Uno Minda Limited (532539) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference 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 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, Minda Industries Limited. Thank you. And over to you, Mr. Bohra.

Thank you, Rutuja. Good evening, 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 the earnings call today, I am joined by my colleague, Ankur Modi. We hope you had a chance to look at our financial results and presentation that is uploaded on the stock exchange as well as on the company's website. I would like to run you through the business landscape and then update you on our performance in quarter 3 and 9 months of FY '22. Following which, we will be happy to respond to your queries. Before deep diving into business performance, let me shine some light on the industry highlights for the period. While the pandemic is not yet over, there is a growing optimism about country's economic recovery. The government's focus on spending more on capital expenditure augurs well for the economy as a whole, and we will have significant multiplier impact on the economy. Auto industry is around 7% of the GDP and around 1/3 of manufacturing GDP. And there is an old saying, when auto industry phases, the economy catches cold, and vice versa. Hence, once overall economy grows, the auto industry is expected to do better. The auto industry like several others was not immune to the drastic impact of the pandemic but is now seeming steady and ready to launch into its next gear. The transition towards electric mobility is underway in 2-wheelers and 3-wheelers, signaling an electric revolution. The government's proposal to implement a battery swapping policy for EVs with better interoperability standards is expected to benefit the entire ecosystem, particularly the electric 2-wheeler and 3-wheeler segments. While we look forward to the intended regulation being rolled out, once done, this move may help mitigate one of the biggest hinderances to adoption of electric vehicles in India. That is the upfront cost, range and charging anxiety. The private sector will be encouraged to develop sustainable and innovative business models for battery or energy as a service. This will improve efficiency in the EV ecosystem. The budget also announced the implementation of clean and electric vehicles in the commercial vehicle sector. This move will help increase manufacturing of electric buses and electric commercial vehicles for public transport, thus reducing the dependency on fossil fuel vehicles, while providing the impetus on players like us to develop better solutions to serve them. With the government announcing and implementing various PLI teams, including one for auto and auto components, and the recently announced semiconductor manufacturing scheme, the government support for the industry is evident. We firmly believe this will be a game changer for the country and will help in long-term growth of economy, with significant job creation, and in turn, increase demand as a whole. On auto PLI, we saw overwhelming response from the industry, with a total of around 115 companies applying for the scheme, including us. Multiple products from the company's portfolio are eligible for the same, including but not limited to, sensors, controllers, ADAS, RPA systems, alternative fuel systems, EV specific products and more. It aligns perfectly with the company's belief that the next level of change will not be only commodity-driven, but more of technology-driven, and stronger and larger players may be able to capitalize on the opportunities faster. However, since the entire auto supply chain is so closely knitted, it will help create demand across Tier 3 and Tier 4 as well. The semiconductor availability is gradually improving. However, challenges still persist. We are witnessing gradual improvement in PV volumes month-on-month basis. Silver lining is that PV demand remains strong. Along with semiconductor issue, industry continues to face strong headwinds in the form of increasing raw material prices and input costs since few quarters, which continued in last quarter as well. The inputs used in the production across diverse product portfolio of the group, for example, aluminum, copper, nylon and brass sheets, et cetera, the prices in the current quarter stands higher by 60%, 22%, 25%, 21%, respectively, vis-a-vis FY '21. In terms of auto industry performance, during Q3 of FY '22, we saw a production of 8.95 lakh units in passenger vehicles, down 12% year-on-year, and production of 45.49 lakh units of 2-wheeler, sales down 23% Y-o-Y basis. While in Q3 FY '21 saw a strong demand post easing of lockdown, to which industry also capitalized. However, due to supply side constraints, production numbers in some segments remain subdued in Q3 of current fiscal in spite of healthy demand. The 2-wheeler segment however was on different trajectory in terms of demand when compared to PV and is yet to catch up. Higher cost of ownership, tough rural sentiment, work from home and latest threat of Omicron continued to impact sales and consequent production. However, overall, we remain cautiously optimistic in the near future and confident of long-term growth potential of the economy, and hence, the auto sector. Moving to key operational highlights. You may refer to Slide #5. During the quarter, that announced entering into a JV agreement with Friwo, thereby enhancing the already impressive EV product portfolio. We are progressing well with separate legal entity already incorporated. We have finalized the location of the new plant for the JV, and land acquisition is expected to complete in the current quarter. The new plant is expected to be ready in around 15 months post commissioning on the ground activities. The contract manufacturing will also start in H1 of FY '24. Till the new plant starts commercial operations, JV will endeavor to serve its orders and contract manufacturing commitment using our controllers division facilities in Pune. In addition, during last quarter, we have entered into a technical licensing agreement with Dhama Innovations for its temperature controlled automotive seats. Under this agreement, Dhama and MIL will launch series of heating and cooling seats for the automobile industry. The Board of the company had also approved a capacity enhancement project of 2 million 2-wheeler alloy wheels per annum and 0.36 million 4-wheeler alloy wheels per annum, thereby further building upon a strong capacity foundation. All these have been covered in detail in our special call. Hence, we are not going into any more details. As was informed in our previous post results call, we have been actively engaged with top 6 to 7 new-age 2-wheeler EV OEMs for supply of EV as well as our traditional products. We are happy to inform that we have secured orders of more than INR 400 crores of peak annual sales value from these new-age OEMs. The peak sales expected in FY '25 as a ramp of production with increasing adoption of 2-wheelers EVs. Turning to our financial and operational performance, you can refer to Slide 7 and 8. At a consolidated level, the revenue from operations for the quarter increased by 7% year-on-year to INR 2,181 crores from INR 2,031 crores in Q3 of FY '21, while revenues increased by 3% quarter-on-quarter, in spite of supply side constraints adversely impacting auto industry volumes. On the other hand, the volume of auto industry declined by 21% year-on-year basis. The company reported 5% growth, largely on account of ramp-up of 2-wheeler alloy wheel sales, growth at all businesses, including aftermarket division, except at acoustic business in Spain and price increases on account of increase in raw material prices. EBITDA for the quarter was at INR 235 crores, while the same for the corresponding quarter was INR 279 crores. The EBITDA margin for the current quarter is lower at 10.8% from 13.7% in comparison to corresponding quarter last year. As was explained in last quarter, there were 2 broad reasons for lower EBITDA margin year-on-year. Basis: first, sustained raw material pricing pressure; second, excess manpower, which we have to keep due to higher indents and to ensure readiness for higher production. While we are largely able to pass on the raw material price increase to customers in line with various agreements, which usually happens with 1 or 2 quarter lag, so while we might get previous quarter of it with average price, spot prices is higher than average impacts negatively. Also, the higher denominator, which is the sales to that extent, is margin dilutive. Interest cost for Q3 FY '22 stood at INR 13 crores, which was sharply lower than the interest cost in the same period in the previous