Uno Minda Limited (532539) Earnings Call Transcript & Summary

Good evening, everyone, and a warm welcome to all the participants. I hope you and your near and dearest are all keeping safe and healthy. On the earnings call today, I am joined by my colleague, Mr. Ankur Modi. We hope you have had a chance to look at our financial results and presentation that is uploaded on stock exchange as well as the company website. I will briefly speak about the business landscape and then update on our performance in the preceding quarter, following which we will be happy to respond to your query. As you know, the government of India recently approved the production-linked incentive scheme, so-called PLI, for automobile and auto component industry with total budgetary outlay of around INR 26,000 crores. As per the scheme, minimum qualifying investment for auto component sector is INR 250 crores over 5 years, with minimum determined sales of INR 25 crores. The qualifying company also have to demonstrate 10% year-on-year growth on minimum determined sales rally. The qualifying companies can avail 8 to 13% incentive of determined sales value. The government is yet to describe a list of components qualifying under the scheme. We believe that the scheme will help accelerate focus and development of advanced technologies locally, increase competitiveness and facilitate rapid adoption of electric vehicles. We as a growing organization will continue to invest in advanced technologies and products. However, qualification of this investment under PLI will depend on final notified product component list. Normally, the festive season sales record peak sales during the year. But this year, the unprecedented supply chain disruptions, fuel price hikes, increase in input costs, consequent vehicle price rise, et cetera, marred the September and October sales, as a result of which EVs dispatched to dealers were affected because the supply did not equal or surpass the consumer demand. The global semiconductor supply constraint continues to be a challenge, resulting in lower production across the industry. Semiconductor shortage started in early '21 due to surge in electronic devices, especially during COVID-19. With modest capacity addition in the last 2 years, semiconductor was not ready to meet that surge in demand. COVID-19 related supply chain disruption along with COVID restrictions by some countries further aggravated the situation. This resulted in product cuts or halt by a majority of the domestic and global OEMs, consequently adversely impacting auto component industry sales. We are seeing some signs of improvement with easing of supply chain disruption. We believe the shortage may persist well into 2022. However, we do expect gradual improvement. On the optimistic front, consumer demand has been positive across segments. 2-wheeler wholesale has improved month-on-month, and commercial vehicle sales are witnessing a gradual recovery. Green shoots can be seen in EV segment with increasing traction in multi-axle vehicle along with recovery in freight rates. Current [ rabi preparation ] and high reservoir level bodes well for the industry due to the boost in rural spending power. Moving to key operational highlights, may we refer to Slide 6. It gives me immense pleasure to inform that the company's determined efforts and COVID-related initiatives have led to 100% employees completing the first dose of vaccination and around 96% of employees completing full vaccination, appropriately supported with the best possible safety measures at all our sites across the globe. While we did have head lamp business from an Indian OEM, we are happy to inform that we have secured first ever LED multi-faceted reflector head lamp from a Japanese OEM for PV, with SOP expected in early 2024. We have added 2 more EV 2-wheeler, 3-wheeler specific products, which is residual current cable or commonly called RCD Cable and acoustic vehicle alert systems. 3 products moved from under development to under production. We have also added new age EV 2-wheeler as a customer. We are glad to inform of being bestowed upon the Amrop ET Best Board Award for Corporate Governance and Board leadership. Such recognitions also encourages us to continuously raise the bar of best practices, transparency and corporate governance. Recently, Minda Industries has also been certified a Great Place to Work, which is a testimony of building and sustaining high-trust and high-performance culture of our company. Moving to Slide 8 and 9 on EV. The EV space in India is witnessing unprecedented traction with momentum across all parts of the value chain. Other incentives by state governments are helping drive the -- bridge the cost gap between IC and EV segment. This plays in well with company's positioning owing to its EV-agnostic portfolio and additional EV-specific product portfolio. The focus, however, remains on the 2-wheeler and 3-wheeler segment due to expected faster rate of adoption in comparison to PVs. Our EV initiatives have further progressed with 3 more EV-specific products, i.e., on-board charger, BCM and BMS moved from under development to production stage. We now have 5 EV-specific products along with smart plug and telematics under production. With these products moving to production, the kit value of products under production has increased to 16,500 from 4,500 in last quarter. While the specific products remain under development, we have added 2 more new EV-specific products. As we just pre [ discussed ] in the highlights, which is RCD cable and acoustic vehicle alert system under development stage, adding another INR 2,000 to kit value. RCD cable is used to protect against shock from faulty currents and fire hazards during EV charging. The company is looking to completely localize the RCD cable manufacturing. The RCD cable complements our complete charging solutions for EV along with smart plug. Acoustic vehicle alert system leverage in place pre-installed artificial combustion engine sounds specific to various modes. Different sounds can be calibrated and customized as per customer needs. It will take around a year for development of these products. Now our kit value for product under production along with existing products stands at INR 28,300 with INR 2,400 for product under development. As we see a paradigm shift in automotive domain from IC engines to electric and autonomous technologies, also there is a drastic shift in lighting technology. UNO MINDA is at forefront in driving the changes in automotive lighting technology developed to automate, adapt and enhance vehicle for safety and better drive. Slide 10 showcase some of the innovative products developed by us. This includes panel illumination with sensor integration capability for ADAS, advanced overhead console and smart automotive wireless charger. Coming to our financial and operational performance, you can refer to Slide #12. At a consolidated level, revenue from operations for the quarter increased by 30% year-on-year to INR 2,114 crores from INR 1,632 crores (sic) in Q2 FY '21. The company has managed to display a growth in revenue both Y-o-Y as well as sequentially, with revenue at INR 1,603 crores for Q1 FY '22, while volume growth of auto industry remains flat on a year-on-year basis. The company reported 30% growth largely on account of addition of 2-wheeler alloy wheel sales, growth at all businesses including aftermarket , except at acoustics business in Spain, and the price increase on account of increase in raw material prices. EBITDA for the quarter was INR 228 crores, same as in corresponding quarter last year. While EBITDA has remained flat, EBITDA margin for current quarter declined to 10.8% from 14% in comparison to corresponding quarter last year. There are 3 key reasons why we believe would have -- which have actually impacted the lower EBITDA margin compared to last year. First being sustained raw material and commodity price increase for the last 9 to 10 months. While we are largely able to pass on the RM price increase to customers in line with various agreements, which usually happens in with 1 or 2 quarter lag. So while we might get the previous quarter on 6 months' average price, if spot price is higher than average, impacts negatively. Second, while we do record the raw material price increase from customers in absolute value terms, it is still margin value to as recovery is in absolute amount, which increases the sales value to the extent of the cost. So your numerator in terms of cost also increases