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

Ladies and gentlemen, good day, and welcome to Rane Holdings Limited Q2 FY '22 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, Stanton. Good morning, friends. Welcome to the Q2 FY '22 earnings call of the Rane Group. To take you through the results and answer your questions today, as usual, we have the management team from Rane Group. Mr. L. Ganesh, Chairman and Managing Director, Rane Holdings Limited, Mr. Harish Lakshman, Vice Chairman, Rane Holdings Limited; Mr. P.A. Padmanabhan, President, Finance and Group CFO; Mr. Siva Sandra Sekaran, who's the Executive Vice President of Secretarial and Legal Services; and Mr. J. Ananth, CFO of Rane Holdings Limited. Please note that we have sent you the press release and also have sent the presentation link of the deck. In case any of you have not received it, you could look at it on our website or even the BSE site of Rane, or you could write to us your questions, and we'll be happy to send the detailed earnings presentation over to you. Before we start, I'd like to say that everything that is said on this call that reflects any outlook for the future or which can be constituted as a forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These uncertainties and risks are included, but not limited to what we mentioned in the prospectus and subsequently in the annual reports we can find on the website. With that said, I'll hand over the call to Mr. Ganesh. Over to you, sir.

Thank you, Diwakar. Good morning to all of you. At the outset, let me take this opportunity to wish you all a very happy, safe and joyous Diwali. I'd like to welcome you all to this teleconference. I hope you are all staying safe and healthy. With the increased vaccination and the COVID-appropriate behavior by and large, India has been keeping away from the further waves of COVID. We hope and pray that this will continue. You have seen the Q2 FY '22 performance highlights of the group companies posted on our website. I would just like to provide a few comments on the industry. Q2 was a good quarter from the demand point of view, ramping up volumes post impact of second wave in Q1 which the industry did quite rapidly because the lockdown was not as severe as in the year before. Some of the positives were India's GDP seems to still be on a good track and clock a healthy 9.5% growth. Monsoon seems to be very close to normal, and therefore, we expect that the rural sentiment will remain bearable and the pace of infrastructure announcements that the government and activity seems to continue to improve day by day. We do see some challenges. The semiconductor chip shortage, as you are all aware, is one severe challenge. Our customers faced availability challenges, and it continues to remain a concern, not only the shortage, but also the kind of uncertainty almost from a week-to-week basis on the availability by customer is causing a big challenge for us. In Q2 FY '22, the crisis deepened, which, as you know, the largest partner vehicle manufacturer in India dropping volumes significantly. There are multiple reasons. They are talking about some fire in Japan which impeded the capacity, the COVID effect in Malaysia, some problems in Taiwan, diversion of capacity to other infotainment and homeworking computers, et cetera. However, the net effect seems to affect the auto industry severely. Based on various feedback we get and the views that are prevailing in the industry, we see that probably some improvement month-on-month from 2022 will start on this front, and probably by some time mid-2023, this program will be behind us. Lead time to add to the capacity, geopolitical situation of various countries like China and high demand of electronics of other nature seem to be the key factors. In addition, we faced a lot of supply chain challenges. This not only the price of commodities like steel, aluminum, petro products have been significantly going up, availability itself is becoming a challenge. This has driven the uncertainty again in terms of inventory management. And while we have been, by and large, successful in passing on to the customers, there is some lag, as usual in the quarter. In terms of inflation, with multiple price increases on all commodities, this is something which we need to watch closely. We hope this will not dampen, the demand seems to be quite strong for vehicle industry. We hope with the easier financing scenario, this remain -- demand will sustain, but at the same time, the inflation will not dampen this. We are working with our customers and Tier 2 suppliers to handle the dynamic environment. We hope there will be no severe third wave, as I mentioned earlier, thanks to the vaccination coverage, and better preparation by the state governments. With these few remarks, I will hand it over to Harish for his comments on the performance in Q2. Thank you.

