Samvardhana Motherson International Limited (517334) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to the Q4 FY '20 Results Conference Call of Motherson Sumi Systems Limited. [Operator Instructions] I would now like to hand the conference over to Mr. Vivek Chaand Sehgal. Thank you, and over to you, Mr. Sehgal.

Thank you very much. Good afternoon, ladies and gentlemen. I hope and pray that all of you are healthy and safe where you are, and that you are taking adequate care of this pandemic, which is there in front of us. I think, normally, we go quickly to question and answers, but maybe all of you would be a bit concerned about the atmosphere and what's happening in different parts of the world. So together with Pankaj, Vaaman, Gauba and me, we will try to give you a little bit of a scenario painting, if you please, telling you what's happening in the question-and-answer that's happening between Vaaman, Pankaj, myself and Gauba. So please bear with us. We'll try and finish it off in within 5 minutes, so that you can focus on exactly what you want to know. So Vaaman, Pankaj, I think it's important that everybody knows what is the kind of situation which is there globally. So Vaaman, can you take America and give us some background, what's happening there?

Sure. Papa, let me take you back to the start of the year, January, February, when we were just starting the last quarter, I think, we were looking quite good. All our plants were doing very well. And we first noticed that the COVID situation had broken out in China. And very quickly, our plants in China went into lockdown. So in fact, we were one of the first people in that aspect to see the effects of immediate lockdown and shutdown that happened and all the plants going into a lockdown. And we suddenly saw that effect moving towards Europe and towards the U.S. So as we got more into Feb-March, we saw that, yes, it was inevitable that the plants in the U.S. and everything would also go into lockdown. And we started preparing ourselves on a global basis. We took a global team and we said, look, if what's happened in China is true and the cases are now globally increasing, we should start preparing already that all our plants are going to go into shutdown. In fact, I together with my entire family came back to India just a few days before the border shut down because we did see extended at least 6- to 8-week period where plants will be shutting going from our experience to what we had learned from China. Seeing the effects that we have, we really prepared ourselves and started mobilizing all our units. And in fact, because this was our last 5-year -- last year of our 5-year plan, we had a project running called Project Victory, which was already very much focused on reducing the cost base so that we could finish the Motherson a very strong number. So we saw that the plant, everything we have were following these projects quite well and we're very well placed to react to the situation of COVID. And all our plants in the U.S. went into shut down except barring a few that were deemed as essential services that were making [indiscernible] for example, ambulances, those kind of vehicles. Those kind of plants were still remaining open, but the majority of them had shut down. So now only in May end have they really started to open. The automotive supply chain is a complex one. It cannot be start-up and shut down overnight. So the customers have been cautious to open up to make sure that the supplies are there from thousands of suppliers together.

But globally, don't you think that the governments outside India are that much more aware that automotive has to come back very quickly because of the overall effect it has in the GDP and the country? And the support also is huge that has come there, isn't it?

Yes, that's very active. We actually are very grateful to all the support that we have got from all the government agencies worldwide. In fact, as soon as the lockdown happened, a lot of our plants got support in terms of payments for salaries, in terms of loan supports, et cetera, that we got a loan amount just to make sure that our working capital sector could suffice during this lockdown and supplier payments, et cetera, would not be affected. And this happened very, very quickly.

And in Germany, I believe you've got the payments within 3 days after the government's announcement.

That's right. Even in the U.S., within the week, we had the support. So we are really grateful that the world recognizes how crucial the automotive supply chain is to the backbone of the entire economy. And we got a tremendous amount of support, which has really helped us to go through this tough time of all the plants being closed.

But Gauba, just to bring you into the conversation very quickly, that actually helped us a lot when we in about June last year, we had come up that this was our final year of the 5-year plan. So we have to be very ROCE focused. So we had -- which we all know as Project Victory, which was to how to improve the ROCE and how to correct and all these happening. Can you throw a very quick light on that? What's -- is that the reason why we are having such phenomenal low take and all that number?

Yes, sir. So there were 2 parts to it. Number one, we knew that there is a challenge in the greenfield, which you also mentioned in today's remarks also, Chairman comments also that we continue to face challenges at one of the plant Tuscaloosa. So definitely, it was very important for rest of the plants, rest of the family members to come together and start working on conserving the cash as well as cutting down the cost. So -- and quarter 4 of the financial year, which is calendar year quarter 1, is always the best. And this is the first time possibly I'm seeing in last 23 years, that quarter 1 is the lowest in a financial year. Therefore, the teams are working very hard to ensure that we convert the cash, we bring down our receivables, we bring down our inventory. As a result, we could generate one of the highest level of cash from operations. While our top line is dependent on the customers being an OEM supplier, but I think we have always asked plants that we had to see what we can do internally better. So the result of which are reflected both on the operating performance as well as on the free cash, which got generated, not only that our debt level are lowest in the last 11 quarters, but also importantly, we could -- we distributed the dividend both for financial year '18-'19 and '19-'20. In fact, '19-'20 would be the highest payout ratio. So I wish...

Correct me if I'm wrong, the new orders winning and all that particular thing also, it doesn't really require huge CapEx spending because almost all the CapExs for the particular orders that we have won is already there, isn't it?

Absolutely, sir. And our CapEx is the lowest in the last 4 years, and this is after we have added PKC as well as SMRC. So while we continue to add the businesses, and we have been able to conserve the cash of better understanding on CapEx and it is not that these are stock traders, these are driven at the plant level because everybody realizes what return on capital employed cost means to their plant or their unit or their company.

Thanks, Gauba, I'll try and bring Pankaj in. Pankaj, I think the HR people and operations people did a phenomenal job in India. Can you help everybody understand what you're getting the feel in India? And also congratulate -- the Board also actually congratulated everybody for a amazing job that you guys did. But a little bit on the Indian side, we are seeing a bit of slowdown. And also, if you can PKC and MWSI, if you can give a little bit of a -- this thing, but very quickly so that in 2 minutes, we'll then close and ask for questions.

Right, sir. So in India, we use this lockdown period to engage with our people, used our e-portals for training and engaged everyone in e-trainings and also all our associates to remain in touch with them and also all our suppliers, so that when we open up, we can have good communication and ensure that everybody is trained on all the safety aspects. And within this lockdown period, we also made all our plants compliant with all the safety requirements after COVID as we had learned from all our international operations and especially from China, what all the precautions we need to take. So as of today, all our plants are opened and people are there. We see every week that the customers are improving their demand and their forecast. First one to have a good requirement was our export customers, nearly 15% of the stand-alone is exported out. And our customers, especially in Japan and they never closed. So all their inventories were getting exhausted, so they have a very good demand. And also now Europe has opened up. So we see good tractions from there. And the next one was the farm equipment sector in India, which has come back very strongly. Then we saw the 2-wheeler industry coming back and the PASSCAR industry following up -- to be followed by the commercial vehicle industry. We are fully prepared. Our plants are in good shape. So with people in there, ensuring that the demands, which are coming from our customers, we meet them. And we remain prepared for every step-by-step enhancement in their requirements.

But an amazing job done to reduce the cost at every angle, isn't it? I think the COVID scenario actually gave even more focus to that because of the emerging situation, et cetera, in India, isn't it?

Absolutely. And everybody contributed wholeheartedly. We could see how everyone was engaged, and nobody had imagined such a pandemic. So it's a very unique situation, and we saw a complete unification and excellent ideas coming from everyone. Even designers who are working from their home and ensuring that all the design work, given the guest new work for the customers, nothing suffered during this period. Similarly, we also saw in PKC. China came back faster and at more than 100% levels today, then Europe came back. And now we see the American side picking up as Mexico opened up for manufacturing. And the same is with MWSI, that farm equipment sector, not just in India, but also in U.S., very strong. So they are marching ahead. And they -- since they were also essential services, so they didn't stop even in Mexico during the emergency period.

Thank you, Pankaj. On the lighter side, our traveling bills have come down to virtually 0. So that could also probably explain for better profitability. Thank you very much, and we are ready for the questions. I hope you enjoyed this little chat because it's a good way to make you understand what the general condition is. Thank you very much. Back to you.

[Operator Instructions] We take the first question from the line of Jay Kale from Elara Capital.

