Precision Camshafts Limited (PRECAM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the earnings call of Precision Camshafts Limited to discuss operational performance for Q1 FY '24. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Shah, Whole-Time Director, Business Development. Thank you, and over to you, Mr. Shah.

Thank you. Good morning, ladies and gentlemen. I would like to thank you all for being a part of Precision Camshafts' Q1 FY '24 Earnings Conference Call. In case any detailed questions of finance, please email your questions at [email protected] or [email protected], and we shall provide you answers in a reasonable time. We have submitted the investor presentation for Q1 of FY '24 to the stock exchanges on 31st of August 2023, and the same is also available on our website. Investors are requested to refer to the same. I'm happy to share that despite the challenging times that we work in, total income of the company was INR 178 crores on a stand-alone basis and INR 270 crores on a consolidated basis. The parent business, PCL India, has grown the last year by better asset utilization of foundries as well as machine shops. [ Several ] new camshaft and non-camshaft projects have been awarded to PCL over the last years, which have started serial production and in the ramp-up phase. We are happy to share that PCL has onboarded new customers in India and overseas, and you can see long-term visibility of contracts for the camshaft business. MEMCO has also seen consistent demand and has delivered good top line and bottom line revenues, in line with previous quarters. The total income at MEMCO was INR 13.48 crores during the previous quarter. Our group company, MFT, based in Germany, has seen stabilization of business during these times, but we still see challenges ahead due to the ongoing crisis. The team at MFT is also focused on brining new non-engine components to the company's portfolio. The total income of MFT during the previous quarter was INR 45.9 crores. In summary, the group's automotive component business is now well diversified in terms of product as well as customer base, where no single customer contributes to more than 20% of revenues, and it's showing consistent growth in top line and margins. Coming to our e-mobility subsidiary EMOSS, based in Netherlands, the company has registered significant growth in business over the last 2 years, and EMOSS posted a turnover of INR 33.2 crores in Q1 of FY '24 compared to [ INR 52.3 crores ] in the last quarter. The dip in revenues was mainly driven by the general slowdown in Europe, summer shutdowns in [ several ] customers and other issues that persist in Europe. The order book still continues to look promising for the coming years. Coming to the e-mobility developments in India, the company is developing an electric driveline for some 4-tonne [ LCVs ] on India. The company is focused on bringing a high-quality, reliable product to the Indian market while ensuring cost competitiveness with high degree of localization. We are in the process of setting up our first EV plant and have signed several large customers across India. We will share more details about the hard product and [ expect ] in the coming quarters, and we expect to start delivering the first pilot vehicles to our major customers in Q3 of this financial year. I will now ask Mrs. Aarohi to go through the financials of the company.

Thank you, Karan, sir. Good morning to all. Coming to the financial performance of the company. Starting with the stand-alone business performance, Precision Camshafts Limited, which houses the camshafts business. Total income for Q1 FY '24 increased by 20.16% Y-o-Y to INR 178.27 crores. EBITDA margin for Q1 FY '24 is 19.08%, and PAT is [ 11.01% ]. Quantity of camshafts sold during Q1 FY '24 -- quantity of [ cast ] camshafts sold during Q1 FY '24 increased by 1.72% quarter-to-quarter and increased by 27.74% quarter-on-quarter to 1.60 million. Quantity of camshafts -- [ machined ] camshafts sold during Q1 FY '24 decreased by 4.53% quarter-to-quarter and decreased by 10.73% quarter-on-quarter to 0.74 million. Now coming to the consolidated business performance. Total consolidated income for Q1 FY '24 increased by [ 12.15% ] Y-to-Y to INR 270.25 crores. EBITDA for Q1 FY '24 increased by 9.63% Y-toY to [ INR 30.05 crores ]. PBT for Q1 FY '24 is INR 8.73 crores and PAT is INR 4.11 crores. EBITDA margin for Q1 FY '24 is 11.12% and PAT is [ 1.52% ]. Now coming to the group company's revenue for Q1 FY '24, MEMCO, MFT and EMOSS. Revenue of MEMCO is INR 13.48 crores. Revenue of MFT, INR 45.91 crores. Revenue of EMOSS, INR 33.26 crores. With this, we would like to open the floor for question and answers. Thank you.

