Suprajit Engineering Limited (532509) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Suprajit Engineering Limited Q4 FY '20 Earnings Conference Call hosted by Anand Rathi Share and Stock Brokers. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vijay Sarthy of Anand Rathi Share and Stock Brokers.

Thanks, Harsha. Good morning, gentlemen and ladies. On behalf of Anand Rathi, we welcome you to the fourth quarter results call of Suprajit Engineering. From the management side, we have Mr. Ajit Kumar Rai, the Founder and Chairman; Mr. N. S. Mohan, the MD and Group CEO; and Mr. Medappa Gowda, CFO and Company Secretary. As usual, quickly, we will get into the initial briefing of the results, and then we'll follow it up with Q&A. Thank you, and over to you, Mr. Ajith.

Yes. Good morning, Vijay, and all the participants. Welcome you all for the Q4 result call as well as the annual results. I will, first of all, like to thank Anand Rathi for hosting this and all of you for taking part in this call as well. We'll go through quick brief. I'll start with Medappa to give a quick review numbers on stand-alone and consolidated basis, Medappa, on the annual basis.

Yes. Thank you. Yes, good morning to all. We have reported the audited financial results for the year ended March 31, 2020. The stand-alone revenue for the year ended March 31, 2020, was INR 1,071 crores as against INR 1,058 crores for the corresponding period last year. The stand-alone operational EBITDA was INR 190 crores as against INR 179 crores for the corresponding period last year. The stand-alone profit after tax, PAT, was INR 123 crores as against INR 115 crores for the corresponding period last year. The consolidated revenue for the year ended March 31, 2020, was INR 1,563 crores as against 1,590 crores for the corresponding period last year. The consolidated operational EBITDA was INR 219 crores as against INR 233 crores for the corresponding period last year. The consolidated PAT was INR 104 crores as against INR 134 crores for the corresponding period last year. Thank you.

Thank you, Medappa. Mohan, can you give a quick operational review, please?

Sure. Thanks. Let me start as usual by giving you some updates on different business units that we have. And then I'll conclude by giving the COVID impact. To start with the domestic cable division, we have completed the installation and commissioning of our new plant at Narsapura, and this is for a key customer. And I'm glad to announce that we had a very, very safe launch and it was successful commercial operations. With this, our total capacity worldwide now stands at 300 million cables per annum. We did very well in our aftermarket operations, clocking a very impressive growth. But however, the changeover from BS-IV to BS-VI affected the OE sales, particularly the low volumes during the changeover phase at the OEMs. Moving on to our automotive exports cable division. We migrated the supplies to our mainland in Europe, that is in Slovenia. And we have also rightsized the U.K. facility. Now with this, what happens is all the EU customers, both OE and Tier 1s that we are serving, get served out of the mainland, which means that they're happy with our move and we are completely covered for the Brexit whenever it happens, we don't know. Another thing is, we also booked new business in both EU and U.S. for various customers, and these come in for launches in the future years. Moving on to the Cable Division. We successfully integrated the erstwhile Osram plant near Chennai. And very important is that Osram as a customer has been very happy with our performance of the plant post our acquisition. And we have met and fulfilled all their volume demands, which in fact fluctuated quite a bit, I would say. And it was always in the positive direction. We also got the bulbs manufactured at our SEZ plant, which is in Noida, qualified for exports. And we have started -- we have commenced already our exports through Osram in Europe. We successfully rightsized our facility in Europe for lamps. That means the Trifa, which was in Annweiler and which had a large warehouse and office, we completely came out of the warehouse and we made it into a common warehouse in Europe at Luxembourg. And the office of Trifa was rightsized in the sense that we gave away what was on lease, and we have moved into a smaller place only for office with less number of people at a place called Hauenstein. With this, we have brought in synergies between Trifa and Luxlite, right all the way from the top, having one person to lead both entities. We had 2 Managing Directors earlier, as you all know. Now we have got only 1. And we are slowly moving in the direction of integrating various other activities, like what we have done in the warehouse. Moving to SENA, that is Suprajit Engineering Non-Automotive. It was a year where we focused a lot on facility transformation. We had a team of about 4 people. Out of these 4 people, 3 of us were from India. And some of this team partially stationed themselves at Wichita for 6 months and worked as catalysts, primarily to expedite changes and aid the transformation. What I'm really happy about is with this exercise that it started to give us results and also build confidence in us to handle acquired overseas entities by allowing local team to react and change, while we, as acquirers, facilitate and work as catalysts with the acquired team to make those changes. I think that -- so that was a key learning for us. As a result of all these changes at foreign entities, that is Suprajit Europe, Suprajit Slovenia, Trifa, Luxlite, Wescon, Wichita and whoever else, we incurred some onetime costs due to the cleanups and rightsizing, and all these costs approximately amounted to about INR 200 million. Now moving over to the COVID impact. As you all know that in the last few days of the last quarter where we generally clocked some good revenues, like I always say the Indian cricket team hitting out in the last overs, but however, COVID rain played a spoilsport and the match was called off early. So obviously, it affected -- like anybody else, it affected us too. During this lockdown period, the entire management team had daily conference calls to coordinate our efforts. And we prepared ourselves primarily for an eventual opening up. So we are ready. And we conducted quite a bit of CSR activities, taking into confidence the local authorities like the local police, panchayat and so on and so forth. We also conducted many e-learning sessions for our employees to keep them completely engaged. And all these efforts were led by our Chief Strategy Officer, Akhilesh Rai, and he spearheaded these efforts. Consequent to the severe loss of revenue in the months of April and May, we all decided to take a voluntary pay cut. And this has ranged all the way from 5% at the lower levels up to 40% at the top level. And I would say that this voluntary pay cut was very well responded by all the employees, and all of them have yielded well to the call that we gave. We have clamped down on all the discretionary spending and cut down severely on the CapExes, except those areas where automation and R&D are, where we feel that it is a long-term investment and we need to keep going on that. Apart from that, at all other places, we are just finishing up a few projects here and there which were stalled before the lockdown. But other than that, it's -- whatever we are doing is in an extremely frugal manner and the entire organization is trying to reduce costs, particularly fixed costs. So this is an overall update from me.

