Rane (Madras) Limited (505800) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Rane Holdings Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingle from Christensen IR. Thank you, and over to you, sir.

Thank you, Rio. Good afternoon, friends. Welcome to Q1 FY '21 Earnings Call of the Rane Group. To take you through the results and answer your questions today, we have the top management of Rane, represented by Mr. L. Ganesh, who's the Chairman and Managing Director of Rane Holdings Limited; Harish Lakshman, who's the Vice Chairman of Rane Holdings Limited; P.A. Padmanabhan, President, Finance and Group CFO; Siva Chandrasekaran, Executive Vice President, Secretarial and Legal Services; and J. Ananth, who is the CFO of Rane Holdings Limited. We have sent out the press release as well as the presentation link. In case you've not received the presentation, it is available on the BSE and NSE website. And in case you wanted, we could mail it to you also. Before we start the discussions and the prepared statement, the safe harbor clause that we normally read out apply. With that said, I'll now hand over the call to Mr. Ganesh. Over to you, sir.

Thank you, Diwakar. Good afternoon, ladies and gentlemen. Thank you for dialing in. I would like to welcome you all to this teleconference. You would have seen the details of the Q1 FY '21 performance highlights of the group companies posted on our website. I'd like to provide a few background remarks before we get into the Q&A session. The world as you know has changed drastically with this coronavirus pandemic. This is an extreme event, one for which there is no precedent. During the quarter 1, the entire month of April and half of May, there was a lockdown, as you know, and therefore, there was no activity in any of our plants or customers for that matter. As such, the results of Q1 FY '21 are not comparable, obviously, to the corresponding period of the previous year. And it was effectively probably June and one week in May is what we worked. All the manufacturing facilities are currently operating at about 50% to 80% of pre-COVID level, depending on the segments that the plants serve, compared to, say, 30% to 40% level in June. Rane TRW Occupant Safety Division started manufacturing masks to cater to the group requirements, and we are also distributing this in Chennai and Trichy through our CSR activities. During the lockdown, as the lockdown restrictions were relaxed, we obviously started our approach with caution to respond to this situation. We had kind of constructed 3 levels. One is the organizational preparedness, second is the plant preparedness and the third was our Tier 2 readiness to service our requirements. This helped us to be agile and enabled us to respond quickly to the evolving situation. Despite challenges, all the 25 plants of the group have been able to meet customer demands up till now. We took decisive steps to minimize the impact of COVID-19, and we'll continue to work on it to mitigate the impact of volume drop during the first quarter. The first, sales maximization was the immediate goal, given the current demand environment, to increased share of business where possible with key customers, and our readiness for BS-VI programs gave us some opportunity in this regard. Also, we are increasing our focus on the aftermarket during this period. Second obviously was cost reduction. This is a key to sustain and to survive, I would say, given the kind of low volumes we have faced in Q1. Some of the initiatives included productivity improvements, manpower savings, optimizing every line item of manufacturing cost, and the staff and management volunteered to reduce their salaries between 10% to 35% from junior to senior level, respectively. In terms of the financial position, obviously, this was an area of focus. RHL and a few group companies availed the moratorium facility offered by the bank to restrict cash outflow. We do not foresee any major challenges in meeting the financial obligations for the year. We are also confident of raising money if required to meet the working capital requirements as and when necessary. I'd like to provide a few details about some of the businesses, starting with Rane Madras. The Steering & Linkage Division business continued to strengthen their position with customers in India. We were very quickly off in terms of BS-VI applications. So that helped, although the commercial vehicle segment, as you know, is still very subdued. The hydraulic business saw continued traction. The farm tractors was very healthy and, therefore, the hydraulic business serving the farm sector helped, but the commercial vehicle cylinder still at a very low key activity. But overall, the recovery in the farm tractor segment helped Rane Madras. Steering & Linkage Division got major breakthrough for ball joint product export. This we have been working on for some years now, and we have finally made some good breakthrough in exports. The LMCI business based out of Hyderabad, the domestic aluminum casting business, is diversifying its business portfolio. They secured a new business from new customers. Bosch, with whom we have been working for some time, is a strategic customer we added recently. We believe this will be a good opportunity for the future. The division won some new businesses for new products, including some battery box for electric vehicle and some gear case and other new products which will add to the portfolio and diversify the risk in this business. Given these new order wins, LMCI is likely to reduce the loss and hopefully achieve a breakeven performance in the year '21/'22. The U.S. subsidiary has been significantly affected by the COVID-19 pandemic. And based