[Operator Instructions] The first question is from the line of [ Garik Goel ] from [ Invest ] Analytics.

Sir, my first question is on our upcoming facility at [ Kolhapur ], which is for electric vehicle [ retrofitting ]. So I'm relatively new to the company. So can you please throw some lights like what is the whole idea about what is the size of opportunity are we looking at in the next 2 to 3 years down the line?

What we are doing in [ Kolhapur ] at this point of time is setting up a plan for conversion of LCVs to 100% electric. We are focusing on the sub-4 tonne N1 category of vehicle, which is typically in a Tata Ace, Ashok Leyland Dost and other such vehicles. Just to give you a idea of the market size, there are around 2 million vehicle that are driving on Indian roads today that are used in this category of vehicles, and we have seen the opportunity to work with a lot of customers, large fleet owners, municipal corporations, e-commerce companies, et cetera, to convert that existing fleet of [ LCVs ], which are used for intra-city logistics into [ pure ] electric. We have gone through a complete localization project where almost 95% of the powertrain is sourced in India, which also ensures cost competitiveness and giving the customer a very high reliable product that works well on the Indian road conditions. So we expect to start rolling vehicles to customers in the third quarter of the financial year, and we will keep you updated as we know more.

Like -- yes, sir. So you mentioned like you are in discussion with the players also to convert this thing. So basically, how fast do you think the ramp-up is going to happen? Like 2 million vehicle are on the road. So how fast do you think the ramp-up will happen, the shift will happen from [ ICE ] to this EV conversion [indiscernible]?

No. For us, it's in the plant. For us, it's not a big ramp-up of sales that we require because it is not a large assembly plant or something like this that we need to set up. At this point of time, we are in the process of setting up our plant in such a way that we can convert vehicles. I'm unable to give you numbers at this point of time in terms of visibility or in terms of what we can do, but there is a significant opportunity. Even a small percentage, a very small percentage of these 2 million vehicles that we consider for conversion, it's still a very large business opportunity for us. But unfortunately, I can't give you numbers at this point of time because we don't have that kind of visibility.

Understood, sir. And sir, secondly, our business is basically divided into this casting camshafts and machined camshafts, which, as far as I understand, is a part of [ ICE ] vehicles only. So if we are doing [ INR 1000 crores ] kind of revenues from something which is not being used due to value migration in the end industry like EV, so how will you grow at a good pace like [indiscernible] of 25% to 30%, going ahead, with this kind of business, which is not used in [ EV]? So help me to understand that [ interaction ] if I am wrong.

Can you please repeat the question because I [indiscernible].

[ Garik ], one moment.

Should I repeat?

[Operator Instructions] [ Garik ] if I may request to repeat your question once again?

Yes. So basically, my question was business is divided into casting camshafts and machined camshafts, which is, as far as I understand, a part of the traditional vehicles only. So it is not being used in the electric vehicles. So how we will grow at a good pace, like see here, 25% to 30% going ahead and the entire EV thing will replace the [ ICE ] vehicles? So that was my question.

I think it's a very far-fetched statement to say that EV will completely replace traditional [ ICE ] vehicles. I don't think [indiscernible] OEMs across [indiscernible] will be 100% replacement of petrol and diesel engines or vehicles to electric. There will always be a [indiscernible] even going forward. Just an idea on the camshafts business itself, we have at least a visibility over the next 5 to 7 years as contracted business from OEMs all around the world, including North and South America, Japan, Korea, India, Uzbekistan, Europe, et cetera. So it's not that easy of a shift to say that everything will become electric. We are actually investing further in our camshafts businesses to increase capacities to build up for the growth that is coming [indiscernible]. But obviously, we also have the EV business. So we are well hedged against any changes that might happen in the coming years.