Thank you, Mr. Ganesh. Good morning, everyone. I think as you would have seen in the results, the Q2 was a slightly better quarter with gradual recovery happening after a challenging Q1. And at a group aggregate level, the total revenue increased by 30% over last year same quarter. But unfortunately, the material cost increase has resulted in a drop in the EBITDA margin by 176 bps. I'd like to provide some details around each of our businesses. In Rane Madras, there was some good order booking that happened this quarter. We secured INR 125 crores per annum order for a Rack & Pinion business with an export customer. And we also secured a INR 26 crore per annum business for our light metal casting product also for exports. The other good development that happened was we acquired the steering components business of Hical Group. This business has one plant in Chennai and they manufacture scaling and suspension components for inner ball joints and outer ball joints. The major customers are Mando India, who in terms of OEMs, such as Hyundai, Kia, Mahindra, et cetera. This is a good strategic acquisition for Rane Madras because so far, we have not had Hyundai and Kia as one of our end customers. The U.S. subsidiary sustained the improved operational performance on quality, productivity and customer delivery. Sales of the U.S. subsidiary grew significantly in this quarter compared to last year because of the strong demand and ramp up in volumes of new programs. However, we are seeing the sales getting impacted due to the semiconductor shortages and especially based on what we saw in the month of October after the end of Q2. In REVL, the plant operations improved their output to support strong demand growth in quarter 2. However, increases in material costs as well as employee costs compared to last year quarter because last year many of the employees had taken salary cuts, et cetera, and we had to reinstate them and other costs resulted in a drop in profitability. In Rane Brake Lining, the demand recovery helped the business posted a 17% growth. The aftermarket segment saw recovery across India. But however, the state transport corporations as well as the bus segment continued to underperform because of COVID and lack of use of STUs and buses, STU buses. Again, here, the increase in material costs and unfavorable product mix resulted in the drop in the profits. And also, when you compare to last year, there was a one-off selling price increase recovery from a customer that we had last year's quarter in Q2, which is why we are seeing a steep EBITDA drop of 21% last year Q2 to about 11.2% this quarter in this Q2. In our joint venture, Rane TRW Steering Systems, the steering systems benefited from the recovery from the CV segment and the gradual increase in demand from the M&HCV customers. The Occupant Safety business got impacted due to the semiconductor shortages, especially with customers like Mahindra as well as with our exports. Despite that, the exports accounted for 65% of the occupant safety sales in this quarter. RNSS, Rane NSK, the better offtake in served model with Maruti helped post a 28% growth. From a profit standpoint, there is a lag in RNSS in recovery of material costs, which impacted the profitability for this quarter. However, we are working with our customers to recover the sale. Regarding warranty, the discussions are under progress to determine and conclude on certain aspects pertaining to warranty returns. The conversations are happening with customers and with NSK. And based on our assessment and pending final outcome of the discussions, no incremental provision has been made during this quarter. A few comments on the PLI scheme, I think, obviously, there's been a lot of media discussions on the scheme. The auto PLI scheme was announced. We are still waiting for the details on the list of components that are eligible for the scheme. Based on this, we will be able to evaluate the benefits for our existing product portfolio and any new potential opportunities. The demand environment in India continues to be favorable, and the export demand remains robust. And we are hoping that there won't be any spurt in COVID cases in which case, in which situation the demand will continue to sustain. However, the semiconductor shortage and recent -- the logistics shortage on containers, et cetera, they continue to be a major challenge impacting both our domestic and the international OEMs. The commodity price increase has been relentless and that's a matter of another concern. In fact, largely, our margins for Q2 of this quarter has been impacted mainly because of this. Our teams are working with customers on price recovery, which will be the key to protecting our margins in the short term. With these remarks, we will now open for any questions that you may have. Thank you.

[Operator Instructions] The first question is from the line of V. Rangan from Rane Holdings.

Are you able to hear me, sir?

Yes.

Hello?

Yes, we are able to hear.

I'm a shareholder for a long time. I've got full faith in the management, and that's why I just don't care because it's really creating value. Now there are 2 things which I heard from the outside. So you've got some warranty out of the train for the NSK Steering like that. So can you tell me how much you have made a provision? I'm told that it is about more than INR 150 crores around, INR 170 crores like that. And there is a technical problem with the steering wheel not coming to its place when it is turned on the right or something like that, I heard. Can you just throw some light on that? Because the working all this cannot -- I don't want to go into them because I got full faith in that. Only there's 2 aspects I would like to know, what is that? I want about the casting company that also made a huge loss, something like that. And of course, now we've got some export out or something in. Can you tell me briefly explain that, sir?

