Motherson Sumi Wiring India Limited (517334) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Results Conference Call of Samvardhana Motherson International Limited and Motherson Sumi Wiring India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vivek Chaand Sehgal. Thank you, and over to you, sir.

Thank you. Good afternoon, good evening, ladies and gentlemen. I'm pleased to announce the results. I think you must have already got a copy. We did INR 16,911 crores of revenues in SAMIL quarter 4. The EBITDA is about INR 1,287 crores and quarter PAT is about INR 122 crores. Please take this under the circumstances of very tough quarter, rising costs everywhere. And yet the company has been able to mitigate challenges, an amazing job has been done by the people in containing the cost and also getting price increases. One particular thing that you must note is that -- this is a work in progress kind of a quarter because tremendous amount of costs almost on a weekly basis have gone up for some reason or the other depending upon the geography that we are looking at. And that of course, is a big challenge for us, but also the segregation of 2 companies, the costs and the legal costs and all that also have been written off in this quarter as those are the onetime expenditure. But it also tells you about the kind of opportunities that we are having. The more the headwinds, the more the opportunities to acquire companies and in the acquisitions, because we do it along with the customer, we also get the opportunity to reset the pricing and things like that. So I call it a work in progress kind a year, very challenging year. We've come back really hard, and we are confident that the coming quarters will be better, but I think you would have a lot of questions, so we'll go ahead with that. I think the MSWIL, which is Motherson Sumi Wiring India Limited has also come out with very impressive quarter 4 results. But that's because India is doing very well. With revenues of about INR 1,662 crores, which is up almost 14% and the EBITDA is up almost 21% quarter-on-quarter. So I think we can easily say that India is kind of a shining point in the whole group, along with America and some other countries. So happy to answer your questions and give it back to you. Thanks. Thank you very much.

[Operator Instructions] The first question is from the line of Kapil Singh from Nomura.

My question is related to SMP and SMR margins. What we notice is that you called out on Slide #15, the impact that has come from high labor costs and high energy prices and inflationary costs. But the impact is much larger in case of SMP than in case of SMR. So if you could give some more color as to how much is the energy costs that is there for SMP and SMR and how much cost inflation we have seen? And what are the kind of conversations we are having with customers in these unprecedented cost inflation time to pass on these costs because what I understand historically, these things have not been passed?

Thanks, Kapil. You're right. It's more pronounced in SMP because SMP has more plants in Germany and the affected area. While SMR is that much more in the nonaffected area. And while I'm not going to go into it politically, whether it's correct or wrong, but Hungary continues to take precedence. They are continuing with their contracts, while the whole EU is trying to get away from the Russian gas and things are -- so all those particular things are known to you. So yes, SMP has to bear the brunt of it more than SMR. But look, these are things that have been taken over by Vaaman. So Vaaman, can you please take this particular thing up and how you are trying to mitigate it.

Yes. Sure. So I think like [ Baba ] said most of SMP plants in the Europe are quite focused on the German side. So that's why you are seeing more impact on the energy cost over there. And definitely, these costs have been transparently shared with our customers, and we are asking them for support during these tough times because these are -- all costs that have been out of our control, including not just the energy cost, but also raw material and consequent raw material prices that, for example, we're getting from our suppliers, et cetera. So these are all being shared, and we're working out a good plan to work with the customers as to how we can be mitigated moving forward.

Vaaman, any indication or any thoughts you have on how much time it can take to pass this on. Do you think it can happen in a quarter? Or it would take 6, 9 months or a year for this to actually passed on?

There is no standard. Some customers have already got into these discussions where they are wanting to compensate. But again, the discussion is going on. And from when it happens and how much of the burden they share, et cetera. So I think all this kind of things are happening. And different customers are in different process, different kinds of this process depending on how much is inflation, et cetera. They are asking depending on their contracts, their [ logistics ] because everything is contract specific. So like I said, there we are already engaged with all of them, speaking with them, and we are in different levels of how much information exchange is currently happening.

Okay. And second question I have on...

Actually Vaaman is meeting them personally. That's how important this is for us. So he has been speaking with all the top people going and sorting out the inflations. Sorry, go back to your question, Kapil.

Okay. Look, that's very important information. We look forward to the update on the same. Yes. The second question was on the stand-alone business for MSWIL. We have reported INR 1,611 crores of revenue and 18.2%. I just wanted to understand what are the one-offs here? Are they both in top line as well as EBITDA or just EBITDA. So if you can just explain the adjustment and what is the underlying margin which we should work with on a normalized basis.

