Uno Minda Limited (532539) Earnings Call Transcript & Summary

Ladies and gentlemen. Good evening, and welcome to the Q4 and 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 for Minda Industries Limited. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and a warm welcome to all the participants. On this earnings call today, I'm joined by my colleague, Ankur Modi. Apologies for rescheduling the call. We have uploaded our financial results and investor presentation for Q4 FY '22 on the stock exchanges and our company website. We hope everybody had a chance to glance through the same. I would like to run you through the business landscape and followed by our performance in Q4 and FY '22, following which we will open the lines for Q&A. Before speaking about the company's performance for this quarter and full financial year, I would like to throw some light on industry front. You may refer to Slide 4. The beginning of year 2022 marked the third year of COVID-19 pandemic for India and the world, ushering in newer challenges for healthcare systems as well as channeling economic growth. However, business continuity coupled with rapid vaccination coverage led to a stronger resilience pointing towards the GDP growth of 9.2% for FY '22, the highest among the world's large economy. Moreover, the Union Budget '22-'23 gives a focused direction towards infrastructure investment with 35.4% higher CapEx over the current year's budget. Manufacturing and infrastructure are said to be the growth drivers bolstered by key government initiatives towards improving productivity. Signs of continued economic revival are evidenced in the healthy growth of indicators, including total GST collections, digital transactions, metal and coal production, electricity demand, rail and air passenger, freight traffic and faster collections. Automobile registrations across most categories also reported an upward trend. As things are settling down, PV and CV space is depicting clear signs of revival. With easing semiconductor supply issues, PV segment reported production of 10.5 lakh in Q4 FY '22, which was higher than last quarter and even 2% higher than Q4 FY '21. During the quarter, we also see risk getting shifted from past COVID-19 to geopolitical issues, i.e., Russian-Ukraine, rising crude prices, and rising interest rate risks. While we do not have direct exposure to Russia or Ukraine, the consequent impact which is resurface supply crunch, as semiconductor shortage along with high metal and energy prices does impact the operations. There was no respite from commodity price pressure as if they keep on finding new reasons to increase. Domestic PVs continues to see high demand and long waiting period with improving semiconductor supplies and backed by a strong shift towards personal mobility, improved customer sentiment and excitement around lot of new launches, facelifts. Chip shortage expected to further ease in next few quarters as capacity additions by chip manufacturers come on stream, helping clear a sizable order backlog built over the past 6 to 12 months. Besides inventory buildup from the current low of 15 to 20 days to the normative levels of 30, 35 days will account for about a third of the incremental volume. 2-wheeler demand remained subdued during the quarter, both in rural as well as in urban markets amidst higher fuel prices, a steep increase in the acquisition cost of the vehicle driven by higher commodity prices and insurance costs. However, we have witnessed increase in sales on month-on-month basis in March '22 and April '22 with opening up of the offices and educational institutions, festivals, and marriage season. Private consumption is regaining traction backed by recuperating contact-intensive services and rising discretionary spending. Also, Skymet has come out with its normal monsoon forecast. If the same is evenly distributed, it will have a positive rub off on rural sentiment as farmers will be able to get a better crop realization thus increasing their disposable income. It will thus benefit 2-wheeler sales. This, along with marriage season in coming days, will also see a traction in auto retail. The demand momentum for electric 2-wheelers remains strong with a massive growth in FY '22, driven by rising petrol prices, new launches, and government subsidies. Monthly run rate of e-2-wheeler picked up from 8,000 units in March '21 to 50,000 units in March '22. Strong growth is expected to continue as most OEMs have strong pipeline of new launches. The CV segment after a long downturn, which began post the announcement of axle load norms in 2018, is now witnessing strong demand recovery as all subcategories continue to inch north. CV demand growth particularly for medium and heavy commercial vehicles is backed by replacement demand because of improved utilization and profitability of fleet operators and government spending on infrastructure. Light CVs is being propelled by a surge in e-commerce and better last mile connectivity, while demand for buses is being driven by the gradual reopening of schools and offices and easing of mobility restrictions. Outlook remains positive with double-digit growth expectation for FY '23 in CV segment. Recent move by government to impose export tax on steel and iron ore and reduce tax on coking coal is expected to help ease some pricing pressure. The reduction in taxes on fuel prices by center is also a welcome move for the industry and will improve customer sentiment. While we are entering into a cyclically weak quarter, which is Q1, the medium-term outlook remains positive as we believe worst of commodity prices pressure and chip shortage are behind us. Domestic auto industry, specifically PV and CV, are poised for a strong growth in the coming quarters. Moving onto financial and operational performance for Q4 and FY '22. You may refer to Slide 5. We are pleased to inform you that the company had received approval from government for grant of PLI incentive. We have submitted required documents as well as bank guarantee for the same. Our various products, like battery management system, on-board and off-board charges, telematics, body control modules, vehicle control unit, sensors, as well as select PNG components qualify for the incentive under the PLI scheme. We believe this scheme will be a game changer, bringing long-term investment and facilitating Atmanirbhar Bharat. We would also like to appraise about the investment announced in last quarter. The company has enhanced its stake in Minda Kosei from 70% to 77.35% by subscribing to rights issue at a face value of INR 10 per share investing INR 61.2 crores. The joint venture partner has renounced their right in our favor enabling us to increase our stake. The company has also completed acquisition cum consolidation of 4 partnership firm by acquiring remaining stake of promoters. Subsequent to these investments, minority interest in profits have reduced increasing MIL shareholders' profits. The company