So yes, Mr. Rangan, the warranty subject has been discussed almost every quarter during our investor calls, the provisions that have been made is actually in excess of INR 300 crores which has happened over the last 2.5 years. Yes, it is a very unfortunate development that has impacted the financials of the joint venture, and therefore, Rane Holdings as well. The problem has been some sort of a sticky steering that has been complained by the customers. But as I mentioned, in this quarter, there has been no incremental provision that has been provided. And so -- but the matter is still being discussed between Maruti as well as our joint venture partner to reach some conclusion. But a lot of actions have been taken, and we are confident that over time, this warranty will come down. Your second question regarding casting, again, both the India business and the U.S. business suffered last year heavily due to capacity underutilization and the COVID situation. Both the businesses has started improving on the capacity utilization. And in fact, the new order booking of the India business is also looking quite robust in the last 9 months. So we are confident that in the coming quarters, the performance of both the casting businesses will improve.

But could you tell me that warranty, whatever that is going on to be debited, or is this a permanent affair like that? Or you have stopped supplying all these things to Maruti now? Are you still continuing that? Where are we placed now? Because it's going to be a never-ending affair and undeterminable that will become a problem, sir. And...

No, no. we are continuing to supply to Maruti and that will not change for a particular vehicle model. And even if you see the warranty returns, of course, it is a big number. But as a percentage, if you see the returns have been around 4% to 5% of whatever we are selling is coming back. So that is the -- that is what is impacting the financial performance. But even with 4% to 5%, we are confident that in the future it will come down because reasons have been identified and corrective actions have been taken.

Like that parts per million effect will be there like that, it should go on coming on each product is differing -- differs actually. Now where we are placed in the global standards, can you throw some light? Because never-ending process that 4%. Of course, by numbers is huge. But whatever that you should try with -- improve the quality like that so that entry barrier will be there for somebody, no.

As I mentioned actions have already been taken, and you will see that in the future because whatever is in the past, supply, even that is what is coming back. But we have taken corrective actions. So in the future, this 4% to 5% will automatically come down.

[Operator Instructions] We take the next question from the line of [ Abhishek Kadam ] from Alpha Invesco.

Am I audible?

Yes.

Sir, my question was regarding Rane Brake Lining. So I understand that currently, we are at 70%, 75% utilization levels. So what will this go towards 99% or higher percentage, will it be rebound in M&HCV or -- with exports growing very fast?

Yes, in terms of RBL capacity utilization, currently, the 2-wheeler, as you know, is not growing at the kind of rate it was growing until last year. So there is a bit of a softening in 2-wheelers. That has impacted the capacity utilization. Once the 2-wheeler growth comes back, especially the high-end 2-wheelers is what we supply to, and they have also been affected by the semiconductor chip availability. So once that comes back, capacity utilization will improve. In terms of passenger car, again, our major customers like Maruti are affected because of the same reason. So it is not that the demand has not gone away, but it is because of this shortage of semiconductor chips. Exports, as we've been telling the investors, lot of efforts are going on -- 3 intense export efforts in the last about 1 year, 1.5 years that is paying some dividends. We have got some new areas now in Africa and the U.S. We have started getting some orders. So it will take maybe a couple of years, but we want to take our exports, which is currently less than 5% to at least 10% of our sales in the next 2 years.

Okay. Sir, another question was on valves. So I understand that our current -- the current product does not apply to EVs. So even the penetration in North America and Europe -- So are these global players shutting down their capacities? Because I assume that it's a smaller share for the revenue share to the parent company. So are those plants in capacities going off, shutting down, what's happening on that, sir?

