Minda Corporation Limited (MINDACORP) Earnings Call Transcript & Summary

Thank you. Good evening, ladies and gentlemen. I wish you and your family best of health in these challenging times. And I thank you for joining the call in such a short notice of time. In order to protect the shareholders' value, the Board of Minda Corporation today took a decision not to further support Minda KTSN. Minda Corporation Limited took a conscious call to use the capital efficiency -- efficiently to generate superior return and create wealth for our shareholders. Thereafter, Minda KTSN has filed for insolvency today. We expect a positive outcome for all our stakeholders in the long run despite the insolvency filing. We are focusing on channelizing our precious capital towards tremendous business opportunities of profitable growth, with the view of enhancing EBITDA margin and ROCE. This move is expected to enhance Minda Corporation's EBITDA by 2% and ROCE by 5%. This company and its promoter do not shy away from taking hard calls and continuously focus on value creation. Minda Corporation has gained expertise in value-added plastic technology such as kinematics and lightweighting in association with design and development institution in Germany. In India, we have already started to benefit from that by making inroads into different products and business segments with large car maker, SUV maker and largest Indian manufacturer of India. The corporation is future-ready and well positioned to address the technological shift due to change in customer requirements, new trends and government regulation. We are focusing on being a system solution provider to our esteemed customers. We are investing in new technologies, such as lightweighting, electronics and EV-related products. Our presence in chosen products and customer segments will help us in sustainable profitable growth, like we have steadily invested in new technologies and have set up state-of-the-art R&D facilities in Pune. We have one business of Bajaj Chetak for 2-wheeler EV system solution; growth in wiring harness, instrument clusters, sensors due to transition from BS-IV to BS-VI; strong and growing export order book of die casting products. Minda Corporation remains committed to its customer to provide best-in-class leading quality of products through sustainable innovation. Now I will request Mr. Laxman to give you more detail on this. Laxman, over to you, please.

Thank you, Mr. Minda, for so succinctly covering the entire facts. And good evening, ladies and gentlemen, and thank you for dialing in. I'd just like to add a couple of points to what Mr. Minda mentioned. Just to give you a quick summary, the sales value roughly of Minda KTSN has been less than 20% of our overall sales, and that's about EUR 70-odd million of sales with about -- a negative PAT of about EUR 45 million. I'd like to share with you that even if we had a little bit of substantial investments for the next 2 years, there did not seem to be any profitable business case going forward. And therefore, there doesn't seem to be light at the end of the tunnel. And our efforts to find solutions included renegotiating with customers, finding a strategic buyer, et cetera, which did not bear fruit. Looking at the positive side, if you see that on an average, just the company -- the subsidiary was losing about EUR 5 million per year, this cash out will be stopped and this would strengthen the profitability and financials of the parent company, Minda Corporation. As indicated by the Chairman, EBITDA and ROCE are expected to improve. Coming to the point of our investment in this company, the book, write-off of the overall investments and some of our commitments is expected to be in the region of about INR 295 crores in the consolidated books of Minda Corporation. However, if you look at our current net worth, which is roughly more than INR 1,200 crores, you will notice that the balance sheet is sufficiently strong to absorb this one-time event. So against this one-time event, we will be saving about -- minimum around INR 40-plus crores of cash every year because these losses will not come. And therefore, future investments into this by way of cash is also stopped, which is a saving. The key point is the above action has removed the uncertainty of loss-making entity for us and, therefore,, brought greater stability and predictability to our overall financials of Minda Corporation. And since there's no further drag on the financials, we are expecting a positive outcome from rating agencies, banks and investors. In fact, we had earlier also communicated that if we'll try best to stabilize Minda KTSN, otherwise, we will not quite shy from taking strategic decisions, and investors have been alluding to this many a time. Just to put a last point that today, Minda Corporation India is standing on an extremely strong balance sheet, as I mentioned, INR 1,200-plus crores of net worth. More importantly, the debt that we have on our books and the hard cash we have in FDs are almost equal into each other, to the extent saying that we are very low in net leverage. So that's a quick summary of points that I had to add over and above what Mr. Minda mentioned. And I'd like to then now quickly open the floor for questions that you may have. Over to you.

