Subros Limited (517168) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Subros Limited Q4 FY '23 Earnings Conference Call, hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

Thank you, Faizan. Welcome to Subros Limited 4Q FY '23 and the FY '23 fourth quarter conference call. From Subros Limited management, we have with us today, Mr. Parmod Kumar Duggal, Chief Executive Officer; Mr. Hemant Kumar Agarwal, Chief Financial Officer; and Mr. Sukhbinder Singh Gill, Assistant Vice President, Finance. I'll now hand over the call to Mr. Parmod Kumar Duggal for the opening remarks to be followed by question-and-answer session. Over to you, sir.

[indiscernible] investor call for quarter 4 FY '23. First, I want to share good news to all the stakeholders here that we have realized the highest ever turnover of INR 2,806 crores during the year with a growth of 25%. This is despite all the odds and constraints, which are available in the industry, including the fluctuation of demand due to semiconductor shortages or any other fluctuation on the customer side. We are able to realize this milestone of INR 2,800 crores plus turnover during the year FY '22-'23. Today, I'll have a slightly longish briefing, so please bear with me. The automobile industry started the year FY '23 on a very promising note, and last 4 quarters have been very good from a growth perspective. The market is showing a sharp recovery post COVID and order booking at OEM is also very high, giving us some confidence of continued growth pattern for the subsequent period as well. While on one hand, we see a revival of vehicle demand, on the other hand, the high commodity prices and inconsistent semiconductor availability, aggravating problem for the auto manufacturer, which is causing major concern for the industry. The increasing price of commodities in India has resulted a record high price of the new and used vehicle in the country. The result of quarter 4 FY '23 has been shared with the stock exchange and also posted on our website. Let me elaborate the summary of results one by one. In this quarter, passenger vehicle industry has shown growth of 13% on a production basis, which is relevant for us. In comparison with corresponding quarter of last year, the year growth is 25% from the last year. Whereas Subros PV segment thermal products growth in quarter 4 is 19% as compared to the corresponding quarter. The annual growth of 28% as compared to the last year. So our performance is slightly better than the industry performance due to the model mix. Commercial vehicle bus is also improving because of tourism sector and school businesses are reviving fully now. AC fitment ratio has also improved in the industry and has overall growth on production basis is 117%, whereas Subros has registered a growth of 59% in comparison with corresponding quarter of the last year and annual growth of 42% in this segment. Further on commercial vehicles, truck, N-2 and N-3 category, which is relevant for the AC or the blower industry for us, industry has shown upside trends in the last 2 years. It has shown a growth of 5% in quarter 4 as compared to the corresponding quarter of the last year and annual growth of 28% as compared to the last year. Our growth in this space is 5% in quarter 4 and 32% in the year. Growth is mainly because of the AC fitment ratio, which is better during this period, which is favorable for us. In Home AC space, we have realized a turnover of INR 84 crores due to the commodity price fluctuation and with no arrangement of back-to-back compensation from the OEMs, we have muted our efforts on the home AC product for the time being to protect our operating margin. We'll watch this segment still softening of commodity prices before we push sales more aggressively again. Revenue from operation has been recorded at INR 748 crores during this quarter. Corresponding quarter was INR 681 crores. Overall, there is a 10% growth in this quarter as compared to the last quarter. Let me explain each segment-wise contribution on sales during the quarter. During this quarter, car and non-car segment has contributed 94% and 6%, respectively. Maruti and Suzuki Motor Gujarat has contributed 84% of the total sales during the quarter. Our share of business in passenger vehicle Aircon market is maintained at 40% during the quarter, and share of business in truck AC segment is 42%, and in bus segment, it is 20%. Now I'll talk about the operational performance. As I mentioned before, there are a lot of challenges of the supply chain, commodity price fluctuation, logistic cost escalation, dollar -- currency movement, which has impacted not only the supplies, but also the operating margin in a big way during last 4 quarters. Commodity prices fluctuation during FY '23 has impacted substantially on the material sales ratio, with there -- though there is a compensation formula for the regular commodities with the OEMs, but there is a quarter lag and also it is not fully compensation. There are certain parts which are not