Uno Minda Limited (532539) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Uno Minda Limited Q2 FY '23 Earnings Conference Call. 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 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 of UNO Minda Limited. Thank you, and over to you, sir.

Thanks, Sajjan. Good evening, everyone, and warm welcome to all the participants. On the earnings call today, I'm joined by my colleague Ankur Modi. We have uploaded our financial results and investor presentation for Q2 FY '23 on the stock exchanges and our company's website. We hope everybody had an opportunity to go through the same. I will first start with industry updates and overview followed by our financial and operational performance for Q2 and H1 FY '23 and some strategic business updates, post that, we will open the floor for Q&A. Starting with industry update. Government's focus on boosting public infrastructure through enhanced capital expenditure is expected to augment growth and [ crowd in ] private investment to large multiplier effects. The second quarter of FY '23 witnessed a turnaround in consumer sentiments with demand growth across vehicle segments on both year-on-year and sequential basis. Robust demand, easing supply constraints and easing off in commodity prices are expected to continue providing relief. Further, increased focus of the auto industry on localizations and the earlier announcement of the PLI scheme by the government will aid in developing India into an attractive alternate source of manufacturing. With respect to auto industry, especially for 2-wheeler and EVs, the order book continues to prosper, led by multiple new launches and planned capacity expansions by the OEMs. Domestic 2-wheeler production is picking up pace on the back of good monsoon season and improving consumer sentiments in the rural markets. Festive season kept the spirits high and led to a good momentum in demand for 2-wheelers, which resulted in highest production in the last 6 quarters and sequential growth of [ 17% ]. Electrification continued to see pickup in 2-wheeler segment and is gaining higher market share on a month-on-month basis. The demand momentum for electric 2-wheelers and 3-wheelers remains strong, with high growth in Q2. We expect this to continue going forward. EV sales continued to stay strong, led by festive cheer and sustained retail outlook post festive sales. The quarter saw volumes of over 1 million units, which was highest ever in a quarter. The outlook and order book from the OEMs is encouraging on the back of robust demand outlook, substantiated via bookings and waiting period across segments. With the easing of the commodity prices and shortages of chips and semiconductors, coupled with new launches on both ICE and EV vehicles, we maintained a positive outlook on EV sales for second half of FY '23. On regulatory front, the government has extended the antidumping duty on alloy wheels, which is the 4-wheel alloy wheels to have level playing field for the alloy wheel manufacturers in India. The move is welcomed and is expected to be a barrier to cheaper imports into the country. On the EV industry front, we continue to believe that the EV industry is at the cusp of multi-pronged growth. The government has set a target of installing more than 5,000 roadside EV chargers in the next 3 years. This infrastructure amplification will act as a catalyst for growing EV demand across segments. We are also seeing strong demand from our traditional ICE segment, with increase in the number of first-time buyers and their preference to internal combustion engines over EVs due to high uptime costs for EVs. We are also witnessing increasing premiumization and demand for more premium products across segments. With this, we are able to increase the effective kit value. We are optimistic about the demand scenario from both domestic and international markets. Supported with a diversified product portfolio, increased content per vehicle and cross-selling of products to our existing customers, we maintain a positive outlook for revenue growth in medium to long term. We also continue to deepen our R&D efforts, enabling us to seize the opportunity in the automotive segment, especially from the EV space, which points to a solid future. Moving to key operational highlights, you may refer to Slide #5. The company has been in continuous pursuit for new and advanced technologies. While company's R&D team has developed several innovative products and solutions in house in last few years, we have also formed joint ventures to gain access to new technologies to accelerate localization and time to hit the market. As you know, the Board has recently approved 2 such joint ventures, first with Tachi-S Japan for EV seat reclining mechanisms and second, with Buehler Motors for traction motors to cater to electric 2-wheeler and 3-wheelers. We will share more details of these joint ventures in [ subsequent quarters ]. During the quarter, the company has also announced significant expansion in 4-wheeler alloy wheels, 4-wheeler switches and now setting up of a greenfield 4-wheel lighting plant to meet the growing demand for these products. Turning to the financial and operational performance, you may refer to Slide #7 and 8. At consolidated levels, revenue from operations for the quarter increased by 36% year-on-year basis to INR 2,877 crores from INR 2,114 crores in Q2 of FY '22. Whilst revenues increased by a healthy 13% on a quarter-on-quarter basis as the company continues to gain market share and increases its kit value supported by gradual recovery of industry volumes, we have witnessed growth amongst all our products with alloy wheel registering phenomenal growth. The recently commissioned additional 60,000 wheels line for EV alloy wheel plant in Bawal is ramping up well, while for 2-wheeler alloy wheel plant, all 4 lines had achieved [ the rapid ] facility utilization. We have been