Uno Minda Limited (532539) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Minda Industries Limited Q1 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinion and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sunil Bohra, Group CFO from Minda Industries. Thank you, and over to you, sir.

Thank you. Good afternoon, and a warm welcome to all of the participants. I hope you and your near and dear ones are all keeping safe and healthy. On the earnings call today, I'm joined by my colleagues, Mr. Tripurari Kumar. We hope you have had a chance to look at our financial results and the presentation that is uploaded on stock exchange as well as the company website. I will briefly discuss about the business landscape and then update on our performance in the preceding quarter, following which we will be happy to respond to your queries. Q1 of FY '21 has been an unprecedented quarter, which witnessed suspension of production for a significant period due to lockdown imposed by various governments to contain the spread of COVID-19 pandemic. It was followed by a gradual reopening in the second half of the quarter. The auto sector volumes declined sharply by 78% as against the volumes recorded for Q1 of '19/'20. The 2Wheeler segment declined by 78%, 3Wheeler by 77%, 4Wheeler by 84% and CV segment declined steeply by 88%. The large part of decline is on account of suspension of production, which resulted in negligible sales in the month of April, followed by gradual reopening of plants in staggered manner in second fortnight of May. With lockdown restriction being eased out in various parts of the country since June, started witnessing -- witnessed resumption of economic activity. Production level at June exit was close to 40%. Consequently, the revenues and profitability have been adversely affected across the segments. As you know, the automotive industry has been facing headwinds since more than a year now. We had been taking cost optimization measures even prior to COVID, and those efforts have been accentuated with the onset of pandemic and its resulted impact on the industry. Various cross-functional teams were set up in order to look at each and every aspect of the cost with an objective to optimize it further with a very rigorous review mechanism. This has led to containment of costs in most areas. We are happy to inform that most of our service providers have supported in the initiative. At this point, I would also like to thank and acknowledge the support from our employees who have also partnered in this initiative through temporary salary reductions. The overall production levels have since grown progressively to around 70% in July and around 80% in August of the pre-COVID levels. 2Wheeler segment has so far done better than the 4Wheeler segment, backed by good harvest and direct benefit transfer by the government to Jan-Dhan account holders. We are optimistic that preference for private transport in COVID times will ensure that demand outlook improves and vehicle ownership increases per capita. Indents received from OEMs month-on-month are also showing an improving trend, which to some extent might also be supported by the need to have adequate inventory before the festival season. And if the momentum continues, we might see September volumes to be in line or higher than the pre-COVID levels compared to September 2019. Secondly, as we know, last year, there was a lot of demand, which might not have fructified due to transition from BS IV to BS VI. Some part of that demand is also expected to convert and provide further support to the industry. Lastly, we hope the government will expedite the scrappage policy by taking concrete steps in that direction. Commodity prices have risen marginally in the previous quarter, while the rupee against U.S. dollar has been stable and range-bound. We firmly believe the growth will be back in medium term. Production at our overseas operations have also resumed, and the production levels in August have reached around 85% of pre-COVID levels in Europe, 75% in Mexico and around 60% in Asia. India has so far witnessed good monsoon, adequate and well-distributed rainfall, which augurs well for the kharif plantation. Accordingly, the rural demand is likely to sustain with sharp recovery in demand for two-wheelers, tractors and farm equipment on year-on-year -- year-to-year basis. As the data trends suggest, 2Wheeler may see sustained momentum and expected to lead recovery, followed by the passenger vehicles and CVs catching up fast. Now coming to our performance. You may refer to Slide #5 and 6. At a consolidated level, during Q1 of FY '21, the company registered a revenue of INR 417 crores as against INR 1,440 crores for Q1 of FY '20, registering