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

Ladies and gentlemen, good day, and welcome to the NDR Auto Components Limited Q4 FY '25 Earnings Conference Call. [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 '25 Earnings Conference Call of NDR Auto Components Limited. We have with us today on this call, Mr. Pranav Relan, Whole-Time Director; Mr. Vikram Krishan Rathi, CFO and Vice President; Mr. Rakesh Rustagi, GM, Finance and Accounts; 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 '25 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 FY '25 conference call. Let me start by quickly going through our financial performance for the quarter under review. Q4 FY '25 total income stood at INR 193.21 crores, a growth of 9.17%. EBITDA at INR 21.86 crores, a growth of 25.80%. EBITDA margins at 11.31% and PAT for Q4 FY '25 at INR 16.45 crores, which is higher by 44.1% as compared to the corresponding quarter last year. FY '25 total income stood at INR 717.1 crores, a growth of 18.5%. EBITDA at INR 77.65 crores, growth of 29.81%. EBITDA margins at 10.83% and PAT for FY '25 at INR 53.25 crores, which is higher by 37.57% as compared to the corresponding last year. Our return ratios continue to be extremely strong. ROE and ROCE for the full year stands at 25.78% and 32.29%, respectively. We are focused on cost efficiencies to drive margins and our premium offerings are also focusing on growth. We continue to endeavor to expand our presence and widen our business relationships. In line with this objective, NDR Auto has entered into a 50-50 joint venture agreement with Hayashi Telempu to bring to the Indian market a range of disruptive and innovative offerings. Hayashi Telempu, a Japanese major with sales of USD 2.1 billion, is a leader in developing customized solutions to enhance the overall driving experience. Over time, we will explore opportunities to localize the manufacturing of some of these products. Both companies will invest equally INR 33.3 crores towards setting up the JV. The JV has also won the first order from Toyota for ambient lighting. The ambient lighting portfolios include vehicle-mounted illumination that comprises planning and proposal of lighting effects such as interior illumination on the shift lever, headlining lever and do. It also offers design and lighting solutions for instrument panel. This has been a very eventful year so far. As you know, we have announced our entering into a collaboration with Toyota Tsusho India and Toyotsu Vehitecs for the manufacture of seat insert fabric with technical insistence from TTI. Our sales have commenced during the quarter, and we are excited about the potential of these offerings. We are happy with our progress over the year just concluded financial year and look forward to continue to disrupt and create all around value. We will now be happy to discuss any thoughts and questions you may have.

[Operator Instructions] The first question is from the line of Jatin Chawla from RTL Investments.

Congratulations on continuously expanding your product basket. After Sunshade, airbag, fabric, we have now entered Ambient Lighting. So my first question is on this Hayashi JV. On Slide #4 of your presentation, there is a very wide range of products that Hayashi Telempu offers to its customers. So just wanted to understand what products are part of the scope of this JV?

The scope of the JV includes all the products. We started with Ambient Lighting.

Okay. So in the future, it is possible that more of these products will come from the JV?

Yes, definitely.

Got it. And broadly, what is the total kit value of these products in a car, roughly?

Ambient lighting is anything between INR 1,000 and INR 4,000. Shade is anything between INR 2,000 and INR 3,000. All the other products, it depends OEM to OEM. So anything for the NVH parts is between INR 2,000 to INR 10,000. So give and take the whole basket is about INR 20,000 to INR 25,000.

Got it. That's a very big jump, right? That almost kind of doubles your -- more than doubles actually the content per vehicle that you offer today because your seating solutions today between INR 10,000 to INR 15,000. So if you add this whole basket of INR 20,000 to INR 25,000 would be a very significant addition.

Yes. It's a big joint venture for us.

Got it. And this INR 33 crore investment in the JV, so right now, at this stage, what sort of asset turns or revenues are you looking at for this JV?

So the asset turnover should be anything between 4 and 5. So if you look at the revenue, our 5-year plan is to take it to about INR 300 crores or INR 400 crores.

Okay. So you're saying basically INR 33 crores from your side, INR 33 crores from their side. So INR 66 crores and then into 4 -- into 5. So roughly INR 300 crores to INR 400 crores is possible from this JV over -- you're saying over a 5-year period?

Yes, that's our plan.

Okay. got it. Yes, since you brought this 5-year target, it seems like a very aggressive target. You're talking about almost taking your revenues from INR 700 crores to INR 3,000 crores over a 5-year period. So is this an aspirational target? Or do you think this is a realistic target?

