Talbros Automotive Components Limited (505160) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Talbros Automotive Components Limited Q1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Talwar, Joint Managing Director of Talbros Automotive Components Limited. Thank you, and over to you, Mr. Talwar.

Thank you so much. A very good afternoon, everybody, and a very warm welcome to our quarter 1 earnings for '24. On the call today, I'm joined by Mr. Navin Juneja, our Director and our Group CFO; and our Investor Relations advisers from Mumbai. The results and the presentation are uploaded on the stock exchange and the company website. I hope everybody has had a chance to look at it and actually see the strong performance that we have given in the quarter 1 of this year. I'll give you a small overview of the industry and the economy, followed by the company's performance. The domestic automotive component industry and expecting a double-digit sales growth in FY '24 falling as higher record turnover last year. The demand is projected to remain very, very strong. According to [indiscernible], the sector achieved a turnover of INR 5.6 crores last year, marking a remarkable growth of 33%. Now with the supply issues like semiconductor availability, RM cost, logistics involved, the industry is all set to maintain its robust performance in the year FY '24, [indiscernible] positive sign for the auto sector as a whole. The sector's positive outlook is also driven by strong exports and growth in the domestic aftermarket. In addition, being election year, there will be a lot of spend happening by the government on infrastructure, whether it's highways, roads, railways, which will result in more and more cars being sold, which is the case that we see today. And coupled with the entire shift of the Indian mindset of a young and youth to be a consumption economy. So we see a lot of buoyancy in the entire auto sector. Even the 2-wheel industries, which is lagging behind, has shown some promising recovery. As the industry moves forward, we'll focus on enhancing exports and reducing imports, which accounts about 30% of the total imports. Coming to our company's performance. Talbros Automotive has really begun FY '24 in a very strong footing. As you can see from our results, we achieved the highest ever income at INR 185 crores for the quarter, a growth of about 20% Y-o-Y. Our EBITDA grew by 34% to INR 28 crores, with EBITDA margins touching 15% for the first time. And our PAT stood at INR 17 crores for the quarter. Net assets also grew by about 46%. As we mentioned, in the order updates, we have secured orders worth INR 1,000 crores received over last year. These orders are split across various companies, various divisions and also various automobile OEMs. These orders are from export market as well as the domestic market. These orders will be executed over the next 5 to 7 years. Out of this order book, about INR 215 crores come from a leading established export OEM for electric vehicles. So almost about 21% of the orders is going to EV and that into export as well. Let me talk a little bit about divisions. Our gasket division has shifted focus towards reaches while constantly diversifying the segment portfolio and [indiscernible] exports. Revenue from [indiscernible] in quarter 1 stood at INR 10.6 crores and the sales to EV [indiscernible] 31 lakhs, but it's a start. We're also now getting direct products from EV vehicle manufacturers for to our Gasket division. It's something like plastic and rubber mix, which is very, very small at the moment, but it's a step in the right direction. We have a very strong order book in the heat shield division from clients like Maruti, Kia and Hyundai, and this realization you will start seeing over quarter 3 and quarter 4 of this financial year. The forging business is an outlier. It's performed extremely well with a growth of 32% for the quarter. And we were seeing a lot of traction from the overseas market. A lot of business is coming to us from a big construction and offshore load highway OEM in the U.K., also with car maker in the U.K. as well. And from this particular division, the EV segment contributed about INR 4.8 crores. We are at an [indiscernible] point of our joint ventures. Our joint ventures have done very well this quarter in terms of revenue growth as well as EBITDA growth. During quarter 1 FY '24, maintaining our hedge portfolio our sales to 2 and 3 wheelers accounted for 20% of the contribution. PVs made up 31% with Maruti and Tata leading the way. Heavy commercial and light commercial vehicles made up about 25% of our sales revenue and agri [indiscernible] sector made up about 10% of our revenue. Our reviews from the PV segment because the JVs are performing well and supplying directly to TVs like Tata and Maruti now stand about 31%, with a growth of about 26% over last year. Even our joint venture, Marugo Rubber, which supplies the E20 hoses to Maruti has set up a new facility in Bawal, which will take capacity up to almost about INR 300-odd crores. For quarter 1 FY '24, exports contributed 14% of our Gasket revenue, 54% of our revenue are forging from exports, 19% of exports came from Marelli and 4% of Talbros Marugo Rubber. We are dedicated to achieving our long-term goal [indiscernible] ourselves as a prominent global leader in the automotive components manufacturing industry. Throughout the course of our endeavors, we're determined to maintain our progress in development while simultaneously looking towards the future by ensuring complete persistence of our performance. The company has put a lot of emphasis in R&D and is putting a lot of trust in gaining more and more market share within India. There are a few LCV manufacturers in the country, which still we have not penetrated into. We will do so in the near future. By FY '27 we intend to have a group turnover of INR 2,200 crores with an export contribution of about 35%. With this, I request Mr. Navin Juneja, our Group CFO, to update you on the financial performance. Thank you.