Yes. So with all the move to electric, obviously, all the OEMs are making investments only the electric, but nobody is shutting down their IC engine plant. I mean if you see even now, there is some marginal growth in the IC engine globally. But of course, the electric market share is slowly increasing from 2% of the global market to 5%, 7%, et cetera. So the -- there will be a problem eventually. I mean it could be 10 years, 15 years from now, where the future of this product line would dramatically reduce. So obviously, we are aware of the impact it has on the group. And obviously, over time, we will address this problem. But right now, we are still seeing opportunities for increasing the business for engine valves in the short to medium term.

Short term, medium term would be 5 years, sir?

Yes, yes. And also, we're also focusing a lot on nonautomotive segment like stationary engines, the diesel -- diesel power engines globally, not just Indian market. In fact, for Rane Engine Valves, already 30% of our sales is nonautomotive. And there is initiatives underway to increase that also further.

Yes. And how much is the export product in valves?

About -- again, about 28% to 30%, 1 second.

Okay, okay. Sir, in this nonauto business, is this India-oriented or export-oriented?

Export -- both, India is also there, but the export percentage is higher.

Okay. Okay. Sir, last question on die casting. Sir, what sort of asset turns, we look for this in India subsidiary and U.S. subsidiary? And compared to 2016 when our revenues were around 200 crores, have we tweaked our product portfolio in the U.S. subsidiary?

Yes, so this business is asset-intensive. So it tends to be about the sales asset turns to be -- I mean, sales to asset ratio, let me put it that way, tends to be about 2:1. I don't know exactly the asset term definition. But sales to asset tends to be about 2:1. And with regard to -- yes, obviously, after hitting 200, when we had a much higher sales, sales came down because of various reasons, including one customer shutting down where one of their product lines, et cetera, and then COVID happening. And we see strong sales coming back in the India casting business. And the other significant thing that is different from 3, 4 years ago was 3, 4 years ago, we were -- almost 70% of our business was dependent on 1 customer, whereas now we have 7 or 8 customers both domestic as well as exports. So the portfolio has also become more diversified. So therefore, the risk of something going down at customer and then impacting our business has reduced compared to what it was 3, 4 years ago.

Okay. Then would it be fair to assume that most of our U.S. subsidiaries business is going towards EV applications in auto PV?

For the casting business?

Yes.

Yes, there is -- not all of it is like EV related. But yes, we have started supplying some products, both in entire Rane Madras, both I am talking steerings and as well as casting side. We are already supplying to some EV vehicles in India as well as in the U.S. market. And we have also won some new businesses for EV vehicles in the export market that we will be supplying in the next year or 2.

[Operator Instructions] The next question comes from the line of Surabhi Saraogi from SMIFS Capital Markets.

Sir, am I audible sir?

Yes.

Sir, my question is that now since your past problem on claims has been resolved, how is the outlook looking, please?

As I said in the past, last conference call as well as in my opening comments, whatever provisions has been made for the past, we have provided. So whether there will be future provisions, et cetera, we're still under discussion with the various parties involved. And whenever there is enough clarity, we will share. But as I said, for this quarter, there is no incremental provisions.

Next question is from the line of Chetan Phalke from Alpha Invesco.

Hello?

Yes. We can hear you.

Yes. Sorry. Sir, Just on a broader level, I just had one question, but now still globally, the future for ICE vehicles looks a little -- I mean the growth will be muted going forward. So is there a case wherein the authorized companies globally they stop investing in their capacity expansions. And that demand is moving towards countries like India because of our cost advantages and other things. And there is a scope for exports. I mean the OEM as a category may not grow, but exports from India might end up in growing as we end up in getting more market share because of our cost structure and everything. Do -- so is that happening? Do you see that happening at your level? And do you see that in our own numbers over the last 3, 4, 5 years?

Yes. So I'll address a couple of points on this. First of all, while EV is definitely going to increase significantly, it's not that IC engine is going to go away overnight. We are talking of EV, even if EV is doubling every year. We are talking of EV going from 2% of the total sales, global sales to 5%, 8%, 10%, 11%. But it will be an accelerated growth. So there is the threat to IC engine business will happen over the next 5, 10, 15 years. It's not going to happen overnight. The second thing -- second point is the impact of this will vary from company to company in the auto component industry. If you take Rane Group, for example, for us, the impact is only our engine valve business, which contributes to about 9% of our group sales. The remaining 91% is intact even in an EV vehicle. So whether you take a steering system, whether you take a seatbelt, an airbag whether you take a brake pad, all of these will continue in electric vehicles. So therefore, the relative impact for Rane Group is lower than, let's say, another auto component company, which is predominantly supplying to the powertrain business. So it also depends on that. Third, of course, from our group perspective for us, both domestic and export, we are seeing a lot of opportunities for growth, and we will continue to capitalize on them. There is a special focus on trying to win new businesses on electric platforms, and we are succeeding in getting businesses, both in domestic market as well as in the international markets.

