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

Ladies and gentlemen, good day, and welcome to the conference call of Motherson Sumi Systems Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. VC Sehgal. Thank you. And over to you, Mr. Sehgal.

Thank you. Good evening, ladies and gentlemen. Welcome to our special conference on the acquisitions that have been done. I hand it over now to Rajat who is the hero for the Chinese acquisition; and also later to Kunal Bajaj, who is the hero for the aerospace one. So over to you, Rajat. Go ahead.

Thank you so much. Good afternoon, good evening, everyone. So the first acquisition we're talking about is basically a mirror business in China that currently is a joint venture between MEKRA Lang and JMCG, Jiangling Motor company. It's a 60% MEKRA Lang, and 40% JMCG-owned joint venture. And with this acquisition, we would be buying out the stake of MEKRA Lang, and it will become a joint venture between SMR NBHX and Jiangling. This is a business which is basically supplying mirrors to all the joint venture companies of JMC. So JMC has a joint venture with Ford, and they have another joint venture with Isuzu. And they're into manufacturing of SUVs, pickups, LCVs and HCVs in the China market. They have about 6% to 7% of market share in commercial vehicle in China. And this company would be then actively supplying all the mirror requirements for these automakers, which are basically JV companies of JMC. So that's in brief. And maybe I can now hand over to Kunal Bajaj to talk about the next acquisition that we made.

Sure. Thank you, Rajat. Good afternoon, ladies and gentlemen. Really pleased to -- as you would have read, Motherson has entered into an agreement to acquire 55% stake in CIM Tools, which is based in Bangalore. This is our foray -- as we have promised you back a year ago, this is our foray into aerospace. CIM is regarded as 1 of the top 5 machining companies in India. It is vertically integrated. It has a state-of-the-art surface treatment facility in Bangalore. Also has a joint venture with one of the leading machining and sheet metal companies called Lauak. It's been present for the last 25 years, started from very humble beginnings. Today, it's a major producer of detailed parts, machine parts for aircraft doors, wings, tails and fuselage. Three state-of-the-art facilities in the Bangalore region, has an order book of about $200 million over the next 5 years and works with the 2 primes in Aerospace as well with a number of OEMs and Tier 1s. Thank you.

Thanks, Kunal. We are open for question and answers. So please go ahead. Thank you.

[Operator Instructions] The first question is from the line of Siddhartha Bera from Nomura.

I had a short question on this aerospace business and basically that's in line with your Vision 2025. I had a question on this. So we highlighted that we have close to $200 million of business potential. So is it that this is the order book as of now? And second is that we have reported close to INR 200 crores of revenues for this entity in FY '20. So if you can just broadly indicate how to understand the ramp-up. Or within how many years this order book will be executed for the company, so some thoughts. And some -- if you can share some highlights about the potential, which will continue then...

Hello? Sorry. I think we lost the question. Could you please repeat it quickly?

Yes. Sorry. So I was saying that this company has a INR 15 billion plus of booked business potential. So does this mean this is the order book? And the second is, because it reported revenues of INR 200 crores in FY '20, how to think about the execution of this order book? Does it mean in the year, the benefits of this will be booked as revenues? Or how to think about the revenue ramp-up [ over the next year ].

Kunal, can you answer that?

Yes, sure. You're right, the potential of the order book is $200 million plus. Now a lot of this -- over 80% of this is from the order book is from, and it's backed by long-term agreements, anywhere between 4 and 8 years, depending on the agreement. On top of that, there are a lot of RFQs that CIM Tools has received in the recent past, which we are -- some we have already responded to, some we're in the process of responding to. We see an uptick to this. Revenue, of course, will come as we start executing the order book. The idea of Motherson coming into the capital structure of CIM is to accelerate the execution of the orders. We are seeing a big uptick in the manufacturing and the build rates that have been given to us by Airbus and Boeing. I mean these are publicly mentioned by Airbus and Boeing, and that is resulting in a much bigger order book. So all eyes on focus on execution and making sure we convert this into revenue as quickly as possible. Does that answer your question?

