Sona BLW Precision Forgings Limited (SONACOMS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Sona Comstar's conference call. [Operator Instructions] Please note that this conference is being recorded. Some of the statements made by the management team in today's conference call may be forward-looking in nature, and we request you to refer to the disclaimer in the earnings presentation for further details. The management will not be taking any specific customer-related questions or confirm or deny any customer names or relationships due to confidentiality reasons. Please refrain from naming any customers in your questions. I now hand the call over to Mr. Vivek Vikram Singh for his opening remarks and the presentation. Thank you, and over to you, sir.

Thank you, Aman, and I hope everyone had a great New Year. On behalf of Sona Comstar, I'd like to welcome all of you to the addition of third pillar in our growth story, one-off sensors and software. Now as the automotive world moves into the future, it is becoming what we call EPIC. In the last couple of years, all of you must have read or at least heard extensively about chips. Well, another term for chips is [Audio Gap] or IC, that is the same IC in Novelic. It is the same IC, which is in another form in our view of the future of mobility. So we've got this EPIC to capture all the 4 big ships, which are electrification of the powertrain; personalization of the vehicles to match and suit driver preferences; the increasing intelligence of vehicles in the systems inside them; and lastly, the connectedness that makes all of this possible. So the EPIC IC also stands for intelligent and connected, and that is that IC in Novelic that it is novel, it is intelligent, it is connected. In this -- that's a brave new world that is coming. Sensors and software will play an oversized role in the automotive. This realization has been there with us for a long while, but it really hit home when we were making our IMCM module, the integrated motor controller module for the intelligent suspension, and we realized is that just a single module in a vehicle required 2 million lines of code, which is about 5x the software that goes into an average space shuttle. And that's not a very surprising thing [Audio Gap] modern car has around 100 million lines of code, where the more advanced ones can go up to 200 million and a fully autonomous vehicle will have more than 500 million lines of code. With this context in mind, we have embarked upon the next phase in our long-term strategy. Once again, we have been listed for almost 18 months, and I want to reiterate our purpose as a company. Why we exist as a company, is to be one of the world's most respected and valuable auto technology companies. This is important to keep in mind with why we do the things we do. There is a purpose we are a company that's led by a purpose. And that's why it's important to keep in mind when you look at any decision that we take. Our automotive industry, as all of you already know has a technology mega trend called electrification. And we expect that by 2025, EV penetration would be over 80% at least. On that trend, we acted early. We started our journey on electrification in 2016. And that has allowed us to take a leadership position in the global driveline space as well as the Indian motor space. Now today, a new technology is emerging, which is one of increasing autonomy and intelligence of vehicles and systems within these vehicles. And in the same Sona Comstar spirit of moving not where the ball is today, but where the ball will be in the future. We are taking a meaningful step in the direction of electrified autonomous vehicle or EAV with the Novelic acquisition. Now building an autonomous vehicle in simple terms is a matter of replacing with machinery, the 3 things that humans need to drive, the hands and feet that operate the controls, the senses that perceive their surroundings and the brain that turns the data into decisions. Now the first bit is mostly mechanical and electrical. The second one, the one-off perception is achieved through sensors whether they be camera, LiDAR or Radar sensors. And the third, the intelligence to turn this input data into decisions is software, software plus and iteratively learning general intelligence or in simpler terms, AI. This is what is driving autonomous. What this does and what Novelic helps us is in adding the second and third set of capabilities of semiconductor chip design of Radar sensors, software and ML/AI tools, to add to what we already have in mechanical, electrical and electronic abilities. This would help us to start building the third business vertical of sensors and software. Now why Novelic specifically, so we have 5 compelling reasons for this. One, extremely, extremely few companies share our DNA of being high technology, high growth and very high profit. I mean the 27% net profit margin is rare. And when we saw that Novelic has achieved all 3 of these without any external funding ever, metaphorically speaking, at least it was love at first sight. Second, we've done a lot of research in the last 6 months to validate the hypothesis that Radar sensors are the best technology to solve the in-cabin sensing problem. We'll speak more about this. And why best, as I've said repeatedly, best is not just high performance. It is high performance. It is high performance and low cost and importantly, with a zero invasion of passenger privacy. Third, which is very, very important to us and very close to our heart. And it is also a fact that most M&As fail mostly due to cultural integration issues. With Novelic, although, I mean, if you can see them on your screen, you will later. They may not look like us totally. But culturally, we are very, very similar with shared middle-class values of integrity and frugality and respect for money. They also committed to vitality and agility in innovation and engineering excellence. Fourth, and this one is a slightly technical one that this is one of the rare vertically integrated companies in this field with capabilities spanning the entire gamut from chip and sensor design to signal processing software. Very rare to have the whole capability set at one place. And last but not the least part of it. So we expect this deal to be EPS accretive from the first year itself, while providing us the opportunity to grow this into another $100 million vertical in the next 6 to 7 years. Now we'll talk about each of these details in the next few slides. So first, the market. Because of increasing autonomy and intelligence in vehicles and vehicle assistance, more and more perception is required. This perception is achieved through sensors, as you can see on your screen, whether they be camera, LiDAR or Radar. And according to McKinsey, increasing adoption of ADAS and autonomous or semiautonomous driving will propel this ADAS sensor market to $43 billion by 2030, which is a 3x jump in the next 7 to 8 years. Now today, most ADAS applications are sold by single sensor solutions. However, as autonomy advances, this can only be achieved through a multisensory approach and sensor fusion, which means a combination of camera, Radar or LiDAR and the ability to integrate it. Today, there are very few companies globally that have innovative single sensor solutions let alone having multi-sensor. So no one company actually today is working on all 3 types. Novelic is very proficient in Radar technologies and can offer sensor fusion algorithms to its customers. In addition to its technology progress, Novelic is unique in its approach to high profitability and sustainable growth. It has been profitable every single year since its inception. It has grown revenues at a phenomenal 53% CAGR over the last 10 years. And all of this without ever raising any external equity capital. So there is a lot I admire in these 3 gentlemen that I may not have told them personally, but I'm telling that publicly that the journey they have taken is inspirational to us in many ways. And this so much like Sona in how we value money, technology and growth that -- I mean this is only our second acquisition in 8 years. So it goes that we look very hard and we are very selective. But when we do find someone, it is someone very, very aligned with us. So together with Novelic, we are going to be one of the very few companies in the world to have a large and growing revenue share from the twin automotive mega trends of electrification and autonomy while achieving and maintaining a high growth and remarkable financial performance in terms of profit and return on capital. Now I'll hand over to our Group CTO, Mr. Deshmukh to talk more about the technology and its application. Mr. Deshmukh, sir?