quarter on account of repayment of part of our borrowings from the QIP proceeds. Depreciation decreased by around INR 2.6 crores to INR 94 crore as against INR 97 crores in the previous quarter on account of MSIP's capital subsidy benefits received during the quarter at our sensor division. The profit after tax, at which MIL's share for the quarter was INR 101 crores as against INR 115 crores for Q3 of FY '21 and INR 95 crores in the previous quarter. While we do look at ROCE on annual basis, just for information, since Q1 was significantly impacted due to COVID, the ROCE for Q2 and Q3 stands at around 18%. On similar lines, the performance for the 9 months ended December 31 was also higher, with the revenue standing at INR 5,898 crores in comparison to INR 4,136 crores for 9 months of FY '21. The EBITDA for the same period in FY '22 is INR 610 crores in comparison to INR 423 crores in the corresponding prior period. Talking about margins, EBITDA margins were higher at 10.3% in 9 months as against 10.2% in the prior 9 months. We would want to highlight that both period of 9 months was -- were impacted by COVID waves. First wave, there was complete lockdown in Q1 of FY '21. And the second wave, partial in Q1 FY '22. Coming to the business-wise -- business segment-wise performance and moving to the product lines, starting with switching systems. You may refer to Slide #10. The segment achieved revenues of INR 638 crores for Q3, contributing about 30% of consolidated revenues. As was highlighted earlier, we have won orders from 2-wheeler new-age EV OEMs for switches. We have also commenced production and supply for export order for our marque American 2-wheeler OEM, which was announced a few quarters back. Moving to Lighting business, which has achieved a revenue of INR 487 crores for Q3, contributing 22% of our consolidated revenues. We continue to strengthen our position in LED headlamps with receipt of another large order from a Japanese 4-wheeler OEM. We have received orders from lighting also for -- from EV, 2-wheeler OEMs for lamps as well. With increased focus on ASEAN, we have made good inroads with large order from Italian 2-wheeler OEM for taillamps and blinkers at our Vietnam plant. Moving to our casting business, which has achieved revenue of INR 355 crores for Q3, contributing to 16% of our consolidated revenues. As is the case in other business segments, we have received a large order for pillion grip and alloy wheels from a new aged 2-wheeler EV OEM. All 4 lines of 2-wheeler alloy wheeler plant has been commenced now, with fourth line during the quarter. And we have started supplies to 2 more OEMs. In view of the demand, we had announced expansion by another 2 million wheels per annum from 2-wheeler alloy wheel plant during the last quarter. Demand and orders for PV alloy wheel is also very promising, leading to announcement of expansion here as well during the last quarter. As was informed earlier, supplies to Korean PV customers with LPDC technology has started, and we have subsequently received more orders from them. Moving to acoustics side level. Our acoustic business has achieved revenue of INR 151 crores for Q3, contributing about 7% to consolidated revenues. Performance of our European subsidiary, Clarton Horn, which contributes majority of acoustics revenue, remains subdued and significantly impacted by volume drop due to semiconductor shortage. However, events for Q4 are better. The milling situation is improving gradually in Europe as well. Locally, we have received order for horns as well from the new-aged EV OEMs. Moving to our Seating business, which achieved revenue of INR 236 crores for Q3, contributing 11% of our consolidated revenues. While CV OR segment remains strong, sluggish demand in 2-wheeler impacted the performance. We have secured orders here also from 2-wheeler new-aged EV OEMs for seats as well. Moving to other product business, which have achieved revenue of INR 315 crores for Q3, contributing 14% of overall top line. Other businesses mainly comprise of sensors, blow-molding business, iSYS, battery, aftermarket which is the trading part. Battery and aftermarket division continued to show strong growth, with iSYS also reporting higher sales, led by product sales. We have received additional orders from a couple of OEMs for wireless charges, which will be positive for our controller division. In corporate, the share of profit loss of associated joint ventures for Q3 is at INR 19.5 crores as against roughly INR 9 crores in Q3 of FY '21. All our JVs associates, including infotainment JV with Denso, our CFP system JV with TG, our CNG product JV with Minda Westport and Roki have contributed positively with the only exception of Kosei Minda Aluminum. Recent announcement relating to mandatory 6 airbags would be positive for our JV with TG, while move to cleaner energy like CNG is getting good growth. You can -- we can move to aftermarket and export, Slide #13. In terms of our revenue pie for the quarter ended December 31, OEM business accounted for 88% and aftermarket accounted for 12% in Q3. Our aftermarket division has done well with revenues of INR 262 crores as against INR 223 crores in Q3 FY '21. The aftermarket division continued its growth momentum in Q3 as well. We are also increasing our focus and efforts towards aftermarket branding and marketing. Our sales from international markets, which is export from Minda India, plus sales from overseas operations, stands at 14% of total consolidated revenues. International sales growth was led by iSYS and Delvis, both having a strong quarter with the innovative products in the European market. Moving to our cash flows and debt levels. Our net debt as of December 31 was at INR 413 crores compared to roughly INR 800 crores on March '21, and our net debt to equity stands at 0.11. The net debt has significantly reduced on account of prepayment of part of our borrowings from QIP proceeds. Moving to Slide #14 on strategic business update. First, merger of Minda iConnect with Minda Industries. The meeting of shareholders and creditors is scheduled to be held on February 16. We had to file to affiliate tribunal to amend the initial order requiring 10% of shareholders present and voting, which was not practical, causing a couple of month delay in convening the meeting. Post this meeting, it will take another 3 to 4 months to complete the merger process. Additional investment in Minda Kosei Aluminum, the Board has approved subscription to right issue of Minda Kosei Aluminum at a face value of INR 10 per share, and issue price also is INR 10 per share. The joint venture partner has announced their rights in our favor, enabling us to increase our stake in Minda Kosei Aluminum from 70% to 77.35%. Total amount to be invested by of right issue subscription is INR 61.2 crores. Minda Kosei Aluminum has significant growth opportunities with increasing penetration of 4-wheel alloy wheel, while penetration of alloy wheel is also increasing, however, still remains low in comparison to developed countries, providing ample growth opportunities. With capacity expansion announced both -- at both the plants, such as Bawal and Gujarat, capacity is expected to increase from current 210,000 wheels per month to 330,000 wheels per month by FY '24. The third being consolidation of partnership firms. As you all would remember, the company had initiated the consolidation exercise a few years back. As part of which stakes owned by the promoters of the group in various entities were transferred to Minda Industries Limited at or close to book value, while all group companies were transferred to Minda Industries Limited in the last few years, there were 4 partnership firms where promoter held some stake along with the third-party. The company is now consolidating that stake in this partnership from by acquiring remaining stake of promoters effective from Jan 1, '22. The aggregate investment of around INR 17.5 crores for buying remaining stake. To note here, the additional attributable profit from these entities for FY '21, which was a year back, was around INR 20 crores per year. In line with the commitment, the transition has been done at book value by promoters. The move will further simplify the holding structure and improve transparency, with significant reduction of related-party transactions. This concludes our consolidation exercise with all group companies, with all auto component businesses have now been brought under the listed entity, barring the joint venture with Nabtesco, which the group is planning to exit in the near future. With this, I would like to now open up the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Aditya Jhawar from Investec Capital.