compensated. Further, for non-regular commodities, which are used in our supplies, the cost impact also is substantial during this period. We are in discussion with customers for setting up the compensation -- new compensation formula for future. Gas prices and other consumable prices due to Ukraine war also started impacting now. The trends are on rising side. And also delay in localization also has a substantial cost impact through the air freight of certain parts during the quarter, which has impacted MSR during the quarter by almost 1%. Otherwise, we would have been better as compared to the last quarter. The company has realized EBITDA of INR 56.67 crores in quarter 4 as against EBITDA of INR 49.8 crores in the corresponding quarter of last year. If we compare EBITDA with the corresponding quarter of the last year, it has improved by 14%. If we compare this with the previous quarter, quarter 3 of FY '23, it is better by 35%. And if we compare this with the corresponding last year on an annual basis, it has improved by 19%. Profit before tax in quarter 4 is INR 26.69 crores, which is 3.57% of the net sales. If we compare this with the corresponding quarter, it has improved by 26%. And if we compare this with the previous quarter, it has better by 118%. Profit after tax is INR 18.64 crores, which is 2.5% of the net sales. And this has also improved as compared to corresponding quarter by 10% and with the previous quarter, 128%. If I have to summarize the overall financial results, the revenue of INR 748 crores in quarter 4 and annual revenue of INR 2,806 crores, the annual growth of 25%. EBITDA level of INR 56 crores, annual EBITDA of INR 188 crores with a growth of 19%, PBT of INR 26.69 crores in quarter 4, overall INR 71 crores in FY '23 with a growth of 56%. That's how the overall financial summary is. Now I'll give a few business updates, which is important for us for sustainable growth. In FY '23, the performance is best so far for the revenue side. Consistent double-digit growth is what I have been informing consistently in my previous talks with you, and we have realized it as of now, and we'll continue this trend even for future as well. Profitability is a bit challenged for last 2 years. And -- but now the curve is moving to the upside and we intend to improve from here on and profitability and EBITDA levels will start moving positively. The debt level is almost negligible, and this will support our cash generation more positively. Localization focus to derisk ourselves from the global cost pressure and economic fluctuation is also continuing. In the last 7 years, we have reduced the import content by 10%. We are at currently 16% of our total revenue, our import content, and we are targeting to make it below 10% in next 2 to 3 years' time. With respect to the new business and product development, the mobility landscape will fundamentally transform in the next 8 to 10 years with ACS trend and autonomous driving, connecting cars and electrified vehicles and with the shared mobility, amplifying their impact. We are preparing with our collaborators, enabling all the parts -- products which are required for this transformation. There's a significant success in securing new business from our customers, business lines of 2 -- 2025 or 2026 is almost completed, and we will ensure that our sustainable growth in future following the same trend. We have targeted to realize 15% of the total turnover coming from hybrid or electric vehicles. This target, we started realizing through the order booking, and we already reached to 15% starting supplying from 2025-'26. There are a few new initiatives which are significant from our strategic growth and profitability perspective. Mahindra, new tractor, a collaboration project with Mitsubishi, Japan and M-Star tractor for the U.S. market, the SOP is in progress. Within next quarter, both the SOPs will be matured. These tractors will be exported to Japan and U.S. market, and we have both ECM and HVAC business for K2 tractor and HVAC system for M-Star tractor. This will add to our growth journey in tractor space, both in Aircon as well as in ECM and our mission to export products through the OEMs to the U.S. and Japan market also will be realized. As we informed earlier, the new technology, wind rotary compressor launched in India 2 years back, happy to inform that the matured business of INR 250 crores, we have realized in this new launch. This is in collaboration with Denso post our equity infusion. The new [ THS ] radiator applicable for hybrid vehicles is also launched in Grand Vitara hybrid vehicle. This is again our collaboration effort with Denso, and this is a new technology product first time launched in India. The product for EV thermal space is also under development with the support of Denso. Significant to mention here that this year, many new SOPs has been done. And in this context, the new plans, which has started in March 23, also using Subros' thermal products. Thank you very much. I'm now open for questions.

