PPAP Automotive Limited (532934) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 FY '22 Earnings Conference Call of PPAP Automotive Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Jain, MD and CEO. Thank you, and over to you, sir.

Thank you, Margaret. Good evening, ladies and gentlemen, and very warm welcome to today's conference call for discussing quarter 2 and first half of financial year '22 earnings of the company, PPAP Automotive Limited. My name is Abhishek Jain, and I am the Managing Director and CEO of the company. Also joining me is Mr. Sachin Jain, who has been elevated to the position of CFO in the recently held Board meeting.

Good afternoon to all.

I hope that all of you and your loved ones are safe and doing well. I hope that everyone is taking adequate precautions and following COVID-appropriate behavior to limit the spread of the infection. I also sincerely hope that everyone is getting themselves vaccinated at the earliest opportunity. In our group, we are happy to inform you that more than 95% of our people working at operations have been fully vaccinated. Ladies and gentlemen, the past 1.5 years has been very tough for everyone, both personally and financially. The COVID cases are on the decline now and thanks -- all thanks to the mammoth vaccination drive being conducted under the able guidance of our Honorable Prime Minister. We express our sincere gratitude to our government, vaccine makers, health workers, transportation companies, essential service providers and everyone else for their tireless and selfless effort in ensuring the safety of everyone in this -- of the entire nation. I hope everyone has had a chance to go through our investor presentation, which includes the strategy for making the company and the subsidiary companies stronger, resulting in higher growth going forward, along with our financial performance for the quarter and half year ended September 30, 2021. I want to start today with a brief overview of the company. The company was established in 1978 and entered the automotive component business in 1985 with the start of operations of Maruti Suzuki in the country. Since then, the company has been expanding its customer base and adding new products to its portfolio. The focus of the company is to become a global level excellence company, which can inspire people to outperform their potential in order to exceed the expectations set forth by our customers, the society as well as all stakeholders. The company's state-of-the-art manufacturing facilities are spread over 4 states: Uttar Pradesh, Rajasthan, Gujarat and Tamil Nadu. In the past 2 years, we have been able to restructure ourselves internally for the purpose of achieving higher growth going forward. The company has identified 5 verticals which it will focus on. The first vertical is the automotive part business, which is the core business of the company. PPAP is already the leading manufacturer of automotive sealing systems, interior and exterior automotive parts in India. The company also has a JV with Tokai Kogyo for manufacturing of rubber automotive sealing system. The products manufactured by this vertical are all engine-agnostic products and can be extended to the electric vehicles as well. This vertical today manufactures over 1,000 different SKUs and ships over 200,000 parts every day to its customers, which include all the major OEM manufacturers in passenger vehicle space, like Maruti Suzuki, Toyota, Honda, MG, Volkswagen, Hyundai, Kia, Tata Motors, Renault Nissan, Isuzu, along with their Tier 1 companies. The company also supplies products to Suzuki motorcycles and a few Tier 1 companies for the 2-wheeler segments. We have always believed that latest technology plays a pivotal role in the overall business. And with this underlying thought, we have a technical collaboration with Tokai Kogyo Japan since 1989 for development and manufacturing of automotive body sealing systems. Also, we have a technical collaboration with Nissen Chemitec Corporation since 2007 for development and manufacture of interior and exterior injection-molded products. The company also tied up with Tokai Kogyo Seiki for manufacturer of tools and dies. In order to become Atmanirbhar, we have developed our in-house team as well, and we have the required infrastructure to do part designing, tool designing, manufacturing of these tools and validation capability for all the new products that are made by the company. Now we have an established team of engineers who are developing cutting-edge technology, focusing on the long-term customer requirements. In this vertical, we are continuously [ seeking ] for new customers and increasing our per car value for the existing customers. We have already opened 3 new sales offices in Gurgaon, Pune and Chennai region in order for the team to be closer to the customer. We are currently in the process of expanding our facility in Chennai and some -- and adding some machines in our Pathredi plant. We are also investing in new technologies, both on parts side as well as the process side, to further develop the technology progress for the company. We are on track for -- in developing approximately 400-plus parts for our customers, which will be in production in the next 2 years. As you know, the Indian automobile industry has been grappling with semiconductor shortage. The global semiconductor supply constraint continues to be a challenge, resulting in lower production across the industry. The demand for vehicles has come back. However, the supply side issues continue to impact the industry. We expect things to improve on ground and drive in auto sales once COVID scenario is normalized. During the quarter under review, due to the ongoing semiconductor shortage, the sales for this vertical was impacted due to reduction of production by the OEM customers. Rising commodity prices continue