Thank you Anuj, and a very good afternoon and a warm welcome to all the participants. Let me begin with the financial overview. Our total revenue for Q1 of FY '24 stood at INR 185 crores as against INR 155 crores, a growth of 20% on a Y-o-Y basis. EBITDA for Q1 of FY '24 stood at INR 28 crores as against INR 21 crores, a growth of 34% on a Y-o-Y basis. EBITDA margin for the quarter has improved to 15%. That for Q1 FY'24 stood at INR 17 crores as against INR 12 crores, a growth of 46% on a Y-o-Y basis. That margins have also improved to 9.4% for this quarter. In the gasket business, including [indiscernible] offering to the [indiscernible]. For Q1 FY '24, our standalone gasket sales was INR 142 crores as against INR 106 crores in Q1 of FY '23, a growth of 15%. Total value of [indiscernible] was INR 23 crores or in Q1 FY '24 as compared to INR 22 crores in the Q1 of FY '23, a growth of 5% because this is directly linked to the growth of Hero and Honda. This segment saw a combined window of INR 22 crores in Q1 of FY '24 versus INR 18 crores in Q1 of FY '23, a growth of 22%. Now coming to our Forgings division a revenue in Q1 of FY '24, importing division grew by 33%, INR 264 crores as against INR 48 crores in Q1 of FY '23. EBITDA in Q1 of FY '24 grew by 71% to INR 11 crores as against INR 7 crores in Q1 of FY '22. Now coming to our joint venture Magneti Marelli Chassis Systems Private Limited, the revenue for Q1 of FY '24 stood at INR 57 crores versus INR 45 crores in Q1 of FY '23, listing a growth of 27% on Y-o-Y basis. For Q1 of FY '24, EBITDA of this division stood at INR 6 crores as against INR 4 crores in Q1 of FY '23, a growth of 44% on Y-o-Y basis. Coming to my last joint venture of Talbros Marugo Rubber Limited, revenue stood at INR 30 crores in Q1 of FY '24 versus INR 17 crores in Q1 of FY '23, reaching a growth of 76% on a Y-o-Y basis. For Q1 of FY '24, EBITDA stood at INR 3 crores as a raise INR 1 crore in Q1 of FY '23, reaching a growth of 238%. As we look into the future, we are optimistic about the sustained growth prospects in the automotive industry. Telcos has taken a significant step to catalyze on these opportunities. We are well positioned to achieve our targets, and we believe that our margins are sustainable. That's all from our side, and I will like now to open the floor to the question and answers. Thank you.

Thank you very much, sir. [Operator Instructions] We take the first question from the line of [indiscernible] from Scientific Investing, please go ahead sir.