surpassing previous highest quarterly sales for the last couple of quarters. We are pleased to inform you that we have surpassed our highest ever quarterly sales in Q2 FY '23 as well. As guided, we have continued to outperform the industry with our 36% growth against industry volume growth of 12% year-on-year basis. Even after factoring the price increases due to commodity prices, there is a significant delta with respect to the industry volumes. EBITDA for the quarter was at INR 318 crores, improving by 40% from INR 228 crores on year-on-year basis. The EBITDA margins for the current quarter has improved to 11.1% as against 10.4% in the -- sequentially last quarter and 10.8% in the corresponding quarter last year. Operating leverage supported by increased volume has led to margin expansion. However, higher energy costs and inflation impact on other administrative expenses had constrained further margin expansion. Finance costs have increased sequentially from INR 17 crores to INR 19 crores as well as on Y-o-Y basis. The increase is on account of increase in debt as well as increase in borrowing costs pursuant to multiple interest rate hikes by the RBI. We see sequential increase in tax expenses from INR 31 crores to INR 55 crores as previous quarter had reversal of [ hyper tax ] liability on movement from old tax regime to new tax regime for the company with a lower tax rate. The profit after tax, which is UNO Minda's share for the quarter was at INR 170 crores as against INR 75 crores in Q2 FY '22 and INR 139 crores in the previous quarter. Coming to the business, segment-wise performance. Starting with switching systems, you may refer to Slide #13. The segment achieved revenues of INR 800 crores for Q2 FY '23 contributing 28% of our consolidated revenues. We continue to receive incremental orders from OEMs as number of switches increased [ with EVs ] year-on-year basis with increasing features. Consequently, during the quarter, we had also announced setting up of a new 4-wheeler switch manufacturing plant in Farukhnagar at Gurugram, Haryana with investment up to INR 110 crores in Phase 1. Beside switches, we have recently also received order for heated grips from an American 2-wheeler OEM. Domestic customers have also started showing keen interest in developing similar switch for them, albeit at much lower costs. Moving to Lighting business, which has achieved revenues of over INR 659 crores for Q2 FY '23, contributing to 23% of our consolidated revenues. Lighting business has also been growing steadily quarter-on-quarter basis, supported by access to advanced lighting technology from erstwhile lamps. Building on our patented switch exports, we have now also won orders for fog lamps from American 2-wheeler OEMs. During the quarter, we have also received order for complete lighting solution from a 2-wheeler EV OEM. Moving to our casting business, which has achieved revenue of INR 614 crores for Q2, contributing to 21% of our consolidated revenues. Casting business continues to grow with expanding capacities with increased demand and penetration of alloy wheels. As you can see, percentage share of casting business revenue has increased from 15% in the corresponding quarter last year to 21% in the current quarter. During the quarter, we had announced another capacity expansion by 60,000 wheels per month at Bawal with a CapEx of INR 190 crores, which is expected to be commissioned in Q2 FY '25. Total 4-wheel alloy wheel capacity now stands at 295,000 per month with LPDC of 25,000 and another 90,000 is under construction. For 2-wheeler alloy wheels, all 4 lines have been fully ramped as we almost achieved rapid capacity production of 9 lakh wheels in Q2 FY '23. Starting with anchor customer, we now supply to 3 major 2-wheeler OEMs and will start supplies to 2 more OEMs in subsequent quarters. Our die-casting business has now also started serving PV OEMs besides 2-wheeler OEMs. Moving to acoustics, Slide #14. Our acoustic business has achieved revenue of INR 181 crores for Q2, contributing 6% of our consolidated revenues. While India business remained stable, our European subsidiary, Clarton, remained under pressure with unprecedented increase in energy costs and lower industry earnings. Moving to our seating business, which achieved revenue of INR 268 crores for Q2, contributed 9% of our consolidated revenues. Revival in EV segment and better volumes from 2-wheeler had supported the growth in seating business. Export of suspended seats were marginally impacted due to ongoing geopolitical issues. Moving to other product business, which have achieved revenue of INR 355 crores for Q2, contributed 12% to our overall top line. Other business is mainly combined of controllers and sensors, ADAS, blow molding business, battery aftermarket, et cetera, all of them have reported growth, Q-o-Q basis. Sensors and controllers, we have achieved revenues of around INR 120 crores for the quarter. We are on track for -- ahead of track for [ steady earnings ] of INR 400 crores to INR 500 crores of revenue by FY '25. During the quarter, we received export orders for side-stand sensor from Italian 2-wheeler OEM as well as export order for wireless charger. The share of profit/loss of associate joint ventures for Q2 is at INR 28 crores against INR 21 crores in Q2 FY '22. While all our JVs associates contributed positively, major contribution came from Denso Ten, ROKI and TG. Moving to Slide #14 on aftermarket and exports. In terms of our revenue pie for the quarter ended September 30, our OEM business accounted for 91% and aftermarket business at around 9% for Q2. Our aftermarket division revenues were at INR 252 crores as against INR 225 crores in corresponding quarter last year. Aftermarket revenues have grown 12% Y-o-Y basis and 13% sequentially. Aftermarket continues to grow at healthy run rate with increased focus and marketing efforts. Moving to our cash flows and debt levels. Our net debt