Lumax Industries Limited (517206) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '22 Earnings Conference Call of Lumax Industries. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Jain, Chairman and MD of Lumax Industries. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. Thank you for your participation in this call today. Along with me on this call, I have Mr. Anmol Jain, the Joint Managing Director; Priyanka Sharma, Head, Corporate Communications. And from the Finance and Investor Relations team, we have Mr. Naval Khanna, Mr. Sanjay Mehta, Shruti Kant Rustagi and Ankit Thakral, along with SGA, investor relation advisers. The results and investor presentations are uploaded on the stock exchange and the company website, and I hope everyone has had a chance to look at it. As I look at the quarter going by, the industry continues to be challenged by the semiconductor shortages as the supply chain globally, which is getting eased out in the forthcoming period. As for the data published by SIAM, the overall industry production in the third quarter of FY '21-'22 was down by 20% from Q3 of FY 2021, owing to the degrowth of both passenger vehicles and 2-wheelers segment by 12% and 23%, respectively; whereas the production of the commercial vehicles and 3-wheelers remained flattish quarter-on-quarter. We appreciate the measures taken by the government of India for the automotive sector, which will give fresh momentum to OEMs and auto component players, both on investments and localization. I would now like to brief you over the Lumax Industries business update. The company is engaged in production delivery of automotive lighting solutions to all segments of the vehicle industry. We are the preferred supplier to the OEMs in India and continue to be the market leader. In the area of conventional lighting and LED lighting, we aim to achieve 50% LED share of business in long term, and we're observing that the trend that LED is getting good acceptability in the market. Our technical and financial collaboration with Stanley Electric Japan over almost now 4 decades makes us efficient in localizing the global technology. We are expecting new technologies such as the ASL/ADB projector systems to play important roles in the SUVs, and we are working with our customers to develop these products. I'm also happy to share with you that our new electronic facility at Bawal has commenced its commercial production in the month of January 2022, which will enable the company to enhance its localization strategy in electronics. The capacity expansion in Gujarat is also progressing as per schedule, and we expect it to commence operations from Q4 of the current financial year. During the quarter, the following new models have been launched which consists of Lumax lighting. In the 2-wheeler segment, Mahindra & Mahindra Yezdi's all 3 models of Roadster, Adventure and Scrambler, are having all the lighting products from Lumax; as well as we have the TVS Jupiter 125-cc headlamp. The company has had in our Bawal, Pantnagar and Haridwar plants international awards for the convention of Quality Control Circle held at Hyderabad, and the Sanand plant of the company has won the Gold award at the 32nd Chapter virtual convention of quality concepts organized by QCFI. The company has also won Gold award for gold management in the PGI HR Excellence Awards. We expect the next few quarters to remain challenging in terms of inventory management and production schedules at the OEMs. However, we are gearing up and investing in our technology capability and adding capacities to provide state-of-the-art products and services to our customers to capture the future growth opportunities, which we are expecting in the next coming quarters. Now I will hand over the line to Mr. Sanjay Mehta, Group CFO, to update you on the financial performance of the company.

Good afternoon, everyone. Let me brief on the operational and financial performance for the Q3 and the 9 months ended FY '22. Operational highlights. The share of LED lighting stands at 33% to total revenue, and conventional lighting stands at 67% for 9 months FY '22. With respect to product mix, for 9 months, as a percentage of total revenue, 64% revenue is from the front lighting, 26% from the rear lighting and 10% from other lighting. With respect to segment mix for 9 months, as a percentage of revenue, 64% from passenger vehicle, 29% from 2-wheeler and 7% from commercial vehicles. With respect to financial performance, at consolidated level, the revenue stood at INR 435 crores for Q3 as against INR 446 crores in Q3 FY '21, down by 2% as against industry degrowth of 20%. On year-to-date basis, the revenue stood at INR 1,202 crores for 9 months this year as against INR 922 crores for 9 months last year, up by 30%. Excluding mould sales, the revenue for Q3 is INR 431 crores as compared to INR 435 crores in Q3. And for 9-month basis, the revenue stood at [ INR 1,171 crores ] as compared to INR 885 crores in 9 months FY '21. The company reported consolidated EBITDA of INR 38 crores at 8.6% in Q3 FY '22 as against INR 50 crores at 11.2% in Q3 FY '21. The EBITDA margin for Q3 FY '22 has been impacted majorly due to time lag on account of inventory increase and other expenses. In the current quarter, the company has incurred an exceptional expense of INR 10.35 crores towards voluntary separation scheme in one of its plants. PAT before exceptional expense and sale of associate is INR 14 crores in Q3 versus INR 20 crores in Q3 last year. On a YTD basis, the same is INR 19 crores as compared to a loss of INR 5 crores in 9 months FY '21. The CapEx incurred during the 9 months is INR 23 crores. And for the full year, the same will be around INR 125 crores on account of capitalization of new electronics facility and Sanand plant expansion. This is from all my side, and we will now open the call for questions.

