Uno Minda Limited (532539) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the business update call of Minda Industries Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the 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, Owner Minda Group. Thank you, and over to you, sir.

Thank you very much. Good morning, everyone, and a warm welcome to all the participants. I hope you and your near and dear ones are all keeping safe and healthy. On this special call today, I am joined by my colleague Mr. Ankur Modi. We hope you have had a chance to look at our presentation, which is loaded on stock exchange, as well as the company website. I will briefly speak about our recent announcements on joint venture with FRIWO, technical license agreement with Dhama Innovation and alloy wheel expansion. Following this, we will be happy to respond to your queries. As you all know, automotive industry is changing at fast pace, revered by accelerated rise of technology, sustainability and changing consumer preferences. These forces are giving rise to disruptive technology-driven trends in the automotive sector, popularly known as [ pace ], which is personalized mobility, autonomous driving, connected and electrification. Amongst these trends, while internal combustion engines continue to lead and is expected so in medium term, the electrification has now accelerated, transforming the mobility industry and present significant opportunities to the entire mobility ecosystem. The Indian market promised high growth rates for EV, which is facilitated by government initiatives such as FAME 2 scheme and PLI that offer incentives, which is expected to bring down total cost of ownership. As you know, a large part of our product portfolio is agnostic to the shift in all our businesses. It presented us with an opportunity to significantly to improve our product offering and [ have the technology ]. We, at UNO Minda have been in forefront of capturing electrification trends in the automotive industry and have built an EV-specific product portfolio. We are delighted to inform you that we are further strengthening our EV plus portfolio by entering into a joint venture with FRIWO, a leading international manufacturer of innovative power supply units and eDrive solutions. Before I proceed with sharing details on the JV, let me tell you more about our JV partner, FRIWO. You may refer to Slide 5. FRIWO founded in 1971 in Ostbevern, Germany has 50 years of innovative strength, coupled with German engineering expertise. FRIWO has been developing and producing digitally controllable power supply units and drive solutions ever since. FRIWO's product portfolio includes smart components for electric drives, as well as premium technological chargers, battery packs, power packs and LED drivers. FRIWO products cover a whole host of applications. While knowledge in the field of charging technology is particularly appreciated by those in the demanding markets of electric mobility among other areas. With modern development centers and manufacturing facilities and sales location in Europe, Asia and U.S., FRIWO is present in all of the world key markets. FRIWO had sales of around EUR 100 million with 20% revenues from e-mobility. FRIWO AG is listed on Frankfurt Stock Exchange with a market cap of approximately EUR 270 million. Now, moving to the transaction, you can refer to Slide 7. Minda Industries Limited has entered into a JV with FRIWO to combine their manufacturing prowess and technical expertise to manufacture and supply various electric vehicle components for two and three wheelers in Indian Subcontinent. Minda Industry Limited will hold majority stake of 50.1% in the JV entity. As you can see on Slide 8, FRIWO brings in product technologies of BMS, on-board and off-board chargers, motor controllers and battery pack to the joint venture. FRIWO has already been supplying these products in the European markets. They also have anchor customers for BMS and off-board chargers in India market as well. Some of these products need to be adapted for Indian automotive market to match specification. UNO Minda will also transfer its existing business and orders for the steel products in JV entity. As a result, the combined entity will be able to offer full line e-drive solutions for the Indian market, combining extremely robust hardware and an outstanding software architecture. Additionally, the JV entity also plans to enter into a contract manufacturing agreement with FRIWO to manufacture the agreed products not only for Indian markets but for [indiscernible] and U.S. markets as well. The company expects surge in 2 wheeler [indiscernible] over next 5 to 6 years in India. The JV plans to incur a CapEx of approximately INR 390 crores over a period of next 6 years to support such growth in the area, the outlay in initial 2 years would be around INR 160 crores. Minda Industries Limited plans to invest INR 71 crores in one or more tranches as equity investment to partly fund the above expenditure with approx equivalent amount from FRIWO and its share of equity. The remaining funding requirement will be met through a mix of internal accruals and debt. The Board has also approved an investment of EUR 15 million in FRIWO AG via a primary issuance, in order to strengthen the industrial partnership between the 2 groups. The planned transaction and capital measures are subject to regulatory approvals, including one of RBI. Moving to the transactional rationale, you can refer to Slide 9. The JV will help the company to further strengthen EV product portfolio and accelerate development. It will fasten time to market and manufacturing of various unit components in India with [ footprint ] increasing client requirements and to offer high-quality customized e-solutions in record speed. As you can see on Slide 10, depicting our EV product portfolio, we have added battery pack, whereas motor controller will move from under study to under development. Additionally, products brought in with joint venture will take 6 to 9 months to move into production, as they need to be adapted for Indian markets. Status of other EV products remains the same as was communicated in our last earnings call in November '21. The potential kit value of additional products would be around INR 28,000 making overall potential kit value of our EV products to be at around INR 56,000. Potential kit value here is derived basis considering that if all easy components manufactured by us are applied to a EV 2-wheeler. Kit value will differ on face to face basis depending on the features and model of 2-wheeler, as well as penetration of specific products. Moving to Slide 13, on our another TLA. We have -- so we can move to next update anything to TLA. We have been working on various fronts to further grow our shipping business post acquisition from merger of Harita which is included adding new customers, developing products like [ expanded seats ], as well as growing export sales. We have also been looking at new technologies through seeking to improve comfort and safety of drivers. We came across one such opportunity with Dhama Innovations. Dhama Innovations is a pioneer in developing temperature-controlled solutions designed to address the problem of thermal stress. Dhama has numerous patents granted globally for its temperature control solution and has been [ bringing ] the product for sports automotive, human health care, industrial and defense industry. The company has entered into a TLA with Dhama Innovations for its temperature-controlled automotive seats. Under these agreements, Dhama and the company will launch a series of heating and cooling seats for the automobile industry. While Dhama will leverage its globally patented ClimaCon technology, UNO Minda will leverage its recently acquired seating business, strong OEM relationships and aftermarket reach to maximize the benefit from this agreement. This technology is targeted towards improving driver and passenger comfort, improve mental alertness while driving and improve driver health. We are positively engaged with leading OEMs for supply of this Temperature Controlled Automotive Seats. Moving to Slide 15 and 16, relating to expansion of our Alloy Wheels business. The Board of the company has approved the expansion plan of its Alloy Wheel business, both in two wheel as well as in four wheel business, considering the increased demand. The company will be expanding its two wheeler alloy wheel capacity by approx 2 million wheels per annum at its existing super plant in Maharashtra. The current expansion is part of the 2 phase expansion plan by the company at the time of foraying into the 2 wheeler allow wheel business. The current capacities are more than booked with incremental demand coming from leading OEMs requiring company to further expand its capacity. The total 2 wheel allow wheel capacity of UNO Minda Group shall be around 5.6 million to 6 million wheels per annum after completion of this expansion. The capital expenditures for the [ proposed ] capacity expansion will be around INR 190 crores. The expanded facilities are expected to commence the operations by quarter ending March '22. Moving to our capacity addition in four wheel alloy wheel business. [ MKA ] one of the key facilities of Minda Industries will also be expanding its 4 wheel alloy wheel capacity by 30,000 wheels per month as its plant in Gujarat to cater to the increased demand from leading OEMs. This is in addition to the ongoing CapEx of 60,000 wheels per month at Bawal Plant. The overall 4 wheel alloy wheel capacity of Minda Kosei post the various de-bottlenecking projects which has been undergoing and this expansion shall be around 325,000 wheels per month after the enhancement. The additional capital expenditure for the approved capacity expansion will be around INR 74 crores. The expanded facilities are expected to commence operations by the quarter ending June '23. Alloy Wheels continues to be an attractive space owing to opportunities in form of import substitution and low penetration providing ample opportunities for growth. So, thanks for a patient listening. We'll now open the floor for questions.