as of September 30 was INR 706 crores compared to INR 570 crores as on March 31, 2022. And our net debt to equity stands at 0.17. Net cash flow from operating activity for the first half ended September '22 was a INR 280-odd crores even after considering increased working capital requirement on account of increase in revenues. We also increased incurred capital expenditure of around INR 218 crores during the period for various expansion projects already announced. During the period, company also paid final dividend of -- for FY '23. As you will see, the investments and operational fund requirement, including dividend had been fully funded through the internal cash generation. Overall, while the net debt has increased by INR 136 crores during the first half, which is primarily on account of investment of INR 125 crores in [indiscernible] Germany as part of our understanding for the joint venture and an investment of INR 25 crores in Tokai Rika Minda for the expansion in Haryana. We have also been making steady improvement in our ROCE, which on an annualized basis stands at 19.5%, which is highest in the last 3 years. Moving to the strategic business updates, starting with the joint venture with Buehler. The Board has approved to enter into a JV agreement with Buehler Motors GMBH, a leading global supplier of customized mechatronic drive solutions to develop, manufacture and market traction motors in India and other SAARC nations. The JV will offer traction motors for the battery-driven electrified 2-wheelers and 3-wheelers. UNO Minda will own 50.1% stake in the JV, while the remaining stake will be held by Buehler. Buehler Motor is a 165 year-old organization currently headquartered in Nuremberg, Germany, with manufacturing facilities in Germany, Czech Republic, U.S.A., Mexico and China. Their expertise is much beyond DC and BLDC motors, gear motors and pumps. They supply more than 20 million unit annually to its customers who specialize in automotive industry, aviation and many other industry applications. Over the last few years, UNO Minda have built one of the most formidable EV-specific product portfolio in the industry for 2-wheelers and 3-wheelers. Addition of traction motors will further complement the company's impressive existing EV-specific product portfolio, specifically the motor controllers. UNO Minda has the advantage of motor controllers, which will help our customers with complete solutions. The potential kit value to the EV 2-wheeler and 3-wheeler will further increase with the addition of traction motor. The company and Buehler had started design, development and production of engineering [ entirely ] and see significant market potential going forward. So JV plans to incur capital expenditure of INR 110 crores, including sustained CapEx over a period of next 6 years. The investment will be scheduled to meet the demand. The company will be initially investing INR 17 crores as equity share of investment in the JV to part finance above capital expenditures, while remaining is expected to be funded through a mix of debt and internal accruals of the JV entity. Moving to another joint venture, which is with Tachi-S. As you know, during the quarter, Board had also approved to enter into a JV agreement with Tachi-S Company Limited, a global seat system creator headquartered in Tokyo, Japan, for manufacturing and marketing of seat recliner mechanisms for 4-wheeler passenger vehicle in India. The JV will offer various products, including recliner mechanisms in first phase with the intention of expanding into other seating mechanisms, seat frames and complete seating assembly. UNO Minda will hold 51% stake in the JV, while the remaining stake will be held by Tachi-S. Established in 1954, Tachi-S is an integrated automobile seat manufacturer from development to production. They have 70 facilities in 13 countries and provide products and services to leading OEMs around the world. Their consolidated revenues for fiscal year '22 were JPY 206 billion. UNO Minda is already a leading player in the automotive seating systems for 2-wheeler and commercial vehicle. The JV will help expand UNO Minda's seating systems' product offering in PV vehicle as well. In the first phase, the Board has also approved initial equity investment of up to INR 10 crores in the JV. Moving to another strategic initiative which is setting up of a new 4-wheeler lighting plant. As was guided earlier, the company had been winning significant new orders and gaining market share in the lighting business. The company has achieved increased traction with both Japanese and Indian OEMs. In order to meet the increased demand, the company plans to set up a new lighting plant with a total capital expenditure of INR 400 crores to be spent over a period of next 5 to 6 years in a phased manner. The initial outlay, which is Phase 1, for setting up of the plant will be INR 230 crores to be spent over a period of next 2 years. The remaining will be spent as sustaining CapEx thereafter based on the envisaged EV business. Phase I is intended to be commissioned by Q4 of FY '24. The company is evaluating various locations to set up the plant and is expected to finalize within a quarter. Another strategic initiative, which was merger of iConnect and Harita Fehrer. We would like to update the progress on a couple of merger schemes, which is iConnect and Harita Fehrer and Minda storage batteries' [ demerger ] of battery business and merger [ entity ] of UNO Minda. The merger of iConnect is expected to be in the last stage of approval with its next hearing scheduled on 17th of November '22. The merger scheme for Harita Fehrer and the battery business of Minda storage batteries was also filed with NCLT. NCLT heard the first motion application and the order is [ reserved for closure ]. It is expected to be completed by March '23. 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 Ashutosh Tiwari from Equirus Securities.

