Rico Auto Industries Limited (520008) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Rico Auto Industries Limited Q4 FY '20 Earnings Conference Call hosted by S-Ancial Technologies. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Bhave from S-Ancial Technologies. Thank you, and over to you, sir.

Thank you. Good evening. This is Saurabh Bhave on behalf of S-Ancial Technologies welcoming you all to Rico Auto's Q4 FY '20 Earnings conference Call. From the management, we have Mr. Arvind Kapur, Chairman CEO and MD; Mr. O. P. Aggarwal, Chief Adviser, Financial Accounts; Mr. N. K. Sethi, Management Adviser; Mr. Surendra Singh, President and COO; Mr. Rakesh Sharma, CFO; Mr. Sandeep Rajpal, VP Marketing; Mr. B. M. Jhamb, Company Secretary. Now may I request Mr. Arvind Kapur to take us through his initial remarks, subsequent to which we can open the floor for the Q&A session? Thank you, and over to you, sir.

Good evening, everyone. Welcome to the Rico Auto conference. Things are absolutely different. The world is not going to be the same ever again, the pre-COVID and post-COVID days. And I think these are going to be the new challenges that we all are going to face. And -- but I think we would always find some ways and means to. Today, we are all participating from our individual houses and some from the office. And it's a new way of communication that we have actually found now. The COVID has had a major impact on whatever is happening around. If you look at the total economic situation, I don't think I need to talk too much about it. Everybody is talking about it. It has impacted businesses. Pre-COVID, before we locked down, we had the challenge of BS IV and BS VI and lot of confusion that prevalent in the market. The sales has actually started coming down despite the massive discounts that were given for BS IV vehicles. And -- but subsequently because 31st March was the last day and some extension given by the Supreme Court. Fortunately, the OEMs have been able to clear most of the stocks of BS IV. And the balance which are left but probably come back to the companies are then exported to other countries where the standard is acceptable. There are challenges -- new challenges that we have in the post-COVID world. The shutdown, the lockdown had a major impact. When we opened up in the first week of May, that's the time we got permission to open up. It took us a while before we could get some of the labor force back. So that was a big challenge that we had and -- because most of the migrant labor had gone back to their cities and the work has started in all our plants. The challenges are coming on a daily basis, but we are there to face them and perform as best as we can. Post-COVID, the other issue we had was preparing the budget for next year. We had prepared a budget in the month of February for the year '21. And there was a total -- we had prepared a budget where we had shown a growth. The kind of focus, we try to get in touch with all our customers and also trying to get information as to what would they expect the market would be like after the post -- after the opening up. Nobody gave us a committed answer. So we have been revising our budget almost on a weekly basis and ever since the opening. The first budget we made was actually 30% less than whatever we had last year. And subsequently, as the markets opened up and as the retail sector opened up, there was a lot of confidence that was coming back to the auto industry, partly because I think people are looking at individual transport so that -- to maintain social distancing and for conveniences. People do not -- people would like to avoid public transport as far as possible. So we found this change. And every week, we've been fortunate enough to get the positive figures. If you look at the two-wheeler market in the first -- in the month of May, whatever the plans that we have made, Hero, our main customer, actually dispatched more than what we had planned. And subsequently in the month of June, they've almost increased the production to almost by more than 4x. And the same messages we are getting from the car industry as well. Maruti had given us a figure of 4,000 in the month of May because of very slow start primarily because they were not sure how the market will react, a; and number two, how well prepared they were in the manufacturing units because of the safety reason that I -- as a tough condition that the government had imposed. And May went off okay with Maruti. And for the month of June, they initially gave us a figure of 22,000. Now it is around 40,000 to 50,000 vehicles. And month of July, they are, again, going to more than double back. So market, fortunately seems to be good. We did not expect this much response from the market for the coming year. And so we are -- we keep on revising our budget. And this year, what we feel is that, that we should be able to cross this turnover of last year despite the fact we have taken lesser volumes of production as far as OEMs are concerned. This is primarily because of the new programs that we have been investing in the last 3, 4 years. Coming to last year, we have had challenges. We have been sharing those challenges with you. This is regarding the team of et cetera, that we had incurred and we had some quality issues on the launch of new products. So we are over with those. And all those products which we had introduced in the last quarter, fortunately, are doing very well for exports. And also the new product we introduced in the domestic market also doing very well. We are hoping that last year exports, they did go up. And this year also, we expect that our exports will be better than last year. And we were very apprehensive of the export market also because the markets globally had closed down, Germany, France, U.S., all the countries had actually closed down, but they opened and the market has bounced back pretty aggressively. So we are happy on that account. And other things we've done is that we've actually -- the expansion that has taken place is also a lot of the electrical vehicles where there's a lot of subsidies and compensations given to new vehicle buyers in Europe, both in France and Germany and other EU countries, so that is also -- and because of the CAFE norms, it has become absolutely necessary for all the companies to manufacture more electric vehicles, the zero emission, so that they can meet the global CAFE norms that they are committed. Otherwise, there would be heavy penalties. So that is also helping us in the turnover that we are doing. And we are hoping that this year would be a better year. Earlier, of course, we were not very confident at the time of shutdown. Now the confidence is coming back. We are looking at all the customers throughout except the commercial vehicle. That's the challenge that we are facing. The heavier commercial vehicles, I think, would be down this year. And if you look at the light commercial vehicles, we feel that those would start picking up soon. The two-wheeler industry, the numbers will be lesser than last year because we've lost almost -- we lost the first 2 months of the quarter. And the IRDA, insurance, they have relaxed some rules that they had imposed that 3 to 5 is [indiscernible] and that was required to be done at the time of registration. That also would have an impact of INR 5,000 to INR 10,000 on a motorcycle and a car. That would also help us to improve the sales. Besides this, we are in talks with the government. And we are hoping that there would be some revision of the GST for at least a small period so that the customers can come back more aggressively. Anyway this budget we have prepared is without keeping any SOPs to be given by the government to the OEM. So we planned our sales accordingly. I think that we'll go to the question and answers now.