to be a challenge for the bottom line of PPAP as well as the joint venture company PTI. Ladies and gentlemen, the second vertical for growth is the aftermarket business. This is a new area of growth for the company, which is being rolled out in the 100% subsidiary company called Elpis Component and Distributors Private Limited. The focus for this vertical is to develop and supply spare parts as well as premium car accessories and cleaning products. Currently, the company offers 250-plus products as spare parts and 50-plus products for accessories. The company has already set up its presence with 60-plus dealers located in 35 cities. The company has also established its online shopping portal, shopelpis.com and also we are selling through Amazon India. If you are an Instagram user, please like and follow our page, which is known as Elpis Auto. The third vertical for the company's growth is Pail container business. This business was done out of identification of products for which we can utilize the spare capacity of our injection molding machines. We have started supplying these containers to the agriculture-based industry. We already have 5 products to offer, and we are developing 15 more products in order to expand to adhesive, paints, FMCG and lubricant industries. The fourth vertical for exponential growth is the electric vehicle industry. We have established a new subsidiary known as PPAP Technology Limited to focus on this enormous opportunity. As you all know, the 2-wheeler industry is going through a massive transformation to EV vehicles. The expectation is that more than 50% of the industry will switch over to electric vehicle in the next 5 years. We have also made some headway in developing battery packs for this industry. Our in-house design and development team is currently working on 8 battery packs for our customers. We have already established 1 assembly line, which has the capacity of 125-megawatt hour per year or 20,000-plus battery packs per year. This subsidiary will also focus on development of battery pack for storage applications like solar streetlight, mobile towers and energy storage solutions. Currently, we have 3 customers in the EV 2-wheeler segment and 6 customers for solar streetlight solutions who we are supplying to. We are seeing a lot of traction in this vertical and a lot of interest from the customers. We are very confident that this vertical will show promising growth going forward. Since this is a new company, the breakeven is expected to reach by March 2022. The fifth vertical for growth is the commercial toolroom for manufacture of plastic injection molds. Currently, this vertical can design and develop molds of size up to 1.8 meters. This vertical can manufacture 80-plus molds per year. This division manufactures molds for our automotive part business also. Apart from this, we have 3 other customers in automotive segment, 3 in white goods segments and 1 in medical segment. Due to global logistic problems, we are seeing a lot of traction in this vertical from customers, not only in the automotive segment, but in white goods, electrical goods, medical goods and other segments as well. Basically, what we feel is that most of the companies who are buying exclusively from China have changed their policy to China Plus One and that is why this business will have a huge opportunity for us going forward. Now let me throw some light on the financial performance and key developments as on quarter 2 and first half of financial year '22. For the stand-alone company, the revenue grew by 25.2% from INR 82.9 crores to INR 103.8 crores in the quarter under review. Revenue witnessed a sequential growth of 32% on a year-to-year basis. The EBITDA stood at INR 11.7 crores, with the company achieving an EBITDA margin of 11.3% in the quarter under review. PAT has turned positive at INR 2.6 crores compared to a loss of INR 3.3 crores in the first quarter of the current financial year. 95% of the revenue is derived from sale of parts, whereas balance is derived from sale of tools and others. Maruti Suzuki continues to be the largest customer of PPAP, and it contributes 34% to the overall revenues. PPAP has also started supplying extrusion and injection molding parts to MG's newly launched SUV, the Astor. During this quarter, we have also received The Machinist Super Shopfloor Awards for 2021, which is organized by the Times of India Group, in the category of maintenance for the financial year 2021. The capacity utilization has improved from 54% in the first quarter to 67% in the second quarter. Our aim is to improve capacity utilization levels going forward and achieve operational efficiencies. For consolidated PPAP, our aftermarket subsidiary, the Elpis Component Distributors Private Limited, has turned profitable and contributes positively to the overall financial performance of PPAP. The EV component subsidiary, PPAP Technology Limited, being a new company, is yet to achieve breakeven and is expected by March 2022. The performance of the joint venture company, PPAP Tokai India Rubber Private Limited, known as PTI, continues to be subdued due to the reduction of volumes due to semiconductor shortage as well as unprecedented increase of commodity prices. Just to summarize, the company is now poised for higher growth and has identified 5 areas, which I have mentioned earlier, for creating a mark for itself and establishing itself as a global level excellence company in India. Till now due to unprecedented market conditions, the growth has been hampered. As soon as the market conditions get corrected, the company will return to its former glory. Thank you, everyone, for your kind listening. I apologize, today's explanation has taken some extra time. We will be more than happy to answer to any questions that you may have. Over to you, Margaret, to manage the question and answers. Thank you.