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

Congratulations on this transaction. Yes, Sunil, a couple of questions first on the -- can you indicate what kind of order wins does FRIWO have in India, which moved into the JV? So, first is that. And this -- I mean, the JV will start operations immediately? Or do you see some development time further required for the products which -- or the order win which will be there in the JV?

Okay. So 2 questions, Ronak, I will respond to both of them one-by-one. So, there are a couple of businesses which FRIWO has secured, as I said a little while back. Both of them will be moved to this JV. And it will take some time, because we will need to set up the manufacturing facilities. We'll see whatever possible to do from our controller division, as we have been saying in past. But with these kind of capacities, we will need to set up a new plant. I think, this was the question which we have also been getting in past couple of calls as to what investments we will need. So definitely, we will need a new plant, and we are considering a location around in North. So this will have around 12 to 18 months of time frame to sort of have this facility up and ready.

Sure. But any details on the order win? I mean, which component is it, how big it could be? Anything which you can share?

Yes. Yes. So it's very difficult to share in terms of the quantum because it's linked to the volumes. But in terms of business, I think we have mentioned, there are what you call 2 products which will be moved with this for -- they have got business for [ namely ] BMS and off board chargers already from a couple of OEMs in India.

Okay. Sure, sure. The other question is on the contract manufacturing agreement. One, is it already signed? And second, how does then the Vietnam plant of FRIWO and the Indian JV will work together? I mean, is that a huge capacity and will clash with the JV?

Yes. So actually, they have been getting good business traction and they wanted to expand their manufacturing capacity. They were evaluating to put a plant in the country. So I think we saw that opportunity, we said why you have such a plan which when you put up this new plant, we can have this also as a contract manufacturing, manufacturing in India. So, which has a potential of almost [ I would say ] [ INR 5,300 crores ] kind of a peak revenue. So Vietnam will continue and India will be [indiscernible].

Okay. Okay. Sure. And the final question. We also taken a minority stake around 5% to 6% in FRIWO Germany. Any rationale beyond this because I mean it's like a INR 130 crore outflow especially in time when the Indian [indiscernible] is seeing a very substantial order and bank CapEx requirements?

No, no, very right question Ronak. In fact, this [indiscernible] significant what also we have done after a deliberate and very in-depth deal which we have announced. So, this -- there are 2, 3 things. One is when we are doing this investment, definitely, you'll appreciate this being a listed entity. The prices are available it's a primary market issuance. So there is always a [indiscernible] price and whatever are the German laws, we are following our -- that laws and what are the lowest possible price, we are investing at that -- whatever formula we have in India as per se we -- there is also equivalent formula in Germany as what our previous ex-date minus x percent discount. So, we have followed that route. Number two, we have no obligation, whatsoever, to keep this investment forever at whatever opportune time, whenever Minda Industries there is a profit undertaken, it can definitely exit. And number three, what it does, which is the bigger objective it was not a equity investment. The bigger objective is that, we believe, that with this investment, we will have some impact into FRIWO also have some say there and it will strengthen the partnership between the 2 groups. So, I think that was a bigger objective.

