NDR Auto Components Limited (NDRAUTO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 Earnings Conference Call of NDR Auto Components Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good day, everyone, and a warm welcome to all of you participating in the Q4 and FY '24 Earnings Conference Call of NDR Auto Components Limited. We have with us today on the call Mr. Pranav Relan, Whole-Time Director; Mr. Mohit Kumar Jain, Chief Financial Officer; and Mr. Rajat Bhandari, Executive Director and Company Secretary, along with other members of the senior management team. Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature and are subject to risks and uncertainties. A statement in this regard is available in the Q4 and FY '24 earnings presentation shared with you earlier. We will start this call with opening remarks from the management, following which, we will have an interactive question-and-answer session. I now request Mr. Pranav Relan to share some perspectives with you with regard to the operations and outlook for the business. Over to you, sir.

Good day, everyone, and a warm welcome to our Q4 and FY '24 Conference Call. Let me start by quickly going through our financial performance for the quarter and full year under review. Q4 FY '24 total income stood at INR 176.98 crores, a growth of 33%. EBITDA at INR 17.37 crores, growth of 27.3%. EBITDA margins at 9.82%, and PAT for Q4 FY '24 at INR 11.61 crores. FY '24 total income stood at INR 605.15 crores, a growth of 51.6%. EBITDA at INR 59.81 crores, growth of 57.2%; EBITDA margins at 9.88%; and PAT for FY '24 at INR 38.71 crores. The last year has been an eventful and exciting year for NDR Auto Components. Aside from continued strong financial and operating performance to business development in line with our long-term strategic focus has helped us towards enhancing our competitive position and growth outlook. In February 2024, NDR Auto Components was a empanelled as T2 supplier to Hyundai Transys to supply of seat-trims to Kia, supply of which will commence from Jan 2025. The seating solution will be manufactured at the company's manufacturing facility in Bangalore, which is in close proximity to Kia's manufacturing operations. This is in line with our strategic endeavor to widen our OEM relationships. Kia is now our third OEM partner, adding to our esteemed and long-term automobile of OEM relationships with Maruti and Toyota. Also, in February 2024, we entered into a technical assistance agreement with Hayashi Telempu for the supply of sunshades to Maruti and Toyota automobiles. Hayashi Telempu is over 100-year-old, $1.9 billion revenue company based out of Japan with capabilities in producing automotive interior, exterior and after-market parts. This initiative of the NDR Auto, the opportunity to widen its product portfolio and introduce other new and disruptive offerings. Utilizations at our facilities across Haryana, Bangalore and Gujarat stood at 80% offering us an ample runway to enhance sales with present capacities. The auto component sector is in a very exciting stage. We will look into leverage our experience and understanding of the Indian market to continue to expand and introduce new options. Our strong balance sheet affords us the opportunity to explore both organic and inorganic growth opportunity. I look forward to continued progressive performance. We will now be happy to discuss any thoughts or questions you may have.

[Operator Instructions] We have the first question from the line of [ Jatin Chawla ] from [ RTL Investments ].

Congratulations on going forward on your long-term vision of transforming this from a single product, single client to a multiproduct, multiclient company. Very heartening to see that. My question -- first question is on the gross margin side. If I look at this quarter, your gross margins have come down significantly compared to what we have seen in the last few quarters. So from a run rate of about 76%, 77%, your RM to sales have gone up to like 78.6%. Even on a full year basis, if I look at it, your gross margins are down by almost 200 basis points. So just wanted to understand why -- what is the reason? What is driving that?

So those gross margins on the artificial leather business are slightly lower, and that is the reason for it to come down by 1%.

Sorry. So this is basically the trim is an artificial leather trim, then the margins are slightly lower?

The margins are slightly lower, the returns are slightly higher, so that's where it comes from.

Okay. Got it. And this share of artificial leather would have increased significantly this year?

Yes. So the Grand Vitara has a higher percentage of artificial leather, so that has increased.

Okay. Got it. And second question is, when I look at your debtors, that number has jumped up significantly. I know we've seen a 50% increase in revenues, so that much increase one would have expected, but the increase in debtors is even higher. So your debtor days seem to have gone from like 30 days to more than 50 days. Any particular reason for that?