[Operator Instructions] The first question is from the line of Resham Jain from DSP Asset Managers.

So my question is on margins because what we have seen across most of the auto ancillary with commodity prices coming down, we have seen that lag, most of them showing decent improvement in margins. But in your case, the margins seems to be sticking at a very low level consistently over the last 4, 5 quarters now. So I fail to understand that what is leading to this kind of margins for us?

Mr. Jain, I try to reply this as part of my initial brief also that there are 2 elements. Material sales ratio, which started improving over a period of time. But this quarter, it was high due to one transaction, which is air freight done to bring the parts because of the sudden demand increase from the OEM side. This is almost having impact of 1%. But if you minus that, it is slightly better from the trend, which was seen for last 2 to 3 quarters. Overall margins -- because we try to offset this impact by improving internal efficiencies, that's how the staff costs and other expenses have come down as compared to the previous quarter and from the corresponding quarter. So efforts are now there to improve the margins, and that's how this quarter looks better than previous 4 to 5 quarters. So this effort will continue.

Resham, you must appreciate one thing is here. When you talk of update in the margin, you talk of the percentage terms, right?

Right.

So you please understand this business model. Whenever there is a spike in the commodity or maybe logistics cost or will be other factors, this is compensated by the customer on a one-to-one basis. So if you see the same compensation which you got from the customer, your -- definitely MSR will go up without diluting your absolute margins or absolute profits. So definitely, it will be reflected in percentage terms without diluting the profit margins of the company.

No. So, if I look at the absolute profit also over the last 3 years, if I look at FY '19, what has happened is that our mix has improved in terms of the vehicles for which we are supplying. And the overall volume for the industry has also normalized in Q4 now. So if I do a like-to-like comparison also, your absolute profit has also been much lower than what you used to do earlier. So that is what I was just -- and at this kind of margins and profitability, our ROC continues to remain at hardly close to 10%. So that is what I was trying to understand.

No, I understand. Your concern is well appreciated. But the only point is that curve has to start moving up side. If you compare quarter 4 ROC, it has crossed around 15%. But overall, yes, it is less than 10%. We have to come back to the normal level, pre-COVID level. So if you are comparing the results from 2019, which was the best year when we closed almost 6% PBT, from there, many changes has happened. New products have been launched. New technologies have been launched. In fact, extraordinary impact of external world has also come down. So things will improve. As I mentioned in the previous call also that we need 2 to 3 quarters to make correction. Once the curve starts moving upside, there will be definitely much more results coming positively.

Okay. Sir, the other question is on CapEx. At the beginning of the year, we mentioned INR 70 crores to INR 80 crores CapEx, but when we look at the numbers from the cash flow, it seems that including some land purchase, we have done almost INR 130 crore CapEx. So what really happened during the year for this increase of almost INR 80 crores to INR 130 crores, INR 50 crores further enhanced CapEx?

So as you rightly said, if you have seen in the CapEx outflow, there is a one -- it's not a land purchase. It's a purchase of the plant, the PDC die-casting plant, which was on rent. That company has purchased the land and building from the owner, right? So that itself was INR 28 crores. And that was not planned earlier when we discussed about INR 80 crores. So INR 28 crores is that amount only.

This happened in which quarter, sir?

[indiscernible]?

This happened in which quarter?

September quarter.

Okay. In Q2?

Yes, quarter 2. So around INR 28 crores is that impact, and we decided to purchase that land and building because our total operation was totally dependent on that unit. So we purchased that. So that was not planned when we discussed you -- earlier on the call.

And in addition to that, Mr. Jain, a few CapExes, which we incurred already, but the recovery from customers because the SOPs are happening this year, so that the final tools and the project cost recovery will happen in this year. So that also has some reflection on overall numbers.

Okay. Understood. So sir, for next year, any thoughts on how the profitability should be, even that there will be some lag and there was some one-offs. So overall, how should one think about profitability for '24-'25?

I will not be specifying the exact numbers, but of course, it would be better than the year which we closed FY '23. It would be better than this. I'll say better than this, so you can just take this as a positive observation.

Okay. Any margin guidance?

We'll not be able to spell out specifically.

The next question is from the line of Nikhil Rungta from Nippon India Mutual Fund.

Sir, 3 questions. Just to...

Sorry to interrupt, Mr. Rungta, the audio is very low from your line.

Is it better now?

Yes.

Yes. Sir, just to continue on this margin side. In your opening remarks, you indicated that you intend to reach to 8% to 10% margin in next 2 to 3 years. Am I correct on that?

No, it was related to the localization ratio, which what I said was that currently, the import content of the total revenue is 16%. We intend to go below 10% in next 2 to 3 years.

Okay. Okay. So on the margin, if I had to look from a 3-year perspective, will we be able to reach to our historical levels?

Yes, we are -- that's what we are inching for now. So we have to revise that the situation which was there pre-COVID. So that's the effort which we are pursuing now.

Okay. And sir, on the Home AC segment, you indicated that you cannot do a pass-through here. So what's the issue here? I mean is it that we cannot do a restructuring of our contracts or what exactly is the issue in this particular segment?