and the denominator as well. So that also is EBIT margin dilutive. Even though absolute profit is same in percentage terms, it will be a little lower. The third major thing, last year as you know, we had salary rationalization in place. And this year, we had normal increases in addition to salary reinstatements. Further, while production was lower on account of production cuts from OEMs, in some of the businesses we still have had to maintain some excess manpower due to higher [ index ] originally and to ensure readiness for higher production once volumes come back. Interest cost for Q2 FY '22 includes INR 4 crores of interest provided for RPS issued to shareholders of Harita pursuant to merger. However, since RPS were redeemed during the quarter itself, the same was reversed. However, as per [ in the IAS ], it was booked as other income. So you have interest cost of additional INR 4 crores and other income additional INR 4 crores, so it's a contra there. Excluding interest on RPS, interest cost for the quarter is at INR 13.6 crores, which is lower than INR 18.7 crores reported in Q2 of FY '21 on account of retirement of part of our borrowings from QIP proceeds. Depreciation increased by around INR 6 crores to INR 97 crores as against INR 90-odd crores in previous quarter, on account of higher utilization of certain plants and subsequently charging depreciation of 3 SUPA spaces. Primarily the higher depreciation is on account of capitalization of a couple of lines in SUPA for [ AWQW ], which was not in MIL last year. The profit after tax, which is MIL's share for the quarter, was at INR 95 crores as against INR 86 crores in Q2 FY '21. While we do look at ROCE on annual basis, just for information, ROCE for Q2 if we were to analyze, it stands at 18.1%. Coming to the business segment-wise performance. Moving to the product lines starting with switching systems, you may refer to Slide #18. The segment achieved revenues of INR 649 crores for Q2, contributing about 31% of consolidated revenues. We have further received orders from Korean OEM for 4-wheeler switches. We have also received export orders from Italian 2-wheeler OEM. Moving to lighting business, Slide 19. It has achieved revenue of INR 454 crores for Q2, contributing to 21% of our consolidated revenues. We are happy to report, as we have said in earlier highlights as well, having secured first ever LED order from a Japanese OEM, earlier we were [indiscernible]. We have also received additional orders from a leading Indian OEM for LED tail lamps and DRL for SUV and compact SUV. This new order further solidifies our position and will help increase our share of business gradually. Moving to acoustics. Our acoustic business has achieved revenue of INR 154 crores for Q2, contributing 7% of our consolidated revenues. A large part of the revenues for acoustic business comes from our European subsidiary Kyoraku, where European auto industry underperformed significantly due to semiconductor shortage, resulting in lower volumes for acoustic business. So while the Indian business did well, the Spain business was quarter-on-quarter lower by almost 25%. Moving to our casting business. It has achieved revenue of INR 320 crores for Q2, contributing to 15% of our consolidated revenues. We have completed trial run of our LPDC line with [ supreme ] capacity. Model launch of customer is slightly delayed as SOP is now expected in Jan '22. We have initiated trial for fourth line for 2-wheeler plant at Supa. The new line is expected to commission by next quarter. Moving to our seatings business. We achieved revenue of INR 243 crores for Q2, contributing 12% of our consolidated revenues. Seating business revenues were higher as EV and 2-wheeler segment were least impacted by current semiconductor shortage. In fact, we are seeing good recovery in EV segment with volume -- volume growth during quarter Y-o-Y basis. The company also received orders for suspended seats. The suspended seats provide better comfort and safety to drivers. In fact, considering safety of drivers, certain European countries have also made suspended seats mandatory. Moving to other product businesses, which has achieved revenue of INR 293 crores for Q2, contributing 14% of overall top line. Other business is mainly comprised of sensors, blow molding business, ICs, battery, catalog and aftermarket -- aftermarket, the trading part. The share of profit and loss of associates and joint ventures for Q2 FY '22 is at INR 21.2 crores against INR 10 crores in Q2 FY '21. Our infotainment JV with Denso, our safety systems JV with TG, our CNG product JVs with Minda GS support and filter products where we were talking that all have contributed positively, while Minda TTE DAPS and Kosei Minda Aluminum lag. In terms of our revenue pie for the quarter ended 30th September, OEM business accounted for 89% and aftermarket business at around 11% for Q3. Our aftermarket division has done well with revenues of INR 225 crores as against INR 173 crores in Q2 FY '21. Aftermarket was also the least impacted by semiconductor issue, hence clogged good revenue growth. We continue to strengthen our aftermarket division with adding more products like alloy wheel in aftermarket. We are also increasing our focus and efforts in aftermarket branding and marketing. Our sales from international markets, i.e., exports from India plus sales from overseas operations stands at 14% of total consolidated revenues. Moving to our cash flows and debt levels. Our net debt as of September 30 was at INR 388 crores compared to INR 803 crores in last '21. And our net debt-to-equity stands at 0.11. Moving to Slide 26 on strategic business update, first being merger of Minda iConnect with Minda Industries. This deal was filed with NCLT in Q1 FY '22. Court to convene shareholders and creditors meetings expected to be scheduled by end of December '21. The merger is expected to be completed in the next 6 months or so. Second being Europe restructuring. We are undertaking corporate restructuring of our European subsidiaries i.e., LSTC Spain, iSYS RTS, GmBH and various entities to realize synergies and realign product and engineering business separately. Under corporate restructuring, it is proposed to merge iSYS RTS into Minda Delvis in first step and subsequently create 2 separate entities under merged entity; first entity for carrying our product business, and second entity to carry out engineering business. The corporate restructuring will help create distinctive businesses for product and engineering companies and remove any overlap of businesses between these 2 entities. Third being Minda TTE DAPS, the company has formed a joint venture with TTE Taiwan to localize controller and related sensor in India. However, since localization could not be achieved, and I think we have been discussing this in past calls as well, the business continued more other trading. Since we don't require a separate JV and entity for trading, we are transferring all the business of Minda TTE DAPS to the company, MIL. The company is also entering into scale and barter agreement with TTE to ensure business continuity. Pursuant to the sale, we will also dissolve the JV and reduce the cost of separate legal entity and related compliances. We, however, continue to work on various ADAS products and have also secured a large camera business from a domestic buyer. Moving to Slide 28 to 30 on -- we first start with ESG. As you all know, ESG has gained prominence in the last few years. However, we have been working on these areas for more than a decade now. We have installed rooftop solar installation across our plants, which along with solar power plants we have connected, is meeting almost 20% of our energy requirement for these times. And by 2025, we are targeting to achieve 40% of our energy requirements through solar energy. We are also running water conservation projects across our plants. We have already reduced our water consumption by 10%. We aim to increase further in coming years. Green belt plantation drives undertaking across plants. We target to have 40% green area for new plants. We also run a charitable trust for engagement of underprivileged and women empowerment. Today through our charitable trust we test and benefited roughly 12,000 people from 10 villages across 7 states in India. We ran programs, which support more than 150 self-help group women for earning their livelihood through mask making, apron making and sale of other products. That's all for me. We now open the floor for questions.

