S.J.S. Enterprises Limited (SJS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SJS Enterprises Limited Q3 FY '24 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Joseph George from IIFL Securities Limited.

Thank you, Manuja. Good morning, everyone. On behalf of IIFL Securities, we welcome you all to the 3Q FY '24 Results Conference Call of SJS Enterprises. From SJS Enterprises, we have with us Mr. K.A. Joseph, MD; Mr. Sanjay Thapar, CEO and Executive Director; Mr. Mahendra Naredi, CFO; and Ms. Devanshi Dhruva from Investor Relations. I'll hand over the call to Devanshi now to take it forward. Thank you.

Gentlemen, and thank you for being with us over the call today. We appreciate it. Moving on, this is how we intend to take today's conference call forward. I will pass on the dias to Mr. K.A. Joseph, our MD and Co-Founder, who will make his opening remarks. Then we will hand it over to Mr. Sanjay Thapar, our CEO and Executive Director, who will take you all through some of the slides of our presentation that have been uploaded on the stock exchange as well as on our website. Sanjay will take you all through the industry view, our business performance and also give a strategic outlook for the future growth of the company at the end. And Mr. Mahendra Naredi, our CFO, will update you all on our financial highlights. Post which, we will open it up for Q&A. Thank you once again. And I will now hand it over to Mr. Joseph to make his opening comments. Over to you, Mr. Joseph.

I trust you have had a chance to look at our investor presentation and the results published yesterday. While Sanjay and Mahendra will take you all through the presentation later, I would like to quickly share some updates with you all. First of all, I would like to start with the good news. This quarter, we have seen Walter Pack India margins recovering with gradual pickup in key OEM volumes, which had impacted Walter Pack's Q2 FY '24 performance. The EBITDA margins of Walter Pack India has improved significantly from 12.8% in Q2 to 20.4% in Q3 of FY '24. We have seen the business slowly coming back to normalcy, and we are expecting Q4 of FY '24 to be even better. Also, please note that as mentioned earlier, the full year -- for the full year of FY '24, only 9 months financials of Walter Pack India will be consolidated with SJS numbers. Secondly, as you all know, in August '23, Everstone Capital sold almost 29.53% of its equity stake in the secondary market. After the stake sale transaction, Everstone's equity holding in the company is now down to 4.63%. Consequently, both their nominee directors have stepped down from our Board. And now they have applied for [ depromotization ] of -- [ depromotization ] due to the lower shareholding and no Board representation. However, on the work front, nothing changes, and it is business as usual for all of us. Now coming to Q3 FY '24 update. After 5 quarters of continuous muted performance in the two-wheeler industry production and volumes...

The management line has got disconnected. [Technical Difficulty]

Yes. I think there was some technical snag with the connections. Okay. As I was mentioning, as you all know, in August of '23, Everstone Capital sold 29.53% of their equity stake in the secondary market. After the stake sale transaction, Everstone's equity holding in the company has been reduced to 4.63%. Consequently, both their nominee directors have stepped down from our Board. They have now applied for [ depromotization ] due to their lower shareholding and no Board representation. However, in the work front, nothing changes. It is business as usual for us. Now coming to Q3 FY '24 update. After 5 quarters of continued muted performance of the two-wheelers industry production, this quarter, two-wheelers volumes have picked up pace. We are excited and hoping that the two-wheeler industry volumes continue to grow in the same trajectory as it augurs well for our stand-alone SJS business, which has almost 55% to 60% exposure to the two-wheeler industry. Walter Pack India and Exotech, both our acquisitions, are more passenger vehicle and consumer segment-oriented than two-wheelers. This helps us to balance our portfolio among two-wheelers, passenger vehicles, consumer segment -- and the consumer segment perfectly, as well as it opens up a plethora of cross-selling opportunities among the 3 companies: SJS, Exotech and Walter Pack India. As for our SJS Q3 FY '24 consolidated performance, 37% of revenue contribution is from two-wheelers, 36% from passenger vehicles and 27% from consumer business and others. I look forward to see how the SJS growth pans out in the future with all the 3 synergies and cross-selling opportunities playing out along with our new product additions as well as acquisitions. So with that said, I would now like to hand over the call to Sanjay to take you all through some of the business and industry highlights for the quarter. Thank you, and over to you, Sanjay.