See, this is the reason that business model for home Aircon is slightly different from the auto or other mobility space. So here, the contracts are fixed for -- normally for the season. So renegotiation of contract was not possible. That's why we have to mute ourself for pursuing more aggressive business. Although business was available to the tune of INR 240 crores to INR 250 crores, but we decided, otherwise, our operating margin operation, overall profitability would have impacted gradually. So we decided not to pursue that. So we are waiting for the market to normalize and then again, we'll revise back. Problem is not from the market side, but from the compensation side.

Okay. And on the margins, in our auto segment, you indicated that there is a pass-through which happens on a quarterly lag basis. But there are a lot of components which are not compensated by OEMs. So what all components would be there, which are not compensated by OEMs?

Normally, the proprietary parts where we don't declare the breakup to the customers, so they are not compensated. But on proprietary parts, suppliers do get the price increases based on our contracts with them.

Okay, okay. And what would be our CapEx guidance for FY '24?

So CapEx for FY '24 would be between INR 90 crores to INR 100 crores, mainly because of the new launches which are planned now, including the EV vehicle for Maruti and for other customers. There will be substantial investments going for these projects because many new technologies will be included in EV products.

Okay. And you indicated that 15% of your revenue or order would be from hybrid and EV by '25, '26, right?

Correct.

And out of this CapEx of INR 90 crores to INR 110 crores, how much would be going towards EV and hybrid?

So EV will, I think, consume around INR 20 crores to INR 25 crores.

The next question is from the line of Aashin Modi from Equirus.

So, sir, we're talking about 15% of our revenue do come from EV and hybrid. So if you could give us some understanding on what sort of a content increase do we see in strong hybrids and in EV? And currently strong hybrid in Grand Vitara, what sort of share of business do we have? And are we supplying the whole kit? Or are we supplying on some of the products?

So in Grand Vitara, we are supplying HVAC. We are supplying hose and tube, ECM that is radiator with [ fan shout ] module, aspirator. And these are the products which are right now in the scope of supply of Subros. Going forward, in the EV space, when we are entering, we are -- we will be supplying HVAC, hose and tube, condenser. This is the next 3D project. And with Mahindra EV, a substantial portion of the hose and pipe will be in our scope. So that's how each business is decided based on the different scope, which OEM will be deciding for us.

Okay. And sir, on the overall kit value basis, what will be the difference for strong hybrid versus ICE?

So between strong hybrid, if you exclude compressor, which is normally 4x from the conventional compressor, so for other parts, it would be now 20% to 25% realization in [ modelization ].

Okay. Okay. And sir, my next question is on the -- so we have 2 things. We have one price pass-through and some nonessential commodities, which are not price pass-through. So if you could give us an understanding how is the prices of the commodities right now? And do we see signs of then softening of the non-price pass-through commodities?

So commodities started softening. If you see the LME trend, plastic trends and also on the copper side, steel side, the trend started softening now. If you compare with the June quarter or September quarter, the trends are down now. So if -- for example, if we have not got compensation for certain commodities during the peak time, so that means we need not to pass on the benefit also now to the OEM where the arrangement is not there. So that will help us improving further. So we are expecting now by maybe next 2 quarters, the commodities and the other economic factors will start softening.

And sir, the heat -- still gases, which we said last time that aren't a price pass-through, so what is the trend on those?

So they are -- that is mainly because of the Ukraine war, certain gases which are sourced or -- materials are sourced from that location, their prices started or they have already picked up now. So we had engagement with customers for compensation. There is so far favorable response from them. So still the conclusion has not happened, but we are expecting within a quarter or so, we'll be able to realize that delta because of the extraordinary incident.

The next question is from the line of Abhishek from Dolat Capital.

Sir, increase in the fabrication cost was a big drag for your margin [indiscernible]. Hello, am I audible?

There is a lot of background noise, Abhishek.

Hello, Abhishek, there is a lot of background sounds.

Yes. So, sir, increase in the fabrication cost was the main drag of your gross margin. So what is the progress in that part, sir?

So Abhishek, fabrication cost is also raised up to the customer now. They are considering that because a lot of other suppliers is also claimed for the fabrication costs, which are, again, extraordinary, not part of the normal compensation. OEM has to decide a policy on that. Still that is not yet concluded, but our efforts are on for that.

So how much benefit we can get in FY '24? So what is your margin target for FY '24? Especially on the gross margin side, the reversal is happening on the raw material cost?