a decline of 71% Y-o-Y. The revenue for Q4 FY '20 was INR 1,339 crores. As updated earlier, the decline was primarily on account of extended lockdown and low scale operations for last part of Q1 of '20. Our product portfolio and customer mix has supported in limiting the decline to some extent. As mentioned earlier, all the facilities are now operational across the globe and have witnessed month-on-month improvement in utilization levels. Despite adverse business environment and suspension of production to contain the spread of COVID, EBITDA loss for Q1 was at INR 71 crores in comparison to EBITDA of INR 172 crore for corresponding quarter in FY '20. EBITDA for the preceding quarter, this Q4 FY '20, was INR 122 crores. The company has taken steps to manage its cost in this unprecedented quarter, including negotiating its contract for leases, rentals, service providers, employee costs and other overheads. The company has taken actions to conserve cash, which is critical in time of crisis. The management is very cautious of making new CapEx decisions and is committed to its long-term expansion plans. PBT loss before exceptional items for Q1 FY '21 was at INR 156 crores as against PBT of INR 84 crores in Q1 of FY '20. The decline in PBT is largely on account of lower operating leverage and suspension of production due to COVID-19. PAT loss for the quarter was at INR 119 crores as against INR 56 crores in corresponding prior quarter. Moving to the product lines. You may please refer to Slide 7 and 8. First is being Switching Systems. The segment achieved a revenue of INR 127 crores for Q1, contributing about 30% of total consolidated turnover. While we had developed gear shifter switch and rooftop switch for PVs, for the first time, we have been awarded business for the same by a Japanese OEM. Moving to Lighting Systems division. The division achieved revenue of INR 119 crores for Q1, contributing 29% of our total turnover. As you know, we had some strong order wins for PV Lighting and have built robust order pipeline for India business, supported by technology from our recent acquisition with the Delvis. Moving to Light Metal Technology or what we call LMT business. It has achieved a revenue of only INR 26 crores for Q1, contributing to 6% of our total turnover. We are happy to inform that we have secured 1 order of LPDC wheel from another large Korean customer in their upcoming model. The new 2Wheeler alloy wheel plant is expected to be commissioned in September of -- which is coming month. Coming to Acoustic or horn businesses. The business has achieved revenue of INR 66 crores for the Q1, contributed 16% of our total turnover. Clarton Mexico has received orders from Ford for electronic horns in Mexico. Moving to other product businesses. It has achieved revenue of INR 80 crores for Q1, contributing 19% of overall top line. I am glad to inform that business has received order for Smart Plug for electric scooter. We have also been nominated for oil temperature sensor from a Japanese 2Wheeler OEM. Total borrowings as at 30th of June were at INR 1,159 crores compared to 1,180 crores for Q4 FY '20. Moving on to Slide 9. In terms of our revenue pie for the quarter ended June 30, OEM business accounted for 84% of total overall revenue and aftermarket business is around 16%. And in terms of segment mix, 4Wheelers have contributed around 53%, while rest is for 2Wheelers which is at 47%. Moving on to Slide #10, Harita Seating Systems. The merger scheme is now placed for hearing on August 24 with Delhi NCLT, which is today; and on 9th September with NCLT Chennai. As you are aware, the matter had been delayed due to COVID-19. Once we have approval in place from both the NCLT for the said merger, it will take around 3 months to complete the process thereafter. The rights issue of INR 243 crore has been launched by the company. The issue will remain open from August 25, which is tomorrow, to September 8. We hope this provides long-term value creation opportunity to all the existing shareholders. Also to note here that immediately post completion of the transaction, it will be EPS accretive since last part of the funds are expected to be used for reduction of debt. The company has been proactively managing its cost of fund and liquidity position and a significant portion of its working capital limits underdrawn. Also to note here that earlier, post lockdown was imposed, ICRA had placed our long-term credit rating under watch with negative implication in April. It has now been withdrawn and the credit rating has been reaffirmed at AA with stable outlook. The short-term rating continues to be at the highest level, which is A1 plus. That is all from our side, and now we can open the floor for Q&A.