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

So on this new electronics facility that is commissioned in January, what kind of benefit it can give in terms of our margins going ahead?

So in the electronics facility, this -- as you know, that has been an integration from an outsourcing to an insourcing and it does not have an impact on the revenue. But on the margins, approximately 1% to 1.5% expansion at EBITDA level is what we expect it to garner over the next quarter.

So this is at a company level, 1% to 1.5% margin expansion from there.

Correct. That's correct at the company level.

Okay. And along with that, I think the flow has also not happened to customers of this RM inflation, right? So that also gives us some extra margins whenever you able to pass on, right?

So partly, the compensation has been received. And if you look at the successive quarters of Q2 and Q3, there is a partial reduction in the raw material consumption that is large -- partly because of the compensation which has come in. However, there still continues to be some amount of compensation, which is yet to be factored, which would probably come in Q4.

Okay. So I think Q4, in that case, will probably have a 1% to 1.5% improvement from this facility and maybe some benefit from this pass-through -- full pass-through as well.

So it will definitely have some impact. It is difficult to assess what exactly. But yes, surely, there will be some positive impact on account of the electronics facility as well as raw material certain compensation. But the raw material compensation, I would like to qualify, is an ongoing activity, given the current hyperinflation of commodity prices. So we do expect that it will probably continue to have the time lag of 3 to 6 months even going forward. .

So over the medium term, let's say next 1 or 2 years, where do you see margins going to -- so if there is no further inflation beyond maybe 1 or 2 quarters, where do you think margin will settle at considering all this backward integration and everything?

So if you look at a year ago, we're already in the vicinity of about 10.5% to 11% in margin. If you look at Q3 of FY '21, I think we would be probably broadly in that range even in Q4 of FY '21. So clearly, with the uptick of volume and with the margin expansions based on the few things I had mentioned, I do expect margins to bounce back in a similar level going forward.

Surely [ improve ] higher now because this new backward integration coming through for us, right?

You are correct, but also there has been some incremental expenses, which will be towards engineering resources deployment because of certain order books and technological shifts. So the incremental revenue flow and the corresponding margins from those businesses or those investments for the future will only come not in a quarter or 2 quarters, but over the next 1 or 2 years.

Yes, yes. I was talking about 1 or 2 years only, not over the next quarter. So looking at next quarter.

From that perspective, yes. Surely, we should be looking at upwards of those margins. And I always maintained that our endeavor is to get towards more 12% to 13% EBITDA for this company.

And lastly, before I join the queue, if I look at the mould sales number, it's hardly INR 30 crores, INR 31 crores in the 9 months. And generally, this is something which maybe have some indication in towards what kind of development or model or maybe the new orders which are being developed work on that. So -- and we used to do INR 100 crore-plus earlier. So how do you see this mould sales trending over next quarter or next year? Will there be a normalization of this and in terms of new order addition as well?

So you're absolutely right that there is about INR 100 crores on an average annual revenue of mould sales. For the next year, we expect a similar trend to continue. For the current year, however, because of the ongoing disturbances in the industry, be it the semiconductor or even the pandemic, there have been certain deferment. You will see certain sizable mould sales in quarter 4 because these have been deferred from Q3. But I think for the full year this year, we should expect somewhere around INR 70 crores to INR 75 crores of mould sales as well.

The next question is from the line of Abhishek Jain from Dolat Capital.

Sir, during this quarter, we have seen a gross margin expansion on quarter-on-quarter basis. And despite that, there is increase in the industrial base prices, and others facing out -- other companies are facing the gross margin contraction issue. So can you throw some more light on it? What is the reason of this gross margin expansion?