Go ahead, Kunal.

Kapil, on the stand-alone side, as you reflect on the 18.2% which is partly on account of the improved performance of all the India businesses. As Mr. Sehgal was mentioning, India has been a shining spot. And all our businesses in India have seem to have done better than the previous quarter. And the one-offs that we are seeing, if you see the Slide 13, it has a note talking about INR 65 crores of pretax income, which is one-off, which is in relation to the 9-month rental and management fees that MSWIL has paid to SAMIL for the 9-month period, which has been accrued in this quarter as this is the first quarter, which has given effect to the demerger. So on a normalized...

Where is that accounted for? Which line item?

If you see Slide 13, the note on Slide 13.

No I understand that, but I'm saying is it in revenue, is it in other operating income, where do we account for that INR 65 crores?

It is in operating income.

Okay. Other operating income that we have seen increasing to INR 122 crore.

Yes.

Okay. Right. So the underlying margin -- to understand the underlying margins here we need to adjust the INR 65 crores. Is that the right way from EBITDA level line as well as...

Yes, that's right. At the EBITDA level that is true, at a post-tax level it is INR 48.9 crores.

The next question is from the line of Raghunandhan N. L. from Emkay Global.

Thank you for providing more details on Motherson Wiring. On Motherson Wiring, my first question on the EV wiring harness, can you give some color or update on how many customers does the company have and to which segments it is supplying as of now? What has been the increase in content per vehicle in EVs versus ICE, if you can share? And also, is there any risk to this increase in content because of technologies like flex PCB?

So you want to specify you're talking about SAMIL or you're talking about MSWIL?

Wiring, sir. Motherson Wiring.

Go ahead.

So just briefly I mean if you talk only about India market, so we're doing both India and outside India market. India market, as we had explained in the last call also, so we are doing all segments, we are doing 2 wheelers, we do also passenger cars, and wherever needed for commercial vehicles or the machines, et cetera. So that's what we do. And in terms of content, of course, the content on the EV side is much more depends on the vehicle. And as you know, the penetration at the moment in India is not so high. So -- but we all know that it is there, and it is going to grow over a period of time. That's how it will be.

Sir, can you give any sense on how much would be the increase in the content in EVs versus ICE and I mean, people are talking about technologies like flex PCBs, which might restrict the increase in content. Your thoughts on that?

So I think what is important for you to understand is the new technologies because the -- they cannot solve the kind of challenges that's in automotive, flex PCB all I think makes lot of sense when you talk about electronics. But in car, you don't have that kind of a need for flex PCB and all that. And the amperage, you are talking ampere, it is at 100 amps, 200 amps. Flex PCB does not work there. So think about it. But if you're talking about the use of flex PCB, we are sure it will go. But will it be in replacing wiring harness, my experience of 47 years tells me that no, it won't, because you need amperage and you need the conductors to carry that kind of current.

And you may be talking about some of the technologies, which some companies or the companies, which are doing very well on the electric side globally are trending to use. But then I think your question was related to India market. So it's not in use in India at the moment.

And any sense on that content per vehicle, sir, if possible, just a broad range?

Generally, what happens is that the vehicles continue to use the, let's say, low voltage cable, which continues. So -- if you take ballpark, 70%, 75% or something even more would be which continue in the vehicle. And that content goes up because the features are much more in a EV vehicle. Only thing which gets changed is the engine wiring harness which doesn't -- engine doesn't remain and instead of that, that is motor-related all this stuff comes in. So that depends on the content. I mean, if you take charging cables, charging connectors also into the whole system, vehicle by vehicle it varies. And then it can be even more than the overall low voltage, I mean, how much is the value add. So there are a lot of things which go into the whole system, and that will be vehicle maker by vehicle maker in that sense. So it's up to us how do we want to take that into consideration.

Pankaj, sir, my second question was, would the company be able to sustain market share in India, considering competition like Yazaki and Aptiv who are trying to gain share in a changing powertrain environment?

We have been there in India for a very long time. And as you know, all the players have been in India for a very long time and your company has never focused on market share. And that's the reason why it is one of the most preferred suppliers to its customers. Because rather than focusing on market share and looking at what others are trying to do, we try to focus on creating value for them jointly working together with them. So even when somebody tries to do price cutting or anything of that sort, we never are worried about it. And we've always continued and that's now we have been a long-term partner with all our customers and continue to grow with them and remained a trusted player. And we believe we will continue to do so in the future.