So answering your first part, I'll not be able to quantify how much compensation we'll get from OEM. That is a part of negotiation. But as I mentioned before, on the overall margin guidance, it will improve from the current level, and it will improve substantially.

So as we are seeing many companies are getting the benefit of the fall in the raw material cost, but in the case of Subros, you are not seeing the numbers. So just wanted to understand when will you start to get the numbers on PL?

No. From our overall margin, as I mentioned, it will start improving. You must have seen now quarter-on-quarter. Last quarter, we closed EBITDA of INR 42 crores. This quarter, it is INR 56 crores. So improvements are available, and it will continue now.

I'm talking about the gross margin side, sir. The gross margin has -- gross margin has contracted around 600 to 700 bps in last many quarters. And there's not any benefit is coming from [indiscernible]. So just wanted to understand when we'll start to get it?

So as I mentioned, I'm just repeating myself that on the gross margin side, situation before COVID and after COVID substantially has changed. Almost [indiscernible] 7% impact has been absorbed so far. We see that it will be coming back to almost at a level of 74 or 70 -- less than 74% in the next 3 to 4 quarters and coming back to around 72%, another 1 year would be required.

So in that case, can we see the margin of 9% to 9.5% in FY '24 after getting the benefit of the gross margin expansion and plus this operating leverage benefit?

So you can take reference from what I said, exactly number prediction would be difficult. But yes, there would be definitely improvement, as I mentioned. 2% to 3% improvement is visible in next 1 to 2 years in a short term.

And sir, my last question is on Home AC, are you looking for any CapEx for the Home AC segment? Do you have any long-term plan?

Abhishek, no further investment till we revise back to the normal level. Whatever capacities we have are sufficient enough to take care of the volume based on the market demand. So as of now, we are not investing further into Home AC space.

The next question is from the line of Mayur Liman from ProfitMart Securities.

Congratulations on a good set of numbers, sir. Most of the questions I got the answer. And just a few questions. I just wanted to understand about the SOP new project, which is in the pipeline for quarter 1, 2024?

So, Mayur, the new projects which are starting and which has started just at the start of the year is the new Fronx of Maruti Suzuki. New -- the Jimny, which is again launched now, will start during this period, quarter 1. Mahindra tractor, both the SOPs will happen in quarter 1. That is K2. That is Mitsubishi project and M-Star for U.S. market. In addition to that, Mahindra electric cars or SUVs also will be SOP during this time. So for that also, SOPs are planned. Quarter 1 or quarter 2, these SOPs will happen.

Okay, sir. And then last question on how do you see the financial year 2024? And what is our expectation and the outlook for the financial year 2024?

So as I mentioned in my initial remarks that FY '24, we are positive in terms of the market demand and the recovery, and we are expecting slightly on the double-digit growth itself. We are trying to maintain that trend.

The next question is from the line of Aditya Makharia from HDFC Securities.

Yes, sir. Just wanted to -- obviously, your margin has improved sequentially, and congratulations on that. Have you been able to take any price hikes with your customers for the new models you had won because the impression we had is that the new models had come at a lower margin for us initially. But has there been any ability to take price hikes with the customers on these?

So, Aditya, for new models, the price correction from the RFQ to the SOP economic condition change has already been factored in and they have been compensated by customers. So that's a positive part. So we -- all the SOPs are starting at the SOP month conditions, not at the RFQ conditions.

Okay. So, sir, any quantification, is it like 100 bps benefit or 150 bps...

I will not say benefit because that much cost will be incurring. As Hemant also mentioned that if compensation is INR 100 and cost is also INR 100, so it will not reflect into overall percentage improvement, but it will at least utilize the profits -- impact on the profits.

Got it. Got it. And sir, just on the hybrid variance for the strong hybrids, is the realization on the air conditioner higher than the regular? Like is there a different technology because in EV, you need a totally different technology of the compressor. But for a strong hybrid, does it require different technology or it's just current...

A few parts will get changed for hybrid vehicle, normally 10% to -- 15% to 20% is the delta, which will be the realization other than compressor. If you include compressor, it would be roughly 30%, 30% to 32%. But right now, in Grand Vitara, we are not supplying the compressor.

Okay. But do you expect to supply, is it?

Only for EV part. For other Grand Vitara normal model, we are supplying the compressor.

[Foreign Language] you're not supplying for the strong hybrid, okay. Got it.

The next question is from the line of Varun Arora.

Yes. I'm audible, sir?

Yes, please.

Sir, first question is on this revenue breakup, if you can give me on PVAC, home AC and others for a whole year, FY '23?