[Operator Instructions] The first question is from the line of Rashi Talwar from Ashmore.

How are you, sir?

Good, Rashi. How are you?

I'm fine as well as we are -- we can be at such times.

Rashi, I can't hear you too well.

Rashi, if you're on a hands-free, please hold the mic -- can you please switch it to handset maybe?

Okay. Just hold on. Hello?

Yes, I can hear you very well.

Okay. So sir, 2 questions. One, in the fourth quarter, other expenses were very high compared to our usual run rate. And I can understand that there was a shutdown which was abrupt, right? So you would have planned for a certain revenue or a certain production which did not finally happen. So we were just trying to make sense of how much of a onetime impact in fourth quarter was there because of either costs that were incurred or costs due to the lockdown. That was one question. Second question was that VRS continues. We still had a [indiscernible] number of VRS. So how -- I mean how much longer? And what is this towards? Is this towards the Dharuhera plant? I mean I'm just asking where does this -- where are the people going from? And then when we look at FY '21, I understand we should look at revenues being more or less flat. How should we look at margins?

Yes. The lockdown was sudden, and that's, of course, did impact everyone, and the costs had already been incurred. And the -- we had lots of consignments lying ready for export. And those shipments could not take place. And so obviously, we got stuck with those consignments lying in our plants. Those are ready materials ready for dispatch which we had done. And the other thing that had happened was we are required to invest in a machine, a pretty large machine, for one of our customers in the South, Kia Motors. And for that, the machine manufacturer in Italy had some problems with the casting, et cetera. So he was delaying the equipment. So to overcome and to be able to meet the requirement of our customer, in the month of August, September '20, I'm talking of this current year, we started overstocking. So we overproduced for almost -- we have, I think, almost 2 months of extra stock. Because our machines can be delayed just to cover up the production, we kept on stocking the material. So that is the other thing that really happened in our plant. A, preparing to meet the customer requirement. Fortunately, the stocks that we have, those are clearing out pretty well. And the customer has [ delayed the demand ] by 1 month. And I think our machine is also delayed by another month, and we should both to be able to match. So that was the other thing that was happening. On the lockdown -- on the VRS, VRS is primarily Dharuhera, but it also relates to some lines, some old lines in our Gurgaon facility where some of the old lines or old components have gone out of production. And some of the old permanent expensive workers we needed them to retire or go. And so that's the reason -- but it's mainly connected to Dharuhera where the VRS. Now what has happened is, in Dharuhera, we've laid off 119 people. And those, I think, we'll pay them 50% for first 45 days and after that we need to plan as to what is to be done. But we are definitely -- we are depositing those workers, and we would want them to go. So that's what the plan as far as Dharuhera on the VRS system front. VRS otherwise is mainly Dharuhera and, to some extent, Gurgaon. And on the -- lockdown, of course, had a major impact, made everybody very nervous. We were -- we didn't know how to make our budget. The budget we had prepared earlier, we just cut it down by 30% to 35% and -- 35% of whatever had happened last year, and we had made up initial budget. And subsequently, when we started opening, I started talking to the customers, the -- we were pleasantly surprised that the demand that they were given was higher than whatever we -- in any case went for a budget which is about 30% lesser than whatever was last year. And despite that, whatever extra we produced this year, the new customer requirements that are coming is going to be an actual added bonus to us. We have the capacities in place, and we should be able to deliver to our customers. So that, I think, should also have an impact. It should also have a more positive impact. The cost reductions that are taking place is, we are shutting down the Dharuhera plant, which -- where we were making losses. And that we will shut by the month of September. That's been planned. And that is the plant that we were incurring a loss of INR 25 crores to INR 30 crores every year. So that loss to get rid of, and that's the reason that this aggressive stance has been taken for Dharuhera plant. Besides that, the -- at the moment, it's a new world. And the number of people