Thank you, Mohan. Before I let the questions to come in, I'll just like to quickly brief that accepting -- because the last 10 days of sort of shutdown and slowdown, we still had a fairly good operational year. What's important is that Indian automotive business has degrown by 15%, whereas we at least ended up with a flat growth. So technically, we outperformed the industry by almost by 15%. The current status, customers are slowly coming back. It is really slow. I think June has been slightly better. April, May has been disaster basically. So the year is going to be very tough, but we are braving ourselves for the tough time. We hope that there is no resurgence, because first of all, we have not even seen the peak in India because it's only getting worse. So we don't really know how the whole thing will pan out. That's why we said that we'll continue to outbeat Indian automotive industry the way that we've always done. But in terms of the margins, it's very difficult to make a reasonable guess, I guess. So that's where we are. And in terms of liquidity, we are fine. We still have undrawn banking limits as well as the cash that we already have in our books. I think, with that, I would let the questions to come in. So moderator, please take over and let us start the question and answers.

[Operator Instructions] The first question is from the line of Nikhil Kale from Axis Capital.

Hope everyone at the Suprajit team and their families are safe.

Thank you.

Yes. So firstly, on the performance again, sir, a very good performance for the full year. I guess, on the automotive cable side, especially flattish revenues in a weak year was very commendable. So just wanted to understand what were the drivers which kind of enabled us to outperform the industry decline or do better than the industry decline? I believe there was some content increase due to CBS, but could you just throw some light on, say, market share gain or any export order wins, which have kind of started ramping up this year?

Yes. I think you're right. First of all, there has been an increased content because of CBS, et cetera. And also in terms of BS-VI, there has been some additional opportunities in terms of value per vehicle. Also, I think the aftermarket has been pretty strong last year, which has been good probably partly because of the GST being positive for people who are all in the organized sector. So I would say those 2 are the main things in terms of exports. We had a strong exports, but yes, that's also added to our number. So it's exports, aftermarket and, to some extent, some increased content per vehicle.

So sir, then would it be fair to assume that given that the content increase is now already in the base that the outperformance could maybe reduce to a certain extent going forward?