Also, I think, they are very respected names that he is taking. So we're not trying to beat them or they are trying to beat us. What do you think, I mean, why they have not been successful in eroding our market share no. If that's what you think then we're fighting -- there is a total amount of commitment in the components that we are supplying. There is a total support that's necessary for the -- so then the markets outside India are very big markets. So obviously, they have not really focused so much on the India side. So then you should think about the localization, the capability to set up components, the capability to set up special wiring. I can go on. I can tell you the market commitment that Sumitomo and Motherson has given. In fact, this whole particular segregation of the company has been done so that we can take care of the needs of India. So I don't subscribe to this and I have to compete with them. I have to keep competing with Motherson. If I can beat Motherson, then I'm sure I'm going to be in business, and we all can watch that happening.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

A couple of clarifications with respect to the concerned numbers which you have declared. What is the difference between the SEBI reported number and PPT reported numbers which are on the last page. Or maybe Kunal can share -- throw some light on that?

Jinesh, the SEBI reported numbers are as per the accounting standard where we have continued and discontinued operations. So it references against continued operations for the prior period. For the current quarter, obviously, the merger has been given affected as well. So when you look at the other one, the pro forma one, that is where the merger and the demerger has been affected for all the four quarters. So it's for reference to draw like-for-like comparison, but the main presentation is against the SEBI reported number.

Okay. So for the fourth quarter, both the number should be as same, will be written as same?

For which quarter?

The current quarter, fourth quarter which we have reported, the SEBI reported as well as our proforma number should be same, right?

That is right. Other than there are one-off expenses. So the INR 65 crores that Kapil had just asked the question, the INR 65 crores should have in the pro forma would have been spread on all the 4 quarters. But in the SEBI reported one, it is accrued in the same quarter. So that's the difference between what you see at a proforma level and here.

Got it. Got it. And secondly, a request on primarily if you remember, you had shared broad business segment-wise revenue and EBITDA in our Motherson 2.0 PPT. So if you can share it on ongoing basis, just a request on that.

We will share that in due course as well. Going forward, that will be the new reporting concept that we will go from next quarter onward.

Great. That will be very useful. I have few questions on the India wiring business numbers which you have reported. So just one clarification, the copper price increase, there is reset every 6 months, right?

Every quarter. Now the quarter need not be necessarily the calendar quarter. It could be any quarter or three months.

Okay. Okay. Got it. And usually, what would be copper as a percentage of our revenues there or percentage of RM cost, whatever is in revenue.

It will vary between pass car and commercial vehicle and motorcycle where we hire. But ballpark, you can take, depending upon the price between 18% to 22% of the raw material cost something like that. But I will have to come back based on the current number of copper price and all that.

Okay 18% to 20% of the total cost -- total RM cost.

That is the range but it can vary depending upon the product needs as I said.

Sure, sure, sure. Got it's.

And for EV it will become even higher.

Sorry, for what it will become higher?

EV. EV, it will become higher.

Got It. Got it. And what is the input content in that business because I believe we have started sharing the [ GP ] by INR numbers. You used to share earlier also, but what is the import content in that business?

We will have the full annual report coming out soon. So you will have all the data there on the foreign exchange [indiscernible] and all that.

Got it. And then last question and I fall back in queue. So just a clarification on what Pankaj mentioned, we are present in 2 wheelers, EVs and CVs that is on electric side? Or this is in general and electric will be -- the presence will be different as of now?

The question was on electric. So of course, we are there on the low voltage cables but also in electric.

The next question is from the line of Joseph George from IIFL.

I have a few questions on some of the numbers that were discussed some time back, which is, firstly, the INR 65 crore payment to Motherson Sumi or rather SAMIL. So what I want to understand is, as you mentioned that this is pertaining to 3 quarters. So does it mean that going forward, we should think of a quarterly run rate of, say, about INR 22 crores or thereabout INR 7 crores or INR 8 crores up or down. But is that a number that we should think of going forward?

Yes, ballpark, that would be right. The number would obviously have variations to it, but ballpark that should be.

Understood. And where -- which line item of the SEBI reported format, is this reflected in MSWIL's results, just to understand the corresponding line items?