also completed purchase of remaining 49% stake in Harita Fehrer from Fehrer GmbH. MIL now owns 100% shareholding of Harita Fehrer. We have continued our momentum for new order win in Q4 FY '22, as well with adding new customer almost across all product segments. This is on the back of building strong order book of INR 400 crores from EV new-age 2-wheeler OEMs in last quarter. Our focus on exports is yielding results with considerable export-led growth in switch and seating businesses. UNO Minda is an employee-centric organization, always puts our people at the heart of whatever we do. At UNO Minda, we believe that the success of organization and its people go hand in hand. Recognizing our people practices, UNO Minda featured in Wall of Fame of Great Place to Work Institute, amongst the Top 30 Best Workplaces in Manufacturing Companies in India. Coming to financial and operating performance, you can refer to Slide 7 and 9. At consolidated level, revenue from operation for the quarter increased by 9% year-on-year to INR 2,415 crores from INR 2,238 crores in Q4 FY '21. While revenues increased by 10% -- 10.7% on quarter-on-quarter basis, in spite of supply side constraints adversely impacting auto industry volume. As you will note, while volume of auto industry declined by 17% year-on-year basis, the company reported 9% growth largely on account of ramp up of 2-wheeler alloy wheel growth at all businesses, specifically to 4-wheeler alloy wheel and aftermarket divisions. The revenues increase also comprises price increases passed onto OEM on account of increase in raw material prices. EBITDA for the quarter was at INR 276 crores, improving sequentially by 17% from INR 235 crores last quarter. The EBITDA margins for the current quarter were lower at 11.3% from 13.6% in comparison to corresponding quarter last year on account of sustained raw material price increase. The upward trend in commodity prices continued in Q4 as well, further fueled by Russia-Ukraine war. Energy prices in Europe also saw an alarming increase impacting our acoustic business profitability. During the quarter, there is an additional employee cost of around INR 15 crores due to the ESOP charge. Depreciation for the quarter increased by around INR 16 crores to INR 110 crores as against INR 94 crores in previous quarter on account of 2 reasons: first, higher utilization level in the current quarter and also capitalization of some of the assets. Other nonoperating income for the quarter increased to INR 21 crores from INR 12 crores, mainly on account of gain of around INR 9 crores from revaluation of investment in Kosei Minda Aluminum post the stake increase by JV partner from 70% to 88%. The PAT, which is MIL share, for the quarter was at INR 144 crores as against INR 140 crores in Q4 FY '21 and INR 101 crore in previous quarter. We would want to appraise that this is highest-ever quarterly profit for the company. While we do look at ROCE on annual basis, which stands at 16%, just for your information, since Q1 was significantly impacted due to COVID, ROCE for the rest of 3 quarters, which is Q2 to Q4, stands at 19%. On similar lines, the performance for the year ended 31 March 2022 was also higher with revenue standing at INR 8,313 crores in comparison to INR 6,374 crores for FY '21. The EBITDA for the same period in FY '22 is at INR 885 crores in comparison to INR 727 crores in FY '21. Talking about margins, the EBITDA margins were lower at 10.7% in FY '22 as against 11.4% in 9 months of FY '21. We know both the years had impact of COVID, but this year, the impact of commodity price has been even bigger. So moving to next dividend. The Board has also recommended a final dividend of INR 1 per share, which is 50% of the face value reflecting commitment from the company to return value to shareholders on a consistent basis. The company had also paid interim rialto INR 0.5 per share in February '22, making total dividend of INR 1.5 per share for FY '22, translating into a dividend payout ratio of 12%. In order to reward the long-term shareholders, the Board has also recommended an issuance of bonus share in 1:1 ratio. Coming to the business's segment-wise performance, you may refer to Slide 15 to start with switching systems. The segment achieved revenues of INR 727 crores for Q4 FY '22 and INR 2,483 crores for full year FY '22, contributing about 30% of consolidated revenues. We continue to receive orders for new generation switches like sunroof, cruise control, power window switches, paddle switches, vehicle stability switches, et cetera. Export is another big revenue stream, which is growing fast, specifically in 2-wheeler switch segment. After an American 2-wheeler OEM, we have now received orders from renowned premium Italian 2-wheeler OEM. Over the years, switches have also become lot smarter with ability to communicate with other parts, with in-built diagnostics, connectors, and bootloaders. The continuing incremental orders for these next-generation switches validates our ability to innovate and stay ahead of technology curve. Moving to lighting business. It has achieved revenue of INR 525 crores for Q4 FY '22 and INR 1,826 crores for full year FY '22, contributing to 22% of our consolidated revenues. Lighting segment has become one of the most exciting segments with very promising growth outlook. After announcing large orders for LED lamps and orders from EV OEMs in last quarter, we have now received a large order for center position lamp from an Indian OEM. Moving to our casting business, it has achieved revenue of INR 425 crores for Q4 FY '22 and INR 1,339 crores for full year FY '22, contributing to 17% and 16%, respectively, of our consolidated revenues. Casting business continues to grow with expanding capacities. The higher revenues during the quarter is on account of ramp-up of 2-wheeler alloy wheel business and supplies to Korean PV customer with LPDC technology in 4-wheeler segment. Our expansion in 4-wheeler alloy wheel business at Bawal and Gujarat is on track with 30,000 out of 60,000 capacity per month enhancement at Bawal being commissioned recently. Moving to acoustics, Slide 17. Our acoustics business has achieved revenue of INR 192 crores for Q4 FY '22 and INR 656 crores for full year FY '22, contributing 8% of our consol revenue. Our European subsidiary, Clarton Horn has rebounded with around 30% growth with better profitability sequentially. However, it is still not out of the woods. Russia-Ukraine war may further dent the revival hopes. Locally, we have received order for speakers and tweeter from an Indian OEM. Moving to our seating business, which has achieved revenue of INR 227 crores in Q4 and INR 902 crores for full year FY '22, contributed 9% and 11%, respectively, of our group revenues. Revival in CV segment and better volumes from 2-wheeler had supported the growth in seating business. We continue to see good traction from EV space with additional orders from another 2-wheeler OEM -- EV