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

On the question side, sir, the first is that in this alloy wheel, the casting in 2-wheeler, what was basically sales of 2-wheelers and 2-wheeler alloys in the quarter?

Sorry, you are asking what is 2-wheel sale in the quarter?

In the NMP, the alloy wheel sales NMP. What were the 2-wheeler sales in the quarter?

Yes, 2-wheeler in the quarter was roughly 70 crores also.

So it did very well, okay. And 4-wheelers?

4-wheeler roughly around 1 90 or so.

Okay. And secondly, we also have seen good ramp-up and improvement in profitability of associates. In this quarter, it has gone back to Q4 levels. Which associate has contributed more to this improvement?

I think as I said, Ashutosh, I think all of them have worked better. What has helped also is that some of the entities which were actually in red, have lower -- or improved the profitability. So we have actually seen the, what we call, the share of profit increase almost across the board barring. In fact as I mentioned, while there are a couple of entities which were in loss, like we do mention TTE. And claim even there, relatively the loss has been lower. So all this has helped.

And there is no element of price increases that we see from previous quarters in this?

No. So that's a running mix now. So while we would have received a little bit of price increase for previous quarters, there is a little bit of price increase for Q2 also which would have spilled over to next quarter. So if you see on a net basis, there is no significant impact.

Okay, okay. And lastly on this lighting order that you received, now basically in terms of this order that we received in total, what would be the potential revenue, say, in FY '24 from these new orders? Or all orders put together?

All these new orders put together are as of now more than 300 crores.

Okay, 300 crores. And this is mainly head lamp orders, right?

No. Earlier, what we have been getting were all LED tail lamps. We have got one head lamp for LED, which was a domestic OEM. Now we have got from them [indiscernible]

Okay, okay. And this aftermarket revenue, which we are seeing a good improvement last year, and in this quarter, reaching good jump going back to, say, last year Q3 levels. Is it like -- can you see here further quarter-on-quarter improvement in Q3 as this? Or -- how do you see the aftermarket ramping up over the next 3, 4 quarters?

Yes, so if you see aftermarket on an annual basis, it will continue to grow in double digits. Quarter-on-quarter is a little difficult to comment. Because normally what happens in Q3, you tend to have it [ pass our ] sales a little bit lower than Q2. Because in Q2 because of festive season and all that, there are a lot of refreshes and all the parts replacement, et cetera. But Q3, normally the sales are a little lower than Q2. But what we are internally working is we should actually see some improvement in Q3 as well. And if you see on an annual basis, we have had pretty aggressive plans. And as I shared also, we are going to sort of start a big branding campaign specifically targeting the aftermarket segment.