But do we see increase -- I mean, let's say, for the next 3 to 5 years. Most of our incremental growth, do you see that coming from exports from OEMs or the -- our global partners increasing their presence in India? I mean just trying to understand from where the growth will come from because if you look at last 4, 5 years data across all our companies, the volume numbers are quite flattish. So that way we're just trying to defend from where the growth will come, whether it's OEM, whether it is exports or whether it be partners savings...

So for us, it will be both. But I think the -- if you ask me to guess, I think exports will outgrow the domestic -- exports will grow the most followed by domestic. See domestic is hard to predict the Indian GDP and the economy takes off in the next 3, 4 years. We can start seeing some solid growth in the domestic market also. So our group will kind of mirror what's happening with the auto industry in India. But our expectation is our export will be slightly more than the domestic growth.

[Operator Instructions] The next question is from the line of Raj Kumar V, an individual investor.

[Technical Difficulty]

Sir, we can't hear you that well. Your voice is not very clear.

Yes, can you hear me now?

Sir, we request to use your handset please.

Hello, can you hear me?

Yes.

Sir, the first question is on the margin of Rane Brake. I see that the EBITDA margins have dropped from 15, seems to be kind of a standard margin for Rane Brake for a long period. So I just want to know when do you think the margins will stabilize both for the Rane Brake as well as the Rane Madras stand-alone?

So it's very difficult to give any sort of prediction because the kind of commodity increase we have seen in the last 9 months has been unprecedented. Most of the commodities are at a record high. And the way it all increased in the last 9 months, so we are also clueless as to what's going to happen if we -- whether the prices are going to go up further, whether it will stabilize at this level or whether there is scope of it coming down because we are already seeing some precious metals where the commodity prices are slightly dropping. So therefore, it's very difficult to give a clearer picture.

Yes sir, that if you see your competitors, although the margins have come down, but we have not seen that kind of erosion. I mean, I'm just taking an example of people like Mahindra CIE. They are still able to show EBITDA between -- somewhere between 12% to 13%, and they still have aspirations to 15%. So just wanted to know, is it because of the scale, we are not able to do this? Or what is really pulling down the margins?

You're asking which business, our brake lining business see because the margin varies depending on the nature of the business and what the issues are. And I'm not able to comment on Mandra CIE.

Okay. No problem, sir. Sir, on the warranty provision for NSK, just want to know what are the numbers outstanding as of 30th September, the unutilized provision?

INR 55 crores.

INR 55 crores.

Okay. And any update on the insurance claim for this loss, sir? Are we working with the insurance company?

Yes. We are working with the insurance company, but there's no clear picture as yet.

Okay. Sir, lastly, I think there was a comment in the presentation, which said that there was a lag in price recovery in Q2 for NSK. So is it possible to quantify what would be the amount?

Unfortunately, we don't have that data available readily.

Yes, I understand. It's joint insurance, yes.

Different supplier.

Sir, one more thing I noticed in the shareholding pattern. I see most of the institutional guys have kind of exited the Rane Group, which is really disappointing to look at. So is there a way you kind of increase your engagement with the institution guys because that kind of helps in the proper price discovery for your stocks?

Sir, we'll -- point noted. We will discuss this internally.

Okay. And the last comment. On the Rane Madras, the U.S. subsidiary, it will be better if you give those numbers separately instead of giving RML consolidated because it kind of dilutes the picture because any way you're giving each individual entity numbers, so it would be easier if you give RML performance separately with your comments and as an investor we will be able to appreciate it better.

Noted your comments.