Hello sir, first, congrats for the great set of presents and providing clarity on each of the businesses. The investor presentation is very useful. Two questions I have. One, if we look at the EBITDA to cash flow conversion trend over last 8 years versus 5 years versus 3 years, it looks like the rate of conversion of EBITDA to cash flow is all in a little bit. So is there more focus on growth versus cash flows? I would like to know your views and second, how are we looking at the export market, given things are not great in U.S. and Europe. So how do you see our aspiration for 2027 with respect to current global slowdown?

So first, to answer your question of conversion of EBITDA to cash. Our focus here is to reduce my debt, number one. Number two, utilize cash approvals for maximal extent in CapEx. I don't want to borrow for the CapEx. That is one of the reasons I think that you can see this whatever you said, is that our focus is to reduce debt, increase my debt equity ratio. It incurred my CapEx [indiscernible] utilization from the internal approvals, not from the borrowings. Second question is about our focus on export. We are not, I think, not really any slowdown in Europe and U.S., as you said, in our businesses as we are growing in businesses of agri and offloaded majorly and the new EV platforms, which is being launched by vehicle manufactures in Europe. So we are having a very, very good production, and we are replacing some vendors. We were there using the new technologies, converting my in the case of off loader [indiscernible] in U.K., we are converting my parts [indiscernible] budget into Forgings from [indiscernible] reducing the price of the component included in the strength of the component and reducing the weight. So [indiscernible] speaking, we are not facing any problem in that. In fact, we are getting more production from our new OEMs based in U.S. and Germany, who has recently visited our facility and approved our [indiscernible] facility, we expect it to grow much faster than we anticipated. And we are quite hopeful about achieving our target when we have [indiscernible].

I'd like to add to Navin's point. You see today Talbros has embarked upon a journey of exports over the last decade when the exports used to be nearly 8% to 12%, and now it is about 25%, 27%. So the current customers are giving us newer products, current customer in as heavy weighted products and some new customers are moving from old technologies to new technologies to adopt light weighting. So we are in the right zone. We did see a slight slowdown with some of the customers like Jaguar, Land Rover, et cetera, and BMW. But we are increasing our portfolio per vehicle and new customers. So we see no hindrance in the short term. Thank you.

That's a lot, so that is very heartening to hear. Just on the first question, so just let me repeat. So my question was more around the EBITDA to cash flow from operations. And if I can take the numbers, the 8-year average FICs almost, we were converting 65% of EBITDA into cash flow from operations. But if I look at the last 3 years of data, it's around 55%. So is it a temporary season [indiscernible].

In some cases, my money is getting blocked in that the more export, the more the conversion cycle is a little late because all the export customers are payments are coming from 140 to 150 days. The more the exports, the more the money is blocked in my records and stocks. That is what [indiscernible] and we have opened warehouses now before 4 years were not there. Now, we have got 2 warehouses in U.K., one warehouse in U.S. So my message [indiscernible] there itself, but everything is factored in the pricing. So that is one of the reasons for that.

Got it, sir. Got it. And thanks for all the answers and wish you all the best for coming quarters.

[Operator Instructions] We take the next question from the line of Riddhesh Gandhi from Discovery Capital, please go ahead sir.

Hi sir, and congratulations on your numbers. Just had a question we are kind of guiding towards almost over [indiscernible] growth over the next few years compared to FY '23. Just want to know the key drivers of this growth? Is it predominantly export? And is it on the Forgings side? And is it because of like new clients? Because I'm assuming the obviously industry isn't growing as quickly. So is this one of market share gain, which we are getting? Just wanted to understand that?

Sir, the growth is coming first, primarily, all the businesses are growing. The major growth is coming from Forgings which was lately, we are targeting last year we were around [indiscernible]. We are targeting a target of INR 500 crores -plus business in the next 4 years in this verticals plus Magneti Marelli, which were around 200. Last year, we have targeted around 700 over next 4 years in this business. And my [indiscernible] which was around 423 something last year, expected to touch around INR 700 crores again in the next 4 years and [indiscernible] from INR 84 crores last year is slated to be INR 200 crore plus in the next 4 years. So all the businesses are growing is because of various reasons, every business has different reasons. And we are working, I think the direction is very clear, and we are getting orders for that. Last year we got out on 1000 crore. And in the first quarter itself, we are [indiscernible] INR 400 crores. This is a combination of export orders be primarily EV segment plus new customers, we are adding new quarters, we are ready. We are a combination of all these factors.