[Operator Instructions] The first question is from the line of Ronak Sarda from Systematix.

I hope you're all safe. The first question, Laxman, so in terms of payments now, I mean -- or in terms of the impact here, so we'll have to take the entire write-off on the investments? And do we have to pay anything over and above this during the bankruptcy proceedings?

So my answer to this question is the INR 295 crore number is a book write-off. It does have some element of some of the amounts that we would have guaranteed by way of some obligations. That is about INR 80-odd crores, and that is a cash outflow. The rest of it is all a book entry, noncash.

Sorry, you said, INR 80 crores?

8-0.

Okay. So this will have to be paid over and above and -- in the next few months, right?

Yes. But this INR 295 crores includes the INR 80 crores. So roughly, the consolidated entity will take a loss of 295 -- roughly INR 295 crores in the books, but the cash outflow in case some of the obligations that we have committed from Minda Corporation in our calculation should be roughly about INR 80 crores, and that will be the cash outflow.

Okay. And is the net payment included...

Just to highlight you, here -- just to highlight you today, our cash balance as we stand today is in excess of INR 400 crores.

Right. Right. But this is the net payment. So there's nothing which will come into the company from KTSN for whatever the payables? Or anything which are outstanding right now?

No. This is the obligation we have committed. So whenever this comes, we will honor it, of course.

Okay. Sure. And in terms of technology for the kinds of analytic products or the plastic products, so in terms of technology, we have absorbed the entire technology, and we can start manufacturing. Are we already manufacturing for few clients?

So we have made very good progress there, and I would probably request Mr. Minda to respond to that question. And if required, if he deems fit, I can add. Over to you, Mr. Minda.

Mr. Minda, can you hear us? Hello?

Hello? So, Ronak?

Yes.

Hello?

Yes, I can hear you. Please.

Ronak, can you still hear me?

Yes, he does.

Yes, I can hear you.

[Foreign Language] [Technical Difficulty]

Mr. Ronak, I request you to please stay connected while we reconnect the speakers.

Sure.

Ladies and gentlemen, we have the line for the speakers connected. Over to you, Mr. Laxman.

So Ronak, you had asked me about the technology absorption with respect to the plastic products, with respect to how we have absorbed that in India, Mr. Minda, are you on the line? So Ronak, while Mr. Minda joins in, let me...

Yes. I have joined. Please -- yes, I have joined.

Okay. Yes, Mr. Minda, the question was, have we absorbed the technology with respect to plastic products into India well and what is the status? So I said if Mr. Minda is on the line, then it will be good if you can answer that question.

Yes, we have -- whatever the business we have got awarded, we have -- already competent enough to provide that technology. Over and above of that, we have also associated that with the design and development institute in Germany, which has already supported us in the past. So that area is very well taken cared to continuity -- to continue for the technology of the product, which is transferred here.

Okay. Sure. And Laxman, just one last, Mr. Minda. This will be effective FY '20? Or this would -- beginning of '21? How will this be incorporated in the books?

So while we have to consult our auditors and take export opinion, the way it appears is that it is an event that has happened after the closing of accounts but before the Board meeting, which is adopting the accounts. So it will most likely be in FY '20.

Okay. Great. So then I'll wait for the balance sheet there, if you get -- if you have some financial data on the balance sheet, if you can just share? So how much of our gross -- how much was the gross suggested for KTSN? And the net working capital, do you have those numbers handy?

I will share it with you. But effectively, we -- for us, it is more an investment in our books, Ronak. So that will obviously be...

On the consolidated level, I mean.

On the consolidated -- that is it. And our results will be out before the end of this month.