I think -- we continue to believe that we have business opportunities and opportunities in the marketplace that even though it's not only Indian automotive market is down, global markets are also down. But we still are believing when we look at our -- very difficult to look into the year with all the kind of uncertainties, but with whatever information we have, we still believe that we can outperform Indian automotive industry. That means to say that if you think Indian automotive will be minus 10% this year, we'll still outbeat that. So that confidence is there. That's what -- in fact, in our business update, we have made that position very clear. One, yes, aftermarket will continue to be strong. I think we still have a strong pipeline of exports. And in domestic, you must realize that increased content was only for part time last year, whereas it will be for the full year this year.

Okay. And then second question is on the margin front. Again, the automotive cable margins have been pretty strong. So was it primarily because of commodity benefits or any change in the product mix? I just wanted to understand the sustainability of margins going forward.

Yes. I suppose there are -- both issues are there. There is certainly in a reasonable -- commodity prices have not really been shooting up. There has been some, I would say, tailwind from that. And also the product mix, I think, to some extent, the newer products have certain possibly a better margin. And also, you must realize that the aftermarket has been strong where we have been able to eke out slightly better margins. So that also has helped us, I think.

So the EBITDA margin guidance, I think, typically, we have -- historically, we have guided for 14% to 16% range. And now I think you're looking at 10% to 14%. Is it only for the near term, maybe a year or 2 or...

Yes, yes. I think we are talking about this year only. This year, we have absolutely no idea, are we talking about a V-shaped recovery, a U-shaped recovery, W-shaped recovery, L-shaped recovery, I have no idea. So we have taken a large guidance that Indian market, is it going to be at 60% of last year or 90% of last year, I have no idea. So we don't know. So while we are confident of outperforming in terms of the revenues, we have no idea how the margins will pan out, because it will depend upon the volume. So that's what the range is.

Nikhil, we would request you to please come back in the queue as we have several participants waiting for their turn. The next question is from the line of Rohit Balakrishnan from VRDDHI CAPITAL.

Sir, I had a couple of questions. One was, sir, given there is a lot of vendor consolidation that has been happening that you've also alluded in the calls earlier, so in the export -- in the automotive cable export business, does that put us at a risk, given that there is consolidation? And I'm assuming that you'd be still lower in terms of our wallet share with our customers there? I also heard that you have -- in the opening remarks, you mentioned that you've won some business in both EU and U.S., so I would want to also understand a bit on that. And the second question is, in terms of the overall acquisition strategy that you have articulated over the years, given this overall slowdown that is happening not just in India but globally, would you share some comments on if you're seeing more opportunities there in terms of maybe entering new areas or even expanding into the areas that you're already there? So these were the 2 questions that I had.

I think on the vendor consolidation, it's a good question that you're asking. I think we have got -- this has been discussed earlier also by us that vendor consolidation is actually positive for Suprajit. In fact, one of the reason why we have been continuously increasing our export business in automotive has been because of those opportunity that we had with some of our customers where they had planned to reduce their vendors. So the vendor reduction, I can clearly say that has been positive for Suprajit. Because wherever we are reasonably strong with the customers, VW and others, we are getting a larger share of business. And the other places we're getting a lot larger, newer inquiries. The second side to it, I mean, it's a little premature, but I think it is going to happen. We are getting these kind of feelers today that customers are derisking a single country. I don't want to mention the name of the country, but it's probably well-known that some of the customers who have, let's say, 100% dependence on one particular platform from one particular supplier from one particular country, I think those scenarios will also change. Again, that will bring us in the focus in terms of opportunities. Coming to your second question of acquisition. I think, certainly, this is the issue where liquidity cash flows will matter a lot. The customer -- I mean, the Tier 1 and Tier 2 automotive component manufacturers who have challenges of debt and challenges of cash flow in the next 1 year will have significant challenges to survive. And I think that would throw out opportunities. So whether it is in our business or related business or some newer businesses is a matter of time and debate, but it will happen in auto component industry. So the consolidation will happen faster now and acquisition opportunities will also come in. I think both opportunities are available for this.

Got it. And sir, just one follow-up on the first question in terms of vendor consolidation. So I mean, for our European automotive business, what would be the volume share that we would have with some of the customers? Would it be in double digits or would it be still in single digits, if you can just share that?