available, especially the workforce is much lesser than whatever is normally required. So now we are also learning how we can work with lesser number of people and produce more. So there are very innovative methods, new things which are coming up. Our people are engaged in that. And we're looking at the possibility of -- but you will see a lot of reduction of our overhead in this current year. There are a lot of changes that have come about. Besides that, all our -- my colleagues, my senior staff as well as all the engineers, they've all -- there is a reduction of salary that everybody has taken. It starts from 30% on the top and goes down to almost about 5% at the bottom. That also is going to reduce the cost. Besides that, of course, I've left my salary for the first 3 months for this first quarter. And after that, there's a reduction of 35% in my salary also. So we are looking at actually every cost now, every manpower that is required, every investment that is required to be made. Last year, we had planned INR 112 crores, INR 114 crores of investment, which we did. And this year, the initial plan was around INR 80 crores, but now we are looking at investments on a monthly basis. This will only happen once the actual requirement is there because there would be commercial vehicles and some components which would not be produced this year. Our machines being flexible, we will be switching those machines over to the newer composers that we have. And we are fortunate that the new component that we had developed in the last 1 or 2 years, they are really ramping up this year, and that is the reason we are confident that we would -- our turnover in this current year would be the same or a little more than last year.

Right, sir. So on margins, where do you think we should settle? Or tough to say right now?

Well, the margins, we had shared those margins earlier, and that is the target that we are still maintaining. And this year was an exception year, primarily because of the premium freights and the quality issues we had in some of the components which have settled down now. And so we are going to jump back to pretty good margins. And the budget we have taken there, we are pretty aggressive with that.

[Operator Instructions] Our next question is from the line of Aditi Aggarwal from Kotak Mahindra Bank.

Sir, I have this one query. Sir, as you mentioned that on the sector sales, you are expecting better or at least crossing last year sales mainly because of the new component sales. So can you share like approximately what percentage may be or any ballpark figure for that as in for the new component sales for current fiscal?

See, if I talk about the breakup, we've actually taken a sale reduction of all the customers. I have the sales figures in front what we planned for. In the 2-wheeler -- if you look at the 2-wheeler business, for Hero, we internally have planned 5 million vehicles, whereas they are planning for 6 million vehicles. And last year, of course, we had produced more than that. And we've done our budget based on 5 million, which is lesser than whatever they had -- they have -- the new plan that they have given us now. And the extra 5 million to 6 million, if they produce that 6 million, that would be an extra bonus for us. But our budget is based on 5 million. And the turnover that we are telling is based on the reduction that is there. Similarly, in the case of Maruti, we've taken close to -- we've taken about -- Sandeep, about 1.1 million it is.

Sorry. How much?

1.1 million vehicles.

1.1 billion?

Million. Million, M.

1.1 million, sir.

Yes. And they are giving us a target of about 1.3 million. Sandeep, please correct me, if I'm…

Yes. In fact, it's 1.1 million that we have taken in budget, and we are expecting between 1.25 million and 1.3 million as per the latest forecast.

As per the latest forecast that is coming. And so -- but our turnover is based on 1.1 million, and that's a very conservative view we have taken. And the increases are going to come from primarily from Kia and PSA and BMW, which has exports and Greaves. These are the new consumers where we have started delivering on the -- for the BS VI vehicles. Greaves is a new engine that they have developed for 3-wheelers, and that's also doing pretty well. And we are surprised at the response that we are getting. And we -- so these are some of the areas that the sales actually go up. Sandeep, you want to add anything on that?

As for the question, I think from all these new businesses, in this year, we are expecting close to 20% to 25% revenue from these new businesses. That was the question which Aditi had asked.

20%, 25% would be better for me.

We'll take our next question from the line of Sunil Jain from Nirmal Bang.