The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund.

Sir, my first question is, you have shown battery pack as one component within the product space. It seems, many OEMs, specifically in the high-performance categories, want to keep this in-house. Now is there a right to then gear in the battery pack assembly? And the other question is, in the second quarter presentation, related to the product previously you have shown motor and motor controller as under study product. Now, the big FRIWO acquisition will be really also assemble [indiscernible]? And one last question on the capability perspective is, does FRIWO have any capabilities on the passenger windshield side? Because their website mostly talk about 2-wheeler [indiscernible] 2 wheeler products. Do they have any capabilities on the passenger vehicle side also?

Right. So, Shyam, I think you have asked 4 questions. So let me go one-by-one. So first is, in terms of battery pack and what is the strategy. I think, we have been sort of getting this question even for the BMS perspective, which is the heart of the vehicle. So as we have been seeing in, and I think I also mentioned the market value as to how it will impact, different OEMs have different strategies. Somebody might be there in house, somebody has outsourced. Like the BMS business, we have got one and FRIWO has also got one. Which clearly means there are customers who believe that outsourcing might be better than in house, same way we believe that market will pan out for battery pack also, yes, we might see some of the OEMs doing it in house, and there are a few customers who are actually evaluating it to be outsourced. So, it will be a mix, and we all have to see how market evolves gradually but definitely, there are people who we believe that we will be able to secure business for battery pack. Then, in terms of motor controller, as far as Q2 presentation as well you mentioned, yes, it was under study. And as I have mentioned, now, from under study, it will go under development, because we already have a product. Now, the parts of the [indiscernible] we don't need this study any further it goes to the next step in immediately. Then, on number three, motor. I don't think we have a motor product as a product available with FRIWO, that's a separate product, which is currently not part of JV. And the last in terms of [indiscernible], as I mentioned, Shyam, the JV currently is focusing on most of our 2-wheeler and 4-wheeler. Definitely, we will have competencies to work on things, but that will need to be valued. As of now, it is not part of this JV.

Sure, sir. Sir, if I may squeeze one last question, sir, from the OEM customers that we easily talk to on the 2 wheeler side, have any shown any soft commitments for these products because we are [indiscernible] up plants and the capacity per se. So, are there any advanced sale costs that gives you the confidence to go and [indiscernible] plant and the [indiscernible] CapEx [indiscernible]. If you can just some quality if you can give a sense, that will be helpful.

Yes. Shyam, I think at this point, also we have been discussing past, because what are products we sell? Mostly, we do have anchor customer who will go to production. And as you have seen in the last quarter, we did mention the 5 products going into production, and we will also add a couple of them from FRIWO also. Obviously, we do have anchor customers for most of our products, which are part of the EV. So, it is not that they are under a design stage or a steady state. So, from that perspective, we do have customers for most of these products, which need to [indiscernible].

So this JV, we should be seeing more of including our competitive positioning in the marketplace, similar to how we did with the [indiscernible] in the license? Is that a fair understanding, sir?

So absolutely, so what can also happen, additionally, Shyam, if you will note that FRIWO was already there in India and already got secured from business from a couple of customers, right? So I'm sure, they will appreciate they did had that technology because of which, they could get the customers in India without any manufacturing in India as of now. Now, once you join hands together with FRIWO and Minda, obviously, we both combined and our object is not to make ones to make 1 plus 1 more than whatever we can do. So be it in terms of time to development, time to market, product costing, competitiveness, there are various things at play, and which we believe is [indiscernible] the agreement for both.

Next question is from the line of Mumuksh Mandlesha from Emkay Global.

Just talk about FRIWO. What are the key products for the FRIWO and what kind of market share it has in key markets. Want to just understanding what are the major products for them?

Okay. So if you refer to Slide #8, and you can see what all products FRIWO already has. So which is like BMS, on-board charger, off-board charger, motor controller and battery pack. So, these are the components from EV perspective, which FRIWO already has. Now, in terms of market share, I think as we all know, market is still evolving. And as of now, there is no credible data for calculating market share. So I will maybe abstain myself from commenting on market share. But I can assure you that going forward, with both FRIWO and Minda combined, whatever win strategy is in terms of in-source versus outsource. I'm sure whatever is the outsource part, we should be able to get the lion's share in medium term.

Sir, in terms of JV, what kind of revenue visibility we have for the next 2 years and over the medium term, as we are setting the plan.

Okay. I won't comment next 2 years, because initially, obviously, a lot of investments will go into setting up our portfolio and as I said, it will take something like 18 months to have a plant up and running and all that. But from a medium-term perspective, we are looking at a revenue in the range of INR 1,500 crores to INR 2,000 crores in around 5 years.

And sir, what are the key products that will be manufactured, sir?

So all these components, you can refer to Slide #8 in case you have presentation.

Right, sir. Right, sir. And sir, will we apply for PLI [indiscernible] apply PLI sir?

Absolutely, this JV will evaluate and consider the PLI participation.

And sir, one question just on the seating side. Can you talk about the market potential of the segment and what is the revenue visibility for the product? Also, what segments have you [indiscernible] because I think it also caters to CV segment, which we are currently not present. So, can you just help on what kind of market potential here?