[Operator Instructions] The first question is from the line of Ashutosh Tiwari from Equirus.

Firstly, on this new order from LPDC from Korean OEM. So in FY '22, what kind of revenue opportunity we have through LPDC LRVs?

Ashutosh, it's a little early to comment on revenue. As you know that in the previous quarter, we said we have got business from first Korean supplier -- Korean OEM. The supply were expected to start in next year, around Diwali, linked with their next product launch. Another Korean OEM, which you know, who the second is. We recently got an order from them as well. And that is also expected to have its production starting somewhere from middle of next year, provided the project is also commissioned.

So it will -- both the orders will be started, say, around -- in the second half of the next year?

Yes. But in terms of annual value or quantum, it is roughly around 75,000 wheels a year.

Okay. Per year, from both put together?

No, no, from this order.

From new ones.

As a new one. Earlier one was how much? Earlier order?

Earlier that will be launched. So we have just been nominated. We'll let you know the time and the orders around that. But it will be on the same lines. That's for SUV.

Okay. Okay. And secondly, on this gear shifter switch that you've got, what exactly is this basically? I mean how it is used in a car? Is it like...

For locking the mechanism.

Okay. Okay. So -- I mean this is not a lever thing. This is something else, is it?

No, no, not lever.

Lever, we are manufacturing earlier where it is part of that another JV called [ TRMN ].

Okay. Okay. Okay. And this oil temperatures and sensor that we mentioned from our 2Wheeler OEM, a Japanese OEM, is this part of Sensata technology that we have acquired? The same technology?

Yes.

Yes. Yes. It is high temperature sensor, HTS.

Okay. Okay. So from this side, the sensors that we've got for BS VI and this one all put together, how do you see the revenue ramping upwards FY '22 and '23?

So it's little early, Ashutosh. We all know that the sensor project has -- as you also mentioned, has been delayed a little bit because of COVID, because the equipment were expected to come from China. And there were 3 aspects or 3 legs of this sensor project because when it was started, it was started with a very small HTS component, then we added cam and crank, and then we added wheel speed sensor. So the first component, which was our first product was HTS sensor that has been commissioned. The cam and crank and the wheel speed sensors will initially be sort of traded, cam and crank. And also in terms of manufacturing facility, it will be up and running in the fourth quarter of this fiscal. So it's almost a 6-month delay.

Okay. Okay. But I'm talking about -- I'm not talking about this year. I'm talking about '22 and '23. What kind of -- so we had actually talked about, say, around INR 300 crores to INR 400 crores revenue coming from over next 3, 4 years?

That is still intact, Ashutosh. That INR 300 crore INR 400 crore additional revenue is still intact from a 4-year perspective. If you ask me, for FY '21/'22, it should add a minimum around INR 100-plus crores.

The next question is from the line of Siddhartha Bera from Nomura.

Sir, first question is on the LMT side in this quarter. The decline seems to be much sharper than what we have seen in other segments. Any particular reason why it is so high?

So we all know that, first of all, the drop in PV has been significant in this quarter compared to 2Wheeler. And secondly, we all know that as of far, there are lower end of models being made more, which have steel wheels more than the alloy wheels. But as we move forward, we are expecting that to also pick up speed.

And you will appreciate that unlike 2Wheelers, 4Wheelers took a little bit more time. So only when June started, they had started the plant. So that is another reason why you see lower volumes, especially on the LMT side.

Yes, 2Wheeler also started initially because we know that one of the major 2Wheeler OEMs had a lot of export orders in hand. So that was also one of the reason why 2Wheelers initially were -- have done much better. And in fact, in terms of -- starting post-COVID, I think the 2Wheeler segment has taken a lead, as Trip also mentioned.

Okay. But the number you indicated that September can be higher than pre-COVID levels was for the overall company or for any particular segment?

Overall.

Overall company, got it. Secondly, sir, on the Delvis technology side, can you just highlight what will be the current order book or order pipeline currently we have due to this technology in the lighting sales?

So Siddhartha, you'll appreciate that last time we sort of -- and in fact -- unfortunately, the gap of last call and this call is only less than, I think, 6 weeks. We had, I think, 30th of June or something like. So I'm sure you appreciate you don't have significant movement in 5, 6 weeks. But the last time we shared that we have actually got 3 large businesses because of Delvis, 2 being LED tail lamps for both the Japanese OEMs, which we have got the first time. We have never got LED tail lamps. And we have also got a head lamp from MSIL. And if you see from value terms, all this put together is -- in terms of peak annual value what we capture is more than INR 150 crores.

Okay. Okay. So fair to assume that this should be visible from FY '22 onwards, right?

When the next model launches.