I wouldn't like to say the exact number, but I can easily say that with, let's say, Volkswagen and BMW, they are all in double digits today, and we are hoping to catch up on that further as we go ahead in the next few years. The rest of them, we may be smaller. But then the point here is that the strategic intent of the customer, one is derisking a country, the second one is finding who is a good supplier. Even if you are not in double-digit today, but if we are the supplier who has got the quality, cost, delivery and development in place, we will win larger share, because somebody else is messing up simply because either there is an issue with their cash flows and their ability to deliver. Because you must understand, some of our own competitors have cash flow issues and debt issues. So all that will be in our favor, because we are quite strong, both financially and our ability to deliver quality products to customers.

[Operator Instructions] The next question is from the line of Resham Jain from DSP Investment Manager.

Congratulation on, I think, a relatively good set of numbers, given the situation.

Thank you.

Sir, I have 2 questions. So first is, in automotive cables, if you look at, you have your base business, and then you've talked about 2 things, which is incremental launches in the U.S. and Europe market and also some of these incremental cables coming into -- through this BS-VI launches, which has come partially only in this year. So -- and your aftermarket also is relatively doing better. So if we just look at these 3 aspects in automotive cable business incrementally, how much this 3 piece will contribute to the overall volume, let's say, in FY '21 second half or something like that?

It's a little tough to exactly quantify this, but let me try to answer this. The incremental business on exports that you said about U.S. and Europe, what has also happened at the same time, Resham, is that the volume itself has come down. We have won newer businesses. But the original volume of, let's say, 100,000 has now dropped down to 60,000. So what is happening is that we have won newer businesses, but we are sort of standing still where we were despite those new businesses, because the overall business volumes have come down, both in U.S. as well as in Europe. So it is like you have run faster, but you've still not really outperformed your last year's number kind of a situation, more business but lesser volumes. On BS-VI, again, it depends upon what would be the Indian volume. If the second half, let's say, argument's sake, comes back to the same level of previous year second half, we will probably have a 5% outperformance on that side of the business, is that what I'm trying to say. On aftermarket, we have done a pretty good -- I think we had something like a 20% growth last year on aftermarket. I don't know the exact number, but it's somewhere there. But that -- whether it will go another 20%, I don't know, simply because in this lockdown period, 3 months has been a disaster, because everything was locked down. Now will there be simple big resurgence of buying, resurgence of vehicle servicing? Actually, we are seeing a good sign of that. In fact, I must say that May has been an excellent month. Despite we just starting up, our aftermarket has really taken off very well, simply because I think everybody was getting their vehicles redone for going back to work and roadside mechanics and service stations are using our products. So whether this resurgence of demand, is it sustainable? Frankly, there is so much of uncertainty, I don't know. But certainly, that will also have a growth from -- in the second half, but first half -- the point is whether overall for the year, whether we will do better than last year, very difficult to say because 3 months are completely lost.

Okay. And sir, my second question is, in the last 1 year, specifically in the last 6 months, we have taken all this write-off in -- and onetime cost in all the overseas entities. You feel that is there anything more or less in the overall restructurings which we have been carrying out over the last few months and quarters? And should one expect now from here on the restructure will help us to improve the overall margin?

There are 2 sides to it. One is, I think, Mohan touched upon it. I will come back to that. First of all, I think I would say I don't know, it all depends upon our strategy of the auditors. Once in 2 to 3 years' time, they want to have a critical review of all the investments. So E&Y became our auditor 3 years ago. So that is what happened in this year. So we took a critical review. So we had an external GT who did the valuation exercise. And we just went by whatever the auditors was -- were looking at it based on these valuation exercises. So I suppose it becomes necessary as per the current accounting norms, once in 2, 3 years, you probably need to review this as a matter of requirement of the accounting standards. But to us, from our strategic point of view, we don't -- well, this is one number. But then to us, we only seriously consider a kind of reassessment only when our strategic intent with that particular asset has changed. To me, today, there is no change in the strategic intent, whether it is with Wescon or whether it is with Trifa and Luxlite. So to us, it is a long-term asset. So frankly, to me, there is no value diminution in that, because we continue to pursue that business strategy without any dilution. So that's how we look at it. But then auditors look at it differently. So I cannot say anything about that. But you must also understand, last year was a year where, in our subsidiaries, we did a lot of cleanup. It is important to also say here that at Wescon, after Mike left, Steve became the CEO and it was first year as CEO of Wescon. At the same time, Trifa and Luxlite were managed as 2 separate entities with 2 separate managing directors. And after Mary left, I think we have consolidated everything under one CEO, that is MD, that is Frank. And in that process, all these restructuring of activities there in terms of shutting down one warehouse, taking up a bigger warehouse, scaling down and letting go people at Trifa, all those was done. And at the same time, to take care of Brexit, we started a parallel Koper warehouse, which was a requirement. Otherwise, we were -- customers were not happy. And in Wescon also, we did the complete facility retransformation, cleaning up their balance sheet, their inventories and those kind of things. They've all been cleaned up completely, and you have taken a INR 20 crore hit on that. That has actually hit the P&L of these companies. So if you really look at our operational result of the subsidies by itself, they're off by INR 20 crore simply because of these cleanups, but we decided to clean up once and for all. Those cleanup, according to me, are all done and dusted. So that's how I would respond to your question.