No. So sitting, Mumuksh, we have had a very clear strategy that when we acquired Harita, it was serving not many 2 wheeler customers while we are very strong with CV and [ opco ], which they continue to and we have been very successful in getting a lot of export revenue because also in the last 10 months for setting purposes, specifically from upward segment. Now, in terms of potential, if you remember, I don't know if you were there in the last call in April when we had what is announcement of the completion of the transaction of merger of Harita, we said even though they have done less than INR 150 crores in last year, a year before they did INR 715 crores. So our target of minimum first milestones to cross [ INR 58 crores ] of [indiscernible] in 4 to 5 years. And I am pretty confident that we should be able to achieve and we will deliver better than that based on whatever current visibility we have. In terms of the road at 4 to 5 years we should be able to beat our guidance of doubling the revenue. And in terms of segment, as you asked, so they are very, very strong in India with the lion's share in EV and upload segment. In 2-wheeler, we have been serving only a couple of customers. So we have been in discussion to add this customer in next 12 to 18 months. That's what we have promised. So we sort of work on that aggressively. We are still on that and we will let you know once we add. In terms of CV, they were doing some work for other customers not directly OEM, but as a Tier 2, if they continue. So, as other is no direct for OE sale to any CV customer.

Next question is from the line of Sonal Gupta from L&T Mutual Fund.

So I just wanted to understand, like you've given 2 CapEx outlays one, INR 160 crores in the next 2 years. I believe that is for the current JV plant and then the INR 390 crores over the next 6 years. So could you just, I mean, talk a little more as to how do you see this investment?

Yes. So what we have done, Sonal, is that you appreciate the market is still evolving. The market volumes are still growing. So we did not want to commit all the capital upfront and have all the machinery [indiscernible]. So we thought it's better that we gradually increase the capacities as and when the demand grows. There are a lot of SMT lines, which you have to put a lot of electronic components. So what we will -- therefore, what we are planning is that recently, obviously, we will have the entire land, building, et cetera, to meet the overall objective of [indiscernible]. But in terms of plant and machinery, we will go in a very paced and a measured way, as and when the demand picks up. So you look at market, what is the market showing for 12 months, 24 months and based on whatever commitments from customers, we got it better to scatter the CapEx because normally, whenever you do a capital announcement of like -- even if we have the 2 investments. So you have to first invest INR 190 crores, fully, because you get INR 1 of revenue. Unlike in here, where you would have the flexibility to do [indiscernible] in a standard way, if you don't have a mastery in say for alloy example, which I will. So that is a big difference we have in the business we are talking about. And that's why we are -- we have actually spread the CapEx. And the whole reason we have come up because otherwise what happens, you will think that we are improving sustaining CapEx revenue of INR 40 crores, INR 50 crores, which was the right way. Actually, we'll be investing that kind of consistently increasing our capacity. So that's why we felt it better to give a full picture of the clear CapEx rather than limiting it to 2 years.

Got it. And so when you mentioned that potential plant potential revenues of INR 250 crores to INR 300 crores, that's on the INR 160 crores of investment?

No, that was only on the contract factor. That was a question specifically on contract manufacturing.

So -- Okay. So this does not include any India-driven revenue?

No, no. So overall, from this INR 390-odd crores of investment, our internal target over the next 6 years or the 6 year of revenue is more than INR 1,300 crores worth of revenue. So obviously, a lot depends on the [indiscernible] volumes outpace our assumptions can be even more, vice versa.

Okay. So it's -- so INR 250 crores to INR 300 crores is the -- I mean with potential exports for FRIWO that you see, essentially. And when you're saying INR 1,500 crores on an annual basis, right?

For the 6 years, yes. You're right.

And -- Got it. And just in terms of, like, the overall CapEx for this year and your investments now, how do you see that? And I mean, would you see any need to -- I mean, this will be more funded by debt or how do you see that?

No, I think we should be able to profitably have all these capital we announced, the condition of debt and growth. I think fortunately, things are a little stable. We all know that there is challenges from semiconductor aspect in terms of volume, et cetera, but I think what has been fine and nothing to compare. So we should be able to have good internal accruals and which we need to fund largely contained the do some debt whatever those are, case-to-case basis.

Got it. No. But given the expansion you've announced, what is the total CapEx that you saw this year and next year?

So let's say, we are not [indiscernible] a milestone we committed at the beginning of the year. We have not even started our mining cycle starting. So I won't comment on, let's say. But this year, I think we are all [indiscernible] of INR 600-odd crores, kind of a number, in an at the beginning of the year, which was a mix of growth CapEx and sustaining business.

Got it. And this fee related investments also largely come in most likely next year, right?

Yes. Other than the equity part, obviously, that's also subject to RBI role to [indiscernible] 3 months.

Got it. And any update on the [indiscernible] transaction is...

Yes, the capability of that is getting -- is better, honestly, because, as we said is also we are very, very strong and have are firm on our demand or expectations on the contract, which have not been closed so far. So, the possibility of that is actually sort of dropping by the bit and it's quite possibly might not actually close the tranche.

Got it.

No, we have got extension by a month. So, we have a date until end of December, but I'm just trying to be a little honest. As honest as possible. [indiscernible].

Next question is from the line of Siddhartha Bera from Nomura.