I have 2 questions. First is, Sunil, if you can break up the order book of that INR 400 crore on EV components into the components which are engine-agnostic, like conventional products like switches LED and the new-age EV components. Yes. That's the first question.

Yes. And second?

Yes. The second question is that on continuing with the same topic, if we have to look at the profitability on EV components as well as the current component like switches and lights supplied to EV, how different it is from the base segment profitability?

Right, right. So thanks, Aditya. So this breakup of INR 400 crore, honestly, we have not shared as of now, but it includes both, as I mentioned, in some of the categories as well. It includes both the existing components and the EV-specific components as well. Maybe once we are mature enough and start having a separate segment maybe for EV, that time, we can share a little more in depth information. But as of now, it includes both. And I'm sorry, we are not able to share at this stage the split of how much is the EV-specific components and how much is the EV agnostic components. And in terms of profitability, Aditya, profitably is broadly in line with our existing margin, be it for EV components or be it for our traditional components or the old agnostic components, which is switch, light say, broadly, I would say, in the same range of the existing margin plus minus percent. So not very significantly different.

Okay. That's very encouraging to hear. The final question is on CapEx. So if you have to look at the CapEx for the next 3 years, what should be our total CapEx and specific CapEx that you have chalked out for EV order wins that we already have to be executed over the next 2 years?

So Aditya, you know that we normally do our budgeting exercise in February and March. And then along with our annual results, we share the next year's CapEx. But broadly, I can share the directional number. So we had a lumpiness in our CapEx a few years back when we had 6 new plants in Gujarat and Chennai and Hosur for our 2-wheeler lighting, 4-wheeler [Technical Difficulty] not big as was in the past, but definitely if kind of growth we have sort of slated for ourselves in the future, we would need to have a -- I would use 1 or 2 plant in the near future, almost every year to see that we are able to meet those growths. But in terms of sustaining CapEx at our current level of operations, it will be roughly around -- in the existing range of around INR 300 crores, which includes not only sustaining but also includes the incremental brownfield CapEx needs. So it will be INR 300 plus/minus, some 10% here and there. Too much of a...

Does that answer your question, Mr. Jhawar?

Yes, yes. Final question, if I can add just one. Sunil, on the raw material side, are you seeing some kind of softness in this quarter and possibly is the worst behind? And from Q4 onwards, we could start seeing some raw materials as such -- yes.

Hello? Sorry, I was continuing to speak. I didn't realize my phone got disconnected. Sorry, I don't know where I got lost.

Mr. Aditya Jhawar was asking another question, sir.

Yes. So I was responding to that CapEx. I don't know when it got disconnected.

It was completed.

Okay, no problem.