Thank you, Vivek. Good evening, ladies and gentlemen. Radar will play a significant role in ADAS. Radars can detect distance and speed of the vehicles on the road, obstacles in the car's path, the position of the car relating to the road and other vehicles and the car's blind spots. Mainly ADAS functionality, such as adaptive cruise control, automatic emergency breaking, lane-keeping assistance and autonomous driving cannot be performed cross effectively without ADAS. Another critical application of Radar technology is in-cabin sensing. Children and pets left behind in locked cars have resulted in thousands of deaths worldwide due to heat stroke. In new car models, government regulations and car Safety Assessment guidelines mandate, Child Presence Detection or what's called CPD. Euro NCAP 2023 requires CPD product of 5-star rating. Major OEMs have joined hands and have announced that they will provide CPD on their own in the cars. Novelic's Radar technology detects life presence, child presence and seat occupancy through vital signs such as heart rate and respiration sensors. The technology works under any lighting conditions, including behind the car seats and even in the car's seat as well. Moreover, as Vivek mentioned, the sensing happens anonymously, so there can be no previously [indiscernible] like those in sensing by cameras. In short, Novelic's mmWave radar technology is the best solution for in-cabin sensing. The in-car sensing that Novelic's technology makes possible can also be used for other [indiscernible] such as optimized deployment of airbags and other safety systems, driver monitoring through the science of drowsy or distractive drive or gesture control, [indiscernible]. Let's look at this technology through a video. [Presentation]

We've seen our glimpse of Novelic's technology. Next, we introduce you to the 3 fore founders of Novelic who are behind this innovation. Darko, who is the CEO; Veljko, who is the CTO; and Veselin, who is the Chief Sales Officer. With that, I hand over to Veljko to talk about their innovation and their capabilities. Over to you, Veljko.