On top of the slide and the MSWIL slide and it is also tried to clarify on the foot note that the management fee goes before EBITDA as an expenditure. And when we are talking about the rentals of the factory premises, which are taken on lease from SAMIL, that will get account -- that gets accounted for under Ind AS 116 or whatever is the relevant standard, which means that the operating lease gets converted into interest and depreciation.

Understood. And the last question that I had was when I look at MSWIL presentation, I'm looking at Slide #7, where I notice that compared to the reported number, you've made an adjustment of INR 24 crores on EBITDA and INR 74 crores on the PBT line. Can you explain what is this INR 24 crores and INR 74 crores, respectively.

INR 24 crores is in respect of the management fee for the 9 months, previous 9 months, which has been booked as an expenditure in the last quarter because as Kunal explained in another question that in the last quarter, we have booked the entire management fees on both sides. And when we talk about PBT the difference is on account of factory lease premises being accounted for interest and depreciation, amortization as per the standard.

Understood. And the last clarification that I needed, this adjustment has been made for the entire amount of 2/3 because 1/3 of the amount would be pertaining to the fourth quarter. So have you adjusted for the entire 9-month number or only for 2/3?

No, we have adjusted 9 months prior period and the current cost remains as part of the normal cost. So -- because this is the fourth quarter, not the third quarter.

The next question is from the line of [ Saurabh ] from Ambit.

Just needed one clarification. So if it's possible, could you please share the gross block figure for both FY '21 and FY '22 in regards to both the entities SAMIL and MSWIL?

It will come out in due course cost as the annual reports are sent out as well.

I just needed the gross block headline number, that's it, if it is handy with you right now?

Unfortunately, not right now. So please wait for them to come out.

I think we have to tell them that we are 2 different public related companies right now. It will...

You can collect it off-line, no problem.

The next question is from the line of Amyn Pirani from JPMorgan.

So before that question, I had a clarification. So when I look at 9 months MSWIL and full year MSWIL for FY '22, for revenue and raw material these are like-to-like, right? There is no adjustment that I need to look at?

That is correct.

So if I look at full year to -- rather 9 months to full year, your gross margin is broadly flattish at a time when obviously raw materials have gone up quite a lot. So is it because you have been able to get the correction from customers at a faster rate? Or have you done any specific cost cutting, some efficiencies at your end. You can help us understand because actually it is a very flat gross margin, I think is a very good outcome in such an environment.

Yes. I think, Amyn, you are absolutely right. Our teams are working very hard and you have to give due credit to them because there have been all adverse situations, both not just on the raw material prices, but as well on the shipping costs or freight costs or the transport cost. So people have found the means so that these costs can be contained.

Okay. Okay. And going forward, I mean, obviously, your production growth should be higher, what is the kind of commodity cost pressure that you are seeing going forward? And broadly, should we expect margins to move higher from here into the next year?

Well, first of all, we don't give guidance for the short term, either on the EBITDA margin. So I will get unnecessarily trapped into some questions. And what is important is for us to work in partnership with the customers, as we have said, that the environment still remains volatile. There are supply chain challenges, which the OEMs have, we also have sometimes from a component supplier. So we continue to do our best and work with customers as well as with the supplier so that we perform in the given circumstances. And I'm sure the teams will continue to perform better.

The next question is from the line of Arvind Sharma from Citi.

Just two questions. One on the other income on the stand-alone side seems to be very high. So what's the reason for that?

That is largely on account of the dividends that we have received during the year.

And bulk of that -- because it is on annual basis, would it also will be a bulk of it coming from MSWIL?

No it does not come from MSWIL, no. I'm referring to INR 711 crores. And on Slide 13, you could also see in quarter 4, we have received INR 264 crores.

You have MSWIL balance sheet and P&L account. There is no outflow of dividend. So the dividend is proposed, which will be paid in the financial year '22, '23 to all the shareholders, including public shareholders.

Right. So that is why I just wanted -- if you could because stand-alone other income is almost [ INR 184 crores ]. It's almost INR 711 crores versus [ INR 110 crores ]. Just wanted to understand what is the main contributor in this sudden increase in other income?

Basically companies have just been merged. That's why they are...

And INR 264 crores is the dividend income received in quarter 4 itself out of the INR 383 crores that you're referring to.

All right. Second question on SMRP BV related to margin pressure due to escalating costs. Any idea by when could margins kind of go back to the levels we've seen earlier? As in terms of costs, when do you think -- I know it's difficult to get them right but when do you think costs could...

