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

Ladies and gentlemen, good day and welcome to Q3 FY '25 Earnings Conference Call of Motherson Sumi Wiring Limited [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. V.C. Sehgal for his opening comments. Thank you.

Thank you. Good evening, ladies and gentlemen. Thank you for joining the results conference call of MSWIL. I am pleased to announce that the Board has approved the results for quarter 3 of financial year 2025. This year is turning out to be a very exciting one for the Indian automotive industry with the OEMs launching a slew of new models across EV and ICE platforms. With feature-rich content, this has augured well for us with the company outpacing the industry by approximately 6%, attributed to the favorable product portfolio of increased content with platform mix. The Indian PV industry grew by about 3% year-on-year whilst registering a degrowth of minus 8% on a sequential basis. Similarly, 2-wheeler industry demonstrated 8% growth year-on-year with a degrowth of 5% sequentially. While CV industry, specifically for high duty -- heavy-duty and medium-duty trucks remained weak on a yearly basis, growth of about 4% on a sequential basis. In this context, the company has delivered revenues of INR 2,300 crores for quarter 3, in which the new greenfields contributed approximately INR 80 crores EBITDA, remained stable for the quarter ending excluding greenfields at INR 278 crores, representing a 6.1% growth on a year-on-year basis. This shows an improved profitability of the business, excluding the greenfields. The 3 greenfields are progressing in different stages. Pune ramping up, while Navagam and Kharkhoda are soon to be on stream H2 2026. These are new facilities and will cumulatively drive an annual revenue boost of approximately INR 2,100 crores, marking approximately 25% growth over financial year '24 revenues on a baseline. The team has done well to secure businesses with marquee OEMs like Maruti Suzuki, Mahindra, Tata Motors across EV and ICE platforms exclusively for new models. I would like to reiterate that these are not just replacements or mid-cycle updates, but absolutely new model. MSWIL remains the preferred supplier for the new age vehicles by OEMs. The team has worked hard in developing these solutions for the customers and along with the robust localization plan. Since new facilities are in different stages of completion, certain costs have been expensed upfront. This is -- there is a negative net greenfield start-up cost impact of about INR 40 crores on EBITDA and INR 32 crores on the PAT, which is expected to be negative net greenfield start-up costs is expected to stabilize as production comes on stream with the new plants. We continue to have conversations with our customers for some of the pain sharing as -- on some of the costs associated with expansions. Our CapEx guidance for the year remains at approximately INR 200 crores, have expensed about INR 120 crores in 9 months, MSWIL continues to be a debt-free company. With this, I would like to conclude my remarks. I have Raman, Pankaj, Anurag and Mahender with me to answer any questions that you might have. Thank you, and over to you.

[Operator Instructions] the first question is from the line of Jinesh Gandhi from AMBIT Capital.

A couple of questions from my side. One is you talked about INR 40 crore impact at EBITDA level from the greenfield. Just to clarify, this is for third quarter and on a quarterly basis or for the full year?

Mahender, can you answer that question, please?

Yes, sure. So this INR 40 crore EBITDA impact is for the third quarter from the 3 new greenfields that we discussed, that we mentioned.

And what would be revenue contribution from these 3 greenfield? You mentioned EBITDA of INR 80 crores. What would be revenue contribution from these 3 plants?

Yes. So as of now, where the ramp-up has already started, the revenue is given -- the revenue is about INR 80 crores. And all -- I mean, a number of these plants are still in the ramp-up phase, and we have given the SOPs schedule when the commercial production would start. So wherever there is a revenue, the revenue is about INR 80 crores, but the cost is there for the other plants as well, where the revenue is yet to come.

And the third question pertains to -- we have seen some of the new age competitors, new age OEMs talking about the advanced technologies, including cables -- including cables instead of wires on the wiring harness side. Any views we have on those technologies, on that -- I mean, yesterday only, one 2-wheeler OEM, new age OEM had showcased that product. Any views on that?

Jinesh, can you please repeat your question?

Yesterday, one of the new age 2-wheeler OEM had showcased advanced wiring harness where it was based on cables, which are much smaller in length and lighter in weight versus a normal electric wiring harness, which would have been about 4 kgs. This was about 800 grams. Any views on such emerging technologies? I'm sure we are also working on it, but any sense on how does it -- what does it -- how does it influence our business?

You're talking about the new age cars, which are being launched in India or this is about...

The new age primarily EV 2-wheelers, Ola yesterday showcased their motorcycles and that they showcase this cable instead of wiring harness.