Thank you, Mr. Deshmukh, and hello, everyone. This is a very exciting moment for us and the whole Novelic team, and we are happy to be here today. Well, I think Vivek and Mr. Deshmukh have given quite good top overview of our technology. And I'm actually happy to see how quickly Sona team understood Novelic's story. I hope also that the video was helpful to everyone else joined today to get better understanding. So I'm not going to talk about technology purely, but also about our story from our perspective a bit. Veselin, Darko and I, we have been working together for the last almost 16 years. And for the last 10 years, we put all our working energy and our time in a company we founded together with our amazing team. We are engineers by background, specialized in mmWave systems, algorithms and systems on chip. And Novelic was founded with clear mission to develop end-to-end capabilities in mmWave Radar sensors and also to commercialize it through various product lines in different industries, wherever possible with major focus on automotive. We built our know-how step-by-step, experiment by experiment, project by project. Our specialty is short-range Radar and applications requiring miniature hardware and smartly engineered embedded software, such as in-cabin Radar, parking Radar, collision avoidance, side or rear Radars, guiding and docking Radars, et cetera. Those examples you could have seen on the video. We started as a team [Audio Gap]. Today, we are over 160 people with 130 engineers 10 of which are PhDs, who are developing product platforms in several European developing centers. Like Vivek mentioned, although we have been working with a capital-intensive technology, we have managed to develop that technology in an organic way. We engaged from day 1 with customers. We provided them short-term value while also trying to identify long-term road maps and how our Radar technology can fit in those road maps in 3, 4, 5 years. On that journey, we generated revenue and profits with continuous growth year-on-year and used that profits to reinvest. And now for moving to the next phase of our growth, we wanted to have a strategic partner, a strategic partner in a real sense of that mean the partner with the same commitment to innovation and technology like we are. The partner who supports us in scaling up our business and who gives us the freedom to innovate further. And to be fair, when we met Sona Comstar team, we knew that this was the one because we immediately felt great alignment on the core values, and those are the main [indiscernible]. Together with Sona Comstar, we access to their customer base and marketing support, we believe that we can grow Novelic exponentially and become a significant player in the global market of autonomous mobility and automation in broader sense. And now on the next slide, let me briefly explain the new ecosystem being built in automotive world and Novelic's capabilities across the value chain. First, the value chain itself is changing and transforming. It's transforming from traditional hierarchy of tiers to hierarchy combined with the need for much more collaboration and orientation to domains of competencies. And that happens in both mega trends of automotive industry in electrification and also in autonomous driving. We are preparing Novelic for that shift. Basically, what our -- now big brother Sona Comstar did in the electrification domain, we are going to do in the autonomous driving domain. In our case, this means that we would keep integrating and improving all subsystems of other sensors we develop. Here, we speak about electronic boards, antennas, [indiscernible] embedded software, application software or machine learning. On our supply chain due to our modular and chip agnostic system, we can partner with all leading chip suppliers. So actually, we want to combine modularity of independent subsystems with vertical integration. And we believe that this approach in combination with changed value chain ecosystem will give us potential to deliver to and collaborate with basically all tiers, with OEMs, with Tier 1s, with Tier 2s, with autonomous driving integrators, with anyone. Depending on the context and customers' demand, we can supply what they need, that can be hardware, software or the fully integrated autonomous driving subsystem. This will give us resilience and we consider it one of our biggest strengths in the times that are coming for autonomous industry. I'll now hand over to Rohit to tell you more about the transaction. Thank you.

Thank you, Veljko. Good evening, ladies and gentlemen. Let me now walk you through the structure and the key financial parameters of the transaction. We have structured the transaction in a way that it's a win-win for the [Audio Gap] both Sona as well as Novelic. Sona will be buying 54% equity in the company for EUR 40.5 million through a combination of primary and secondary route. This will mean that Novelic founders will continue to contribute and participate in its growth story in a meaningful way. At the mentioned consideration, Novelic is valued at a pre-money EV of EUR 64.5 million and post-money valuation of EUR 75 million. It puts the implied valuation at 26x the estimated PAT for the calendar year 2022, which also happens to be the financial year for Novelic. Purchase consideration will be distorted in 3 installments with 60% to be paid out at the transaction closing and the balance 40% in 2 equal installments, each at the end of 12 and 24 months from the date of closing. The transaction will be funded primarily from Sona's existing resources, and we expect it to be closed by end of March. We expect the transaction to be EPS accretive for Sona from the first year itself. This brings us to the end of our presentation, and I'll now hand the proceedings back to the chorus team for Q&A. Thank you.