Thank you so much for being so appreciative that it is difficult to fathom but still, you want an answer from us, we will give it to you. I hope yesterday. But look, we have to work together with the customer, make them understand the whole thing and then do it. So we can't do it with the breakneck kind of thing over there. We have to be cognizant to the price and everybody is facing a challenge. So definitely, we want that the growth and everything comes back to normal. We also want our life back to normal. And we don't want Monkeypox to monkey around with us, this is coming up. So look, wishes are horses even beggars would ride. Again, we are all trying to work under the difficult circumstances. It's very difficult to give a clear answer to you. But I'm appreciative that you understand that.

The next question is from the line of Mumuksh Mandlesha from Emkay Global.

A few questions on Motherson Wiring. Sir, in the revenue clarification there is other item, others revenue, to which segment does it refer, sir?

Gauba, can you take that?

Sorry, can you repeat the question?

So in the Motherson Wiring, there's an item others in revenue breakup. So which segment does it refer, sir?

Yes, this could be to any of the segments, which are otherwise described because this is more to the Tier 2 as well as components to digest. So some part could relate to pass car, some part to commercial vehicles, autos.

Right, sir. And globally Sumitomo has a strong presence in industrial wiring business. So over the medium term, can Motherson also diversify into industrial wiring business or any other segment, sir?

Sorry, I didn't get you. Diversify to what?

Industrial wiring business, sir?

Industry wiring, what do you classify as industry wiring harness.

To nonautomotive channel like aerospace, [indiscernible] .

Sir, now you want to know my strategy, but I can try and help you out there also. Please wait till November this year, we will come up with a 2.5 or half yearly report on our industrial different segments. So you'll have to wait for that. I can't take the thunder away from it. Please wait for another 6 months, and we will have the half yearly [ 5-year ] meeting, half way point report, then you will understand where are we getting into.

Sure, sir. Sir, what about the competitor leader in the highly furnished PV segment and the second largest in 2 wheeler segment. Is it possible to share, indicate market share in the other segments like PV's, CVs and 2 wheelers sir?

We don't believe in market share but all I can tell you is that if you are in it, we are in it. When you go from, we don't wait for percentages. But we don't guide normally on this. I don't know why you want to know what's our share market share. We don't believe in market share.

Just in other segments where the company has presence.

Why do you want to know that? How will it help you?

No problem, sir. I will pass it on.

Okay. Sorry, we normally don't give it, I am wondering why you want it.

The next question is from the line of Vimal Gohil from Union AMC.

Sir, my question is on the wiring business India. So if I were to look at the performance, clearly, you've outperformed the industry by a very healthy margin. Just wanted to understand the contours of the same. If you can just probably help us how much has come from the content increase, how much has come from pricing increase? Clearly because the margins also show that you've taken healthy pricing increases. So if you could just help us maybe break that up or understand your revenue performance better? I have one more question on margin?

I'm afraid, we don't have such kind of working nor we try to do that. Because that will be something which will divert our attention to something which is more important from a more important work. So as we said, our teams are very focused. We work very closely at our plants. We focus on our plants, our work and ensure that we meet the customer expectation, reduce the wastages, eliminate wastages. So this is all about the focus. And at what price increase volume, it is not comparable because the vehicles which are sold in this quarter would be entirely different than in the previous quarter or those things. It will be not giving us any results. It is better to focus on today and tomorrow, how we can further improve our performance. I'm sorry, I don't have answer to your analysis, but this is how we have been performing and historically we have been presenting the data, which you can see we would have done.

Gauba, Can I support you with one line. We also don't have so many people bisecting and dissecting and all these particular things happening, and that's how we save money. And don't have people who add positively to the production, the quality and these anything. So we are not a research organization. We are a production company. We focus on what delivers value onto the bottom line. So I hope that could also help you.

I understand that just in a declining environment, your company has grown quite well. So I was just trying to understand better on that. But I can...

We never waste a crises. We always come out stronger. You should have seen the last year first quarter result, we almost had tears in eyes but then the next quarter, we came back very strong. And that's exactly what we do. We don't waste the crises, we use that to our advantage. So not going just, yes, let's compare this also or let's compare that also. Our people are very focused. They know exactly what to focus on, and that's only the reason why we -- Motherson results are that much better.

Great. Great, sir. Sir, just one question on margin.

We don't guide on margins.