[Operator Instructions] The first question is from the line of Raj Joshi from Ace Securities.

Sir, I believe PPAP had done its earnings call maybe a couple of years ago, so this is a good factor that we have commenced with the earnings call again. And I hope it will be a regular exercise every quarter going forward. So my question is, what has changed in the company over the last couple of years? And what are the underlying parameters driving the change?

Yes. Thank you, Mr. Joshi. First of all, I'd like to apologize for not being able to organize these conference calls for over 1.5 to 2 years. The reason for that was primarily we were busy in restructuring ourselves for achieving this higher growth. As you know, since 2019, the automotive industry, something or the other has been happening. First, the industry went down; then when we were supposed to have good sales and the market demand came back unfortunately we were hit by the pandemic. So first lockdown happened. Then during the time it was recovering, again, we were hit by the second wave. So again, lockdown has happened. And now that things are coming back to normal, again we're having the semiconductor shortage problem happening. So since 2019, something or the other is happening in the automotive industry. So in 2019, basically, our entire leadership team, we got together and we brainstormed on what do we need to do to overcome this kind of disturbance in top line and bottom line, which is happening for the industry. So our prime focus was that how do we derisk ourselves and start expanding our customer base and how do we exploit more -- exploit the know-how which we already have in the company. So that is when all these 5 areas -- that is when we started dividing the company into these 5 verticals to realize the hidden potential of ourselves. And that is why our primary focus came on developing aftermarket for our products so that we have a larger customer base to deal with. Then because we were already focusing on injection molding products. So we thought why not have some -- develop some products in the neighboring industries for achieving higher growth. That's when the Pail business started. Tool business, we were already doing in the company since 2008, but that was primarily for the captive purpose. So we thought why don't we commercialize this and develop more opportunities for ourselves. Then at the same time, this whole buzz for electric vehicle components -- electric vehicles was going on. So we then thought we should definitely try and make some dent in the market for electric vehicles as well. And that's when we decided to launch this electric vehicle company. So it's taken us about 1.5 to 2 years to figure out all these things and to restructure ourselves. And during this time, lot of changes have happened in the company, lot of different ways of working have been established. Leadership changes have happened. Organization changes have happened. So it took us about this much time to organize ourselves. And now that we are ready with the strategy, now we are ready with our reorganization, we are ready to achieve this higher growth, now we will continue with the quarterly conference calls and make sure that every quarter we get on this call and explain to everyone what has gone right in all these 5 verticals, what has gone wrong, where we are today, what has happened, so that we are all on the same page going forward, and we share honestly what is the good part and the bad part, both, with everyone.

[Operator Instructions] The next question is from the line of Varun Gupta from Augmenta Research.

Sir, I have 3 questions. Going with the first one, I wanted to check like what percentage of increase of raw materials are you able to pass on to the customers? And how much of it is absorbed by the company?