[Operator Instructions] While we wait for the queue to assemble, we have our first text question that is received from Chirag Jain from Catamaran. So the question is, basis the press release and the presentation, it seems Novelic's key solution is in -- is in-cabin sensing. Is Novelic solution also being built for the core autonomous driving? If yes, what is the [Audio Gap] vehicle today? And what can it increase to?

So I kind of expected this because this is a -- Novelic team, apologies. But this is one of the key questions that you get in India as a listed content per vehicle is somehow term that is used. So Chirag, it is more about the capability that is there. The applications are immense. I will request Veljko to talk a little bit about the applications because -- and I think that's what Veljko tried to form for you the pyramid that it's changing so much that who provides what kind of content in a system and what is the shape of that final system is very different. I think that question of content per vehicle is very rooted to the world that we showed, the Tier 1, Tier 2, OEM world. Here, Novelic has the ability and already does provide service to all 4 levels. So the customer could be a chip designer itself. It could be a global Tier 1. It could be the OEM, and it could be [Audio Gap] could become mobility solution providers people like Waymo, Uber who are providing you the final autonomous solution, all 4 of them are currently all 4 of these categories are already customers and will continue to be. However, the framework that one uses to ask question will be different in this world. But Veljko, you can talk more about what other solutions this capability set can be used for. But for everybody on the call, it is this, it is Radar sensing, and then processing that sense or that perception when it comes back, processing that for meaningful decisions. That's the capability in very simple terms. But Veljko, please.

Okay. So when we speak about in-cabin solution, we speak about a completely new application in the automotive. So this road map was defined pretty recently. We were working on that since the beginning, since our inception. We knew that this application will be on the road of new vehicles. And we build the technology for that. So the road maps, like we could have seen on one of our previous slides are starting the production of that sensor that is mandated by regulatory bodies from 2024, 2025 onwards. And all OEMs will be -- will have to be ready for that solution. Radar is actually has proven over the years of competition on the technological level and stories among, let's say, regulatory bodies, et cetera, as the most suitable choice here. So the best product market fit. And we, as the company, are now ahead of the market regarding the maturity of the solution that we are preparing. And regarding the -- also its cost side, which is not neglectable while partnering with our chip suppliers. So we have [indiscernible] the time software to resolve several critical applications. So when we speak about -- regarding the content, we speak about applications which are mandatory, which we will have to provide, actually, which OEMs will need to have as the functions for 5-star safety. This is the child presence detection. But we also speak here about add-on functions that we built by smartly engineering the software, which are the seat occupancy detection, so detecting the occupied seat and therefore replacing the current technology, which is existing there, which is actually basically the cables and sensors put in the seat. So the Radar can -- by using Radar, we can get rid of those existing sensors and basically get the new product at the very little cost. And also in addition to seat occupancy, we speak about intrusion and proximity alert when basically in one sensor, we will also have the alarm function completely integrated in serial production. So that this is for the generation one of the products. So child presence detection, seat occupancy and intrusion alert. Of course -- and these are the [indiscernible] on road maps of OEMs. Of course, we are not sitting still, knowing already what can happen in the generation 2, and the work has been done also on more advanced features.

To add to what Veljko said and to give an analogy that I think maybe everyone is familiar with, to say content per vehicle in a software-driven world is trying to, let's say, how much does SAP cost or how much does Microsoft cost per machine. It's a very hard question. It depends on the optionality and modularity that you choose. If you choose just one function Veljko does told you about 3, it could be one, it could be done in how many features do you want to add, depends on each provider, and it will be a choice between the OEM and between the Tier 1 and the chip designer. Similar thing, if you had asked us in 2017 that what is the content per vehicle of a driveline in electric vehicle, we wouldn't be able to answer you. We are trying to do things which are at the cutting edge of what is available in the world today. To be the best, you have to be that person because if we -- that's a classic innovator's dilemma [Audio Gap] how much is the addressable market and you think about what was asked to IBM in 1980s, that how many computers do you think you can sell, a closer to our industry, what was as to Mr. [indiscernible], when the car industry started, that how many cars do you think you can sell? The question, I don't think it's the right question at this moment. The track record is there. The growth record is there. Like we said, we are going to grow very strongly and profitably. I don't think these [indiscernible] are model making devices like content per vehicle need to fit in. And trust me, within 10 years, you'll realize that, that's not the question anymore. Veljko, I think another request because he said about general autonomy, I think how Radar perception can be used for enabling autonomous vehicles in its mobility function that I think you should also address.