The next question is from the line of Mukesh Saraf from Spark Capital.

Firstly is on your EV products that you have given some details on, it's good to see that you have more products now under production as well as under development. First question is on the BMS and BCM that now you have started under production. Could you give us some sense on initially would be have more of imported components, that you have to work with and probably later look to localize some of those? So how does this work -- so yes, I mean in terms of costing and margins for us?

No, I'll comment on costing and margin as of now because I think we are at a stage where the volumes are obviously very, very low. These volumes are not very, very significant. But I can say in terms of localization, as you know, our always endeavor has been to sort of see gradually we localize most of the components. But we all know that the biggest component in all the electronics is the semiconductor, which we continue to import as a country. And even if somebody has to set up for capacity, it takes a good 2 to 3 years. So in the medium term, we have no choice but to continue to import of -- primarily on the semiconductors and chips.

And apart from the semiconductor, most of it is localized is what you're saying?

Yes, yes, yes. We'll be localizing in gradually because initially you have a little bit of reports like magnets, thermostat, capacitors. But then also we are trying to see how we can gradually either localize or will move or diverse our supply chain as well.

Right, right, understood. And related to this, when we say products under development, is it fair to say that we are working -- I mean there is an OEM already working with us on that product?

Yes. So normally as you know, Mukesh, whatever products we invest in, we always try and have an anchor customer. So we do have an anchor customer for products which are under development.

Right, right, understood that. And when I look at the others segment for you, you've touched now close to INR 290-odd crores. Last quarter, I think you had mentioned that sensors and controllers out of that was around INR 40-odd crores. How would that number be this time, sir?

You're referring to in this quarter, how much is sensor and controllers?

Yes, correct.

Sensors and controllers. I don't have controller number readily available with me. Unless Ankur, you have the sensor -- I remember, it was around 55 crores.

Okay.

Control, yes. So central control put together is around 68 crores.

Right. So that's again ramping up back to the earlier level, so that is good to see. And on price side, I think specifically last time around, you had mentioned that seating was an area where it was getting slightly tough to get the entire price hikes for the commodities. Now with some improvement in say, commercial vehicles and some of the other areas that we are supplying, has that situation improved for the seating systems in terms of price hikes?

Yes. So while yes while -- partly yes and partly no, Mukesh, and I'm trying to be honest. So as I was saying that while you would have got the price for some of the customers for previous quarter or previous 6 months, but spot unfortunately in a lot of the components it's fairly sitting, is mostly still. While there has been some softening, but it is not significance still as either at the average or above average price. So that continues to impact the seating business. And we do expect seating business to have gradual improvement in coming quarters in terms of its margins.

Margins, okay, okay, understood. And just last bit, you had said that by November 30, you'll want to get some update on this [indiscernible] acquisition. Any update there at all?

Do you have -- refer to [indiscernible] because I think we have been having tough negotiations with the sellers. So things are a little in gray area now. I won't say certain, but we will confirm that. But probability is reducing actually.

Okay. Got that. I'll get back to queue.

The next question is from the line of Aman Pirani from JPMorgan.

My question was mostly related to Slide 11, which you've given a very detailed breakup of the EV kit value. Just a question, so I mean basically INR 28,300 is the potential EV kit value that you can do after all product under development come into production. Is that a correct way of understanding that?

Yes.

And INR 7,300 is what you are already doing for ICEs and that can be fitted into EVs.

Yes.

Is there anything that you're doing right now which could get -- I mean replaced? Is there any ICE thing that you're doing right now? Or all your ICE is fully compatible with EV as of now?

Okay. So actually we used to have one slide which we have removed from this presentation. If you want, we can separately share with you. So there is a slide, it's also there on another side. Ankur, if you can send separately to Aman as well. So we have made a slide which shows all our components today, which goes into ICE, what will go into EV and what will not. So as of now if you see from Minda Industries consol perspective, all the products which are there in MIL will go in EV. We have a couple of joint ventures, which is one is the filter for ROKI Minda for which revenue does not fit consolidated. And other is Minda Westport, which is the CNG kit. So these 2 products, this consolidate revenue doesn't get consolidated in MIL because they are joint ventures. And these are the 2 components which have obviously no requirement in Ev, most filters and CNG. So other than that, almost every product will go will be actually agnostic to the type of energy .

Understood. So the starting point of INR 7,300 is basically a net, which excludes all of that?

Exclude all of that, yes.

Understood. And just one more clarification, which is refer Slide 8. So basically you're saying that battery management system is something which is a new product. So when you supply battery management systems, so how does it work? Have you developed this? Or is the IP line with the OEM, and they have shared it with you, and you are just manufac -- how does the arrangement work on this?

Yes. So if you see the slide, there is a small word mentioned, AMP. AMP entry is our technology partner. it's out of U.S. It's a niche technology player. It's a very [ muted ] form. And this product is developed along with AMP and Minda Industries in our R&D center at [indiscernible]. So this product is developed fully by us.

Okay, okay, okay. So basically, the OEM is basically taking it from you and fitting it into their overall system.

That's right. But obviously, whatever OEM needs customization that has...

Okay. So this also means that you can do the same thing, you can scale it up to other OEMs, with just minor customization. You don't have to develop it again for a different OEM.

Absolutely.

Understood, understood. That's very helpful.

The next question is from the line of Nikhil Kale from Axis Capital.