Sorry, Varun, you have 3 questions, right, you said?

No, I just -- okay, you wanted me to ask all the 3 questions together?

Yes, yes, please.

Okay. The second question I have is what would be the average content per vehicle? And so what are you targeting that content per vehicle to be going forward in the next 1 or 2 years as far as you can give the guidance. Also, the third question, is there some cost [ pass-through ] that happened from the company to the customers? So how do we see the revenue growth? For example there might obviously be a proportion of the revenue growth that's purely coming from the perspective of [indiscernible] and there also might be a certain portion of the revenue growth that's is clearly coming from the…

Varun, your voice is not clear for the third question. Can you please repeat it once again, to understand what you're trying to say with the third one?

Sir, am I audible now?

Mr. Gupta, I would request you to speak on the handset mode and come a bit closer to the phone, please.

Hello? Am I audible now?

This is much better. Please go ahead now. If you can please repeat your question as well.

Yes. So my third question is this, obviously, some -- there's some cost pass-through to the eventual customers, there's some part of the revenue growth that might have been come -- that might come from that side. And there also might be some part of the revenue growth that's coming from your pure growth and not from your cost pass-through. So if you could give the bifurcation of that numbers? For example, if you grew 20% in this quarter, 10% of it might be a factor of your increase in prices towards the eventual customers and 10% might be due to the pure growth you had in terms of customer offtake. So if you could give me that numbers, please?

Thank you, Varun, for your question. So about the raw material percentage increase and compensation. So it is like 50%-50%; 50% is being compensated by the customer. And right now, the 50% cost increase or the decrease is to be taken care by the company itself. So -- and the second question is regarding the average content per vehicle. So it varies customer to customer. And for Maruti, it is between INR 2,500 to INR 3,000 in a [indiscernible] level. And for Honda, it is more than INR 7,500. So it varies across the customer. And the third point, the cost revenue growth. So cost revenue growth, if you see, I think, in Q2, we understand now the commodity prices are at peak. So in the next 6 months, the growth mostly would part only in terms of the volume increase, not in terms of the cost of revenue growth. And as per the industry announcement or the ICA Reports there are -- India Ratings report there are chances that the auto industry would grow around 15% to 18% in this financial year, factoring the semiconductor and other things. So on the same line, we are also looking to have growth in second quarter -- third and fourth quarter.

[Operator Instructions] The next question is from the line of Kunal Koladiya from Anova Capital.

Hello, hello?

Yes, please.

Sir, I have a few questions, if I may. Sir, my first question pertains to our aftermarket subsidiary. So as you mentioned that it has turned profitable. So I just wanted to understand that what is the percentage of growth we expect from this segment going ahead? Like if you can give some guidance for FY '23.

See, this is a new focus for us, which we started last year only. So currently, I mean the growth -- year-on-year growth is hopefully exponential because we are going very aggressively towards this opportunity which is available to us. In about 3 years' time, we expect aftermarket business to roughly contribute about 5% to 8% of the total business what we have for automotive parts.

Okay, okay. Any FY '23 per se guidance you would like to provide from this segment?

I've already told you that this is a new segment, and this should contribute 5% to 8% in the next 2 to 3 years.

Okay. No worry, sir. Sir, my next question is about our EV business. So I just wanted to understand that who are our customers and like have we started supplying any components to the players like Ola Electric or Ather.

In the EV business, because we are developing our own technology -- and this has just started about a year back. So currently, we have some makers who are making electric cycles. And 2 customers we have are making 2-wheelers, which are located locally in this Uttar Pradesh region. So total, we have about 3 customers for mobility. Right now, we're not doing any business with Ola or Ather or any of the established ones. It's too soon for us to do this business because we are still in learning phase. We're still trying to develop the technology. So we have 3 customers right now who we are doing business with and a lot of places, I'm not at liberty to disclose those information to you today. But we have supplied a lot of battery packs for testing purpose, and those are under evaluation. So as soon as the results come out, we can start supplying to some good -- some other makers as well.