Can you share your sales breakup vehicle type wise or 2-wheeler, passenger car and CV for FY '20?

You want to -- yes, we can give you a broad breakup. Sandeep, would you be able to give a broad breakup for last year?

Yes. Last year, you can see approximately around 35% is from the 2-wheelers and around 55% -- 50% to 55% is from the passenger car and balance 15% to -- 10% to 15% is from the commercial vehicles.

These commercial vehicles are small commercial vehicles and large commercial vehicles.

Yes.

Sir, can you come again? What you said, it's heavy commercial vehicle which maybe you're supplying or LCV?

No, it's a combined -- light plus heavy whatever commercial vehicle customers we have, it's approximately between 10% to 15%.

Okay. And sir, this VRS what you had suggested, that still continues? It will continue till September, the payment for that? Or it can continue even thereafter?

See, in the [indiscernible] of Dharuhera, we are shutting down the plant. So that would be over by September in any case. But whatever VRS comes, the additional that would happen would only happen in the Gurgaon facility, the old facility of Gurgaon. And I don't think -- it will not be to the extent that was done last year. It will be much, much lesser than this. But that also helps us reduce our cost.

I agree with that. I was just thinking about the cash outflow about VRS which is happening at Dharuhera. Is that over or it's still continuing?

[Foreign Language] September [Foreign Language]

[Foreign Language] Okay. Fine. And then there will be something in…

September [Foreign Language] But we'll probably settle before that. Most likely we will settle by the next month, but September is the last.

Okay. Okay. Fine. And because of this close down of the plant, you said that you will be gaining around INR 25 crores, INR 30 crores because there will be lesser losses of that. So this is -- right now, the production and all are still working on and there will be sales in all, which you can shift to some other plant?

We have already shifted most of the components to other plants, but there are a few components where we need the customers' permission to shift those production facilities, which we are seeking. And those are -- so whatever sales is happening in the Dharuhera facility, those we have shifted to the other plants along with the machinery.

So Dharuhera plant has incurred a loss of around INR 25 crores in current year, am I correct, FY '20, which will not be there post September?

Yes.

Okay. And sir, since you have maintained this metal part. So was there any inventory gain or loss in the current year -- current quarter?

Rakesh, do you want to say something?

Yes, sir. Yes. Can you repeat your question, please?

Yes. Yes. My question was more related to inventory gain or loss because of the movement of the steel prices or aluminum prices.

Yes, normally, what happens -- in our case, it's pass-through, in most of the cases. So there is -- sometimes some lag impact would be there. But otherwise, we are -- we don't have much of impact on the movement of prices in -- on metal.

Okay. Okay. So that is totally -- yes, that is totally pass-through, but inventory and all will not have any impact on that.

Yes. Yes. Yes. Some lag impact can be there. Otherwise, there is no impact.

In our case, what happens is, in some cases we settle every quarter; in some cases, it is 6 months. So whatever the average of those 3 -- 3 months or 6 months is that is what is passed on for the next 3 to 6 months. This is what happens as far as the aluminum -- mainly the aluminum fluctuation which happens and also the steel and -- but see, if at all there's an impact that will come is mainly because of the dollar and rupee is weak at the moment. In some cases, there's some adjustment which is done. But in most cases, there's no adjustment done. So we might -- we will probably have some gains there.

Because why I was asking that because if I see your last year gross margin and this year gross margin in the fourth quarter, there is a good improvement is there a little in that. So I was just thinking whether there is inventory gain or is there any reengineering benefit…

No, it is actual efficiency in iron consumption that we could achieve in some of the plants. So it is on that.

You would also see a major change happening this year. There are a lot of improvements that have happened. And a lot of thinking has gone in this, and you'll see further addition in the gross margin.

Okay. So if I simply -- sorry to drag on this question. If I simply -- PO margins are comparatively lower than the other auto ancillary player, even if I add up this Dharuhera additional benefit what we are getting. So I was just trying to understand how much more room is there to improve the margin in the normal circumstances. I'm not talking about current scenario. If suppose we leave this and look at just third quarter where the most of the things will be normal. So in that scenario, is there any possibility of improvement in the margins from current level?