So we've got an order book of about INR 1,100 crores to INR 1,200 crores. That is from our organic business. We think we will be able to take it to INR 2,000 crores within the next 5 years. And the additional INR 1,000 crores, we are quite -- we think we'll be able to do it from joint ventures and M&A. So it's not an aspirational target. I think we'll be able to -- let's see, give us some time. It's not a set for us.

Got it. This order book number, I think last quarter, you had stated about INR 550 crores INR 450 crores and then we added INR 100 crores on the airbag fabric. So this INR 550 crores to INR 1,100 crores, what's the difference between -- is that some gap in my understanding?

So INR 700 crores is the existing revenue, INR 550 crores is the order book that takes us to INR 1,200 crores. And then in addition, we're going to grow our organic business, we want to grow it to INR 2,000 crores. An additional INR 1,000 crores is for all joint ventures and M&As that we're looking to do over the next 2 years.

Got it. Got it. So this INR 3,000 crores -- because you're doing some JVs as well, right? So I'm just trying to understand this better, let's say, you do a 50-50 JV and that entity is doing INR 100 crores, then in this INR 3,000 crores target, will you be counting INR 100 crores or INR 50 crores.

We count INR 50 crores for the JV.

So your share.

Our share, yes.

Right, right. So INR 3,000 crores should be including just your share?

Yes. The next question is from the line of Hitesh Goel from [indiscernible] Capital.

My question is related to actually when I was seeing the Q-on-Q growth in revenues, right, it is 10%, right? But you see Maruti's production in this quarter, that's sort of double digit on the models that you supply to, right? And you had Kia Syros also coming through, which has done around 15,000, 16,000 in this quarter, right? So that itself adds INR 15 crores to the revenue. So can you explain -- my belief is that your revenue numbers are INR 15 crores less than what we had expected. So what am I missing here?

So the Kia Syros, I think the artificial leather didn't sell as much as the fabric. We have both. So that is why the ramp-up has been slightly slow. And in terms of the Maruti vehicles, we are on -- Maruti should be in line. I think Maruti numbers should be quite accurate.

Yes. No. So basically, you're saying the content in Syros was not 10,000, which you had indicated.

So we have artificial leather and fabric for the Syros. Artificial leather didn't sell as much as the fabric. So artificial leather, the content is a lot more. So that is why the numbers -- the INR 20 crores didn't come into play for that.

And this artificial leather is going to come in from next quarter or...

Yes, it looks like it. It depends on how the customer pull is.

Okay. And on the EV side on Maruti, that is also delayed, right? So have we started supplying? Have they started exporting EVs now and you started supply?

I think they're starting it any day. They haven't started it yet. So as soon as that comes -- so that's not part of our current revenue, neither is the shade part. I think the shade is about INR 20 lakhs came last quarter. So all that will come next quarter or the quarter after.

Yes. So you said will probably come in the second quarter of FY '26, right?

Yes, subject to the ramp-up.

Okay. And in terms of basically INR 2,000 crores order, you had actually talked about around INR 1,200 crores, INR 1,300 crores revenue. INR 1,200 crores revenue, I think, FY '28 or something, right, based on the order book that you've given. And from there, has there any -- and now you're talking about INR 3,000 crores. So basically, a big part is also coming from the Toyota plant in Aurangabad, which is going to start from FY '27 where you are supplying?

Aurangabad plant is probably going to start in 2028, 2029. We don't have any orders for that right now. That is going to be in addition to our existing order book.

So this INR 3,000 crores revenue includes that number or no?

Yes, that will improve.

That is including Toyota.

Including all our plants, all our products, all our joint ventures.

Okay. And my final question on Kia. So basically, is there any more orders that you're winning on Kia future models? Anything which is up?

We are quoting some new orders. Once something happens, we'll let you know.

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

I joined a bit late. Sorry for any repetition. But sir, firstly, in your presentation, you have alluded to your 2030 vision. wherein you have articulated about our revenues. I'm audible, sir?

Yes.

Yes. Where you have spoken about revenues touching INR 3,000 crores and ROCE at 25% plus. So if you could give us some more color. already you have mentioned about the 3 factors, the expanding and the deepening of OEM partnership, portfolio expansion and doubling of capacity in the next 5 years. Just more color to it? And how will this gradual move of INR 3,000 crores happen? If you could just give some more understanding on the same, sir?

So what we've done, we made the 5-year plan. I don't think we're going to make it public, but we can discuss the details offline. In terms of the INR 3,000 crore mark, INR 2,000 crores, we think we can do it from an organic business. That is just by doing seeds, BIW without any joint venture. And the additional INR 1,000 crores that we want to do an M&A for or we want to do additional joint ventures for that could ideally be new products or new customers that we're looking to acquire.