So you're doing -- when you say gross margin expansion, you're talking from Q3 last year to Q3 this year?

No, sir. I'm talking Q-on-Q basis.

You're talking Q2 to Q3?

Yes, yes.

Yes, okay. So Q2 to Q3, few points here. I think number one, as I had mentioned, the raw material consumption has gone down by a little over 1%, which has added or expanded the contribution margin. . Also, the significant increase has been on the manpower cost. I think if you see from an absolute amount, it's gone up by about 5% on a quarter-to-quarter basis, INR 60 crores to INR 63 crores. This, as I mentioned, even if I were to compare the manpower cost on an annual basis, it's gone up by roughly about 10% in absolute amount. So this is largely on account of multiple things. If I compare year-on-year, it is largely because of the appraisals of the employees, which was -- which came into effect. Also, because in the last year, there were no operators. Also, if I look at the successive quarters, as I mentioned, there has been some incremental increase in the R&D and engineering resources and this is largely to take care of [ each ] from order book which the company enjoys, which has to be delivered over 2 years in terms of the whole engineering and product development cycles. So for those reasons, there has been some incremental expenses on the R&D part. And also there is quarter 3 traditionally the Diwali expenses, which weren't there in Q2. So if I were to successively compare the quarters, there is an add-on onetime Diwali expense, which is always budgeted for. The manpower part, that's the primary season. Apart from that, the other expenses are more or less in line, rather they have slightly improved on the successive quarter. And hence, we were able to maintain a similar EBITDA on a successful quarter basis.

So sir, can we expect that employee expenses will go up further because of this commissioning of Bawal plant?

The Bawal plant will not have anything significant to do with the manpower cost. But as I had mentioned and have been talked about, the voluntary separation scheme will definitely give the company, over a next year and even going forward, a definite improvement in the manpower cost. So that is one reason why this strategic action had been taken -- undertaken. So going forward, I do expect the manpower cost as a percentage to sales definitely easing out.

Okay. Sir, as the semiconductor shortage issue is easing up and a few OEMs are giving their positive outlook like the [indiscernible] production number has gone up, so what is the outlook for the fourth quarter for your revenue and the margin side?

So from a revenue point of view, we do expect almost maybe a 15% further growth of revenue from Q3 to Q4. And this is largely in line with what the industry is also expecting because, as you rightly said, the semiconductor shortage is easing out. So that is the kind of revenue expectation we are expecting.

Also just wanted to add here that with the semiconductor shortages easing out, the customers are also having much more confidence on their launches as well as basically ramp-up of the launches. And in this year, I mean as you have seen, especially for our model mix where the launch is being delayed and we are hopeful that now with the semiconductor easing out because you know the lighting is very, very closely associated with new model mix in Europe. So we're also very confident that this would actually give us a good tailwind once for semiconductors eases out.

So most probably that from FY '23, the mould revenue will increase significantly because of these launches?

The mould revenue, as I said, you're talking about tooling revenue?

Yes, yes.

Yes. I think, of course, I mean the tooling revenue, we expect to basically book it on time. However, I think, for us, it's mainly on the utilization of the new investments, what we have done for some new launches, which had been kind of delayed at almost 6 months due to this whole semiconductor and variability of not able to have seasoned supply chain. So I think these 2, 3 customers, especially MG, Mahindra & Mahindra, we are very bullish on. They'll give you good revenues going forward next year.

And my last question is related with the HVAC panel. So when you are going to start production? And what is your revenue target for FY '23? .

HVAC panel, we will get into SOP approximately in FY '24. Right now, we have only got one OEM for certain new models. And the revenue visibility, at least for FY '24, would be maybe, give or take, INR 60 crores to INR 70 crores.

Okay. And how much CapEx you have done for this?

Right now, we have not any -- incurred any CapEx because the model is in FY '24. But next year, we will probably be incurring some payback from getting ready for FY '24 SOP.

So whatever the CapEx you have done in the last 9 months and you're targeting around INR 200 crores kind of the CapEx for the full year, that is only for the PCB plant?