My question was first on the lighting order volume. So you mentioned about Minda might be affected with the heavier border. So if you could just throw some more color on this? What is -- how is this product different from the existing light content? What is the difference? And also in terms of any numbers of volumes that you're looking at for this order.

Yes. So I won't be able to share volumes as of now. You know well that I'm sure if I share volume, you'll be able to guess who is the customer. So let us park that because that is also depending on what you call customer's reach, et cetera, model et cetera. But ballpark, I can share that we are expecting revenue of that lamp LED more than INR 20 crores of that one lamp. In terms of why it is important for us is that first of all if you remember a couple of years back, Minda for us, it was very difficult to even get a head lamp business, a halogen head lamp business. We are mostly into all other lamps, but for head lamp. So today we have reached the situation where we are getting not only head lamp, but we are getting the top technology head lamps primarily in the LED space as well. And we have actually got earlier head lamp LED business from a domestic OEM. This is the first with the Japanese OEM. So it makes a significant milestone for us, because then it also opens a door for future business. Because gradually every vehicle is now moving from halogen to LED. And this will sort of establish ourselves as a full technology provider, which has got everything what the customer wants. In fact I think I've said earlier also, our technology company, which is based in Europe, it also already has a what we call a laser lamp. So -- which is way ahead of time. We don't know whether when will we see laser lamp being productionized. But that's where we are in terms of technology. And today we are very happy that it actually now cement our position in the PV head lamp business.

Okay. And secondly on the seating side, so if I look at the revenues, revenues were broadly similar to Q4 levels, despite -- I mean if I just compare the production for EVs and 2-wheelers, Q4 was a pretty strong quarter for EV production. And yet we have kind of matched the revenue on that on front. So are there any new orders or new customers that we have started already supplying? Or is it more driven by price increases? What is driving that?

So as I said, Nikhil, we have added one new customer for seating, primarily that also for suspended seats. Just to tell you, suspended seats is almost like 4x of the traditional seat because it has got the suspension. Suspension are normally 2 types. One is mechanical and the other is pneumatic But both of them, the costs are significantly higher than traditional seat. And that we have got from our core customer. So we are actually gradually adding what we call new customers to seating business. We already have almost like 3 or 4, I don't know exactly. New age EV place also where we are providing seating to them. So we have been adding customers in our seating business.

Okay. And just one last question on the lighting side, what would the revenues for the quarter?

In the lighting side, what is the balance revenue.

Yes.

Balance revenue for the quarter was roughly around 55 crores or so.

Okay.

[Operator Instructions] The next question is from the line of Ronak Sarda from Systematix.

First question on the alloy business, given how the production from your key customers were restricted in this quarter, so how was the alloy wheel revenue, let's say, in Q2 of last year versus this year? So has there been a significant decline? You mentioned INR 150 crores for this quarter, right? Or did I hear it correctly?

You asked for -- you are referring to...

4-wheeler alloy, 4-wheeler alloy.

So 4-wheeler more, 1 90 I guess.

1 90, 1 90-plus.

And how was it...

Last year, 4-wheeler was in the same quarter. It was 1 22.

1 22.

Yes.

Okay. So what explains this very strong -- given how the production was also constrained this quarter? So this is driven by more of new orders? Or this is like price escalation also has like to this sharp jump?

Definitely. There is a component of price escalation. You are 100% right at all. But even if you exclude that price escalation, there is a significant growth in the PV 4-wheel. This is primarily because of not only new orders, but also increased penetration which I think we have been talking for the past few years. The prices that increase in penetration of alloy wheel versus steel wheel. That has been creating the demand. And also despite the volume being lower, we have been consistently almost like close to the capacity. And we might have actually have to now work on increasing our capacities further, because we have been fortunately getting more businesses. So maybe soon we have to increase our capacity in PV, alloy wheel as well beyond what we are doing in Bawal. So we might look at starting Gujarat again.

Okay, sure, sure. and the second question was on EV component. I mean we have highlighted the content. But I mean if I see your current product portfolio, we are the market leaders in most of the components we supply. How do you see the market share stabilizing in the new age component for electric vehicles? And what would be your target market share where you see -- which would be more of a success or a great business to be in?

Very good question, Ronak. So in terms of targets, we all know, I think you have communicated very clearly in target, that whatever business product we enter into, our target always is to have a minimum 30% size of the cake in terms of market share. We don't want to be a fringe player of single-digit percentage. And then we have no choice but to then be dependent on what our competition does with us. So our target always remains at least 30% share in whatever business we are. Now specifically what is our share of business today, I think it's very, very difficult to comment, because what is happening is that the volumes are so low. Normally, OEs are also, you have to appreciate, they can have multiple sources when the volumes are low. Because then you have to work development et cetera. And EV volume is so low. It's very difficult at this stage to sort of guess what is going to be our market share going forward. But rest assured, I think we are sticking to our target. Whatever products we are in, our target remains undiluted.

Right, Right. But based on I mean the current production, let's say whatever it is, maybe around a lakh unit. Will our market share be in double digits right now based on your understanding?

Honestly, we have to get back on this. We have not even calculated that.

Okay, sure. All the best.

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

Sir, on the EV side, I mean we see that you are also considering other larger product opportunities, like the motor controller. So some thoughts here that given that this is a sort of a slightly higher technology expertise side, and we have many players here again are making these things, how do you assess your strength to make and supply these components? Do we look for any tech partner here? Or where are we in terms of the planning? So just to understand that.

