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

Ladies and gentlemen, good day, and welcome to Q1 FY '27 results conference call hosted by Motherson Sumi Wiring India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Laksh Vaaman Sehgal from Motherson Sumi Wiring India Limited. Thank you, and over to you, Mr. Sehgal.

Thank you. Good evening, ladies and gentlemen, and thank you for joining us today. I warmly welcome you to the Motherson Sumi Wiring India Limited results call for the first quarter of FY '27. We all are thankful for your continuous support and trust in your company. I am pleased to announce that the company has delivered resilient performance during Q1, reflecting the enduring strength of our customer relationships. Our expansion into greenfield projects and progressive ramp-up of new customer programs supported revenue growth, outpacing the industry, despite ongoing cost headwinds. Elevated copper prices and increased manpower costs, due to the exceptional minimum wage increases have impacted our profitability in this quarter. However, we continue to have constructive discussions with our customers to recover cost increases and maintain business momentum. Contribution from EVs continues to be strong, with 8.5% of our revenues coming from EVs in Q1. I want to reiterate the fact that we are an engine-agnostic company and a key supplier to leading ICE and EV platforms in India. Built on decades of trust with our customers and powered by the passion and commitment of our people, we are well positioned for the future. With these strengths at our core, we firmly believe that our future is bright. With that, I now hand over to Pankaj sir, Anurag and Gulshan, who will be happy to address any questions you may have. Operator, please open the floor for questions.

[Operator Instructions] The first question is from the line of Raghunandhan NL from Nuvama Research.

Firstly, on the greenfields, can you broadly indicate how has been the performance in Q1? If possible, please do share revenue and EBITDA or qualitatively, please do indicate whether the revenue has further grown and breakeven has been achieved?

So with respect to the greenfield, we already had our breakeven in the previous quarter, our run rate of around INR 450 crores in the previous quarter. We maintain the same level of revenue and the breakeven point at this quarter as well. So in terms of the growth, we are at where were we in the previous quarter. Obviously, some plants are in the process of ramping up stage. So in terms of contribution towards our bottom line, that we need to wait for one or two quarters, which they will start contributing in that way also.

Thank you, Gulshan sir. Sir, in terms of greenfields, at optimal utilization for these greenfields, margin may be lower than existing plants owing to high import content, but would ROIC be similar or lower because there will be a better asset turnover for these plants?

Look, that's not how we look at it because these greenfields were there as a part of the separate disclosures because the three plants have come in simultaneously, so there was significant impact, right? Because we never talked about plant-level profitability in the past also. So now they have reached a stage where the breakeven has already reached. So talking about, the plant-level profitability is not the right way to look at it because there are certain level of productivities which are already there in the plants, which were there in operation for many, many years. So it is better to look at it at an overall level. And this notion is not 100% correct that the material consumed or the material cost is relatively higher in these plants. I think this is all about the scalability and the productivity, which has not reached to a level which other plants have already reached.

Noted, sir. In Opening remarks, you alluded to Q1 FY '27 EV share of revenue at 8.5%. Within this EV revenue, broadly or approximately, how much would be the share of high voltage and low voltage business? Would this entirely be high voltage?

No, this is not the high voltage business alone. This is the business which we do for EV vehicles. So that is what it is.

Understood, sir. But would you have it handy, any broad breakup?

No. It's a breakdown between what we do for EV vehicles and what we do for ICE vehicles. So that is just that breakdown which we are mentioning here.

Noted, sir. Sir, on the cost side, on the copper prices, there is an automatic pass-through, which is likely to be received with a lag of 3 to 6 months. That we completely understand. But in addition to copper prices, there is an increase also in other commodities like plastic. Would that also be an automatic pass-through? And another point relating to cost is the minimum wage hike impact. You indicated that there is a constructive discussion with customers. By when do you expect customers to compensate, and would you be able to pass on, say, 80%, 90% of the impact? Thank you.

You have asked multiple questions, so I will try to answer them. Anurag, please correct me where I go wrong. As far as other material costs are concerned, we use a lot of components which are specified by the customers. And if there are increases by the component makers in those component prices, we negotiate mutually and discuss along with the customer for those increases. As far as your question regarding the increased wage hikes, which have been mandated by the government, which have been very, very -- I mean, much higher than what could have been anticipated at any point of time, these are all constructive discussions which are ongoing. Nobody can predict exactly the time line, but our endeavor would be to reach an agreement with the customers as soon as possible. But we are a very patient company, we discuss mutually with the customers and reach agreements which are in the long-term benefit of both of us. Our customers have very transparent, and we have long-term relationships with them, and we do believe that they acknowledge that this is a product which we assemble for them. Our products are quite manpower-intensive. And hence they understand that this is a cost element, which needs to be taken care of. I can only disclose so much as possible.