on that, as you know, we had to take an impairment last year in the year ended March '20. The Board will review the performance of this business closely in the next 12 months. We have limited the investments. And then subsequent to this review, the Board will take an appropriate decision keeping in view the long-term interest of shareholders. However, recently, we are seeing some more businesses being won in the nonautomotive sector and very healthy RFQs are coming from this division, but more we will see maybe during the rest of the year as we go forward. Rane Engine Valve also was affected by COVID-19, obviously. Given the age of 2 of our plants with very high employee costs, the challenge becomes always tougher when volumes drop in the engine valve business. Management is addressing this issue of lowering the breakeven even further. REVL, of course, strengthened its business development efforts, and we have secured several new orders, which will [ augur ] well for the future. Got nominations for new programs with Hyundai, with Kia and Toyota in India. REVL won some new export business with the leading engine manufacturer in Germany, and also secured some good export aftermarket business in the U.S. The order book position is very strong and, hopefully, the company will capitalize this, once the demand recovers. In the meantime, we continue to focus on operational improvements and cost reduction initiatives for the future. Rane Brake Lining's had lower volumes and lesser capacity utilization, like the other businesses. But having no debt in the business, the financing arrangements were much simpler. There's no interest liability. And given the robust liquidity position, we do not foresee any major challenges either. The aftermarket business continue to be reasonably good. The drop was not very severe while the OE business, of course, dropped the volumes in the customer side. From the business development point of view, REVL is well positioned in terms of passenger vehicle. It's our new businesses. And the penetration of 2-wheeler disc pad is doing some good for this business. Rane TRW, as you know, has 2 divisions. The drop in volumes in the medium and heavy commercial vehicle impacted the steering division significantly. However, thanks to our preparation for BS-VI, we did get a better market share in Q1. But overall, as you know, the volumes of this segment are far below the pre-COVID levels. And even '18/'19 and '19/'20 was not a very good year, so the volumes are significantly lower even than that. Although the Indian customers' schedules were dropped, the Occupant Safety business continued to do reasonably well. And the -- this is due to the export business. We also won the first business for Occupant Safety products with Hyundai India, and geographic diversification of exports continues. Export remains an important element of the division, and it will remain so in the near future. However, we are diversifying the secured orders to supply to other geographies, such as Mexico, Russia and Europe. The cushion exports back to our partner, ZF, in Europe, is progressing very well. Rane NSK Steering Systems, the warranty issue and related provision impacted the performance in '19/'20. The countermeasure addressing the problem has been implemented, and the warranty provision has been made on the technical assessment of the potential number of units that may come. We see a trend beyond the countermeasures going down. Therefore, we hope that there will not be any major future provision on this issue. And maybe in the next few months, this issue should be fully resolved. RNSS continues to do well with customers. We have won some new business with Maruti Suzuki. We also won some new businesses with other new passenger vehicle customers in India. In terms of industry, Q1 was a forgettable quarter for the automotive industry, for the whole economy, as you know. This will have a bearing on the full year performance. We expect a decline across all the vehicle segments. But going into quarter 2 now, we see strong recovery in farm tractor segment, driven by buoyancy in the agri sector and rural demand. We see some gradual recovery in the passenger vehicle and 2-wheeler segment. The worst affected continues to be the commercial vehicle segment. The numbers in July were pointing to recovery. However, we need to read these numbers cautiously as the inventory levels were very low, post the BS-VI migration, and there could have been some pent-up demand. So while the trend in quarter 2 is good, I would like to view this with some caution to see whether this trend continues in quarter 3. Sustainability of the demand is very important. And also the ability to get the resources in place and no future stringent lockdown measures are all critical factors in how this pans out in quarter 2 and quarter 3. So with these few words, I would like to conclude the remarks. And we are now open for any questions that you might have. Thank you.

[Operator Instructions] The first question is from the line of Divyesh Shah from Pragya Equities.

Sir, my question is regarding Rane Madras. Sir, I highly appreciate our management's sincere effort to turn Precision Die Cast (sic) [ Precision Die Casting ], our U.S. subsidiary. But sir, my real concern is how much time and money we will won after this company because a lot of time and money has gone into this company, and we are spending our good money after the bad money. So I think, as a shareholder, we are really concerned that how much more time as well as the money? Is there any cap on the number of -- amount of money we plan to spend on this as well as the time? How much time you want to give to turn around this company?