Yes. So add to Navin's point, I think, to be honest with you, what you said, one is gaining market share in the country by spending money in R&D, number one. And number two is export customers like I told you from the same customer, we are now deploying it horizontal during the [indiscernible], we had a customer that only Forging focus. Now he's moving towards our chassis division. He is moving towards our [indiscernible] division. So that's also playing out very well. The China [indiscernible] strategy is helping India and India's cause as well.

Got it. All right. Thank you. And that's' all from me. All the best.

[Operator Instructions] We take the next question from the line of [ Dipen Shah ] [indiscernible] please go ahead sir.

Yes. Good afternoon, Anuj and Mr. Juneja, congrats on a very, very good set of numbers. Just had one question. Most of the explanations are given in the PPT. So no major questions. Just one thing on the margins. Our 2 subsidiaries, Marugo and Marelli, they are currently operating at about maybe between 9% to 11% margin. Now how do you see the trajectory of these companies over the next 2 to 3 years in the overall sense that you are expecting margins to remain flat over the next 2 to 3 years, that's what you say in the guidance. But how about the margins in these 2 subsidiaries, whether they can scale up to 15% or they will remain around the current revenue?

Sir, first, coming to Marelli. Their target is to increase the EBITDA margin to about [indiscernible] EBITDA margin to touch 14%, approximately between 13.5% to 14% by [indiscernible]. And Marugo will be able to touch EBITDA of around again 13% by that. So their margin will also improve, definitely will improve.

So then is it fair to assume that by '26, '27, most of the businesses will be in the 14% to 15% band?

So approximately, we've said it should be Gasket it should be around [indiscernible] stand-alone should be around 15% plus. That's [indiscernible] and Marelli should be around 14% and Marugo should be at 14%. So average, you can take 14% to 15% all the businesses.

Okay. And just another question on a longer term. Any idea or any intention of launching any new products? Or should this INR 2,700 crores come from the existing products only that's it, thank you so much.

Whatever the plan we have given for INR 4,200 crores of production sales in FY '27 is from the existing companies but different products will be added in that company. But in the scope of JV, we want to add one or two steps like we added here in Gasket division, plastic parts to be added here. All this does not include any other organic growth like acquisition, I think new joint venture has not been added here.

Okay. Thank you so much, sorry it was INR 2100 crores, I said INR 27, but thank you so much and all the best.

I hope you're right.

We also hope that Anuj, thank you.

Thank you. We take the next question from the line of Ashish [indiscernible] from Ambit Capital, please go ahead sir.

Hi, am I audible? I was just saying in the last few years, our growth trajectory for the last 3 to 5 years have been around 15% to 19% kind of a top line growth. And now you're guiding for, I mean, almost tripling the top line in the coming 4 to 5 years. So I know you mentioned on the view of this aspect, how we would want to achieve. But just wanted more elaborate answer on why exactly, are we gaining significant market share because the ultimate market is actually not growing at that kind of pace? And are we gaining significant market share from our clients? If you can be more elaborative from each division perspective?