Yes. And I mean any color on the margin side? And how much will be paid to acquire this 55% stake?

Kunal Malani, maybe you could take that.

Yes. So look, I think it has high double-digit margins greater than 20%. If you apply that to FY '20, you would be getting somewhere in the 7.5, 8x region in terms of EV/EBITDA. What you may also want to note is, looking at the order book, there is a significant ramp-up expected going forward. And the order book is clearly much in excess of where the existing turnover reflects on it.

[Operator Instructions] The next question is from the line of Chirag Shah from Edelweiss.

Sir, so first a very broader question. Now congratulations for this acquisition on the aerospace side. So how should we look at the strategy in aerospace? This is one of the smaller sized just equity acquisition or specific acquisition at the behest of customer? Or -- and how should one look at the aerospace space as far as inorganic activity is concerned over next 2, 3 years? So -- because it is one of the identified areas from Motherson going ahead.

Very good question, Chirag. Of course, if you want more details, Kunal is going to tell you about that. But you're very right. It is the first stepping stone, which has been happened. We have -- want to continue with this particular joint venture acquisition that we have. It is very difficult to get the approvals and all that. This company has all of that, and Kunal Bajaj will talk about that. But if you don't have this vehicle, you cannot deliver the kind of target that we have for aerospace in about 2.5, 3 years, which is to go to about close to $1 billion plus per year project. So it's a very important step in the right direction. And a lot of people were asking us where -- what is it that we are going to see about the aerospace and all that. But Kunal, can you just very quickly talk about it without giving too much away on the strategy? Chirag is very keen on the strategy, but don't give the strategy away.

If you were part of the investor presentation last time, I think we talked about where our play will be in aerospace. We have talked about detailed parts as an area where we want to play and aerostructure. So I'll stop there. This acquisition fits very well into that strategy. It actually gives us a head start, as Chairman has just said. It's got 60-plus qualifications and certifications. These are prerequisites to work in aerospace. And the barriers to entry in aerospace are very high. With this, we are able to come in very quickly and help scale this business, which is what we want to do. So the idea is to create a strong foundation which CIM Tools gives us. And of course, we are looking at other organic and inorganic ways to build on top of this. There are other stuff that we're doing organically in plastics, in thermoplastics, which plays to the strength of Motherson. And then, of course, inorganically, we're looking to create more synergies around CIM Tools.

The second...

And Chirag, just -- go ahead.

No, sir. [ Correct ].

Yes. I think the key thing is that one thing that you should read in what Kunal just mentioned, the scalability of this company is not just in India. We're in 41, 42 countries globally. So at least in 41 more countries, we can scale up this particular business because the CIM company has the capability to deliver it in different business. So please keep that in your imagination. It's not just an India story. I hope I'm clear as we try to explain to you this opportunity.

Yes. Just an housekeeping question, and it's probably -- so both these acquisitions, this one and the Chinese JV, which was acquired, I presume the accounting of that, the Chinese JV would come as a share of associates, right? And this is for Kunal, it's -- only you would be able to address. And this company would be the part of our subsidiary list? Is it the right way of looking at it?

Yes, that is right.

Yes, Kunal, go ahead, please.

The right way of looking at it, no? Yes, it is.

[Operator Instructions] The next question is from the line of Prashant Kothari from Pictet.

Congratulations on this acquisition and your foray into the aerospace business, like you are have been kind of waiting for. I just wanted to understand what the addressable opportunity for CIM itself. And how should we think about that?

Sorry to interrupt you. May I request you, Mr. Prashant, to speak a little louder.

Yes. I just wanted to understand the addressable opportunity for CIM, just their own kind of business. How do you see that in terms of maybe more number of customers that you can reach to? Or maybe, as you mentioned, more number of geographies and how would that help? Because these businesses usually have global supply chain. So I'm not sure I kind of understand that proposition properly.