Sir, again, on this transaction, some thoughts I wanted to understand for FRIWO. So, one is, obviously, they have got some orders in India. But as a Germany-based group, any areas you -- or any -- I mean if I look at the long-term, revenues have been broadly in that EUR 100 million. So are there any other factors which helped you to close this deal? So in the longer term, just wanted to understand more their right to win any -- some of these products.

So I think when you talk about right to win, which clearly establishes that they have already got business for a couple of components already. And though I can't share exact details, they are also in discussion for some of the components, at the last stage with some more customers. So you would appreciate that they were already in India and getting business. Now, when you partner actually together, you -- as I said, [indiscernible] how do we do a better product, better technological development, better or faster development time and how do we overall increase the business by more than 1 + 1 rather than 2, how do you make it more than that. So I think that has been the objective for us. So obviously, when we join hands, there are a lot of synergies which are also at play, a lot of collaboration things can happen. So overall, I think there were these multiple factors, which you said that putting all these things together, our right to win also should get strengthened further rather than maybe they have some, what we call, vantage points or we have some other vantage points. So we add both of them and see that how do we make a better offering to our customer.

Got it. So some of these products, which you said, these are apart from the products which you have highlighted here or part of these only?

Yes. So part of these only. Obviously, we are not going to increase the number of products as of now with [indiscernible]. So we have -- whatever we have on platter as of today, that has been mentioned in the presentation also.

Okay. And secondly, basically, some of the products already like -- we have developed on the controller side and we have done the full investment and now you are transferring it to 50% daily. So how to think about these in terms of the transaction?

No. So Siddhartha, not all products are going into this deal. Only the specific EV-related components are going, say, for example, telematics. Telematics will continue to remain in our, what we call, controller business. Same way -- missing one component. So there is one more -- there are 2 or 3 components which will not move to the JV, they will remain under controller business. And what are EV-specific only will go here.

Okay. So even the sensors and all, which probably you are supplying to EVs, they all also will be remaining in the existing business? Or will there be again transferred?

No, no. They will remain in existing business. Sensors will not get transferred.

Okay. Okay. Got it. Got it. And lastly, sir, if I look at, I mean, FRIWO's financials globally also, so the margins have been very low. So for the India business, which you are targeting, how to think about margins perspective?

So as of now, whatever business we have been securing, look, first is, very difficult to comment in medium to long term because we are in a competitive landscape. But whatever businesses we have been securing, I think they are near or better than our average margins.

Next question is from the line of Ashutosh Tiwari from Equirus Securities.

Congrats on the transaction. First, in Europe, which of the key products from EV side will generate higher [ revenues ] currently?

It's mostly related to the chargers.

And this is off-board chargers?

Yes. As of now.

Okay. And which will be customers for them over there?

I don't honestly remember. Maybe you can take some off-line there.

Sure. And BMS and off-board chargers order that they got in India like you mentioned...

Sorry, I lost your words in between, Ashutosh.

So in India, the business that they -- order that they got for BMS and off-board chargers, what will the content of FRIWO in these products in 2 wheelers?

Yes, 2 wheelers only.

Yes. What is the content, I am saying? BMS and off-board, what is roughly content for vehicles for both these products?

So it is in line with what we have shared in the past. So BMS, almost like 6,000 to 7,000, if I remember. And off-board charger, I honestly don't have that number off hand in terms of what was their business really.

Okay. And on this 4-wheeler and 2-wheeler alloy wheel plant, so after the complete expansion comes to 5.6 million wheels per year for 2 wheeler, and -- so what would be the sales in it? The peak sales [indiscernible]?

So with -- post commissioning of this plant, our peak sales should be around INR 775 crores to INR 800 crores.

INR 775 crores for 2 wheelers?

Yes.

And 4-wheelers, 330 wheels per month?

4 wheelers will be significant. 4-wheeler, we should be more than -- honestly, I don't have the number at least. I don't want to do a guess work. Maybe you can calculate that, because what we have done is we've added a lot of capacity also by debottlenecking. So if you add -- stack up the numbers, you will find that the number is much higher than what it was earlier. It is more than 30k delta work we have just measured. So we will be having 325, which is almost like 3.7 million wheels a year.

[Foreign Language] I'll generate the numbers, that's okay. And lastly, on this Dhama JV for the -- your seating system...

It's a deal. It's not a JV.

Yes, [indiscernible]. So in this side, do they have customers in India as well as of now? How is the current business for them?

No, they don't have any customers. In fact, they have a product, which we have been discussing with them for last, I think, 4 to 6 months. They have this product which has got application in non-auto as of now. So what this does? It has got a component, which you sort of put in inside your home along with the seat. And it does a temperature control. So in heat, when you see a 2 wheeler, normally, it's burning, right? So it will reduce that impact of burning, same way in the cold. So it will do some temperature control in the seat. Obviously, seat value is a little higher. So you will not see that very aggressive application. You may initially see application in the top end 2-wheelers. And then gradually, as things improve and as the costs come down, then we will see a mass application. So initially, it is more a technology product, which we will see application in -- maybe in the premium bikes.

But this is like ventilation seats, right? It is similar to that product?

Sorry?

This is more like a ventilated seat that we see in some...

No, it is not a ventilated. So it has got some sort of a -- I don't know what we call, a controller or something, which will be put in inside. It is an equipment which will get fitted inside the seat.

Okay. So this can also give you a decent product for 4 wheelers, right?