Okay. So total is INR 3,000 plus INR 1,000 crores, that is INR 4,000 crores top line?

So INR 3,000 crores is what we're trying to do, including any joint ventures and acquisitions. For joint ventures, we'll add the share that we have. So if there's an acquisition, we'll add 100%. If there's a 50-50 joint venture, we'll add 50%.

Okay, sir. Sir, about our EBITDA margin and in fact, the net profit margin, what steps are we taking? I think so we are at the higher single digit for the net profit margin at closer to 8% and EBITDA at 11%. So how will this -- Yes, please.

So EBITDA margin should be similar. It should be anything between 10% to 12%, subject to some businesses we have to take a strategic pricing, some we take at a better price. And then there's a lot of cost-cutting measures that we're doing. But we think the margin -- EBITDA margin should be at 10% to 12%. In addition to that, there's not much depreciation or interest. There's not much CapEx that we're doing in the next 2 years. So we -- our depreciation and interest shouldn't add too much. So our PAT margins should improve.

Okay. So now closer to 9% is what -- similar to that 8.5% to 9% should be our trajectory that we are going to transfer going ahead?

So consolidated PAT margins, yes, I think that should be okay.

You have also spoken about some nonproductive land in your presentation. So if you could just throw some more color what is the size of the land where located? And what are we trying to do with this land going ahead?

So for Aurangabad, we've acquired 26 acres of land, that is for Toyota. We've announced a joint venture with Hayashi Telempu. So that we're trying to expand that. We are also under discussion with 1 or 2 more companies what we can do for Toyota. In addition to that, we want to replicate our heating business. In addition to that, we have about 10 acres in Karkhoda. Once Maruti Suzuki starts scaling up, then we will set up a facility over there.

Okay. So all this land will be our -- will be asset going ahead? That is what you are...

So it's an investment for future business. Yes, that is correct. Okay.

Right. And sir, for the dividend distribution part, this year, I think so we paid around INR 2.75. So we have provided this dividend distribution policy, 25% what percentage will be shared with your investors?

So it's about 10% to 15% of payout ratio, and we stick to that because we see many growth opportunities.

Okay. And lastly, sir, for the new JV, if you could just -- for the sake of repetition also, what are we eyeing in terms of revenue from the recent JV, which we announced today? And when will this see the -- how long -- what is the duration? And how will the scale up happen, sir?

So the JV's production starts, I think, July 2027. We've got our first order for ambient lighting. Over 5 years, we want to take it to about INR 300 crores.

Congratulations on a good set of numbers, and we look forward for the continuity of operations.

The next question is from the line of [ Samraj Jadhav ] from Wealth Advisors.

So my question is on EBITDA margin. There's an increase in EBITDA margin. So what steps we have taken for the increase basically? Is it due to raw material prices, any cost cutting? What is this?

So we focused on a little bit on raw material prices. We focused on negotiating with vendors because our volumes have increased. We've also focused on personnel cost. We've focused on productivity improvements. We've reduced our overtime. So all across, we focus on.

And my second question would be out of our total volumes, how much is domestic and how much is export?

So we supply to the OEM. I think we can just bifurcate from them what is the domestic and the export volume.

The next question is from the line of Divyansh Gupta from Latent Advisors.

A couple of questions. I joined in a bit late, so it might be a repetition. If I look at year-on-year growth, right, from INR 176 crores to INR 192 crores, what would have been the, let's say, the volume growth in the number of seats that we would have manufactured and sold? And the second related is that given that Kia has would have also happened in full quarter for March, is there any reason for only 9% growth?

Yes. So the volume growth, I can share with you, maybe I'll share that with you after the call because I don't have that top of my head. Kia -- the fabric variant sold a lot more than the artificial leather. That's why the numbers are slightly lower. Going forward, hopefully, the mix comes back and the numbers should become back to normal.

Got it. Got it. And the second question one was this -- the JV that we have announced today. I understand FY '27, it will start and there will be initially, let's say, some margin drag. But what will be a long-term margin for this business? Is there any visibility that you have?

Yes. So EBITDA margin should be similar, about 8% to 10% or 10% to 12%. I think that's what we're going to focus on.

Got it. And the third question was of all the products that are mentioned in the slides, like silencer, seals, undercover and fenders, this JV -- under the JV, you can do all of this. It's more about winning contracts with the customers. Is that the right way to look at it? And Ambient is what we have [indiscernible].