See, our margins -- yes. See, Dharuhera that is going to have major impact in any case because that is pulling down our margins by INR 25 crores in any case, that was happening. So that we have reduced since last year, some of the VRS that has happened. And there are 119 more people that would be -- would also -- we are negotiating with them, and that will also improve our cost. And besides that, the -- if we look at the other plants, we've been investing in the last couple of years where we -- there was major investments, like we're talking of INR 112 crores and prior to that was INR 180 crores. So all that the investment -- though what we invest today, we actually start using up 1 year, 1.5 years to 2 years. This is what happens. Most of the equipment that we've invested in, we'll start using -- we've already started using that equipment, and the customers have already started picking up those materials. So the machines which are lying with us major investments have been done where only the samples and other -- the formalities of the customers are going, those are all over on those footprints. So that will also help us improve the margins. Besides this, our exports have a better margin than the domestic market. And since we are pressing on exports, these forcibly going up, that also helps us to improve the total margin besides the cost reduction that are happening.

Okay. Okay. So sir, the last question is related to debt. Can you tell exactly how much is the debt on the book? And what's the plan for FY '21, whether it can come down in the current year?

See, our total debt, including working capital and the long-term loans also, it is in the range of INR 400 crores.

Okay. Yes.

That includes the working capital.

Yes. Yes.

Yes. Yes. So is there any plan to reduce that in the current year? Or it is likely to remain more or so at a similar level?

No. We don't plan to further increase it, and repayments will be there. So it may remain at the same level or slightly come down.

[Operator Instructions] Our next question is from the line of Nikhil Deshpande from Axis Bank.

Quite an encouraging outlook you have painted. Just sir, what is the current capacity utilization?

See current capacity utilization pre-COVID, I will talk about. We were -- in the aluminum, we were at about 65%, and that also included some of the capacities we have created for the new components that we're going to be making now. And in the iron, we were in the range about 50%, 55%, 60%. It dependent on the exports that were taking place. Now post-COVID, this year, what we are seeing is that the market has really surprised us, the way the market is picking up now. And we see that by the month of September, almost everybody is a little more or very close to whatever the pre-COVID days were. So our capacity utilization in those days, those months we will actually be back to about 65%, 70%, That's what we're looking at. Then post that, in the last, fourth quarter of this year, the -- some of the productions are higher than whatever the companies have produced there ever. So that's the other thing that is really surprising for us, and the market seems to be doing well. So it would -- our capacity utilization would be, at the moment, best. In the month of May, our -- we had done about 35% utilization. That is -- we worked only about -- we actually worked about 18 days. This month, I think we should be around 55%, 60%. That's what we are estimating. And thereafter, we would go up again and -- 65% or whatever we produced last year. And we -- by September, I think our capacity utilization would be close to 65% to 70%. And beyond that, then, of course, we hope the market the way they are projecting it now, our capacity utilization is much better. Another thing that I add here is there is one business that we have been working on, the clutch business. So we've invested very heavily in the R&D. We've invested almost about INR 18 crores to INR 20 crores totally in the clutch business, including the development cost, et cetera, that has happened in the -- for the 2-wheeler. And earlier, we were only -- our total supply of clutch was about 25% to 30% of whatever the requirements of Hero was. But now our target is to cross 50% because our R&D has already developed all the clutches. They have been approved by the customer. Now is the question of supply.

Okay. Good to hear that, sir. Sir, could you throw some light on the labor situation? Given what the ramp-up you're looking at in June, July, how confident are you on the labor front?

At the moment, there is a challenge. We -- a lot of labor had gone to the villages. We are in touch with them. We are trying to get them back. And we are -- month of May and June, normally, the labor challenge is there, mainly because of the harvesting that happens, April, May. This is what happens. But this year, it happened because of COVID. And so the challenge is there. We have a large training center. We're getting new people. We're training them and putting them on the machines. So all that is happening today. And hopefully, I think in another month's time, we should stabilize. And the signs we are getting is that the people who want to -- eastern UP, they have started coming back; western UP, they've also started to come back. From Bihar, we are encouraging them to come back. They are prone to come back. So I think in the next month to 1.5 months, we would see people kind of actually coming back to work. So -- but for the next 1 or 2 months, there is going to be a challenge. That is for sure.

Training new people is a challenge. And again, quality has to be maintained, and the business is majorly about quality. So…

So that is what happens because quality is very, very important. So our costs go up slightly because of the extra inspection, et cetera, that we got to impose. So all that happens. And we are working on it very aggressively. And hopefully, we are hoping that by another month's time, 1.5 months' time, there would be some normalization that would take place. But it's a good situation to be in, that there's a hole in the basket, you are unable to put yours. You're looking for growth and everything. That is a good thing to have at the moment.

True. True, sir. Sir, what would be your exports FY '20? And then what are you looking at contribution from exports in FY '21, percentage-wise on revenues?

Beg your pardon. Can you repeat it again, please?

FY '20, what is the contribution from exports? And then FY '21, what kind of contribution exports could you have?