Yes. So when we speak about autonomous driving, so basically, we have 2 worlds. One is inside of the cabin and one is the outside. Basically, all the -- most of the attention is focused on the outside now. Our solution was focused on inside of the cabin. So detecting what happens inside. However, I mean, one of our product lines. However, we do develop the other product lines, which are also based on the same Radar technology, which resolved the exterior functions. Some of them also already mandatory, some of them on the road maps, every of them basically on the big road map of having fully autonomous vehicles. And Radar is the inevitable sensor that must be used if we want to have -- to achieve full autonomous driving. In the exterior world, we are focused on, what we call, the short range detection. So let's say, vicinity of the vehicle so around the vehicle to allow, what we call, low-speed autonomous driving functions, such as helping with parking such as emergency brake in city drive, such as detecting the pedestrians and also providing not only that, but interaction between the car, the people approaching or the passengers while detecting the gestures and other commands to unlock the car or protect the doors of the car. So this is where we are focused today.

Thank you, thank you, Veljko. And Darko or Veselin if you want to add anything on ASPER as a product or how ASPER helps autonomy, please, please feel free.

We are speaking about automotive, but we should have actually a much broader spectrum of the observation that needs -- and what is our technology is doing is addressing mobility world. Mobility is not only pure passenger vehicles, this -- also transportation vehicles we already have in today, the agriculture vehicle construction, it's minor vehicles. This is also vehicles who have 2 years of feedings. So all of them will come and need to merge with new technologies together. The advantage of another culture, which is not purely automotive is that deployment of technology potentially a little bit faster considering automotive design process and deployment of technology. Our ASPER platform can offer typically protection from potential collisions which are coming for the back, rear Radar observation also transportation vehicles and also for 2 and 3 vehicles as well as a lateral protection. In many cases, in automotive world people are addressing only corner [indiscernible] Radars and front Radars, and we are addressing rear Radars and lateral Radars. The main also difference between our approach and other approaches is that a lot of intelligence and signal processing is done on a module itself. That means that ASPER type of products can be used for the aftermarket approach and also approach where such are called EC unit or processing unit like we have in classic automotive vehicles is not existing. So that means we are strongly believe that [indiscernible] will be deeply employed in transportation vehicles like [indiscernible] vehicles and also will be deployed in vehicles like motorcycles, like e-bikes, where actually the size meters, we are processing power meters and power consumption meters.

Thank you, Veselin that was actually -- yes, we missed that point that is much broader than what is currently called automotive. We can move on to the next question, but every one of you who's here you're invited, and please do visit us all at the Auto Expo. You will get to see the technology live when in action. The demonstrator that some of you saw in the video would be there. I think it's landed in India today. You will also meet these 3 gentlemen and their teams. And you will also see the other perception applications of Radar at our stall. So please do come. Seeing is much better than seeing on a video or a slide. So please try and come to our show.

We invite our next questioner that is from the line of Kapil Singh from Nomura.

Maybe first of all, congratulations for embarking on a new journey for third dimension of growth really. So look forward to all the developments here, and to the entire Sona Comstar as well as Novelic team. I'll start with the Novelic team first. As somebody who's on the outside, what I would like to understand first is you are a profitable, high-growth kind of a company. So -- and you've never raised capital as well. So when this -- when you look at this transaction, obviously, you're looking at something very strategic that comes to your table. So I heard you talk about the strategic fit. But if you could also share some of -- some 1 or 2 examples of what you think, for example, Sona brings to the table from your perspective [Audio Gap]?

Yes. So Darko, Veselin, Veljko, anybody wants to answer that. Please go ahead. I'm not going to help you with this question. This is just for you guys.