Congratulations on a good set of numbers in a challenging environment. And I hope all are safe at your end. First question was regarding your -- seen a very strong performance at SMR and many other businesses as well. You also mentioned that you did receive some support from the government in various geographies. So would you be able to quantify, if at all, would that have come in the quarter 4? Or was it more to do in the first quarter in the current ongoing quarter?

So most of the supports and everything have come in the first quarter. So they're not reflecting in the quarter 4. I think it is prudent to tell all of you that, of course, but till Q4 up to March end only our China plants in that quarter were really affected. China plants came back towards the end of March. And the rest of the plants of the world went into lockdown in forced conditions. So definitely, Q1 will look very different to Q4 because there hasn't been any production for the last 2 months. And things are only opening up now, and we are hopeful of the quick pickup in June, July, that's coming up. But yes, definitely, credit to the entire team. They worked extremely hard on the Project Victory, which was to reduce all the costs from our plants in the last year, and that has definitely helped even the COVID situation to alleviate, they would have done even better. But we are grateful for their all their actions that they took to showcase that performance. Definitely, Q1 would be an aberration and in no way it can be compared to what Q4 has been done since the impact was very limited, but Q1 would be definitely an aberration as we report those numbers.

Sure. So that's great. I mean, with such a depressed pacific posted a pretty strong set of margins. So I'm assuming there's no one-off in SMR. As you mentioned that most of the things have come in Q1. So my second question is on the...

Just one moment. Even the help that is coming from the government is 95% loans, it's not anything which is a grant or something. Gauba, correct me if I'm wrong.

Yes, sir. That is right, sir.

Okay. Good. So please go ahead with your second question.

Yes. Great. Sir, second question was on the stand-alone side. You've posted quite a resilient performance despite another industry being down in Q4 and that too even when the copper prices were lower. So just wanted to get your sense of how are you seeing this impact? Is it that you are seeing a strong content increase because of your BS VI, most of the platforms and most of the OEMs would have transitioned to BS VI in Q4. So what would have been a few key drivers of this revenue or performance on the stand-alone side?

Pankaj, can you take this one? And then just hand it back to me. I have one comment only to make. Go head, please, Pankaj.

Right. See, our performance is backed by, of course, how our customers performed in the last quarter. And as you rightly mentioned, that definitely, the customers had already started building Euro 6 products as well. So they started ramping them up in the first -- in the last quarter. Some of them had started even before January, but most of them started to build up from Jan to March and there has been an enhancement in the content. So it's not just Euro 6, but as new models come up, they always have more enhanced features as the customers want more enhanced feature. So it's a combination of both.

The thing I wanted to add, one of the reasons why we are very sure that the demand in India is going to come back the moment this whole thing opens up is because of this accentuating circumstances where you had COVID pandemics everything closed down in a hurry. Secondly, there was very little inventory in the system because people were changing over between Euro 4 and -- sorry BS-IV and BS-VI. Secondly, I think -- thirdly, I think is, there is amount of liquidity that's available for people. Their expenses for the house for everything else has been reduced in the last 2 months. And I think the fourth most important reason is that there is going to be a need for people to believe that private -- some form of private transportation is going to be better than getting into taxies and share things and all that. That, I think, is going to be a reason why demand is going to be more, but the supply is going to be restricted because things are going to take slower to open up and come to capacity. And that means that there is going to be a vacuum. And hence, even all the segments, A, B, C, D segment, every segment, according to me, is going to do better. But that's my personal thinking, my personal view. Sorry, go ahead. Back to you.

Sure. Great. Just one last question on the booking side. Your depreciation seems to have -- you've taken an impairment of around INR 30 crores. Gauba, sir, if you can just clarify what was it regarding?

See, as you know, our major part of the investment goes into land and building. So this is in respect of some of the land or some -- and some buildings, I think, it's in portion of that because if those land or buildings are not put to the use, then they get valued at a fair value. It's a accounting thing and noncash item as of now. Surely, we have bought the land to build a factory there, but it is prudent accounting to do the fair valuation at every time.

We take the next question from the line of Raghunandhan from Emkay Global.

Congratulations, sir, on good set of numbers, and thanks for the insights at the beginning of the call. Sir, 2 questions on from my side. Firstly, can you share the CapEx plan for FY '21? And secondly, net debt has seen a reduction between the December quarter to March quarter, if you can throw some color as to what are the components which led to this reduction? And also, like you've given details of a strong liquidity situation, I just wanted to understand your thoughts there.

Great. Gauba, I think you should take this one.

Yes, sir, I come back to the CapEx later because that is something which is a question of business coming back quicker. I think what we try to emphasize on the net debt level or the debt level, we have been very focused on conserving the cash. And as Vaaman explained that we saw in China, how the things started fading away because of lockdown, et cetera. At the same time, our Project Victory was in place, which means that we were able to reduce the working capital, our CapEx, which we have been saying for so many quarters that our CapEx once the greenfield are done will come down. And you can see that in the last 4 years the CapEx has been lowest. Further, this net debt reduction is to be also seen that in the month of March, we also paid an interim dividend, maintaining the same level in terms of share -- per share dividend, but a higher payout ratio. So obviously, there is much more focused on the capital employed as part of improving the return on capital employed. And truly reflected because Chairman has always been telling that when we are into a 5-year plan, initially, the debt level goes up because we have to build capacities. I think we have built around 40 plants in last 5 years. So as these CapExs have come down, as we have improved on working capital, we have reduced the net debt level. Also, what is important is when the whole situation turn into a lockdown situation, so we had a challenge that we have a return on capital employed. But at the same time, in an uncertain world like this, we have to conserve -- we have to be sitting on a cash. So we decided to take some liquidity line. Subsequent to the year also, then we took an approval from the Board to raise INR 1,000 crores of NCDs in India. We raised only INR 500 crores in a record day of 3 or 4 days. So therefore, what is important is when there are uncertain times or there are likelihood because this situation is not caused by any particular market or any particular industry, this is a world-wide problem. So going by the experience of China, when the things come back, they come back very quickly. So we had to be always prepared to refuel the engine as I used the term because when the operations will get to a normal, there will be to put in the working capital. So we think it is prudent to keep a good liquidity, not just because of the uncertain situation, but also to really pick up the operations as they start similar to what Pankaj was talking about preparing the supply chain, preparing the facilities and all that.

Gauba, interject and also explain that because we have cash in our balance sheet, hence, our ROCE is also looking a bit on the lower side, isn't it? But...

Yes, sir.

But circumstances, it is a very prudent thing that we had taken knowing decision that we're going to make sure that we have a lot of cash in the group.

In fact, as -- I mean, old people, we were remembering in today's Board meeting, 2008, '09 was the year when we generated one of the highest level of cash in a crisis situation of Lehman crisis. And this year, again, I mean, last year of Vision 2020. And so we have created the highest level of cash from operations. So we are very focused on that and to treat whenever the situation demand so. In respect to guidance...

Gauba, also by making this statement, you're also probably telling the people that we love crisis.

I mean, so there is an opportunity....

We have high cash. Okay. Sorry, go ahead. And, otherwise, if you finish, then...

I mean, how can we forget SMR coming to us in 2009, '10. So that's a good flip to that.

Okay. Go ahead.

At the same time, on the CapEx side, I think, we have always been saying that CapEx will come down gradually. As of now, to put a tab on the figure will be difficult because we want customers to come back and see how they start in terms of the new programs and all that. As of now, we have not had any significant delays or any program being delayed significantly. So we would look forward for the more guidance from the customers and then come out with the exact number.

One particular thing, you also want some kind of a number. So at this particular moment, those things are very uncertain. I think a number below INR 2,000 crores of CapEx for maintenance and other things probably would be the accurate number?

Yes, sir, even last year also when our CapEx is INR 2,200 crores, it also includes some of the land and building we bought in Serbia because of -- it was on lease and we wanted to expand there. So our CapEx has been closer to INR 2,000 crores even last year. So we have always been containing CapEx as the greenfields have gone enough.

Basically, the message that we are giving to everybody is that INR 2,000 crores for normal business or lower than that. And acquisitions and all this particular thing would be different matters isn't it?

Absolutely, that is independent.

Also, sir, can you highlight in terms of the challenges on Tuscaloosa operations? And how you see things going forward over the next few months? How are you coordinating with Daimler? And how you see the situation panning out in the future?