Congrats on decent numbers. So sir, on this alloy LMT side, we have seen a very solid ramp up in this quarter as well versus first quarter. So can you share the revenue that you have done in the passenger vehicle and 2-wheeler alloys?

Okay. Anything else?

That's the first question. And secondly, on the -- obviously, you announced all these CapExes in the [indiscernible] and 4-wheel lighting as well. How do you see the CapEx and investment in '23 and '24?

Okay. So thanks, Ashutosh. Thanks for the compliment. In terms of alloy in 2-wheeler, that has almost operated at the capacity in Q2. The actual revenues during the quarter were around INR 150 crores.

INR 150 crores?

Yes.

Okay. And passenger vehicles?

And the balance is -- okay, you are referring to the entire casting?

Yes, yes, yes.

Okay. So Minda posted roughly INR 325 crores during the quarter.

INR 325 crores. And current base is, like you say, is 295,000 units per month. So it was operating at around what level during the quarter, alloy wheels produced in the quarter?

[Technical Difficulty] of 60,000, those are the numbers that is available, but I think that can to be taken offline, if you are okay.

Yes, sure, sure. And CapEx guidance for this year and next?

So, Ashutosh, I think you know very well, normally, we don't give CapEx guidance. So only we normally give at the Q4 call. So most probably, we should be able to give a little feel there because, for us, a lot of our expansions, while we are currently in a phase of expansion of our switches, wheels and recently light also, but a lot of our CapEx comes through a brownfield or incremental CapEx, which gets [Technical Difficulty] only when we do our budgeting exercise. So that's why, normally, as you know, we comment on that only in the April-May.

Okay. For this year?

For this year, I think we have been sharing that number. We are sticking with that number. And with this increase, which was, I think, INR 600-odd crores, the 3 projects which we have announced. Earlier, it was wheel for INR 190 crores and then INR 10 crores was Minda Rika and now for lighting. So all these -- we'll have some expenditure this year. From this lighting project perspective, this year we might have primarily amount going towards land and also maybe some advances, not beyond that in the next 4 months.

Okay. So, I mean, then CapEx amount should be slightly maybe ahead of INR 700 crores in this year, right?

Maybe around that number.

