering, sourcing and development capability in China in this fiscal year for benchmarking of new trends and technologies and gain real-time access to information from the Chinese industry. At the same time, we are also going ahead for setting up of a technology center as a part of SHIFT Smart Hub for innovation and future trends at Bengaluru. Both these strategic initiatives are expected to be commercialized by quarter 3 of the current fiscal year and will play a key role towards our strategic move from becoming -- from a Tier 1 to becoming a Tier 0.5 player for our OEMs. Certain recognitions during the quarter, the Plastics division of the company and subsidiary company, Lumax Mannoh, received award for overall performance in the Maruti Suzuki Vendor Conference of 2025. IAC India also received a certificate of appreciation in recognition of its superior performance in vendor system audit rating at the same Maruti Suzuki Supplier Conference. Lumax Mannoh was also honored with the CNBC TV 18 SME Champions Award Season 2 in the category of Manufacturing SME of the Year Industrial Excellence. Another subsidiary, Lumax Telematics was awarded the Runner Up as Partner of the Year at the Daimler India Annual Supplier Meet. Talking about the order book, we are pleased to report a robust order book of INR 1,500 crores with strong visibility across next 3 fiscal years. Of this order book, approximately just 8% is projected to be materialized in the current fiscal year, almost 40% in FY '27, 40% in FY '28 and the remaining 10% to 12% in FY '29. The order book reflects healthy traction across all product verticals with advanced plastics contributing the largest share, followed by mechatronics, alternate fuels and structures and control systems product vertical. I'm also pleased to share that 40% of this order book rests within the future and clean mobility solutions thereby taking the company forward in line with its midterm plan. Despite the industry's largely flattish performance this quarter, we remain firmly aligned to our vision guided by the theme Bridge, the bold road map integrating diverse growth engines as a part of our midterm plan. Our focus on diversifying across OEMs, products and segments while accelerating our presence in EVs and greener fuel technologies, enhancing our wallet share positions us to capture emerging opportunities and drive sustainable growth in the evolving mobility landscape. With a good start to FY '26, we remain confident of marching towards our North Star of 2020. With this, I hand over the call to Mr. Ankit Thatrawal, the CFO of the company.