Yes. No. I'll connect with you, Sunil, off-line. But just last final question. On the RM side, is it -- are you seeing some directionally things started to improve from Q4 and possibly the worst of RM pressure is behind?

So if I have to see only January and February so far, based on whatever we are discussing looks like things are still going north, specifically for some of the resins and some electric components which are still there is continuous price increases. But in some of the commodities, the messages we are getting is that things might stabilize here. Too early to say whether they will cool off. But what increases we have seen in the last 2 quarters, we might not see in the current quarter.

The next question is from the line of Ronak Sarda from Systematix.

Yes. The first question, on the alloy wheels. Firstly, what was the production for 2-wheeler alloy wheels during the quarter? And how is the run rate now?

And second?

And second, on the entire stake increase, I mean Kosei announcing its rights towards Minda Industries. So how is the relationship developing? I mean is it because you've seen in the other JV consignment, there have been impairments there as well. So is it -- I mean, are we looking to increase the stake to almost 100%? And again, I mean, a touch on the technology side. Have we fully absorbed the technology, and how things should look now going forward?

Right. So Ronak, first point first, on alloy wheel production during the quarter for 2-wheeler is roughly around 60% to 65% of our capacity from the 3 lines. Fourth line has just been commissioned. So that's on the capacity for 2-wheeler alloy wheel. In terms of stake increase, definitely, the relationship is very, very strong. And I think it was -- if you remember, in last year, in Kosei Minda Aluminum, we had reduced our stake from 30% to [ 18% ]. And Kosei, which is the kitty, which Japan had good equity in Kosei Minda, which obviously at that time, we chose not to participate in that fund raise, right? So the same amount sort of we have raised in Kosei Minda, where they have renunciation -- they have done a renunciation of their right in favor of Minda Industries. So overall, what happened because of this is that in -- if I see from an independent shareholder perspective is -- and the loss-making subsidiary, you reduced your stake, whereas in relatively a better company, we have been able to increase our stake from 70% to 77%, and that to at INR 10 a share, which I'm sure the delta versus the fair price, what it could be. And in terms of relationship, I can assure you relationship is very, very strong. And there is no hint of doubt on our relationship. In fact, both have been supporting each other very, very strongly. For every product, every business, even, in fact, if you remember that 2, 2.5, 3 years back, we had set up another subsidiary called Kosei Minda Mold, which is the mold manufacturing JV locally. I think that shows the confidence of the JV partner. Otherwise, normally, they don't do that in other JV relationships because that's where the heart of the technology also retains, which is already we have a subsidiary in -- next to the casting plant in India.

Got it, got it. No, just wanted to understand them increasing stake in a much smaller company and reducing the stake here. So that's what I wanted to understand. So just a clarification on the 2-wheeler alloy production, 65% of the 3.6 million capacity or that's the...

No, of the -- because fourth line has been commissioned. So obviously, not much of production from the fourth line.

Okay. Right, right. And the run rate looks to inch-up again? Or how would the...

Yes. So as I said, in addition to the key customer, we all know about that, Bajaj. So we have also started 2 more customers sort of starting offtake from that plant. In fact, as we have been discussing, we have been very fortunate to get a lot of orders in that business. And we know that as a country, we are importing almost 50% of our requirement in 2-wheeler alloy wheel. There is huge potential, and that's why to meet that kind of demand, the Board had approved in last quarter an increase of capacity from 3.6 million to 4 million wheels to almost 5.6 million to 6 million wheels. This -- the number of wheels depend on the weight of the wheel. But in terms of the casting capacity from 13,000 ton to almost 19,000 ton now.

[Operator Instructions]

No. That was just the first question. Can I take the second question?

[Operator Instructions]

Yes. The other question was on the financial side. If I look at a couple of things here. One on the RM side, you answered it partly. But this is one of the highest RM per sales as far as in, let's say, almost 5, 6 years. So I mean, is it -- there is some under recovery as well which would kind of get settled in the fourth quarter? Or should -- this should be the run rate going ahead? That's one. And the tax rate also looks pretty large, almost 30% odd. So if you can guide on that, because last year, we were at around 25-odd percent. So 2 questions there.

Yes. So first, on the RM, Ronak, as you know, that this I just said, the prices continues to bump up in the last quarter also. So even though we would have got from our customers, the average commodity prices for Q2, the Q3 spot being higher had a big impact on financials for the quarter, same what we saw in the previous quarter. So once we see the prices stabilize for consecutive 2 quarters, then actually, like we will see what is the real RMC because if the spot is higher than what you are getting from customers that obviously hits your RMC. So that's one of the major factors. And with prices for commodities still sort of a little bit inching, north and north sort of cooled off significantly. We might have some impact further in Q4. But once there is stabilization, this -- we will see some improvement in terms of RM as a percentage of total revenue. In terms of tax rate, yes, you are right. Ronak, it is high. The key reason being the overseas subsidiary, which is Clarton in losses, so obviously, that had a negative impact in terms of the overall tax rate, so your profit reduces but tax doesn't. And also because of our accrued MAT, we continue to remain in the old tax regime. We have not yet opted for the new tax regime.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

Congrats on new orders. Just a couple of questions on -- one is on the PLI scheme. So can you talk about what all products you have applied for PLI schemes and also clarify whether the products under Friwo JV will be -- will we have applied for?

Yes, Jinesh. So we have applied for in the PLI for all the products, which are currently eligible. And obviously, the products which will be manufactured by the JV also because there was an option to apply PLI scheme, either at a stand-alone entity level or at a consolidated level. So obviously, we have applied for at a group level. So all the subsidiaries of the group, even though they might not have the CapEx of INR 250 crores or so, they would still be entitled or eligible for the PLI scheme. So accordingly, the components which will be manufactured in Friwo JV they that are also been eligible and applied for.