The next question is from the line of Pritesh Chheda from Lucky Investment.

Congratulations toward this development move for the minority shareholders. Sir, just one clarification. This doesn't include the Poland operations, right? It's just the German and the Czech Republic operations which gets closed?

So it includes the entire Minda KTSN because the company which has been -- has filed insolvency with the parent company. So all the other companies were subsidiaries of this company. And when I spoke about the numbers, I meant consolidated KTSN numbers, Pritesh.

So this includes all the 3 operations, German, Czech and Poland?

And Mexico.

And Mexico. Okay. And this INR 80 crore outflow, whenever it happens, it means the INR 400 crore cash that we had, hypothetically, gets reduced by this INR 80 crores whenever you have to pay out, right, that's how we have to read it?

Technically, either the INR 400 crore cash gets reduced by INR 80 crore or my leverage increases by INR 80 crore and I use that. I would rather leverage and use the INR 80 crore because this is the INR 400 crore what -- just that we would like to maintain. We have current year spendings as well, yes.

Okay. Can I take a question on the overall operations?

In terms of operations, yes. In terms of financials, while we are absolutely in the middle of our preparation of accounts, I will not be able to respond much on the financials for FY '20 application. But please go ahead on operations, if you'd like.

No, I just have one question. So we -- so for FY '21, and that's not for FY '20, assuming that, let's say, Minda KTSN was there for simplicity of calculation, considering the wiring harness content per vehicle increase that we have, which is substantial for this year, and corresponding volume drops so far expected out of the 2-wheeler, 4-wheeler and the EV market, is it fair to assume that you would still directionally hold on to your top line number for FY '21? Is that adequately right? Or there is some error in this arithmetic?

It's a -- firstly, it is a very good question. And you're asking me if can one offset the other? One is a certainty and the second is dependent on the market conditions. However, we are extremely well positioned in the wiring harness business to increase our value per piece, which is our -- increase our product value by more than double. So -- but however, the question remains open, whether the doubling of my kit value will offset for the taking away of the sales. But the more important question is how am I protecting EBITDA and the bottom line as well as de-risking my balance sheet. And these are the three things that we have achieved in terms of protecting EBITDA and bottom line, de-risking the balance sheet and strengthening the leverage. These are the three things that we have done.

Okay. Yes, that was my question. But directionally, it makes sense, right, considering whatever 15%, 20% volume drop that one is expecting in the auto as of now. And on the corresponding whatever value or SOP increase that we have on wiring harness, the arithmetic is -- if you do the arithmetic directionally is what I am hinting at, right?

If you -- yes, if you do it the way you're explaining, I would tend to agree with that thought process. However, how much is the volume going to be here in 2021 is anybody's guess. And that's where we'll be grappling with.

Yes. As of now, agree. As of now, whatever 15%, 20% volume drop that one is expecting, it automatically matches the SOP increase as of now.

I hope so. I don't know right now.

Yes. Okay. Okay, yes. This also -- and what is the CapEx for FY '21?

So we continue to invest well in technology, in new equipment and in terms of boosting our capability for exports. All this put together, our CapEx as of today is planned at INR 140 crores. And in most likelihood, we will do that CapEx, but it will be very, very focused on customer orders, customer new models and customer confirmed business. So we will be calculating how to spend the assets even before we install it on the shop floor.

And we are matching this, our cash outflow, in CapEx, depending upon the customer's new launches. It's the -- so far, customer has not said any delays in those launches. So -- but we are very much aligned with that.

And now your reported ROCE will look closer to 18%, 20% after the transaction?

That is correct.

It is your stand-alone ROCE, basically?

That is correct.

The next question is from the line of Mayur Milak from BOB Capital Markets.

So just some basic numbers. So we are saying that our total investment is about INR 300 crore, we were generating a revenue of about INR 600 crore and doing a loss of about INR 40 crore in the business. First of all, are these figures right?