OEM. During the quarter, we also received orders from a leading EV bus OEM as well. Export for seating business also remains robust with start of export for suspended seat in Europe aftermarket. Moving to other product business, which have achieved revenue of INR 341 crores for Q4 and INR 1,130 crores for full year, contributing 14% of overall top line. Other businesses mainly comprise of sensors, blow molding business, Minda Systems GmbH, battery, Minda Katolec, aftermarket, et cetera. The aftermarket division continue to show strong growth with Minda Systems GmbH also reporting higher sales led by product sale, further developing on our relations with 2-wheeler American marquee OEM, we have received orders for accelerated paddles position center. On EV front, we have received incremental orders for chargers from traditional EV OEM. The share of profit/loss of associate joint ventures for Q4 is at INR 29 crores as against INR 21 crores in Q4 FY '21. All our JVs associates, including infotainment JV with Denso, our safety system JV with TG, our CNG product JV with Minda Westport and Roki have contributed positively. Moving to aftermarket and export Slide #22. In terms of our revenue pie for the quarter ended 31 March 2022, OEM business accounted for 90% and aftermarkets at around 10% for Q4. Our aftermarket division revenues were at INR 225 crores as against INR 215 crores in corresponding quarter last year. We continue to strengthen our aftermarket presence with launch of new product as well as new branding and marketing initiatives. Our sales from international markets, which is export from India plus sales from overseas operations stand at 16% of total consolidated revenues. International sales growth was led by Minda Systems GmbH having strong quarter with its innovative products in European market. Moving to our cash flows and debt levels. Our net debt as of March 31, 2022, was at INR 569 crores and our net debt to equity stands at INR 0.15. Moving to Slide 23 on strategic business update. The Board has approved merger of Harita Fehrer Limited and demerger of domestic business of Minda Storage Batteries Private Limited with the company. Both these companies are 100% subsidiaries of the group of the company, hence no further share will be required to be issued on merger. This merger is in line with our stated objective of simplifying this group structure and achieve the economies of scale. The proposed amalgamation will lead to elimination of multiple administrative functions and recordkeeping and enhancing operational efficiencies, thus resulting in reduced compliance and administrative costs. Harita Fehrer Limited and seating division of the company already have common premises at 3 of their plants and are sharing resources. Merger will help in better synergies and efficient operations. HFRL also supplies one of its product such as PU foam are required for manufacture of seats by seating division of MIL. Hence consolidation of HFRL by way of post-amalgamation would lead to synergy benefit like smooth functioning and to manage operations effectively, efficient utilization of capital, and help to achieve a streamlined structure by eliminating multiple entities. The proposed amalgamation is expected to lead to greater efficiency in fund management and deployment for the combined entity and unfettered access to cash flows generated by the businesses, which can be deployed more efficiently for funding growth opportunities to maximize members' value. Moving to CapEx and expansion announcements, first at Vietnam. We had announced that our Vietnam subsidiary MIVCL has received business from Italian 2-wheeler OEM for blinkers and taillamps. It is proposed to expand our MIVCL plant in Hanoi to serve this order. As of now, MIVCL manufacture only switches. With this expansion, they will start -- they will have a big entry into lighting products local manufacturing, which so far has been exported from Indonesia. The total CapEx is around INR 37 crores and additional facility is expected to be commissioned by March 23. Next being Mindarika expansion. The company is also expanding its 4-wheeler switch plant under Mindarika Private Limited at Chennai to serve new order received from Japanese and Korean OEMs. Total capital expenditure for expansion is around INR 73 crores, and additional facility is expected to be commissioned by end of March 23. Tokai Rika Minda, the Board has approved investment of up to INR 25 crores in TRMN for their new plant to be setup in north with the total investment of almost INR 160 crores, INR 170 crores. Moving to technology. While we are expanding our operational capacities, we have also been enhancing our R&D capability. We are expanding our engineering team at all locations of our flagship R&D center CREAT, which is in Pune, Gurugram, and Hosur. We recently also shifted our flagship R&D center CREAT in Pune to a much larger office, with double the size. We intend to double the number of engineers at that location. At new office, besides EV components, we have also set up new labs for material science and ADAS. We recently also held our annual event called INNOVATION MEET at the new office. Around 50 shortlisted teams from all of our group companies participated showcasing innovation and led connection around the future and emerging technologies. We also invited some of our customers and investors enlist to the facility. We would like to take this opportunity to also thank all the investors and analysts who visited our facility and participated in INNOVATION MEET. We are also progressing from just component supplier to a system supplier with robust software capabilities. Majority of the component today has embedded software or ability to communicate with various systems and diagnostic purposes. CAN FD switch supplied to American 2-wheeler OEM and our pioneer connected car platform, Minda iConnect, are classical examples of our embedded software capabilities. Recently developed intelligent transport systems comprising of camera switch, speaker control unit, and driver console is another example of full system offerings from UNO Minda. We are also first in India to certify an intelligent transport system as per BIS-16833 Anx D. As we all know, effective corporate governance is the foundation upon which our organization is built. In line with our commitment to set industry benchmarks for corporate governance, we have further strengthened our Board of Directors by inducting one more Independent Director, Mr. Satish Borwankar. We have now 5 Independent Directors out of total 9. Having served Tata Motors for 45 years, he brings vast experience in product development, manufacturing, operation, quality assurance, et cetera. We also have Mr. Rajiv Batra joining the Board as Independent Director during the last quarter. A seasoned finance professional with over 4 decades of experience in finance and accounting. With this, I would like to now open up the floor for questions.