You mentioned you're getting new orders, like you also mentioned about it in your opening remarks long-term visibility and order book you are getting. So what kind of growth guidance or growth [indiscernible] do you see for next 3 to 4 years down the line for the business at consolidated levels?

We are unable to provide you with forward-looking numbers at this point of time.

Next question is from the line of Vishal Agarwal from Leo Capital Advisors.

I wanted to understand the growth in EMOSS over the last few quarters. The growth obviously slowed down with the war in Ukraine, and we always felt that the order books are very good and the growth will come back. But for the last several quarters -- while on a year-on-year basis, both still looks good for the financial year, previous financial year, but the last several quarters, the growth has been [ tepid ]. So is this the base at which EMOSS kind of settles where given the nature of the business, this is the scaled protection of the business? Or is there more possibility there? And how should one think about long-term growth for this business?

I think it would -- it's very difficult to look at the business of this nature on a quarter-to-quarter basis. So we are not a typical FMCG type of company where you can see all this happened in this quarter and this has happened in others. As such, important to look at the bigger picture and see what is happening year-on-year. If you look at where we were just 4 years ago to where we are today, I think we have grown 5 or 6x, that's significant growth. We still continue to look for opportunities to grow. And I think the market is there in Europe to -- with our existing customers as well as new customers to grow this business. And we are continuing to do that, and the order book for the next 2 to 3 years is quite healthy. We see good visibility. And I would not say that the business has plateaued out at this level. There is definitely opportunity to grow from here. But I can't quantify that to you in terms of a forward-looking number right now.

Understand. Sir, your business has not plateaued out, but has it kind of become a scaled business, at which point it starts growing at high teens kind of growth rate? And is that the potential? Or do you think it's still a very nascent business and it can really grow much faster for several years? Obviously, not on a quarter-to-quarter, maybe but over a long term, if I take a 3, 5-year view, it can grow a lot faster.

It can. Yes, yes. I mean looking at the landscape in Europe in general, looking at where customers are focused on, especially on decarbonization, on electric mobility, I think there is a lot of potential. We are also looking at newer technologies to working in the businesses that we are in with our customers. So there is definitely opportunity, but I can't say whether it is going to be teens or 30s or 40s, it's really hard to say that right now.

I understand. But you don't think it's a mature business, which is kind of going to be growing in the teens and so on. And you -- as a management team, you feel confident or much higher, but obviously, it's hard to tell.

Yes.

Got it. And [ speaking ] against the India LCV launch, you mentioned that the launch is expected next quarter. And several OEMs like Tata have also launched an electric -- probably Ashok Leyland, [indiscernible]. How do you -- and here, I am just asking of with retrofittings. One, how does the cost benefit for a retrofitted vehicle from PCL or EMOSS compare versus these offering of those kind of [ Leyland's ], and what's the potential you see in that business?

Yes, see, I can't talk a lot about commercial at this phase point of time before we have launched. There's going to be a phase in over the next, say, 6 to 8 months where we will have a significant amount of road trials and understanding directly from our customers because these vehicles will be delivered to customers in the coming -- in the next quarter. So I would be able to speak a little bit more on commercial later. But I think -- look, I think this is a -- it's a very small market at this point of time. You know e-mobility is less than -- if you look at the total number of vehicles sold on India, certainly, and I'm [ seeing 2% to 3% electric ] vehicles. If you look at [ 4 ] figures only, I would say that [ it's less than 1 ] percentage of sales right now. So it's a big opportunity for everybody and enough space for everybody to be in. So while the OEMs will have their own products, like you mentioned, I think we are catering to a very different audience here where we are saying that you have existing fleet of vehicles and you have the opportunity to spend an entire amount to convert existing fleets into electric, thereby giving you tremendous amount of operational cost savings over the years that you continue to operate the vehicles. And then the customer has a choice whether to convert the existing vehicle into electric and use that for the next 7, 8 years or to go and buy a new one, which is all I can tell you at this point of time, it is definitely more expensive to buy a new electric vehicle than it is to convert one with us. Now how much is that gap? I can't explain to you right now, but there is definitely a difference between buying a new one and then converting an existing one.