Okay. Okay. And you mentioned in the comment about this energy cost and inflation and all this. Obviously, as of now, OEMs have not been passed through, but recently, in the Maruti con call, they talked about maybe some of this inflation being passed on in Q4 and all. So what kinds of margin impact you are seeing from this side, especially energy costs, if you have any rough estimate on that?

Your voice was not very clear because I could hear [Technical Difficulty] you are talking about.

Yes, yes. I'm just trying to understand what is the probably rough estimate of this energy cost inflation in our margins?

So, it's very difficult to comment, Ashutosh, because the biggest impact we have on energy cost is primarily in the casting business. I was referring to the energy cost impact more so from the European business, which was the Clarton. So there, we have got a significant impact because of energy costs and interest rate impacts and also the lower volumes. That's what I was referring to that our Clarton, which is a Spanish [ business ], remain under pressure.

Okay. And lastly, sir, obviously, we have seen very strong ramp-up in our profit reversals yet. And you did touch a bit that probably ROKI, Denso and Ten -- TG Minda doing well. But even last year, I think ROKI obviously was impacted a bit maybe even 1 year, last year, generally, they have been doing well. But this year, in say, Y-o-Y, this company has seen strongest growth in terms of profitability among these 3...

See, from that perspective, Minda Onkyo, which was the last quarter in loss is into profit. So if I see last quarter, Minda Onkyo was roughly at INR 1 crore of loss, whereas this time it's INR 3 crores of profit, so there is a clear delta of INR 4 crores in Minda Onkyo.

Okay. Okay. And is it because of the volume improvement or this is because of some price passthroughs on OEMs?

No, no, there are 2 reasons. One is definitely volume, another is, if you remember, when we had been discussing a couple of years back, there was a huge pressure and delay in terms of localization of parts. So I think that has all been done now, and that is what is clearly showing that impact in terms of the performance.

The next question is from the line of Aditya Jhawar from Investec.

Congrats on new JV and new order wins. My first question is on the lighting business. I was just wondering if you can tell us what is the split of 2-wheeler and 4-wheeler in the lighting business? And secondly, our 4-wheeler lighting order wins in terms of margin and ROCE, how different they are as compared to company average?

Sorry, come again? What is the second question?

The recent order wins in 4-wheeler lighting, how different are the margins and ROCE profile as compared to company average?

Okay. Okay. So first things first, so in terms of lighting, the 2-wheeler lighting business during the quarter did something like INR 250-odd crores, and 4-wheeler, I think did somewhere around INR 200-odd crores of revenue during the quarter. That is the domestic business. Then you asked about the new orders for 4-wheeler, how is the margin and ROCE? So as you know, the Board has today only approved this -- [ declared ] and the ROCE and the margin, et cetera, they are all as per our group norms. So it will be in line with our average or maybe marginally better.

Marginally better than the company average?

Yes, from a ROCE perspective, may not be for margin because of maybe little bit [ less returns ].

Okay. Okay. That's good to hear. And secondly, on our joint venture with Tachi, if you can help us understand what is their global market share? What are the key OEM relationship globally, which we can benefit from in India?

So Tachi-S, Aditya is a -- as I said, is a very large company with almost close to $2 billion in terms of revenue with manufacturing in 13 countries where they associate with almost, I would say, all the OEMs. For more details, we can inform separately, you can also refer to their website. It is a listed company in Japan. So all the information is in public domain. In terms of India business, so what we have done, and as I said, as of now, we have got a business for a recliner mechanism, it's a very small component. So as I said, it is a foot in the door but into PV manufacturing. This is just an initial phase. We are working to work on developing [ DPR ] for a full seating mechanism [ whether for the ] only mechanism for seats. So it will be a gradual and maybe a little slow entry, but at least now we are getting into PV seating, which I think has been announced especially from one or 2 guys as to when are you going to get into the PV seating. So yes, it will be a slow journey, but good thing is, yes, we are putting foot in the door.

Okay, okay. Help out in this, if you can share like last quarter that what had been the EV order wins in Q2? And if you can break it up into EV component and non-EV component?

So we normally have been giving every 6 months, Aditya, because quarter-to-quarter, we normally don't capture this information. I gave in last quarter, before that, we gave, I think, in December, so December and in June. So maybe in the next year, we will give you for the half.

Okay. Okay. And the final question is on the RM side. Is it fair to assume that most of the under recoveries are now behind and we should see a sequential uptick in gross margin from here on?