The next question is from the line of Jay Mehta from Edelweiss.

Chirag here. Sir, first question is slightly strategic one in nature. So how would you look back at your acquisitions in, be it Wescon, be it PHL, did the -- the underlying restructuring part was not anticipated or they were more driven by market dynamics? Because we are -- we have done a lot of restructuring since acquisition, both in Wescon as well as in Phoenix?

Yes. At Wescon, I think I must say that we lost a year or so because of the leadership issues, not for any other reason. But whenever the new CEO takes over, I think he always will have his own way how he wants to operate and how does he wants to clean up balance sheet in terms of whether it is stocks or the valuation of stocks or inventory methodology, et cetera, et cetera. So that's what has happened in Wescon. And Wescon, I would say that the real SENA strategy has only initiated in the last 6 to 9 months, although that's what we started talking almost 2 years ago when we acquired, but that push was never given in the previous regime. I think that is what is happening now. But of course, this year, the growth would be very hard to come by simply because all the -- even the U.S. markets are down completely and there will be negative growth in the U.S. market. So is -- the strategy was not right? Absolutely correct in terms of saying that we think that it was the perfect strategy for us to give a 3 plant outlook to customers. And then that was not properly presented. So we have now changed the structure, the people, the team and the business development itself. The new VP is somebody who's really a go-getter. I'm pretty sure we'll see the numbers changing in the near future. To some extent, I will come to Luxlite and Trifa that the original strategy was to have 2 separate entities. I think that was to think that one entity will focus on Europe and other one will do the other exports of Phoenix in the world. So that was the strategy with which we operated till the 2 Managing Directors were separately operating these companies. But then we realized that routing anything to Europe is adding to the cost and it is a very highly cost-sensitive product. So that cost cannot be or will not be accepted by the customer. So what we have done is that by doing now a lot more focus on direct exports, the reasoning for having 2 separate entities, 2 separate warehouses, 2 separate strategies, that has changed. The only change in strategy has not happened in Wescon, but change in strategy between Trifa and Luxlite has happened. That's why we went ahead with this single warehouse, had people let go in Trifa and the whole thing has been restructured. I think that was a more complete restructuring, and there's a change of strategy, I agree with that. Whereas in Suprajit Europe and our new facility, it was a requirement of customers. And with the increased business, anyway, I think we will require on a longer-term 2 warehouses. So it had that one-off expense for 1 year. So that will not be a repeating type.

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

Sir, my first question was related with the recovery in the Indian market. So what's the sort of recovery are you sensing post the opening of lockdown and most probably demand of the lower-end bike will improve as well as the scooters also? So how do you see -- it could be an opportunity for your company? Because there will be an extra cable that will be used in the CBS as well as in fuel injection system also. So how do you -- what sort of the guidelines for you for the -- this cable business for the FY '21?