Okay. Sir, and in continuation to this question, like as you mentioned in your opening remarks as well that the EV segment has an exponential growth opportunities. So are we targeting or planning to do some inorganic expansion in terms of technology in the near future to expand this business segment?

See, inorganic growth, we're not going to say no to it right now. But our current focus is on developing our own technology, first. Establishing ourselves in this segment because it's a very new segment for us. And it takes time to learn the tricks of the trade. So we want to first get a feel and develop our knowledge for this business and then start thinking about inorganic growth. So we are [ close ] to it. But currently, we don't want to focus on something which we don't know. First, we want to establish the know-how, establish our learning curve and then go aggressive on it.

Okay. Sir, and one last question, if I may. So are we looking for any CapEx in the coming year? And if any CapEx we have done in FY '22?

You are talking about the EV segment?

No, no. So overall, overall business.

Yes. On the overall basis, if we talk about the PPAP and subsidiaries, so there would be the probable CapEx about INR 60 to INR 65 crores in this financial year that we have planned. But further, it will also depend how the things shape up in the coming months.

So in FY '22...

Till now, we have spent around INR 22 crores.

Okay. So the balance 40 -- approximately INR 40 crores will be spent in the [indiscernible].

Next 6 months. And out of that...

FY '22, right?

Yes, yes.

Okay. And in FY '23, do we have any targets?

There's no target as such. It depends on how the business is going to develop. So we are very -- we stay very safe when we talk about CapEx in the company. So we have some plans, but we're going to wait and see how things are developing and then maybe then take a call on what requires to be done.

[Operator Instructions] The next question is from the line of Nisha Desai from Raga Securities.

I have a few couple of questions. Basically, firstly, the company has achieved a capacity utilization of around 67% in quarter 2 FY '22. So what will be the level of capacity utilization we can expect for the rest of the year?

See, if the projection growth which has been anticipated by the market, that has happened in Q2, so end of the March we will be able to achieve the capacity utilization of around 80%.

Okay, okay. My next question is on the EV segment. Basically, apart from the battery pack, do we manufacture any other components?

See, whatever we are making in the -- as the traditional components, so all those parts are applicable for the EV segment as well. So what we are actually trying to do is we are engaged in cross-selling of product portfolio with all the customers. So when we talk to an EV component -- EV maker like a 2-wheeler company who is making electric vehicles, apart from selling our battery pack, we also extend our portfolio for plastic injection parts. And there are some components which go from extrusion side also. So we try to do that. And then these plastic injection molding parts, they require tooling also to be made. So we cross-sell our tooling division also to them to make those tools. This whole bouquet of products is what we offer to the electric vehicle makers. So starting with the tooling required for the plastic products, the plastic products itself, then some sealings which is required and then, of course, the battery pack, which we are making.

Okay. Sir, my other question is, if you could throw some light on what is the estimated opportunity in the aftermarket business?

See, this is -- this has been an untapped opportunity for us. So we are rolling out our products. We are introducing lot of new products for the aftermarket, especially. So there is a big opportunity available to us. And that is why we are saying that this division should contribute about 5% to 8% of our business in the next 2 to 3 years.

Okay. Sir, lastly, my question is, I mean, what is the company's top line and bottom line growth forecast for next 3 to 5 years perspective?

I'm sorry, -- that's a forward-looking statement. So very difficult for us to give you that answer. But like I was explaining in the opening remarks that these 5 areas, we've restructured ourselves 5 verticals. We have separate teams who are working on the business development side and on the operations side to grow all these businesses. So I think in the next 2 to 3 years, our top line should be very different from what it is currently on a stand-alone basis and on a consolidated basis.

[Operator Instructions] The next question is from the line of Amit Shah from Ace Securities.

Sir, I have a couple of questions. So firstly, which are the products added to our portfolio -- product portfolio? And are we planning to venture into any other product segments?

Sorry, product added to the portfolio?

Product added to our portfolio, new products or...