The loss on investment of INR 290-odd crores includes money obligations as well? Yes, to that extent, it's correct. And your revenue number and...

So coming to the accounting part of it, what you also said is that the cash outflow of this INR 300 crore or INR 295 crore is typically going to be up somewhere around INR 80 crore-odd, and rest of it is only a book entry that is going to be write-off, kind of, which means I should assume that will be an impairment of asset, kind of an entry, right?

That's correct. Yes.

Right. And also to understand that because this was about 20% of your revenues, in pure mathematics, it typically takes my overall revenue for the next year down by 20%, 17% to 20%, whatever is that figure. Now how do we actually expect to make up for any of that revenue loss through local production? So what is the kind of incremental gain do you think you can achieve in maybe FY '21 and '22 through this division? Keeping everything else as is, the wiring harness business as is, all I'm trying to understand, what happens to the overall projected revenue in absolute terms?

See, in the 2020, '21, it is a very -- uncertainty there. We do not know. The customer has recently started, but we are -- we have to see each segment what is going to happen. However, the wiring harness is one area of BS-IV to BS-VI. The export in the die casting is another area, which will increase the growth potential. But otherwise, volume-wise, how much reduction is going to be there, we do not know.

Okay. And also trying to understand that when you put this up for insolvency, it also means that somebody can actually come and bid for the entire company as a business, right? So there is always a chance for recovering something out of that business? Or do you think at this point, it is a complete write-off?

So allow me to take that question. See, the point is as of now, we -- this calls for writing off the entire investment. And even otherwise, if somebody bids and takes the asset at a value, the shareholders stands last in the queue. And typically, the shareholder gets very little. So I would not recommend getting hopes on that.

Okay. Okay. And one more question about -- so we're done with this. And are we looking at anything newer in this aspect, maybe in the overseas market, in something in Europe? Or at this point, we intend to come back to basic business in India and focus with all the growth in the existing line of business?

Please, Mr. Minda.

So we shall continue to pursue inorganic growth opportunities, which are -- which has to be relevant to the group core business. And I would also like to mention that the leveling of the past and broadly pursue the growth opportunities for the shareholder value creation and more focus on profitable and growth areas.

The next question is from the line of Rajesh Kothari from AlfAccurate Advisors.

First of all, congrats for taking a bold call on the -- to ensure that there's no further deterioration on the balance sheet. I just have one question, or rather observation, is that during the last 3 years due to internal or external issues, we had one or two incidents, Furukawa and then something else, and then KTSN, and finally, write-off in the balance sheet. While, of course, it improves ROCE and also the reported profitability. But going forward, since you continue to desire for inorganic growth, how do you basically -- as an investor, we would like to have this clear guidelines from the company that whatever acquisitions you may do, what kind of a financial discipline we are going to follow? Because every acquisition by any management is always EPS accretive on face of it on day 1, but actually never happens in that way. So our request is, please, it will be great if you can explain that -- what will be the financial discipline the company will follow while making any acquisitions in the future.

I'll take that, Rajesh. I think it's a very good point. And this is something that keeps us extremely alert when we are evaluating acquisition opportunities. All of this on paper is good when you start and then -- so we have clearly put up specific boundary conditions for acquisitions. Clearly, it has to be within our core area. In financial terms, we are also clear that we are not interested in chasing insolvency cases, or in India, bankruptcy cases, we are not interested in chasing. We are good in our business. We focus clearly on how do we increase our bottom line, how do we -- what is the financial synergies that we get out of the acquisition, what is the EBITDA margins of that business and how can I make the business that I acquired into a 1 plus 1, which is greater than 2. We are very clear on financial parameters. And some of it, for example, it has to be adjacent to our business. The change has to be a growing sales. The EBITDA has to be comparable. And most importantly, in -- financially, when we make our future model, it has to be highly synergistic and value accretive.

And Rajesh, you have seen that, that is why the money, which is raised, it is still available, and we have not used that just for chasing the acquisition.