[indiscernible]. As you know, we have got new orders of last INR 1,000 crores last year. Now the order has been converted into commercial season. In the first quarter itself, you can see [indiscernible] sales in this division is around INR 11 crores. Last year, it was out INR 2 crores to INR 3 crores. So that is #1plus my [indiscernible] new conversions are happening in being added in this year of those order that we added about 1 or 2 years for. This is one of the reasons. I think we are getting good market because the economy is also growing domestically. I'm talking about here. They are also growing. So we are getting more market share. And we have developed all the BS6 [indiscernible] whatever are there, we have developed in last 2, 1.5 years that now starts showing up. Numbers are being start moving in this direction. This is one from gasket [indiscernible]. On the porting front, we have got a huge order last year. There was no sale of that. In the first quarter, we did a sale of [indiscernible] of that particular customers. Plus we have added more customers to add it. The growth is coming from that particular order, which we have acquired. Merely, the growth is coming from the growth of Maruti and Tata Motors, as you are aware, the numbers are growing as compared to last year. Thirdly the JLR, which was required last year are now being converted into commercial sales. Talbros is coming from there. Marugo the growth is coming from the hoses for EV vehicle last year, it was nil. Now the whole growth is coming from that segment plus the number of [indiscernible] also going down. These are the broad number, things we can [indiscernible] and this growth will continue.

So what is the capacity we have currently? And what are the CapEx now? Utilization level?

Utilization level is different for different divisions, in gasket it is about 90%, in forgings 82%, in chassis around 85%. In Marugo, it's again 90% approximately. And regarding the CapEx, we have already [indiscernible] at 4 years we are we will have a total CapEx of INR 200 crores more plus in all the divisions.

So in this case, I mean, we are already operating at a fairly high utilization levels. So do you think this kind of [indiscernible]?

Yes, this year, I'm doing CapEx of around INR 15-20 crores in gasket and [indiscernible] division, around INR 40 crores in holding division, [indiscernible] will again grow a CapEx of INR 30 crores in this year. Marugo will do a CapEx of INR 5 crores this year. So we are adding, no order is coming there, there is a time for conversion. We had divested before that.

So I just want to understand if this growth will be more back-ended since we will be doing the CapEx and maybe in FY '25 would be a higher growth kind of year much faster than FY '24 because once this new capacity comes in, only then the higher growth percentage from a top line perspective , would that be a fair assumption?

Yes, that is a fair assumption, of course, we need to go up to 4,200 target. Last year, we got around INR 1,000 crores, I'm talking about the [indiscernible]. This year, first quarter, INR 300 crores. So we have capacity much like before, we have capacity [indiscernible] of course, we're adding more [indiscernible] more growth we expected in the last quarters. So I think it's more or less it would divide us equally, it will be more or less it fair to say that.

Thanks, if I have any more questions, I will [indiscernible].

[Operator Instructions] We take the next question from the line of Naysar Parikh from Native Capital, please go ahead sir.

Hi, thanks for the opportunity. I just want to understand on each business, what has been the kind of order flow in this quarter? And coming to [indiscernible]. I was asking on the heat shield business. Can you just give an update on the kind of orders you've received this quarter? And how do you see that business going forward?

So as of today, we have an order take the total, first, [indiscernible] is about INR 50 crore order book is available with me. But something that we already converted to commercial products here, something will be converted over the next third quarter or the fourth quarter and the way inquiries are coming and we are engaged with our customers. I expect this business to be double in the next 2 years, to be around INR 100 crores by "26-27 easily. This year, I am expecting to take a turnover of about INR 44 crores, INR 45 crores in the business. So the way we are getting inquiries and we are planning to put this also we are trying to expand our [indiscernible] facility very shortly. I think by year-end, we'll extract the facility because a lot of traction is coming from the local OEM based in that belt. So plus the export orders, we are expecting on this business. By '27 we should be around INR 100 crores in this business easily.

I'd like to just add to what Navin said, I think with our partners, [indiscernible] Japan, with the Indian customers such as Maruti, Tata, Mahindra, Hyundai Kia, I will be very sure that our penetration will be about 80% share of business. So it maybe not a very large turnover business like Forging, but it's a very niche business to get into aluminum day. It's for the light-weighting, it's for the new emission norms, it is for the new thing on EV vehicle. So it's a massive potential where global potential of each is about $27 billion globally the potential. Now we'll take this technology to outside as well. We'll try and take it to company, we already supply and to JLR, but very small heat shield. But now even our partner in Japan as in BOS, Japan going down, India shining, lets tie up hands together, let's go to global areas. So solid potential in there.