So maybe I can start and then we can all add on. So for us, we see a very, very serious company with high technology focus. So the company that was built on the innovation and that was able to commercialize its innovation on the market. So -- and which built the, let's say, the spirit and the culture for that. And this is not something that you can build quickly or you miss some steps. Basically, you see that by doing conversations by moving on in tracking whether you have -- you have alignment. So this was the most important aspect from the beginning. We see that we will -- we can and will be mentored on our journey to grow Novelic in a very similar way just on the, let's say, another technological field. So like I said on my slide, we want to do in the world of ADAS sensors and autonomous driving what Sona already achieved in another period. Also, what is important for us is that they will give us the support, but they will give us also the freedom to operate. They believe in us. They will believe what we have built is on the healthy, let's say, pillars and that we could execute. And we think this is important in these kind of deals that you keep the momentum. You keep the momentum of your vision because it will take some time until we really align on all details, and we are sure we will. And by that time, we feel that we will get the freedom to operate and to build a Novelic like we ended. I don't know if Darko and Veselin can add. Darko, maybe you?

Yes. I would like to add. It's -- I think we get the experience. If I may summarize guidelines, and we can be teach also by Sona how to become the big company. We see it as a big brother and also not just that capital investment, but also like having a teacher who can provide us and lead us to this success, if I may summarize in a short sentence.

I will add only one sentence. What we really respect the Sona's dynamic, dynamic movement. We are facing that all automotive world is dramatically changing. You had a new [indiscernible] of approaching fast. We have the old ones, was still slower try to adapt. In the world of Tier 1 worlds where the Sona is -- because we engage with a lot of Tier 1s as a customer. This is our customers. You see that the organization matters are very old fashioned, which cannot allow them to act fast and to move [indiscernible]. They are not inventing. They are reacting on the needs for. You need to predict what ones will need. You need to engage with ones in early stage. You need to invest in relationship with the ones to understand their need before they are raising [indiscernible]. And this dynamic is something that you'd like to follow up together with Sona. We recognize this is a huge Sona advantage.

One question is on just the growth opportunity. How should we think about it going ahead for this business? Is it manufacturing capacity kind of driven business where we need to make investments, what is the investment plan in next, let's say, 2, 3 years? What is the capacity utilization, if that is a relevant metric? And there was also a mention of a potential to -- or option to acquire a chip designing company, I believe. So if you could just touch upon that as well.

So Darko can take that one, but it's not a potential to acquire. We have a chip design company already.

Okay. [Audio Gap] the transaction scope also includes acquisition of Nirsen, yes.

Yes. So Nirsen has been -- it is a company owned by the Novelic founders in the same proportion. So this -- as part of the transaction, Nirsen will be acquired by Novelic as a form of having the full integration going from chip design and putting the software on that -- like the sensors and then the software. The one thing I'd like to add, and thank you guys for all the love, but also getting to mass manufacturing in millions, takes a bit of experience. That's something we can bring. Everything else they can do independently, and we don't really -- they don't require us as much. Yes, we're always there to mentor and guide but they already have a number. But yes, going from a few thousand to a few million is not a journey that is -- I mean, if you do it first step, it's much harder and longer, you go together, it's a bit easier, and we've been there. So that's a good advantage to have in that space. But the second part, Darko, you can talk about that also, what Kapil asked.

So regarding the first focus of the growth is definitely in the technology you have seen on the video. As Veljko already mentioned, this is a mandatory [Audio Gap] NCAP for car OEMs to have it in order to get this safety stars and safety points. So also our road map is this something that we are pushing to be focused on our investment. We are in this field for a long time. We know the technology. We have also a lot of patents there. And it seems for us the first, let's say, success as the in-cabin that we mentioned on the video.