Yes. My sincere request would be to, first, continue to sit tight on that money. Because I'm sure you are aware in such a market of credit squeeze, there is a significant pressure on any company, which is debt anything higher than even probably onetime debt/equity, which is actually not that bad from a corporate perspective, but it turned out to be bad in such kind of an environment. So the markets are becoming extremely volatile, and it is a credit adverse market. And you never know such Black Swan events keep happening every 2 years, 3 years. My request would be to ensure that you remain the debt-free company, not only on net debt level but also on a gross debt level, make it 0 debt company. And then whatever acquisition you do, it should be ROE accretive from day 1. And of course, it is very hard to find such acquisition, but that's what adds value in the long term to the shareholders. Because synergies and everything, everybody talks about, but nothing happens. Most equities, say, have not delivered, and we have discussed it time and again. So I think from investors' perspective, we keep, what I would say, get kind of a feedback that company is still considering acquisition, and that's why there are many investors, they may not like such kind of an approach. Because at the end of the day, you don't know what you are going to acquire. And at that point of time, only one can comment. Was it good or bad? But a framework, that whatever acquisition you do will be ROE accretive, that kind of framework, that kind of financial discipline, guidance on that, it will be very helpful for all the stakeholders.

Point taken, Rajesh. Point well taken. Thank you.

The next question is from the line of Sunil Jain from Nirmal Bang.

My first question relates to more of the impact of this -- you may be having a common customer over there in KTSN and here. So whether this can have any impact on our existing customer in India, Indian business or anything like that?

First of all, we do not have -- only there is a Volkswagen is a common customer. Otherwise, we do not have any common customer in Germany and here. And that, too, is very, very insignificant, and the product is totally different. So I don't think any impact from that perspective.

Yes, that is good to hear. And sir, second thing about the investment we might have done while acquiring that company. And over the years, total investment, which we might have done to run this company or to revise this company in -- this INR 80 crores. Overall, how much amount we might have lost because of this?

So the total investments as well as the support we have given today stands at this 200 -- the current value in the books stands at INR 295 crores.

Okay. Plus this INR 80 crore, which we might have on that?

It includes -- it's included in the INR 80 crores. It's INR 295 crores, it includes INR 80 crores.

So we have not taken any impairment of these assets in the past?

No.

The next question is from the line of Srijan Sinha from Future Generali Life Insurance.

Laxman, I just want to ask, Minda KTSN is 100% -- it's a wholly-owned subsidiary, right? Or do we have minority investor in that as well?

No, it's a wholly-owned subsidiary.

Okay, the second thing is that...

With -- to a holding structure, of course.

Okay. Does it -- does Minda KTSN also had external debt from banks?

It has certain external debt, yes.

And any sense on the quantum of that?

So overall, that debt must have been about EUR 22 million, if I remember as of date.

So ballpark, INR 150 crores?

And -- yes, but that includes some of the debt that we have stood by.

Okay. So I mean just help me understand, on the accounting treatment. Does this debt get written off and the debt is converted into equities of the bank? How does this work?

So that is actually up to the insolvency administrator. However, all I'd like to say is there are sufficient assets in terms of net block, gross block and value in the company that has been left behind to -- very fairly compared with the small debt that the company has.

So our gross debt is in the range of about INR 500 crores. So does that reduce post this insolvency? Because that would also include the INR 150 crores of the KTSN debt, right?

Yes, it does. Yes, it does.

Okay. And our net cash, I mean, is the same, which makes us a net cash company, right? Is my understanding correct?

That is correct. Yes.

The next question is from the line of Sachin Kasera from Svan Investment.