Good afternoon, everyone, and thank you for joining us today. Q1 FY '26 has commenced on a solid revenue gain, reaffirming the strength of our evolving and well-balanced portfolio. This performance is a direct outcome of our disciplined execution of the strategy and sustained focus on innovation, premiumization and deeper alignment with high-growth mobility platforms. Let me now take you through the key operational and financial highlights for the quarter. Beginning with the Advanced Plastics division, this segment recorded a year-on-year growth of 25% in Q1 FY '26 with revenues increasing from INR 420 crores to INR 525 crores. This performance reflects our strategic alignment with OEM programs that prioritize design, durability and lightweighting. The order book remains strong at INR 940 crores, providing solid future visibility. Next, the Mechatronics segment sustained its upward momentum, delivering a year-on-year increase of almost 100% in Q1 FY '26 from INR 28 crores to INR 54 crores. With a healthy order book of around INR 250 crores, this segment remains highly technical due to its high engineering intensity and relevance in the shift towards intelligent mobility systems. Turning to the Structure and Control Systems vertical. It reported a Y-o-Y growth of 10% in Q1 FY '26, increasing from INR 165 crores to INR 180 crores. With an order book of INR 110 crores, it strengthened our position as a trusted technology partner in the evolving mobility ecosystem. The aftermarket segment showed a strong growth of 16% from Q1 of last year, reflecting strong customer traction and product acceptance. We are very much hopeful of sustaining and building upon this strong growth for full year FY '26 and way forward. The Greenfield Energy Solutions acquired in the latter part of the last financial year contributed INR 95 crores in Q1 backed by the order book of around INR 200 crores with margins expected to be accretive to the group average over the medium term, this segment is positioned to grow in alignment with the national shift towards alternate fuel platforms and rising OEM adoption. With an enhanced focus on the segment diversification aided by the seamless integration of IAC and acquisition of green fuel has translated into a notable shift in revenue composition. In Q1 FY '26, the passenger vehicle segment accounted for 55% of total revenue, 2- and 3-wheeler segment contributed 21%, followed by CV at 11% and aftermarket at 10%, reflecting a well-diversified and balanced mix across mobility platforms. Our consolidated revenue for Q1 FY '26 reached INR 1,026 crores, marking a Y-o-Y growth of 36% and reflecting the growing strength of our core business as well as the momentum from our newer verticals. The revenue saw a decline of 9% from Q4 FY '25, which is due to the higher tooling revenue of around INR 90 to INR 100 crores, mainly in IAC India in Q4 of last year. Tooling being cyclical in nature, which is executed in line with the new model launches by the OEM. If we exclude this tooling revenue, the revenue for Q1 FY '26 is in line with the Q4 of last financial year '25. On the profitability front, EBITDA stood at INR 136 crores, up 29% over the same period last year with margin steady at 13.2% -- the decline in margins from Q1 FY '25 has been clarified. And with respect to the Q4 FY '25, it is down because of profitability impact from the just explained tooling revenue and deferment of the customer price corrections, which has been subsequently received in Q2. Profit after tax before minority interest stood at INR 54 crores, registering a Y-o-Y growth of 30%. The effective tax rate remained stable at 27%, and we expect it to hold at similar levels throughout the year. The share of minority for the quarter stood at 22%, down by 27% from Q4 FY '25 with IAC becoming the 100% subsidiary from 22nd of May. The minority share for the upcoming quarter is expected to settle between 15% to 17% CapEx for the quarter stood at INR 73 crores, which includes a strategic investment in Gujarat land of INR 31 crores. These investments are aimed at unlocking medium-term revenue growth and supporting localization efforts across key platforms. The full year guidance for the CapEx remains at around INR 180 crores to INR 200 crores. As of 30th June 2025, we continue to maintain a strong balance sheet and a healthy liquidity position. Free cash reserves stood at INR 359 crores, providing us with the financial flexibility to support ongoing investments and navigate market cycles confidently. Following the payout for the 100% acquisition of IAC, our long-term debt stood around INR 600 crores, resulting in a conservative debt-equity ratio of 0.63, which is within our internal comfort thresholds. We now open the floor for questions and answers.

[Operator Instructions] The first question is from the line of Amit Hiranandani from Phillip Capital.

Congrats team for once again showing strong set of numbers. Sir, first question is we have observed high growth in clients like Tata Motors and Mahindra. If you can please throw some color on this? Also, secondly, we have created 2 new subsidiaries. So what's the plan and whether any inorganic talks are nearing completion?

So I'll take the second one first. I think we continue to pursue future opportunities of growth through the inorganic route. As I mentioned before, the company is always evaluating certain future growth strategies inorganically. And just to expedite certain processes, these are just enablers to -- for future growth. As of now, we do not have any material information to share in terms of next inorganic move. But as and when we are there, we will definitely keep you informed. Regarding the customer growth, I'll suggest Ankit to just give you some brief.

So yes, you are absolutely right. Firstly, the Mahindra & Mahindra has reported almost growth of more than 50% at INR 317 crores. So of course, if you see the Mahindra own growth, at the same time, it has increased by 24% year-on-year. But if you bifurcate that 24% increase into PV and CV, the passenger vehicle segment of Mahindra has shown an increase of around 30% to 35%. So of course, due to this increase and of course, IAC being the more dominant player in Mahindra due to their premiumization content, the overall revenue for us from Mahindra has increased more than 50%. And now Tata Motors. So Tata Motors, if you now for the Q1 FY '26, the revenues for the green fuel has been consolidated, which were not there in the last year. And Tata being the #1 customer for green fuel almost commanding around 1/3 of their overall revenue, both in passenger vehicle and commercial vehicle. So because of this reason, Tata Motors, including the green fuel revenue has been doubled from last Q1 of FY '25.

Yes, helpful, sir. Sir, secondly, can you also help us understand how the emerging subsidiaries have performed in the first quarter like your [indiscernible] et cetera? And what kind of growth you expect in this and in the next fiscal as well? And sir, in general, have we added any new customer or received any substantial orders from the existing ones for across all subsidiaries?