I think if you look at our investor PPT, which is available, so it clearly shows on one of the slides. Very difficult to explain you over the phone. But if you refer to, I'll just tell you the slide number. Slide numbers, 21, 22, 23, 24, 25. These 5 sites they give you -- you can see the product portfolio, which is being offered by the company now.

Okay, sir. I'll go through those slides, sir. And sir, any -- and any product segment that you are planning to venture?

Amit, we've just covered like these 5 different verticals, we've divided ourselves up, and we are -- in each vertical, we are launching new products. So injection molding toolings, we are adding battery packs. We've started then the pail containers. We've started in -- then complete new segment of aftermarket has been started. And even in automotive products, we are making our -- we've launched a couple of new products, and we are developing new technologies now so that we can be self-dependent and launch more products which the customer wants in the future.

Okay, sir. Sir, and lastly, sir, what is the share of value-added products currently? And what will be its share, say, a couple of years down the line?

Amit, I'm not sure what we -- do you understand what is the meaning of value-added products?

Sir, so value-added in the sense, sir, premium product, if you say.

Well, each customer is thinking of that. Our target is to delight them with our products and services. So I don't know if we've never differentiated between a value-added and a nonvalue-added product. For us, it's essentially meeting the customers' expectations. So all the products are value added for us.

The next question is from the line of Nitin Gandhi from KIFS Trade Capital.

Can you share something on your long-term contracts for auto parts? They must be for 2 years, 3 years, and what's the overall value? And if you can give some color more in detail for them.

Nitinji, what do you exactly want to know about long-term contracts?

So each of the vendors, OEM, you have long-term contracts with them 2 years, 3 years for particular model and something. So collectively, all this put together will be how much? And how is it shaping last 1 year back? How much was it? And how much value -- order book value addition you have got in last quarter?

See, our basic contract for the -- for any part that we are developing for an OEM customer is for the life cycle of the vehicle. So first, now every 4 to 5 years, customer changes the complete model. So this life cycle used to be 6 to 7 years earlier. Now it has come down to 4 to 5 years. And then we have contract with them to supply spare parts for 15 years more. So for any part that we are making for an OEM customer, it's a 20-year life cycle, which we need to manage. Regarding the order book, currently, we have around 400-plus products, which we are developing. And I think if I'm not wrong, we are working on around 40 different projects with putting all the customers together. Some for Maruti, some for Honda, some for MG, Hyundai, Kia, Toyota, everyone put together. So they are currently working on 40-plus projects for everyone.

But can you share something on our total value of the long-term contracts? Maybe 5 years, 7 years, whatever it is.

Total value, we don't have the data with us right now, but we can get back to you on that.

Okay. Can you share something more on Isuzu and MG Motor contracts, how big they are?

No, Isuzu, MG Motor, same contract in there. This 15 to 20 years life cycle, first 5 years -- 4 to 5 years for the OEM business and then for the spare parts for 15 years.

Okay. Let's shift to some other non -- other than this [ auto ] other 4 verticals, can each of these verticals be giving you INR 25 crores, INR 30 crores plus revenue in 3 years' time, sir?

Sorry, I didn't understand.

Can -- this all 4 verticals other than auto, which you have shared that is Pail container EV and commercial tooling. Because for aftermarket, you said INR 25 crores to INR 30 crores is potential in 3 years. But for other 3 business, can you share what is the potential at the end of 3 years from now?

What I can say is that we are quite confident that this will be significantly adding to the top line of the company going forward.

What about your investment of roughly INR 50 crores in this JV, which is not yielding any returns on date? Can you share something more on that? How you propose to bail out? And how you -- when do you think that within 2 years, 3 years' time frame, can you have 10% return on this investment?