And buying the new EV or buying the new IC engine vehicle?

New EV. New EV.

Got it. Got it. And within the e-mobility space in India, our focus will largely be the LCV space? Or are we looking to tap into other spaces as well over time?

At this point of time, only LCVs. It's a big enough market that are -- and I think if you look at the application of these vehicles, there are so many different applications in terms of waste collection, in terms of last-mile deliveries, in terms of just pure logistics, et cetera. And these are the vehicles, if you think about it, that pollute the most because these are always running within the city. There is a lot of start/stop in these vehicles, which causes even more pollution. And if you want to really have a completely circular kind of setup, then your best -- that is to go with repowering as we call it, because you're essentially taking away one decent vehicle from the road and putting that same vehicle back as one that does not emit any pollution. So it's kind of -- that's our focus area. We are not at all looking at any other type of vehicles at this point of time, at least.

And from a scalability perspective, for you in the constrained in the short term with demand? Or will it be your ability to manufacture? Like from a manufacturing setup or ability perspective, what's the kind of ramp-up that's required if you see a lot of demand in the market? And how are you placed to handle that if you see it?

I don't think setting up manufacturing is a constraint because we are able to scale up pretty quickly. It is not a high CapEx kind of assembly plant that we need to set up, it's a very different setup than typical OEM because we are only disassembling the existing powertrain, assembling a new one, doing a lot of testing in-house and then shipping it out. We are able to scale up. We are also able to do, let's say, [ satellite ] plants wherever our biggest customers are so as to be closest to them. So that's not an issue. I think creating the demand will be thing that we will look at in the coming quarters because at this point of time, we do have a good set of customers who are willing to take the first [ bet ], who are willing to actually start with the pilot vehicles in the next quarter, but we need to see how this can be scaled up with other new customers as well.

And you want to scale it up slowly with first into a pilot vehicle, given 3 months and then launch it fully. You don't want to do something like all the startups have done, is just to go the [ whole house ] and launch in one shot?

No. I think that has not worked in many cases, and we don't want to take that kind of an approach.

Next question is from the line of Shubham Jain, an individual investor.

Congratulations to the excellent performance in the parent business. Now I had a couple of questions on the e-mobility business in India. Now you are setting up the plant, and you have done all the testing, and you're going to launch early next quarter. I wanted to understand what is the average time taken to retrofit either of these vehicles, Tata Ace or Ashok Leyland Dost, in terms of rolling out completely retrofitted vehicles? And what can be the estimated amount of cost for the retrofitting? We know that the cost of Tata Ace EV, which has been launched with the company, is as well as around INR 9 lakhs to INR 10 lakhs. And where do we see the conversion costs coming in and what is the payback period, which is estimated for the customers who are going for the retrofitting?

As I mentioned in my previous answer, I really cannot comment on commercial at this point of time. It's just too early to do that. We need to have vehicles in the market. We need to have feedback from customers, et cetera. And only then I would be able to give you more insight on that. But like you said, a brand new applying Tata Ace EV is available in the market for INR 12 lakh today. And our conversion cost is -- that is surely lower than that, but I will be able to only explain to you in more detail when we have much more customers using these vehicles in the coming months. As far as your first question on how much time does it take? I mean, it's a function of the kind of setup that we have and the number of people that we are working on these vehicles. But it is -- I mean it takes -- the measurement is in hours. So it's not a very lengthy process.

Okay. So can we get to know how many vehicles are we planning to convert on a monthly basis? Is that possible to know currently or...

No, I don't -- I can't -- I don't have that at this point of time because we have to roll out the first pilot vehicles with our customers. And we have about 10 to 15 customers. We have MOUs or [ advisement ], and we are rolling out to these customers next -- in the next quarter. And only after it has been enough testing on field, enough data collected, then we will be able to actually start ramping up and give you real numbers that are possible.