First of all, technology is available, Ashutosh, in terms of heating and other applications in the premium vehicles, if you see. So it may or may not. Our objective initially, because we don't have a PV customer as of now. While we do have TLA, which covers PV also, but initially, our focus will be mostly 2-wheelers and CV of course.

Next question is from the line of Nikhil Kale from Axis Capital.

Yes. So my first question was on the products that you have. So now with all these additional products also coming in, are we largely done in terms of the products that can go into an EV and what we can offer? Or are there any other incremental products or work like we are doing on new products? Can you just specify that? Or is the focus now going ahead more on the PV side?

So Nikhil, I know we have got expectations to consistently outperform and I'm sure, in order to do that, we will continuously evaluate what more we can do. So this might not be the, honestly, end of it. We are still working on a few things, but we'll come back once we see light of the day. But as of now, I think this is what we have.

No, but on the 2-wheeler side, would it be fair to say that now the kit value that we have, it is like a INR 56,000 kind of potential kit value, that is addressing most of the high value kind of opportunities that we can have?

There might be more, honestly.

Okay. Okay. And secondly, I mean, mobile, we've discussed the kind of potential kit value and [ maybe so that we can ] work out the revenue potential from these products. How are you looking at these margins? The reason I ask this is, as you mentioned, some of the OEMs are keen to keep their BMS or battery pack in house. On the other hand, you also have multiple companies which were maybe not direct competitors till now. But given that on the EVs, there are only so components that you can make, many of them are also now working on the same components. So going forward over the next 5, 6 years, while the top line potential is great, but how are you looking at margins in these products? Will it be similar to the current levels? Or do you think margins could be under pressure for some time?

So definitely, I won't be very, very optimistic, honestly, on margins initially, because we know the markets are evolving. There are a lot of players in the country. And you know that it's a normal phenomenon, because when you are in the phase of evolution, there is everybody who try to sort of pitch into and sort of be successful. We all know that today we have more than, say, for example, more than 50 2-wheeler new age OEMs who are in the country, trying to sort of give a better product, right? And I'm sure, we will see some consolidation at some appropriate point in time. I'm sure same thing will happen on the component side also. Today, everybody is talking of working on the EV side, yes. So what it does is initially, you will see some competition. That's number one. And number two, we know that in most of these parts, you have very, very high electronic component, which is bought out, right? So when you go to a customer, at times, you have discussion of -- about value add versus investment. So while initially, whatever business we've secured, our margins are broadly in line with what we have. But definitely, you can't rule out a pressure in the medium term, maybe 1 or 2 years, until you have some sort of visibility, consolidation and also comfort from the customer that, yes, this is a product which they will continue to go to a Tier 1 like us. And I think then we can also sort of expect some premium to the new -- newer entrants in the segment per se, because we -- you all know that we have got whatever decades of experience and credibility build up. So from customer choice, also, we would like to retain that first choice of our customer in terms of supplier. And we'll do work on that consistently to see that for whatever new business. Yes, you have to be competitive, but over the period, how do you see your business and build their trust and confidence to move back the margins to a -- maybe a respectable earnings. But yes, your point is very valid. We might see some pressure in the short term, but we are not very worried in the medium to long term.

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

Thank you for the opportunity. Firstly, if I look at the product portfolio, we obviously are having a lot of overlap as well between FRIWO and what we're doing right now. So what do we do, say, for example, with the AMP tie-up that we have on BMS? Will we stop that? Or do we have both [indiscernible]?

Yes. So that we still need to talk to AMP because that was only a TLA and it was not a partnership. Obviously, once you enter into a partnership, it's almost like a marriage. So I'm sure, engagement versus marriage, marriage will fail, so -- on a lighter note -- so definitely, with FRIWO having all that wherewithal and Minda also has developed, now is in collaboration with AMP, we will need to sort of take a course ahead in the discussion or a mutual discussion as to how we proceed. But as of now, I think it is Minda plus FRIWO.

Okay. Okay. And again, in continuation to that, I mean if I look at the products that are getting actually added, that is the off-board charger, battery packs, largely, and then the motor controller is moving into the next level of development. So -- I mean is it like there were some technology gaps in the products that we were already working on, on our own? Because as you see, there's no key product sitting idle right now from this year -- from this JV. So how do we look at that?

Yes. So Mukesh, as you see, rightly mentioned, if you exclude these 3 products, the fourth is, you just spoke a little while back, was BMS, right? So BMS also here depending on a TLA. So, obviously, a JV is much better than a TLA. I think the same thing we were experiencing in -- I'm not saying we will have it here, but we had similar experience in the past when we had a TLA for our 4-wheeler lighting business with a technical partner. And always, there used to be priorities with the TLA partner, this whole set of authorities, and you have to be in sequence for any sort of development. So once it gets into a JV, then it's a business for both, rather than a product which is technically licensed. There are always some limitations. I'm not saying we have a limitation, but in future, it could arise. So I think, from that perspective, even BMS actually, you see, is added, I would say, by FRIWO. So there are 4 key components in addition to off-board charger, motor controller, battery pack, even BMS, I would say, is now full technology being on board by FRIWO.

Understood. Understood. And -- so we're also going to be moving our current EV business into that. So could you quantify what kind of revenues we are right now generating out of it and how much [indiscernible] going to make in JV?

Very difficult to say, Mukesh.

Okay. But -- Okay. But we're not going to be moving any asset...

Because even their revenue is coming to the JV. And as of now, whatever visibility we have is broadly equal.