I think, as Mr. Ganesh already said, we have limited the investments going forward. And we are also -- he's clearly communicated in multiple forums that we will take a call by end of this financial year. So by April of next year, we will be able to have a clear direction on the way forward. It is still too early to say if it is definitely good money going into bad money. That call is what we are yet to take. And depending on what transpires in the next 9 months, I think we will have clarity.

But sir, as far as last year's annual report, you have mentioned that it will take 3 to 4 quarters for the improvement of the Precision Die Cast (sic) [ Precision Die Casting ]. And already, 6 quarters have been passed and things are not improving at all. So my concern is...

Yes, unfortunately, COVID has also happened, which has delayed across everything. So...

But sir, is management ready to accept the mistakes and cut off this company and look out for our Indian business?

Of course.

Any hard decision is possible?

If we realize that there is -- this business is not viable and there is no future, we will have no hesitation in cutting our losses and moving on.

The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund.

I hope you're all well and safe in this environment. Sir, my first question is on the TRW, on the export side. This quarter, like you said, the exports have been pretty good at around [ INR 2.5 crore to INR 4 crore ]. So going forward, from quarter 2, are we seeing that -- can we go back to the INR 110 crores, INR 120 crores per quarter kind of a run rate because Hyundai -- the Korean market seems to be doing very well on the passenger vehicle side? Do you see that kind of a momentum continuing there? And if you can indicate some broad color on the Hyundai India new business size, any broad indication if you can give on that, sir?

No. Definitely, we expect the export to continue to grow, and I'm not able to clearly tell you when it will go back to pre-COVID levels. But it is definitely happening faster than the Indian domestic market. So I'm not able to exactly tell you whether it will happen in Q2 or Q3. And as we already said, in addition to the Hyundai businesses that we're having, there are many new businesses also that have actually gone into production, as we have announced the new plant that we set up in Trichy, is also doing airbag covers for our own partners, ZF, and some of that has also gone into production. So there are also some new programs coming. So definitely, this growth will continue. The Hyundai -- new Hyundai business, I'm sorry, I don't have the information with me. This is going into production only after 2022. So the sales will kick in only a couple of years from now.

I think the important thing was to make a breakthrough with Hyundai in India. Maruti, as you know, we made a breakthrough about a year ago. So, so far, we were not in the seat belt and airbag business with Maruti and Hyundai, the #1 and #2 in India. So that way, this is a very important breakthrough for us.

[indiscernible] Is it audible, sir?

We couldn't hear you.

The seat belt for Maruti, is that also going into production from 2022 or...

I'm sorry to interrupt you, Mr. Sriram, but we request you to use the handset if you're on a...

It is not audible at all.

Am I audible now?

Mr. Sriram, we can't hear you. We request you to disconnect your line and call us back. There seems to be a network fluctuation where you are.

[indiscernible]

I'm sorry, we're not able to hear you.

We'll move to the next question. The next question is from the line of Shashank Kanodia from ICICI Securities.

Sir, my question is pertaining to Rane Brake Lining. So if you can please explain us the entire competitive landscape in terms of what is the market share that we enjoy? Some color on the market size? And secondly, if you can also talk about the new businesses that you won in the PV division for Rane Brake Lining?

Rane Brake Lining, in terms of market size is -- the aftermarket is very difficult to estimate. But our best estimate is we have about 35% to 40% market share in India in the aftermarket. In terms of OE, in passenger cars, our share is very high because of Maruti Suzuki. And therefore, our share is probably in the region of 65% to 70%. And in terms of 2-wheelers, of course, only disc pads we are supplying now, where the disc brakes are used, that is still a small population, but it is growing and it will grow as we go forward.

Okay. So sir, the entire market expected about around 1,000 -- INR 1,200-odd crores domestically, OEM plus replacement or...

The total market size, I'm not aware, but we'll find out. But I'm not exactly -- off my head, I'm not able to tell you. We'll have to do that estimation.

Okay. And sir, secondly, on the new business wins in the PV division?

Yes. We have won some new applications for Maruti Suzuki, some of the new models. So I think that will add in maybe in a year or 2, when the models are launched.

Okay. So in terms of new client wins, nothing addition -- no addition for us, right? Or have you broken through with Hyundai for this division as well, sir?