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

Congrats on good numbers. Firstly, we are seeing good improvement in profit from associates over the last few quarters and this quarter was highest ever. Can you highlight which are the JVs or associates which have done better and seen lot of improvement in profitability versus earlier quarters and also is it sustainable?

Yes, Ashutosh, you are right. I think this has been the continuous trend which we have been observing. So in the past, we had some of the associates, which were in red. So they have moved to black, reduced their losses. I think that is a straight positive. Plus also, as I have mentioned a little while back, there are 4, 5 key subsidiaries -- sorry, joint ventures, which is the Westport is doing pretty well to start with because the CNG business has been doing pretty well. Then our airbag business with TG has been doing pretty well, and also, our JV with Denso and Roki. I think all these businesses, we have been seeing significant traction, and we believe that the growth which we are seeing should be sustainable in the future.

So even, let's say, Minda Onkyo is now breakeven...

Yes, Minda Onkyo is breakeven, but I think I must -- I think I missed in my talk track. So just to tell you the Onkyo, which is our JV partner, has -- Onkyo Japan has filed for bankruptcy. So there while we have got a turnaround in the business, there has been uncertainty around the technical support. So what we have done, we have onboarded some experts from Onkyo onto our payroll to see that we get continuous support on the technology and we make this sustainable. However, as a conservative practice, we have taken a provision for impairment in investment value in standalone. You won't see in consolidated because the share of losses has -- in past has already reduced the investment value in the consol financials. But in standalone, you will see an exceptional item, which is primarily for provision in the investment in Onkyo.

Okay. And this TG Minda also is doing pretty well. Is it a good contributor of profit now? Some color on that.

Yes. TG is very good. In fact, from previous quarter, it has done pretty well in this quarter. It is -- actually, if you see the last quarter of FY '21, it was into negative, which has come into positive sustainably now for last 2 quarters.

Okay And sir, minority interest as well has declined a lot. Is there -- like say, the profitability has come down in, say, Kosei or Minda Rika or any other reason behind that?

As I said, Ashutosh, so it will back that, a, we have increased our stake in Minda Kosei, which is the most profitable, I would say, that's [ vary ] from 70% to 78% almost. And also, there were a couple of partnership firms where we're holding only half of it. They have also been consolidated from first half January. So accordingly, you are actually reducing the minority interest in some of the companies, which in turn increase your effective ownership and the profitability.

Okay. Okay. So actually it's more -- so it got effective from January only. Okay. That's very clear. And the switch segment, we highlighted new order wins or supplies for the sunroof, cruise control, paddle switches and all. So can you provide some color that how is the content increasing in the switches business, especially in both 4-wheeler and 2-wheeler versus earlier, because these are new switches, which probably you were not supplying earlier or their content is -- basically this isn't existing in the cars now. So can you provide some color on that?

Yes. So, Ashutosh, you are right. The content has been consistently improving in almost all the segments. Primarily there are 2, 3 key reasons. One, if I exclude the commodity price impact. There have been a lot of electronics net increase in almost all the electric switches, lamps, et cetera. And also, this migration, which we have been seeing from a normal product to a premium product and also as a country, we have seen transition from A segment car market to a B segment car and also this high-platform car, or we call mini SUVs, there the kit value is normally higher than the, obviously, the lower ones. So I think all this also has a positive impact. So overall, if we see the kit value for 2-wheelers, I think across the board, we have seen improvement by almost like 10% to 20% in various categories, be it economy, executive or premium.

Okay. In cars specifically.

In 2-wheelers you asked, right?

No, no, in both I'm saying, both 2-wheelers and 4-wheelers.

4-wheelers also, there is an increase of similar range.

Okay. And can you just provide lastly 2-wheeler alloy wheel sales for the last quarter and full year also 4-wheeler alloy wheel sales?

One second, you're asking 2-wheeler alloy wheel sales for last quarter and full year?

Full year, Yes, and 4-wheeler as well.

Okay. No problem, Ashutosh. So last quarter, the 2-wheeler alloy wheel sale is roughly around INR 90 crores and for full year it's roughly around INR 280 crores.

Okay. And 4-wheelers?

Sorry?

4-wheeler alloy wheel.

4-wheeler alloy wheel, do you have, Ankur, readily available? Yes, I got it. So 2-wheeler alloy wheel, which is Minda Kosei, right? So it did roughly around INR 250 crore revenue and for full year around INR 800 crore.

INR 800 crores.

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

My question was you mentioned that there were certain price increase benefits that you've gotten. So can you just maybe quantify what was that benefit and was there some part related to prior quarters, both in the main company and also in the JVs?

No. So if I could understand clearly, you're saying what was the price increase during the quarter and was it in some way related to previous quarters?

Right. Correct.

Yes. So that's normal, Nikhil. I think this we see every year phenomena that normally the PI is always with some lag. So that's why we say normally Q1 is lower and Q3, Q4 are better because by the time you start discussions to ending with your customers, it takes some time. So definitely, in Q3 and Q4, there has been some positive PIs, which relates to maybe Q1 and Q2.

Okay. And would it be possible to quantify what would be that number?

Sorry, your voice is not very clear, Nikhil.

Saying, would it be possible to quantify that number.

Not really, Nikhil, because it is for -- now we have at 32 businesses and to now capturing this is difficult. I can give you a very broad number, which I remember that number was roughly around -- if I see at a very high level, what was the previous quarter numbers which we have got or PI we've got in this quarter is roughly around INR 14 crores, INR 15 crores for which we have got in Q4. It is broadly same as last year also I think it was a similar number.

Got it. And just on the lighting side, I just wanted to understand, going forward for the next couple of years, what is the order book that we have now? I think we've been talking about a lot of orders. So what is the order book that we have and how do we see that ramp up over the next couple of years?