Okay. It's going to be equal, understood. And we're not going to be moving any assets, et cetera. Any components that we might be manufacturing, I'd say, in our motor controller division, that will be like supply from the stand-alone entity into the JV, right?

Not as of now. We will evaluate at a later stage, in case, say, for example, the biggest investment in EV is the BMS or the SMT lines, right, which we have a JV with Minda Katolec. So initially, if they want, obviously, Minda Katolec will support, but it -- to remain competitive, it will need to have its own SMT lines and BMS facilities in-house so that it does not pay any markup to a third party. Otherwise, their margins will come under significant pressure in terms of the JV. So over a period, I would say, this JV will be fully self-dependent. It may not buy anything from the other Minda entities.

Okay. Understand. And just my last question is on your alloy wheels and especially the 4-wheeler alloy wheels. We're making very high margins there, relatively much higher than the other products. And now because of expansion, is there some kind of arrangement where the margins kind of come off because that was an initial phase where we needed that kind of margins to justify [ in terms of ] ROCE and now how do we look at that business?

So, Mukesh, I think you have been consistently saying that, since last 3 years, that the margins we've been enjoying was primarily because of the businesses we have secured when there was antidumping duty in place. For last 2 years, there is no antidumping duty and all the business -- and also in last 2 years, a lot of competitions have also grown up. People have put up their capacities and there is a severe competition in the business. Good thing is that despite that competition, we have been securing businesses and expanding. Earlier part of this year, we announced 6,000 wheel CapEx -- capacity addition in Bawal. Now we are expanding in Gujarat. That clearly demonstrates our ability to win businesses from customers. Yes, margins -- as we have been saying since past 2 years, margins were expected to come down, and I don't think that's a surprise. So we do expect to remain in that range of around 16%, 17% kind of margin, still what we have shared in the past [indiscernible] on this post expansion of the capacities.

On the 4 wheeler side?

In the 4 wheeler side, yes.

Next question is from the line of Nishit Jalan from Axis Capital.

Sir, my first question was on FRIWO. If I heard you correctly, you mentioned that 20% of FRIWO's revenues come from electric vehicles and rest all come from other segments. Is that right?

Sorry, I missed your call -- missed your -- the voice went, in between, off a little bit.

What I'm saying is, you mentioned that FRIWO's -- 20% of FRIWO's revenues come from electric vehicle and rest all come from other segments. Did I hear you correctly?

Yes, you're right.

So then basically, it means that the EV portfolio is only about $20 million and essentially, they are just supplying off-board chargers and maybe some BMS to 1 or 2 clients. And I was just visiting their website, which talks about 2 clients. One is Brekr and one is IST. Does FRIWO have any real stream auto company, 2-wheeler company and all which are their clients because their website doesn't talk about that?

Yes. So we all know about that, that the market is still growing in terms of 2-wheeler EV. They have got a customer, as I said little while back, in the country, but obviously, the sales are yet to start. So as the market is evolving, they have also sort of developed products and actually have been able to secure businesses. Yes, in terms of actual sales, they are yet to materialize.

And these off-board chargers will not be supplied to OEMs. They will be supplying to the charging companies who are setting up charging infrastructure? How does it work?

It will be a mix of both, Nishit.

Okay. And when you say you are transferring some of your products to the JV, what I understand is only the BMS, off-board chargers are the only 2 products which are getting transferred over there. And basically, the motor controller and battery pack anyways is the capability you are taking over from FRIWO. So that will be the part of -- that will be part of the JV, right? Rest all products, whatever you've highlighted in your Slide 10, remain with you?

No. So what happens, if you see the Slide #8, we have mentioned what all components will be part of the JV. So what products will move to JV and what FRIWO products will move to JV. I would request instead of Slide 10, you look at Slide #8.

So that shows everything. DC-DC converter, acoustic vehicle alert system, on-board chargers. All those things will ship to the JV?

Yes, except telematics, it doesn't move there.

So essentially, your entire EV portfolio, you will try to build up through this JV entity rather than doing in the stand-alone, right?

All these products, yes.

But these are bulk of the products which are used in -- even in electric vehicle, right?

You are right. You are right, Nishit.

And just one last question from my side, Sunil, is that you have talked about a INR 28,000 increase in content per vehicle, right, after this JV. And if I look at, 2 products are essentially added. One is the battery pack and second is the off-board charger. Motor controller was already in the -- under development stage, maybe, or in the consideration stage, which comes into the development stage, right? Battery pack content...

But that was not part of INR 28,000.

Okay. So where I'm coming from is, this battery pack content, what we understand is, fairly large in the 2-wheeler, even if you assume a 2.5, 3-kilowatt hour battery and a $200 kind of a cost. So are they doing a part of the battery, not the few -- cells and all the sort of things? Or how is it?

So they are doing full battery pack. Maybe we have been a little conservative in terms of, what we call, assessing our kit value. It can actually be more than that, but this is the current -- what our estimate, we said, to be on a conservative side.

Okay. And, Sunil, you also talked about -- I mean someone asked you about the PLI, then you talked about that JV will definitely consider a battery PLI. Now, if you look at...

Not battery PLI. I didn't mention batter PLI. PLI is for auto components. There is separate PLI for battery, which is very different.

Correct. Correct. That's what I'm asking, because where I'm coming from is because most of the companies who want to scale up the battery pack business, they will apply for battery PLI and they will get sufficient scale and incentives. So on a stand-alone basis, if you are not part of a PLI, it will be very, very difficult for company to scale up the battery pack business, right?