So in the full year this year, we will end up probably doing a CapEx of about INR 125 crores to INR 130 crores, out of which, majority of it or almost INR 75 crores would be on account of the Gujarat facility, which will be capitalized in quarter 4. The electronic facility, only about INR 30 crores will be done in this year. And you're absolutely right, the initial outlay of CapEx for the current year was about INR 170 crores to INR 180 crores, INR 50 crores of that CapEx on account of electronics, land and building, will be -- is being deferred to next financial year.

So after this Gujarat plant, how much would be that total capacity? And what would be the peak revenue from this all CapEx?

Post this brownfield expansion in Gujarat, the total gross block or the total investment in Gujarat would be close to about INR 250 crores. And from a capacity utilization or from an order book, we should be able to get at a peak revenue of about INR 600 crores a year. Currently, we are already clocking revenues to the extent of INR 400 crores a year in Gujarat. And the future order book, because of which we have invested this additional in the brownfield, should take up that order growth to INR 600 crores only from Gujarat by itself.

So incremental revenue would be the INR 200 crores, right?

That's correct.

[Operator Instructions] The next question is from the line of Sanjay Shah from KSA Securities.

Sir, when I'm talking to Mr. Deepak Jain, I really expect something which we must know about the auto industry planning ahead and what differently are Lumax trying to do. We have done a remarkable thing on achieving on LED side and then moving towards that electronic, reducing the cost, adding the capacity. And now even we are talking about the adoption of new technology like AFS and ADB. So can you throw us that what we are doing as Lumax Industries for 3, 4 years from now? And do we see any material change happening in there's a change in adoption of this new technology on our growth side?

So thank you, Sanjay, by all this for your kind comments. So I'll just try and take it up. In terms of the industry, I think lighting product, as you know, has already seen a very, very strong shift. I think because of the downturn, it had kind of paused the adoption. But given basically this whole advent of EV changing 2-wheelers even now pass cars, CV segment, [indiscernible] segment, we see that the LED penetration will continue. I think the company has been pretty proactive in actually spending quite considerable resources, both in terms of capacity expansion as well as on engineering expansion, and try and get basically skill ready for actually delivering quality or defect-free products to basically our customers. I think it's been enormous effort on our part, and we've actually proactively shown it. What we're actually hopeful is that in the next 2 years or probably now with the whole, I would say, corona probably coming in at the tail end, certain supply chain issues easing out, we are expecting that the next 2 years, 3 years to be bullish in terms of even the organic growth, organic numbers and hopefully the segments also, which have not probably performed. Although they may be muted, their technology adoption on lighting continues to stay strong. And with that, I think we should be able to penetrate and get market share. Happy to say that over the last 2 years, we've also added customers to [indiscernible], which is basically like in 2-wheelers, TVS, we'd probably trying to get in entry. And also, I mean you say try and get certain baskets on the EV players as well, recently we did with Matter. I also -- one strong intent on fast cars would be to continue to focus on our key customers, be it Tata, be it Maruti Suzuki. And especially, I mean, say, our main customer, when they launch their EV products, we expect that they would be on a probably high volume game and we expect that business to be with us. If that happens, I think probably from a very low penetration, I would say, EV revenue sales, we probably can very quickly ramp up onto a higher penetration in EV revenue sales because we see that at least the legacy players or established players may have a much more better capacity to ramp up. So I think as of now, I mean, we are focusing on, again, financial prudence. This year has been extremely tough, although, I mean, say, you would see most of the peers, they have had a very steep escalation on raw material prices. Because of these initiatives before, we have been at least able to keep our raw material margins or RMC probably in line check. We have proactively also done some DSS. We are proactively down on engineering costs. You've probably seen that because the revenues have not put in, but our cost structures have probably -- especially on the manufacturing increased; manpower costs, the costs have gone up. But we at least expect in the forthcoming years it would ease out as and when the growth also comes back. The company is pretty much aligned because we have about close to 75% of the CapEx utilization. So in current way, we can actually bump it up to about INR 2,000 crores plus the revenues stream. And if that happens, I mean, say, you see the ease of cost structures happening as well. So we'd be happy to give any other specific focused questions. But I think in a generic way, this is where our game plan is for this market and remain as the market leader in lighting.

It was really helpful. You explained it very well, sir. Only the point left out was regarding adaptability of the new technology. How it has been adopted world across this technology? And how fast do you think they will come to our market?