Thanks. Really, this is the first question. It's #3. So maybe I just hand this larger pressing issues now in the new world. Like I have been talking to you all throughout last few quarters that we are putting a lot of focus into the improvements over there, the 2 greenfields that talk about Kecskemet and Tuscaloosa, to give you an idea of in Kecskemet before the COVID thing really hit and the plant got shut down, it actually had hit breakeven level. So that was a great achievement by the team there. SMP Tuscaloosa also, we have made significant amount of improvements in progress. You can see the numbers, how the losses are being reduced. Consistently, I think, with Tuscaloosato to give you an idea, together with the customer support, we've been able to reduce 2,400 people that were in the plant already close to 1,800 and 1,900 people. So that's a significant reduction in the people that we've had. We continue to get Daimler's support to be able to change some of our feeding lines, our assembly operations, et cetera. And perhaps that's been the only silver lining of this entire shutdown that we could put in a lot of improvements during this closedown phase to further improve the plant. So yes, we are getting a lot of support from our customers over there as well. They understand the size of this elephant over there and are totally supporting us to bring in the improvements, which we will continue to show quarter-on-quarter. Unfortunately, the COVID situation hit at the time it did when we were going to show you the best performance in, I think, in Tuscaloosa. But again, barring this quarter, once the plant is back up to running, which has just started again. But we envisage in quarter 2 is when it will finally get back to its pre-COVID levels, if nothing else changes. And you will really see the impact of all the improvements and efficiencies that we have built in over there.

We'll take the next question from the line of Kapil Singh from Nomura.

Congratulations, a truly remarkable performance on all fronts by the team. My question is on the plants that we have opened. Can you give some idea how many plants are opened currently? And what is the revenue run rate that we are back to compared to the original run rate?

Yes. So we can give you a little bit of a consolidated view on that. A majority of our plants went into shutdown into -- by the time April came around, a majority of them were all in shutdown, except for our China plant that had just started back up. They were actually the learning ground for us to bring a lot of our plants back into open when in May as we have seen as the different geographies have relaxed the lockdown. So at this point, we have -- almost all our plants are completely opened. It's in the presentation number of the manufacturing facilities that are opened. So I'm just going to read it out. There is about 39% of our plants, which are greater than 75%. And by that, we are really talking about more people coming in and the attendance ratios and how we see the demand really picking up there. So 39% or over 75% -- between 15% and 75% is about 22% of the plants, between 25% and 50% is 27% and less than 25% is around 10%. By the end of June, we do anticipate that the complete majority should be that greater than 75% levels as the volumes and everything picks up. Definitely in the western world. India might be slower. As you're seeing, the number of cases in India are still peakings and more and more hotspots are being declared. So India is the only question mark really there, but the rest of the world, with the numbers that we are getting, would be towards that 75% plus by the end of June, is the feeling that we are getting, and hopefully, it will stay that way.

Thanks for the detailed answer. Secondly, I wanted to check, we were earlier reporting SMP performance ex of SMRC and greenfield. So any thoughts on -- we are changing the format going ahead? Or why we are using a different format now?

We gave that special number on our disclosures to give you the impact of the start-up plants that the investments had been made, and there were a lot of questions around it. Now those plants have ramped up. And of course, SMRC has also been longer than a year, so it becomes all part of SMP. So it's really not prudent anymore to give that information. We will continue to answer any questions regarding any startup. But like I said, post the COVID shutdown, customer had already hit breakeven. We made tremendous progress in SMP Alabama when this COVID situation hit. But once it settles, we believe that we will make a ton of progress there also and most of the plants there are now moving into a mature phase rather than start-up. So it doesn't -- it's not relevant anymore to give that information. But again, if you have questions and things around it, we will be happy to answer those on any of the calls.

And Kapil to be very fair this time, we have tried to do lot more data because of the special situation in terms of -- so we thought it is becoming too bulky that data. And of course, this being an annual year, so you will have a lot more information in the annual report, both at MSSL and SMRPBV. I think SMRPBV annual call is tomorrow and their annual report would have been released by now.

Sure, sure. So Vaaman, we should expect even the Tuscaloosa plant to turn profitable sometime in FY '21?

Look, we are making best effort towards that, that is a lot of support that we still need from a customer to get it over the line. We are talking about the changes that we are doing in that plant, even from like visibility of our suppliers. As you know, we only get a 3-hour window from our -- for supply that we get at the start of the week. We're increasing that window to 5 hours that will give us a head start in terms of improving our efficiencies and supplies, which kind of hold us back and then we have rework costs, et cetera, resequencing costs. So all these things are in play. Definitely, our intention is that to get into profitability as quick as possible. And the COVID situation has put a little bit of a speed bump on that. But let the plant come back to its normal volume levels and let this quarter go by, I will give you a lot more color on Tuscaloosa in the next report.

Sure. I look forward to that. And sir, any comments on the next 5-year plan?

Wonderful question. This is -- I think [Technical Difficulty]

Hello? [Technical Difficulty]

Operator?

Sir, as the current participant has just placed the call on hold, we will proceed to the next question is from the line of Jinesh Gandhi from Motilal Oswal.

Hello?

Hello?

Yes, sir, can you hear me?

Yes. Go ahead.

Sir, congrats on good number and tough times. My first question pertains to the SMR business, where we have seen a very good improvement in margin in the fourth quarter. Is 14.6%, is it a normal margins? Or there are any one-offs in that? If you can throw some line on that -- light on that?

Look, quarter 4 is always the strongest quarter that we have. If you look historically at all our plants, all our companies always try to finish the crossing line with the strongest set of results. But again, with the COVID situation and things like that, what will come up in the first quarter will not be comparable to what we have done in quarter 4. Obviously, with 2 months plus of no production and then June only being when things are starting up again, it will not reflect how we have done in Q4. So please do keep that in mind that Q1 will be a tough quarter because of no production in any other plants, and it will not be comparative to what we have achieved in quarter 4. But yes, SMR continues to improve, continues to be the mature organization that's holding on and improving profitability even in these tough conditions. And the rest of the group is also demonstrating that with their numbers. So there's no one-offs. It is the effort of the entire team to finish the 5-year plan extremely strong. And unfortunately, the COVID situation has helped otherwise that would have been the new benchmark.

Okay, okay. That's quite happening to know. Secondly, you alluded to Alabama plant reduction of people. You indicated it's reduced by 500 to 600 people? Or I missed that point?

That's right, 500 to 600 [Audio Gap] in the plant, and we have reduced 500, 600 people before COVID hit and during the shutdown period to improve the efficiencies. So definitely, that improvement is being seen in the numbers in Alabama. But again, Q1, because of the complete shutdown will not be reflecting any of the improvements since there has been no production and only the cost.

Sure, sure. And when we say Kecskemet plant has the breakeven, we are referring to PBT breakeven, right, or EBITDA breakeven?

EBITDA, EBITDA.

EBITDA. Okay.

Next, it is now PBT.

Okay. And lastly, given our track record of making every adversity count, do you -- are you very actively looking at opportunities in this kind of environment? And perhaps you can throw some light on what kind of options you would be looking at to be very helpful to us to see what mix, I guess, can give to us?

Sure. We have a lot of opportunity, but it's not what you would imagine for the simple reason that the governments all over the world have given or virtually thrown money to help out companies. So even companies, which were almost on the verge of being taken over February, March, have got a kind of a new lifeline. So we think it's probably going to get consumed in the next 3 to 6 months. So for the moment, we have not -- for the last 5-year plan, it's already over. We are probably at about $12 billion, I think you guys can do the math from the dollar and the turnover. But I think we are not going to extend that 5-year plan, but the next 5-year plan that we will come out will definitely give you an idea that we will try to cover up for this particular 5-year plan because of this very crazy circumstance. I mean, nobody ever believed that such kind of a thing would happen. Just to give you an experience, in February, March, when China was opening up, we actually exported something like, I don't know if I'm not wrong, 120,000, 130,000 masks because that's the time that we got this thing that we have to supply masks because the masks are not available. So we have a huge learning that has happened in this particular thing. And I think that is the advantage of the group that something is going wrong or something has not been -- the whole group comes to know about it much faster and can take corrective actions. But again, I won't hold back, I will go against my team, but I will tell you, the number would be anywhere between [INR 33 billion to INR 35 billion], but we still need a little bit more work to be done. The moment that's done, we'll come back to you. Probably, we will do an investor conference somewhere around e-conference or whatever, but somewhere around August, September or near about there somewhere. And by that time, we would have given you a clear target for the next 20, 25. I hope that helps.