So as I mentioned in my opening speech, so the emerging subsidiaries under the mechatronics domain has increased from, I would say, closer to INR 25 crores, INR 28 crores in last Q1 to almost INR 55 crores. So it's a straight away 100% increase from the Q1. And specifically, the main increase is in 2 subsidiaries firstly being, yes, the Lumax Alps Alpine, which was around INR 8 crores to INR 10 crores base of last Q1 has increased to INR 25-odd crores in this Q1. So as we have explained in the Q4, so whatever the new SOPs has happened mainly of the total position sensor to the HMSI, that has led to the increase in this Lumax alpine revenue. And going forward also with the introduction of new products and 2 and 3 products, which are in line that is supposed to go into SOP in the later part of the year. So for the full year, we are anyways expecting a similar sort of growth more than doubling its revenue from the last year FY '25 in Lumaxi Alps Alpine And secondly, the Lumax 5, so the SOP for Lumax from the Royal Enfield was just started in the Q4 of last year. So the full quarter SOP impact has come in FY -- of course, it was miniscule in the Q1. And for the full year, we can easily see that this Lumax revenue is expected to surpass around INR 55 crores to INR 60 crores for the full, I would say, for the full financial year '25-'26.

Helpful, sir. Sir, lastly, sir, export opportunities are opening up for the Indian auto component players. So do you see anything here in the midterm or any plans or talks ongoing.

So I think from an export point of view, we are already engaged in indirect exports. Our products do get exported to other regions through the Indian OEM counterparts. So we don't count that as exports necessarily. I think from an OEM export point of view, currently, we still have a very clear focus on capturing the opportunities and growth of the domestic market. Please also be cognizant that most of our joint venture partners also have geographical presence in ASEAN countries and maybe in certain Western Europe and North American countries. So we are cognizant of that. So we don't have an immediate midterm plan to significantly increase our export footprint. However, aftermarket exports is a completely different chapter, and there are very clear, ambitious and aggressive plans to try and tap into that market going forward.

The next question is from the line of Vijay Pandey from Nuvama.

Congrats for a great quarter. Sir, a couple of things I wanted to check the commercial vehicle sales segment has grown significantly this quarter, more than doubled. Is it primarily because of the Tata Motor sales? You mentioned about the alternative fuel segment that has got consolidated from first quarter. Is it primarily coming from that? And secondly, can you just explain to us like a bit more clarity on the price corrections that happened in the between the first quarter and the second quarter and fourth quarter, like what happened and why it got delayed? Will this may happen over the coming future? Or is it like just a onetime effect and won't be happening again? If you can just give some light on that, that will be pretty helpful.

Sure. So the first question, yes, your understanding is correct. The reason for the commercial vehicle segment growing for us is primarily because of Tata Motors is commercial vehicle revenue coming from the green fuel, which starts to getting consolidated in Q1 of this year. And in last year Q1, it was not there. Number two, in terms of the price correction. So let me just be very clear. There are 2 sets of price corrections, right? One is a price correction on account of inflationary raw material increases, which are very normal in nature. And there, we continue on every quarter to have a quarterly lag. So that is not something which has in any way impacted the profitability for Q1. There was a price actualization primarily for the BEV models of Mahindra & Mahindra for IAC India. These BEV models have recently been launched over the last perhaps 4 to 6 months. There were a lot of commercial negotiations. There were a lot of changes done on the actual interior space. And hence, these were actualized now based on retrospective effect from day 1. So the cumulative impact from the first day of SOP until end of quarter 1 stands at almost close to INR 7 crores, which is significant. And all of that was to be realized in quarter 1 because it pertains to that period, but because of certain ongoing understandings with our customer, Mahindra, that would have not been reached and that has only been reached in the current month of July. And hence, this impact will come in quarter 2 pertaining to quarter 1.

Okay. So sir, I wanted also to check if Mahindra launches a new model again in second half of this year. Will this mean that again, this price actualization may happen? Or is it like this was only the one-off time that it had happened?