Hyundai, not yet. We are working on Hyundai. But we have not yet made a breakthrough with Hyundai in India, yes.

Okay. And sir, one last thing, does BS-VI transition increase your content per vehicle by any chance? Or is it largely the same?

Sorry?

Sir, does BS-VI transition led to increase in content per vehicle for us -- there's an increase in content per vehicle for us?

Not for friction material, not for friction material. I think steering is the main thing. There are engine valves, et cetera, have been modified, upgraded in technology. In value terms, some upgradation, but essentially not in product application.

The next question is from the line of [ Raja Kumar V ] who's an individual investor.

So I have a couple of questions. So sir, if I look at your -- the listed entities, I see there are 3, 4 entities with less than INR 500 crore market cap. So would it not make sense to have all of them under one legal entity so that we have the scale advantage and -- as well as you can look at saving some of the SG&A costs, because I look at other players like a Motherson Sumi or a recent entrant like a Endurance Technologies, they all have -- they are kind of getting benefited by way of further scale that they have. So I just want to know whether the management is looking at it from that stand. And the second question is from a fund raise standpoint, I just want to know what leverage the group has in terms of monetizing any of the nonmonetary assets like land or if that is not significant, do we need to further dilute the capital?

Yes. In terms of listed companies, some years ago, we restructured and created this holding company structure. So we still think that's a valid structure to hold on to. So there's one holding company and a couple of listed manufacturing companies, which are not joint ventures. So that gives some scope maybe but we have not really applied our mind on doing this. The others are all, as you know, are all joint ventures, including Rane Brake Lining, we have a Japanese partner, although they are a minority partner. So that leaves only 2 manufacturing companies, Rane Madras, Rane Engine Valve, and a holding company. I mean we have simply not applied our mind, although we do kind of get some kind of feedback like what you are giving from other people also. So we'll see as we go forward. In terms of fundraising, land is available in Rane Madras and Rane Engine Valve. We have not thought about it. If need be, we can always monetize that. We've not thought about it for the short term. But yes, in the long term, we can always think about that.

Now is not the time to sell.

Yes. Anyways, now, of course, even if the fundraising is to be done, timing-wise, land sales, this is not the time. And therefore, we have not thought about it.

Okay. But sir, how about the SG&A? So by having multiple entities, you're not creating different SG&A buckets in each of these entities, by which you are losing out the scope for leveraging that cost?

In terms of cost, not so much. I mean in terms of maybe some governance and listing cost, et cetera, could be there. Otherwise, the businesses by themselves warrant a certain amount of management time and management resources. So costs may not be the driver. Ultimately, there could be size, capital floating, et cetera, could be the driver, but not so much the management costs because the locations, et cetera, will still probably continue. So that may not be the real criteria.

Okay, sir. Sir, if you permit me, just 1 question on the focus from China. So I just wanted to know this new initiative of going for local India production and avoiding imports from China. I just want to know how much benefit Rane Group would expect to get. I know it will not be something to come in the short term. But in the long run, do you see this being a game changer for Rane Group?

Yes. So again, I mean, as you yourself pointed out, it's very difficult to assess and try and put a number to it, other than saying that definitely this is an opportunity. But we'll have to see how it evolves. Even for us, for some of our components, we do import them from China. So obviously, we are looking at some alternate sources, et cetera. And wherever our products are there, given our current product portfolio, there is very little Chinese competition. There is a little bit but -- so hopefully, we can try and take over that business in the next year or 2. What -- where we are seeing opportunity actually is in the global markets, especially U.S. market, where traditionally many of the customers have been buying from Chinese suppliers, we are suddenly seeing an increase in RFQ. Probably they are trying to resource some of their business from China to other countries. But as you know, in our business, that takes about 12 months to 18 months before that actually translates into, say, potential sales. So while we do see a lot of opportunities, it's still too early to put a number.

[Operator Instructions] The next question is from Pratik Kothari from Unique Asset Management.

Sir, my first question around our -- the U.S. die-casting business, which we acquired. I think in one of the earlier calls, you had mentioned that to break out from -- to leave this business, it will be a huge cost for Rane Madras stand-alone entity. So can you maybe quantify that number, please?

No, you can see -- it's very difficult to quantify the number, but you can see in the annual report and the balance sheet what is the total investments we have made there. So theoretically, the entire amount is at risk.

