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

Ladies and gentlemen, good day, and welcome to the conference call of Motherson Sumi Wiring India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. V.C. Sehgal. Thank you, and over to you, sir.

Thanks. Good evening, ladies and gentlemen. Thank you for joining the results conference call of MSWIL. I am pleased to announce the Board has approved the results for quarter 4 as well as the full financial year 2025. The company continues to chart a strong trajectory of growth based on sustainable fundamentals. I'm happy to state the company has delivered its highest ever revenues, both on a quarterly and a full year basis. We are setting up greenfield plants to support our customers. And I would like to highlight MSWIL is supplying to the customers of the top 10 selling vehicles, four-wheelers in India as of financial year '25. With this, I conclude my opening remarks. I have with me Vaaman, Pankaj, Anurag and Mahender with me to answer your questions. Back to you. Thanks.

[Operator Instructions] The first question comes from the line of Raghunandhan from Nuvama Wealth Management.

It is heartening to see a 12% growth when industry growth is in mid-single digits. My questions relate to the greenfields. Firstly, for the greenfield plant revenue of INR 119 crores, would it be completely EV-related revenue or approximately what portion of revenue would be EV?

Go ahead, Anurag, Pankaj.

Sorry. Out of the total revenue of the company, about 4% has come from the EV side.

But these investments are in these new plants in the greenfield and it's a mix of EV and IC engine vehicles which are being produced by the car makers. So some are pure EV and some of them are more combinations.

Got it. On Gujarat greenfield plant, when is the production expected to commence, as there is a mention in the investor PPT, which says delay in launch? Would the ramp-up happen in Q2 instead of Q1?

Anurag this side. In Gujarat, there are 2 sort of projects and one project is going to happen in Q1 of FY '26 and the other project is going to happen in Q2 of FY '26. And if you see the presentation also, there is an EV and ICE, both models are there in this.

Anurag sir, for the greenfields, approximately what level of utilization would be the breakeven point? Would it be like 40%, 50%?

See, if you have seen our last quarter presentation also, the total sales from these 3 new greenfields is INR 2,100 crores on an annualized basis. And once the volumes will pick up, which we are expecting in H2, when these 3 plants, all volumes will pick up. And at that time, the sales will get realized on the annual basis.

Understood. So fair to assume by end of the year, we would be closer to optimal utilization?

Yes, that's right. So what we are saying about the greenfield, towards H2, we should be able to utilize them to the optimum capacity. And that is why we have calculated the revenue on an annualized basis from these 3 greenfields to the extent of INR 2,100 crores on an annualized basis.

[Operator Instructions] The next question comes from the line of Siddhartha Bera from Nomura.

It's good to see that the greenfield losses have kept on coming down every quarter in the past few quarters. Sir, first question, again, on this aspect only. So we have already started 1 greenfield and 2 are about to come. So the losses mainly pertain to the 2 new greenfields, or the first one which has started, that also has some element of loss because of the lower utilization?

Anurag?

Yes, sir. So largely, it will be on account of 2 new greenfields. But yes, there will be some bit of the other greenfield also which has started the production, because the sales for the second customer had started in between Q4. So that is still not at the optimum utilization as far as capacity is concerned.

Okay. Understood. And second question, sir, when you say that the EV revenue share is 4%, does it include only the high-voltage harnesses or this will have some low voltage harnesses also, which will be going in this?

This is purely about the EV, the electric harnesses only.

The high voltage only when you say the EV?

Yes.

Okay. Okay. Sir, lastly, on the gross margin side, I understand that the copper is usually a pass-through. And even in the past, we have not sort of seen any meaningful impact on our gross margins because of the volatility. But this time, the gross margins have sort of dipped Q-o-Q and both on a Y-o-Y basis. So is it something to do with the mix which is impacting the gross margins or something else which we are missing here?

Go ahead, Mahender.

Yes, sure. So it's a combination of both. Obviously, product mix is one of the reasons where the margin varies on different products that we have, different wiring harness. Also as far as copper is concerned, even though there is a pass-through arrangement with the customers, there is a time lag. So there could be an impact on the margin for a particular quarter, but then we need to look at it for a larger period, maybe for a year or so, where the impact will get squared off.

The next question comes from the line of Vijay Pandey from Nuvama Wealth Management.

Sir, I just wanted to check, can you tell us about what is the capacity of the greenfield plants, so the upcoming Gujarat, Haryana and Pune plants. Just wanted to -- just to help in the forecasting.