So definitely, a lot more would be in public domain soon, but I think it is important to understand the opportunity of the company. And it cannot be tomorrow morning, but it is an opportunity because we have plants in 277 facilities in 42 countries. So I'm just giving you the expanse of it. Is this going to happen tomorrow morning? I think not. But the customers -- one of the reasons why Motherson has been selected to look at this particularly, or take over this company, is the fact is that we are globally applicable. That's the thing. But Kunal, you can talk a little bit more, Kunal Bajaj, sorry.

Sure, sure. In terms of the market size, Boeing and Airbus have just come out with what the addressable market is for the next -- until 2040. And it's about a $9 trillion market based on 40,000 aircraft. So this is post pandemic. We're not talking prepandemic numbers. We're talking post-pandemic numbers, 32,500 single-aisle aircrafts and 7,500 widebody aircrafts. Now if you look at where CIM plays, CIM plays in materials and aerostructures, which is about 25% of that market. So looking at about $2 trillion-plus market size that CIM has an ability to play in. Will CIM get all of it? Probably not. I hope so, but probably not. But the supply chain has changed. We said this again back last November, that we are expecting the supply chain to dramatically change. And that is exactly what has happened. A lot of the small companies, the weaker companies globally, have backed up because of the pandemics, unfortunately. But the ones that have survived have become stronger and bigger. The good companies who performed well, like CIM are getting a lot more packages. So packages that are coming from: a, the companies that didn't exist or their backed up packages are moving to strategic, low-cost countries like India. We are seeing a lot of pressure on American and European companies, the existing supply chains of Airbus and Boeing. There's a lot of pressure on them to start outsourcing or to partner with companies in countries like India. And then of course, like Chairman said, right, there is a whole synergy around this. Motherson is very strong in wiring harness and thermoplastics. When we start talking to our customers, they are interested in knowing about these solutions. So one of the primes, as an example, 1 of the 2 primes, we have -- we are -- we have agreed with them on a thermoplastics package. This is the first time that this company, this prime will be giving a thermoplastic outside the United States, first time in the history of this company. Similarly, in wiring harnesses, again, one of the primes has reached out to us. They are looking to diversify from their 2 major suppliers in wiring harnesses. And now we are in discussions with them. So all of this is connected. We have an opportunity to grow the machining and the aerostructures business and then bring the best of Motherson...

Kunal, Kunal, Kunal, very quickly. We can't -- we are in the silent period, yes. So please focus on the acquisition and the -- how that gets us. Let's not talk about outside this thing. Sorry, Kunal. Please take care of us.

[Operator Instructions] The next question is from the line of Nishit Jalan from Axis Capital.

Sir, I have 2 questions. Firstly, on CIM Tools. You have a big order book. Just wanted to understand what kind of capacity does CIM Tools have to execute this order. Or we will need to make CapEx over the next couple of years? And secondly, on the Chinese acquisition, what I have understood is Ford and Isuzu will be the main customers on both passenger vehicle side and commercial vehicle side. Is that correct? Or we will have more OEMs to start with? Obviously, we can add more OEMs as we go. But to start with, we will have Ford and Isuzu as the 2 main customers. Or do we have more customers as well?

We address the mirror first. Rajat, go ahead.

Yes. So to start with, yes, you're right. This is basically Jiangling Motors who has 2 JVs. So one is the JV that they have with Isuzu. And then there is another JV, which they have with Ford in which Jiangling Motors also is a part of it. And these are the 2 JVs, which are then manufacturing SUVs and LCVs and SCVs. And yes, these will be the customers to begin with. But as I said, this opens up the door for us to get into commercial vehicles in the whole market, right? So this is just the beginning. And I think as we go in and we bring in the technology that SMR has, we would then have the opportunity to get into a lot of other customers in the commercial vehicle. And as I said earlier in the introduction, JMC is about 6.5%, 7% of the total market. So there's still another 93% addressable market, which is available for growth in the future.