Okay. Got it. And lastly, sir, on this associates part. So this losses from associates has been significantly higher again in this quarter. Can you throw some color on -- I understand, I think it might be coming from the 3 major entities like Onkyo, TG and Kosei. But any plan, if you can share, how to look at for this whole year or probably FY '22? What will be the extent of profitability or losses? If you can throw some color on that.

So Siddhartha, I think from that perspective, if you see our financials, I think this is the first time we have our minority share and a share of associate exactly same. Otherwise, our share of profit of associate used to be always higher than the...

Minority interest.

Yes. So from that perspective -- actually, if you see with that light, they have actually done better compared to the previous quarter.

Correct. But for the whole year as such, how -- what is the plan here, sir? I mean Onkyo losses, Kosei Minda losses, how to look at this from a year or, say, FY '22 perspective?

So from FY '22 perspective, let's start with, say, ROKI. ROKI is doing, as of now, very well. And that is one of the business which is actually doing maybe more than pre-COVID levels even in August. And we are expecting that to be in green even in this quarter -- in a very good number. So it should not be a cause of concern. Moving on to TG. TG is primarily -- is 4Wheeler heavy. So they are also doing good. There also, I think on a full year basis, we should have a good number, in positive only. In terms of Onkyo, the losses have been coming down. If you see Q4 loss to Q1, it is less than half. Then if you see Katolec, Katolec is also in the positive territory, moving towards that if you see from Q4 -- Q2 perspective. And what else? Onkyo, I have provided...

Kosei Minda?

Kosei Minda. So Kosei Minda, definitely, there is a challenge in terms of customers. So we are actually working with them. And it's quite possible that we -- Kosei actually might be coming up with the rights issue, which we might not participate. And our actually -- ownership in Kosei will go down by almost like 10, 12 percentage points.

The next question is from the line of Basudeb Banerjee from AMBIT Capital.

Sir, few questions. Recently, on media, there has been lots of news on electronic auto components exports getting some PLI incentives. So Minda being one of the players who are into sensors and other electronic stuff, so do you have any plans under that scheme?

I'm not aware of any scheme which has been announced from electronic components perspective, Basudeb, as you are saying, right?

Yes, it was coming on TV multiple times for the last couple of weeks.

The government is working on. I don't think...

Yes, yes, working on. It has not been finalized. They are working on. So will you be...

I think we have to still wait and watch. I think there has been a lot of discussion on various forums. Government has been asking us also as to what can be done in terms of derisking China strategy, and I think we have also been very open and candid in our feedback, because the large part of the import dependency is from electronic components, and they are like LCD panels or magnets or registers. Some of them are actually, you can get alternate source which we are getting. From their perspective, while we will derisk, but from cost perspective, definitely, it's a challenge. That's number one, because you have to be first competitive. Secondly, if you are to manufacture in India, you need large volumes because if I -- Minda, say for example, has to put a facility, it will be heavily CapEx intensive, plus you need a huge market to sort of service to because the scale at which they are producing, even the India market will become smaller. The components are very small, something like in paisas or rupees, it comes. And to be competitive, you have to have a very large scale. And to some of the products which we have examined, it can easily cost you more than $1 billion. So definitely, it's not something which is, a, on the radar immediately for us because we are not sort of looking for any such kind of CapEx to start with. But in terms of opportunities, if you see from Minda perspective, there are definitely there. But as you know that the OE cycle is normally like 2 to 3 years before you get any business, so that -- and you know that Minda actually has grown in past primarily because of localization. So if you see this sensor also is primarily localized. And as of far, it was primarily being imported from China. So I think we will get there first more advantage in terms of putting our facilities well in time. In fact, we have started even before COVID or China threat was there. And also the alloy wheel, it's primarily being imported from China for two-wheelers. From there, again, I think we will stand to benefit. Now can there be additional products or small components which Minda can get into profitably? I think it's too premature for us to discuss as of now because while there are discussions, I think it will take some time to fructify.

Sir, where I was coming on was much more larger strategic picture that Minda being much more domestic oriented. So if you get any good export incentives, will you start focusing on exporting in a larger way if opportunities come? Or you will remain focused on domestic? So that would be the right way to ask.