See, the program is that the JV is very similar to what we have in the PPAP Automotive part business. But we've -- the problem is twofold basically in that company as well. First is the top line, which has gotten reduced because of the semiconductor shortage happening this year. So that has resulted in a drop of sales because of which the fixed cost is not getting distributed -- getting distributed on smaller scale now. And second problem is what I was talking in the opening remarks as well is the high commodity prices which are happening. So they have really played havoc in that company as well similar to what PPAP has faced. So we hope that once this supply constraint of semiconductor is gone and the demand of the production increases for vehicles, top line will increase in that company. And right now, it is very difficult to say about the commodity prices getting corrected. But we have decided that we will start our discussions with our customers on how to arrive at a win-win situation to make sure that both are a win-win thing going forward.

What is the previous best revenue in a quarter or in a year for that subsidiary?

So for the subsidiary, we have the best revenue of around INR 21 crores in a quarter.

INR 21 crores in a quarter. And approximately...

It is before this all our [indiscernible] before this restriction took place.

So what is the revenue potential of this client in a best-case scenario? At 75%?

In the 75%, there are probable chances of around -- for the -- you can say around INR 80 crores to INR 90 crores we can easily achieve [indiscernible] goes up to 75%.

Okay. This is 100% subsidiary or...

No, this is the JV, 50-50 JV.

So 50-50 JV, INR 50 crores our investment, INR 50 crores is the investment by the partner, right?

Yes, yes.

Okay. And [indiscernible] can max be INR 125 crores?

Yes, yes, yes.

1.2?

Yes, yes, 1.2 [indiscernible].

Based on your -- coming back to auto, based on the orders which you have in hand, is it possible that your asset [indiscernible] can shoot beyond 1.4 in 3 years' time? Because you have been more or less hovering for 1, 1.2 for very long. So unless you scale up significantly in 2 or 3 years, it will not make any meaningful big profits.

Yes. There will be -- 1.4 would itself be a good ATR in our type of industry. So if you compare with other auto ancillary also, so there is a definitely CapEx requirement along with the growth. So we expect the CapEx would be there. However, we are working on this. We are also adding new aftermarket business also and auto side also. So the CapEx would go, but however, the overall turnover will grow so that our ATR can be improved in the next 3 years.

Can you share some more color on tooling business? What is the potential?

The tooling business is we also -- for the aftermarket, we have [ said ] that it should contribute 5% to 8%. The same way we are targeting that tooling business should also contribute around 5% to 8% in our overall turnover in next [ 3 years ].

But tooling should give you a higher margin 25% plus, right, because it's a complete in-house technology and with very low asset base you are able to get, right?

Yes, definitely, in tooling also, the ATR is around 1, 1.1 across the industry. So investment requirement would be there. But however, as we mentioned that margins are better that the other business in tooling business, being the semi-technology-driven business.

The next question is from the line of Shashank Kanodia from ICICI Securities.

So just wanted to understand, for this quarter, we have grown upwards of 25% sequentially that is quarter-on-quarter. So what will be the volume growth and what will be driven by realizations?

If you compare with the quarter-on-quarter basis, the realization would be around 2% to 3% to the previous quarter. Rest is towards the volume growth.

Right. So sir, in that terms, we have vastly outperformed our largest client, right? Because I think Maruti has grown sub 10% on a quarter-on-quarter basis, but we have grown 25% plus, right?

Yes.

So do we expect this trend to continue going forward for a few quarters?

Again, it depends.

We have new clients on board.

See, we are getting orders from a lot of customers. So definitely we're not -- we'll be in a better position from customer derisking point of view. But today's situation is such that semiconductors, we don't know who has been able to crack the jackpot of raising semiconductors going forward. So very difficult for us to comment whether this trend will continue or not continue. But what we are doing is we are expanding our customer base for this automotive parts business. And not only limited to OEMs, we are also getting a lot of inquiries, a lot of interest from good quality Tier 1 makers. So hopefully, we should continue to grow much higher than what our main customer is doing.

Sir, is there any target in mind? Let's say, I mean, as a company, we need to go 10% higher than the industry benchmark or any such parameters that you guys have been internally working with?