I wish, Aditya. I think our endeavor has been very, very clear and that's what we have been able to achieve also is whatever is the price, commodity volatility, we should be able to pass on to our customers, and we have been saying consistently for last 1 year that we have been more than satisfied in terms of passing through that accounting as movement to our customers. So if the prices goes down, that also I have to pass on, because I can't keep it with me, right? So it works both ways. It is not only when prices goes up. Even when prices go down, I have to share -- give it back to our customers. So from that perspective, while you might not see any benefit, but at least the good thing is, you will appreciate, it insulates us from any such movements in future because like in short term, we are seeing there is a drop, but this can again turn the tide around, right? So whenever this happens, we will not have any significant impact. Yes, timing-wise, there can be some plus and minuses on a quarter-to-quarter basis. But on a full year basis, we don't expect any gain or loss.

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

Congratulations on the good performance and progress on new businesses. Sir, just continuing on the margin question, sir, how do you see the [indiscernible] wheeler alloy plant has been fully ramped up now, sir? Has it reached the normalized margin or more efficiency expected in coming quarters? And can you also indicate on the PV alloy wheels? Has the data stabilized considering the competition pressure was there on the segment?

So Mumuksh, thank you for the compliments. So in terms of margin, as I said, Q2, we have had very stable performance from the alloy wheel business. So -- but because of the significantly higher gas prices and all, as I said, casting business primarily is a gas consumer because in casting we use mostly, for melting, gas only. So there has been some impact. But if you see from the margin perspective, definitely, it is a little below our group average from a 2-wheeler perspective, but 4-wheeler is still above our group average.

Right, sir. Sir, can you talk about the regulatory changes happening related to airbags, seat belts and acoustic alert systems? Any plans or investment to tap this opportunity, sir?

Yes. So in terms of airbags, we all know that this airbags of 6 to be mandatory has been -- the implementation time has been extended or deferred, but we are ready. So whenever customer demand, I think we should be able to service them. In terms of seat belts, there has been a regulation recently post the unfortunate incident that happened, I think, a month or 2 back. So there has been a regulation now that all the front facing passengers in a car, irrespective of number of rows, even if you are second row or a third row, passengers who are sitting facing the front needs to have a mandatory seat belt warning buzzers. If you're not wearing the seat belt, obviously, the buzzer will sound. So that has become mandatory as effective sometime next year. And from the acoustic vehicle alert system, AVAS, so we already have a product for AVAS, for EVs, and we are already working to service one of our customer. We are working on developing that product. So as of now, obviously, in domestic, volumes are very low. So once that volume increases, we will also see our volumes getting aligned. So yes, I think from a regulatory perspective, all these things are positive for us.

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

Sir, first question on this strategy business update, which you have shared. So first on the Buehler Motor, can you...

Siddharth, sorry, please can you repeat? You voice was not clear.

Mr. Bera, please increase the volume of your device.

Yes, yes. So sir, just wanted to check first on this JV with Buehler. If you can throw some more light on how is the product portfolio in terms of the wattage which they already have. And by when do you expect this JV to start? And if you have any anchor customers as of now? So some more color on this progress on the JV?

Yes. So, Siddharth, while I would give you a brief as you requested, but for more information, you can also refer to their website, it's a very old company. They have roughly EUR 300 million plus kind of a revenue, it's an 150-year-old company, family-owned company. And their 90% business comes from auto and 5% from aviation and 5% from others. So they do manufacture a lot of motors. So currently, with them, we are working to develop motors for EV specifically to start with 2-wheeler and 3-wheeler EVs. Our intention is to start production in the second half of next fiscal. And from anchor customer perspective, we are at the last stages of finalizing 2 anchor customers, hopefully, within this quarter itself. So we should be able to give you that confirmation in our next call. But we are at the last stages of maybe just getting the advance.

Got it. And these motors will be in the sub-3, 4 kilowatt range or...

It is up to 6 kilowatt range, yes. Next 6 kilowatt and we'll be working to take it up to 9 kilowatt in the first stage and then maybe think of taking it further.

Okay. And then on this other JV, which -- of the seat JV which you just discussed quickly, would you be able to share the value of the components which you can potentially make over a period when this ramps up in the future?