So overall, I'll give you broadly a breakup of INR 2,800 crores. So out of that, around INR 2,100 crores is for PV thermal products, around INR 400 crores is for ECM, INR 35 crores for bus, INR 80 crores for truck, INR 85 crores for home AC and balance is in the other parts.

Okay. Sir, on this Jimny and Fronx. So that SOP is going into this quarter, Q1. So what sort of revenue we are looking at from these 2 SOPs and for the -- same for Mahindra EV, XUV400. If you can give us just -- a ballpark number will also look good for us?

So very ballpark figure would be that next year, we'll be having around INR 115 crores to INR 130 crores delta coming in from the new Vitara Brezza from the delta businesses, which we got.

Okay. And can we see the impact in the Q1 FY '24 only? I mean, are we having this in this current quarter?

Q1, it would be only the Fronx, which is already commercialized to the full, but rest started ramping up. It will take -- I think the major reflection will come in Q2.

Okay, sir. Okay, sir. And sir, on the inventory level, sir, what is the current inventory level as the last time you have stated that your inventory level stood at like INR 315 crores, and it was locking your 10% to 15% cash flow that you stated on your last con. call. So can you just give some comments on that one, sir?

So it has reduced from that quarter, I think roughly, I'm -- INR 290 crores is the inventory level at the end of quarter 4. So it has reduced by almost INR 20 crores during the quarter. That against INR 290 crore includes certain safety inventory, which we kept because of the logistic disruption still, but normal level for our kind of business would be around INR 270 crores to INR 280 crores.

Okay, sir. Okay, sir. And sir, on this Maruti, Mahindra, Tata and some other big customers. So if you can give the current revenue percentage, I mean, what they're holding actually into your revenue, sir? 84%, 86% Maruti you've told, sorry. Yes, sir. Go on, sir, please.

84% is almost Maruti, which is contributed 4% is -- of the total revenue is Mahindra, 2% is Tata, roughly 3% is Home Aircon and balance would be in other customers.

Okay, sir. Okay, sir. And for the thermal products, if I ask that are you targeting like 20% revenue for the same years, then what will be the time line to achieve that revenue percentage for thermal products?

No. Can you just repeat your question? It was too heavy?

So I'm asking for the thermal products. So are you targeting a double-digit sort of -- I mean 20% of the revenue coming from the thermal products and [indiscernible] then what will be the time line you are seeking for the sale?

So normally, as part of the long-term strategy, we kept a target -- there are 2 KPIs, which we are driving. One is that 75% of the total revenue should come from car and 25% should come from non-car, which include bus, tractor, railways refrigeration and so and so. So that is one KPI. Against that, we are at right now, I think, around 94% to 96%, that's the first KPI, which we are driving, and this should result into 3 to 4 years' time. The second KPI, which we are tracking is about 60% of the total revenue should be coming from Maruti and 40% from others. So that means we need to enlarge our customer base to secure that 40% of the revenue coming from here. So these 2 KPIs we are driving from a long-term perspective.

Okay, sir. Okay, sir. Sir, last question if I may sneak in. So for this U.S. and Japan, I missed your initial comments. So if you can tell me by what time line you will supply these components with these 2 markets, for U.S. and Japan? If you can give an elaborate, better your answer please, sir.

So we are not directly exporting to U.S. and Japan. We are giving to the OEM and these tractors will be used in U.S. and Japan market. And this SOP will start -- already starting at the last month of this quarter, but the substantial impact will be in Q2. So that's what we are planning. These Aircons are going into tractor -- tractor cabin, and this will be used in these 2 markets.

And sir, what sort of revenue we are seeking from these two -- I mean, from this tractor segment?

So tractor would be roughly, I think, INR 8 crores to INR 10 crores will be a reflection in this year, but mature volume would be around INR 18 crores to INR 22 crores.

And sir, by what time line, you will be able to achieve this mature amount, that INR 18 crores to INR 22 crores?

Next year.

In FY '25?

Yes.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

So as I mentioned before, things are taking a positive note now. I think the curve has started moving up, both on revenue side as well as on the margin side. We are hopeful that next 2 quarters we'll be trying to recover as much as we lost or declined during last 8 quarters. Of course, coming back to the level of FY '19 will take another one more year. So we'll be -- our efforts are on towards recovery and come back to the best results, which we shared in FY '19. Thank you so much for your participation.

Thank you. Ladies and gentlemen, on behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.