So the PLI scheme, as you've seen, is lighting is not part of the PLI scheme. And probably, I mean, say, we will -- and hoping that maybe the next list going forward may take -- because the lighting does involve a lot of import. I think the other technology, the intent is to first be engineering-ly self-reliant. We will continue to track trends, but I think India market is unique, very price sensitive. So it's not just a copy/cut-paste on what global technology is and we just launched it in India. . Stanley Electric, we're almost going to complete almost 40 years of our relationship and we enjoy a very good relationship and open relationship. So we use their leverage on at least technologies or tracking technologies and presenting it to our customers in both affordability and what concern. I think going forward, we will probably see more and more penetration of LEDs as well as on headlamps, especially on fast cars, these adaptive lighting technologies. Also, I think lighting technologies are changing very rapidly on connected vehicles. And I think this is something, which India still needs to look at. So I think multiple players, but we are with all our customers trying to present technology road maps and then seeing what is the best way to adopt and localize to create value for our customers here.

[Operator Instructions] The next question is from the line of [ Manan Mehta ] from [ MM Securities ].

Sir, I have 2 questions. One is, how is the relationship developing with TVS? Are we further -- are they declining their reliance on China? And what kind of orders do we expect for them in the future?

I think the TVS relationship, as you see, has been very recently been established. I'm happy to say that TVS actually comes in now at #7 customer for basically Lumax. And that's what I think we would like to -- #6 actually now. And now we would like to basically continue to basically do it. And this quarter, we actually blocked about INR 11 crores of sales for basically Q3 '21-'22. I think from a TVS perspective, for the 9 months, we have actually done close to around about INR 33 crores and it's a 125% jump from if I compare it with 9 months of last year. We still have a low penetration with TVS. And with basically given the relationship, we would like to continue to grow that. So that's -- we're bullish on TVS. That's number one. Number two, I think if I look at it from a China point of view, I think we continue to have from a China -- there are 2 ways to look at it. One, we are sourcing from China. So some of our components do come in from China; as well as, I think, given the electronic capability of China, we just cannot isolate them. You know that the company about almost 5 years ago established an office in Taiwan. That was fundamentally for electronic sourcing as well as project management. Also, I mean, in China, Stanley, our partners, have got quite well-established lines as well as the good presence. So we leverage China wherever we can. But we do see a good kind of sourcing coming in from China to continue. Was that the 2 questions you had?

Yes, sir. Just one more. Thanks for that elaborate answer. So just one more, is that -- we have discussed about some office in Czech Republic regarding our technology and R&D unit. Sir, if you can throw some light on that also and what are the plans for that unit?

Yes. So it's not a unit. It was mainly, you're right, the Czech office was mainly for designing. We have already added resources in our Czech office. This would help us to nurture and secure orders from Indian players. Hopefully, in the next year, we can probably give you some further announcements. We are already engaged with some new players to penetrate using this Czech office in India, OEMs as well as to get the technology-driven adoptions from basically Czech. So our intent is to basically wrap up. You already got about 9 engineers there. The intent is to probably ramp up to about 15 to 20 engineers there.

[Operator Instructions] The next question is from the line of [ Priyanka Shah ] from [ Seed Securities ].

I have 2 questions. On export front, what is the development, if you can help to explain those lines?

Okay. And what's the second question, ma'am?

Okay. What is the expectation on raw material prices and semiconductor shortage scenario for quarter 4 and going forward?

Okay. On the exports, I think in 9 months, you've actually talked about INR 25 crores, which is about just 2% of the revenue. We are largely right now focused on the domestic OEMs, but we will continue to explore opportunities as and when the customers require for the export sales. Our export sales also are largely on to the OEM side. In terms of the raw materials, I mean you've seen steep escalations on raw material prices, electronic components, even on plastics. But as Anmol had also explained, we had back-end contractual obligations with our customers, which has helped us to negotiate with them, and it's a rolling kind of a negotiation which goes in with 3 to 6 months kind of time line. We are seeing easing of basically raw material commodity prices. But again, it will be very soon to say because there is still a lot of disruption happening in a global supply chain level. So we basically are maybe inventorizing certain raw materials more so that we are basically getting the benefit, and our purchasing departments are doing the tracking of the same.

The next question is from the line of Ashutosh Tiwari from Equirus Securities.

So what would the CapEx for next year, including the INR 50 crore deferment to '21?