Look, it's always difficult for us to talk about capacities and all that because our customers don't appreciate, because we can't really talk on that. But wiring harness is such a product that we can always increase the capacity by boards, by better efficiency and all that. So not extremely relevant for Motherson. But Pankaj, what would you say?

Exactly, sir. So we definitely need the space and we can keep the capacities on the machine side, but then assembly capacity we can flex. And that's how we work it out.

Okay. So just if I try to frame it in another way, sir, like how should we expect -- once all the 3 plants start running up, what level of sales can we expect like when they are fully ramped up?

Difficult for us to say that because it will depend upon the mix, how much is electric, how much is ICE, how much is hybrid? Very difficult for us to guide you on that, because at the end of the day, it's the customer who is -- Pankaj, can we help with this? If we can...

Exactly. So the exact mix, what will get made and what will get sold, it's a time question. What we had indicated in the last quarter was that if all the volumes come in, which were based on the plans, then all the total volumes with the kind of mix which we had received from the customers would be about INR 2,000-plus crores.

The next question comes from the line of Raghunandhan from Nuvama Wealth Management.

For FY '26, what would be the broad CapEx planned? Would it be again in the range of INR 200 crores?

CapEx is about INR 200 crores also, isn't it? Pankaj -- sorry, Mahender and Anurag?

Yes, sir. It is approximately in this line.

Anurag sir, with relation to the high-voltage margin, how does it compare with the low-voltage harness margins? And by when do you think the profitability will match in terms of -- would you look at scale of high-voltage harness going up, localization improving? And would you say that journey might take 2, 3 years before you start making similar profitability in both the products?

I think, first of all, it's wrong to say that there will be no profitability into the high-voltage harness also, and it is going to happen only after 2 to 3 years only. Yes, there are different margins into the different businesses. And all the time, our, I can say, efforts are that we should look for the opportunity where we can do a lot of localization, whether it's high voltage or low voltage, wherever it makes sense, and try to keep discussing with the customer as well on these things and keep improving the margins wherever the possibility is there.

And I will just add on, Anurag, that in terms of localization, already there are high-voltage cables plant where we localize the high-voltage cables as well as CCS2 charging connectors and the company works with the customers for further localization of the same.

Just one question. In terms of the copper price increase, would it be fair to say that generally 3 to 6 months is the time for pass-through?

In the world, it is the last quarter, but we try as early as we can.

[Operator Instructions] The next question comes from the line of Vipul Agrawal from HSBC Bank.

So part of my question on localization has been answered. Just wanted to understand a couple of points over there. Like in a layman's language, like how does localization work in wire harnessing business? Like what parts can be localized in India? And to what extent it is possible to localize at all? And what are the margin -- how the margin trajectory changes when localization improves?

A question very close to my heart. But Mahender or Anurag, can you take this question?

Yes, sir. See, on the localization front, this is -- when anything -- because we are a design partner also as well as development also. So whenever the customer is giving us the product and putting the components like that which are not localized, there is always -- we do a feasibility of that. Can we go for the localization. Initially, it started with the import parts only. But in the longer run, we try to localize that as soon as we see the volumes. And we have SAMIL one side where we have all the wire ranges which are localized. Already 1,000-plus components we are manufacturing in India. So we are capable enough to handle. Any components of wiring harness can be localized very, very quickly if it makes sense. Whenever we are doing a localization, we obviously discuss with the customer also. And then we see how the benefit goes either to us or to customer, in which way, that decides with the customer in close coordination.

And sir, how does it impact the margin trajectory? Like is it accretive for both OEMs and you? Or just you have to pass on the total benefit to the OEMs? How does it work in the localization?

It depends upon the customer. But as much as possible, all the customers prefer that we have localization. So depending upon what the opportunity is, we share or we don't share.

Understood. Sir, second question is on copper pass-through, like it's a pass-through. But again, historically, if I see the data, despite steep increase in copper prices, your margins remain resilient. Maybe a few quarters here and there, but you normally catch up. So like is it like hedging is there? How does it work at MSWIL? Sorry if you have answered this question, actually this is something new for me.

Pankaj, can you take this question?

Yes, sir. We are not hedging any copper by ourselves. Basically, if our customers are hedging it, we work together with them. We have pass-through arrangements as we discussed earlier, whether it's quarterly or half yearly. So it's a pass-through item for us.