Thank you, Joe. Hello, and good morning, everyone. I'll start with the Q3 highlights. I am very happy to inform you that it is this -- today, the 17th consecutive quarter that SJS has again outperformed the automotive industry. Auto industry, two-wheelers passenger vehicle production volumes combined have grown by 16.3% in Q3 while our consolidated revenue, that is SJS plus Exotech plus Walter Pack, grew 51% Y-o-Y during the quarter, backed primarily on the Walter Pack addition and strong growth in the consumer segment as well as exports. Strong 36.9% Y-o-Y growth in the automotive industry, that is two-wheelers plus passenger vehicles combined, as compared to 16.3% Y-o-Y industry growth has helped us navigate this quarter. Automotive business has grown well for us both in the domestic markets at 37.2% year-on-year and the export markets at 32.1% year-on-year. I'm also delighted to share that the EBITDA margins improved quarter-on-quarter to 25.5% margin, primarily on back of significant improvement in the Walter Pack. EBITDA margin to 20.4% versus 12.8% in Q2 FY '24 as the key OEM volumes gradually picked up. During Q3 FY '24, the company generated strong cash flows of INR 512.7 million. And our overall cash and cash equivalents stood at INR 338.2 million. Our net debt has reduced by more than half in Q3 FY '24 to INR 220.1 million from INR 599.4 million in Q2 of FY '24. We are confident by the end of the year, we will have negligible debt on our books. In Q3, two-wheeler industry production volume grew 19% Y-o-Y, while SJS consolidated two-wheeler sales grew by 21.6%. The company witnessed PV growth of 56.7% year-on-year, while the industry production volume grew by 5% during the same period. This was on account of Walter Pack acquisition and the increasing share of PV business in our automotive segment. Overall, consolidated SJS automotive sales grew 36.9% year-on-year, while organic SJS plus Exotech automotive business growth stood at 16.4%. Simultaneously, for the 9 months FY '24, automotive industry grew by 5.7% year-on-year, while SJS consolidated automotive revenue grew by 27.2% year-on-year. And organic growth was about 14.7% on a year-on-year basis. We are seeing some improvements in the export markets as it witnessed a growth of 39.7% year-on-year for the quarter. New business wins are partially offset by slow-paced recovery in certain pockets of the European market. While all other regions have witnessed robust growth on a year-on-year basis. Overall, 9-month FY '24, we saw a robust growth of 48.9% of exports to INR 350.4 million. Q3 FY '24 exports constituted 7% of our total consolidated sales. Both Exotech and Walter Pack are primarily domestic businesses. Hence, exports as a percentage of consolidated sales is at 7%, while exports is 12% of SJS stand-alone sales. We continue to expand our share of wallet by winning new businesses from key customers like Mahindra, Tata Motors, Autoliv, Whirlpool, Ola, Royal Enfield, Honda Motorcycles, TVS, amongst others. I would like to share one more positive update with you all. SJS became the first Indian company...

Sir, you are not audible.

Am I audible now?

No, sir. There is some disturbance in your line. [Technical Difficulty]

Okay. Let me start again. So I would like to share one more positive update with you all. SJS became the first printing company in India to be awarded the Quality System Certificate for the new technology of optical cover glass. We believe this is a step towards achieving our strategic goals. Before I hand over to Mahendra, I would like to give you a quick update on ESG and CSR front. On the ESG front, we are increasingly moving towards higher usage of green energy and consuming more solar and wind power. At SJS Bangalore, almost our entire power consumption requirement is now provided through renewable energy. This will not only help us to reduce our carbon emissions, but we also anticipate some cost savings on power and fuel consumption going ahead. Next, as a company, we strongly believe in women empowerment and financial independence of women. This quarter, we joined hands with Varchass National Seva Trust, a nonprofit organization to primarily support women empowerment. Our contribution will aid in supporting 150 underprivileged women by providing them with vocation training like tailoring, driving, hand embroidery, computer training, beautician skills, et cetera. These skill sets will help them improve their standard of living and be financially independent. It is satisfying to note that the contribution...

Sir, there is disturbance again in your line.

Okay. So I would now like to hand over the call to Mahendra, our CFO, to update you all on the SJS financial performance before I talk about the future growth outlook. Over to you, Mahendra.