We'll take the next question from the line of Puneet Gulati from HSBC.

I just wanted to understand on your new orders execution, it seems $6.4 billion of orders got into execution in the second half. Maybe give some color on what these orders are and which new plants are executing these?

Okay. Look, the orders execution, again, are all our plants that we have won at the entire SMRPBV level. So that includes all the SMR, SMP SMRC, I mean, the entire company that we have over there. The new orders means that the first part of their entire new order has been delivered. The entire 5-year order comes out to the books. So yes, because of the numerous plant construction that we have done, Papa also said, we had launched more than 40 plants next 5-year period. So all those new plants have all started their orders. And hence, you see a big chunk of that new order book that is coming out because all the new plants have all started up. Correspondingly, the new orders are lifetime orders that we have won, they don't correspond exactly what the new order started because the combination times and, of course, the COVID situation, et cetera, all has perhaps also affected delay of some of the quotations awards being giving out and things like that. So it doesn't mean that we are winning less or anything like that. In fact, all our targets of winning new businesses were achieved, but some of the programs, which we were counting on, the nominations haven't been received yet because of the COVID deal.

And also I think, Vaaman, a lot of the models are being continued as well. They're going ahead more...

That's right. We're continuing -- prolonging some of the volume ends or the model end have been prolonged in the...

Prior years of Period.

Yes.

Okay. So these new orders is going to fill [indiscernible] really major plant I mean, they all came in on the existing -- in the earlier plants, which was running in early FY '20?

That's right. And all the orders that are won can be serviced from the existing plants, there is no need for a new plant to service any of these orders.

Okay. That's great. Secondly, can you give you more color Sehgal, sir, COVID support from the government has come in from that front?

Sir, I'm so sorry to interrupt, but your audio was not audible. Could you please repeat yourself?

Yes. Can you hear me better?

Yes, this is better.

Yes. Sorry. Yes. So [Audio Gap]

Mr. Puneet Gulati, I'm sorry to interrupt again, sir, your audio is not very clear. I would request you to please join back from a different number, and you may join the question queue.

Okay. Hello?

Yes.

Yes. So for your new -- the support from the government was in form of loans only? Or was there any grant also for the employees' salaries-related stuff?

Gauba, sir, can you take this, please?

See, Puneet, this varies from country to country. So it is in both forms. And some of these are also under discretion or negotiation. So we will have to basically wait for it. Secondly, it may not be prudent for us to share some of these details, which may be specifically for some [indiscernible].

Okay. And once all these plants have started have been...

Just a moment, I had already answered another gentlemen who had asked me this question. Almost about 5% of this is kind of a loan availability. And because of our condition, as Gauba will decide and his colleagues will decide, if we need, we will take that loan. Otherwise, we will not. But the loans can be a huge amount. I mean, the grant portion of it would probably, Gauba, would be about 5%, 7% approximately?

Yes, sir, it could be higher from country to country. So I'm -- that is why I'm...

No, no, I'm just saying on the overall would it be 5% loan, again, that also being -- that's not been in the last quarter, isn't it?

Yes, yes, it will come only in April-June quarter, by the way.

Yes, yes, of course. And when these plants have started, do you still get the support? Or have they taken back the support?

No, no, support is not to start a plant or something like that. It's generally, as I said, is available as a loan. It's a loan us for 1 year to 3 years. So I don't understand which way the plant operation gets counted in that. I'm just talking about the grant.

We take the next question from the line of Amyn Pirani from CLSA.

Sir, my first question is on the cash flow performance. Obviously, 4Q is a quarter where you do reduce the working capital significantly. And I think that has definitely played out. But going forward, is there a risk that payment terms in terms of receivables could get extended or on the trade payable side, you may have to pay your suppliers faster? I mean, how is the liquidity situation on both sides of your customer as well as on your own suppliers? And how should we look at working capital going forward?

Gauba can answer that. But generally, we have never had any issues on this particular thing up till now. So unless something is bothering you, which you think that the supply -- the customer or the supplier won't get paid or the customer won't pay you, I don't think there's going to be much different. But Gauba, if you think differently, then go head and...

No, absolutely right. We are 100% OEM supplier and all our customer ratings are investment -- better than the investment grade and all that. So all payments have come in time, and we also pay our suppliers on time. So there is no question of customers delaying payment or we delaying the suppliers' payment.

So Gauba, you can confirm that in March, April, May, Motherson has not delayed any supplier payment or anything sort of that. And we've -- wherever they needed help, in fact, we've provided help to them, isn't it?

Absolutely.

Sir, my concern was not whether you will delay. In fact, we expect that you may have to support your suppliers, they are smaller companies, and hence, does that impact your working capital. But I get the point. Secondly, certainly unrelated thing. Does this situation of COVID delay the restructuring bid? Can you just give some update on whether this is on track or you have delayed it for the time being?

I beg your pardon, I didn't get your question very clearly. Could you start it again?

No, the restructuring that you had announced in January earlier this year of the situation of the wiring harness businesses. So is they on track? Or is there some delay because of the current situation?

Track -- on track, but the most interesting thing that's happening, we have a lot of banks, some of them are also probably on the call here. But the weekly number change of the automotive production estimates that we are getting from the authority, we have to go back to the Board again and again and again. So it's not an easy job. And then a lot of ability has to be there to come up with as close to the accurate number as possible. So the Board was also appraised of the situation. Normally, we were supposed to have come out with our pretty different this time. So I think in the next 1 to 3 months, we will come up with the right way, how we have to proceed. And I think more stability would be better. So if you understand that the numbers that are coming from -- what is it, IHS and what's the other one is FCA or something...

LMC, LMC -- LMC Automotive, L-M-C.

LMC. So all these things are sort of creating a confusion. But I think somewhere down the line, we will have to take a call when the numbers start to become more steady. That's the time that we would expect and discuss this. But yes, all processes are on. We are very sure that we're going to go past this particular thing. But yes, maybe 3 months, 6 months delay, I don't know what the real situation would be.

We take the next question from the line of Sahil Kedia from Bank of America.

Congrats on your results. Sir, I have 2 questions. First is, you've given out a new order book that you have. When should we see or how should we think about execution of that in the sense that in financial year '21 and '22 over the next 2 years, how much of those orders are likely to go into production? Just if you can give us a sense there, that would be great. And the second question, not relating to the quarter, but slightly longer term, what does COVID-19 do to global procurement and supply chains? Clearly, the world has got a big shock in that regard. So how do you think that pans out? And how is Motherson positioned in that?

Okay. Thanks, Sahil, for those questions. This is Vaaman. I'll take the question on the supply chain and everything first. The supply chain for automotive is complex, especially us being just in sequence supplies, we're not sitting on huge amounts of inventories and things like that. So because we get information from the customer just in time, just in sequence kind of supply. So we are, obviously, have to be really close to the customers' demand I mean, that they're opening up. But they have multiple supplier levels, so Tier 1s, Tier 2s, Tier 3s. And for example, a labor issue is happening with migrant workers in India, but that's really not an issue outside in the western country. So different places are dealing with different issues. There are places in high containment zones. So for example, one of our French plants was a last to open up because it was in a containment zone, while the others opened up 2 weeks before that. So the only way that Motherson can really react to the situation is being closest to the customer and reacting on a day-to-day basis as the things are coming. Even in places where we have started up a plant and employee has come in and perhaps has some symptoms of COVID, there has to be immediate action that has been taken to disinfect, sanitize, make sure that the people that they've been in contact with are sent home. And we're trying different things like not loading up the plant 100% completely, putting people on a roster basis where every day, there's a different team that comes in so that God forbid, even if one team is exposed to a COVID infection, the other team can take over while continuing to maintain [food] supplies to the carmakers. So everything has been changed in our plants from assembly lines to where people are going to the canteens or how they are entering the lifts, so how the buses are acting. So a lot of changes are really happening, which will make sure that we can continue to supply the carmakers, but of course, maintain all social distancing and disinfection, sanitization, which becomes a real need of the future. And those have already been started to be implemented globally. And Motherson was in advantage because we saw the learnings that came from China because they were the first to shutdown. So we saw what were the mistakes that we -- that they made, the right things that they did by opening up what work, what didn't work, and correspondingly, that information was shared very quickly with the rest of our plants globally, which enabled them to open up in a much more responsive and careful manner and avoid the mistakes perhaps that were made from the first timers that we're opening up the plants in China. So we're very grateful to our plants over there that shared all those learnings that could help us really open up. Sahil, you had a second question, I'm sorry, I've forgotten it since I was answering.