Sir, not the investment, right? I meant to leave that business, there will be some liability on us. Is anything on those lines true? Or is it just the investment that we'll lose?

No, there will be investments, and there will be the liabilities on the balance sheet of the U.S. entity.

Okay, okay. Fair enough. Sir, my second part, on the cost-cutting measures that we have taken, you have mentioned in the presentation in terms of improving our productivity, in terms of manpower savings, some manufacturing costs, et cetera. Sir, if you can maybe qualitatively talk about what have we done, apart from the salary cut, which you have mentioned in the presentation, and maybe on the quantitative side, too? I mean what have we done, what is sustainable, your thoughts on the same?

No. I mean -- yes, we have taken initiatives across all elements of the fixed cost. Of course, salary being the largest component. Salaries almost contribute about 50% of our total fixed cost. So as Mr. Ganesh said, we have taken cuts there. Over and above that, obviously, I think anyway travel budgets have been completely eliminated with what's happening. And I think that has been a big benefit. We actually are finding -- we have been able to have many, many customer meetings, even new business sourcing meetings all over video conference. So I think that our travel budget will probably not come back again to pre-COVID levels for a long, long time. I think we are very clear that we have -- we can be far more efficient. So I think the travel is a good example of what will continue to stay even after COVID -- things return to normalcy. There are elements like repairs and maintenance and certain other professional charges, consultants, we use tax consultants, legal consultants. So all those, we have cut, renegotiated contracts, et cetera. Of course, I think once market returns to normalcy, some of these elements will come back to pre-COVID levels. It is inevitable but we do see opportunities in that elements where it will continue. And our teams are closely reviewing all these cost items on a monthly basis.

No. Fair enough, sir. And sir, my last question around, our Chairman, in the initial remarks, he mentioned this cautious stance on the -- slight improvement in CV numbers that we witnessed in July. So do we hold this stance in -- for other parts too, like passenger vehicle or 2-wheeler? And we would have some order visibility for the month of, say, August or September, also on the CV side. So are those numbers discouraging for us to have such a stance?

No, I'm not sure whether -- there's some miscommunication. Actually, what we said was we are seeing improvement in the 2-wheeler segment and passenger car segment. And of course, tractors is already at its peak. We are not seeing enough of a pickup in the commercial vehicle segment. So CV segment is where we are seeing a lag. In fact, compared to what we anticipated 2 months ago also, we have not seen. Whereas in passenger car and 2-wheeler, we are seeing slightly better sales than what we anticipated. Having said that, we would still like to wait till end of October, early November to figure out whether this is sustainable. We do have a fear in our minds whether this is just some pent-up demand that happened during lockdown and that is generating it during the months of August and September. And of course, October is the festival season. The key is whether this will sustain in Q3. If this will sustain in Q3, then I think it's good news for all of us.

And sir, what would be the root of our concern for this to not sustain beyond the Diwali or November/December?

I mean, see, honestly speaking, I mean, the overall economic activity is down. Just -- I mean, I have a classic example in Rane itself, and this is not unique to Rane, almost many -- most large corporates have cut salaries of all management. So obviously, discretionary spending is going to come down in the economy. People wanting to buy car, buy 2-wheelers, et cetera, we'll have to wait and see. With salary cuts, are people still going to buy some of these products? Of course, if the economy picks up -- I mean, I guess everything is a vicious circle, everything is connected. If economy continues, we'll also reinstate the salaries back. So we'll have to wait and see.

[Operator Instructions] Next question is from Manish Goyal from Enam Holdings.

A few questions from my side. On the Rane NSK, sir, in opening remarks, it was mentioned that henceforth no incremental warranty provisions would be required. If you can just kind of elaborate in terms of, like, have we been able to identify the problem? And has it been resolved as on date? And second question is, do we expect any more -- basically, any recoveries from the past provision? That was my first set of questions.

Okay. In terms of the root cause and the countermeasures, we have identified it was a complex problem having multiple dimension. So that is one of the reasons why it was so long drawn out. But we believe that those causes have been identified and countermeasures in place. But what happens is, because this problem manifests after a certain mileage, it keeps continuing, depending on the owners who bought vehicle before the countermeasures and when they complete or come near the mileage, it is showing up and then it is being replaced by Maruti and being debited to us. So that is the reason, the uncertainty, I'm not able to forecast. But having said that, the positive trend is that, post countermeasure, the trend of defects and claims have come down. That is very clearly seen. But when this mileage will clearly be exceeded by all the pre-countermeasure customers may take the next few months. But the trend is positive. That is the reason we believe that no major provision may be required. We'll be able to manage. In terms of recovery of the provision, the only possibility is insurance. We have launched the claim with the insurance company. But being a major claim, it's going to be a long drawn affair. So we don't expect any quick results there. Nevertheless, we will do our best to try and convince the insurance company on the claim.