So I think it has to be, Basudeb, seen in a commercially -- basically, if we are getting a product which can be commercially advantageous for the company, I think we will be open to look at it. But as you know that our primary focus has always been India, the reason being whatever project we do, we always want to sort of be a little conservative in a way that at least we should have one anchor customer to start with. So that when you start the business, you don't look out and scout for customers. So from that perspective, obviously, then your first thought or first strength comes from India.

Sure. Sure. Second thing [Audio Gap] perspective for full year fiscal '21, with 1 quarter being gone and you are in the middle of the second quarter. A few things like, as you said, 2Wheeler alloy wheel coming up end of September and Harita might come in from only for Q4 and OEM demand improving, so are we in a position to give a holistic view on full year consolidated revenue as of now?

No, Basudeb, unfortunately. I wish I could. But I don't want to shoot in dark and then get questioned on that number because we all know that things have been changing by the day. While immediate month or 2, I will be happy to answer. But if you ask me beyond 2 months, I think it's very [ sketchy ].

Sure. Third thing, sir, if I look at raw material to sales on a stand-alone basis and consol basis, I can see stand-alone RMP sales Q-o-Q not being much favorable. But at consol, it is down almost 200 basis points sequentially, which means itself standalone RM cost has come down. So is it anything to do with this one-off odd quarter, and one should not take it on a sustainable basis or something major improvement or mix improvement or something happen and how should one look at? Any comments?

Yes. So Basudeb, I think it's a very good question. So what has happened is, if you see from last Q4, we have added Delvis, right? And Delvis is primarily an engineering company where your RMC is not that significant. And the weightage of Delvis sales to the total sales in Q4 was X. And now it is like multifold of X because we have not seen that kind of drop in volumes in engineering services as we have seen in product. So just because of, I think, its sheer weightage also, the RMC is actually being -- coming down.

So is that a seasonal revenue of deliveries or that is a...

I won't say seasonal, Basudeb. So once you -- say for Q2 and if you see the quarter sales is INR 400 crores odd. Next quarter, say, if I'm INR 1,000 crores plus, their [ least ] revenue is not going to go 2.5x. From that perspective, your RMC again will increase a little bit.

Understood. And what's the annualized Delvis revenue run rate now?

Almost INR 250 crores on a full year basis, but the first quarter was slightly around INR 30 crores -- INR 20 crores, INR 30 crores.

Sure. And like most of the auto component companies are cutting their SG&A cost with more focus on digital meetings and lower -- lesser traveling, so how should one look at your P&L other expenses line item with the revenue recovering back? So how much you expect this cost cuts to be structurally mature? And how one should go on with it?

Look, from -- if I start from a few examples, which you took, say, for example, traveling. Traveling, definitely, I don't think even if volumes go up, is going to be normal anytime soon unless we have vaccine or something because that restriction is always going to be there, and we are not going to expose our employees where we can minimize that exposure and do more digital meeting. So from that perspective, from immediate short term, yes, there will be some lower cost from travel. But as we move in future, as things normalize, I think those old things might come back. May not be at that level, but definitely there will be some expenses. For, say, for example, some rental costs, we have actually been able to negotiate almost on an average, if I remember, 8% of our annual rental cost for full year basis, we have negotiated. Now that has got a compounding impact because there was, say, for example, we had annual escalation clause 5%, 10% for our rental properties. So we have not given any 5%, 10%. On top of it, we have got 8%. So delta perspective, if we see some of that 15% reduction, which is sustainable reduction. Now but if you ask me what is the weighted average number, it is very difficult to say because what happens, all your consumables, all your electricity, everything is on -- production linked. So those things will come back. But what I think we have done is maybe we'll let you know more detail next time. We are actually working on a large-scale solar power initiative to see that almost 50% of power gets -- we get through solar and reduce our cost of electricity. So maybe we will share more details once we close maybe in the next [ 12 ] months.

And like quarterly staff cost, which is roughly INR 210 crores to INR 215 crores, in general, which is INR 166 crores this time. How much of this reduction is because of pay cuts and job cuts? How should one look at it with revenue recovering broadly?