The question was more that of the total order book that is today outstanding, how much of it is likely to get going to production in financial '21 or '22 if you can give kind of a combined, if you can have -- seen the number individually, that will also help. Just getting a sense of how much would go into production over the next 2 years?

So by definition, the entire order book will be 0 in 2 years' time because any order that we have won, the number that you see today, that number within 2 years will be 0. It will all would have started and the whole thing will come out. Now the new order that we have won right now, this, again, the timer starts now. So within now to the next 2 years, that orders that we won today would have started and hence will come out. So every quarter, things are getting added. And every quarter, things are leaving as those programs start. But by definition, the number that you see as a total order book as of today, that has to be 0 for these orders in the next 2 years because they have had to have started. We have not heard from any customer, any cancellation of any new order or anything like that. Of course, in this uncertain period, like we said before, they are maybe continuing something, which they could have discontinued or delaying nomination of some new programs for a couple of months till the situation settles. But there has been no cancellation or big change in any such order in order book.

And just to -- on this order book itself, is there any programs that you have repeat orders that have won? Do you put them in this order book? Or that is treated separately?

No, that also comes in the repeat order book. So that number is reflected as a new order in the order book. And new order just means an order which hasn't started yet. It doesn't mean whether it's a repeat or a completely new order. There'd be a mix of both of them in the new business.

Okay. In the...

We're just 5 years old. So our orders are all new orders.

No, I'm just trying understand what is the proportion of your book then to new potentially orders or which are -- or programs that you're already supplying?

Yes. Look, I can give you a rough estimate, maybe 70-30 or 60-40, somewhere around that because sometimes, with the company that we have taken over, there are some orders which we choose not to go after because they may be loss making or there may be a change in the customer strategy to change one big model because if they have 3 or 4 different models, they do switch around the models between their suppliers just to keep everybody on their toes. So one program can be replaced by another program, which would technically not be a repeat a new but is actually filling up the last program.

So sir, 60% being new and 40% being repeat? Or was it the other way around?

I'm giving you rough numbers, Sahil, that's what tentatively it happens. But again, that keeps changing.

While we can't -- every time the order comes, the platform remains the same, but the body completely changes. So how do you classify it? There's a lot of confusion on that. So I'm just -- we are trying to give you a just thumb rule, but normally 30-70 or 60-40 could be that.

We will take the next question from the line of Mayur Parkeria from Wealth Managers.

Am I audible?

Yes, very audible. Thank you.

So sir, you have been always being proponent of the -- sorry, of sales, profits and cash. And you probably -- you can just add one more thing that when the going gets tough, the tough gets going. So it's further heartening performance in terms of the way you have -- the numbers have come out. Some of the back the numbers when we see the Q4, the SMRPBV and other subsidiaries appears to have reduced the fixed cost by almost INR 500 crores to INR 600 crores for the quarter. Will it be a right number to look at Gauba, sir?

But the challenge is when we are looking at the consolidated number, it may reflect. But surely, we look at unit by unit. So to draw that inferences to consolidated accounts become a bit of a challenge. But as we emphasized that this was our last year, we launched a lot of project, project victory in terms of reducing the cost and Vaaman had already explained how on the greenfields the improvements are happening. So I think this year has been one of the toughest year because of uncertainties around the full year. I mean we -- today, we are too much worried by COVID factor. But believe me last 1.5, 2 years have been very challenging for some reason or the other. And in those circumstances, the teams have done a lot of cost cutting, a lot of conservation of cash. But to put a number, because we say that you should look at the cost at 0 base, not thinking that this is a fixed cost, this is a variable cost. So I would not like to comment. But surely, there are much more substantial savings than the number what you are arriving at because there was whole amount of preparation for ramp-up.

All right. So as analyst, we always -- we are still struggling to understand that fixed cost, what -- which kind of companies will be able to reduce fixed cost in this year? In fact, in Q4 itself, you have demonstrated this -- it may be a function of many things, but sir, great number on that side. On the gross margin side, also, we see a lot of improvement both on stand-alone as well as on the subsidiary side. So just on the subsidiary side, again, on the SMRPBV side, especially, we earlier used to mention that there were some legacy orders which were there. So while we have maintained that the -- there have been improvement in the plants also, which must have helped. What is the kind of -- now the proportion of the legacy orders, has it been reduced to so -- has that impact also started playing out? And is this a more structural trend of gross margin improvement? Or is it just because of raw material costs coming down for some and that can change though the prices has come back?

So I can answer, and I will seek support from Gauba sir and Pankaj sir to add on. But it's a mixture of a lot of things. Of course, as the time goes on, for example, SMR probably doesn't have any legacy orders at all, but SMP has probably also reached the end of that. But SMRC are still having those legacy orders, which they have had. Plus the new plant that we have set up, they're moving from start-up phase to getting into maturity, so that is there. Also our initiatives in vertical integration are also paying dividends on that front. And of course, our project, which we have started as a group-wide thing where we had made all the investments for these new orders and now the job was on all the team members to deliver the returns. All of them are paying fruit. We've also in this last 5-year period done management changes, brought inside the focus, elevated those people that have performed well and are delivering all those returns. So it's really a combination of the entire team's hard work, and it's really chipping away at each one of those costs and not only any one thing which we have done. It's really a team effort that has led to this result.

Okay. So just one more thing on the cost side. And just trying to understand. So while we know Q1 is going to be on the domestic side, it will be difficult, definitely a very challenging quarter. But when we look at the whole year and Sehgal, sir, you may want to just add a line here is, how do you see -- because we have almost INR 2,000 crores of annual fixed cost on the domestic side on the stand-alone entity. And given our sales, a 30% drop would mean that we would be broadly breakeven. I'm just trying to understand that do you see any kind of situation where we are having a tough on the stand-alone side or do you think we'll be able to pass through this?

So one thing that Motherson does is, we don't take bets. We will come to the situation, we will look at the situation, we will find a solution and respond very fast. So when we were going through all the tough times 1 year ago, we had already clearly understood that this is the first year, and we have to really focus on our ROCE. And we have to have clear focused drives, which are going to make sure that our costs are in control and things like that. So we then came up with a clear plan, clear assignment of whose responsibility to do what. We dug up all those things just stuck up for whatever reasons in different car companies and each one brought to one home. And that's the reason why the results have been very, very strong. So I think I would not want to guess what will happen in this year and what my fixed cost is and what the whole thing is. But yes, I think we are very well aware of our fixed costs and things like that. And barring the first quarter and the second quarter, I think the third quarter and fourth quarter will be phenomenal. You guys can't imagine how the third quarter and fourth quarter will be. Because in our belief, the -- and what we are seeing, I mean, if you see the numbers that are going to come up, you'll be surprised yourself because at the end of the day, this whole concept that I'm safe using anything, that whole case of case has gone out of the window. So I think the shared vehicles are really going to have a tough time to come out of this. So for me, the shared vehicles are always an opportunity because they're always increasing the cars. But the good thing about this particular crisis is that you will see A, B, C, D segment, all segments are going to do very well. So I think we should not write off the year or something like that. I would just say that first 2 quarters are going to be tougher. But definitely, the third, fourth quarter will outdo all your imagination. That's my take of it whether you like it [indiscernible].

Sir, last question on my side is given the kind of political development happening on the -- in U.S.-China side and we'll keep the election and everything aside, but is there any kind of -- what kind -- or rather what kind of thinking currently we are having in terms of any repositioning or any kind of based on OEM situation or any strategic changes, which comes to the business model because of this in terms of whether advanced preparation or any kind of directional, if you would like to say how -- what kind of discussions or strategy changes can it bring to the table? And how are we looking at it?