No, I'm not asking for guidance. Just wanted to understand your -- nature of your employee cost, given the fact that this is a slightly more labor-intensive business as compared to some of the other parts. So would your employee costs remain fixed for a certain amount of time before you probably expand capacity? How should we understand your employee cost growth?

Let me tell you almost about 65%, 70% of our workforce is ladies. Luckily, the ladies get married and then they move around. So that's probably one advantage point that we have. Maybe that helps you to understand our margins and sustainability of margin. Does it help you?

Right, right. Got it, sir.

The next question is from the line of Ronak Sarda from Systematix.

First question is on the consolidated leverage. I mean you have called out INR 2,000 crore of working capital impact and on the leverage. So how should we look at this number over the next, say, 1 year -- so OCF minus CapEx and plus any recovery on the volume side, how should this number trend over the next 1 or 2 years?

So Ronak, the INR 2,000 crores of working capital that we called out was largely to highlight the fact that given the supply chain disruption that we have seen across the globe, we are required to keep a much higher level of inventory. We're also required to have multiple suppliers. This is in place just to make sure our supply chain is there to service the customers. So that's why the working capital has got expanded. Now going forward, as -- and the hope is as things normalize, this will also normalize and hence, these should get released. And at the same time, with better realizations and better pass-through of some of the inflationary costs to our customers, hopefully the improved performance would also mean that there is improved cash flow and that in turn would imply that the debt figure should be looking down going forward. In general, there is no major CapEx that we have in play, there is no major greenfield, et cetera. Our order book -- our current capital assets are sufficient to meet the requirements of the current order book. And hence, in general, subject to market conditions, we should still be on a deleveraging path. And obviously, subject to any new acquisitions that come into place.

That's clear. A couple of questions in the Motherson Sumi wiring side, sir, if you can just help us understand on the yen exchange rate. So are we already seeing benefits of the yen depreciation? Or these are also kind of 3- to 6-month contract? How does this impact our financials?

As far as copper and Japanese yen is concerned, that is a pass-through for us. We didn't add or whatever those terms are.

Okay. Got it. Got it. And sir, any indication, I mean, MSWIL has very -- continues to be at very strong free cash flow. So how do we intend to deploy the cash given we have a pretty long-term agreement with SAMIL on the component supply. So how do we intend to deploy this capital inflow or cash to keep generating 40% less ROC?

Return back to the shareholders, please. Thank you. We need it.

Perfect. Sir. And a couple of...

Ronak, that is one part, but the whole purpose of reorganization in terms of just to add there has been that we want to -- Sumitomo wants to focus on the domestic wiring harness business because the domestic industry is also undergoing the change. So you will see that with the requirement coming from customers, we would be making necessary investment so that we go ahead of the time to service our customers as has been the past track record. And as Mr. Sehgal said...

Thanks, Gauba, you're right. But I will just try to have fun because of the question with they will have cash, so why not I said look after the shareholder out there. We look after everybody. So why not we look after the shareholders also. But yes, I think to answer the question, the other gentleman who was trying to find out about our competitive landscape, probably Motherson Sumi Wiring System, we invest tremendous amount of money in the electrification need if there are any but also for the hydrogen cars, for the different wonderful cars that everybody wants to be seen made in India. Probably Motherson will be the one company, which would be taking care of all the needs. So definitely, that's the logic if you agree with it.

Sure sir. [indiscernible] I mean when is the electrification of hydrogen car, I mean where specific would be the investments go, I mean...

We make the wire, we make the -- see the wire will not be the normal wire. The components will not be the normal components. We need to make special investments in new technologies, new products, new materials because you can't use normal thing for this particular thing. You can't charge it in our home charger. You need a special charges because the needs are very different. So that's more technological play, but definitely, we have it, and we also are very capable to get more from Sumitomo also.

Got it. So for the [indiscernible] where lot of side parts and components comes from SAMIL for electrical -- for EVs and hydrogen MSWIL will self invest in those components. Is that the way to understand?

Sure, why not that also and if there is any need for them to have more help then mother company is always, I mean is there.

Okay. A couple of clarifications, Kunal. So on Slide 13, SAMIL standalone EBITDA for quarter 4, which you have highlighted as INR 293 crores. I mean at the SEBI format, it is much lower at INR 215 crore or INR 216-odd crores. So how do you go from that number to INR 293 crores, if you can just help us with that?

So you're referring to stand-alone, right?

SAMIL stand-alone, yes.

So where are you picking it up from the SEBI stand-alone numbers?