Look, if you ask me, Basudeb, look, we have also -- I think, also mentioned that this salary reductions have been temporary and should normalize, and we are expecting this normalization now. So the salaries should get ideally reinstated this month or next at best. So on that basis, I don't think we'll have any sustainable reduction in people costs.

So you mean bulk of the salary -- staff cost reduction is due to pay cuts and not because of...

There are 2 factors, Basudeb. One is pay cuts and another is whatever variable manpower you have. So if we are able to reach the numbers, which is 90% -- 80%, 90%, 100% of pre-COVID levels, you will need that variable manpower back. [indiscernible] I think plus/minus 5%, 10%, that can be at play, not very significant.

And last small question, sir. This quarter, I remember, [indiscernible] and in Q1 everybody's debt in general moved up. I can see your interest outgo on P&L being lower Q-o-Q. So how to look at that?

So I think, Basudeb, again, you have to give credit to the management team that has been able to manage the cash flow so well. So we have been able to control our working capital. We have been able to control our -- or maybe I think a blessing is that, in India, fortunately, all the OEMs are well placed in terms of their financial strength. So we have been able to get all our dues on time. So that has helped ease out a lot of pressure on finances. And also, we have done different means of financing. We have raised CPs at something like around 5%, 5.5%. So that also brings down cost a little bit. So we have been looking at each and every aspect to bring down this financing cost.

[Operator Instructions] The next question is from the line of Jeetu Panjabi from EM Capital Advisors.

I have a couple of questions. The first one is just trying to map what the source of demand is in your view? Is it the inventory rebuild which could peak around Diwali? Or do you think there is genuine pass-through demand in this cycle sustains over the next 12, 18 months?

So normally, the festival demand inventory gets built 60 days around roughly or so before the festive season because it takes roughly around 15 to 30 days based on which geography you are. So I think 60 days from the perspective, it starts only from middle of September. So Diwali is in, I think, middle of November, I think, 13th or 14th. So from that perspective, a, I don't think, as of now, whatever demand we are seeing has got any festive link. So definitely, it gives comfort that this is mostly a consumer-driven demand. It is not a demand which is going and filling up the inventory. Actually, the data point which we have been getting, the inventories actually are lower than what they were compared to pre-COVID levels, so which means that the market is able to absorb more than the production. So which is a good sign. I think the normal question would -- come is how much of this is a pent-up demand and whether this is sustainable? I think that's the question you are trying to ask. So if you -- whatever -- we know normally a pent-up demand because whatever closure was there and this mark getting accumulated coming to market, it's something which is in play for maybe a month, 1.5 months or 2 at best. So if any sign of sustained demand, which you see more than 45 to 50 days, the pent-up thing gets faded away. So we believe that the pent-up demand, I think -- we believe that has sort of -- is behind us because I think it only started more than 60 days back in terms of the market demand, May, June, July, August. We're actually in the fourth month. So from that perspective, we do expect that a large part of this demand should be there in the market, sustainable. But I think, again, here, I think, as I said, a little while back also, it's very difficult to say what will happen 2 months down the line. But we all know that as of today, things are looking much better than what they were a month or 2 back.

Right. And in your path to normalization, I heard you make a comment that you could, next month, possibly be at 100% of pre-COVID levels. In this path to normalization, what is the biggest challenge? Is it supply chain? Is it people? Is it logistics? I mean what are the challenges in normalizing the supply chain?

I think first thing is we need to give full marks to the industry in terms of its efficient supply chain management because despite being COVID and the kind of number of parts you see in a vehicle, even if I see Switch business, Switch business has got 4,000 parts -- more than 4,000 parts. Now for a plant to be sustainable, you have to have smallest of the small part, be it a small spring, be it a small screw. You have to have everything in inventory. If you don't have one, the line stops. And it's not your line, it's -- the OE line stops. So from that perspective, I think the entire automotive supply chain is very, very strong in India. And the way it has sort of come up post the lockdown, I think it's full marks to the entire industry. So from that perspective, I think everybody is very geared up. Now when we say pre-COVID -- while we are all talking pre-COVID, mind it, pre-COVID was also not normal because in last 12 months prior to March, we have seen the demand sort of dropping continuously. So even if we are at pre-COVID, we will be maybe around 70% or 80% of our peak. So there is still a lot of potential available or possible in terms of reaching the peak, which we have seen in FY '18. So I think...