So lighting, I think, as I said, is the most, what we call, optimistic business we have, and we are very, very positive on this business. Our order book is much, much more than what we shared. I think last quarter we shared something INR 250 crores, INR 300 crores. As we speak, it is more than INR 350 crores, INR 400 crores. I think we added more than INR 100 crores in last business. As I said, one of the new business which we've added I said about that center lamp, that itself is around INR 60 crores.

Okay. So would it be fair to assume that most of the business will come into the top line maybe FY '24, FY '25? That will be a right number?

Something will come in '23. It will start coming in 2023 because we will be commissioning our Gujarat plant maybe in a couple of months max. So once it starts, we should start seeing -- initially, it will be more of testing and validation for our customers because the new business, which we'll start from this new plant, so you know the process which most of the OEMs follow. We might not have any significant sale immediately. But yes, you are right, we will have material sales coming in from next financial year, which is 2024 and then 2025 definitely.

Okay. And just lastly, I think a couple of more projects announced in terms of CapEx. So what would be the CapEx guidance for this year, maintenance as well as the project CapEx that we are looking at and the total investments in subsidies and associates?

So broadly, the investment we are looking at is same, Nikhil. So this year we would have done CapEx of almost like INR 600 crores, which is broadly around INR 260 crores in sustaining and rest is growth. For next year, this is a similar number we are looking at.

Okay. And investments in subsidiaries or associates? Nothing which is, what you call, on the anvil as of now, other than this INR 25 crores we just spoke.

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

Sir, just an update on the EV plant. So company planned to set up the EV plant. So what's the update on that, sir?

Yes. So, Mumuksh, we have -- first of all, if you know, we said last time that currently we have a controller business in Pune. So the initial volumes, which are obviously at a low level will be supported from there. The new plant, which we had to set up in north, we have got the land. The CLU has all been done. Board has also approved the CapEx as in past. So our target is to commission it by end of this financial year.

And sir, what would be products that would be focus for this plant, sir?

All these products I think what we spoke, be it the BMS, be it the charger, and all that. So all the specifics 2-wheeler EV components will be outside -- from this JV.

Sure, sure. And sir, any new update on the TRM business, Tokai Rika Minda business, what's the growth happening there? What's the investment for?

So TRMN currently has a plant in Bangalore, which does a revenue of roughly around INR 550 crores a year. And we have got a good business -- a new business from Japanese OEM in North. For that, we will need to put up a new plant. This new business -- new plant will have investment of roughly around INR 170-odd crores, and we are expecting incremental revenue of close to INR 400 crores kind of number in the next 3 years.

And so the products would be the -- which products would drive that business?

Same products what we have, be it the seatbelt, there is a product with smart keys today. We manufacture the key [ steps ] in Bangalore. In this new plant, we will have the smart keys, which will be the future trend coming. So that also will be manufactured here in addition to some of the products which we do.

The next question is from the line of Noel Vaz from Asian Market Securities.

Just one question is regarding, so the exposure to Europe, exactly how much of revenue are we earning from the European operation? So I just want to know what exactly is the revenue exposure to Europe.

Yes. So I don't know how do you see, Noel. I believe that you are looking at manufacturing from Europe, right? Or you are looking at export also from India to Europe?

If we could get both, that would be very nice.

So export from India to Europe is a difficult number to be given immediately off the cuff, but I can tell you what we are generating revenue from Europe. So we are doing roughly around INR 400 crores from, what we call, the Delvis and iSYS, which has been restructured. If you remember, around 6 months back, we had announcement of restructuring our European operations. So roughly INR 400 crores is from that and around INR 400 crores is from Clarton Horn. So in all around INR 800 crores kind of a number from these operations in Spain and Germany.

Okay. Yes, that answers my question. Second question is actually relating to our exposure towards the various segments in India. So regarding 2-wheelers versus 4-wheelers versus 3-wheelers, what is the current mix and has it changed over the past 1 year? And is this more due to -- the change in mix more due to the fact that change in sales volumes for those particular segments? Or has there been some wins in some segments that have grown the share [ after the announcement ] of the previous year?

Okay. So from a segment perspective, our 2-wheeler revenues if you see for the quarter is roughly around 45% and for full year it's around 47%. And historically if you see that has been a trend. Some quarters it is plus-minus 3%, 4%. But broadly, the range is 45% to 55% for 2-wheeler and 4-wheeler. 3-wheeler we are not that big and so is CV. So if you see from that perspective, I would say broadly on an annual basis, it is maybe between 45% and 55%.

2-wheelers and 3-wheelers, right?

2-wheeler and CV, 4-wheelers.

Okay. So sorry, 2-wheelers and I didn't get it.

4-wheelers. There is a slide in the presentation. I don't know the number. Ankur, it's 20, right? Yes, you can refer to Slide #20 on the presentation.

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

Sir, on this EV side, possible to highlight what will be the order book currently? Any new customers if you have added, any more input there?

So from EV side, Siddhartha, I think we said last time that we have shortlisted some of the key customers because we don't want to get into multiple customers and not able to serve them properly. So we have not increased our customer base, but existing these shortlisted customers, we have been able to get newer products, which is basically you can say a deeper penetration of EV products and also the existing components.

Okay. So if we look at the kit value, what will be the kit value. We are currently -- we have orders which we are supplying, are they premier? Just to understand, will it be more of chargers and other smaller components? Or do you have added anything more there in terms of the components?

So we have not added any new component, Siddhartha. So this year, if you are thinking from '22, '23 perspective, I think we will have sales from almost all the components, except maybe a battery pack, which still is in the works. Otherwise, most of these components you will see production in '22-'23.

Okay, okay. And if you can share the revenue numbers for the sensor and controller also for the quarter and what do you expect for the current year.