So as of now, as I said, Siddharth, the components which we are manufacturing is very small. It's the recliner mechanism, it's not for a full recliner. And we are currently in discussion with Tachi-S to come up with a full-fledged DPR for complete recliners, which we have to -- we have promised to the Board to come back in the next 2 quarters. So maybe by May, we should be able to give you a better visibility. As of now, it is very small. It is not very big. And as I said, it is primarily a foot in the door, but we are not going to stop there definitely.

Okay. Okay. And we also do some EV-specific components already. So would you be able to share the revenues which we would have done for some of these components in the quarter?

Ankur, do you have that number handy?

Not as of now.

So can you share that offline?

Yes, I'll share.

Not having handy here, Siddharth, sorry for that.

Okay. Okay, no issues. And sir, lastly, on this margin, again, I mean, if I looked at the last like 7, 8 quarters, at least on the other expenses side, we have not seen much operating leverage coming through despite a significant improvement in the revenues. So I mean, just how to understand this? Should we expect that the percentage of revenue should be similar for other costs? Or shall we expect some amount of operating leverage also probably to come in at some point?

Definitely, Siddharth, actually, we are also expecting a good operating leverage from this, but the entire electricity cost, including gas is part of the other expenses. So from that perspective, if I see the wheel business alone -- and I know somebody else have asked for a quantification of that, and I said we don't have this number for all. But I can tell you from a wheel business alone, as the current pricing we have versus the last year prices, the impact is more than INR 25 crores to INR 30 crores a year. In addition, we have a large amount in Europe. So all that had hit our other expenses that has not been there and so you would have seen that operating leverage benefit.

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

First off is on the casting business, you have mentioned that you're getting into passenger vehicle side as well. Could you give some sense on what components are we going to get into there for the passenger vehicle?

So Mukesh, as of now, you know that we have been primarily serving the 2-wheeler and [Technical Difficulty] Q2, one of the PV customers, but we were not having any PV customers from past times. So recently, we have secured a business from one PV customer. The [Technical Difficulty] is expected in the next financial year. So initially, it is very small. I think the annual revenue is going to be roughly around INR 15 crores, INR 20 crores, but again, it is -- once we get onboarded with the customer, then definitely that -- the entire book opens,[Technical Difficulty] what could have been underneath. The annual business potential is around INR 25 crores, not INR 20 crores.

It will be for ICE component, sir?

Yes, you're right.

Got it. Got it. And secondly, I think there was a question on this earlier, but just trying to recheck on the 2-wheeler alloy wheels. Last quarter, you had mentioned that you've probably just about stopped burning cash there. And as you achieved scale in kind of EBITDA positive, so just wanted to check there, you did mention that we are slightly below company average, but does it mean that we have significantly scaled any EBITDA there?

No, I think my bad. So alloy wheel 2-wheeler definitely has achieved our target EBITDA, which is a little above our -- what you call, company average. My apology, I said somebody else, in between, I was referring to the lighting 2-wheel. I missed, it was wheel, not light.

Right, right. And on the 4-wheeler alloy wheels business, I mean, in the past, the Minda Rika entity has been at about 26%, 27% EBITDA margin. And last year, I think it came down to about 21%. Is that a trend here and will this kind of keep coming off maybe close to 17%, 18%? Or is that only because of raw material costs, aluminum costs especially going up? And do you think we can maintain 20%-plus kind of margins for this?

No, no, no. I think. Minda Kosei, you're referring to, right?

Yes, yes. Sorry, yes, Minda Kosei, right.

Yes. So Minda Kosei, I think we said last year also that there have been 2 impacts, one because of the sheer commodity price increase, which is even though we have been able to pass all the commodity price increase to our customers, the denominator itself had increased. So in terms of percentage, it is dilutive, that's #1. And #2, we've said consistently that we do expect margins to come down gradually from 20%-odd level to around 15%, 16%, which is still well above our company average, so that was #2. And #3, this also, as I said little while back, had an impact of significantly higher gas prices. So all these factors have impacted Minda Kosei's profit in terms of percentage and somewhere in terms of value also.

So yes, I mean, us coming to this 15%, 16%, how long will that take? I mean, is this going to happen, say, around next year or...

I'm saying, Mukesh, it is actually below 15%, 16%.

Oh, it's already below 15%, 16%.