Sir, SEBI stand-alone number comes to around INR 216 crores, if I do revenue minus raw material, employee and other expenses.

There is a dividend income of INR 264 crores, which is excluded as highlighted, which is not part of the EBITDA, right? And then there is an interest income also, which we do not consider as part of EBITDA so that also needs to get excluded.

And [indiscernible] the erstwhile is SAMIL entities, right, the one which we highlight on a consolidated basis or the proportionate basis, those won't be part of the SAMIL standalone. They will still be as separate entity rate? Or do you at some point of time we will try to merge all of these companies as well.

So what business used to exist in the erstwhile SAMIL stand-alone is now part of SAMIL standalone. There are businesses 100% subsidiaries as well, which remain out. There are joint ventures but also are separate legal entities and hence they remain now.

Thanks for bringing up that. Because we have now simplified the [indiscernible] or there is nothing. So the segregation has been completed.

The next question is from the line of Jay Kale from Elara Capital.

My first question is regarding the MSWIL on the wiring harness side. You did mention that you are committed to investors in India and it seems that your competitors may be in the current EV wiring harness, maybe the high-voltage wire and a lot of components would be imported. So how different are we versus the competition in terms of our localization content for the high-voltage wires? We understand the connectors are one of the major components over there. And would we be producing it in India and hence, our cost structure would be much better than competition? And would it require a different kind of commoditization from the OEM since...

Let me just help you out here. The customer is going to decide based on the economics. Think about it. If you go and blindly go and copy the components and start making it here, I think it's a big, big mistake. At the end of the day, you need the volume. Otherwise, it is better off importing it. So the tools, right, they can cost you crores of rupees. So it has to be a make or buy decision that we have to do. And that's the reason why, at this moment, we are not really going for because the volume for cars is very small. The other gentlemen was also asking about electric cars and things like that. How many cars have been produced in India of electric vehicles? So I think we just lose our balance and just want to go from like a pendulum from left to right and from right to left. But there is make-or-buy kind of decision which is there. So these particular things will be answered maybe another 2, 3, 4, 5 years. And that's the reason why Sumitomo and Motherson together have -- and it is better to segregate that and set up special plants depending upon what the need is. So we don't -- really don't know what is going to be the real numbers that we are talking about. So -- but if you have any of those numbers and all that, we'll be very grateful if you can give it to us.

Sure, sure. Sir, my next question is regarding the SMP business. We now -- we kind of now segregating the start-up costs, et cetera, because now it's a part of normal operations. But just an indication of how would we be in the journey of margin improvement for the Tuscaloosa as well as Kecskemet plant? Are they operating at optimal capacity utilization? Are we close -- for those plants are we -- the margins kind of have trended towards the company average margins? Or they are still at the breakeven level? Could you just throw some directional light? I understand you might not be able to give exact numbers since now it's a part of normal operations?

Vaaman and Char, can you take this up, please?

Sure. So I can offer more details on that. But we classify them as normal plants now. So we do not see them as startup plants anymore but Char, please guide on more details about this plants.

Absolutely, yes. In regards to SMP Tuscaloosa in Alabama, our operations in United States, this is predominantly serving Daimler vehicles and SUVs they are producing there. And we know this is pretty low family product line and our performance is very satisfactory in regards to the top line and the bottom line at this facility. All past growing things of Greenfields are long behind us. I think continually we are improving, continually our performance, operational performance and efficiency, business group operating plan. In regards to Kecskemét, again, there is a similar situation in Hungary. That facility is supplying again for premium vehicles for Wrangler and Audi. And again, a very different story than it was 2 years ago, where operating organization and performing, I would say, above the average for SMP in regards to the financial indicators. And of course, we are facing in both locations some pressures from inflation, but we are countermeasuring that with effective negotiations with customers. I hope that addresses your question.

The next question is from the line of Chirag Shah from Edelweiss.

Sir, I have a question on SMRP and PKC. Sir, just wanted to understand that the raw material or the cost contract that we have are generally annualized in nature. And obviously with excessive numbers we have negotiations with the customer, right? That is the nature of contracts in SMRP and PKC?

I don't know where you are taking this stuff from. But look, if the pressures are unprecedented, then definitely, whatever we have to do, we have to do. But again, I would let Vaaman answer this particular question because you're talking about SMRP BV or SMP and you're talking about PKC? So PKC is great, Pankaj will take care of that. And Vaaman will take care of SMP.