Yes. So sensor, I think we spoke last time also, it has been sort of stabilizing at a revenue level of roughly INR 50 crores a quarter, stable there. And controller, if I see, because we started looking at a small EV also part of this. So that is around 15%. So all put together, it's a quarterly run rate of INR 65 crores for both sensor and controller put together.

And how you look at the ramp-up going ahead for the next 2 years?

So we are still sticking our guns to the target, which we spoke last year for 5 years of INR 500 crores. I think we are on dot. In fact, we will -- we are confident we will be able to do even before that.

Okay. And sir, last thing on your margins, we have reached about 11.5% margin. There has been a lot of cost pressure in the last 1 year. Now with price hikes being taken and expecting the commodities don't go up significantly from current levels, what do you think you will look to target for your margins in the coming quarters?

Yes. So quarter is always difficult to guess, Siddhartha. We know that Q4 is normally better versus Q1. But if you see on an annual basis, we are pretty confident of maintaining the range we spoke last time, which is between 11% and 12% on a full year basis.

Okay. Any particular segment there that has been a significant cost pressure and because of which you have said that margins will be in that range? Or will it be possible to hit the higher end of that band?

No. But actually, if you see, Siddhartha, if you go back in history 2 years back, I think we have been clear that our margins actually should be around 12% only because there was no Harita, which was a single-digit margin. And some of the new businesses which were not there that time are still not into, what we call, breakeven level like light -- sorry, alloy wheel and all that. So considering there are a lot of nascent businesses and also addition of businesses with low margin, I think we always looked at around 12%. But only with these commodity prices, the range might have shifted maybe 50 basis points, not much. So we are still holding our guns despite what we call increase in the commodity prices and all these cost pressures, et cetera. We're still working to see that we maintain this range of margin on a full year basis.

The next question is from the line of Vimal Gohil from Union Asset Management.

Sir, just a couple of data points. If you can just highlight what is the revenue for Minda Rika for FY '22 total revenue?

Sorry, you're asking annual revenue of MRPL?

Yes. Minda Rika, yes, that's right.

It's roughly around INR 830-odd crores.

INR 830 crores.

Yes.

Okay. And last year, if I'm not wrong, it was around INR 650 crores, right?

INR 630 crores.

Yes, sorry. And sir, in the other revenue if you can just highlight what was our revenue from controller, sensor, and telematics for FY '22?

Okay. Controller, sensor. I think we just spoke about the controller and sensor and telematics put together. Last quarter, revenue was at INR 65 crores. But if you are looking at a full year number, it is something around INR 260 crores.

This is the total FY '22 revenue for all 3 products, right?

Yes.

Okay. And sir, lastly, I missed the CapEx number. You said this year around the number will be around INR 600 crores, right?

Yes. INR 550 crores to INR 600 crores is what we are looking at overall, including all the growth CapEx either announced or we are expecting maybe in a month or so.

Right, right. And sir, this INR 25 crore investment in Tokai Rika Minda, with the revenue of around INR 550 crores, what is the PAT margin this company generates approximately right now? Or is it breaking even on PAT level or how is it?

No, no, TRMN is a very old entity, and it is into profit. I don't have their profit actual handy. Maybe we can get back to you, if you don't mind, Vimal, on that.

Sure. No problem. Okay.

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

Most of my questions were answered, but just wanted to understand this INR 1,000 crores enabling resolution for debt. So could you put some sense on what are further plans of CapEx or investments, et cetera, for which you might acquire more funds?

So Mukesh, you see every year we take some enabling approval from shareholders. So it is only enabling. As you saw, there is nothing on the anvil. Quite possible we might not need any significant investment barring any timing gap, because if you see our -- even last year our EBITDA is around INR 880 crores, and we are expecting much higher in the coming year. and with a CapEx of around INR 550 crores, INR 600 crore and tax of around INR 150 crores, INR 200 crores, I think we are more than internally funded for any internal CapEx needs. So from that perspective, I think we are fairly placed. So as of now, this INR 1,000 crore, whatever approval you are seeing is more of enabling. So that in case there is any requirement, we need not every time, go back to shareholder and spend 1.5 months' time for getting approval.

Right. And so this also means that most of our restructuring plans related entities, group entities, et cetera, is all now done with this now [indiscernible] and all of them getting now part of the initial entity.

Absolutely.

Okay. And just one last thing is, I think last time, you had mentioned some steep targets for the FRIWO JV business. So, could you kind of just reiterate some of that? I mean, now that you have more clarity. Could you give us some more sense on how that entity could work?

No, the target remains same, Mukesh, which we spoke about INR 1500 crores of revenue in 6 years and other investment also which we are spread out of INR 380 crores. Everything is as it is and there is no change in that.

Okay.

If at all, we are seeing only upsides, no downsides.

Yes. So the reason for the question was also that if you think INR 1,000 crores is very easily achievable?

Yes.

The next question is from the line of [ Anupama Bothra ] from Arihant Capital.

Yes. I wanted to know, like, can you elaborate more on this PLI scheme, like how much investment would be needed and what all products would be covered under the scheme?

So Anupama, the PLI scheme investment required is -- I don't know if you have seen the policy is around INR 250 crores of CapEx over 5 years. Our CapEx is much, much more than those threshold. So, we are not going to do any specific investment only for the PLI. We are doing investment purely on merits. And obviously, the scheme does give you that edge in terms of competitiveness for any domestic sales or also exports. So that's on the CapEx. And in terms of, I think, products, I also spoke initially about what all products, which are eligible, be it sensors, the telematics, be it all the EV products we are doing, some of the CNG components. So, there are multiple products which are eligible for the PLI benefit.

Okay. And sir, one more question. Has there been any increase in EV kit value like in last quarter, quarter 4, on quarter basis or year-on-year basis, if you can give us some information?