Just one question on the cash flow. So from what I understand, there's going to be an INR 80 crores cash outflow in the current financial year as far as the remaining liability obligations towards KTSN is concerned. And you also mentioned that this year, we are looking at INR 140 crores CapEx. So without obviously getting into some specific numbers, but based on whatever numbers you have visibility right now, how comfortable you are in terms of net debt remaining at the same level? In the sense, is the company confident of generating INR 220 crores of cash flows, so that the net debt remains more or less the same or the net cash remains more or the same? Or do you think that we could see the net debt go up because of this CapEx as well as INR 80 crores cash outflow for the obligations?

So our intent will be to...

Laxman, let me. Laxman?

Sorry.

Basically, this INR 80 crores is including in the debt. And the debt will also reduce by INR 80 crores. I think there is some clarity required there.

I understand that, sir. I'm talking from a cash flow point of view, that this INR 80 crores plus is INR 140 crores, totally, we will have to pay INR 220 crores. So this INR 220 crores, will we be able to generate efficiently from the operations to be able to meet on our -- I understand we have to adjust for this INR 150 crores. After adjusting for this INR 150 crores, it will generate INR 220 crores of cash flows?

Yes. So first point is, I'll clarify what Mr. Minda also mentioned, that this INR 80 crores, today's line is debt in my books, either you replace the debt or repay by cash. So effectively, it doesn't change my net debt position at all. Okay. So that's taking care of there. And the second is the additional, what you're talking about, of CapEx of INR 140 crores. Our endeavor, of course, is to ensure that we continue to remain neutral in the current year.

Okay. Okay. Because the number of -- a little higher considering FY '21, as you know, are very abnormally -- nobody has too much clarity on how the cash flows and the numbers would look like. But I'm sure you guys would have that...

But I would still -- yes, I would still like to imagine that we should remain neutral.

Sure, sure. And secondly, now that the KTSN, which was impacting our numbers, is out of the way, is there any medium-term goal that you could leave us? Because I think that was one of the key reasons we could not very confidently give a 2- to 3-year number in terms of margins and ROCEs. I know FY '21 is abnormal, but say, maybe from a 2- to 3-year, maybe '22 or '23 perspective, what is the aspiration for EBITDA margin and ROCE for the company now?

So we continue to stick to our goal, what we mentioned in terms of greater than 20% ROCEs, and we want definitely double-digit EBITDA margin. We continue to stick to it. Of course, the current year is a little bit of a challenge. However, we will rework our numbers and come back to you. But our medium-term goal continues to remain the same.

Sure. And one -- just last question regarding acquisition. So I -- from what I understand in my previous interactions, you had been extremely careful in terms of going ahead with an acquisition, which you also alluded to that you are very, very careful on those numbers and all. And you had mentioned that one of the keys in all of that, you are not able to find targets which are meeting your parameters. So post the correction that we have seen in the market and all, are you now starting to see some proposals which are probably getting more closer to the parameter that you have set in? Or you still see a significant gap between what you're looking for and what is available?

I think the gap will always remain. We need to pick what makes more sense for us in terms of value proposition. And to answer your question directly, yes, we are looking at multiple acquisition opportunities, and most of them are always in different levels of evaluation. When something significant comes, we'll definitely share those.

No. My question is if, say, there -- your target which you really thought was value proposition for you, but it was mainly because of the gap in terms of valuations, say, 3 months back or 4 months back and you were not able to close that. So some of those targets have seen some gap flows, and that's why it may be more possible to look at them closing in the next 1, 2 quarters.

It's a moving target. So I won't be able to commit right now. It's a moving target. So our endeavor is to see where do we get value.

The next question is from the line of Jay Mehta from Edelweiss.

Sir, Chirag here. Congrats for this decision finally, you have bitten the bullet. Sir, two questions, one, first on this INR 80 crores, so what is this commitment pertains to? If we have gone for insolvency, what is this commitment pertains to the view -- which is almost similar to the -- some kind of debt that we have on this? So is it commitment towards long-term debt...

It's a past -- no, it's a past debt, et cetera, where you would have stood guarantee or backup for this debt given by a bank. So it's a past [ that we committed ]. We launched...