Thank you, Mr. Thapar. Good morning, everyone. Let us delve into the financial snapshots. Slide 12 and 13 provide a concise overview, with Slide 12 focusing on the organic performance of SJS and Exotech and Slide 13 presenting the consolidated picture, including Walter Pack India. Subsequently, Slide 14 and 15 explain our financial performance in detail. In Q3, our consolidated revenue reached INR 1,605.9 million, showcasing growth of 51% Y-o-Y basis. This robust performance is attributed to the inclusion of Walter Pack India addition and strong contribution from the consumer segment and export. Organically, our revenue grew by an impressive 21.8% Y-o-Y. Moving to EBITDA. We achieved INR 412.4 million, highest-ever, marking a Y-o-Y growth of 45.2% with a margin of 25.5%. The quarter-on-quarter improvement of 256 bps in quarter 3 EBITDA margin is notable mainly driven by Walter Pack India's significant jump from 12.8% in Q2 to 20.4% in Q3 FY '24. Additionally, Exotech recorded its highest-ever EBITDA margin at 18.4% since acquisition in 2021, improving 224 bps quarter-on-quarter and 588 Y-o-Y attributed to enhanced gross margins. Excluding Walter Pack India, organic EBITDA for SJS and Exotech stood at INR 347 million, boasting a healthy margin of 26.7% and a Y-o-Y growth of 22.2%. EBITDA margin has shown a positive trend improving by 53 bps Y-o-Y and 63 bps quarter-on-quarter, primarily due to superior margin performance at Exotech. Our consolidated PAT reached INR 208.5 million, demonstrating a robust Y-o-Y growth of 32.7%, with PAT margin standing at 13%. Despite strong EBITDA growth, PAT margins were slightly impacted by lower other income, increased interest costs, which is related to debt taken for the Walter Pack India acquisition and higher amortization cost on intangible amounting to INR 21.5 million post tax each quarter, which we have calculated after the Walter Pack India acquisition. Organically, PAT growth stood at 28.8% to INR 202.4 million with a healthy margin of 15.6%. This growth was driven by higher EBITDA, offsetting the impact of lower other income and increased finance costs. Our consolidated ROCE during the quarter stand at 18.8% and ROE, return on equity, at 14.1%. ROCE was impacted due to Walter Pack India acquisition, and this will gradually improve over a period of time and with better utilization of new investment over next 1 to 2 years. As Mr. Thapar mentioned earlier, our cash and cash equivalent were INR 338.2 million at the end of December '23. For the Walter Pack India acquisition, our net debt, which had risen to INR 599.4 million in quarter 2 FY '24, has been significantly reduced to INR 220.1 million as of 31 December '23. We are confident that by the conclusion of FY '24, we will attain significantly lower net debt level on our books. I would now like to hand back the call to Mr. Thapar to discuss about our future plans and growth outlooks.

Thank you, Mahendra. [indiscernible]

Mr. Sanjay, your line is still...

Sir, there is disturbance. [Technical Difficulty]

[indiscernible]

Sir, it's not clear. [Technical Difficulty]

Okay. I'm back. Moving to the future growth outlook. Keeping in mind the underlying industry performance for 9 months wherein the auto industry production volumes grew 5.7% year-on-year, we have significantly outperformed the industry on both organic and inorganic fronts. We are confident that we will continue to outperform the industry growth by over 1.5x on back of our presence in multiple industry segments, global footprint, large product portfolio, strong customer relationships and inorganic performance. We've been able to stay ahead of the curve versus our peers for quite some time now. Primary reason is our capability for -- of introduction of new premium products and technologies. It continuously enables us to increase our addressable market significantly. We have strategically built a large product portfolio over the last few years, anticipating the futuristic technology trends in the market. In this regard, we've been working on this journey of diversification and accelerating our efforts to increase our kit value in two-wheeler passenger vehicle and consumer businesses with the addition of new premium products through both organic and inorganic routes. Inorganic route was the acquisition of chrome plating, IMD/IML/IMF parts via Exotech and Walter Pack India acquisitions. On the organic front, I mentioned to you all of our plans to introduce optical cover glass at SJS. The addition of optical cover glass or plastic will be a complete game changer. It will also aid in reducing two-wheeler dependence even in our stand-alone SJS business. SJS stand-alone kit value in the passenger vehicle segment will increase over 10x with the introduction of optical cover glass from being a 2D/3D dial supplier to the PV segment, to become a supplier of high-value premium products. Apart from this product, we are working closely with some OEMs to introduce innovative premium products like IML wheel caps, complex IML/IMD part for consumer companies. It gives us great satisfaction to see our organic and inorganic strategies playing out very well. Our potential content per vehicle for PV over the last 2 years has increased by over 4x. And today, we are one of the mainstream suppliers to the passenger vehicle segment as well. Our outlook for the current year FY '24. We maintain our guidance to deliver consolidated annual revenue growth close to 45% year-on-year. Organic growth for FY '24 would be over 1.5x of the industry growth, close to about 20% year-on-year. Our consolidated PAT growth is also likely to be near 30% year-on-year. This 30% growth will exclude the higher amortization cost of INR 21.5 million post tax, each quarter on intangible assets and onetime acquisition costs of INR 21.5 million incurred during Q2. In the last 3 months, we've not only seen Walter Pack India key OEM volumes recovering gradually, but it has also won several new businesses that gives us confidence for a robust order book for FY '25. We have strong conviction that strategically, Walter Pack India is the right acquisition for SJS and will help us drive growth -- both growth and profitability in the long run. We are confident in our ability to outperform the industry on back of various cross-selling opportunities that we see playing out between all our 3 businesses. With that said, I come to an end of my quarterly updates. Thank you, and we are now open to answer questions, if any.