People are very optimistic that...

We don't see the challenges from supply side. Initially, there was challenges from a migrant labor perspective. But I think there, again, people have done really well, and migrants have actually started coming back. So that thing also has, I think, started easing up.

Okay. And my last question, this new aluminum wheel capacity that is coming up, is that going to create overcapacity in the industry in your view? And the linked question is, there has also been pretty public talk of all the 2Wheeler aluminum wheels that come out of China, which are integral to the Indian supply chain, which might be delayed or whatever, how much of that -- migrating that -- I mean what I'd say is localizing that demand and supplying from here is going to be in that aluminum wheel capacity assumption?

So see, Jeetu, I think, first let us look at the macro picture. The 2Wheeler alloy wheel consumption in India versus the import, it is 65%. And what capacity we're putting is just [ 50% ]. So even if our -- once our plant is fully commissioned sometime -- same time next year, we'll still be importing more than half of country's total demand because there's no other new capacity coming up in the country what we know today. So from that perspective, I really don't understand [Foreign Language] what can be the potential threat.

So this includes Enkei's new capacity as well which you -- when you're putting this number?

Yes. So 2/3 of the entire requirement is currently imported. And we are, just for example, out of 24 million, 23 million wheels, almost 20 million or 18 million to 20 million is imported. So we are just manufacturing 4 million to 5 million as of now.

No, no, no. 3.5 million.

Yes. 3.5 million, 4 million now. And even with our capacity of 4 million that we had, we are still not -- we will still be 8 out of 24. And I'm sure some additional capacity will come. But a lot of it is simply import substitution.

And is this at the economic price? Like are you doing price parity with imports and still making money after that on the aluminum wheel?

No, we have not yet communicated anything on pricing. So we will communicate once it starts.

But if you assume market parity pricing, like what is the local price for an equivalent product?

It is about that. It's not a material difference from this.

Okay. So it's a positive economics after calculating everything? That's my question.

Yes, yes.

[Operator Instructions] The next question is from the line of Mukesh Saraf from Spark Capital.

First question is on the...

Mr. Mukesh, can you speak closer to the handset, please?

Yes. Is it better now?

Yes, sir.

So on the 4Wheeler alloy wheels business, sir, I mean you did mention that you've got this Korean business orders. I mean given that your plant is in Gujarat, do you think you'll be able to kind of keep the margins at these levels, the 23%, 24% margins because the freight costs might actually be higher there on the alloy wheels business?

So Mukesh, I think it's a very good question. So let me tell you that we have made a strategic entry into LPDC and -- to get sort of business from the Korean OEMs when we were not there. So to start with, definitely, the margins are not as per the existing business. They are definitely going to be lower. But as you know that once you get the business, you continuously then work on how to optimize, how to improve the margins. And those efforts have continuously been going on. But as of now, what we know, margins are definitely going to be lower than the current business. But then I think what is also important to see is that the kind of CapEx which we are doing is leveraging on the existing plant. So we are not putting a new plant for manufacturing and LPDC wheel. We have a plant in Gujarat. So we are utilizing that plant, and we are just putting a separate line for LPDC and also sort of utilize a lot of assets of the existing plant wherever there are common processes like printing, et cetera. So from that perspective, we are trying to see that we have minimum investment if the returns is lower.

Got it. Got it. So -- I mean ignoring this first quarter, lockdown impact, what would be the utilization rate at Gujarat, sir? I mean just a ballpark number, say, FY '20 and where did we end at?

FY '20?

Yes. I mean where did we end last year, right, in terms of utilizing rates for this plant?

Last year, we were at almost 45,000, in FY '19.

Out of 60,000.

Out of 60,000.

75%.

Okay. Okay. Got that. And the second question is on Harita. I mean you had once mentioned that you had already started working on new businesses there despite the fact that the transaction has [indiscernible] is it better, sorry?

Yes, actually in between, we just lost what you were trying to convey.