It is already coming under our debt. So this is just a repayment of the debt at once. That is what Laxman has explained earlier.

I understand that. But I was just trying to understand that if when you are filing for bankruptcy or insolvency, in a sense, there's no necessary liability on you, right?

Except for what you would have committed or guaranteed in the past. Yes. Except for what is committed or guaranteed in the past.

Is there a report that -- in that sense, is there is report that...

Yes, yes. Absolutely. Absolutely.

Okay. That was one. The second thing is any tax benefit that you will derive from this INR 295 crore write-off? Or I don't know if it is INR 295 crore or INR 150 crores, whatever -- [ than say INR 20 crore write-off ]. But any tax advantage that you will get in your books, or not really?

Unlikely, and we have not yet factored in, it will definitely call for a deeper study, but as of now, unlikely.

It's unlikely. And sir last thing, is the cost of repeating through, how should we look at your future strategy? Would it be more organic, focusing on small product development, diversification on that and -- which you have in any way delivering since last 1.5, 2 years? And acquisition as a strategy goes on a back burner? And second, how do you also look at joint venture as an opportunity from here on? If you can throw some light on both these aspects.

As I mentioned, you -- the company will continue to pursue inorganic growth opportunities, but it has to be relevant to the group's core business. It could be joint venture, it could be acquisition. So that is -- that can be anything. But it must be aligned with our core business, not spending at some other products. So it should be aligned.

Okay. And would that also be right that you would have spoken with your -- the OEMs to whom you supply before you -- before filing for bankruptcy? Is that right, so that your relationship don't get hampered with them? Was there any interaction over there or not really?

See, the customer is concerned about how the Spark Minda or how the Minda Corporation is secured from the cash flow to run the business from a cash flow perspective. So that situation, we are already very strong. Another is there are only very few customers, which is having this product related to interior plastics, that we are already in the communication with them. And the rest, we have to give them the assurance and tell them we are in a -- we have a good and healthy balance sheet and good cash results that we have to run the business and to support the business during this period.

The next question is from the line of Dhananjay Mishra from Sunidhi Securities.

Sir, just one last time clarification. You said EUR 2.2 million is the debt, which also include the debt for which we have given guarantee. So what is the breakup? We are seeing INR 80 crores debt is -- for INR 80 crores debt we have given guarantee and balance INR 110 crore is without guarantee. That is your commitment?

Yes. Roughly EUR 22 million -- EUR 22 million roughly, half and half.

Sorry. I didn't get you.

I said EUR 22 million roughly, half and half.

Okay. Okay. So that is why you are saying that this could be a onetime cash outflow from our book apart from this...

Yes. There is -- yes, it's a replacement of debt because the debt is already in the books [ anytime ]. The INR 80 crores, already I'm taking it as a debt in my books and my consolidation. It's just moving from one debt into the other.

Yes, that is fine. But it will come to our books, or...

It is already there. It is already there.

Okay. Okay. So in that way, there is no cash outflow, in that sense? Because our debt is anyway coming down, from INR 190 crores it is coming down to maybe INR 100 crores?

Correct.

Okay. And secondly, sir, just on Minda-Furukawa and other joint venture, what kind of investment or return we are getting? Is there any possibility to look to this joint venture? As well if they're not having good profitability in the future, can we also look at, I mean, getting out of the joint venture in the future?

No. We don't have any intent to disturb any of our joint ventures. There are -- each of them are pretty strategic in nature for us.

Sir, are we comfortable and satisfied with their performance -- recent performance?

No. Performance -- always, there is expectations to do much better. And we also see a long-term plan for those companies to do much better.

Okay, sir. And sir, incrementally, apart from this debt obligation or guarantee, is there any legal cost involved, which we are not factoring in and that may come up?

I'm not expecting any right now. We'll have to see.

The next question is from the line of Nikhil Kale from Axis Bank.