No, increase in last quarter, Anupama.

[Operator Instructions] The next question is from the line of Peter from KSEMA Wealth Management.

Sir, my first question is that you had mentioned that the alloy wheel sales was INR 250 crores in this quarter and INR 800 crores for full year. Was that for 4-wheelers or 4-wheelers and 2-wheelers together?

INR 800 crores was -- I think a question was asked on 4 wheelers, so that was for 4-wheeler.

4-wheeler. Okay. So 2-wheelers is INR 90 crores and INR 280 crores for you? Sir, so what are the major raw material costs that you incur -- what are the major raw materials and what is the raw material basket cost you are incurring right now?

I didn't get the question.

So what are the major raw materials that you are using?

Major raw materials. So major material obviously is on commodities, be it aluminum, be it steel, be it all the plastics, legends. So, I'm not sure what you're actually looking at for the Q4.

Sometimes some companies will give a raw material basket cost. This quarter, it was this much. It has increased as much, so to understand.

No. We are very, very diversified. Unfortunately, Peter, we have 32 lines of businesses. It will be herculean task to even think of calculating average basket of commodity prices because it's not only a computing about average, it's also about your consumption is different, your growth is different business to business. And at the end of the day, I'm not sure what will we achieved by putting those kind of efforts.

Okay. And sir, are there any cost reduction initiatives, major construction initiatives under that, just in light of how much margins to protect?

No, Peter, we used to have a specific cost reduction initiatives couple of years back when we had the onset of COVID. So what we are trying to do is we are trying to sustain some of those cost reduction initiatives in spite of market sort of coming back. And I think that is what has helped us sort of cover up some of the pressure on the margin and we are trying to see that whatever good work we have done in past that should not go away and we are trying to sort of maintain those benefits or those initiatives which we have taken in past.

Sir, that line item purchase of stock in trade as a percentage of sales, it has increased comparatively to the last quarters of last year and the year before. So any light color you can throw on that, sir? Sir, it has gone to 16% this quarter compared to it used to be single digits in some of the quarters in the year and the year before?

Cost of material?

Yes, purchase of stock in trade, just that line item, purchase of stock in trade?

No, I think we have to see in totality, Peter, you have to see cost of material consumed and stock and trade. We can't see in isolation.

I thought maybe that specifically some new materials that you are importing or something product component [Foreign Language]

No. So what normally we do we look at in totality. So, if you see from that perspective, our last quarter, the total RMC cost is roughly around 64%, and in last year, Q4 was also 64%. So, broadly, when we see on an annual basis, last year, it was 63% and now it is 64%. So broadly, in that range. So, there is no material difference if you see from that perspective.

Correct. And sir, finally, can you tell me that what is the price hike you have taken in last quarter, last fiscal year in the FY '21, sir?

So that question is more relevant for OEMs, Peter, not for us.

Okay. And sir, the CVs, there's lot of CV demand, so any exposure you plan to have in the future on CV market?

No, we are not, unfortunately, have any specific plans for expansion in CVs. So, what we have been working is that, Peter, if you remember, when we have acquired Harita Seating Systems. So which is having significant share of business with CVs because from Minda perspective, earlier, we were not having. So what it has done is that we have got entry into lot of CVs which we were not serving. And now backed on the business we had for seating, we are sort of approaching them for all other products, be it switches, be it land, acoustic, et cetera. And that's how we are trying to increase our business with the CV players.

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

My first question is on the seating business. We have delivered close to INR 900 odd crores. Sorry, Am I audible?

Yes, I could not get, which business, seating business?

Yes, sir. Is this better, sir. On the seating business, we have delivered close to INR 900 odd crores of revenue this year. How do we see that ramp up here by F '25 in 3 years' time frame? And approximately, what should be the margin that we can take here? I understand this year, we would have had cost pressures, but if you can give some sense on that per se?

Yes. So Shyam, if you remember, last, from 1st of January, we got effective control of Harita Seating Systems Limited. And even though the revenue for preceding year was, I think, INR 50 crores odd, we said, no, when we announced the acquisition, the revenue was INR 150 crores, and our target was clear to double that revenue in 5 years' time frame. And I'm pretty confident that we will be able to achieve even before that. So, if you see this year itself we have done INR 900 crores. So, one year gone by, I don't think we will take another 4 years to reach INR 1500 crores, I'm sure we'll be able to do in maybe 2 to 3 years now. So, from that perspective, I think we are very, very optimistic on the seating business. And I would say we will be able to deliver better than what we have promised.

And on the margin, sir, for seating?

So margin also, if you see that despite all the cost pressures, in fact, seating from a CV perspective has got very big impact of commodity prices because steel is the main RM there, which prices we have seen almost more than doubling for steel and where you don't get a pass through. So, if you see from that perspective, what happens -- and I think the example as in past also that whatever commodity price increase, even if you are able to take from customers, it is margin dilutive. So, if you do nothing and you just get your margin -- absolute margin protected, it will mean that in terms of percentage, it will reduce. But despite that, we are pretty confident that we should be able to get into a double-digit zone, which it was a single-digit even before our acquisition.

Okay. So double digit when we reach the INR 1,500 kind of revenue, sir?

Yes.

Okay, understood. Sir, here, we don't -- steel it's not a pass-through for seats is what you mentioned. I'm just...

Sorry?

Steel is not a pass-through in seating, sir. Is that what you were mentioning?

No. steel is pass-through for some customer -- what happens, for example, on 100, if the steel price increase...

I got that math, sir, numerator-denominator math that I understand.

That's it.

Okay. Understood. Sir. And one other point on the PLA, you said our CapEx will be definitely be higher. I understand that. Just to get a little bit more clarity here. While we are investing in multiple product segments that qualify under PLI, what could be the eligible CapEx under PLI from Minda Industries? If you can give some perspective that would be helpful, sir.