So it's important to see where the opportunity in each customer. Based on that, we will pursue the product.

But under the JV, you have access to all of these product manufacturing.

Yes, we have access to all the products.

The next follow-up question is from the line of Jatin Chawla from RTL Investments.

When I look at the quarterly employee cost number, that's jumped from like a INR 5 crore run rate to INR 6.5 crores. So does this include the ESOP cost? I think we had created an ESOP pool last quarter.

No, that doesn't include the ESOP cost.

So then what is driving this significant increase on a quarter-on-quarter basis?

So we're hiring people for growth opportunities. I think that's the reason why it has increased.

Got it. Got it. And you said this Hayashi JV will start in July '27. So this production will start in Aurangabad or will this be at some other -- one of your existing plants?

So this will be in an existing plant in Bangalore.

Okay. got it. Got it. And when you say this will be INR 300 crores to INR 400 crores over a 5-year period, that 5-year period you're saying from July '27 or from today?

From SOP, from July 27.

From July 27. Got it. And this Kia number, so if you assume that the ratio of fabric to artificial leather remains what it is right now, then versus our earlier expectation, I think we were expecting about INR 8,00 crores. How much lower could the number be?

So it was -- I think we gave the number of INR 80 crores before. if the ratio reduces or there's a lot more fabric, then it will probably be maybe INR 60 crores or INR 50 crores out of the INR 80 crores. But usually cars, the top-end variant tends to sell more.

The next question is from the line of Bijal Shah from RTL Investments.

Congratulations on great numbers. I have one question on -- you talked about INR 3,000 crores of revenue. So what would be your CapEx requirement through 2030? And would you need to raise capital through equity in this for your working capital requirement as well as your CapEx requirement?

So, no plans to do a fund raise right now. But yes, if we do require a CapEx plan, then we can share that off.

Okay. So that is not ruled out. There is a possibility that you might require?

No. At the moment, no plans. But if we go very aggressive with some high fixed to turnover businesses that we're scaling up, then -- sorry, low fixed asset turnover businesses that we're scaling up, then we might look at something. So at the moment, we're debt-free, we have about INR 80 crores of cash. So we're quite comfortable to grow organically with internal accruals.

And sir, another thing, you're looking at revenues going up so much, in fact, without much of CapEx or existing facility going up. So why your margin guidance is so conservative? Typically, we see margins significantly expand this kind of revenue growth which you are.

Because we'll have to take some businesses at a strategic call, they'll be lower-margin businesses. There will be some new products that might be lower-margin businesses, some might be higher-margin business. So let's see. So now let's stick to this number if our margins increase, and I'll give a guidance.

The next question is from the line of [indiscernible] Chheda from Purpeilvan Vertex Ventures LLP.

Congratulations for the strong results. Sorry, sir, I'm new to this company. I just wanted to understand, I heard this INR 3,000 crores vision. By when are we targeting to achieve this? And...

It's a 5-year plan, so by FY '30. That's our plan.

FY '30?

Yes.

Okay. Okay. And broadly, operating margins, you seem to be suggesting the current 10%, 12% range broadly is sustainable?

Yes, that's sustainable. That's what we're targeting.

Okay. And sir, I don't know if you would be open to this on Bharat Seats, just trying to understand what could be your vision for the next -- similarly, like you have for NDR Auto, what would be your vision for Bharat Seats be? And how do you look at it as in terms of revenue potential 3, 5 years down the line and operating margin?

So that should also be something similar around INR 3,000 crores. That should be our vision and margins should also be similar to what it is right now.

About 6%, 7% there?

Yes, 6%, 7%.

That this 6% is sustainable. My understanding was, and correct me if I'm wrong, sir, that now the pricing on the seats could likely improve in line with the global average is what I've understood. Is that correct? And if that is correct, whether operating margins may have some bit of an upside potential on this?

So obviously, seat is getting premium. There's artificial leather coming, there's power units coming, there's ventilation seats coming. The seatbelt reminder sensors are coming in. But that should impact -- our margin should still be similar. Let's see. So some things will be directed, some things we will try to do in-house. Depending on that, we take a call, but our margin should be similar.

So for now, you would say that similar margins what at best we should be guiding for?

Similar is a fair number.

Okay. And sir, just last query on my end. And I have -- and this may be incidental, but I've come across a couple of tax notices, demand, et cetera, frequently across India as well as Bharat Seats alongside the search operation, et cetera. I mean what's the sense on these frequent notices that come up, I mean, in general?