So just wanted to check, I think FY '19 annual report has some loans given by the stand-alone entity to KTSN. So just wanted to check if there is some amount there? And is it included in the write-off amount which you mentioned?

It is all included, all included.

Okay. And secondly, on the acquisition side, now with this KTSN chapter over, have we kind of also relooked at some go, no-go areas in terms of geographic regions? Because, I guess, Europe is, again, a difficult region to kind of have high profitability levels, given higher employee costs. So any relook at the strategy there? Or are we still open to make acquisitions in Europe?

Whatever the acquisition, we have to do a -- the principle is that -- what we discussed before, that the -- there has to be a reasonable -- there has to be a return. And we just -- we do not want to go just for the sake of acquisition. And it has to be matched and/or it has to be relevant to the core business.

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

Sir, just wanted to ask you that all the labor issues and the pensions are all settled in this? Or there will be any pension issues are remaining on that?

Typically in insolvency, all those risks would be [ counted ].

Okay. So we will not have any obligation regarding pension or labor issues in it?

That is all factored, obviously. I don't foresee any.

The next question is from the line of Sachin Kasera from Svan Investment.

So the numbers of KTSN that you shared, are there numbers for financial year '19 or they're for FY '20? Or they're annualized numbers over the first 9 months of FY '20?

They are roughly annualized numbers, Sachin...

Okay. And you say the -- on the -- it's particular to the PAT level, right, sir, or the PBT level?

Sorry. It's the same now.

It's the same from us. Okay. Okay. Okay. And just to -- one clarification again on this gross debt and net debt. So basically, essentially, the net -- the cash in the book remains the same, and the debt reduces by -- the gross debt reduced by INR 80 crores, right? Is that understanding correct, sir?

That's correct.

The next question is from the line of Pritesh Chheda from Lucky Investment.

Sir, just again on debt, a little bit confusion. Initially, you said there is an INR 80 crore outflow. And now the gross debt gets reduced by INR 80 crores. I am confused here.

Laxman,...

Allow me to explain...

Yes, please clarify. Please, go ahead.

Yes. See, the total overall debt in my consolidated books will come down because this entity is going out of my [ source ]. That amount may be around, say, INR 160-odd crores. The debt will come down.

INR 160 crores.

Yes. However, because I have guaranteed past loans of INR 80 crores, that will remain. Therefore, although my overall debt will come down, only INR 80 crores will remain. So therefore, of the total gross debt I have today, and if the total gross debt is, say, INR 160 crores of -- attributable to Minda KTSN, that will reduce to INR 80 crores. And that INR 80 crores, I may have to repay, which I will replace with another loan. So overall, therefore, the gross debt will go down.

So we have a choice to either to repay or to convert the debt.

That's correct, sir.

So which means at the reported level, as of now, whatever INR 600 crores or INR 700 crores of debt you are running with, that number itself comes down by INR 80 crores?

Yes.

Yes.

As of now, right?

Yes.

Okay. And second, what is the depreciation amount in this Minda KTSN consol?

Minda KTSN is just -- [ amount will not ] -- the depreciation should be a couple of million euros. Yes.

Okay. And can you -- okay. what is the net debt that we are running with?

With -- today?

Yes, consol.

So I'll tell you, the consol net debt as on 31st March provisional numbers, my stand-alone is about -- so you're talking about net debt, right?

You can give gross and -- whichever you are comfortable.

That is -- today, net is almost 0.

Net is 0.

Yes. And once this happens, it will become minus INR 80 crores, because my debt is going down by INR 80 crores.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.

Yes. I would only like to say that these are unprecedented time, and we are working doubly hard in this post-COVID-19 time to ensure that our products are simply the best. And we are aggressively pursuing cash-generating ideas so as to continue our balance sheet strong and future-ready. During the conference, I've also mentioned that group shall continue to pursue the growth opportunities, which is relevant to the group business. With this, I wish you and -- wish you and your family best of health in these challenging times. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Minda Corporation, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.