Yes. And regarding CIM, Kunal, can we answer that, please, about is CapEx required or whatever and the growth?

Yes. So if you look at this year and next year, we have sufficient capacity to be able to address the order book. But as we -- as looking at the build rates, again, the guidance driven by our customers, we will -- and our ambition, yes, we will have to invest in 2 years' time, we will need to put in CapEx.

As I understand it, probably you will be assessing the CapEx requirement. And now any rough indication as to what? Kind of a broad range also is just fine. Just wanted to understand what kind of asset turns are there in this business. What kind of capacity in terms of revenue potential CIM already has? And will our CapEx -- what would be the broad range of CapEx that you need to incur to take on this capacity?

Kunal Malani can -- sorry, can you take this?

Yes. Look, number one, I think the capacity that exists right now is capable of delivering at least 1.5x more. So there seems to be enough headroom to begin with. Whatever additional that has to come in is minor. This is largely a machining business. So you don't need to set up your machining outfits. But the design and mirroring/IT-related stuff is already embedded. So the more machining you do, you end up actually leveraging the same, let's say, base R&D that exists. So to that extent, the expansion CapEx required is much less. And if I could put a guesstimate right now, it will be low middle digits kind of CapEx to meet at least the existing order book, let me put it this way.

And a bit from my side to help you understand. Motherson is a manufacturer of cutting tools. And I think we can definitely add to their competence by increasing the productivity by using -- we manufacture diamonds and CBN and many other different things. So I don't know. I think we'll come to know as we get deeper into the company, we'll come to know. And we are absolutely positive that these strength also is a big strength for CIM and other parts of Motherson, which increased the productivity dramatically.

The next question is from the line of Nishant Vass from ICICI Securities.

Congratulations on the acquisition. So just first of all, can you question -- can you give what would be gross profitability profile at JMC?

So well, it's a positive cash flow business. That's what I can say. And then I think the synergies that we have with the rest of the SMR business and the know-how that we bring to the company, I think, there is huge possibilities and improvements. There are also opportunities to vertically integrate the business more as we go in. As it stands today, they are sourcing most of their parts from outside, which is going to change as we step in. So I see a huge opportunity there to increase the profitability as we go forward.

Okay. Second question is on the input side. So I think we briefly mentioned about the portion of vertical integration that you can do by 2 sides. So can you give us a sense as to -- you said that is already doing 20% gross margin. What kind of vertical integration does this company have on the machining side? Would they build their own machines? Or they are still purchasing it from some external vendors in Germany or Japan? Something on that side in terms of where it is on the capability side. Because which also says that it's a 25-year-old and a long history of relationship. So I'm sure they will have some share of -- meaningful share of business with existing customers. So just trying to understand where the vertical integration level is and where you can push it forward.

Great question, but you must take into account that we are, at this moment, in the process of understanding where the synergies lie and things like that. But I'm sure -- and Kunal Bajaj is going to give you some inputs on that. Just remember that the capability of over 470-plus facilities of Motherson will become extra huge advantage to CIM. So we make our own machines. We make our own -- even the raw material supply. I mean you name it, we do it ourselves. Cutting tools, I told you, we are already doing at Motherson. So a lot of things are happening. And I'm sure it's going to get better and better. But Kunal, could you also give a little bit of -- say to them, but be careful about...