CapEx for next year would be, give or take, about INR 100 crores or so. And other than that, as I mentioned, bulk of it or around INR 50 crores would be the deferment of the land and building of the electronic facility, which was envisaged in the current year, but will now be pushed to the next financial year. And apart from that, there would be regular kind of CapEx to the tune of about another INR 50 crores to INR 60 crores. So give or take, INR 100 crores ballpark in terms of the capitalization in the books for FY '23.

And how much you said was the 9-months CapEx?

So in the 9 months, right now, we have done INR 23 crores of capitalization as CapEx in the books. And we're expecting close to maybe about another INR 25 crores to INR 30 crores in Q -- sorry, INR 30 crores in the month of January by itself has already been done. And yes, so for the full year, as I mentioned, we are looking at about INR 125 crores to INR 130 crores. So in quarter 4 by itself, we will be doing about INR 100 crores capitalization.

So this is capitalization or investment, total investment in...

Capitalization. I'm not talking about cash flow, I'm talking about capitalization.

So how much cash flow is there already there in the 9 months?

So in terms of cash flow, on account of both electronics facility and the Gujarat expansion, around INR 115 crores have been incurred up to 9 months, which will be subsequently capitalized in Q4 and some portion is deferred to be in next year.

Okay. So roughly maybe INR 15 crores will happen in Q4 in terms of cash out, sir?

So there would not be any immediate cash outflow in terms of CapEx in Q2.

Okay. Got it. And what are the debt number as of December?

We are adding debt of INR 81 crores long-term debt, which will convert around 0.2 in tax equity ratio. And that is around...

What did you say?

INR 81 crores, so around 0.20 of debt-equity ratio and we have taken largely for the Sanand expansion plan. So what Ankit has told about INR 115 crores cash outflow, out of that, almost around this debt has been taken.

Okay. And what is short-term debt?

Short-term debt is almost around INR 320 crores, working capital limit.

Is it fully utilized or...

No. Not all. Whatever the limit essentially is not fully -- but INR 320 crores, I'm talking about utilized, the [ financing ] is higher.

Okay. And lastly, we talked about M&M being a driver for growth next year. So which are the key models for us in M&M?

So in Mahindra & Mahindra, I mean, say, the Z101, which is probably still to be launched. It's been actually delayed. I think those are the 2 basically models which we can see it for next year. Of course, that means that the company has already secured orders for another 3 platforms from Mahindra & Mahindra going forward.

[Operator Instructions] The next question is from the line of Abhishek Jain from Dolat Capital.

Sir, can you throw some more light on SL Lumax performance in 9 months FY '22 in terms of the revenue, EBITDA impact?

So SL Lumax for 9 months, the turnover was around INR 1,450 crores with EBITDA of 4.6% and the PAT of 1.3%.

And what is the outlook ahead for FY '23?

Outlook, as earlier also mentioned, I think outlook for Q4 seems to be, sales-wise, they will achieve, but as because we are not actively involved in that because of the...

Currently, I mean, we don't have an outlook for the next year. I think, as you know, it's basically dependent on the Korean customer, single customer. So it's actually kind of mirror images the revenue side [ that Hyundai ] is projecting.

Okay, sir. And sir, what is the share of business you have with a different OEM kind of 4-wheeler side?

Sorry, could you repeat the question?

What is the share of business with the different OEMs in the 4-wheeler side?

For the 4-wheeler side, okay. So we have basically the share of business with basically Maruti. Again, it's different on headlamp and taillamp, but you could say that Maruti Suzuki would be close to around about 45%. For basically Mahindra & Mahindra, we would be close to around about 65%. And for Tata Motors, we would be around about 30%.

Okay. And then in 2-wheeler side, sir?

Two-wheeler side, at Hero, we would be around about 45%. And for HMSI, we would be around about 35%. Bajaj is higher, but we don't do it from the factory.

Okay. Our next question is related with the raw material prices. So we have seen that gas pricing has gone up significantly. So just wanted to know how the range going ahead as that -- as the oil and gas price is going up, so most probably that it will continue to be strong. So can you throw some light on this part?