So Kapil, because you also covered text, that will be easier for you to understand. A lot of it, the investment is people because you're writing code, how many lines of code is basically the functionality. The board, you're not going to manufacture anyway, right? That comes, the chip is also -- it's chip design. You're going to get the software part. It's just the manufacturing of just the sensor bits. That's the only bit that is there. So capacity is a derivative of people. We are putting in primary so that the first 3-year business plan is going to be self-funded after that primary. And beyond that, should right now doesn't look like. So when I said [ $100 million ] [indiscernible], the money is already there. I hope that this [ $100 million ] happened much earlier. And I hope then we need more money to do something bigger. Like we have, as you have seen with Sona, I mean if you say how much would the CapEx that we have previously outlined last time we spoke, what was about $120 million, right? $120 million, yes, is enough to service what was our order book till the end of last quarter. Next quarter's order book will increase and hence, funding increases. But yes, we feel good with, I would say, capital deployment, capital allocation and capital uses. We have a very -- I'd say -- like I said, and this you would also appreciate it. It's a very middle class strong value on how to take every rupee every euro and extend the maximum use out of it, while not sacrificing our technology goals. It is extremely there. And that's why, I mean, we acquired Comstar I think 2018 for 4.5 years, we haven't done anything is because we rarely need somebody like that, if you need really high tech, high-growth companies then you have to talk about cash burn and all, we are not the people who can digest cash burn. We don't have that in our system, right? Or you need people who only talk about things like, yes, this content per vehicle, $10 per vehicle, so many vehicles, this multiple, give me 8 multiple. Those -- why should I do something that I can buy the equipment and do it myself. If you're not gaining any capability, if you're not adding anything to yourself as an organization as a human being, what are you doing? We are trying to make technology that the world looks to us for, which is why it started with our purpose. It is never purely financial, but it has to be financially solid. Finance is the second part of it, but it has to be highly profitable and able to stand on its feet. But this transaction that we've envisioned and the business plan that we've drawn out together, that funding is there. So we should be able to, on our own steam get to -- like I said, the $100 million target is because we all joke about but that's the time when we can become a real company, right? So that's the goal. And then when we see how we take it from there and how [Audio Gap].

Sure. Look forward to that. Just one clarification. This $100 million includes what all, does it include -- is it in-cabin technology only or what all does it include?

So ACAM, ASPER -- am I missing something Darko? ACAM is the short form for in-cabin advance, I don't know. You guys can -- Darko, Veljko can explain. And ASPER is the sensory perception one plus we have IoT products also. Darko?

Yes.

So in [ EUR 100 million ], what would be the breakup like?

It's more a question for Veselin, I think.

So we will have 2 different main approaches, one a little bit smaller. The direction is that we are hoping that we are approximately, equally strong, having us the type of the platform. And from other side, inside of the cabin platform. There will be the main pillars of that what we are expecting as a revenue stream. You need to understand and we have in a space of the sensors, you're speaking in a defining smart commodity hardware, if you have smart commodity hardware. After that, you can bring up new functionality considering machine learning; new functionality, considering new applications who are actually like a software. This software content together with hardware will make a difference. The value for the customer will be not necessarily -- actually, you will have a smart sensors, which we are going to develop. So in our road map, all type of platforms, the basic platforms which we are designing for the hardware point of view will be enhanced by comprehensive software updates for the different application, which will come constantly. So we are expecting that in this area, we will have -- having 2 major platforms, a lot of family of different products for different type of concrete applications, covering complete mobility. And we are starting [Audio Gap] the advantage like detecting people, detecting people means you can detect people inside of the vehicle. You can detect the people outside of the vehicle. You can detect the people also in an industrial environment. So all those things are there. But as I said, we are focusing at the moment to mobility solution. We are automotive itself, passenger vehicle is one part of the story. And the second part of the story is the rest of the applications in construction, transportation, 2 and 3 vehicles.

So Kapil, in short, ACAM, a cabin sensing, ASPER, which is sensory perception, which is outside the vehicle. These are the big 2 from product side, plus there will be engineering services and licensing. There is a lot of licensing income that we get because there are customers who want to deploy on their own. They just want you to design and get them the sensor software. And you get paid for as many units they sell. So these are the 3 revenue streams. And licensing currently -- a large part of it is licensing. And there, trust me, if you can think of any major European OEM, it is already there. So yes, that will also continue. However, over time, ACAM will be the biggest in the industry as per second biggest and licensing and software services as the third industry.

I have a lot of questions, but we'll come back in the queue.

Yes. But the thing is in this changing or whether product versus service or product versus solution. Actually, it is solution now. The solution could be a piece of hardware or it could be a few lines of code. Now you don't manufacture lines of code. But you've got to do it together. I mean, you have come to our Chennai plant and you've seen our IMCM. What is it look -- it just a board with a lot of electronics and you would wonder why is it so expensive is because of the millions of lines of code that go into it. And that -- I mean, like somebody asked me once that, what is the weight. How [Audio Gap] I think we all -- and hopefully, as people understand us as the company more. And I hope we can do that job. We sometimes are not that good at it. We can also help people realize that It is a very fast changing world in a car that has 100 million to 200 million lines of code the old way of how much does it weigh and how much is value addition. Those days are going and very fast. So let's see how well we communicate this, that's always been a challenge, especially in India, right? I mean I think it would be easier to communicate this in San Francisco or Israel or [indiscernible], but India, it gets a little difficult because we are also used to what we see around us, and that still perhaps is a little behind where global mobility has already moved.