I wish I had, what I would call, a magic wand to say what's going to happen. But we think -- it's very difficult. I would like to get some of you -- participants' view on this. But we think first quarter may be around, say, 20% is what the business will be. Second quarter, anyway, may be 40% to 50%; and the second half, probably anywhere from 70% to 100%. This is the kind of range. It's a fairly large range. So I'm talking about anywhere from 65% to 85% would be the business. This is all assuming that second half is good, means that there is no further lockdowns and that there is a reasonable recovery in the second half. Now the way COVID is spreading in India with -- we have not even come to the peak of the bell-shaped curve, it is still going up, we don't know how the thing is. So whether there is a talk that people will prefer individual transportation, don't want to go in the public transport, COVID fears, true. There is an argument in that favor that would favor a 2-wheeler, I agree. But at the same time, you must also realize with the kind of job losses that's going to happen, a lot of vehicles will be seized and will be sold in the second-hand market. So there will be second-hand market also which will grow phenomenally, I think, in this year. So that would mean not so great for OEMs. So I have no answer. So we are watching it very carefully. All I can say is that there seems to be a good noise from the OEMs in this month. But only by end of the month, we'll really see whether the numbers that has been brandished is actually going to happen. So we have our own doubts. So we are very skeptical that the numbers that you have seen in the newspapers of some of the customers will actually fructify, I'm not so sure. Based on -- we are half -- almost halfway through the month, we don't see that really. So I have no answer, frankly, to you.

Next question is related with the Phoenix Lamps. So what is the reason for the sharp fall in operating margin in 4Q? So now it has come down to around 4%. So is there any one-offs in quarter 4 in Phoenix Lamp?

In -- on a consolidated, we have said, no, there is also -- there are costs that we incurred at our subsidiaries, Trifa and Luxlite. So that has certainly affected the overall numbers for the quarter, yes.

The next question is from the line of Pritesh Chheda from Lucky Investment.

Sir, I just wanted to know, in case of wiring harness, what is the content increase...

Sorry, I can't hear you. Sorry, you are very disturbed. I can't hear you.

Is it audible now?

Yes.

In wiring harness, what is the content increase, sir, if you could give some highlight there? And FY '20, you would have seen that content increase coming in quarter 4. So for FY '20, what would be the contribution to your top line on account of content increase, if you could give some color there?

So general content increase has been because of certain change in the design of the vehicles during BS-IV to VI and also because of an extra cable on CBS. On the CBS, that has already been there in the full year of last year, so that will not add to the -- any content increase. On some changes in some of the BS-VI vehicles, there are 2 throttle cables and some extra cable for multiple use, things like that. So the content of that, it's not that significant, maybe 2%, 3%, I think, overall, extra content, it's not that significant. But there is a positive trend. It is not negative. That's all I would like to say.

And second, in case of Phoenix, what portion of our revenues will be aftermarket in the INR 300 crore revenue that we report?

Only Phoenix, is it? I think if you can come offline with Medappa, he will tell you. I don't have it off-hand actually.

But is it fair to assume that large part is aftermarket?

Yes. Okay, okay. Let me give you -- okay, sorry, I didn't catch the question. In Phoenix, I think it's about 30% is -- if you look at Phoenix as a group with the subsidiaries, only about 30% is in OEM and 70% is in the aftermarket.

Okay. And lastly, does wiring harness have any portion of aftermarket business?

Significantly. Actually, last year, we had a very good -- nearly 20%, I think, of -- 15% to 18% of our Cable Division is in the aftermarket. By the way, we don't make wiring harness, we make mechanical control cables. Wiring harness is an electrical cable. What we make is a mechanical cable, just to clarify.

[Operator Instructions] The next question is from the line of [ Saurabh Shroff ] from [ ORV Investment ].

Congratulations on a very good set of numbers. Sir, just given the environment that we are in and I sort of agree with you that you can't give your view. Wanted to just understand what actions are we taking and if you could quantify on the cost front to maybe bring breakeven levels down and given the low utilization that you spoke of, just so that we get a sense as to where numbers would look for the first half maybe and going ahead?

Yes. Well, a good question. I think all of our current focus is how do we bring our costs down so that our breakeven is down. So first of all, I think all the CapExes, whether it is larger, capitalizable CapExes or even smaller CapExes, which hits our expenditure, which hits our P&L, they're all being, let's say -- because there's a lot of time, we are also doing even micromanaging the units on those fronts just to make sure that there is no spend that is not absolutely necessary. We are not doing any new CapEx. Basically, our CapEx would be just the maintenance CapEx for the year. We are working on seeing how we could change our operational systems to the best possible ways to improve our productivity per mandate, productivity per hour. We are also -- as you know, we have already announced certain salary cuts for various levels going up to 40%. I, as the Promoter Chairman, am not taking salary at all at this moment. So like this, we are also trying to now tighten our belt in terms of what is required for operations, how we can bring the cost down at various spheres, whether it is a white collar or blue collar related. So there are multiple activities going on. And we are hoping that, that will become -- not only bring our breakeven down, but it will also be long-term positive by bringing our cost structure itself down. So that's what we are doing today actually, as we speak.