So on PKC, just generally, our -- most of the contracts of copper will be fixed monthly or quarterly. And similarly for some of the countries where there are currency mix for the same, makes for the currency as well.

And for SMP?

Vaaman?

Are you talking about the raw materials pass through to the customer?

Yes.

So in SMP, there is no pass on to the customers in the contract, it all has to be discussed with them. Usually in the contracts, we do take some margin of movement of these. But if it's beyond a certain limit which is happening with the volatile movement of raw materials, it's a discussion to be had with the customers. So like we have already said in the call, we're already having those talks with the customers and looking at ways that we can minimize this noise that comes from this high volatility.

So when you say contracts over the -- you're referring to the life of the contract or on an annual basis, you again have discussions?

Yes, it's on the annual basis.

It's on an annual basis. So I presume that we would have kind of in process of concluding some of them. So sequentially, the margin pressure should start considerably? That is the right way of looking at it. And as you conclude your discussions, the frequency of pressure would start considerably?

Yes, absolutely. If the customers are going to give us that support then yes it definitely will be better as we move forward.

Yes. And secondly, recently VW, CEO, made a comment on easing of chip supply and ramping up the production of [indiscernible]. Is that kind of indication has gone to you also as a key supplier? And directionally, is it possible to indicate what kind of ramp-up they are indicating?

We can't answer customer comment, but in many interviews for the last 6 months, I've been saying that the chip situation is improving on a daily basis virtually. And by September end, according to me, by September end, it could have eased considerably. And if not, because of the war situation or whatever the other things that are there, maybe December might be showing you the betterment of the IC situation. Please don't ask us to comment on the what the customer is saying, we can't tell you that.

Definitely. Just one question for you.

He doesn't tell us. He actually increases the order. And we know that we earn income from and we are going...

I'm trying to understand what is the pace of increase that they are doing. I was trying to referring to that only.

Chirag, that's a very good point that you are trying to raise. Actually, people are thinking that the world is doing nothing but please believe me, even plants, which have been given up as bad have been restarted. Lot of things are happening. But these people are not talking about which plant, what is happening and all that because the competitor gets that information and it becomes a lot tougher, for obvious business reasons they don't talk about it much. But believe me, we are seeing it, every day, every month, there is an improvement. But as much as what the world needs is not there, that's for sure.

Just one clarification from Pankaj, sir. Sir, if I look at PKC number, if I look at PKC results, our revenue on YoY basis is slightly higher than on last year same time? But margins are on the lower side. Is it largely because of cost or it has to do with the industry dynamics in terms of demand being -- on the demand side?

As you know, Chirag, that there have been high inflationary pressures. There have been huge increases in the RM cost as well as people-related costs. So that has been the impact of that. Also, there have been erratic production due to the shortage of material. So while the capacity is there, there is still not 100% of the production could take. Therefore it's a combination of all these things.

Is he asking about Europe or America? What is he...

It's again overall.

Overall.

So it is a combination.

I think you should give the example of Mexico where the minimum cost has gone up 22%.

There has been unprecedented increases in Europe also, double-digit increases in minimum wages in most of the countries and in Mexico it has been very, very high. So this is all compounded, and you know wiring harness is a people related business. So it is..

So this is helpful. Really helpful.

There have also been mitigated. The customer is also facing the same problem. Customer is not that he is sitting pretty and he has his own workforce and he has to pay them nothing. I mean, the minimum wage has gone 22% in Mexico. So even the raw materials are effected. So there is no way that they can run away from it. So it's a general increase that going be there. Inflation is at the highest everywhere. And that's also because a lot of money has been given globally as in the COVID times to help the people and all that. So a lot of reasons. You can't really pinpoint and say this is the reason why that has happened or something.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Vivek Chaand Sehgal for closing comments.

All right. Thank you all very much. I think what is important is to understand according to me, this is a work in progress quarter. You will see the effect, the positive effects of this coming in the next quarter and then quarter after that. And it will be going on for some time to come. I think it needs about at least 6 months to a year to really settle down. So till that time, it's a challenging environment. But in Motherson, we always say when a challenging environment is there, that can bring more acquisition opportunities out there. So I hope all the wonderful companies that you admire are also falling in Motherson's lap. So with those issues, wish you all a very happy weekend coming up after tomorrow and all the best. Stay safe, stay healthy.

Thank you. Ladies and gentlemen, on behalf of Samvardhana Motherson International Limited and Motherson Sumi Wiring India Limited that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.