[Operator Instructions] The first question is from the line of Ajox Frederick from Sundaram Mutual Fund.

Sir, I have one question on WPI. Sequentially, the revenue has come off despite the client level models increasing in Tata. So how could I read that?

So as we said in the last quarter, there were some new launches that Walter Pack initiated. These volumes were increasing gradually because of launch issues at the customer end. So these have stabilized. And for the quarter 3, typically, the pace of growth has been gradual. So we see that improvement happening, but the full improvement still has to play out. So the volumes will increase further. And I think Q3 -- Q4 would be closer to what is the normal run rate expected. Plus in addition, we see very strong order intake. So there are some new programs that are starting up, which will lead to revenue growth at Walter Pack India in the next quarters.

I'll say -- Ajox, just to add to what Sanjay said. So in Q2, if you'll actually see, out of the INR 38 crores, INR 39 crores of revenue in Walter Pack, around INR 11 crores was tooling revenue, which we had mentioned. So the actual revenue was somewhere around INR 28 crores, whereas this quarter, we are somewhere close to INR 33 crores. So that way sequentially you could see that there has been a growth.

Okay. Okay. Understood. And on Exotech, the margins have improved sequentially. So what can be the steady-state run rate margins for this business going forward, let's say, 1 year, 2 years down the line?

So we have maintained -- yes. Mahendra, you take that, yes.

The margins have improved, mainly the operating efficiency and more of a lesser raw material consumptions and a better product mix. So like your question, is it sustainable basis? So it's depending on the product mix continuation, but we believe that our margins will be in a good trend and we will deliver better than what we have than the last year.

So -- but fundamentally, specifically answering that question, 15% is what we've guided to, that this should be sustainable margins. And of course, our effort is to increase that further as has borne out in this quarter. But steady-state margins should be in the region of 15%, 16%.

The next question is from the line of [ Amar ] from Lucky Investments.

Am I audible?

Yes, you are, [ Amar ].

Yes. First, sir, in terms of the Walter Pack, like the production-related scale up and the descale-up of few models which you were expecting for the client-specific issues, how -- is that behind now?

Yes, that's what I answered. In Q2, there were some starting problems at the OEM, which have been sorted out now. So what I guided in the last quarterly call was that margins should come back to somewhere midway between what it finally should be and where we are. So we've demonstrated that robust growth in margins at Walter Pack India. And moving forward, it should normalize in Q4 and early Q1 FY '25. So those issues are behind us. There are some new model launches that are happening. So we have a good traction and this will help improve revenues as well as margins in the next 1 or 2 quarters, even further from that improvement as you've seen in Q3.

Okay. And then was there like some rejection-related costs even in this quarter for Walter Pack? And if you can quantify that quantum, like was that significant?

Typically, whenever we introduce a new product, these are new technologies introduced for the first time in India. So there is a learning curve that is going. We do a lot of internal trials. So a lot of costs get built in without being billed to the customers. So yes, there are rejections in the start-up phase for the new project. But in a quarter, they stabilize. So we expect that these should improve margins as I guided earlier in Q4 and Q1 FY '25. So any time that you launch a new product, there will be some feeding costs, which get normalized over the next 2 or 3 months of launch.

And just one last, sir. On a stand-alone Walter Pack basis, what would be the year-over-year growth we would be expecting in '24 and in '25? Just on stand-alone Walter Pack.

We expect very robust growth. We will far outperform the industry. So that's what we've guided to. At the moment, we will give you guidance on the next year for Walter Pack, maybe closer to the end of the year. But on the whole, it looks very promising.