Okay. Okay. And based on this application, any sense on what kind of CapEx are we looking to commit there?

Yes. So that CapEx is obviously is only for those components. So be it sensors, controllers, advanced driving assistance systems, reverse parking assistance system, alternate fuel systems, EV products. So all that put together definitely is more than the minimum requirement of INR 250 crores over the next 5 years, not very big. But I'm sure you remember that the government also has indicated that they will be coming up with the same list of components which is yet to come. So we are waiting for it and hoping that we might have a little more components from a profile, road profile to be eligible for the P&I scheme. So that's where we are in terms of the PLI.

Okay. Okay. Got it. Secondly, what would be our revenues from EV -- pure EV components in 9 months FY '22? Would it be fair to say on absolute basis, that number would be very negligible currently?

As a percentage of total revenue, yes, it won't be very, very significant. If you see at the group revenue of consolidated of around INR 8,000 crores. I'm excluding the revenues which we don't consolidate, because of accounting rules. So if you see our revenue is roughly around INR 10,000 crore, INR 11,000 crores, whereas what we see quarterly is only to -- which is roughly around INR 8,000 crores. So of that, currently, in FY '22, obviously, there are not many EV specific products and not volume also. We did have production of BMS and smart plugs, et cetera. But because the number of vehicle is so small, I'm sure you'll factor it you can make out how much will be the percentage of total revenue. But what we have also started out is that the products which will be manufactured from the Friwo JV and the number we spoke about in the last call to be more than INR 1,500 crores over next 4 to 5 years. Based on our current assessment, the belief is that we should be actually able to do even better than that.

Got it, go it. And lastly, any sense on the increase in kit value on the airbag side as it actually increases from 2 to 6?

Yes, yes. So in terms of airbag as an opportunity, it is definitely very, very big. It will be almost, if I remember correctly, roughly INR 3,000 crores of additional revenue for the industry. And we are targeting a market share of almost 25%. So that will be the potential opportunity for us in the airbag business additional.

Okay. But any sense on the kit value, how it would go up?

In terms of kit value you are referring to, I believe from, what you call, 2 airbags, 2 what you call...

Right, right, 2 to 6.

2 to 6, airbags, right?

Right, right.

Yes. So from 2 to 6 airbags, the kit value will expand to almost INR 3,000 for a PV, which currently I think it stands at roughly maybe 1/3 of that, less than 1/3.

The next question is from the line of Ashutosh Tiwari from Equirus Securities.

Sir, firstly, on the aftermarket piece, I think...

I'm sorry. Just one thing. I think I -- on the previous, Jinesh, instead of kit value I have shared revenue numbers, so kit value will be roughly around INR 6,500 additional. Sorry. Go ahead.

So firstly, on this aftermarket sales, I think we are seeing really good ramp up this quarter to INR 262 crores, 17% growth versus last year same quarter despite high base. So is it this year growth is driven by more new product addition? Or it is still the older products which are giving us more revenue in terms of growth as well? And also, in term of network where we are today versus what we are say versus March?

Yes. So Ashutosh, you are right. I think we have been very aggressive in our aftermarket, I think we've been speaking for all this for almost 1 year, 1.5 years now. So our aftermarket, which is a B2C sale continues to be very, very good. It is driven by 2 key factors. First is, as you rightly mentioned, because of addition of new components, which is heating and alloy wheel. And let me tell you, alloy wheel, actually, we could have done better, but because of our existing capacity itself is able to sort of meet OEM demand and running almost at capacity. We maybe lost some opportunity for aftermarket, but we are -- with the additional capacity, we'll be able to even increase our sales in alloy wheels in aftermarket. Seating also, there is a big opportunity which has started a few months back. So we are onboarding the dealers for that gradually. And also, the increase is also because of a little bit of gains in the share of business in our traditional components, which is lights and switching and also some bit of exports. So I think it is an all corners a little bit contribution is there. And that's why we've been able to hold on to our guidance of double-digit high-teens growth. And going forward, as I said, that we are undertaking a huge branding promotion exercise. So with that, we expect or we plan to sort of even increase our growth year-on-year in the near future. So as of now, we are almost, if I see, run rate #2 in B2C sales in the country. And our target first is to be #1 in terms of B2C sales.

Okay, okay. And you mentioned that alloy wheel is running sort of capacity. So even you said that last quarter out of 240,000 capacity per month, we operated almost close to full?

Yes, yes. For 4-wheeler, we have been almost running close to capacity.

And the next leg will come where basically the additional capacity in 4-wheeler?

So the initial expansion which we announced of 60 kt per month in Bawal, that should be up and running in the first quarter.

Okay. So from there, I think you'll see the further ramp-up. And just you also mentioned that you've started supplying to this Korean OEM. So this is, I think, the extra capacity, right? This is at Gujarat.

Yes. Yes. That's the LPDC one.

Yes, yes, LPDC one. So that is not -- that deflection over there must be lower.

No, that also has started now. And in fact, there are also reflection almost, I would say, 80% of the capacity. And there also, with this new business, we will be able to utilize the capacity maybe in 6 to 10 months from now on, because the new orders, obviously, as you know, is linked with the upcoming volume -- the upcoming model.

Okay. So it seems like the way things are going, maybe you need to announce another expansion in the next 1 year?

Yes. For LPDC, I think that's the target, I think we shared initially also, that as of now, we are putting a very small line of 25,000 wheels per month for LPDC. And as business grows, we will see how we sort of cater that demand because currently, that is put up in Gujarat, which is primarily only the casting line, but entire machining, painting, everything is common aligned with the GDC facility. So as volume grows, we'll see how do we sort of meet that incremental demand.