Yes. Siddarth, I think again a very good question. So motor controller, definitely we have been working in-house. So that's something our teams are -- have been working for quite some time, and we hope that we should be able to do on our own. And in terms of motor definitely, we might make some technical support. So while as default, the teams have been working in R&D, we are also looking finally for some technical support from a technology partner.

Okay. So; based on your assessment, probably how soon can we start or look for this moving into production? Any time lines you can share on that?

I don't want to speculate Siddharth. Once we have got full visibility, let me come back to you. And it will be in the near future. It won't be too far.

Got it. And sir, on the products side, I mean there are a lot of opportunities there. I mean I think in Q3 that we used to do only the RPAs. So any thoughts here? Any more products we can add or we are working on this side?

So as I said, we recently won a large camera business. And the annual kit value is more than INR 100 crores for that business. So -- and that is something which will step forward in terms of that all around vertical 360 view and all that stuff. So we are working on it. Given the camera addition was a big step forward, which is the revenue given much more than what is the existing business of TTE in that business. So we are very, very positive on ADAS protocol product as well. And in fact even we see from that part what we have sort of taken with TTE. Yes, there was a cutback in terms of local manufacturing, but that relationship definitely continues. So as and when sort of market demand, we will be ready with the product initially. Maybe we will have to do a bit of trading. But gradually, we'll see once volumes increase, how do we have a local manufacturing as well.

Okay. Got it. And would it be possible to share the profit of [indiscernible], TTE Minda for this quarter at least?

Normally, Siddarth, we stop saying quarterly profit because of opportunity from customers and other companies.

Okay, sir, no issues.

The next question is from the line of Suraj Fatehchandani from Compound Everyday Capital.

So my question was how much revenue do you think we have lost because of the semiconductor shortage issue?

How much of revenue we have lost?

Due to the semiconductor shortage issue? You said in the introduction that we had demand, but there was pipeline shortage because of semiconductor issues.

No, so we all know that -- I'll give you an example. So while we had a broad indication from customers for a rolling 3-month basis, and I think we all would have read in news also the speculation that Maruti is planning to produce 180k volume in a month. But for the component shortage, they had to limit it to 120 or 130. So that is the kind of delta we have seen with some of the customers in terms of impact because of semiconductor shortage. Now if I have to put a number to it, it's very difficult because it's a mix of that with customer to customer. So some customers, it was like down by 30%, some it was down 20%, some maybe it was more. But definitely there was a significant impact because of the semiconductor shortage. Because I think we also know as a [indiscernible], we have to go to market to buy . the wait time is almost like up to 6 to 8 months.

Understood. No, sir, got it. And lastly, sir, so the current debt levels, should we assume that these are the common debt levels which company would like to assume?

No. So we have said very categorically for last I think many years now, our max debt to EBITDA level is 1 is to 1. Today we are fortunately very low primarily because of QIP and the decision we took during the second phase. Because nobody knew what will happen for second phase or the third wave. Third wave was COVID or now. So as we discussed in the last call, there was a conscious call being taken by the Board to stay fit. And that's why this QIP was done. Otherwise, our balance sheet was healthy without that. The whole purpose we have taken the decision. In hindsight one can say we could have avoid it. But that time, market was a little different. We all knew that the country had suffered very badly in second wave. And we have taken this at that point in time that is better to stay fit and reduce some of the debt. And that is why we have done that QIP. But in no way we are saying that we will, what we call, reduce our target. Because if we have to consistently grow, and we have to grow more than what the industry does, which you see in this quarter while our growth on top line is 30%, even if you exclude the impact because of the commodity price increase, we have grown north of 20% where the industry overall volumes were flat. So if you have to continue to continuously grow the business, you might have to consistently invest in our capacities. As we also shared one example, that for PV alloy wheel , while we are currently in expansion mode in Bawal, we might have to go further expansion in Gujarat. So fortunately we have been getting good businesses. And to meet those kind of growth -- aspirational growth, we might have to consistently sort of reinvest in our business.

Okay. Got it, sir, okay. That would be all.

[Operator Instructions] The next question is from the line of [indiscernible] from Emkay Global.

I just want to understand these products. It has grown by 63% Y-o-Y. So other than the sensors, how was the growth in blow molding, PCB and lamp batteries?

So other than sensors, how much is the growth in blow molding?

Yes, blow molding, PCB and lamp batteries?

So blow molding, growth is almost like 10%-plus on a quarter-to-quarter basis. Battery and all also have that actually very well. So while it is part of our aftermarket, because battery mostly we are selling in through our aftermarket division. But it has grown almost 20% or so compared to the last Q2.

On PCB? Katolec?

Okay, okay. So Minda Katolec also has grown significantly. I think last year it could be said we have grown more than 50%. Because we have added some capacity, and now we are also adding more capacity this year. So Katolec has grown more than 50% on a year-on-year basis.

And sir, only how do you see the ramp-up for the 2-wheeler alloy wheel and the sensors over the next few years, considering some lower production? And how do you see the ramp up for this, both this division?

So to the alloy wheel, so as I said, we should actually what we call after we commissioned this fourth line. We should be almost at capacity by end of the fiscal.

Okay. And for sensor, sir?

Sensors has actually been doing very well. So sensor business if you take last year versus this year, it has grown more than 20%, 25%. And today we are at a run rate of almost like 220-odd crore annualized figure, even if we put control together, it is like 270 crores, 280 crores run rate. So -- when we have shared a couple of years back, we said our annual target is almost like 500, 600 crores in the next 4 years or so, and we are sticking to the target.