[Operator Instructions] The next question is from the line of Manish Goyal from Enam Holdings.

Is it better now?

Yes.

So sir, first on Rane Madras. It has been very heartening to see that for last 3, 4 quarters, we are seeing a regular order inflow for both Rack & Pinion and casting business, especially from the exports market. So based on like all the orders, what we have received probably over the period of next 2 years, how do you see the revenue mix for Rane Madras on a stand-alone basis? Like how do you see that exports contributing both from steering and castings business? What could be the revenue contribution? Because that will provide a lot of stability to our revenues and our earnings.

Manish, I don't have the exact number, but I would guess that companies on an RML stand-alone basis, the exports will be close to -- already we must be close to about 30%, 28%, and we expect this to grow to about 33%, 34%.

Okay. Okay. And these are typically ideally a long-term contract with at least 3 to 5 years visibility?

Yes, it is. Very much. These will all be typically 5-year contract. And if you see even this 28% last year was about 23%. So we are steadily increasing it.

Great, sir. And on U.S. subsidiary, you did mention that we saw a strong demand recovery and the programs, the new programs have started ramping up. Yet, there is a shortage of semiconductor, but like how do you see these new programs ramping up? And then how do you see profitability improving? When do you see the breakeven now, sir?

Yes, definitely, the sales compared to last year, there will be a significant jump. And Q2 to Q2, there was solid growth almost -- what is growth?

30%.

30%, 35% growth, and we will see significant double digits -- continue to see double-digit growth. But when I compare the Q2 that just got over to the upcoming Q3, clearly, we have seen semiconductor shortage impacting the business. So there is some concern about our Q3 performance because of the semiconductor shortage even for the new program that we launched which started off well, there is some impact. But of course, the impact around 5%, 7% of sales on a month-on-month basis and depends on chip availability, very difficult to predict. Now the other new -- there is another new program also that will be starting in Q4, and that will also hopefully add to the growth of the business. So we are seeing slow and steady growth for the U.S. division. And as far as profitability is concerned, of course, I think this year, we have benefited from the stimulus package of the U.S. government. And I think we had indicated in our last call also, next year, we are trying to be EBITDA breakeven during the next financial year. And also, that will depend on how much the sales growth business because we have booked enough business to achieve an EBITDA breakeven. And now if the volumes materialize, I think there will be confidence. So that's what we are hoping for in the next 12 to 15 months.

Okay. And is there any more incentive spending or we have received large part of it?

A large part of it has come. There is some remaining for Q3. After that, it will be over.

Okay. And what kind of fund inclusion it will require from Rane Madras going forward?

No, I don't have that number as yet, Manish.

But do you see that it will probably require some significant...

Yes, yes. I think, again, in the last call, as I indicated, there will be some investments. But the good thing is that all the -- unlike in the last 2 years, where a significant portion of the money went to fund the losses that has changed. Going forward, whatever investment that will be required from Rane Madras that investment will go towards funding CapEx and growth and repayment of some loans. There will be no more loss. We are not seeing any more loss funding. I mean unless there's another wave 3, those kind of -- as long as there are no more black swan events, we don't see funding of losses happening anymore. Everything will go toward the growth of the business or repaying some past loans.

Sure, sir. Sure. And on Rane NSK, you did mention that it's only that 4% to 5% vehicles are coming back at the moment. So basically, now in terms of the correction what we have taken, is it that after correction, we are seeing only 4% to 5%? Is that a fair assessment?

So this was before.

What we -- yes. But then it will take some time because usually these voluntary returns happen after 1 year, 2 years, 3 years, et cetera. But we took action, let's say, about 18 months ago. So for us to feel that it will take another 10 months, 12 months. So eventually, we'll see this 5% come down.

Post countermeasure, as we see it, the numbers are much less, less than 0.5% so far. So it's all precountermeasure what is still coming back.

Okay, okay. And last question on overall as a group, like we have been taking price corrections on the cost increase. So do we think that going forward in Q3, we will probably have seen most of the price corrections of the cost increase, which have happened in recent past, and we should be able to see some normalized margin?