So usually, this is not such a case where we have such long periods of price actualization. Usually, it is a much shorter period. But because this was the first time Mahindra got into BEV platforms, there were a lot of new things which emerged on the BEV platforms and a lot of changes which were ongoing, it took a significant amount of time for us to reach a price settlement. However, usually, across all other Mahindra models and IAC and even the other product verticals of Lumax Technologies continue to service Mahindra and Mahindra. This is not a regular feature.

The next question is from the line of Dhaval Shah from Girik Capital.

Sir, my question is for the full year, the minority interest should be around 11% as guided in the last call?

So the minority interest, as I mentioned in the opening speech, will be closer to 15% because of the higher contribution in terms of green fuel because in green fuel, we have around 40% minority that is there. So however, it is a substantial reduction from around 27% to 28% last year, thereby IAC becoming the 100% subsidiary from May '25.

Yes. And then it will continue at 15%, right, after for the next 2 quarters?

As for the existing structure, if the existing structure remains as it is, so the minority will continue to between 15% to 17%... 15% to 17%.

Okay. Great. And my other question, which I would like to understand a bit in detail is about the long-term FY '30 business plan. Now for this, what sort of capital would be required? What sort of asset turns are we looking to have? Do you think you will -- there would be a short-term need where you'll have to -- there will be some equity raising which can happen here or it will be all done internally with some help of bank borrowing. Can you throw some light on this, please?

So I think if you look at our last 3 to 5 years performance, the asset turns almost going forward every year is continuously improving. Looking at the FY '31 strategy, as I mentioned, as a part of our 2020, at a 20% CAGR, perhaps we could be also looking at tripling the revenues from FY '25 of INR 3,500 crores or so base to maybe upwards of INR 10,000 crores. Largely, most of our different verticals will be continuing to look at an aggressive growth. But we don't see any substantial, let's say, from an equity point of view, any change in terms of raising capital. We are sitting on healthy free cash and each of the business verticals continues to generate healthy operating free cash on an annualized basis. So with internal accruals and debt, we should be able to service the needs of this revenue increase over the next 5 to 6 years.

And this -- the CapEx requirement should increase to around -- for this total period around INR 2,000 crores over this entire period?

So again, I think if I were to take out any inorganic pieces and if I were just to say that the current base of give or take this year, probably looking at another 20% growth over last year, you were probably looking at upwards of INR 4,200 crores revenue. So that base to grow that base, yes, I would assume at a 20% CAGR, we should be looking at a similar CapEx outlay as the current year of about INR 200 crores to INR 250 crores on an annualized basis, which would be largely met, as I said, through our internal free cash accruals.

Okay. But with this INR 200 crores, INR 250 crores CapEx, that means you are estimating a much higher asset turnover going forward. the incremental revenue to be added is another INR 7,000 crores and with the past asset turn. I mean, we can take it offline, but I was just doing my math that the number could be between INR 1,800 crores to INR 2,000 crores over the next 5 years, the cumulative CapEx.

That's absolutely correct. So the reason for that is primarily 2. Number one, as I mentioned, 40% of our order book stands in future and clean mobility. So the value and the content per vehicle on that is significantly higher. Greenfield, for instance, is not a very capital-intensive business. So with a base of roughly INR 300 crores to INR 400 crores, it growing significantly in the next 5 years will not have a significant CapEx outlay. Secondly, on the interiors vertical, the premiumization is also going to fetch a higher content per vehicle. Thirdly, the aftermarket, which is poised to grow at a significantly higher CAGR does not again need a capital outlay. So again, as I said, based on these 3 or 4 verticals significantly growing in the future, we do expect our asset turns to significantly improve based on what it is today.

Okay. And sir, last question before I get back.

Mr. Dhaval, may we request you to join the queue as there are other participants waiting. The next question is from the line of Sanket Keskar from Ashika Stock Services Limited.

Congratulations on a good set of numbers. So my first question is on IAC. So how much is the revenue from IAC in quarter 1 and its growth? And do we have any RFPs, which is in the last stage of conversion from any new customer or existing customer for new models?