So we have legal opinion for that, and we'll be challenging that.

Right. And we are fairly confident, of course.

We are fairly confident.

The next follow-up question is from the line of Hitesh Goel from [indiscernible] our Capital.

My question is related to the new hires that you've done, right? You have Mr. Rajiv Arora coming from UNO MINDA Group and also Vikram Rathi coming from UNO MINDA. So what has been Rajiv's focus basically in the company? Is it getting new JVs on board or basically he has very excellent relationships with the OEMs, right? Can you explain, I mean, what was the previous role in UNO MINDA and what you -- want are the [indiscernible]?

So he was business head and then Mr. Rajiv was domain finance head. They are focusing on the execution. And so in terms of the relationships, we already have multiple relationships across country. So we are looking to monetize those relationships.

So basically, promoter family, I know has a lot of already relations with the OEM. So Mr. Rajiv Arora is more focusing on operations or basically on getting more JVs, getting new products. That was my question actually.

Both sides actually focusing on both.

The next follow-up question is from the line of Saket Kapoor from Kapoor & Company.

So when we see the capital work in progress, closing balance of INR 27 crores. If you could just give us INR 28 crores rather, you could give us for which projects they are and when they are going to get capitalized. And for the next financial year, what have we outlined in terms of the CapEx amount?

So for the capital work in progress is for the new EV project, the tooling for it and the new BIW project, I think we're starting in July and August. In terms of CapEx for next year, we should be -- we should have a CapEx of about INR 20 crores next year and INR 20 crores the year after at the moment.

But this year, when we look at the cash flow from investing activity, it was closer to INR 48 crores that we have spent, including the capital work in progress. So this figure will be lower for the next financial year to INR 20 crores.

Yes, that should be lower by about INR 20 crores. There's some tooling that we invest that goes into capital work in progress, but our customer tends to give it back -- reimburse us for that.

Sir, come again.

So the tooling that we invest in, that also goes into capital work in progress. But the customer, once the production starts, they reimburse us for that.

What should be that amount, sir? Can you quantify?

I don't have that off hand, but I can share that with you.

Okay. And sir, also, we have seen appointing the Big 4 as now the auditors. So that is also a commendable move. So we congratulate the management and the promoter for taking the initiatives should give us -- more endorsement, sir, that we have taken Big 4 now on board.

Thank you.

And we hope for good times ahead.

The next follow-up question is from the line of [indiscernible] Chheda from Puralvan Vertex Ventures LLP.

Yes. Sir, I just wanted to understand whether -- I mean, my understanding is clear. I mean, majority of the revenues or sales for Bharat Seats is effectively Maruti Suzuki only. And so they're both intertwined. And more or less, the proportion or the percentage revenues from other than Maruti is fairly limited. Is that correct?

So Bharat Seats, all the sales are through Maruti Suzuki.

Okay. are all for Maruti only?

100%.

Okay. And for NDR, the proportion would be majority Maruti and some others? Or how would that be?

So it's maybe it's about 70% at the moment, 80% is Maruti. 70% is maybe Maruti Suzuki and then there's some Toyota and there's some Kia that we started.

Understood. So predominantly Maruti, 70%, 75%.

The next question is from the line of Ashok Shah from [indiscernible] Capital Advisors LLP.

Sir, any reason for keeping 2 listed company in sitting business for merging? Or do you have any plan to merge in future years because business are overlapping in both the...

So no plans to merge the 2 entities. They've been historically listed, and we want to keep both of them as a listed company.

And sir, after 30 years, we have listed Bharat Seats on National Stock Exchange. So any reason specifically? No, we wanted to increase the liquidity and some more visibility in Bharat Seats also.

The next follow-up question is from the line of Jatin Chawla from RTL Investments.

Just one question. So when I look at Bharat Seats numbers, Q-o-Q, the revenue is up almost 30% and Y-o-Y even more. And since that is largely to Maruti, as you said. Is NDR's Maruti business also up in the same proportion? Or is there some business for Bharat Seats, which is not done through NDR?

So in Bharat Seats, in addition to the seating business, we started some tire and wheel assembly business. So that is the reason for the jump. And whatever seating business that comes in Bharat Seats also comes in NDR Auto. So that's a new vertical that we started in Bharat Seats.

As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.

Thank you for your time and participation. We continue to be optimistic about the opportunities before us and look forward to sharing these with you as we move forward. Should you need any input or clarification, please write into us or our Investor Relations partner, CDR India. Thank you.

Thank you. On behalf of NDR Auto Components Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.