Okay. And then '24, let's say, the 45% guidance, so what would be the growth penciling for Walter Pack?

So [ Amar ], as it was mentioned, even by Mahendra in his comments, it was said that the organic growth that we will see is going to be somewhere around close to 20% and the balance would be coming from Walter Pack's performance.

The next question is from the line of Pratit Vajani from Union AMC.

My question is more regarding the optical cover glass opportunity, which you spoke about. So can you just elaborate a little bit more about it that you said the ASP is going to go by 10x? So what is the opportunity size you're looking at? And do we have orders on the same?

Yes. So optical cover glass is a very high-value part, and that is where I said, if you talk of stand-alone SJS, this is going to increase our content per four-wheeler by almost 10x. That is for stand-alone SJS. We are in the process of proof of concept and validation. And when you introduce a new product, there are a lot of audits that are done by the companies, our customers. So we see strong traction. At the moment, we are in the process of this auditing phase where our processes are being verified. And we hope that in the next quarter or 2 quarters, we should be able to have orders for this. So typically, what happens is the customer audits you, validates everything, and that is when they start awarding business. At the moment, what we have is proof of concepts, which we've given to customers. They've evaluated it. They are happy with it. So on the whole it looks very positive.

And sir, this product would be the dashboard kind of glass, is it?

Yes. So this is a display that is there in the center stack. So if you've seen the XUV700, for example, from Mahindra, so you have a huge display screen in the center, which has navigation and your audio controls. So this is the center stack display screen. And the cover glass is a protective glass that covers the TFT screen that comes in the center. So our scope is to supply the cover glass which will protect this TFT screen in the center. So depending on the premiumization or the premium content in the vehicle or which model you top of, so these would be extremely large parts, which are quite expensive.

And also, sir, regarding the issue with the OEM, which we called out last quarter, so now this quarter, you said that, that is largely behind. But are we getting new orders for the same OEM where they have a model launch already done and a couple of launches are pending for this quarter -- this year? So do we have any visibility on that front?

Yes, we have very good traction, as I said. So there are a lot of new models that we are working on. So these are exciting times for us as we look at these new models being launched. So we have a very good traction with the customers for these new models as well.

And sir, just last question from my end. What is your thoughts on the overall export side? So are we seeing any delays in the orders or anything of that sort on the export front? That would be my last question.

So exports have done very well for us. So Devanshi, if you could share the numbers, please.

Yes. So exports for us has grown by almost around 40% this quarter. And we believe by the end of the year, we would be back to our FY '22 levels of exports. So on a stand-alone basis, because if you see our all 3 businesses, it's SJS stand-alone business that has exports, and that's about 12% of our stand-alone business. On a consolidated level, yes, both Exotech and Walter Pack are these largely domestic business. In fact, Exotech had one -- the Whirlpool business of completing badges, and that has also started for us since last quarter. So we are trying to see how more cross-selling opportunities can play out for us with the existing SJS base as well as now the other 2 companies also and how we can increase our exports going ahead.

The next question is from the line of Rajesh Kothari from AlfAccurate Advisors.

First of all, congrats for a good set of number. Just wanted to know that from the ramp-up perspective on your key customers, as and when that happens, particularly on the Walter Pack side, when you say that it will come back to the normalized level, how do you define the normalized level? What does it mean from the capacity utilization perspective?

Normal margins that we guided for Walter Pack basis...

Not on the margin front. I'm saying the revenue front as even the customers impacted in 2Q and now we are saying third quarter was still kind of a more like a ramp up more, but in the fourth quarter, where you see the normalization. So what does it mean from the capacity utilization perspective? And what does it mean from the revenue potential perspective?

So Mahendra, could you answer on the capacity utilization? I'll come to the revenue.

So Rajesh, regarding capacity when we acquired this company, they were operating in the range of 65% to 70%. During the year, we have also invested in this company, and capacity was expanded. On a yearly basis, this company can achieve around INR 250 crore on a current capacity. So let's say, currently, for the quarter 3, they were somewhere 70%, 75%, but that can grow eventually in quarter 4 and the quarter further.

And coming to your revenue or where we see growth, so we see very strong growth. Devanshi already answered that question. But overall, we expect 45% year-on-year growth over last year. And organic growth out of that should be about 20%.

And when you see next year, when you say 20% organic growth, these are the pro forma basis you are saying or on the reported basis you are saying? Because Walter Pack was there only from July. So is it on a reported basis, you're saying, 20% growth for the next year? Or you are saying on a pro forma basis, you're saying 20%?