Okay. Sorry. On Harita seats, so you had in the past mentioned that you had already started winning some new businesses for seating systems in passenger vehicles. So any updates there on that? Any new businesses you're working on for Harita?

We are definitely working on, but I don't think we've reached the stage where we can communicate.

Okay. Okay. Right. And just my last one is on the tax rate for subsidiaries. So have we moved to the new tax regime for all the subsidiaries already or is there some more left?

Yes. So wherever we have got MAT credit available, there we'll continue to be there in the old regime. And where the MAT accumulate has been utilized, there we'll go to the new one because once you have MAT, your cash outgo in the old regime can be lower than 25%.

Right. Right. So in your assumption, like, say, FY '22 or something, we can move to the new one for the -- maybe FY '22 or FY '23...

Yes. FY '22 should be possible because I think it also depends on the rest of the year for FY '21. If everything goes as currently is, I think we should be able to move to FY '22.

[Operator Instructions] The next question is from the line of [ Rajesh Gupta ], an individual investor.

I just wanted to know how much of our RM comes from outside India?

In terms of imported raw materials?

Yes.

Yes. So that will be close to Minda Kosei, which is a major importer, where the entire raw material is imported, which will be 50% of their -- almost utilization levels -- sales level. And at other units, the imported content will be close to 15% to 17%.

Okay. Okay. And what would be our capacity across products that we do?

That will be a very detailed question. I think we will -- generally, we have -- we work in a batch process. And the average utilization that we have conveyed for '19/'20 was around 75% to 80%.

Okay. Okay. And the new products that we're entering. So I mean, will we have the same EBITDA margins in these?

Which company EBITDA margin you're saying?

The new products that we are entering.

[indiscernible]

Okay. So we marginalize our -- normally, our margins at a consol level as well as the stand-alone level. And these margins, we don't release quarterly. On an annual basis, we do come back with these numbers where there can be some seasonality from Q-on-Q as well.

[Operator Instructions] The next question is from the line of Ashutosh Tiwari from Equirus.

Sir, in our Lighting segment, roughly what percent of sales comes from LEDs, if we have done that exercise?

I've not done, not for this quarter.

No, no, no. I'm talking about last year, not for a quarter.

So for 2Wheeler, this number was around 35% last year.

Okay. 35%, 2Wheeler. And in terms of whatever products that are in pipeline, will the share go multi-yearly over the next 3, 4 years? And can it go above 50% over the next 2, 3 years? So that will lead to higher [ relations ] for us, higher revenues for us?

Okay. So recently, also, Ashutosh, the 3 orders that we have announced post-acquisition of Delvis, you have seen they have all been on the -- close to INR 150 crores, as sir has indicated, will be the revenue addition per annum. And these are all LED lamps. And we are quite hopeful that the percentages will go up. While for 4Wheeler, it should be around 25%, 27%, and it will increase year after as well. So I don't know if 40 -- 50 will be 2-year exercise, but definitely the journey is towards that side.

So I missed this new order of INR 150 crores. This is for headlamps in 4Wheeler?

1 headlamp and 2 tail lamps, and both are -- all are LEDs.

Both are, sorry?

All are LEDs.

All are LEDs.

Okay. So incrementally, I mean the Lighting business is something which will grow faster than industry growth because of LED penetration increasing?

Correct. Correct.

And secondly, on the alloy wheels front. So we have -- the first [ year capacity ] is 300,000 wheels per month, so by end of this year, by March, will it be -- what kind of capacity we'll commission like out of the 3 lakhs?

So we are expecting the commission activity to take roughly around 12 months, and it will be almost sequential. So you can see...

So full capacity will reach by mid of next year, by, let's say, June-July this time.

Okay. So I mean -- okay. So roughly, around, say, 180 kind of level [indiscernible]

As there are no further questions, I now hand the conference over to Mr. Bohra for closing comments.

Yes. Thank you. I would like to thank everyone for joining on the call. I hope we have been able to respond to your queries adequately. For any further information, request you to please get in touch with us. Stay safe, stay healthy. Thank you.

Thank you. Ladies and gentlemen, on behalf of Minda Industries, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.