Okay. And these customers are both private sector entities and the government departments? Is that so?

Yes.

Now coming back to our EMOSS business. We have seen -- you have always maintained that reason to compare the business year-on-year, right? Okay, the revenues have gone down. But I've seen that you have shown small negative EBITDA also in this quarter. Can you throw some light as to why we have turned into a loss in the first quarter?

Again, as I mentioned, it's not possible to look at this business on a quarter-to-quarter basis. There are certain dips in the overall economy in Europe, as you know. This period of time, which is June, July, August, is typically summer shutdown in Europe, which is why there is always -- if you even compare it to the last year, you would also see a similar trend. And there will be an, let's say, stabilization in the coming quarters. But -- the simple answer to that is that this reduction in revenues has led to a negative margin, but that should get compensated in the coming quarters. So it's -- I would again suggest not to look at this on a quarter-to-quarter basis.

I understand. So are we safe to assume that our revenues are intact [indiscernible]? Because of summer shutdowns and holidays in Europe, the revenues have been pushed back to Q3, Q4 or whatever it is, right? And...

Yes,it is also -- like I said in my opening statement, there is also a general slowdown in Europe. You see that there is -- most countries in Europe have declared that there is a recessionary trend. And even though it is not -- we are not as hard impacted on the EV side of things as it is on, let's say, the typical combustion engine vehicles, but there will still be an impact. It is hard to ignore that.

No, I understand, but we were anyways -- order book full for the next 2 years, right, if I'm not wrong. And are we seeing any cancellation of orders or withdrawal of orders also?

Not cancellations, but there can certainly be the pushbacks, there can be delays in uptake.

So we are safe to assume that the growth rate which we have been maintaining over the last 3, 4 years, will continue to target to hit those growth rates in the next 2, 3 years' time and the EMOSS...

Yes.

Okay. Now coming back to EV mobility business in India, one question is the revenues will start reflecting in our annual accounts from Q3 onwards, right? So we will see the first revenue coming in when we talk again sometime in January, February, right? Will that be the case?

It's really hard to answer this at this point of time because it will take amount of -- some amount of testing, some amount of understanding from customers, real-world application of these vehicles. So towards the end of this financial year, early next year is something that we should expect.

Next follow-up question is from the line of [ Garik Goel ] from [ Invest ] Analytics.

Just want to understand more, like you mentioned that we are trying to capture the gap due to cost of new EV and this retrofitting. So is this not like a conflict, means that this will put you directly in the competition in players like Tata and Ashok Leyland, who are into producing the new EVs? And they are, at the same time, our customers also in the traditional business of camshafts. So how do you look at it?

I actually don't look at it as competition because we are not going after the same customers in terms of new vehicles being sold, we are looking at an existing fleet owner or an existing government body that has vehicles but would like to electrify for reaping the benefits of electrification, which is decarbonization as well as reduction in operating costs. So that is where our focus is. I think -- like I mentioned in one of the previous answers, it's a very small percentage of the market, and there is enough room for everybody to grow here.

So continuing with this thing, like you mentioned, there is enough room for everybody to continue. So is it like there are no entry barriers in this retrofitting theme? Or there are some technology advantages that you have and somebody or any other player is not having, due to which he can't enter into this space?

Absolutely, there are technology barriers, and that is -- it's not an easy -- it's not -- okay, let me explain it like this. Electrification of a vehicle is not the same as converting a diesel vehicle into CNG that even a technician can do at a garage, which is possible. When you are talking about electrification, you are changing the complete powertrain of the vehicle. It is not just the fuel source. It is a complete powertrain. It requires a lot of engineering work, it requires a lot of software. It requires -- after you have sold the vehicle, requires a lot of aftersales care and so on and so forth. So it's not as simple as just -- it's not a simple change. So there are not -- if you look at what we do at EMOSS in the Netherlands, that are only, let's say, 4 or 5 companies around the world that do the kind of work that we do at EMOSS on the heavy vehicle side. And even in India today, if you look at the overall market, there are a lot of players in the 2-wheeler, 3-wheeler space, but not a lot of players in the 4-wheeler space. It's because it's a much more complicated architecture.