Rajesh, just to correct you, when we said organic growth of around 20%, that was for the full year FY '24. That was the question that was asked earlier.

No, that, I understood. I'm saying FY '25, when you say FY '25, you are expecting, say, 20% kind of a growth, correct? Because we are writing organic growth to be expedited to 20% to 25% CAG, correct? So I'm saying FY '25, when you say 20% growth, does it pro forma basis, 20% growth? Or is it a reported basis, 20% growth?

No, no, that is more of a pro forma basis growth.

More of a pro forma basis. It means you are saying assuming Walter Pack is a part of full year for FY '24, then on that basis, you can grow at 20%. That's what you mean?

Yes, that is absolutely right.

And this assumes two-wheeler and passenger vehicle industry growth of, what, 8% to 10%?

Yes, we believe that two-wheeler will grow in the range of 8% to 10% and the four-wheeler will grow in the range of 10% to 12%.

Okay. So two-wheelers, 8% to 10%, and four-wheeler, understood. So in terms of the value addition from the margin perspective as that revenue grows by 20%, do you see potential of improvement in margins from where it stands in third quarter?

So definitely, the higher revenue and better operational efficiency will add into the EBITDA level. So yes, we are very much confident, and we will see the growth path.

Okay. Any CapEx plan for '25, '26?

So we already have explained in a couple of -- all quarters also. Our plans yearly basis for all put together 3 companies, we will do a CapEx of -- in the range of INR 40 crore to INR 45 crore. Apart from that, we are evaluating our expansion for Exotech and Walter Pack India. We have already acquired the land and how we can take in much growth for both the company at same land. So that plan is under evaluation and that will come maybe somewhere in calendar year '24.

The next question is from the line of Amit Hiranandani from SMIFS Limited.

Team, congrats for the good set of number. And sir, my first question is basically on the -- a bookkeeping question. Basically on the -- what is the absolute gross debt number, including the working capital for Q2 and Q3?

Sorry, maybe you have to repeat your questions once again.

What is the absolute gross debt number including the working capital loan for Q2 and Q3 FY '24?

Okay. So our gross debt at the end of quarter 3 -- one moment, please. Our gross debt at quarter 3 was INR 55.8 crores. And that was -- in the last quarter, it was INR 83.7 crores.

Okay. So debt is repaid in Q3, but I can see interest cost is nearly the same Q-on-Q.

So you are not able to see the interest cost reduction, why because, actually, there is a reduction into interest costs. But there were some processing costs we have incurred for the term loans. And since we have repaid the all processing costs which was supposed to be deferred over a period of time that's also been charged off in the quarter. So henceforth that impact saving has been offset with the processing cost.

And sir, any further plans for the Q4 debt repayment?

Yes. As and when, we will maintain our cash generation. There are some loans like acquisition loans. There are some time-bound loans, which is going to be repaid at a certain time, not before that. But some loan we will repay in quarter 4, and largely the loans we're going to repay in quarter 1 of '25.

Okay. Sir, my second question is on the stand-alone business. So we have seen the gross margin has come down year-on-year as well as quarter-on-quarter. Is this due to mix impact?

Yes. So on stand-alone, yes, that's absolutely right. That is more of a mix impact. If you recall, by starting in the year, we already have highlighted that there could be some margin impact in the current year because we are launching some new products here, and that would be impacting the gross margin. So yes, that was a sales impact.

But just to supplement what Mahendra just said, we are not so worried about the gross margin because we have demonstrated considerable resilience in getting back to margins. So the idea was what we guided in the beginning of the year as well that we are going to enter into new technologies, which are going to serve our purpose better in the long run. Yes, in the short run, there will be some start-up costs, some new technology introduction challenges that require higher RMCs, et cetera. But then we are not so concerned about this. On a steady-state basis, we see that this will continue to emerge as a very high-margin business.

Yes. So just last question, just if you can throw some guidance on the CapEx for FY '24, '25. And I require basically the breakup of the CapEx, including your Exotech expansion as well.

Okay. So Mahendra, if you could please share that?

So Amit, for the year -- current year, '24, for the 9 months, we already have done a CapEx of around INR 33 crore, which also include the land we acquired for expansion. For this quarter 4, we are expecting that we will be somewhere INR 40 crores in this year. So this year between INR 40 crores, where we had captured the expansion, the land acquisition as well as the new CapEx we have done for the Walter Pack. For the next year, largely we have already touched upon about the optical cover glass for which we need to go for a CapEx. So next year, for this one, plus maintenance CapEx, we believe that we will are going to incur somewhere INR 40 crores to INR 45 crores. Plus expansion of our Exotech and Walter Pack, the land we already acquired, we are evaluating our plans, how to see the future. We would like to be frugal in our investment policy. So that plan we will be going to explain more into detail somewhere in quarter 2 or quarter 3.