Right. And sir, last question on the CapEx and investment plan for this year?

So as of now, there is no change in CapEx plan and what we have said earlier. We might have to expand a little bit of capacity [indiscernible]. But definitely we'll come back once it is recommended to the Board and approved.

The next question is from the line of Bibhishan Jagtap from Canara Robeco AMC.

My question is on Minda Kosei. I think you earlier highlighted that the production to start from the quarter 4 of FY '22 onwards. So are you still on the schedule?

You're referring to the LPDC for the Bawal expansion?

Yes, correct from 1 20 to 1 80.

That is Bawal expansion. Yes, so we are sticking to that target of end of the year starting with commercial.

So when the commercial production will start?

Yes, there won't be much gap, maybe a month or so here and there.

Okay. Okay. And sir, secondly on lighting business, the new plant which we are setting up for the 4-wheeler, which is in Gujarat. So are we done with it? Or ...

No, that has just started. That will take a little bit more time. Ankur, what was the time line we set? Originally, it was...

This was September next year. That is September '22.

Yes. But we did start the project over there, a couple of months after that.

Okay, okay. And sir, at the beginning, you mentioned that the RM or probably the increase was largely passed on. Is it possible for you to quantify how much we have taken or how much is yet to get?

We have quantified, but we do not share these kind of numbers. But I can tell you whatever was [indiscernible] due as per contract, we have received broadly.

Okay, okay. That's it from my side.

The next question is from the line of Peter Uday from [ Hema ] Wealth Management.

Sir, my question is that in the last 2 years, the high -- in terms of Indian domestic numbers. The CM numbers are highest in 2019 for 24 million for 2-wheelers and over 4 million for passenger vehicles. So I want to understand for FY '22 and '23 as a company, what numbers are you guys working with? Are you taking the high-water mark of 2019 can be breached in consecutive years? Given the constraints on the demand situation, what is your -- as a company, what is your view for the next 2 years?

No. So I don't think our view matters much because it's different for different customers. Because we all know that everybody has been impacted because of the semiconductor issue. And which is as we said, we are expecting well going into middle of mid-2022. But for this semiconductor shortage, it has not been there. what internally we have been sort of working on is that definitely industry volumes of the previous peaks, the extra [indiscernible] is we should see that again in '22 '23. So that is the broad thing we're working. But when we see internal we see a lot more than that. Industry volumes is one reference point. Our target normally is how do we increase our share of business year-on-year? Because even if the industry volume remains same and if you are able to increase our side of business, we will continue to grow. So our normal internal target is irrespective of whatever industry volumes are going to be going to happen. Are we growing our share of business year-on-year? So that has been the target for our businesses and our marketing teams.

And would that be similar to your strategy in Europe as well?

Absolutely, absolutely.

The next question is from the line of Raghunandhan NL from Emkay Global.

Most of my questions are answered. Firstly, considering the improvement in chips supplies, how do you see the increase in production schedules for you in 3Q compared to 2Q? Secondly, many ancillaries are trying to get into EV-related parts. Would there be pricing pressure, given your aspiration of 30% market share? And also, if you can share how many customers does the company have in electric 2-wheelers in domestic market?

Okay, so I think you asked 3 or 4 questions, [ not written all ]. So first, you said last half from bottom 2-wheeler EV customers. I think we have almost 4 or 5 large EV customers in currently year. Then you said 30% share of business, does it pose any challenge because of a lot of people getting into ancillary business? I must tell you, Raghunandhan if you see we are already more than 30% in most of our businesses, be it lighting, be it acoustic, be it switches, be it wheel. So most of our major business, we are already...

Talk on the EV side.

So EV side, yes you are right. A lot of people are working on getting into, but it is I think easier said than done. Because even if you are core OE player, I don't want to take any name, but if you are an existing OE player or even the new OE, do you always like to have a reliable partner, and not only cost as a driver. So from that perspective, Minda has got a credibility and experience of more than 6 decades. And with almost at least existing OEMs, we have been working for more than at least a decade. It's not less. Maybe with some of them, we are maybe they are 3 decades. So if you see from that perspective, we got the credibility delivery established fully. So if at all, I think we should be the supplier of choice rather than any newcomer on the block. And our strength has always been technological led products and also the just-in-time delivery, manufacturing, et cetera, et cetera, what we call QCDD: quality, cost, deliver and development. So even though if you might have competition, as a customer, you always would like to have a reliable supplier. Because if you cut corners, and there is some supply shortage from your vendor partners, your entire line stops. So nobody will take the risk of line stoppage. So from that perspective, I think we are very, very well placed. And even with the new age OEMs, we are finding that traction. Yes initially we were, maybe a year back, we were a little late. But I think we have caught up, and we are there now with the new age EV players. So to cut the long story short, there might be challenges. And having said that, in the existing players we have enough challenge. But I think we have time and again proved our results delivery, and we stay to our commitment of delivering to our customers. So I think all in all, we are not very too much afraid of competition. Because in existing business, there is a h*** lot of competition.

Thank you for the reassurance. That gives a lot of confidence on the EV side. And just that other question like on the PV side, how are you seeing the increase in production schedules for 3Q versus 2Q?