I won't give a number at this moment, Shyam, specifically. It will be more than INR 250 crores, which is required, but based on whatever interactions we have been having with the government, we believe that the second list, if you remember, as government promised when announcing the first list should be on the annual. Once we have that list, I'm sure we might have maybe one or 2 or 3, I don't know what all additional products which might get what we call eligible. If not, then obviously, there is no change. If it does, then maybe that's the right time we'll tell you what will be the actual investment for components or products, which will be eligible under PLI. But as of now, I can tell you, it is more than INR 250 crores.

Understood. Sir, and so the incentives that we get under PLI, will that be actually a pass-through to the customers per se? Or will we try to retain some part of that?

So it's a very tricky question, Shyam. Look, if I am investing, then ideally, I should have this entire margin with me. But what happens is that you are in a competitive world. And if your competitor also has got the benefit, somehow it will reflect in the price itself. So, it's quite possible that even though you might get the PLI incentive say, for example, 8%, it's quite possible that competition eats up into that margin. What it does is it gives you a big advantage when you have an export because there with other competitors, you don't have that challenge. But domestically, it will give you an edge over somebody else, who is not qualified under PLI. Otherwise, even your competitor has got this incentive then you are actually on the same footing. So, somewhere, what it will do is, it's quite possible it might not end up fully to flow to the bottom, but it will end up increasing the share of the business in the country. And also secondly, because OEMs also multiple have qualified under PLI, there is a general expectation that India gradually will also have increase in exports, which means that if there is an export or there is a wheel being manufactured in India for export, the components which are being sourced through the current sources will continue. So, overall, it will be increasing the size of the industry itself.

Understood, sir. Sir, one last question, sir. In the alloy wheels, while we are doing extremely well from a revenue and a ramp-up perspective. Now aluminum prices, just like you have mentioned, even in the case of steel has been -- has gone up very substantially upwards. So, approximately, what would be the margin range for 2-wheelers and fours-wheelers because when we started, I think we were -- in 2-wheelers, we were thinking of a 15% kind of a margin band and 4-wheelers, we were upwards of 20%. What would be for F '22, any broad range if you can just provide that would be helpful?

So Shyam, I remember this specific discussion that 2-wheeler we said we will give you absolute margin profile once we see plants stabilized. The only thing which we said was that it will be higher than our group average margin and that we are still holding to that view that it will be higher than the group average margin. But let the plant fully stabilize and have a full year of stable operations. And in terms of 4-wheeler also, if you remember, we have been consistently saying that 20% margin is not sustainable. In fact, that was when the prices were low. So, even if, for example, you were able to retain that absolute margin just because aluminum has doubled, this will come significantly down. So, I hope you understand that math, as you've just mentioned.

Sure, sir. But will it be at least a 10% band for -- in 4-wheelers and something close to that in 2-wheelers as...

No. As I said, it will be higher than the group average.

Okay. Even in F '22?

Yes.

Okay.

Yes, for 4-wheeler, not for 2, because 2, as I said, it still has a stabilization, not yet in green, not in black.

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

Just wanted to drill down into the CapEx part a bit more. So, I think the CapEx that you have talked about for switches and...

Hello, Nikhil, we are unable to hear you, can you hear us. Nikhil, can you hear us? Due to no response, we move on to the next participant. The next question is from the line of [ Vikash ] from [ Healthx Services ].

The one thing is there in balance sheet in the current liability side.

Sorry, your line, voice is not clear, Vikash. Vikash, Your line is not clear.

Vikash, can I request you to speak a little louder?

Hello. Can you hear me?

Yes, please.

Yes. In the balance sheet side, in the current liabilities, the total outstanding dues in the micro and small enterprises is still in the INR 180 crores there. Any major default has happened? Or is the time line, whatever the guidelines of the MSME, -- with respect to whatever the guidelines is there for 45 days?

There is no delay in MSME payments, but just to clarify, Vikash, it is not MSME 45 days. It is only MS, not MSME. And also purely manufacturing, not anything else.

So there is no issue.

Anybody who is micro and small and manufacturing, there you have to make sure that you pay within 45 days, if not then we have to pay interest. That is very well understood and we are very, very clear. We pay, in fact, few days before, not with any delay.

And one another part is there in the asset side is that goodwill has increased by INR 281 crores to INR 284 crores? There's slightly increase of INR 3 crores as well? Any specific reason on it, sir, what is the mechanism to write off this goodwill item?

Goodwill is not written off. There a testing for impairment. So the impairment testing has been done. And I think auditors have also been convinced about the current value of the good. And intangibles, which is the in-house created technology that is being amortized over the life of the technology, which has been generated.

Okay. So every year the statutory auditory test whatever the life of the intangibles and the goodwill?

Yes. So intangible, as I said, intangible is normally amortized and goodwill is tested for impairment.

Okay. Thanks for the impairment. And what is the life to consider right now?

No, it's different for different products because what happens, Vikash, is that when you say intangible, it is not only one product. You will have multiple technology investments, multiple patent products. So, if the life of the product is 5 years, you will amortize 5 years less, if the product is 8 years, you amortize over 8 years, if it is 10 year, you amortize 10 years. There is not a single number.

Okay. In any ballpark number is there is a 5 years, not 6 years kind of thing that average out?

I'm not able to follow you.

Not possible because it depends on the product.

I'm not able to follow your question.

So it's not possible to average out is the amortization and the testing period is there, it depend on the product and the life of the patent is there. Correct?

Yes, you are right.

Thank you very much. I now hand the conference over to the management for closing comments.

Thank you, everyone, for joining on the call. I hope we have been able to respond to all your 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 very much. On behalf of Minda Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.