We've set some long-term targets for that division, for the team to focus on. But the main target is to get lot of business from new customers. So they are really struggling hard for development of opportunities and especially in the West region and the South region. That is the reason why we are expanding our plant in Chennai, because in that region still lot of untapped potential is there, and our teams are working very hard to develop new customers in that region. Pune region, we already have few customers. So we're trying to get more customers in that region, both in the passenger vehicle space and in the 2-wheeler space.

Secondly, sir, how has been the production schedule from the OEM for this quarter? Do we see any quarter-on-quarter growth for that?

You're talking about the next quarter?

The prevailing quarter, October, November, December.

See, again, it is very difficult for anyone to plan this time. One of the -- customers, they commit some numbers, but end of the day it depends on if they are able to procure the semiconductors or not. Overall, things should get better this quarter, I think, because our biggest customers, they've committed a certain number and they're very confident of sourcing that number of semiconductors and making vehicles for that. So I think this problem should start getting better, but it is a long-term problem. I don't think we are getting out of this semiconductor problem for at least 1 full year now. Estimates are coming out. I think January 2023 is the earliest when things should start getting back to normal completely. And the customers would be back to their normal sourcing actions rather than doing firefighting every day for sourcing of semiconductors.

Right. Sir, lastly, are we supplying [indiscernible] product profile to Tata Motors?

Sorry?

Are we supplying [indiscernible] product profile to Tata Motors or [indiscernible]?

Tata Motors has been our customer since 2006, I think. We developed the first Nano components with them.

Right. So are we present in Punch, which is the recent launch from them?

Punch, yes, yes. I think we supply outer belt and roof molding, I think, for that.

The next question is from the line of Dhiral Shah from PhillipCapital.

I just wanted to know.

Sorry to interrupt you. Mr. Shah. May I request you to speak on the handset mode. Your audio is not very clear.

Am I audible now?

You're audible, but it's not very clear. if you are on speaker, please come on the handset mode and then ask your question.

Am I audible?

Yes, this is better.

Sir, my question is pertaining to the revenue contribution from the different clients which we have, if you can share the data?

Yes. So currently, Maruti Suzuki is the biggest customer for us for automotive parts business. And they contribute around 50% to the top line. Second biggest customer for us is Honda, which contributes around 20%. Tata contributes about 5%. And Nissan -- Renault Nissan contributes 4%. Hyundai and other customers, all put together they contribute about 18%. I would say Hyundai and Kia put together they contribute about 2% of the top line right now. And others are -- for the other players like MG and Tata Motor and Isuzu and [indiscernible] and Suzuki motorcycle, et cetera.

Okay. So sir, 100% of the revenue is coming from the Passenger Vehicle, right?

No, out of that around the 6% revenue also come from the 2-wheeler side also.

The next question is from the line of Anurag Jain, our shareholder.

My question is related to your receivables. What is the like policy for receivables for different categories of customers? I'm asking this question especially in light of 2 things. One, like Ford has folded up its operations. From the news, one can see that a lot of vendors have money stuck there. And a lot of these new electric vehicle companies coming in, they will -- very few of them will survive and prosper. Most of them may not be able to be successful in the industry. And for the existing players also, it's a challenge because the industry will move from oil to electric vehicles. So in light of this, how do you propose to manage your receivables because the company has gone through a significant change in the last 2 years?

On the receivable side, for the OE customer, there is no issue of receivable, and that is mostly driven by the OE [indiscernible]. So specifically for Ford, we don't have any outstanding with Ford and there is no payment stuck at the Ford. And about the other segment, that is mostly market driven and we are taking adequate care while dealing with the new customer. Usually we set up with the advanced payment or postdated checks, and gradually once the confidence is built up, then we go to the credit facility.

As there are no further questions from the participants, I now hand the conference over to Mr. Abhishek Jain for closing comments.

Thank you, Margaret. I thank everyone for taking time out of your busy schedules to attend the conference call today. Please feel free to approach us with any questions that you may have. We will be more than happy to show you around the excellent facilities that have been created to service the customer. I thank SGA Advisors for organizing this call. Last but not the least, a big thank you to the team at PPAP for supporting this call. Thank you, everyone.

Thank you. Thank you, Everyone.

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