I'll stick to the asset, sir. Yes. So in terms of vertical integration, as you may or may not know, there are a lot of processes that a machine part has to go through in aerospace, in the very stringent processing. So what -- first of all, a lot of the machines are from Japan, the Japanese machines doing aerospace work. And they're new because the facilities are new. So if you look at what they've created in SEZ, which is a few years ago, it's new, state-of-the-art. The joint venture that there is with Lauak is also very recent. So again, the machines are state of the art. Vertical integration, CIM, as we had mentioned in the brief, owns -- or has a subsidiary called ATPL. This is a treatment -- surface treatment facility, which is very, very critical in the aerospace industry. Typically, what companies do is they machine and then they outsource the treatment. Whereas in CIM's case, the treatment is done in-house. And that allows them to control quality. It allows CIM to do on-time delivery. And the customer really appreciates that, which is why these are approved by both the primes. And this creates a lot of synergies for the asset. Now looking at this, there is room for more vertical integration. And as we get into the asset, we will look at how we get more vertically integrated.

So Kunal, if I can just ask a follow-up question here with the prime. Where -- without putting the CIM number, I don't know if you're comfortable sharing that. But where do you think the business -- the share of business lies and the opportunity that's in play here? And do you think that can dramatically change by, obviously, whatever you have highlighted from a global footprint standpoint as well as making to a larger business -- for getting into a larger business forward? Can that share of business dramatically improve across programs with the primes?

I mean I think so. That's the reason why we're doing this acquisition. We've got very positive feedback from the customer base. They welcome this. So we are expecting large packages to be given to their existing supply chain. And we are sitting in a very good position to take advantage of that. So the idea will always be to grow, right? We, as Motherson, are very excited to come into synergies part in their journey. I hope, as investors, you are, too.

The next question is from the line of Joseph George from IIFL.

Am I audible?

Yes.

So first of all, congratulations on the acquisitions. I have a couple of questions. So one was an extension of what Prashant has asked earlier about the size of the opportunity, of course, your numbers running to trillions of dollars, that sounds good. But if you specifically look at the components that the company makes, how big is the realistic opportunity size maybe both globally? Could you give us some practical guidance with respect to the industry size and sort of running to trillions of dollars?

George, with all humility, our target for Motherson Group is $36 billion. So definitely, the trillions won't get covered in that. They go much more than that. But Kunal, both Kunals, if you can help with that then we -- that be good. But definitely, really, we're looking forward looking, so we don't want to be there. So just please understand our situation, but we are in a quiet period. But as much as Kunal can and KB, if you can help, great.

Sure. So George, sorry, I didn't -- I was trying to paint the full potential of the market size. Of course, for us, it's a subset of a much smaller subset of that. I think the important thing to note is that we are in the beginning of a growth cycle in aerospace. The -- again, everything has to do with build rates. The primes issue build rates to their supply chain basis. That build rate you have to keep, and the kind of components that the company does, you start prepping for it. So the build rates that they've given us -- and they give us 5-year build rates. In the current year, it will be month by month. They are very promising. The growth that they've given us is tremendous. And that is resulting in the packages that we are seeing, which is resulting in the order book. What we are -- what we want to do is work with the customer base, with our customers base to see if we can do more, and that will be the endeavor. Chairman, I don't know if you want to add something.

Yes. Look, the one other way to think about it is when you also say the addressable market, the addressable market is significantly increasing. There is an overall market, but there is an important part of where is this production shifting. And with the whole aircraft purchasing power coming, let's say, eastwards, the production is also shifting towards the [ LCC ]. And that's where the interplay lies in terms of having a presence in here and then being able to -- whether it's on an offset basis, whether it's on totally being able to supply this at better cost terms is where part of that shift is expected to occur, and then provide a much larger addressable base to play off from.

Sure. So okay, if I were to ask you a very specific question. I mean, as analysts, we always calculate the addressable market assessment. So if I were to ask you a very specific question, in our regular aircraft, say, A320, the value of components that the company makes, what will be the value on a per aircraft basis? You can share that, we can do the rest of the assessment ourselves. Would that be possible?

Yes. Very granular, but again, so that you understand it. Kunal can. Are you going to take this or you want to take this, Kunal Bajaj?