Got it. And I wanted to talk a bit about margins, if you look at on the gasket side, right, our margins are, I think, a flat around 13%, 13.5%. So I just want to understand over there, do we see individually within the gasket side margins going up, especially in this year or the next year given everything around raw materials and everything?

Sir I want to add, I think the margins are good in this business. And the more in the first quarter of course because more OEM was there the first quarter, the second quarter, third quarter, you can see more export and are RE coming in, the margins will improve. But I think you should see that some expenses, we can't allocate proportionately between Gasket and [indiscernible] sorry for that. But because we made different profit loss, some expenses on building in the gasket business, they are not exporting like oil and like GST, et cetera. So sometimes it becomes a little unfair to gasket for that. But for otherwise, the margins are 14% there. If we do the 2-way accounting. But because being a single company, we can't do that.

Understood. And sir, last question, what is the order book as of either June end or today?

Sir, July was a good month for us again. And order book at present, if we get 3 years projection, then we will be quite healthy.

We take the next question from the line of Akash Mehta from Capaz Investments. Please go ahead sir.

Hi sir, good afternoon and thanks for the opportunity. I have 3 broad questions. Firstly, on the segment side, can you just please discuss the Q1 FY '24 performance across all the segments in terms of the 2-wheeler and passenger vehicles and the other segments?

laid out that in the opening remarks that how being a hedge portfolio, we have order book in each and every segment, I'll just repeat it again, about 20% of our revenues came from the 2 and 3 wheelers in quarter 1. PVs went up 31%. So that's a growth of about 26% over last year with getting more market share with Tata Motors and Mahindra and Maruti Suzuki. Commercial vehicles was about 25% and the tractor was about 10%. Tractors 10 because of the fact that this has been a little bit of a muted for the tractor industry.

Do you expect this to be on the same line going forward?

Well, it will be similar. We can't really predict a couple of percent points up and down. I think PVs will probably continue to dominate and so commercial vehicles also in India. That's what we see. Maybe next 2, 3 years, maybe 2 wheel has come down to about 16%, 17%, and PV goes up by 2%, 3% and commercial by a couple of percent.

Okay. So like JV performance, JVs have performed really well. So just if you could throw some more color on the update on the JV what's happening?

The 2 joint ventures, which is Marelli for chassis and Marugo for rubber, they both are basically, I would say, about 100% in the PV space. unlike our other companies like Forging and Gasket are into commercials and 2-wheelers and offshoot highway. And in Chassis, what's happening is that we've actually got a very large share from Tata and Maruti in India and a very large business orders coming from JLR in the U.K. for sheet metal welded components and chassis well. So that's something solid. So the pretty much these 3 customers take credit out there and only growing. And I'm very hopeful with Jaguar, Land Rover margin is improving. Now they're putting more money into CapEx, they're taking more and more vehicles that sell more, like the Defender, the Range Rover Sport, where we are. So that will be some rise for the Talbros Group. Not only with Chassis Forging, but I got my JV right now. Marugo Rubber has benefited the most with this whole move by Mr. Modi and Gadkari for the E20 fuel, which is the biofuel, where you mix ethanol into petrol and you reduce the consumption of oil imports. So there, we have a new product which we make causes and that is about product revenue is about INR 40 to INR 50 of product of that thing and of the wholes, and that's where we're gaining a lot of market share for Maruti as well. So this is the answer for the 2 joint ventures that are growing. And there's further continue to grow in the next 7 to 8 quarters because of the order books that we have and we're acquiring more business.

Okay. That's the incoming figure?

And also just to add on to it in the Chassis JV, we are more and more with the model we are very well like Nexon, Tata Punch, we're in those kind of vehicle platforms. So that's also lucky that we are part of that.

Yes, we have also won the order on Maruti EV, which is going to be launched in '25, '26.