The next question is from the line of [ V.P. Rajesh ] from [ Anvil Capital ].

Just on the European businesses, we hear that the governments over there are providing lot of subsidies to the automakers. So are we expecting any benefit because of the subsidies being provided by the governments over there? That's question number one.

Okay. Yes and no. To some extent, yes. In U.S. -- in Europe, there is what they call as a furlough support by the U.K. government, which means that if you put people on furlough and keep them on the roll, to some extent, their salaries is paid by the government. We have taken credit of that. It's not a very big sum, but some amount has come. In -- it is not so much in Europe, particularly not much in Luxembourg where our now business is operated. There is some minor benefits that we have been provided, nothing really to talk much about. But I think it's a lot more interesting in the U.S. actually. In the U.S., they call Payroll Protection Plan, which is a fairly large federal government-funded scheme, where small businesses of below certain, I think, 500 people or whatever size, get significant support by the government to keep people on the payroll and they will basically pay. They didn't want the employment to hit. I think something $400 billion or so was allocated for this fund. And actually, Suprajit has got a PPP loan of nearly $2.2 million, of which our current estimate is almost $1.6 million will be written off as support. So I think U.S. is probably far ahead of rest of the world, and they are too fast as well. I think the PPP loan came to us in 48 hours after it was -- we applied for it. And I wish governments elsewhere, including ours, sees these kind of programs and does something like that.

The next question is from the line of [ Varun Gyani ] from Sharekhan.

It is 11:45, moderator. I will take 2 more questions. We have another con call organized at 12:00, so I need to get off. So we will take 2 more questions if there are.

Sure, sir. The next question is from the line of Anirudh Shetty from Solidarity Investment Manager.

So sir, I just wanted some industry data from you. Earlier, you had mentioned how globally customers are looking to derisk themselves from a particular country. So could you just give a sense of how big this country would be in the auto eng space? And if you have data on the products that you are in and how big they would be there, that would be really helpful.

That country, I think you all know probably. So let's say, for example, people like -- a country like China is one of the largest auto component country in the world actually. So that's the one we are talking.

Okay. And sir, my last question is, so if I look at your return on equity, at a consol level, last 2 years has been a bit of a tough year, so the numbers are low. But if I look at it prior to that, we've been around 20%, 22%. So once things normalize, and whenever that happens, do you expect the numbers to kind of revert back to those levels? Are those your steady state kind of numbers to look at?

I would think -- I would like to believe that, yes, it is. We have always been in those ranges in the past. And once these uncertainties are over, once we are back to normal businesses, I don't see why we should not get back there.

The last question is from the line of Abhishek Jain from Dolat Capital.

Sir, my question is related with the SENA. Despite the fall in the revenue in SENA Division, there's a sharp improvement in the margin on a sequential basis. So can you throw there some light...

Sorry, sorry. I didn't get the question.

Sir, in SENA division, despite the fall in the revenue during this quarter, there's a sharp improvement in the margin. So can you throw some light on the -- what are the triggers for the margin expansion?

You're saying there's an increase in margin in the last quarter in SENA?

This quarter, there was a sequential improvement in the margins in SENA Division.

Medappa, do you have any comments? Because I can't think of any reason why there is an increase in margin in the last quarter.

Yes, we can have offline discussion, sir.

Because I don't recall there is -- according to me, it is in the same levels actually. But you can check with Medappa later on, on this. Thank you. So with that, I think we will conclude the thing from our side. I would like to thank Anand Rathi. And I'd like to you all the participants, if there's some more clarification that you need, please be in touch with Medappa for any clarification. All I can conclude by saying is that we are doing everything that we can to make sure that we go through these difficult times with minimum damage. And our belief is that once reasonable normalcy comes, we'll be back to action. So thank you so much for your interest.

Thank you. On behalf of Anand Rathi Share and Stock Brokers, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.