Yes. So for sure, in more than 95% of the cost increases we recover within a quarter, within 3 months, it could be end of the quarter. But within 3 months, we usually get whatever we have passed on to our suppliers, we are able to recover from the customers. So there will be -- the lead lag effect will be a maximum of 3 months. Now the only concern, Manish, is we don't know whether there'll be some more increases in the month of November and December. There is already some talk that steel prices are going to go up a little bit more in the month of November. So if prices stabilize at this level, I think by December, more than 95% of the cost would have been recovered from our customers. But if there is some further increase in November, December, then again, that lag effect will continue.

The next question is from the line of Krishnakumar from Lion Hill Capital.

Congrats on a great bounce back during this tough time. Sir, first question on the steering warranty issue NSK, so is it possible to give some color in terms of the return rates on supplies in FY '21? Would it be like 2%, 3% now based on FY '21 supply? Is there something that you can share or strictly confidential?

See, the -- as I said, the countermeasures were taken sometime in October -- September, October 2018. Beyond that, the claim ratio is very low. Whatever is coming back is less than 0.5%. All the claims so far are coming back before that date. So we are hoping that once we -- that period is over, then it should come down. That is our expectation.

Sure sir. And sir, just addition to the previous question on price increases and pass through. Sir, when you say that you get a price increase, you cover on price increases basically from now. Is there any positive benefit that the OEMs are willing to give us, sir? Because if you have an unprecedented move in steel prices, et cetera, so are we able to kind of get some retrospective benefits also, sir?

See, it depends on the contracts that we have with customers, where there is -- many customers, there is a clear contract that every 3 months upward movement or downward movement will get corrected for the next quarter. So whatever adjustments that take place during the quarter, we may not be able to recover, but the next quarter, we will recover it. That is as far as customers where there are clear contracts. Where with customers we don't have contracts, obviously, we put best efforts basis to get it retrospectively from the day we incurred the cost increase. And I would say that in -- I mean I'm guessing -- but 80% plus most of the time, we get it with retrospective effect. Sometimes, they are not able to recover fully. So that depends case to case. There may be some other negotiation points with the customers, some other kind of quality issue or a delivery issue. So it gets clubbed with those and then some settlement is reached. But most of the cases, we do get it.

Sure, sir. And in terms of acquisition of the steering component figures from RHL, sir what kind of revenue, seems that we can after -- or a couple of years from that business incrementally, sir? Any guidance broadly if you can give.

The business that we have acquired currently has a top line of almost INR 40 crores, INR 45 crores, right?

Yes.

That's what we...

Is it open up any...

Yes. It will grow. The future of that business is closely married to the success of Hyundai and Kia because it is -- they were a competitor of ours, but we never had access to Hyundai and Kia business, now we have access. So that business will grow in line with how Hyundai and Kia perform in India.

But is there an export opportunity there sir to the...

Long term, yes. Definitely.

The next question is from the line of Jigar Shah from Financial Research.

Sir, a couple of quarters, we have been mentioning about consolidation of various group companies and that you all were thinking about it and there is what at an appropriate time any further inputs on that, sir?

No. I mean right now, there's no further development. We just continue to -- we are still continuing to discuss and evaluate obviously, it's a complex decision with so many listed companies. So -- but it's still under discussion.

So should we hear more about it over the next 12 months or so, sir, you say?

Difficult to give a clear timeline. Definitely, once we are ready, we will for sure communicate with the investors.

The next question is from the line of Samarth from TPF Capital.

Question on RBL. Could I get the breakdown between the revenue growth breakdown between volume and price?

Unfortunately, we don't have that data with us.

Okay. Can you give a rough estimate?

We grew from that. We grew 16%. Overall growth was 16%. We are not able to give a clear picture. I don't want to guess.

Okay. And there's the 12% differential between the OE growth and the aftermarket, is that because we're able to pass on cost increases in the aftermarket more quickly than we are to the OEMs?

Yes, we got price increases from both the segments. But yes, aftermarket, we are more in control on deciding the price increases and the timing of it.

I guess my question is the differential between the 2 is largely reflected by price increases or is there also...