In India right now, this isn't only that is doing this kind of thing, right, 4-wheelers?

Yes.

Lastly, you mentioned about this recessionary trend in Europe. So are you witnessing across the category? Or is it towards a particular category like [ passenger ] vehicles or the commercial vehicles or something like that?

I think it's across the board. It's not just in our industry also. It's just across the board, there is a slowdown.

Okay. And I think it is getting worse and worse over the quarters. So that's what you are mentioning.

Yes.

Next follow-up question is from the line of Vipul Shah from Sumangal Investments.

So Mr. Karan, my question is, I mean what type of CapEx we are planning to spend on this retrofitting of EV projects? And have -- we have data for -- in-house data, of course, which you cannot share with us right now, but have you -- data for converted EVs which can work for 2, 3 months, and you have some in-house data for that?

To your second question, yes, of course, we have in-house data for vehicles that we are testing. But at the end of the day, we are waiting for customers to use these vehicles in their real-world applications. Each application is different. Each use case is different, which is why we are starting with this pilot rollout next quarter. But to your other question, I think it's not a high CapEx business. As I mentioned before, it does not require a large machinery or equipment, it is mainly people and good supply chain and good technology to be in place to make sure that we can effectively convert these vehicles. At this point of time, I think, as I mentioned in some of the previous con calls, approximately INR 5 crores to INR 7 crores has been spent on the plant setup.

So this technology has come from EMOSS, should I assume that?

Architecturally yes, but we have localized everything in India. So like I said, more than 95% of the powertrains are localized in India. So while overarching technology and architecture has been acquired from our Netherlands business, it is reengineered to fit Indian names.

And regarding your European subsidiaries, sir, can you share what type of capacity utilization they are working with? And what percentage of capacity utilization they should breakeven at the EBITDA level? If you can give directionally any color, it will be very helpful, sir.

So at EMOSS, we can't define capacity because it is, again, a similar thing like what we do here is this retrofitting or it is a kit business for our customers. So as we only need more space and more people to scale up capacity, each kit is also different. So we make a very small kit for a road sweeper, we make an extremely large kit for 50-ton vehicle, so it's hard to define capacity. Whenever required, we are able to scale up very quickly. On the MFT side, Aarohi, ma'am, if you can please explain that if we have some idea of capacity utilization?

Existing 70% at MFT and expecting 80% for breakeven.

So what should be the breakeven level for MFT at this...

80%.

80%. At the EBITDA level, Mr. Karan?

Yes.

Next follow-up question is from Vishal Agarwal from Leo Capital.

In the past con call, you have also mentioned that the vision is to start with retrofitting, but eventually [ you have ] an OEM in India in the LCV space. Can you talk a bit about that journey? How far along are you beyond that? And is that something -- like you had mentioned it will be happen next financial year. Is that something we are on track for?

No, no, I did not mention that it would happen next financial year. I think the journey towards becoming an OEM is already underway, but I certainly can't give you an update from last quarter to this. It's a long process. And we expect this to be a journey of at least 2 to 3 years to actually set up the entire -- the facility, the technology, the know-how to transition from becoming just a powertrain supplier to becoming an OEM. It's a tall order, but we are working towards it. So the idea is to have enough vehicles on the road with our powertrain in the next let's say, 2 to 3 years. When we get enough data, where we understand the market well, where we understand our customers well, based on which we can build our OEM platform rather than doing it right away.

Got it. So for the next 2 to 3 years, the focus in the retrofitting and uses the [ base ] that you kind of create the vehicles for the OEM?

Correct.

Understand. And how much capital investment does all of that require? Because a lot of startups are raising a lot of capital externally and so on. So any plans to do that for you, and how much capital would that be?