So look, I'm not very educated like what you guys are. So you can go and do geo-planning of political structures and things like that. But in my thinking and the way I will lead the group is more towards being more responsive. So whatever will happen, we will find a solution to that then. And if we have to just only visualize and strategize, Motherson doesn't believe in strategy. We believe in responsiveness, and we will take it when it comes there. I think our clear direction that we are going 3CX10 or globally local and things like that is paying really rich dividend to the book because in 41 countries, we are dealing with a lot of people. And the most important thing that the local people are running the plants. So I think that particular thing gives tremendous amount of security and, how do you say, local knowledge that comes up to the group. So I think we would continue to do that. Yes, there are a lot of standoffs. There are a lot of things that are happening in different countries all over. But one never forgets that in 1947, 563 countries became India. So what a great future with another 40 or 50 [Foreign Language]

We take the next question from the line of Basudeb Banerjee from AMBIT Capital.

Good set of numbers. Just a couple of questions, sir. If you can qualitatively explain the contours of this project victory, which helped you to reduce fixed cost? So if you can highlight various aspects under that project?

Very simply, improved growth is equal to victory. Everybody in plant, what all we have achieved, how we can achieve a ROCE of 40%. If we have already achieved that, then can you do 50%? If we had done 50%, then can you do 60%? It will just go on, just do better than yourself, ROCE improve, think about it. Look at every cost, look at every single thing. And I can't tell you how proud I am of my team. What a great job they have done. What a great job.

So can you highlight, sir, few of the features, how they have done that? And how we are moving ahead?

Do you want to know -- yes, you want to know about wiring harness and I'll ask Pankaj. You want to know about SMP, SMR...

More from SMR, SMP side, sir?

Vaaman, go for this.

So again, we have gone into it on a unit wise basis. The unit head identifies a complete fixed cost. They identify the variable cost, the people that they have. And the CapEx is the -- what they're investing in. We went [indiscernible] and for them took a target and it was monitored from our central teams on a monthly basis. We'll be happy to show you some of these reports in person. And each one of them set themselves a target to reduce that fixed cost base and reduce the CapEx this year. Again, each unit has individual ideas of low-cost automation where paybacks were less than 1 year, they put those in, even though we had to make some investments, but the paybacks were there. We were able to use groups working much more closely together to share capacities instead of buying new machines. If there was 1 unit that was sitting on an idle capacity, those things were shifted around. We also had different units piggybacking on each other to win orders without making significant investments. I can go on. I mean it's really a -- you can imagine a report coming from every unit of our plant around the world for every month. And all those reports being shared with all the other plants that they get ideas of how the other plants are doing. And that's how we really achieved it.

So will it be possible, Vaaman, to share with us some ballpark 1 term of the sustainable fixed cost reduction in SMP, what you have achieved? So that one can get an idea post Q1, say, for SMP business comes back to pre-COVID levels from Q2, Q3, so in this new normal of fixed cost, one can imagine the quantum of margin it can operate. So just from that angle?

Sure. So let us look at that over and come back to you in the next quarter. If we can see -- we can show you some answers to that, we can come back. But of course, right now, the whole focus is to see how the things are opening up and how the comeback after the break is going to be there, and how much of those costs that received in the start of the pre-COVID can be sustained. We'll give you more color on that in the next quarter.

Sure. And, sir, my second question was, as Sehgal sir, in the earlier part of the call, explained that it might take 3 months, 6 months for the demerger announcement for India wiring harness business because predictability of production is question mark. What about the transfer of residual stake of SMRPBV to the listed entity that was also announced? So any color on that from a time line perspective? Or it is also uncertain from a 3- to 6-month perspective or that's going to happen earlier?

No, no. Everything will happen at one time. You have to understand that Sumitomo, our -- Sumitomo, our partner is there in the listed entity. So if you bring the rest of SMRPBV without giving them the bifurcation in the domestic wire harness business, their share will come down below 25%. It will be very difficult to come back. And then, of course, when the demerger happens, they are not able to -- they'll have to do an open offer. So whatever will happen will happen once. We are giving it our best effort. You can imagine in the times of uncertainty, how many different questions there are. And of course, we are working through all these challenges to come to a good way, and the teams are working. And we're reacting to the situation. So again, like I said, if June is coming back to normal and things like that, we should come back market very quickly because things are playing out as we have anticipated, and we have done all our valuations, elevating sector on that basis. And if there's a change, of course, we will plead for some more time to get it right because, of course, volatile market like this, somebody has to put the pin on the Board and say, these are what the numbers will be, and we can only have more clarity on that as the things kind of settle rather than them being a little bit volatile as they are right now.

The shareholders are very wise. So we cannot give any number to the quantity of cars, which are going to be produced in the world. So that whole thing has to be acceptable to a lot of people. So once that changes, again, we have to come back to the drawing board again to do the numbers and do this whole particular thing. So please understand it's a challenge, but we think within the next month, 2 months, you will see steadily normalization happening. And that probably is the right time to do it because otherwise, every week, the numbers are different.

We'll take the next question from the line of [indiscernible]

I just have a couple of quick questions on the cash position. I see the number of INR 10,000 crores in terms of the liquidity that's available in the company. I just want to understand, I believe that this is spread across subsidiaries, right? So is this fungible? And is it fungible, and if not, is any of the subsidiaries in somewhat of a tight cash position?

Gauba?

Yes. See, most of the cash is fungible. I mean, of course, we have a structured -- capital structure, which is SMRPBV MSSL 100% own businesses. What is important is today the cash is not needed at 1 place or somewhere. Because of the COVID situation, it is all across, that they're having lockdown as a result of which the cash is needed as the operations come to normalcy. So while there is a good amount of flexibility and fungibility and this will not impact 1 unit to another. So there is -- to be sure there is enough of flexibility. I hope that answers.

Right. And my second question on this was on the undrawn limits, are these readily drawable? Or are there any considerations as opposed to -- considerations for drawing them?

So whatever bank guarantees and everything that is required, already, the Board has given the approval already. Gauba, you want to add anything on that? We can draw it anytime if we want it.

Yes, larger part of these limits are committed. There are some uncommitted lines also. But given the relationship the company has with the banks, there is no going back. At the same time, we don't think we will require to use the 100% of that. I mean that's also a fact.

Next question is from the line of Nishant Vass from ICICI Securities.

Congratulations on closing the 5-year plan on a strong note. Sir, first question, you continue to surprise on SMR profitability. Sorry for harping on this again. Vaaman, could you just break it -- is my thought process clear, this is largely -- is this productivity driven and very limited product mix driven? Or is there any product mix angle also to it? Just a broad thought.

Yes. Definitely, as the models become more mature, more towards future, content rich, it helps our margins as well. And of course, it is also the improvement on the productivity side and the lowering of the costs. And of course, again, the last quarter is always the strongest quarter. So finishing on a very strong wicket there with the SMR team. But we do see a trend towards more content-rich mirrors that's happening. So that helps SMR.

But Vaaman, you remember, like 7, 8 years ago, everybody used to tell us that everybody is going to go into cameras. And we used to say no, it's not going to happen.

So cameras are still a fraction of a fraction. I was probably one of those proponents. I said cameras have come [indiscernible]. But as always, papa is always right. So it has taken longer. In fact, the cost advantage of the cameras is still yet to be seen to come in, in a way that there is a high take rate from those cameras. And we are seeing that the first usage of high level of take rates will probably come more in the commercial segment where it becomes that much more of a necessity because of the wider angles and things like that. So yes, we are still seeing a very, very low take rate of the cameras. But as we have stated before, we are prepared for that eventuality. We are already supplying to some programs, which are now 100% camera as well but they're a fraction of a fraction.

And Vaaman, I think we are getting tremendous amount of traction in SMR this year. We are winning orders, which we had lost 5, 7, 10 years ago, and yet we are coming back on to them very strongly. So I think SMR definitely has done a phenomenal job. I hope that answers your question.

Yes, sir. Sir, I have a question related to the 5-year plan, one which is gone by and one which is possibly coming forward. So in the gone by, could you just give us some sense in terms of what are the -- finally, what are the ROCEs across the, let's say, various parts of businesses where we have likely closed that in SMP, SMR and PKC, some color on that would be really helpful.

Gauba, do you want to answer that? Or do you want to -- we normally don't give that, isn't it?

It will show up on the annual report once we have all those calculations. But we always give 2 numbers. One is the number of the plants. And -- I'm sorry, my kids have just run into the room. The perils of working from home, not being able to stop the 4-year-old. So sorry. As I was saying, the numbers, just on a very high-level basis, I can tell you the total group number is somewhere around that 10%. But that's including all the new greenfields and acquisitions that we have done that have not been with us for the 5-year period. So we usually give 2 numbers. One is that is without the greenfields and any acquisitions that have not done a 5-year period into Motherson or any greenfields that have started up in the last couple of years. That number is closer to 25%. Stand-alone is at 31%. But again, these numbers will be finalized and will come up in the annual report. So I'm giving you my estimate.