Okay. And lastly, I want to understand, on this wireless charger, what will be the content per car basically? And can we share the revenue that you're deriving right now from there, and how we can see ramp-up of that?

I'm not sure wireless chargers specific, we have shared content in past, Ashutosh. Let me check back my minutes, but...

Yes. It has become a sizable business because I think in all the new cars this is...

No, absolutely. So this is part of our internal business, Ashutosh, and it definitely has a huge potential. We have already got business for wireless charger from 2 large OEMs, and it has been increasing from 1 model to 2 model, and we are seeing a good growth in that business.

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

My first question is on the PLI scheme. Could you give some sense of -- on what products have you applied for? And how would the investments span out there for that PLI scheme?

Okay. So I did share, Mukesh, initially. Let me repeat that in terms of what products we have applied. So basically, it is the sensors, the controllers, ADAS, RAPS and the EV-specific products. And also, as I mentioned, that we do expect this second list to come out soon. And hopefully if there is a little more then those components will also be added. And in terms of investments, as I mentioned, that the minimum requirement was INR 250 crores over 5 years for these eligible components, even though our CapEx is much more. But these eligible components will be having investment more than this, you know that even only in the Friwo JV investment was more than the [indiscernible] also we'll be getting those guidelines.

Sure, sure. Right. And the scheme doesn't really specify that it should for exports, sir. It could be both domestic and exports, right?

Yes. It doesn't specify it has to be export. It is basically over a base year, how much incremental you are producing, so -- and selling. So there is no demarcation of domestic versus export. In fact, on exports, you actually have a better incentive.

Okay. Right. And next is on the airbag thing. I mean given that it might come into effect from October, any sense of the kind of orders you might have to -- you're already starting to get on this? And any -- again, here, any CapEx in that -- in the TG, I mean, the entity that you might have to do?

Yes. So Mukesh, we definitely would need to do some bit of CapEx there. But let me tell you frankly, while government has set a target of October 1, '22, what we hear from our source is that people are obviously not ready for -- not everybody is ready for this October 1 date because it is not only about fitting of airbag it also means a lot of design changes, power, a lot of infrastructure in the car has to be upgraded. So I believe people have been approaching government. I'm not sure formally whether or not, but we might see some relaxation in this date. But over a medium term, this is rule -- a regulator is going to be there it's -- October 1 or April 1 won't make a big, big difference. But it's a big decision from government towards passenger safety, and it's good for our business. So we are very positive on this.

Right, right. And just the last with just a clarification of the partnership firms that now we are investing in, do they largely generate all their revenues only from Minda Industries, right now?

Yes, yes. That's what I was saying that it is, a, being done at all -- only at very clearly book value. And b, it will reduce related-party transitions very, very significantly.

Yes. No, so I want to check if they have any other external revenue at all if...?

Nothing material, maybe a little bit, but not very high level.

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

My first question was on the LED headlamp order. Can you just share some more color on the order size, who is the OEM? If you could just provide some details on that.

So Nikhil, I'm sure you appreciate we don't take customer names normally. But yes, I can share the quantum. So this LED business once it gets into SOP, I believe, in FY '24. The annual value from only this one model will be roughly INR 60 crores per year.

Okay. And sir, the existing order book, does that -- has that started getting into production or it would start at FY '23? You are like I think...

No. You're referring to this order? Or you're referring to generally the LED business?

The existing LED order book, I think you had orders from a couple of Japanese OEMs.

Yes. So I think, Nikhil, is that all these LED businesses we have got in last 10, 12 months, they are all linked to the upcoming model launches for all our customers, which are slated FY '23, '24 onward. So obviously, it will be productionized as and when the customer is ready for its model launch. And also, we are putting a specific plant for meeting this demand in Gujarat, which is under construction. Hopefully, that plant should be ready by end of June this year.

Okay. Got it. And my second question was on the airbag side. So can you just help us who are the key customers there? Is it spread across the customers that we have? Or are there a couple of main ones like, say, Maruti or Toyota? Those are the key customers there. And also on the airbag side, the content that you mentioned, if the [indiscernible] side INR 6,500 for the incremental 4 bags. Is that correct?

Yes. You are right.

And so that's the entire airbag that we manufacture and supply, right? Or are we doing this a few components there?

No. So entire airbag we give along with the inflator airbag, the entire kit value. So this is there in our EV business, where we do -- putting in the steering wheel, so steering wheel we close, it's already fitted with the airbag inflator and everything. But obviously, for other things, you have to supply with an inflator and the airbag. So in terms of customers, obviously, we are working with almost 4 or 5 key OEMs in the country, be it Suzuki, be it Toyota, be it Tata, be it Mahindra. So I think we are working with all the major ones domestically.

And broadly, overall in the industry, what would be our kind of market share on the airbag thing?

So as of now, our market share obviously is very less, and I'm being very candid about it. Our market share is roughly around 14% and -- 13%, 14%. And we are targeting to take it to north of 25% in the next 3 to 4 years.

The next question is from the line of Mumuksh Mandlesha from Emkay Global.

Sir, in the first 9 months, what is the revenue for the 2-wheeler alloy wheel? And what do you expect for FY '23?

Hello, Mumuksh, can you -- your voice actually just went off a little bit. You're saying -- if I heard correctly, you're saying what is the 2-wheeler alloy wheel, then it was just a pause.

2-wheeler alloy wheel and first 9 months, and what do you expect in revenue in FY '23?