I will need to get back to you on that. I don't have that number off the top of my head right now.

Got it. And on the EMOSS side in Europe, any particular segments or areas that have been affected from a growth perspective from where you are seeing order postponements or pushback, which kind of has resulted in [ cull ] the performance in the last few quarters? Or is it more general in nature?

No, it's quite general. We work across a variety of wheels, right, from road sweeping to waste collection, to buses, small buses, to large trucks. And it's across the board, [indiscernible] in general.

Got it. Got it. And any plans around EMOSS for it to extend beyond Europe? Do you see a market to the outside of Europe? Given the technology that EMOSS you have mentioned, it's -- there becomes a very [ few ] number of player globally. Any plans to scale that beyond Europe?

We do have a customer in New Zealand, for example, right now where we are supplying kits. And that customer is growing, we grow with that customer. But if you look at the business opportunity in Europe itself, this is one of the most mature markets in terms of e-mobility, and we are saying that we should focus there rather than looking for small pieces of business in different parts of the world. So given that we are located in Europe, I think it would be the financing market. But of course, opportunistically, we will look for other customers as well.

Next follow-up question is from the line of [ Garik Goel ] from [ Invest ] Analytics.

Just wanted to understand on the margin product mix change. Like you are entering into this retrofitting chain, so what kind of asset terms do you expect? Or what kind of margins do you expect? Is it likely that it will be at a higher pace, at a higher level as compared to the existing business because you are mentioning we are the only player in India in this space? So how is it going to shape up?

Yes, but I can't answer that question right now because I'm also unable to answer anything regarding the commercial, including even the selling price of the kit. So it's really difficult for me to answer that. But while I say we are probably one of the first ones, the early ones to do this in India, it is an extremely cost competitive market. At the end of day, the vehicles used by individual driver owners, in most cases, are on fleet owners who -- for whom using these vehicles is bread and butter. They are using this for transport of goods. And the only metric that is important is how many rupees does it cost per kilometer, per KG to go from point A to point B. So it is an extremely competitive -- cost-competitive market. And I mean that should give you some idea of what the pricing and margins would be, but I can't give you numbers today.

Next follow-up question is from the line of Shubham Jain, an individual investor.

Karan, you have been -- you have started with the non-engine business as well, right, the MFT and in the parent entity as well. So what are we seeing? How is the traction coming up and -- because we want to diversify away from camshafts over a period of next [ 3 ] years. How is it coming up? And what is the expected contribution to revenue the non-engine business is contributing right now and is expected to contribute by the end of this year?

So look, all 3 manufacturing businesses, whether it is PCL, MEMCO or MFT, all have diversified businesses non-engine components. For example, at MEMCO, we have a customer here who's doing the instrumentation part, where that share of business used to be 5%, just 4 years ago. Today, it's almost 25%. So we have grown that business. Similarly, at PCL, we started a non-engine component with a global -- year 1. And that is just in the ramp-up space. You will not see a big percentage difference as a percentage of sales from now until the end of this year, but there will be more towards next year and the years after that. We also have been awarded new nonautomotive business at our German subsidiary, when we will start production and supplies next year, in Canada, year 2024. So we will only see impact there after the [ supplies ] have started. But I think just to give you enough comfort in saying that across all 3-component manufacturing companies, we have actively started manufacturing and supplying non-engine components.

So do we have a long-term plan in terms of 3, 4 years, where do we want to look at as a total content percentage contribution to revenue? Where do we want to have the non-engine holding up revenue contribution?

Yes. So we are -- I think we have said this in previous calls also that we are expecting that over the next 3 to 4 years, about 20% to 25% of our component business revenue should come from non-engine components. But I think it's really important for me to restate here that we are absolutely focused also on our camshaft business, on our MEMCO engine component business, as well as MFT engine component business because this is a business that continues to grow. I know from the outside, it looks like that EV will take over everything, but this is not the ground reality of things. There are new businesses that we have won from OEMs that start production next year and go up to 2030 or even beyond that. So we will continue to invest in these businesses. We will continue to grow these businesses. And as a matter of fact, being an Indian manufacturer, being in this Indian auto space, which is expected to double in terms of volumes in the next 5 to 6 years, we are in a very good place to actually take best advantage of this rather than saying that you forget about all the goods that we are doing on the engine component side and only focus on diversification. So I just wanted to clarify that.