As I said, I mean, say -- as I said before, I think we have seen hyperinflation. It's not -- raw material prices going up, coming down has been a phenomena with the auto industry for always since inception. However, as last 2 years because the supply chain disruption as well as due to a kind of a misallocation on the supply and demand side, I think the auto sector has seen hyperinflation in the market. And obviously, this is true for our company. It has also translated into electronic components getting very, very high as well as on the plastic side. You're right in probably noticing that the oil prices also have had a very strong base, has actually gone up. We see that, that remains a challenge of basically the commodity prices. Volatility will remain a challenge going forward. But again, we're quite confident that with our back-to-back rate which we would be able to at least try and negotiate with our customers and pass it on. And there is a lead or lag of between 3 to 6 months.

Okay. So what is your current import content? And what would be the import content after the commissioning of this power plant?

I think it's mainly on to the lighting electronics perspective. I think if I look at the current import, we are basically having a total 17% to 18% is there on that. But we just -- this means that the Bawal is not a part of localization. The Bawal will not add any significant change to our import localization part. The Bawal electronics facility was more from an outsourcing to insourcing. The outsourcing was also done locally only.

The next question is from the line of Apurva Mehta from A M Investments.

Yes. Just wanted to ask, are we having any new orders from this electric new scooter like Ola or [indiscernible], all these new electric 2-wheelers? Are we not going for such type of orders? Or we would stay out from this new age companies and stick to the old companies?

Apurva, this is Anmol. So we are definitely in dialogue and discussions with these, I would say, new-age customers. We have recently announced that there has been an order win from Matter motor, which is also an electric 2-wheeler manufacturer. Regarding Ola, we are in discussions with them. We have not yet concluded anything, but we are very hopeful that in the times to come, we should also have them as one of our customers. We are also engaged in similar discussions with other OEMs as well, other 2-wheeler -- electric 2-wheeler makers. So we are definitely engaged and we do expect going forward, maybe in FY '23, FY '24 onwards, when the real EV transformation really kicks in, in the volumes, we will also start seeing a significant shift in our overall revenue coming from the EV side.

So then I was looking to our company. Last 4 years, we have invested a lot on technology, capacity expansion kind of thing, close to around INR 550 crores to INR 600 crores. But it has not translated into a major revenue stream kind of thing. So there are various reasons. I know the industry was soft and post that, corona was there. But materially, when can we see some kind of headwinds to our company when the normalization happens? And what kind of revenue target is there for next year also?

So coming to the revenue side, I think, obviously, as you know, the industry has been subdued in the current year and even in the last year. You are absolutely right, certain investments were envisaged for certain new models, for certain backward integration. Some of the new models have been deferred, case in point was the Mahindra Z101. But nevertheless, I think in quarter 4, as I mentioned, we are looking at an incremental revenue of about, give or take, 15% compared to Q3. And over next year, I would say that we should further add about close to 20%-plus in terms of the revenue, 20% to 25%. So considering those numbers, I think next year, we should be inching closer to a 90% capacity utilization of maybe, give or take, a revenue of around the ballpark figure of 12 -- INR 2,000 crores. As I said, most of our expansion -- capacity expansion investments have been done. Next year, we will just be doing mostly on account of the land and building on the electronics. But I think, really, the revenue game changer, and I'm saying 20%, 25% is fine, but I think some of the significant strategic order wins, which we expect in FY '23 will get into production in FY '24. So I think from FY '24 onwards, you should start seeing good amount of uptake in our top line and reflecting the similar trend in our bottom line as well. But FY '23, I think I would -- you should be looking at a 20% to 25% upswing in the revenue numbers. And obviously, correspondingly, it will add to the bottom line as well. I think the endeavor on the margins, as I mentioned, in the short term would be to bounce back to where we were in Q3 and Q4 of last financial year, which was roughly around 10.5% to 11% EBITDA.

And when we are telling that we would reach to 90% capacity next year by next onward, so we would do more CapEx or there will be only brownfield expansion and there will be lower CapEx for the next expansion?

So for the next financial year, we do not foresee any significant CapEx on capacity. It will be pretty much brownfield expansions. And again, please, I would like to qualify here that sometimes what happens is that there are regional shifts in the production volume of the OEM, and that's because of the sensitivity of logistics to our products. It entails partial capacity enhancement in certain regions because most of our machines don't necessarily can be just -- they're not plug and play where they can just be taken out of one plant and moved to the other. So because of that, there might be some very nominal incremental CapEx required, but nothing significant. Greenfield, I personally think that somewhere in FY '24, we will be definitely requiring additional capacities in putting up a greenfield site. The discussions of that will probably be underway in FY '23 and we will probably seek the regulatory Board approvals to probably get into a greenfield expansion for FY '24.