I can give a little bit of flavor around it. The reason why the addressable market is very large is because anything, for example, it does help on being to the broader sector, which is all the metal products, which will all the machines. So there are certain parts of these that they are doing now, but it's not to say that they don't have the capability of doing the other parts. The other parts, to some extent, has not come in, as what KB was mentioning earlier in terms of larger packages, et cetera, which is where the shift is occurring towards the [ LCC ] construct in the current, let's say, supply chain rigid that is occurring now. So that's why the addressable market is that large. From a capability, it's there to tap into. Obviously, we would appreciate that these are often critical parts, which takes some time for the customers to get comfortable with, take some time for customers to feel that you can provide the same quality, et cetera, consistently, which is what we like about CIM. And then clearly, the objective would be to try to get larger and larger packages. KB, if you want to add?

No, I think you've covered it.

Just take the example of what Motherson did with the automotive side effect. When we talk about it, we talk about the simple wire harnessing. And then today, we are making over 20,000 components for the automotive industry. And so then the sky is the limit. But I think if you appreciate the level of involvement is that the customer has asked us to take over this particular thing. It has been facilitated together with the customer. So you can read into that. You can take advantage of that to just to get an imagination of where we will be, but very difficult to quantify it at today I think, yes. .

Sir, the second question that I had was with respect to how the aerospace big targets that you have with respect to revenues that get into the $36 billion number, et cetera, how will it be structured. So the direct question there is, will a large part of the aerospace business?

$36 billion, not $33 billion. But it's been very clear, $36 billion. It's in our annual report. Yes. What were you asking?

Yes, sorry. So I thought I said $36 billion. So the question that I had was -- so the non-auto piece, which includes aerospace, I think the target for that was $9 billion. And so I'm guessing that aerospace would be a big chunk of that $9 billion. And so in that context, the growth that you're targeting in the aerospace business, which is captured in this big addressable market that you talked about, will most of that be captured through this entity? Or is there an option for you to make similar products outside this entity? So in a sense, the question, does this 55% stake restrict you from making similar products outside this entity? And...

No, no, no. We have cleared the thing. We are not going to stop because of this acquisition. Definitely, this and multiple other things are happening all across the world, but we are not at liberty to talk about that just now. But all we can say is just watch this space. And this is a very important acquisition that we are doing because it tells you how serious we are about what we are talking. And the rest, I would leave it -- we have on, November 22, we are going to come back to all of you in the midpoint reports we're going to give you. And I think you will get much more flavor at that time also. But this is not the only one, and it does not restrict us from doing whatever we want to do across the world.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Finance Securities.

Yes. Can you hear me?

Yes.

My first question pertains to CIM. The $200 million order book which you're talking of, is that based on prior build rate which we have or based on the longer build rate?

Kunal Bajaj?

Yes. So the guidance that we, again, get from the primes is on 5-year build rates. So that's how they give their guidance.

Okay, okay. And second question from CIM perspective is the new products, which we can do based on the technology they have. What could be the validation cycle for that? And from day 0 to actual commercialization, would it take, what, about 3 to 4 years? Or what's your indication on that?

The answer is it depends on what exactly are they doing. So if the core is machining, they've got the certifications, they've got the qualifications. And they're doing a broad variety of different specialty metals. It's not just aluminum. So we don't think there are additional qualifications. They already have, so those stay. But yes, if we are looking to do -- to vertically integrate even more, then yes, we will require qualifications and certifications for that. Typical qualification takes -- a typical certification takes 3 to 6 months. If you are an old hand at it, then 3 months, if a new hand, 6 to 12 months. And then qualification is something to work with the OEMs to get qualified. But qualification can take anywhere from 10 days to 2 months, depending on the OEM's availability. There's a lot of preference given to existing suppliers. So that puts us in a good position.

Right. But for a new component, the validation of component would be longer gestation period, right?

Again, I said it depends on the component, right? And if you already have done similar components and played with that kind of metal before, then it's -- the cycle time is much shorter than if you do something that's very different.