Okay. So first 9 months, our 2-wheel alloy wheel revenue was roughly INR 200 crores. Ankur, let me know if I'm wrong. I think it was roughly INR 200 crores for first 9 months. And you mentioned for next year?

Yes, next year.

So next year, since this fourth line is now commissioned. I think we are definitely going to target between 90% and 95% of our capacity in next financial year, which should be more than INR 450 crores, INR 500 crores, between that.

And sir, similar for sensors also, what was the revenue, say, for 9-month and expected revenue in FY '23?

So sensor last quarter, if I remember correctly, revenue was roughly INR 50 crores for the quarter, and for 9 months, roughly INR 140-odd crores. And you are asking next year, right?

Yes, next year.

So next year, we are definitely targeting roughly around INR 250 crore kind of range for FY '22, '23. But maybe I can give you a better precise number once we are through with our budgeting cycle in the next couple of months.

Yes, sir. Sir, is it possible to share what kind of price hike was taken in Q3 in terms of value-wise?

Price hike in value, didn't get the point.

I mean a price hike taken in Q3 if you can share something.

You are saying overall how much is the price increase impact to the price?

Yes, price, yes.

It is roughly around 8%, 9% of total revenue.

[Operator Instructions] The next question is from the line of Siddhartha Bera from Nomura.

Yes. Sir, first question on the margins. So just wanted to understand, has there been any difference between the -- if I look at the segment-wise, margins of 4-wheeler and 2-wheelers given that 2-wheeler, as an industry volumes have been under pressure over the last few years. Has there been any structural gain in the margin profile for the components you supply currently between these segments?

Sorry. I didn't hear it very, very clearly, Siddhartha. So if I -- let me repeat if I understood correctly, else you correct me. So you are saying that what is the impact on margin because of the 2-wheeler volumes versus 4-wheeler volume. Is that right?

Yes. Because 2-wheeler industry of course has not grown. So I mean, the ability to raise prices to achieve our sustainable margins of 12%. So has there been any sort of difference or sort of resistance to raise prices between these 2 segments?

Not really, Siddhartha. So what happens is that, yes, there might be a push back. But because we have got very clear agreements with our customers, it is not linked to volumes. So whatever is the price increase pass-through as per agreements, I think we have secured almost from all the customers. Yes, you are right that from industry perspective, quarter-on-quarter also there is a declining volumes. I think last quarter as an industry we produced something like 2 million 2-wheeler wheels, whereas this quarter it was [ 45 ], so almost 14% drop quarter-on-quarter. But that does not mean that there will be an impact in terms of the price increase which we have to sort of get it from our customers. So no impact from that perspective.

Okay. Got it. And second is on the sensor business. So if we look at in the last few quarters, we have done in that range of INR 50 crores to INR 55 crores every quarter. So what will be the driver from here which will lead to a strong growth in the revenue?

Yes. So there has been a new business, what we have secured, which are getting broadly in line or in production, a, from the next year. And also, there is expectation that the volumes also will be better next year compared to this year. So I think these 2 will be the key drivers for our sensor business.

Okay. Because PV revenue volumes actually on a quarter-on-quarter has gone up, but our sensor revenues have remained flat. So just wanted to understand.

No, not really -- actually, sensors' revenue quarter-on-quarter is almost down by 10%. So in previous quarter, we did INR 55 crore, INR 56 crore, this quarter, we did INR 50 crore. It's almost like INR 5 crore lower in Q3.

Okay. So any lumpy new order wins which is there which will come from FY '23?

Yes. That's what I'm saying. There are some new business which will get in line sometime from next fiscal year, which will provide that additional revenue growth versus the industry volumes.

The next question is from the line of [ Vishal Srivastav from Swan Investments ].

Congratulations for a decent set of numbers in this [indiscernible]. Sir, my question is regarding the alloy wheel business. Sir, what has been the gross block invested in 4-wheeler and 2-wheeler alloy wheel business so far?

I don't have that numbers handy, [ Vishal ], I'm sorry. Maybe Ankur can share with you off-line if you don't mind.

Sure. Sure, sure, sir.

2-wheeler, I can share with you because 2-wheeler we know, it is roughly INR 25 crore of total CapEx, which we did for the plant, but 4-wheeler has been -- continuously we have been sort of having investments. So 4-wheeler, we can share you off-line.

Great, sir. Sir, my second question is regarding, can you share what has the -- what would be the breakup of the 4-wheeler alloy wheel capacity in the industry for LPDC and GDC?

Yes, I think we have it again as maybe off-line if you don't mind.

Sure, sure, sure. Sure, sir. I'll touch base [indiscernible] regarding this. No problem, sir.

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

Sir, my question is on 4-wheeler alloy wheel business. So how much does the per pair cost now for the 4-wheeler alloy wheel business? And after seeing the 60% increase which you mentioned in the presentation now?

Per wheel cost?

Yes. Per pair 4-wheel cost.

Very, very difficult to answer because every model will have different cost because it depends on the weight of the wheel, not the wheel cost per se. So the bigger the wheel, the more the metal it is linked to how much of alloy goes into the casting of the wheel. So very, very difficult to say how much will be the cost. So if a wheel is weighing 10 kg and a set is like 40-kg wheel will have very, very different pricing versus a wheel which is weighting overall say 60 kgs. So there's no standard number for that. I'm sorry for that.

And sir, how is the penetration now for the industry currently for 4-wheeler alloy wheel?

So penetration is very good. In fact, when we started this business 5, 6 years back, with Minda Kosei in North, the penetration was roughly 12%, 13%, which today is more than 30% currently. And I think we have been talking on this earlier also that the developed markets, the penetration is almost like 80% to 90%. So there is a huge room for growth for the next few years.