So the Gujarat and the NCR plant, our payment terms are within 30 days. The Bangalore plant is slightly higher. In addition to that, even our creditors have increased by similar days. So our working capital has almost no impact.

Got it. And you mentioned that your utilization rate currently is around 80%. The rate at which you're growing, you would -- kind of, in a couple of years, so by FY '26, you will maybe run out of capacity. So any plans of kind of -- because getting a land, setting up a plant, that takes time. So what are your thoughts on expanding capacity?

So we've already bought land in Kharkhoda where the new Maruti plant is announced, and we are looking for land potentially in Anantapur. So once we run out of capacity, then we will look to expand.

Anantapur basically will be near Kia.

Yes.

Got it. Got it. And this Kharkhoda plant, when do we expect for production to start here?

No. So we bought land in Kharkhoda. We haven't bought any land in Anantapur. Anantapur Kia currently, we're going to be selling from our Bangalore plant. If we get new business, then we will set up something closer. The Kharkhoda plant we will set up, we will use the existing capacities as of now. Once we have enough business, then we will set up something close by.

Got it. Got it. And once you decide to set up a plant, how long will it take for it to -- production to come on stream?

1.5 years.

The next question is from the line of [ Saket Kapoor ] from [ Kapoor Company ].

Sir, firstly, if you could give us an understanding of where -- what would be the volume growth for the current year and our margin profile? And also where would we be expecting our volume to come from since we have a capacity at 80 percentage you were alluding to earlier? If you could just give us some understanding how FY '24-'25 is likely to be?

So in terms of volume growth, what we've seen is an upward revision in terms of the volumes for this current fiscal for the SUVs. In addition, the Kia business is starting 2025 January, and the shade business is starting 2025 Feb. The Maruti EV is still postponed to March 2025. So I think we should be at a low double-digit number this year. Margins should be at a similar profile, maybe a slight upward revision.

Low single digits? I didn't get that point.

So I would assume anything between maybe 15% -- 10% to 15%, maybe 15% to 20%, depending on the model mix and how the market behaves.

Okay. And how would the margin profile be likely?

Margin will be similar, maybe slightly better.

Right. And sir, we distributed dividend higher to the payout ratio of more than 10%. So have you formulated any dividend distribution policy or on what basis are you deciding these numbers?

Sorry. Can you repeat that?

So we declared dividends to the tune of -- on a payout ratio of higher than 10% -- 12% payout on the EPS we posted for the current financial year. So have we formulated any dividend distribution policy that gives an understanding of how are you going to share your cash with your investors?

Between 10% and 15%.

This is our codified policy.

Yes, that's our policy, between 10% and 15%.

Okay. And sir, then coming to the cash flow line item wherein we have paid higher income tax to the tune of INR 10 crores. So if you could explain the reason for the same, whether these INR 10 crore accounts for current year profitability or earlier areas have also been...

Tax rate income somewhere 25%, since the PAT higher side, the tax is coming accordingly.

Okay. Okay, sir. But last year, the numbers -- okay, last year operating numbers were lower that is the reason. We paid last year -- yes. Sir, you were answering?

25% is the standard corporate tax.

25% is the standard corporate tax. Okay. And sir, going ahead of -- how are the employee cost and the raw material mix is likely to be? How are the raw material prices trending currently as we have seen that there is a further inflation in the key raw materials. If you could give us some understanding of the raw material mix and how are we aligned to protect our margins?

It will be at a similar percentage. We don't see too much difference in employee cost as such.

Hello?

We don't see too much difference in the employee cost or the RMC. We think they'll be at a similar percentage.

Okay. Can you give the mix, sir, out of the total?

RMC is 77%, and employee cost is [indiscernible].

Yes. Percentage is clear. I want the mix, the basket for the RMC.

Maybe I'll share that with you offline or I'll get back to you on that.

Okay. And lastly, sir, on the depreciation part. This year, I think so with the commissioning of the new contracts and the new facilities, our depreciation rate -- the net -- absolute number has gone up. So for the current year, what would be our CapEx be, we will be spending? And what kind of capitalization can we look -- commercialization for FY '24-'25?

So next year, our CapEx is approximately INR 30 crores for the new projects, and depreciation should also be a similar number.

Right. Sir, I will wait for that answer for the mix and I will join the queue, sir.

Give us some time. We will calculate and...

Yes, sir. Okay. Fine.