Perfect. And if I could try my luck with -- sir, on the next 5-year plan, you mentioned something close to INR 33 billion to INR 35 billion. Could you throw some light in terms of any new segment opportunities that will embody this kind of revenue trajectory? And what are your thoughts on possibly the ROCEs as well, broad sense?

So ROCE doesn't change. We will always stay with 40% ROCE because that puts a discipline in the group. However, you started the question asking me, but I think this question is more for Vaaman because he'll tell you better about the new verticals and what are we expecting from there.

Don't worry, Papa is going to be with me right throughout. So it's not that there's any change or anything like that. Listen, I think the next 5-year period, we have decided that we will diversify the group even further. While the focus will always remain on automotive, and we will continue to grow over there and have aggressive growth target for the automotive, but we believe that the group is not strong enough and has built enough, let's say, synergies and expertise in things such as engineering, manufacturing competencies, information technology and in general, being able to contract manufacture, et cetera, that we believe that all these expertise will help propel us in the next 5-year plan to go after industries and set our mark in places like aerospace and defense. Full team has already been set up, and we are looking at opportunities of expanding that business. There is a complete team there for health care. That also we have some existing business that are now looking to grow that, that's become an independent vertical in itself. In fact, our own IT company as well, we have a management change that has come into place over there, takes over from the last management to now grow the IT side of our business as well. So these are some cases that we are very focused on. We have a joint venture in -- which is a little bit more on the group side. We have a new joint venture on the logistics as well. So we believe that all these learnings that we have had in the automotive world will help us propel these new verticals of Motherson forward. And again, in the next 5-year plan, we will give you further color as to what ambitious targets all these verticals will have. And of course, they are all part of that 30, 35 number that Papa has said, it will encompass that.

We take the next question from the line of Sandip Verma from Axis Bank.

Congratulations for a good -- on good set of numbers. Sir, my first question is, I just wanted to understand, like, first 2 months would be like very insignificant for all the companies. But given the kind of employee cost that you have around INR 1,250 crores per month, so how the company has dealt with it especially in terms of...

Very difficult question to answer. I think the results actually tell you how we should dealt with it. We have taken every help that we could get, but we are very grateful that all of us realized that these are tough times. So we didn't sort of lay off anybody or anything like that, but we maintained close contacts within the HR departments and the different groups have worked. In some countries, we've got some help from the government also and voluntary pay cuts also. So a lot of things have been done, which is -- I mean, I see a lot of companies going about saying, we've done that, we've done that. We don't normally believe in that. We are very grateful to everybody. Everybody chipped in, everybody acted very, very responsibly. And I think that is probably the biggest attribute that we can give to the entire workforce all over. But I can confirm that we haven't laid off anybody or we've not stopped our supplier payments or anything of that sort. We've all worked together to solve the issues.

Okay. And sir, in terms of your debt, what would be your expected FY '21 debt?

Gauba, can you take that one, please? Anything with numbers off my head [Foreign Language].

Sandip, it is very difficult to guide on '21 number because, I mean, debt is a matter of cash flows. So we can only say that we continue to follow a prudent financial policy. We are very conservative as far as the debt is concerned or the criteria of return on capital employed makes us more accountable for respecting the capital. So therefore, I would not be able to guide you. Today, nobody is able to guide what will be the volumes for 2021. So I think we will have to wait for some time. As the situation develops, then we come to a normal situation.

Also for parent company, we have reduced the debt, isn't it?

Yes.

So whatever dividends we got over thing, I think we have reduced our debt in the parent company also dramatically.

And sir, from various industry reports, we've come to know like the sale of high-end cars will be impacted the most. And the low-cost or mid-range cars will see boom, maybe in Q3 and Q4. So how is your reading of situation, sir?

So I think that is a matter of personal choice. However, all I can tell you is that if you start thinking like that, then let me just tell you a very simple fact. If you go just now to book a Ferrari or a McLaren or any type of that sort, they're the sports cars, sir, you have a waiting list of 2.5 years. So sir, [Foreign Language] because the total number of these cars on the higher end is very, very small. It's a mere fraction of the total 100 million cars or 80 million cars, whatever the new number is, depending upon your this thing. So they go much faster than what you can imagine. I think the good news is not whether the big cars are going to sell or not, I know they will sell. However, the good news is that actually the A segment and B segment will sell like hot cakes. So that particular thing, I think the market has still not realized, it will come back very quickly because, definitely, people are going to do a lot of work from home, but whenever they have to go to the office, they're going to figure out something or the other and get their own car and all that. So I think the first effect of this particular unfortunate virus is that the automotive sector is going to go through a huge bump because you will have the 2-wheelers going, you'll have the 3-wheelers, 4-wheelers, you name it, everything will go. So I would not agree with what people are saying. They're just being very pessimistic.

We take the next question from the line of Shyam Sundar Sriram from Sundram Mutual Fund.

And many congratulations on the wonderful cash flow performance. Sir, just given -- in the post-COVID world, given the cost focus for most OEMs, do we see any supplier consolidation happening with OEMs? And can Motherson benefit from that sort of a trend?

Definitely, you're right. The one particular thing that I would leave a thought with all of you, a lot of the smaller and medium companies are going to get into a real situation. I don't know about the world, but India, definitely, they will. The world, the governments are coming out, trying to help them as much as they can. But I think they are going to -- the kind of burn rates that they have, they will have 3 to 6 months, 9 months, maybe a year max, and they will get into trouble. So we are anticipating that there is going to be a tremendous push from the carmakers to us to look at what companies, whichever is shaking to have a look at them. Secondly, I think the whole design of the car has to be different now because in 1 car, you have 1 AC and 4 people are going to sit in it or 5 people or 3 people, whichever way the social distancing in that country works, the driver's air vent has to be filtered and then brought back into the car, so a lot of things that are going to happen. I'm just -- we are -- all of us are kind of thinking how we are going to solve a lot of the problems that the carmakers has. And all these things will need major changes. So I think a lot of people thinking that cheap cars are going to come back and all that, I think those days will be -- we still have to wait maybe 10, 15 years for that. So I think there is a lot of opportunity for innovation and the carmakers are going to be requesting us to really look deep into that. So definitely, a lot of consolidation is going to happen. We ourselves have looked at this particular thing. And we think in the coming 5 years, almost about 75% of our turnover is going to come from automotive. And that's where the bulk of the next 5-year target will be achieved. And then, of course, the new segments that Vaaman just talked about.

Great, sir. We are hearing a lot of specific directed auto stimulus measures being announced by countries like Germany and France, specifically the Western European countries, what are your customers being telling you on this? Will there -- will that lead to a substantial jump in volumes? Are they telling you to be prepared maybe 6 months down the line, is that something you're hearing from customers? And in that light, you also spoke about some new model launches also probably getting delayed. Is it -- are they getting deferred by a year or so? Or is it more of a few months delay until the carmakers get on the feet in terms of resuming normalcy on both of...

I think the delay in the models is not going to be by year. It's going to be probably be by 3 to 6 months max. So remember, the new cars means sales for the carmakers. And all the tooling and all that is all going on, the orders are still going on. So various orders at different levels of fulfillment. But Vaaman, can you go to the other one?

Yes. I think, look, every single carmaker is interested in catching up what they have missed in the last couple of months. And of course, there is pent-up demand, like we talked about, the personal mobility case becomes more relevant. So there is inherent demand that is going to come up very quickly in the next quarter or 2 once the supply chain is stable and the carmakers are able to produce the cars in a safe and stable environment. So...

Vaaman, we have also heard from a lot of our customers, Pankaj, bear me out on that, that they are all determined that they will try to catch up these particular numbers. Isn't it, Pankaj?

That's right, sir.