Right.

So from that perspective, this battery pack adds up to a theoretical kit value, but in potential, realizing that will be challenging and competing with players who are setting up a scale of more than 5 gigawatt hour of capacity and taking part in battery PLI, competing with those guys will be very challenging.

Yes.

Next question is from the line of Rishi Vora from Kotak Securities.

Okay. Congratulations on the deal, sir. Two things. One, you said that -- like for an investment of INR 400 crores, you will be able to generate INR 1,600 crores of revenue. So basically, the asset turnover of this business is 4x. So like in a steady state, what will be the ROCE? It will be more than 20%?

Yes. That's the target, Rishi. To deliver more than that in the next 4 to 5 years.

Understood. And sir, secondly, you are also set up a subsidiary, Minda Auto Systems Private Limited. What does it pertain to?

As of now, it is primarily for the PLI scheme. There is nothing in there as of now.

Understood.

It's a more enabling, I would say, entity.

Okay, so nothing has been decided. It's just -- you've just formed a subsidiary.

Yes.

Okay. Okay. And sir, this battery pack, so basically, you'll also be manufacturing cells? As in do we have the chemistry capability? You will just be packing, right? Packing the battery...

No, only battery packing, not battery manufacturing.

Understood. Understood. And sir, lastly, on motor controller. So do -- does FRIWO supply to any of the OEMs the motor controller? Hello?

Participants, request you all to please stay connected. We have lost the line for Mr. Bohra. Participants, we have the line reconnected for Mr. Bohra. Sir, you may continue, please.

Sorry. Apologies, my line got dropped.

Sir, last question on motor controllers. Does FRIWO supply motor controllers to any of the OEMs right now?

No.

Sir, just to get a sense, because motor controller is also one of the critical part of the...

That's what we mentioned, Rishi, if you remember, a little while back that motor controller moves from under study to under development now. So post development only, you have -- it goes into a production phase.

Sir, so basically, in our last call, you said that for any new products which you develop, you aspire to have 30% market share. And if I look at motor controller space, a lot of domestic there, as well as global players have already started supplying motor controller to the domestic OEMs. So what are the product, let's say, differentiation or capabilities that we have so that we can meaningfully scale up this business given that we have been little late in entering this space?

Yes. So, Rishi, we have actually -- as I mentioned, we have actually got anchor customer, again, for motor controller now, which is why we have gone into our development phase. Otherwise, we would have expected to remain under the study phase. So we put money and resources and go into development phase only once we have some anchor customer. Yes, I agree with you that we might have been a little late, but we do expect to catch up on that market share target. That's what I said in the last call, that in next 4 to 5 years, whatever business we enter into, it is not only for this, our always target is that we have 30% share of business in fifth year or after 5 years, we should have that kind of cake in terms of market share. So obviously, you won't expect that in the first year or second year.

Ladies and gentlemen, we will take our last question now, which is from the line of Vishal from Edelweiss.

Sir, my question is relating to the alloy wheel business. So currently, the 4-wheel alloy wheel business, we have a capacity close to around 2.8 million to 2.9 million units. And 2-wheeler's current capacity is approximately around 3, 3.1 million units, if I'm not wrong. So...

I'm intervening here. So 2-wheeler capacity, when we have announced, so it is more on the, what we call, casting. So the casting capacity is same at 13,000 tonnes a year. What happens is based on the weight of the wheel, the number changes. So when we have initially thought, we thought we'll be able to manufacture 4 million at the kind of business we have secured. The average weight of the wheel is more than what we have initially planned. And that's why we are saying, it could be something around 3.5 to 3.6 million wheels. But in terms weight, capacity remains same.

Okay. Okay, sir. Okay. Sir, I want to know, at the current capacity, which you are having, what will be the gross block breakup between the 4-wheel alloy wheel and the 2-wheel alloy wheel, currently?

So 2-wheeler alloy wheel, the gross block is -- on total investment which we've done in the plant, in first phase was roughly around INR 325 crores. Four wheeler, maybe we will be able to share you, obviously, off-line. I don't have that number readily on my mind.

Right. Okay. Okay. Okay. Sir, my second question is regarding -- sir, these capacities will be LPDC and GDC, specifically 4-wheel alloy wheel?

No. So the new capacity which we are putting, 30,000, is all GDC. LPDC is only that 25,000 wheels capacity initially what we have put 2025, which is yet to commission, which is ready for operation. But as I said, this was linked with the product launch of the customer and the product launch for the customer has been deferred a little bit. So it will happen in the Q4.

And, sir, this was in Bawal plant, if I'm not wrong?

No, Gujarat plant. LPDC is in Gujarat.

Okay. Okay, sir. Okay. Sir, my last question is, with these capacities, do you now go for export opportunities also in alloy wheel business?

So as of now, definitely, our intention is to go for export. Plus consistently, I think we have been able to have significant business wins. So whatever capacity currently we are putting, we'll be able to -- unfortunately, we meet only domestic demand, which is consistently growing. Once we see any flexibility in our capacity available, that time, maybe we'll go little more aggressive on export. But as of now, I think our hands are full domestically.

Thank you very much. Ladies and gentlemen, we will take that as the last question. I now hand the conference over to Mr. Bohra for closing comments. Over to you, sir.

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

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