We move to the next question. The next question is from the line of [ Raja Kumar V ], who's an individual investor.

Sir, I basically want to know what would be the debt level of the group compared to the March '20 number. Where do you see the overall debt moving, the delta? And the second question is, of all the 4 listed, leaving aside the holding company, the 3 operating companies, the listed entities that you have, I would like to know which entity has better prospects for -- in terms of showing positive bottom line and coming out and getting into the growth mode compared to the rest of the entities? If you could give that.

In terms of debt, of course, group level consolidated debt is kind of an academic figure. But I can give you the group...

His question was debt, how much has it moved up from March to now?

March to now. We are just checking that. But the -- actually, the first quarter, a lot of working capital efficiencies and the moratorium helped to some extent. Therefore, there's not much of a movement, but I can -- can you show it and maybe -- I'm just looking at the figure. I'll just get back to you. In terms of growth, I think all the companies are in line with their growth. Indian auto industry and the export market will grow. So our objective is to try and grow every business. Only the segments and the strategies are different. Some are more export-oriented, like the engine valve business. Some are more domestic, like the steering gear division. But all the businesses, once the effect -- negative effect of COVID is gone, should grow in line with the Indian market and the exports where we are planning. So the idea is to grow all the business. I'll just come back to the debt in one minute.

Sir, do you expect all the entities to recoup their losses incurred in Q1 and do show a positive PAT for FY '20/'21?

Not recoup their losses, no. I think the idea is if we can stop bleeding from Q2 and improve further in Q3, Q4, that's the idea. But the impact of Q1, I'm afraid, will be there in the annual results also. So our debt-to-capital employed in June totally is about 38% -- 38.6%. And in March, it was 36.1%. So there's no significant change because while some capital borrowings were done, the working capital efficiency was improved during the quarter. So overall, the debt-to-capital employed has moved up by only 2%.

Okay. And sir, you're not planning to restructure your debt because you said you have already availed the moratorium. So you're not planning to go for a restructuring of the debt?

As of now, the moratorium has helped and business seems to be improving. So we don't think that will be required. We'll see how the business goes in Q2, Q3.

The next question is from the line of Sunil Kothari from Unique Investments.

Hope everybody is fine, sir. Sir, my question is on this external opportunity of manufacturing, maybe replacing China or creating second source of supply globally by a global player. So are you getting any inquiry, any feel, any scope of opportunity, any development? So that will be helpful, if you can explain on that.

As I explained, Sunil, for India, we are not yet getting any significant inquiry. But for supplying to U.S., especially U.S. market, and some to Europe, we are getting a lot of inquiries. So the RFQ pipeline in Rane Madras, in Rane Engine Valve, even Rane Brake Lining, we are getting inquiries for the global markets. See, in India, as I mentioned earlier, whatever Rane portfolio that we are already supplying to the Indian market, there is very little Chinese. And in that, there is a potential for us to remove them by increasing our share of business. But we are not seeing anything new as far as Indian market is concerned.

Right. But globally, you are getting this good inquiry from [indiscernible] for that?

Absolutely. Ever since the trade war between China and U.S. has escalated, and especially in the last 4 months, so the RFQ pipeline that we had 6 months ago to now has increased.

Okay. And sir, this must be a very big opportunity?

Yes, yes. But a lot of it also depends on, finally, what happens between China and U.S. and what kind of understanding they reach, et cetera. But right now, it looks like it's not heading in the right direction. Therefore, it is going to favor countries like India.

And I wish you good luck. I'm hopeful we'll be able to capture this opportunity.

Yes, absolutely.

The next question is from Jaimin Desai from ICICI Direct.

My first question was, now we are hearing from some ancillaries that truck demand has picked up well on the aftermarket side over the last couple of months. So are you seeing something similar in your businesses also? Can you provide any color in terms of, be it utilization levels or something like that? And do you think it is sustainable for the coming months? And secondly, specifically to Rane Brake Lining, do we have any plans to reduce our dependence on the M&HCV space?