And on the LED side, we have -- this quarter, we have been close to 31%, which is far lower than our expectations and maybe your expectations also. So the journey of LED moving towards this 40%, 45%, when can we see this happening because we were talking since long that we should be at 50%, 50% kind of thing. But still that it's not being seen. When -- so are we seeing any new SOPs coming, which are only LED kind of things and that will drive us towards the journey of 50% kind of LED component -- LED lighting? So can you throw some light on that?

So absolutely, I think the market is definitely shifting towards LED. If I were to look in the last 3 years, the LED penetration has gone up from 25% to roughly around 35%. So it added about 10% contribution only on the LED part. And in the last 3 years also, I think the number of model launches have been partially restricted. I think going forward, we are seeing a very strong traction in the LED requirement, both on passenger cars as well as on the 2-wheeler side. I would like to, again, just clarify that when we talk about LED, it's not that the complete lamp is of LED. There are certain LED elements to the lamp and that's what qualifies it as being LED lamp. But I think that clearly, the market is shifting towards it. And I would give you reasonably that over the next 2 to 3 years, we should probably look at about a 50-50 kind of a ratio on LED versus the conventional contribution. By FY '24 is a reasonable time period, I would say, where you should start seeing a 50-50 LED contribution.

Great. So that will also help us to inch up the margin, that is -- that we can think of it that our margin should inch up towards...

Sure, sure. It depends case to case. I mean it definitely will add to the revenue because there is a plus delta element on pricing and realization per [indiscernible]. In terms of margins, one can generalize because there might be high import content on certain lamps because of certain technological design and certain proprietary rights. But it's fair to say that the margins will surely be maintained, if not further expanded because of the LED.

And the last question on the competition, how do you see the competition because a lot of players are there now on the lighting side also and everybody is having this LED kind of thing, which we were thinking that we were the pioneer and the technology was we were far ahead. So how do you see the competitive edge in next 1, 2 years kind of thing? And is this -- is the competition putting some pressure on the margins? Or is that not the case?

It's Deepak. I think the competition is always welcome. You're right, I mean, say, the competition will continue to intensify. Lighting remains to be a free product going forward. But we are very bullish that as we said with Stanley's cooperation and given what the company has invested over the last 2 years in basically building up competencies and capacities, we should be able to at least maintain our market leadership position. There is also competition, which cater specifically to one market segment. However, I think from our perspective, Lumax, we see opportunities there to penetrate into certain customers as well as certain market segments which were not there before. Case in point being the agri segment, also in commercial vehicle segment because as and when the segment starts shifting more and more towards LEDs, they probably see Lumax as then a viable supplier, which was not there in terms of the old tech kind of a situation. So I think we do want to basically see ourselves, again, penetrating in different segments as well. But yes, you're right, I mean competition will intensify and we are obviously having to keep close watch to what the competitive landscape is and how it's changing.

And just lastly is that when we move towards the LED at a faster pace, so can we see growth also of our top line turnover going at 20%, 25% constantly for next 2, 3 years kind of thing?

Absolutely, and I think that you see. I mean just let's look at data before. I mean '17, '18, our basically LED was only 25%, non-LED was 75%. And more so, the 2-wheeler industry was only having a 20% penetration LED. Now 2-wheelers are kind of closely reached to 50-50 already on basically in a 4-year time frame. And given the time, the 2 years was basically all the corona years, all that. And I think since then, they have launched and so -- so LED is obviously adoption. Gives us a much faster uptick on the revenue, much better at least on the industry organic growth. And of course, as Anmol said, I think we would like to basically maintain the margins on the LED, so probably get an absolute number, better profit.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Deepak Jain for closing comments.

So I'd like to thank everyone for joining on the call. I would like to say that we remain confident on the growing prospects of India and the automotive sector. Besides the challenging environment, I think the company is in good stead for future-ready opportunities of growth. . I hope we've been able to respond to your queries adequately. For further information, request you to please get in touch with SGA investor relations advisers. Stay safe and healthy. Goodbye.

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