You're talking about the 2-wheelers. So these are like these 3 plants, which we explained are about the new age cars, which are coming in. So we have given an entire schedule about these launches. They are from Maruti Suzuki, Mahindra & Mahindra, Tata Motors in particular.

Also, Jinesh, I think new things cannot be experimented and all that. They try and showcase all the new technologies. But this is product liability and all that, is huge in this business. So it's not a telephone that they are doing. This is a car. Car or 2-wheelers. These are human life dependent. So there's always a lot of research which has gone into this. But I think as Pankaj said, we'll come back in case there is...

If it is, we are also in the same boat.

The next question is from the line of Siddhartha Bera from Nomura.

Sir, my first question is on the growth. We have seen a revenue growth, which has been much higher than the industry volume growth in the past. That gap seems to have come down quite a lot in the last couple of quarters. So is this more reflective of the current content increases being lesser than in the past? Or -- and is there any changes in market share also in the industry? Or we are largely seeing similar market share?

Normally, we don't guide on market share. We think market share is for [indiscernible], but look this is a rapid changing scenario. And it's really very difficult to come out with some credible numbers and all that because it's changing very fast. Pankaj, do you want to add something more on that?

Yes. And basically, it's also the model mixes, which happen. And as you would see from our presentation, the new plants which we are launching as per the customer volumes, these are all new age vehicles, they should contribute significantly to the revenue of around INR 2,000-plus crores, INR 2,100 crores annually. Also from Hyundai and Kia Group volumes are taken care of by the joint venture company. So if you look at there from the India perspective, MSWIL has been very well entrenched, and we are grateful to our customers for partnership in the new vehicles which are being launched in the market.

Will it be possible to share the EV segment, high-voltage wiring harness contribution in the current quarter's revenues or probably in the last 9 months?

See, generally, the revenue coming from EV vehicles have been in between 3% to 4% approximately, I mean, ballpark.

And these 3 greenfields, which are starting now, what will be the peak revenue potential from these plants going ahead?

Yes, it's about INR 2,100 crores as per the forecast, which were given by the customers. If they increase further, then it could be more.

And it will be a mix of both high- and low-voltage wiring harness?

Yes.

Okay. So this ramp-up -- so start-up costs we should expect should start normalizing from quarter 4 onwards? Or do you think the start-up costs may continue for some more time before this ramp-up plays out?

See, there is a presentation on which we have given when our SOPs are happening. So start-up costs will start to set up plant in Pune. Some launches are happening now, and in Gujarat, it will be in Q1 of '26 and some launches are happening, SOPs are happening in Q2 of '26. So around that period, Q2 '26, Q2, Q3, that's the time when it should get normalized completely over a period of time.

Sir, you have said for the third quarter, it is INR 40 crores. Will it be available for the last 9 months because in the first and second quarter also, we had some start-up costs. So for the 9 months, would you have the impact in EBITDA?

It's also given in the presentation, Mr. Mahender...

Yes. So for the 9 months, it's about INR 95 crores.

The next question is from the line of Gunjan Prithyani from Bank of America.

I just had a follow-up on this -- on the 3 new plants that you mentioned. Now these are all in newer locations, right, Pune, in the Gujarat, all these locations are new. I just wanted to get a sense that when you are expanding into these new geographies, is the profitability or margin going to be very similar to what our core business has had in the past? The reason I ask is because it's a labor-intensive industry, and there may be labor laws, which are different expense which is different on discount. So just want to get a color on whether the profitability remains same when you get into newer locations.

Pankaj and Mahender can take this.

Yes. Ma'am, for us, we have been in Pune for a very long time. So initially, there have been brownfield expansions and greenfield expansions in Pune. So Pune has been -- since 1997 or something we have been there. So it's old time in Gujarat also, we have been there in Sanand. So this is an expansion and a new land because the volumes are growing, so we are setting up more facilities. Similarly, if you look at Kharkhoda, it is not very far from -- it's within the NCR region, where we have been there since the beginning, since the foundation of the company. And when we go to new regions also, we take care because every time we have been expanding the company has more than 30 manufacturing sites today. It has expanded very well and having a concept of a mother plant, which supports any new plant which comes in with people getting trained and people being treated respectfully in every geography where we are. So MSWIL operates its plants in every region of the country, wherever the carmakers are there, whether it be it in Chennai or Bangalore or Gujarat, Pune, NCR region everywhere. So with its good practices and human practices, it has been operating the plants efficiently in all the regions.