I think our exports will go up by another 10% from whatever we had done now. And we are hoping that pulling the way they are pulling. And fortunately, we are in the newer vehicles. So that is helping us a lot.

But as a percentage of overall revenue, what was in FY '20? What was exports?

In exports, we are looking at only direct exports. When I say direct exports, I mean what we are exporting. There are many components -- earlier, we were exporting to Renault in France. Now Renault, they do -- they have a central collection center here. And we sit there and then they ship further. So that we don't regard as export even though they are supported as component. Now what we ship to Kia, they ship to various other countries. We ship to Renault in India. They ship to many countries, the components as such. So we don't regard those as exports. But if we include those, then we are in the region of about 35%.

Okay. And sir, what -- because the dollar-rupee equation is there with the rupee depreciating, is these contracts adjusted for the rupee depreciation or we get that benefit of rupee depreciation?

See, both are there. They are -- in some contracts, they are adjusted. In some contracts, they are not adjusted. So both the things are there.

Okay. Sir, lastly, if I could squeeze in, how is the liquidity position at your end?

At the moment, I'd say a little tight, but we are okay. And so I don't think that there should be major issues. There were, of course, there's a stretch. And mainly because we had to pay the salaries of our workers for the 2 months that the lockdown was there, and I think that stressed everything, and, of course, the other expenses which are there, but it should be okay. It's under control.

[Operator Instructions] Next question is a follow-up from the line of Aditi Aggarwal from Kotak Mahindra Bank.

Sir, can you please throw light on your CapEx plan for the current fiscal?

Beg your pardon?

Can you share the CapEx plan for this fiscal FY '21?

See, the CapEx for this year -- earlier, pre-COVID, we had planned an expense -- the capital expenditure of about INR 65 crores. But post-COVID, when we had prepared a budget, we brought it down to INR 40 crores, and that too we have a condition with the Board that it will be reviewed every month. We'll see how the productions go. In case the production pick up rapidly, then only will we invest. Otherwise, we will not make any investment this year. So capital expenditure this year is going to be minimal except, of course, for the dyes and molds which are required for production. Those, of course, would be done in any case. So that's what we are limiting in this year. And there is some building expansions and some flooring, et cetera, which is done. Those are -- so it would be in the range of INR 15 crores to INR 40 crores. That's what the range would be.

Our next question is from the line of Sandeep Kumar from Axis Bank.

Sir, just wanted to understand like what would be the quantum of VRS expenses that you are anticipating for FY '21?

Singh Saab, would you like to say something?

Exact figures, we'll have to calculate actually, but it should be around INR 3 crores to INR 4 crores, sir.

That would be lesser than INR 4 crores.

INR 3 crores to INR 4 crores. All right. And…

Please understand one thing. Earlier, we had excess labor in Dharuhera, and that's where the main VRS was happening. And now 119 people are laid off. And in the other plant, we are running short of workers. And so at the moment, we are not even contemplating to do this. VRS, we had planned earlier. We want do that because we were trying to fill up the lines and have the workers in place. So it would -- the total focus is Dharuhera where these losses were coming. Otherwise, and -- we would like to focus there as far as VRS is concerned. But other plants, even though we do like to keep on replacing the expensive people. That may not happen this year, mainly because of the shortage of labor.

Okay. And sir, with respect to your exports, the BMW and PSA to whom you were exporting, how is the order book out there, sir?

Very good. We are very happy with that. And in fact, post-COVID, after we opened up, we received another huge order from BMW. And so -- which we had been -- we are discussing more orders with BMW and the other customers as well. And, I think, we should start finalizing them pretty soon.

Okay. Any amount that you can specify, sir?

See, single order was in the year '22 will be touching about almost INR 25 crores to INR 30 crores a year on one item. So that -- if you look at the total orders, at the moment -- Sandeep, would you like to throw some light on this? The orders we picked up last year and which -- some would be delivered in '21, some in '22, some in '23. Sandeep?

Mr. Sandeep Kumar, do you have any more questions?

No. No. Sandeep, I'm talking to my Sandeep.

Hello?

Mr. Rajpal, please go ahead.

Yes. Can you hear me?

Yes. Yes.

Yes.

Yes. So last year, we did approximately INR 1,270 crores of new program value, out of which some was replacement. But as Mr. Kapur just mentioned, we have been able to get new orders from BMW, Maruti and Toyota this year post-COVID, I mean, in May and June, and we are in the -- just finalizing the total numbers year-on-year as they go around. And there are certain new customers that we are discussing and very hopeful that within the next 2 weeks or 3 weeks we should get new nomination from some new customers like [indiscernible] and also we are looking at some tractor companies also who are interested to expand and they have positive outlooks for the next couple of years. So still post-COVID also, there is a huge opportunity, and we are in the good books of our customers, and we continue to aggressively scout for new business.