So the -- like I was saying, that they are requesting us to be prepared to move back to pre-COVID levels in a very short period of time. Again, Motherson is well placed to do that because we are locally supplying, locally sourcing, locally purchasing and locally supplying most of our components to supply the carmakers, and we are present with them locally. We do not do a lot of exports, et cetera. So we have been told by the carmakers that be prepared, come back June once the things are starting depending on the carmaker. Some are already being very aggressive for June itself. Somebody -- some are saying that by July and perhaps the most conservative are saying latest by start of August that they want to be back at that COVID level. So it depends on geography, it depends on customer, it depends on the location. But yes, the overall theme is that each and every customer is very eager to get back and try to recoup some of the lost sales that have happened in the last couple of months.

We take the next question from the line of Raghunandhan from Emkay Global.

My questions are to Gaubaji, a couple of queries on the results. Firstly, on the tax rate, it has been on the higher side due to deferred tax of INR 197 crores. What does the item relate to? And secondly, the other income in stand-alone is on the higher side, what has led to that?

Okay. On the other income, we have given in the presentation what is the amount of dividend which has come. So in the year presentation, if you go to Slide number, I would say, 23, you will find that the dividend income has increased to INR 310 crores compared to INR 123 crores in the last year. And a good part of it has come in last month as well as some portion would have come in August -- July, August, September quarter. Coming back to the tax, tax is -- first of all, it is very important to focus on the current tax because that is where the cash outflow happens. Of course, from EPS or from a [ PAT ] point of view, deferred tax is something which is there. But tax -- deferred tax has a lot of assessments in terms of some subjectivity of, I would say, certain revisits, which are done year-on-year. So -- and this should be taken more for the full year than for the quarter. So therefore, there are some benefit of deferred tax, which has gone into the current tax. And deferred tax, we looked at for the full year rather than just for the quarter. So I would encourage everybody to look at the deferred tax for a full year basis rather than just for the quarter.

We take the next question from the line of Nitin Agarwala from JM Financial.

Congratulations for a good set of numbers. Sir, I have 2 questions around the debt. Firstly, if you could tell us that, quantify how much of debt repayment is scheduled for the next 2 years in FY '21, '22? From our 2H present -- 1H presentation and annual report suggests that it's around $400 million, if that is correct? And if it is so significant, then what is our plan for the repayment? Have we arranged any refinancing for that? And my second question is, in these tough times, are we under any threat of breaching any debt covenant in the near term?

First of all, we have to focus on the 2021. In 2021, there are no significant repayments, which are there, hardly any amount, which you will have seen in the [indiscernible] for Q1 results also because the amount due was in 1 year. '21, '22, yes, you are right that we have a bond of USD 400 million, which comes for refinancing, repayment, whatever we can say. And by that time, you will find that the company operations or the company -- because of greenfield coming on track as well as no COVID impact, the situation will be far more comfortable than what you are seeing today. The action for refinancing these start closer to a period and in more certain markets than in an uncertain market. But surely, the company has enough of liquidity and enough of ability to raise a fund on a bilateral basis, if so required. Coming to your question on the...

Gauba, one thing which you might add, the last Board meeting that we had, we had taken approval for GBP 300 billion -- GBP 300 million from the Bank of England, isn't it? What is the rate of interest of that?

It is sub-1%, sir.

Sub-1%, isn't it?

Yes, below 1%.

That goes, I think, for 1 year to 3 years. So I think the options are huge that we have, isn't it?

Yes, sir. So we are not worried, and that is why we also said that and we wanted to raise INR 500 crores, we did in a period of just 3, 4 days, the NCD in Indian market. So I think given the relationship we have and the creditworthiness we have, relationship is not, I mean, kind of any other [indiscernible], relationship is there because of the creditability and the trust and the commitment we have shown since inception. So that is the talking point. The second point is with respect of covenants, I mean, at MSSL consolidated level, we don't see that as an issue. Covenants are tested only in half yearly basis. At SMRPBV, we will have to check what -- when it comes to the June quarter end. And if the need be, we'll decide whether to support from the parent or go for a covenant base, but it is more likely that it will be...

Yes. I think we have to see this June month playing out. It will be very critical to see how the client demand is coming back. I think you have to also understand that the covenants that are put on those -- on our funds are in relation to the debt. We clearly don't have any debt issues. It is an EBITDA issue, which of course, if the plants are shut and not producing for 2 months out of the 3 in the quarter, there is very little that we can really do to maintain the ratios. But of course, a lot depends on how June plays out. We will do our best to not go for it. But in a situation like this, I think banks and everybody is very understanding when you haven't had production for 2 months, I think a lot of companies have been in the same position as ours because, frankly, you can't generate EBITDA without having any production.

We take the next question from the line of Chirag Shah from Edelweiss.

Sir, congrats for a very elaborate answer on various aspects. Has just one housekeeping question as most of my questions are answered. And apologies if I'm repeating the question. Sir, the gross margin that we have seen across the board improvement, is it -- how should we look at it? Is it -- primary driver is a better mix or improving in efficiency in terms of lower existing rate in some of the plants, which are not as efficient as some of the other plants are? Or it's more to do with the pricing and the short-term issue or a timing mismatch where you may have got some price arrangements from your customers, which was pending and which has come in this quarter? And how should we look at going ahead, given a lot of new programs are coming into your P&L, especially SMRPBV?

Sir, I think you answered the question while asking the question itself. It's a mix of all those things. Definitely, we have not got any pricing changes in the quarter. That's for sure. It has all been an effect of the hard work put in by the teams and the product mix. And generally, the fourth quarter being the strongest in terms of sales as well. So it is a combination of all those factors. Gauba sir, Pankaj sir, can add. But definitely, there's been no change in any of the pricings or one-off situation that is there. It's the hard work of all the teams and, of course, the blessing that we've got that our models that we are on and the product mixes that we are on have performed better in this last quarter.

And just from [indiscernible], in SMRPBV, how does the raw materials price are to work for us? Is it a contract period arrangement over 5 years? Or it gets looked at annually? Obviously, there would be a bank. But beyond that particular bank, this would relooked at annually? Or it is just for a period of 5 years? Or what are the time duration of that order flowing?

Right. So first thing that the -- there is no price pass-through. We do that all at our end when we take the orders. And of course, these are very highly engineered plastics. So as the oil prices drops, it's not a one-to-one correlation that you see, which allows us to have more stability in the supplies. Of course, with the carmakers, if there is a big change in any one of those commodities, we sit across the table and we adjust it in a delayed period. So sometimes it takes 6 months for that to happen. And only if it is a material difference, do we sit across the table and really go back and forth and change that. So usually, like you would see in these highly engineered plastics and things that we do, the effect is not one-to-one, it's more muted, and that also helps us when the prices spike in the short term, you see a little bit more consistency than the high volatility movement. But of course, generally, the commodity price is coming down, you do see that effect of it helping your numbers in -- after a 6-month period, but things moving up -- but things are so volatile right now, things are moving up and down in that 6-month period.

And one question, if I can ask on China. So we read a lot of reports that April was very strong and May have seen a drop in volumes in China. Is it on normal expectations or the drop is in line with your expectations or is it slightly better or slightly worser than what OEMs or what customers are guiding you?

Wait, wait, wait, what volume drops in China, are you talking about, right...

So we are -- yes, there are a lot of media reports which say that industry level, the volumes after a strong April in China, in month of May, there is a decline in volume. Okay. So I presume there would be elements of...

Going 80%, 100% plus.

Yes, we still haven't seen that in our industry.

Pankaj, maybe, will be able to tell them better on the -- on the wiring harness side. Pankaj?

No. On the commercial vehicle side, it's going very, very strong. And actually, we are expanding.

Yes. So yes, this is helpful, this is helpful.

[indiscernible] has been down or something, isn't it?

No, not yet. We have only seen strength coming in and possibly also because as during the tough times, sometimes the smaller companies and weak companies become weaker. So we see still there is growth coming in and the market is strong.

Well ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. VC Sehgal for closing comments. Over to you, sir.

Thank you very much. I know this time, we have exceeded our time, but we thought it was necessary to allow you to ask as many questions as you wanted. We have been forthright and trying to tell you in these uncertain times, but please don't use that as a precedent. We will try to give you as much as details as we can. But we have tried to reassure you to tell you that, yes, the last 2 months were tough, but we feel that the bright days are going to come very, very quickly. And I can see globally the trend that every country wants to open up as quickly as possible. So wish you all safe day, safe week and safe time ahead. And see you at the next -- either vendor conference or the global -- sorry, to have just a talk on the results. Thank you very much. Bye-bye.

Thank you. On behalf of Motherson Sumi Systems Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.