I mean there's been growth as well. I mean, you take our aftermarket business last year, see, when you compare it last year quarter, the COVID impact was far more significant. We had total lockdown in the month of May, June last year. Whereas this time, the lockdown is not that intense. So therefore, the Q2 performance, there is a significant volume growth as well.

Okay. And in terms of -- I guess you mentioned in terms of pricing for the whole group, but for RBL in particular, is that -- with that 95 -- supply that you can pass on 95% of the cost increase would that apply to RBL as well within the next quarter?

Yes.

By and large, yes. There are some formulation issues and complexities in RBL compared to others where we can straightaway link, correlate the commodity to the rate of the component. But yes, by and large, we try to recover everything in our RBL.

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

Yes. Just on -- coming back to the acquisition of component business from Hical. So you mentioned you have inner ball joints and which is the other product we have, sir?

Inner ball joints and outer ball joints. Those are the only 2 products.

Okay. And you mentioned it is INR 45 crore revenue base and -- so ideally, how much of the current demand does it meet for Hyundai and Kia?

It's about 40%.

Okay. Okay. So ideally, like this is one customer base which somehow our group was missing out. So how do you like intend to leverage this with Hyundai and Kia going forward? I just want to get a perspective.

Yes. So just to clarify, Manish, Rane Engine Valves has always enjoyed a very good relationship with Hyundai and Kia. We continue to do that. But so far, on the steering side, we have not been able to penetrate Hyundai, Kia accounts obviously, because Mando who is also a customer now, but is also a competitor when it comes to some of the other steering products. So the good thing is now we have made -- through this acquisition, we have made an entry. And clearly, we have support from our customers with Rane in making this acquisition. So we are going to use this to enhance the relationship, and we are seeing opportunity. It is too early to quantify anything, but we are optimistic about leveraging this acquisition for more business.

And is this profitable, like the revenues of INR 45 crores, what is the profitability of this business, sir?

It's -- I mean, the margins are similar to our Rane Madras ball bearing business. The contribution margins are very similar.

And will it require any further CapEx in near term?

No, nothing significant.

And sir, on Rane TRW, if you can provide the breakup of revenue between steering system and occupant safety for the current quarter?

Steering is INR 145 crores.

Steering is INR 145 crores and occupant safety for the quarter was 183.

Okay. And can you please provide the breakup of occupant safety between domestic and exports?

Domestic was as I said export was 65% after 183. So 118 and 65.

The next question is from the line of Mohan Krishna Swamy, an individual investor.

My question relates to the warrant in. I'm very glad to know that you still have an unutilized provision of INR 55 crores. If I remember right, at the beginning of the year, it was around INR 80 crores or INR 90 crores. That means that we have only consumed about INR 25 crores in the first half of this year. Is that the right statement? Is it the right figure conclusion anyone can draw?

We just need to check the numbers. INR 55 crores is correct. I don't remember the quarter movement.

So as a follow-up question, would it be -- would it be too optimistic to expect that there could be a write-back at the end of the year if the provision is no longer required?

Very unlikely, very unlikely.

That's all.

You can come back.

Yes, I would still wait for the figure at the beginning of the year what are the warranty provisions?

Yes. For the quarter movement was around INR 25 crores. The number is correct.

The next question is from the line of Raj Kumar V, an individual investor.

Yes. Just one small query. What is the benefit? Have you booked anything in the current quarter?

Your question is regarding to any specific company in the group?

Yes. If you can give by company, it's fine. Or if you can -- I mean, if you give -- I just wonder, is it a relevant significant number if it's INR 1 crores or INR 2 crores then its fine.

For Rane TRW is about INR 2.5 crores. But all the others, it's not a significant number.

Does it include the benefit for the prior quarter, is actually the old scheme?

Yes, it is.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Thank you very much for your questions. Just one announcement. We'd like to inform all of you that we will be shifting to a biannual earnings call starting from '22. We will do one after the H1 results and one after the whole year. However, we will definitely keep the investors updated should there be any material disclosures and the same will be intimated as per requirement, and we'll definitely keep you posted. Thank you very much. We wish you all and your families a very happy Diwali. Thank you.

Thank you. Ladies and gentlemen, on behalf of Rane Holdings Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.