Okay. Sorry, FY '25, we total INR 45 crores, including the expansion rate?

For the current financial year, INR 40 crores you can say, yes.

No. FY '25 -- Amit, just to correct you, FY '25, INR 45 crores is excluding that Exotech and Walter Pack expansion. That plan we're still working on it and evaluating it.

Okay. Very clear. Just my last question, sir. So on the export side, it's still doing roughly INR 12 crores quarterly run rate. So are we facing any kind of a problem despite having good orders in hand and we are adding new clients as well? Just need your color on the export side and the Q4 outlook and visibility for FY '25 for exports, please?

No. So as I guided during the -- earlier during the year, so there was a hit that exports had taken last year because of these macroeconomic challenges. We had guided that in this year, we will come back to near normalcy of where we were a year ago. So we are on target there. So we will be almost at least a little lower than the levels that we were the year before last. But moving ahead, we see good traction. So for us, the automotive business, the appliance businesses, both have -- are looking good. There are some challenges still in Europe. But overall, other geographies are doing well. So we are quite optimistic that this will open the doors, and the doors will open wider for us. Also, thanks to this new Walter Pack product portfolio that we have in our product mix. And that should lead to larger revenues coming in from exports. The guidance, of course, is that maybe over the next 2 to 3 years, almost -- exports should increase from about 7% to close to about 10%, 11% of our consolidated revenues.

The next question is from the line of Saurabh from Multi-Act Equity.

This is Akshat from Multi-Act. I have a question specifically related to Walter Pack. So just wanted to understand, last quarter, the loss of revenue was mainly on account of model change at one of our OEMs. So there were 3 models which changed. Now if we track the volume data of those models, they have been broadly back to the Q1 levels. So they had gone down in Q2, but in Q3, they were back to Q1 levels. But our recovery does not seem to be matching the -- tracking those numbers. So is that -- there are some particular trims where our components are higher and those trims are not there so much in these volumes? Or if you could just explain this divergence?

So your question is more in regard to the revenue?

The revenue of Walter Pack not coming back to Q1 levels despite the volumes of OEMs coming back.

No. So you need to account for the fact that last year there was a significant amount of tooling revenue that compensated sales. But...

But I'm comparing with Q1, not Q2. Q2, I understand. But in Q1...

Saurabh (sic) [ Akshat ], I just like to add to you in one -- out here. The question that you're saying is in Walter Pack, the key OEMs that we are talking about whom we supply to. There, if you will see the volumes in terms of the Q-o-Q growth, that has not come back to Q1 levels. It was flattish in Q3 also for them.

Okay. Okay. But just wanted to clarify our components. Last quarter, we had talked about increasing in the wallet share and increasing in the size of the kit. So this higher kit value, is it there across all trims? Or it's more for the higher end of the model?

So across all trims, so fundamentally -- so these 2 key models where this innovation -- the new-technology interiors came in, where we have a very significant increase in the content per vehicle. So those are there for most of the trim levels.

Okay. And now in later part of December or early January, are the volumes back to Q1 levels? Or we are just still behind those numbers as of now?

For the Q4 still has to play out, but we see robust orders and not only for the existing models, but our content in those models have increased even further because of a lot of new products that we won. So our content per vehicle, for example, is going to increase even further. So we will see robust growth coming in for Q4 as well.

The next question is from the line of [ Amar Kalam ] from Lucky Investments.

Can you hear me?

Yes, sir.

Yes. So sir, basically, like, given the numbers which we are talking, I believe third quarter is seasonally the best quarter even for your stand-alone and Exotech business. So I can understand that content per vehicle increasing in Walter Pack. But I mean given the guidance you're talking about, we are expecting a significant growth in the stand-alone and the Exotech business also in Q4. So what would be the reason for that?

[ Amar ], just to correct you, one thing. Usually, Q3 is not generally our best quarter. It would be Q2 and Q4, which are usually better quarters for us because if you'll see, Q3 is generally the time when there is plant maintenance, shutdowns and all those things also that happen, and the festive period is just over. Usually, the demand and the push thing that comes, the distribution channels get in Q2 usually. This time it has happened that, yes, there has been a little spillover in Q3. Otherwise, generally, Q2 and Q4 are generally better quarters for us than Q3.