Okay. Okay. And when it comes to the 2-wheeler, how is the import is coming out for -- coming down now for the industry?

The imports are still there, unfortunately, because obviously, the domestic production is catching up. I don't have those numbers readily available. Last, which I -- which we saw a year back was almost like 50% plus kind of numbers being imported. But recent data, I think we need to pull it out.

Okay. Okay. And sir, just lastly, if it is possible to give a broad breakup of that other segment that is sensor. I think you already share the number for the sensors, but for the other segment like controller and the other division.

The sensor controller put together, so controller is very small as of now, sensor controller put together is around INR 65 crores. So last year, controller did only INR 15 crore. Then you wanted for what you call the other product side?

Yes, yes.

So if you don't mind, can that number be shared off-line?

Yes, sure. no Problem.

The next question is from the line of Rajesh Kothari from AlfAccurate Advisors.

I have 2 questions. My first question is, you mentioned that the raw material prices, your contract versus the spot prices. So what is our raw material procurement policy normally?

So the raw material, which we buy is different for different commodities. So what we try and do is to try and match ours versus customer, but that at times is not possible. We try and do it for maybe alloy, but what happens is that if you're buying resin, if you're buying any other material so you have inventory of maybe roughly 15 days, 10 days to 30 days based on components. So if you're sitting in November, you will end up buying at the spot price versus the customer giving you the previous quarter average. So that's how you actually end up having that delta of what you get from customer versus what you pay during the quarter. And that is part of the cycle. So when things goes on a price increase trend, you get negatively hit and when things soften up, you also would get a positive impact of it.

So are you trying to say that if the current prices, let's assume for a moment that it remains same, then fourth quarter, when I say same means not equal in the third quarter, I'm saying as of now, where we stand because we're already in kind of a mid Feb? Then do we see fourth quarter improvement in margins? Or do you think to come back to the normal margins it may take a few more quarters?

Yes. As I said, initially, Rajesh-ji, so if you note that still the prices are a bit higher. In fact, electronics is significantly higher, still prices are going north and also for some of the commodities. So as of now, we are not in a steady-state situation. So there will be some impact but might not be same as what we saw in the previous quarter.

Understood. And sir, my second question is with reference to the industry size. Is it possible for you to share the -- what is the total industry size of, say, sensor industry? And I don't know when I say in a normal market, I mean FY '21, of course, first quarter was not working. So I don't know how to put it, but on a say quarterly annualized kind of a number, what would be the size of the industry?

For sensors?

Yes.

Very difficult to say because, again, here, sensors, while we can give you for the components of the sensors we produce, there are multiple types of sensors, which go into a vehicle now. If you see that sensors have been increasing almost on a quarterly basis or annual basis in every modern launch for a customer because that's what a common man wants. So today, a vehicle has -- a top-end vehicle has more than 100, 150 sensors. So it's very, very difficult to say how -- what is the overall value of sensors. But if you want -- if you're interested, we can share with you separately what is the industry size of the sensors we produce. That can be shared.

No worries. I'll take it off-line. Last question if I can squeeze. Sir, our FY '20 revenue was roughly about INR 6,000 crores. '21, of course, was then impacted. '22, also partially impacted. So can we see that by FY '24, the INR 6,000 crores can become like INR 12,000 crores, INR 13,000 crores kind of revenue in terms of the overall target estimate? Because you have already have the order books and the new customer and expansion. So is it that a safe assumption broadly?

So Rajesh-ji, I think we spoke on this earlier also. It is very difficult to say absolute number because our endeavor always has been to outperform the industry growth. So if industry remains where it is, right, then our idea or our strategy is always how do we increase our sales, which can be through multiple sources, either exports or maybe increasing our share of business or increasing kit value. So we have been working all that. And that's why if you see for the last quarter, the industry volumes were down 21% overall, whereas our revenue is up 9%. Yes, some component is also because of price increase. But even if you exclude that, I think we have grown significantly compared to the industry growth. So if that trend continues, I have not done the math, but if it leads to that number, we should reach that.

The next question is from the line of Deepak Khatwani from Girik Capital.

My question has already been answered.

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

Sir, actually, in the audited results on Page #14 if you can turn to that. In the seventh point in auditor's report, I'm seeing that the sales are INR 2.11 crores in 4 of your subsidiaries and profits are around INR 9 crores. Am I missing something here?

I don't have that handy, Suraj, unfortunately, in front of me. What is INR 2 crores you are saying and INR 9 crores?

Yes. So the note says that for 4 subsidiaries, [indiscernible] financial results are revenue INR 2.11 crore and total net profit after tax of INR 9.73 crores.

Okay. So there might be a typo. We'll get it corrected. Thanks for highlighting it, it's not possible that INR 9 crore profit on INR 2 crore revenue.

Yes. No issues. So secondly, I wanted to ask, so I have been following this company recently. So would you be able to tell me what were the investments for the stake of 70% in Minda Kosei, and in which year?

So Minda Kosei was a fresh company. It was not an acquisition. So it is -- it was a company established afresh, so it was not acquired actually.

So what would be the investment on the CapEx pertaining this year?

So I think we just spoke about that, Suraj. I think somebody else also asked how much is the CapEx we have done so far in 4-wheeler and 2-wheeler alloy wheel, so 2-wheeler, as I said, roughly INR 25 crores. 4-wheeler, we can share with you off-line because continuously, we have been investing in that business. So I don't have that number handy. So if you don't mind, we can share that off-line.

Okay. No issues, sir.

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Sunil Bohra for closing comments.

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

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