So last year was INR 1,270 crores was total new orders. Out of which INR 500 crores were replacement orders.

Sorry, sir. We could not hear you.

Hello?

Sorry, sir. I could not hear you.

You want to hear the second question or the first question?

Yes, second portion, sir.

Okay. So last year, we picked up INR 1,270 crores orders, new orders, out of which INR 500 crores were for replacement, replacement of the older ones that we are making into newer components that we will be supplying for similar vehicles. So the fresh addition of what is it INR 700 crores. That's the program value. And program value normally will take 5 to 7 years. And those -- some would start -- some of the replacement would have already started. And the newer component, some would start by the middle of this year and some would start next year, and some would also start in '22. But this year also, we've -- post-COVID, we've had confirmations from Toyota and BMW and PSA and some other customers as well.

And sir, with respect to your -- the finished goods which were airlifted and there were quality issues, all those things have been completely been taken care by Q4?

Yes. Yes. We've taken care of that. We've actually incurred huge cost there. And so now all the shipments which have gone in the past are all by sea. And those are major changes that would happen and should add to our profits.

Okay. And what would be the impact of that particular transaction, sir, in Q4, I mean, in value terms?

Rakesh? Rakesh Sharma?

Mr. Sharma, I think you have muted your phone. Can you please unmute and go ahead? Sir, I think there's no response from his line. We'll have to disconnect and call him back.

[ Guptaji ], would you like to say something on that?

Please kindly repeat your question again?

Sir, you had certain issues on -- quality issues with respect to the consignment with BMW and PSA which has been…

No, no, no. Not BMW, it is mainly PSA.

Okay. Okay. So because of that, what were the additional expenses that you incurred in Q4, sir?

Quality expense…

Quality and air freight.

Quality and air freight would be in the range around INR 4 crores.

INR 4 crores. Okay. Otherwise, profit would have been higher by INR 4 crores. Your PBT would have been higher by INR 4 crores.

Approximately…

About we are telling, but it could be INR 5 crores also. So that's base. But I will send you the figures in any case.

Our next question is from the line of Manish Bohra from Param Capital.

Yes, sir. Basically, my question is related to the previous participant. So like in quarter 3 con call, we had like you had guided for EBITDA margin improvement on quarter-on-quarter basis, basically due to lower air freight cost and reducing manpower in Dharuhera plant and also new product sales while there is a dip in the EBITDA margin by around 294 bps quarter-on-quarter. So basically, what is the reason of sharp dip in EBITDA margin in current quarter?

One is, of course, the premium phase that was there. And the Dharuhera thing, we had thought that by end of February we'll be able to clear total accounts, which did not happen. And then, of course, the lockdown happened and so nothing could happen after that. And so the cost of the labor, et cetera, and that loss-making part just continued there. And the other thing is that there's a lot of material which is lying ready with us which did not come to our sales at this time, primarily in Chennai and also the exports that were lying here with us. These are some other things that actually impacted the last quarter as well.

So basically, what was the net impact on our total top line due to lockdown?

Rakesh, would you like to talk about this?

Sir, our Q4 turnover is down by INR 15 crores as compared to the previous year -- previous quarter, sorry. So the cost of that would be on account of -- yes…

Rakesh, [Foreign Language]

[Foreign Language] Hello. Am I audible?

Yes. Yes.

Yes. Yes.

Yes. Yes. I was saying that in quarter 4, the turnover is down by around INR 15 crores as compared to quarter 3. And most of the portion is on account of COVID, we can say, because in the later part of March, the lockdown was there and we could not ship.

And the other thing I did mention to you was that the 2 to 3 months of extra stock that we produced in Chennai so that we could accommodate the customers' requirement where we -- our machine was getting delayed being shipped from Italy.

Okay. And sir, this is -- the air freight cost, this will go on till like in FY '21 also or like it has been completely…

No, no. Not the way it happened in last year. Now we are over that hump. There would be some premium freights that's a normal course of business, which we've already factored in our budgeting also. But last year was the other extreme. That will…

Yes, how much did we incur towards air freight in FY '20?

Total, we incurred around, I think, INR 10 crores, INR 12 crores or something like that.

That was, I think, for 9-month figure, INR 10 crores, INR 11 crores, including quarter 4.