What space?

M&HCV.

So your first question was specifically relating to the aftermarket of M&HCV, correct?

Right.

So definitely, there is the -- I mean, Q1, there has been no sales at all, pretty much. And a lot of our dealers and distributors, they work on a very -- they basically work on working capital efficiency and how they manage cash. So the business has gotten hit quite badly. Having said that, very clearly, we are seeing signs of the aftermarket recovering much faster than the OE segment. And we are seeing sales picking up a significant portion. I mean we're almost at last year levels, but not there fully as yet, but we are almost there. So on the whole, our guess is for the aftermarket sector, we'll -- I'm talking specifically M&HCV also, we'll grow about 9%, 10% in the remaining part of this year is what we are estimating. And your second question was on RBL.

In terms of RBL, I just want to clarify. See, RBL, nearly 40%, 45% of our business is aftermarket. The nature of the product is such, and we have a very strong position in the market. And in the aftermarket, commercial vehicle users consume much more friction material than passenger cars. Because of their utilization of the vehicle and the long distance driving, the wear and tear is much more. So traditionally, commercial vehicle brake linings is a big part of the aftermarket, and that will continue, okay. Today, their utilization may be low. Therefore, market is somewhat dull. But once the utilization comes up, the nature is such that there's always more parts consumed, especially friction material, by the commercial vehicle segment compared to passenger cars and other light vehicles.

The next question is from the line of Manish Goyal from Enam Holdings.

Sorry, my line got disconnected. A couple of questions on -- sir, I missed on the Rane Madras new business opportunities you spoke about in terms of aluminum die casting. If you can highlight again that, please?

So you mean the aluminum die casting in India, right?

Yes, yes, the Indian business, sir.

Yes, so 2 things. So one is we have won -- during this COVID time itself, we have won 2 or 3 -- 3 new businesses. And as Mr. Ganesh said, including we have broken into Bosch. As you know, traditionally, our -- one of our largest customers has been ZF and then, of course, Nexteer. Now we have also penetrated Bosch, and we have won an order from Bosch. So that was -- and in addition, we have won 2 more orders, 1 of which includes from ZF. So we have not only booked some businesses that will go into production next year, over and above that, the RFQ, what I think Sunil Kothari was asking earlier, so the RFQ pipeline has also increased for the casting business in India to export to both Europe and U.S. So a lot of them are in advanced stage of negotiations. So looking at all this, as you know, we have told in multiple calls last time, the number one problem of our die casting business is capacity utilization, having set up that second plant and some things went wrong and we couldn't utilize the capacity fully. Now we are seeing clear visibility of better capacity utilization, which will automatically help achieve breakeven in the next financial year.

Okay, okay. So is it that -- at what levels of -- the revenues will breakeven in domestic die casting, sir?

About INR 160 crores.

Okay. And on the -- there was something also mentioned on the [ JLTIs ] for EV, so I missed on that as well, sir.

So yes, we won an order with -- for an electric 2-wheeler manufacturer in India, where we're going to be making the battery cover.

Okay, okay. And sir, last question on the U.S. subsidiary. Like have we availed or applied for any subsidy scheme offered by the U.S. government for our U.S. operations and -- both from the employees front as well as company level, sir?

Yes. So what we did in the U.S. business, of course, during the month of April, we had laid off almost 95% of the workforce for one full month. So we had laid them off, as a result of which there was no expense for us and the government paid the salary. In addition to that, we also have applied and successfully got the PPP, Payroll Protection Program. As a part of that, government was giving loans. We also successfully applied for that and got the loan. And if we meet certain criteria, that loan will also be forgiven as per the government, what they laid out. So we are reasonably confident that whatever we borrowed from the government of U.S., a substantial portion of that is going to be forgiven in the coming quarters. So definitely, that program has helped our business to some extent. Otherwise, we would have had to foot that bill.

So that credit, we have taken in our P&L?

Not yet.

So what is that loan amount, sir, which we are -- we have -- we have been -- got approval for?

It's a little in excess of $2 million.

That was the last question in queue. I would now like to hand the conference back to the management team for closing comments.

Thank you very much. Thank you for your interest. And we definitely hope that when we meet after Q2, there'll be more positive news, and we look forward to improvement from a very, very difficult quarter. Thank you. Thank you all.

Thank you very much. On behalf of Rane Holdings Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.