Honestly, not much of improvement because still there is significant impact because of semiconductor shortages. So overall if you see Q3 to Q2, I am personally not expecting any significant volume growth. Because there is one more factor in Q3. You have a couple of shut downs also. You have festive season which just happened for Diwali then. Again, the holiday post Christmas annual shutdowns, so that also has some impact on volumes.

The next question is from the line of Nagendra from Growthx Capital.

Just one question on this JV side that Minda TTE Private Limited. So that JV is going to dissolve in some time. So I just wanted to know how much top line it was contributing? And what was -- for that inclusion to this main company, what are your targets from this JV?

So your first question was how much of revenue this what we call Minda TTE has been contributing. So definitely it has not been consolidated in Minda TTE, because it was a joint venture. The revenue was not consolidated. But irrespective of that, I think last quarter they did something like 14 crores, 15 crores worth of revenue.

40, 50 crores?

14, 15. 1-4.

Okay, right. So what is your goal with this JV? Is it to consolidate it into main company?

So what we are -- what we said is that as of now, , we will move the entire business from MTTE to Minda Industries. So business continues as it is. It just moves from JV entity to a parent entity. And we move from what we call in terms of simplification, this infrastructure, we get out of MTTE because we are not getting any significant value there. And we -- whatever business we have in pipeline, like we're just adding the camera business also, that all-wheel come in. MIL will continue to work for growth of this ADAS business. So our focus remains irrespective of whether this -- there are no impact. Now we have got better flexibility also because when we were having this way. We were also bound by the project where obviously we had exclusivity with TTE, which will no longer we will be having once we move to our trading business. So it will also give us a lot more flexibility in maybe getting into a little maybe if required, another some technology support, et cetera.

Okay, okay. Okay, that's all from me.

The next question is from the line of Shashank Kanodia from ICICI Securities.

In your opening remarks, you mentioned about adding 2 more new age EV OEMs in the portfolio. So would you name them? Or could you share some more color on the customers whom you are supplying the EV products?

Normally, we don't name customers, Shashank.

To be specific, have you onboarded Ola Electric. Just -- you can just...

No.

Okay, no. Second, sir, on the long-term basis, you have always maintained a margin guidance of 12% to 14%. So that still remains too, right? Or is there a scope for an upward revision over there?

I won't say upward revision. We are sticking to our 12%-plus kind of guidance. But what has happened is if you have seen and I think I also tried to explain, Even though the cost escalations, cost increases, we have been able to sort of pass on with our customers based on the different agreements we have, it actually values in absolute. I'll give you an example, and maybe a very broad...

Absolute cost passed is the point that you alluded to. Is there a INR 100 increase in costs probably you have increased that in realization as well. So mathematically, the margins look less, right? So that is...

Yes, yes. Absolutely we maintain absolute profit, but percentage-wise it will drop.

Right. Understood, sir.

We'll take the last question from the line of Vijay Karpe from Bryanston Investment.

You talked about the increase in penetration of alloy wheel, so the aluminum prices have shot up drastically. So is that not impacting the operability of alloy wheels, and will that impact the increasing penetration in the [indiscernible]?

So to answer to your point, Vijay, it does not impact immediately. Yes, you might be right that in medium to long term, it might impact a little bit of demand where maybe the penetration one would have expected to go from, say, 35% to 50% in 3 year. It might go to a little less. But today whatever is the volume lineup, right, normally it is very difficult to just shift from alloy wheel to a steel wheel. And secondly, today alloy wheel is something which a customer is asking. So if OE does not provide, it actually might impact the eventual sale of the vehicle. So yes, OE can give an option because the costs are going up of alloy versus steel, but we are pretty confident that the penetration continues to grow. And the reason for our confidence is that our alloy wheel in the OE SPD, the spare part division, continues to grow. Which means that people who are even buying a steel wheel, maybe after some time going for a replacement of steel to alloy. So it is also driven a lot by what customer prefers to buy. So if customer is willing to shell out that money for fancy alloy wheel, definitely that draws in the minds of the customer as well in terms of the OE customer. Now just to answer to your point also, if you see globally the alloy wheel penetration in developed markets is almost like 80% to 90%. And we are still in 30s. When we started, we are in 15, we were in teens. So we have been catching up, but there is a long road to catch up. And we are pretty confident that despite this whatever price rise, we will continue to see the increase in penetration of alloy wheel versus steel wheel. And that also is proven in some way, the way we have been fortunately securing some of the businesses and expanding our capacities.

Okay. And my last question on the reconciliation of the 4-wheelers alloy wheel capacity at the end of FY '21. I mean Bawal, we had 120k wheels. In Gujarat we had 60,000 wheels. So end of FY '22, what will this move to?

Bawal will be around 180 hopefully, considering -- assuming that project comes online on time. Gujarat will be 60 plus maybe another 20, which we are trying to debottleneck, add some capacity here and there. And plus another 15, 20 of the LPDC. So overall Gujarat may be close to 100, and Bawal may be 150. So around 280.

Okay, okay. And then you also talked about we will require more capacity. So what will be the capacities like? And when would they come?

So as of now, there is no proposal which has come to the Board. But we are actually working on that we might need to expand our capacity in Gujarat because we have been fortunate to get more businesses. And to meet that business, we will have to expand our capacities. So -- and normally, what we have been doing is a multiple of 30k in LPDC, 30k capacity per month. So if at all, the minimum expansion will be 30k.

Great, great. Best of luck.

Thank you very much. I now hand the conference over to Mr. Sunil Bohra for closing comments.

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

Thank you, sir.