So yes, I'll answer the first question. So the IAC revenue for the quarter 1 '25, '26 stood at INR 317 crores, up by almost 45%, 50% from the Q1 of last year, directly because of the strong growth in the Mahindra & Mahindra PV segment of around 30% to 32%. Sudhir, would you want to just come in and talk about the new models and how IC positioned with respect to Mahindra?

Yes. Thank you, Amol. Just for clarity, there are -- I think we just had a look at there are between now and next 3 years, Mahindra is bringing at least 7 new models. And at least on our commodities, we are front runners and coming very close to maybe even getting nomination on some of the business. Hopefully, we'll conclude that by end of this month, at least the first piece of business and the remainder to follow in next quarter or so.

So we remain quite significantly deeply entrenched in Mahindra. We've already had some significant order wins in the current month of July, which we will be pleased to share in the quarter 2. But again, as Sunil mentioned, out of 7 new models, some of them being new platforms, some of them being kind of a carry forward from the current models, we are deeply engaged and we are quite hopeful to win a significant share of this new business from Mahindra. Despite -- I mean, apart from Mahindra, we have also made inroads into other OEMs where Maruti Suzuki as well as Tata Motors, we're also trying to gain traction in those OEMs apart from just Mahindra being the significant growth driver.

Sure, sir. That's great. My second question is on our various subsidiaries. So some of our subsidiaries are having similar product lines. So do we have any plans to merge them in order to obtain synergies out of it?

So as of now, we do not have any plans to merge the different subsidiaries. Each of our joint venture is specifically focused into a particular product line or a particular technology area. So as of now, we are very cautious. They don't compete with each other. But again, we will continue to grow each of them individually.

Okay, sir. And apart from FAE and Alps Alpine, like which are the among other of your stress entity do you expect to turn around impact in FY 26. So Vikas, Ankit would you like to take that?

So yes, if you see the other entity in the mechatronics domain, it is Lumax Yokowo. So again, Lumax Yokowo has recorded a strong growth from Q1 FY '26, almost doubling its revenues, but because the base was too low for the Q1 of last year, so that is why the contribution is not so much. But for the full year, again, we are estimating a similar sort of growth from INR 20-odd crores last year to maybe closer to INR 50 crores owing to the various SOPs that have been planned throughout the year. And I'm happy to inform you that by the end of the financial year, it is expected that all the major 4 OEMs, be it Mahindra, Maruti, Honda and Toyota will be the key customers for this particular joint venture. And way forward, we are pretty much optimistic to have a strong growth in this particular...

Sir my last question is on the recent of our press release, which we made on SmartHub, which we have established in Bangalore and one of the other press release as well. So I want to understand if you can elaborate on this as well as if there are any new customer wins in Ituran that is Lumax Ituran segment as well.

So Lumax Ituran, as of now, we don't have a new customer win. However, we have made very deep discussions with a leading 2-wheeler OEM as well as passenger vehicle OEM, and those talks currently are undergoing. As and when we have some updates, we will definitely inform all the investors. In terms of the press releases, I think there are 2 significant updates Number one was the start of the shift in Bangalore. This is largely a software integration center, as I mentioned, as a part of our midterm strategy from going from a Tier 1 to a Tier 0.5. We do need to also develop software capabilities, how do we integrate different product lines together and sell it as an integrated solution for the customer as one interface. So as a step towards that, this is the first time we will be getting into this software domain. And the idea is to grow this over time to try and not just support the different product lines of the group, but also perhaps to start selling software services to outside customers and make it as an independent profit center. The # 2 announcement was opening up a branch office and having a significant presence in China. Largely, we see that the interior space, premiumization trends, technology trends in China are way more advanced than today what India sees, and we would be definitely putting in the resources in China to try and get these technology trends into India at a competitive price point, thereby, again, being the first to get these technologies into India and thereby enhancing our content per vehicle.

[Operator Instructions] The next question is from the line of Hitesh Goel from Orion Capital.

Sir, I joined a little late. Did you give the IAC revenue for this quarter?

IAC revenue for the current quarter was INR 317 crores, up by almost 50% from the Q1 of last year, owing to the strong growth in Mahindra & Mahindra PV segment of around 30% to 35%.