And the other thing that you mentioned that we are in conversations with the OEMs to share the pain on the start-up cost. Is that a practice which is usual? I would expect that these contracts are only when the revenue start to accrue. So is there something that we can expect that these costs hit could come down before the plant ramp-up happens? I'm not quite sure of the comment that you made initially.

Ma'am, there are certain costs which get incurred during the development period. There are certain changes which happened during the development period. So that's why that comment is there. So there are things which get discussed with the customers and they get shared.

The next question is from the line of Raghunandhan from Nuvama Research.

Thank you for sharing the details of the upcoming plants and customers. Very helpful. Sir, 2 questions. Firstly, on the high-voltage wiring harness, with the new plants coming in, that should also indicate a higher focus on localization. And if you can talk a little bit about how the efforts have been in terms of reducing the import content, increasing localization? And would there be any targets you would like to share going forward?

Thank you, Pankaj, over to you.

Well, there are localizations which have happened in terms of the cables for high-voltage harnesses. And as far as the connectors are concerned, some of them have also been localized already, still there are a few which are imported. And as we see newer models coming in, especially coming from global carmakers, there may be still some more import content as they have been designed outside, but they all have a direction that over a period of time, they would want to localize or as they launch more models, they would like to localize.

And imports, the currency movement of late is turning the rupee is depreciating continuously. On the USD/INR movement, would we have arrangements with customers to pass on the impact?

We have almost every customer, so -- Pankaj, am I right?

Yes, sir.

The next question is from the line of [indiscernible] from Chanakya Capital Services.

Just would it be possible to give the breakup of revenue as per vehicle in categories like commercial passenger and 2-wheelers?

Mahender, we have given that in the...

We provide this data once in a year on an annual basis. And this was in the last annual report, you can go through that passenger vehicle is approximately 69% approximately and 2-wheeler is 10% to 12% and then commercial vehicle is also 10% to 12%. So bifurcation is given on the annual report. You can refer that, please.

It's same for this quarter also or are there any changes?

No, there is once in a year only.

The next question is from the line of Jinesh Gandhi from AMBIT Capital.

For these 3 plants, what would be our total CapEx invested for these 3 plants? And what kind of manpower addition would be happening for these 3 plants?

Mahender?

So in terms of CapEx, depending on the size, it's about INR 40 crores to INR 60 crores that we spend on 1 plant, and this doesn't include land and building, which we take on these from SAMIL.

So primarily, this would be roughly about INR 150 crores to INR 180 crores for the 3 plants put together. Got it. And total manpower addition would be what? Roughly about 15,000, 16,000 people or lesser than that between the 3 plants?

I think these plants are -- as the volumes are given and for the product we are making, these are sort of little large plants, so between 2,000 to 2,500 manpower will be involved in these 3 plants individually, each of them.

[Operator Instructions] The next question is from the line of Shirish from Nippon India Mutual Funds.

I'm trying to understand the correlation between copper prices and so if I look at the industry growth and add it up with the copper prices, somehow your growth seems much lower than the number which I was looking at. So can you explain why really is there a difference because Y-o-Y copper prices are up 12% plus industry volume growth also was not too bad. So our growth in that context looks a little low. If you can elaborate on that, sir, please?

Look, your calculations are based on what -- your calculations or it's some kind of a standard or something?

Sir, just looking at the copper prices, there was a fair bit of inflation. So I just want to understand if -- like how are you looking at market shares? Are the market share stable? Or was there a difference between the production and the wholesale numbers that we are looking at for the industry?

I think we've already said that our growth is higher than that of the market. But we can't just answer on speculation that it looks lower, it looks higher. It is very difficult for us to quantify what you are saying, on what basis you're comparing.

Copper price inflation was 12% and the industry growth would have been close to -- so if I draw a parallel from that 59% comes from PV, 12% from MSE. On that basis, the industry would have grown at least like a double-digit kind of a number, close to like a low double digit. So based on that, yes, so just trying to understand.

The industry growth, if you will see, is about 3%.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. V.C. Sehgal for his closing comments.

Yes. I think the Board congratulated the team. I think they've done a phenomenal job, including the marketing people and all that. 3 new plants in 3 new geographies, even though we are present there, it's still a huge mammoth task, but the company has done that. The prospects look phenomenal even in the coming months and all that. We'll keep you informed. And thank you very much, and wish you all a very good week ahead. Thank you.

Ladies and gentlemen, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.