[Operator Instructions] Next question is from the line of Gunjan Prithyani from Bank of America.

Just quick follow-ups on the earlier questions. One, on the staff cost, is everything now well reflected in this quarter at INR 600 crores, or is there more to go? Just assessing how should we look at this line from an annual full-year perspective?

So it depends on how the other state governments react to it because this increase was not anticipated in the beginning of this fiscal year also. But there was increase of 35% to 40% in NCR regions. So as we speak, we are hearing something from the other states as well, but nothing has concluded so far. So it is very difficult to anticipate that how the other governments will.

As on date, whatever is there, this is fully...

Yes, as on date, whatever has been mandated by the government has been considered in the fully, yes.

And this is largely NCR, the minimum wage hikes, right? None from the new plants as such?

Ma'am, there would be certain usual VDA increases and other things, adjustments which happen in different states, but the unusual increase was in NCR region.

And one of the plants was in the NCR region also.

Okay, got it. And just on the pass-through discussions, which you mentioned earlier, how does it -- I am just trying to understand how does it typically happen? These are negotiations, and given these costs are more regulatory led, is that something that we assume is a full pass-through or it's a negotiated discussion, so it settles somewhere in between? Just trying to get a sense on what is the pass-through of this that we should think when we look at the more normalized profitability?

Ma'am, it's a matter which is between us and the customer, so I wouldn't like to -- I mean I can't comment more on this. This is not a usual thing which happens every year. So when something unusual happens, it is definitely considered by our customers because it's in our mutual interest that in terms of the sustainability of business operations, these unusual costs are considered.

Okay, got it. Just moving to the revenue side, is it possible to just sort of get an understanding of the 37% revenue growth that we've had in this quarter? Of course, the industry grew, you all get some benefit from content value, but what would be the element of copper price inflation that is reflecting? So I'm just trying to get the breakup of the revenue growth if that's something you can give us a color on. And secondly, if you can give us the capacity utilization for the new plants that you've been typically sharing in the prior quarters?

Out of the total 37% growth, 7% is on account of the copper inflation and the remaining is on account of volume growth, content increase, premiumization, our presence on the new model launches by the OEMs. And in terms of the capacity utilization for the greenfield specifically, as I mentioned earlier also, our revenue was there with respect to the previous quarter and improvement is already there, so utilization is almost at the same level which was there.

[Operator Instructions] Next question is from the line of Siddhartha Bera from Nomura.

Sir, again on this cost increases, are we sort of shifting to a monthly lag for some customers going ahead, or it continues to be a three-month or six-month lag, which we are working on? And second is, on the Pune plant greenfield where we had told earlier that we were trying to get more customers. So what is the status there? How would have the utilization moved in the Pune plant?

Copper, the lag is still on three to six months. There is a situation which has happened which we are seeing from past few quarters, which is abnormal and obviously uncertainty, we don't know how it is going to happen in the next quarters also. So three to six months is still the lag. Approach can be a month also, 15 days also. So that's the desire from our side to the customer, but then we have to see when we are discussing these businesses with the customer. So at this point in time, I can only say that this lag is still continuing with three to six months.

I mean, your question is valid in the sense that that's the direction in which we are discussing with the customers to reduce the lag period. And so far the lag is still there as we have reported this quarter. So in case there is any change, definitely we will let you know in the future, but that's the direction. If possible, we would like to reduce this lag. There was another question on Pune greenfield utilization.

Yes. Now for this utilization, we are totally seeing into the totality for the utilization across the plants, not specific only to the greenfield only. But if I can see that in totality also, as we have said in the past also, as soon as we are going to reach to 80%, we started expanding ourselves. And the way the industry is going and the forecast figures with us, maybe in the next few quarters you will hear us for that as well.

Got it, sir. And any new big plant you are planning to start in this year in FY '27, or nothing is planned as of now?

As I said that seeing into the forecast and the plan given by the customers, we are still working on that. And as I said, in the next quarters, you can hear from us that what are the new expansion plan for the next...