It was about INR 12 crores or INR 13 crores, something like that and plus the quality issue that we had. No. That, we can't afford. That is no way. That will not happen.

Okay. So basically, also…

Premium freight [Foreign Language]. It happens. But this happens mainly because some shipments are delayed there or there are some also new samples those go by air freight. For the first 3, 4 months, any new component that's developed that also is sent by air freight. In that case, we normally ask the customer to pay for it, but sometimes we also compensate the customer. So [Foreign Language] which is normally -- normal part of business. But last year was exception, both in quality as far as -- as well as the premium freights.

So basically, my last question is like this year, FY '21, we are expecting to achieve a turnover of around INR 1,400 crores or even we may cross INR 1,400 crores. And also like VRS expenses would be lower compared to last year. Air freight cost would also be lower compared to last year. And like you said, higher sales from new components. So are we expecting EBITDA margin improvement from FY '20 levels, like which is around 8.12%?

See, the margins we had promised last year were higher than 12% or so. And we hope to exceed that last year. Last year, in any case, we will exceed, but we hope to achieve the margin that we were discussing last year.

Last year, how much was the margin -- I'm not aware of it.

Okay. We had given that we would -- we would have touched around 14% to 15%.

Like in -- by when?

[Foreign Language]

So you are saying 14% to 15% margin in FY '21, EBITDA?

Yes. Yes.

And it was around 8% in FY '20. So that would be achievable?

Yes. Yes.

Our next question is from the line of Apurva Mehta from A M Investments.

Sir, what will be our export share going forward for maybe in FY '22, '23? What will be the likely export share as per our turnover be?

You're talking about '22, '23?

Yes. Yes. Yes.

See, if you look at the total market, India, we -- the total auto components that we produce in India in the auto industry as such would be 60 billion, 70 billion. And compared to the global, we are only 2% of the total global market. Our focus is on export. We are focusing on getting larger orders for export, where the margins are also a little better. And then we are hoping that there will be some impact -- some sentimental emotional impact of China. And that would also help us to increase our exports. And we will do it not because of the weakness of China but because of our own strength of engineering, et cetera. So we are confident that our customers also -- new customers we are talking of, they are talking of huge exports that would -- direct exports that we are talking of. There's a lot of internal export which is also increasing, like through Kia, through Renault, through others, through PSA. And those we are not including as part of whatever we do. But we should grow by about 20% to 25% year-on-year on exports.

So currently, we are at 35% export, currently?

35%, if you include also the indirect exports in the year. In the indirect export, we do not include the vehicles which are exported. We only include the components which are exported.

Yes. Yes. So if we include it by '22, '23, can we go up to 45%, 50% of exports?

Total [Foreign Language] we would like to achieve 40% to 50%. We would like to achieve that like today, and the opportunely exists in export. That's very clear.

And this is mainly in die casting?

Both -- we don't sell only die cast. We sell fully machine components and/or assembled components. So it will be more than the aluminum and the iron field, both.

Okay. And currently, how is the traction in -- when you talk to customers and everybody because are they fully positive on getting demand and everything?

Very positive. That really surprised. That gave us a pleasant surprise because we were expecting that -- in fact, nobody knew how the market will react. Nobody knew how the customer will behave. So everybody is very happy as to when the market opened up. But within a week, 10 days, we were surprised that the responses we started getting both from the domestic market as well as the export market. The surprise was, of course, the domestic market and then, of course, the France and Germany which were also locked down for quite a while, very aggressive demand from there also.

As there are no further questions from the participants, I hand over the floor back to the management for closing comments.

Gentlemen, thank you so much. Ladies and gentlemen, thank you so much. And last year has been one issue after the other BS IV, BS VI, insurance issues, registration issues, a lot of issues we've had. Hopefully, this year, post-COVID, we will bounce back absolutely. And there's a lot of cost-cutting measures that have been taken by the -- undertaken by the company, and we will see the result. The monitoring is very aggressive. And we will like to surprise the market. You'll see the results in the next quarter. You'll see the changes that are happening. And we should exceed or at least equal the turnover of last year and with much better margin. And let's hope the market continues the way it is showing at the moment. And we're hoping that Maruti and Kia Motors and Hero and others would do well and including that -- including the export market where the -- surprisingly the electric vehicles are picking up because of the subsidy that the government is giving, and we are deep into those vehicles. Thank you so much for coming today. Any other questions, you can write to us. We will certainly respond on those questions.

Thank you, members of the management. Ladies and gentlemen, on behalf of S-Ancial Technologies, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Yes. Thank you so much.

Thank you.

You're welcome, sir. Good bye.

Thank you.