We move to our next question that is from the line of Hitesh Goel from CLSA.

Hi, everyone. Hello, Vivek, Rohit and Sona team and also the Novelic team and congratulations for the great deal. I just wanted to understand, I missed that structure part on the transaction first. Can you please explain that is it -- as founder [Audio Gap] how much going into the company, if you can explain that? And I also ...

Hitesh, I'm sorry to interrupt. May I request you please speak a bit loud?

Can you hear me now? Can you hear me now? Yes. So I just wanted to understand the structure of how much is there a stake sale of founders in this transaction? How much is -- or how much is going to the company? And in EV EUR 64.5 million. So there is around Euro 23.5 million debt, right, in the company? Just wanted to understand the structure because I missed it.

So I'll clarify. So post money valuation is EUR 75 million. okay? And Sona will be acquiring 54% stake as a mix of primary and secondary. So what Sona will pay out would be EUR 40.5 million as total consideration. And the payout is -- has a staggered sort of cash outflow. So 60% on closing and then 20% each at the end of 12 and 24 months, respectively.

Okay. So -- and is there a debt in the company? Or it's totally...

No, no. It's near to 0, let's say.

Okay. Okay. My second question would be, can we understand much better the background of the promoters on Novelic before starting Novelic. Just wanted to understand how they worked with -- in which companies so that we can understand some relationships?

Sure. So who -- first of all, hi, Hitesh, I haven't seen you face for like in 1.5 years. Darko, Veselin, who wants to take this one.

I will take as a couple of words. So the company normally just celebrated 10 universally, recently. But generally, the co team, that means 3 of us, we can been working together previously in a German-based Tier 2 company in [indiscernible]. So we were actually delivering solutions to Tier 1 companies in Germany. And we're working together in this area for more than I would like to say, I think, 7 years before. So that means we are working quite a long time together. That was very important because it's not easy to make an innovative company, which also brings some money. It's not easy to make innovative company which can stand how to make a product. This is an essential thing in order to have this unique experience how to make a product. This is a basic classical startup. He has excellent ideas. Maybe they can have a -- like a property, but doesn't know how to make a product. So that means in this parallel world, you need to beat the other competencies to deliver maturity of the product and also to bring up the new ideas in front. So I think we managed to do it through our long experience work in this area. So Darko, that was a short time for ...

Veselin was their boss, Darko and Veljko when he hired them. And then the 3 of them came back from Germany. Actually, if you understand a little bit about the European structure, a lot of people, the right people -- had to go and work in Western European countries like Germany, happened in India as well, right? Like a lot of our brighter engineers went to the U.S., and now we are also seeing that. And then all 3 of them thought why can't we do this in our home country. And that's why I said when he shared values and lot of things, but I'll let Darko free on why they came back and started an entrepreneurial unit?

Yes. At that time, it was more than 10 years ago. Now we're sitting on the table -- at the table, and we then decided -- we're speaking about any of these ideas we're discussing because we were based in [indiscernible]. We had many connections with automotive industry. And then we came to the idea and be able to see how the mmWave Radar sensor is going to be developed in the future. And we decided to go back in downgrade and set up and found the company. We started with 5 people. And today, we have more than 150 people. All 3 of us are -- have electrical engineering background. So at the beginning of Novelic, we all were also designers, software developers. We did also the programming of these FPGA chips. We designed the chips. So we have also skills there. And slowly as the company progressed and became larger and larger. We actually started to see that there is really a potential that needs to be used in order to develop this same idea.

And just one more question. Do you think you will also get benefit from Sona relationships, global relationships in some of the OEMs or customers that they have? In Europe, you have a good relationship, but they had who have a relationship in China, U.S. as well, right? So is that a thought process while going with Sona?

Yes, also having access to these customers going hand in hand with our big brother. That's definitely something that can be useful for us and getting experience also from these relations with the OEMs with Tier 1s, how to deliver the products, how to communicate with them, how to set up these deals. How to go at the end into the production also of these products, that's something that definitely can Sona help us.

We take our next question from the line of Jinesh Gandhi from Motilal Oswal.

Can you hear me?