Sure. Sir, one last question on industry trends, basically, maybe this would be -- so basically, how are you seeing industry moving towards hybrid? Like there are a lot of discussions among OEMs that -- there's a lot of discussion going on between EVs and hybrids. But again, hybrids are still highly taxed. So any sense you are getting from the OEMs like they are more focusing on hybrids going forward or they still stick to EVs? How are you seeing the trends in between hybrids and EVs in India? Maybe you can take a view of 3 to 5 years?

We can't comment on which way the market will -- that would be in a way taking bets. So Motherson does not do that. We, in fact, follow the customer. We are very, very fast on our -- nimble on our feet. We react very quickly, and that's how we are this thing. And secondly, we are not trying to make money on these variables. We make our money on our efficiency, our good speed and everything like that. So yes, these kind of things sometimes may give you money, sometimes will take money from you. But we try and operate the plant based on the efficiencies of the plant, people. And we don't second guess the customer. That's at least what I have always told my teams. But Pankaj, Anurag...

This is very right, sir. So we are supporting all the powertrains. And for us, it's very difficult in which one will do how much. So we are working on all kinds of powertrains and we support the customers, be it ICE, be it hybrid, EV, CNGs, multiple options the customers are all working on with different possibilities.

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

Just a short clarification. In a scenario that some of the new greenfields, which we have, sort of are expecting start of production in Q1 and Q2, in case they get delayed, what happens in that scenario? Is there some compensation which is there, which we get, or we need to continue to sort of bear the start-up costs for a few more quarters? So what happens in that scenario, if you can just help me understand?

Pankaj...

Sir, this is a very, I mean, private discussion with the customers. And of course, if there are impacts, then always gets discussed mutually.

[Operator Instructions] The next question comes from the line of Raghunandhan from Nuvama Wealth Management.

For the 3 new greenfields, about 7,000 to 7,500 employees were required, as indicated in the last call. Have these employees already been taken into -- have they already been hired? Trying to understand whether employee cost, which is currently hovering at INR 410 crores per quarter, whether there can be an increase to that in coming quarters?

It's need dependent. Maybe Anurag and Mahender can give some light on this.

Right, sir. See, as you have seen that one plant has already ramped up. So that manpower is fully there. The other 2 plants is falling on Q1 and Q2 and some of the trials has already been started because in the phase when SOP gets -- the mass production ramps up. So partially, yes, that manpower has been hired. But in case of any changes happen, we always believe to brief with the market and try to adjust our actions accordingly.

And just to add to what Anurag mentioned, as the volumes will ramp up after the SOPs, because many more versions will come up, people will get added.

Got it sir. So it will be in a staggered modular manner based on the scale and utilization ramp-up.

Yes.

[Operator Instructions] The next question comes from the line of Kapil Singh from Nomura.

Just one question I had. We are seeing some supply constraints for rare earth materials because of the Chinese government putting some restrictions on that. So are you facing or likely to face any kind of supply constraints on account of that? And also for the connectors, if you could tell us what percentage of the connectors are localized?

Kapil, we produce a lot of different harnesses and all that. Are you talking of any particular harness or just...

Mainly for the...

We produce maybe 1 million connectors, so which connector are you wanting to talk about?

Sir, basically, I wanted to understand for electric vehicles and hybrid vehicles, because it seems there is a higher content of rare earths over there, but...

That's the raw material, yes. We don't make connectors out of lithium and all that. That's battery. We don't do battery yet.

Okay. So there is no risk of any supply disruption on account of that?

Not that I can imagine, but I'll open it to Pankaj, Anurag and...

Yes, as you rightly said, sir, there is no, as such, disruption on anything.

[Operator Instructions] Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. V.C. Sehgal for the closing remarks.

Thank you very much. Thank you all for your questions. I hope we could answer them. I think under tough circumstances, the results have been very, very encouraging, and the Board accepted that and congratulated all the people in the company. Yes, the transaction in future, what kind of car is going to be important or not important or is going to sell or not going to sell is there. But I think generally, we are seeing that we are in a position to support the customer exactly where he wants us to. And that allows us to actually increase our share. So we will continue to do that. And wish you all a very happy and safe weekend, and all the best to everybody. Thank you.

Thank you, sir. Ladies and gentlemen, on behalf of Motherson Sumi Wiring India Limited, that concludes this conference. You may now disconnect your lines.