So we are confident about basically the guidance which we are talking about even for the stand-alone and Exotech business, the kind of growth which we are seeing?

Yes, that's right. Because we have won, as we had mentioned even last year as well as during this year's quarters also, we had won quite new businesses that have started since Q3 onwards now. So Q3 and Q4, that's why we are seeing this kind of growth.

Okay. And how this visibility basically percolates in FY '25? What could be the '25 stand-alone and Exotech growth, if you can?

So we are not guiding to FY '25. But what we said is in my outlook, what I just explained to you, we hope to outperform the market by at least 1.5x to 2x. And we expect that the two-wheeler business should grow by about 8% to 10%. The four-wheeler should grow at about 10% to 12%. This is the industry growth rate that we factored in, and we should be close to about 1.5x to 2x better than the industry.

So basically, 20% kind of. Okay, got that.

The next question is from the line of Vatsal Kothari from AlfAccurate Advisors.

So my first question would be with regards to Walter Pack India. If you could just help with the segmental mix in terms of the auto segment and the CV, what would the revenue mix look like?

Devanshi, could you share those numbers, please?

Sorry, can you repeat your question?

Segment mix for Walter Pack.

Sure. So segment mix for Walter Mark would be -- Walter Pack since is largely a passenger vehicle and consumer appliances player, so there it will be around 55% -- 55%, 56% of our revenue is from passenger vehicles and balance is from consumer appliances and some other segments. Very negligible two-wheeler player, yes.

Understood. And...

Sir, you are not audible.

Hello?

Yes, please continue.

So [indiscernible].

Sorry, I'm not able to hear you.

Can you hear me now?

I think it's better now.

So my second question is with regards to the auto segment for Walter Pack. I think if I'm not wrong, the top 2 OEMs or the auto players contribute to about 60%, 70% of your top line for Walter Pack alone. So if you could just share what would that mix look like? Does the largest OEM still contribute to about 50% of the Walter Pack top line? Or how does it look like for this quarter?

Just a second. So the large -- 2 large OEMs, yes, they contribute somewhere around 65% -- or 65% to 70% of our revenue for this quarter.

Understood. And my last question would be -- so I heard that you guys have added more clients, which will contribute to a robust order book growth going forward for the next 1 to 2 years. So if you could just give some names in terms of the clients that you have added for perhaps Walter Pack and Exotech, that would be great if you could just give some color on that.

So when we mentioned -- sorry, yes, sir.

Yes, our clients are fairly wide based, so we virtually do business with most of the companies in India. So it is not so much as adding clients as to winning new businesses from these clients. So I just want to correct that. So we already supply to virtually everyone. So the growth is more in terms of new businesses that we are acquiring both for electric vehicles or the variants that these companies are launching or the new-generation vehicles that they are launching. So we see very strong orders coming in from new launches that are happening.

And also, when you have mentioned that we had added new customers and all, that was more from the stand-alone SJS perspective that we had mentioned in our earlier calls that we had added a telecom player. We had also added Atomberg. We had added Autoliv. So all of them were also added in the last couple of quarters.

Due to time constraints, I will take the last question from the line of [ Aditya Zohar ] from [ AKC Capital ].

Great set of numbers. Just to confirm on the guidance part, I'm already unclear. On FY '24, this year, we would do somewhere around INR 600-odd crores of revenue, and next year, we're guiding about INR 720 crores to INR 740 crores. Is my numbers correct, sir?

I'm sorry, [ Aditya ], we will not be able to guide you in terms of numbers or anything. We've already guided in terms of growth, how we anticipate it.

Yes, ballpark number, just not exact numbers, I'm saying. So this year, roughly INR 600 crores, next year, INR 700 crores. So this is what our guidance stands for.

So we have said that we will achieve 45% compared to the last years. So what you said for the financial year '24, INR 600-odd crores, yes, more or less number. For the next year, we've already given that we will outperform the market by 1.5x to 2x, so your number's pretty okay, but it could go higher also.

And it all depends even on the industry growth as well, but how the industry also plays out.

Due to time constraints, we'll take that as the last question. I now hand the conference over to Ms. Devanshi Dhruva for closing comments.

Hi. Thank you, everyone, for joining us on this call. In case if anybody's questions have remained unanswered, you can please feel free to reach out to us, and we will try and answer all those queries. Thank you so much.

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