The next question is from the line of [indiscernible] from [ LTD Capital ].

I remember you taking a look at what's the kind of customer compensation that we have. Are we essentially exposed to both the big guys? Or is there a higher exposure to work?

I'm sorry. There's some background noise, so I didn't catch that question very clearly.

Sure. I'll try again. I was wondering what's the kind of customer concentration that you have as the bigger -- have more exposure to one of the big guys, and that's [ between the 2 ].

Rajat Jain, what concentration of clients, I think. She wants to know more about the customer spread.

Sure. Sure. Yes, I got your question. I got it. No, so they have a diversified customer base. As you know, there are 2 primes. One is American, one is European. They are working equally with them, either directly or indirectly to the Tier 1 OEMs. So it's a good mix. It's diversified, and there's an opportunity to grow that even further.

Got it. And in terms of, are we a Tier 1 as far as [ OE ] suppliers are concerned, both the European and the American side of this?

We are a Tier 1 and a Tier 2, both.

Got it. Also wanted to check with you on the Chinese acquisition. Could you help me understand whether it was also customer-led? Or was it driven by our own sort of going after this particular piece of the business? And also, like could you sort of help me understand the synergies which are there with our existing business in China?

So yes, I think it's a mix of both. Obviously, the current stakeholder, MEKRA Lang, wanted an exit. And our partner in China, which is NBHX, also has a very good relationship with this group, Jiangling Motors. We already have 2 other JVs with them. So there was, of course, a discussion with them as well, and Jiangling was very happy that SMR can step in. So yes, it is going to be a very good partnership going forward because we have good experience with Jiangling already for last many, many years.

Got it. And in terms of our own presence in China, does it also include an existing mirror facility we can sort of maybe build on further synergies -- or like it as such?

Yes, yes. So we already have 5 other facilities in China. And yes, definitely, there's going to be a lot of synergy. As I said, there is a huge scope of increasing vertical integration. There is engineering setup that we have, which can help this new company to scale up in terms of technology that you can offer to the customer. So there is going to be synergy in all aspects of the business.

And also, I guess, they have the plant was just coming.

Yes.

And were are not there on that -- that's also both ways.

That's right. So even the manufacturing footprint, if you see, we are there in the Shanghai area, and we are also in the northern Beijing area. We are also in central China in Chongqing area, but we are not there in South and Southeast. And this is in southeast, which then also augments our footprint. And as you know, China is a very large country. So we have to cover that with new plants. So this also then complements our existing footprint.

Got it. My last question is on the CapEx indication that you have given for CIM. And I didn't understand. You said something like a low middle digit CapEx. What does it mean exactly?

Sorry, low double-digit CapEx.

Not INR 100 crores to INR 200 crores, looks like.

Low double digits.

Sub INR 100 crores or something like that? Okay. Low digits.

The next question is from the line of Arvind Sharma from Citi.

A question on CIM. In enterprise value, what will be the cash outflow for CIM out of this INR 4 billion?

Again?

Sorry. Again. What do you mean by cash outflow of the -- what is the total acquisition price?

Correct. Then you could also have some debt visibility, it would help? So what would be the -- if you could either give some idea on the debt, which is built in.

Look, the debt, there are obviously things to be done between signing and closing. So some of that will be a little moving number. But it will lie somewhere in that INR 150 crores to INR 175 crores at an estimate level, right? I mean it obviously depends how the closing situation looks like.

Thank you. Ladies and gentlemen, this was the last question for the day. I would now like to hand the conference over to Mr. VC Sehgal for closing comments.

Thank you very much. Ladies and gentlemen, these are COVID times and, hence, acquisitions are not easy. Our teams take a lot of pride that they remained safe and yet covered up these particular acquisitions in as much details as they can. So thank you very much. And I hope you guys stay safe and healthy. And catch up with you soon when we have the next acquisition. I don't know. Thank you all very much. Bye-bye.

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