Okay, thanks for that elaborate, [indiscernible] Just to close out the third question on the demand scenario panning out, how are you seeing that planning out? And since we're focusing on exports and increasing our contribution over the next 4 to 5 years, if you could just elaborate on that strategy?

Demand is okay. Our endeavor is to [indiscernible] the head of the automotive industry. And we've always been guiding for the last many, many years that we are focusing exports also at about 25% now, should go up to 30%, 32% next 2 years. We are working very aggressively with our customers in U.K., Europe, the U.S. to gain bottom of traction and then also preferring this whole China [indiscernible] strategy. So I think that it's favoring India also in a big way. So with the same customer, new product portfolio, same customer, we are adding more divisions to it and new customers, new technologies. That's what it's working out. And let's not forget, India is shining and we are trying to gain more and more market share in India with every automobile vehicle manufacturer in the country as well.

Thank you sir, the next question is from the line of Ketan [indiscernible] from Robo Capital, please go ahead.

Hello, sir, thank you for the opportunity, I just wanted to know revenue and margin guidance for FY '24 and '25.

Margin guidance, we have given till FY '27. So we expect on a stand-alone basis, for this year, we should grow about whatever 17% to 18%, we should be able to grow on top line on a stand-alone basis and the [indiscernible] we should grow by 20% plus in this year. And on my EBITDA margin should be around 15% for this year, definitely, for next year, it should improve a little bit further. And my top line should also be increased by about 15% to 20% basis of that. I can say as of today, maybe after 3 months, some better connectivity there [indiscernible].

[Operator Instructions] We'll take the next question from the line of Mr. Ashish Garud from AMBIT Capital. Please go ahead sir.

Hello sir, this is Ashutosh Garud, just to correct name. So just wanted to understand, you're speaking about 15%, 20% top line growth, won't we have to grow much faster to achieve the goal which we are setting as far as the top line aim is concerned, [indiscernible] and would that also be just to add, would there be some kind of inorganic approach to that as well?

So whatever the position we are given for INR 2,200 is sort of inorganic growth, okay? And first of all, this is the first quarter, see the growth is 22% of all basis. So we are hopeful that we should be able to maintain this growth may be better in the last half year. And the more that clarity will come, the more the time will pass that more priority will come, we are quite confident of achieving our target for [indiscernible] quite confident. And this time, we call [indiscernible] also maybe next quarter, we will reach. You can see the better growth going forward.

And what is the current capacity able to do from a top line perspective from the current capacity, what is the maximum top line we can?

Yes. On the correct capacity, I can easily do on a console basis, around INR 1300 crores of business easily, but [indiscernible] but we added the capacity then more being added, I think by December the capacity will be ready for INR 1,500 crores plus.

Because what I understand, we already operate at 80%, 85% plus kind of utilizations in most of the divisions. So just wanted to understand how is it that we can do 1200 capacity.

Capacity are being added every quarter, the [indiscernible] will be added. Machines are being ordered every quarter basis, we foresee business the quarter for third quarter, fourth quarter, we add the [indiscernible]. So [indiscernible] we are adding good capacity in [indiscernible] division at present we are increasing [indiscernible] and the slide is going to be added in this quarter. So by the end of this year, we'll be ready for the INR 300 crore plus capacity easily.

Thank you. [Operator Instructions] We will take the next question from the line of Shanti Patel from Shanti Patel Investment, please go ahead.

Good afternoon sir, my question is, what will be the return on capital employed as [indiscernible] and what will be the return on equity capital at that date?

Sir, we are targeting a return of capital employed of around 40% over a period of next 4 years, okay? And return equity should be around [indiscernible] 40% plus easily. And return on equity should be, I think more than 25% by that time.

Thank you, ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.

Thank you so much for being a part of the earnings call for quarter 1, and thank you so much for being a part of this call. And we see a very strong future in the automotive industry, and we continue to gain further from it. Thank you. Bye.

Thank you. On behalf of Talbros Automotive Components Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.