I understand that, Karan. I understand that. I wanted to also understand from you, a lot of global majors have the camshaft business in-house. So has there been a trend of some of the camshaft business of these global majors moving in-house to getting -- coming to Tier 1 suppliers like yourselves? Is that also happening?

Look, no, the legacy businesses will continue because the OEMs are very reluctant to give up what their existing capacities are because you have to also understand that they have the assets to do it. They have the people to do it. So it's not very easy for OEMs to say, "Okay, we let go hundreds of people from their payroll and also write-off equipment and machinery and plants and outsource." What is for sure is any new programs that come into production, almost all of them are outsourcing. But legacy businesses will continue as is, yes.

And sir, what percentage of those are coming as stand-alone entity? What I understand is we have around 9% to 10% market share, globally. And as they're increasing our business, I believe that over the next 3, 4 years in a shrinking market, we should have our market share increasing. So do you expect the market share to go from 9%, 10% to 14%, 15% over the next 3, 4 years? Though the market might shrink a bi,t but because we are the leaders in India and also we are one of the global leaders, do we see that kind of a traction coming in for us?

I just want to give you a slight correction before I tell you where we can expect ourselves. The market is not shrinking, in general. If you just purely look at India numbers, there were, let's say, 4 million cars manufactured this year, out of which 2% were electric. The expectation is that in 3 years, if this number is 6 million or 7 million and even 20% of those are electric, the traditional vehicle numbers are still growing, not only in India, also in North America, also in countries like Mexico and Brazil, also in countries like Russia, Uzbekistan, Korea, et cetera. So it is not shrinking market. I do want to clarify that. But based on where we see, of course, we will look at increasing our market share, whether it's in India or globally. And I can't give you a number today, though. I can't quantify that.

Next question is from the line of [ Brajesh ] from [indiscernible] Corporate.

Karan, so I have a couple of questions. One question on the OEM part has been answered. My second question would be, there are some talks about launching a new in-house LCV, small-capacity LCV, but we don't hear anything about this for last couple of quarters. So the plan has been [ held ] or is it in the pipeline?

I think I've mentioned this over the last few answers that we are planning to actually start rollout of these pilot vehicles of electric LCVs in the next quarter.

No, no, I'm not talking about retrofit. I'm talking about developing an LCV in-house.

Yes, that will take time. It will take a few years, at least, also something I just mentioned.

That will come maybe after OEM part, right?

That is OEM parts. In-house development of LCV is OEM part.

Okay. Okay. And just one last question. So in terms of [indiscernible] we have confirmed order in sales, so we will have to do some small CapEx cluster-wise to cater the customers like [ region-wise ] or maybe [ city-wise ] and all?

Yes. Ideally being close to the market is a good idea because there is cost of logistics otherwise. But at this point of time, we have enough in more customers in and around where we are in Maharashtra, so that is our focus. But of course, when there is a bigger demand in, let's say, Delhi or Chennai and Bangalore or whatever, we would look at expanding in those markets.

Okay. Great. And just last question on -- so we were -- we're talking about the OEM part. I know you may not disclose some information as of now. But are we in touch or maybe we are in testing more in some of the largest, let's say, the players like Tata and all to supply the powertrain complete solution over the years? Have we started the testing part of this?

No, I can't disclose anything on those fronts right now.

[Operator Instructions] As there are no further questions, I would like to hand the conference over to Mr. Karan Shah for closing comments.

Thank you very much. I hope we have been able to answer most of your queries today. We look forward to your participation again in the next quarter, and thank you again for joining our earnings call. Bye.

Thank you very much. On behalf of Precision Camshafts Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.