Yes. Whatever you are saying is already factored in.

The next question is from the line of Rishi Vora from Kotak Securities.

Just a follow-up on our strategic JV for traction motors. So will we be working also closely with FRIWO JV because I think in that JV, we manufacture motor controllers and in this we'll be manufacturing traction motors. So if an OEM requires both the products, so will we be working together to supply that product? Or how will be the arrangement over there?

So definitely, Rishi, as customer wants, we will -- we have both the product which customer wants jointly, we will be happy to give them a product which is motor controller plus motor. But in case customers wants separate, we will be open to give them separate as well.

Understood. And sir, just on the traction motor front, given that the market itself is very competitive, there are many players who are -- who have already developed this product. So what will we be doing to differentiate ourselves from the competition?

I think our USP has been very clear, in addition to whatever strengths Minda brings in terms of [ QC/BDs ]. Our endeavor is to -- if I use a simple language or single line, to bring in German engineering at Indian costs.

Understood. Understood. And just one clarification. You said CapEx for this year broadly would be INR 700 crores.

Yes, between INR 600 crores to INR 700 crores. I think this question was raised earlier by Ashutosh. So he was saying, would it be around INR 700 crores? I said, yes, it would be around that number.

And investments for '23? Any guidance?

Investment? What do you mean by investment?

As in investment in subsidiaries and all or it is a part of CapEx that you said?

As of now, there is no plan to include any additional funding. Whatever is announced -- like today, it was also announced of around INR 15.3 crores investment in Minda Katolec. So with that, as of now, there is no request from any subsidiaries for any growth [Technical Difficulty].

Okay. So first half plus INR 15 crores, that would be your guide as of now.

Right.

The next question is from the line of [ Peter Ackman ] from [ Simba Wealth Management ].

Sir, first question is, can Minda maintain this run rate of INR 2,500 crores-plus per quarter, given that you mentioned that commodity prices get passed on? So is that -- can we expect this run rate to continue going forward?

Okay. Anything else?

Yes, sir. And also then what is your market share you have in the EV space in 2-wheelers and 3-wheelers? And Q2, what was the export revenue share? And do you witness any softness in demand in exports?

Yes. Right. So run rate of INR 2,500 crores, Peter, definitely, we are working to do much better than that, but you know that our destiny, which is 90% of our revenues are linked with the OEM volumes. So as long as volumes remain in this region, we would definitely be able to do this and even more. In terms of market share, I think it's too premature to calculate market share for EV because even if you see the EV numbers, there is a list which gets published every month as to who has produced how much in terms of OEMs. A lot of them, you will find, they are just assembling, they're buying the kits from China and outside of [Technical Difficulty]. So as of now, market is still very premature and at a stage where there is no, what you call, right data available. So in absence of that, it won't be fair for us to comment on market share, et cetera. But whosoever are the larger players, we have been working with, I think, almost all of them, be it newer EV players or the traditional ICE players who are also into the EV. In terms of export revenue, our total global revenues from export and -- from India and also domestically in the overseas location is roughly around 16%, 17% of our total pie during the quarter. In terms of demand, definitely, there is, in fact, as I said, around suspended seats, which we primarily export to Europe. So there has been some demand impact, which led to little lower volumes for the suspended seats. But the exports which we are doing to U.S. light or switches, et cetera, as of now, there is no significant impact there.

Sir, so this last 2 quarters of INR 2,500-plus crores run rate, say, what percentage would you attribute to higher raw material costs, that it went up that much like growth...

[ If you compare, work is, ] last year, I think this data point also we shared last year, roughly around 8% is primarily because of the commodity price increases.

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

Sir, on this casting side, you mentioned that revenue from passenger vehicle alloy wheel is around INR 325 crores and INR 150 crores is your 2-wheeler alloy wheels, which is INR 475 crores. We have reported around INR 614 crores revenue in this vertical. The remaining INR 139 crores, is that -- such a large amount is as well in the casting?

Yes, 2-wheeler is INR 160 crores, not INR 150 crores.

Ashutosh, yes, casting -- that casting is contributing to somewhere around that number, yes.

And in the previous quarter, it was only around INR 84 crores, right? So it has, let's say, INR 300 crores was passenger vehicle, INR 100 crores was 2-wheeler. And then INR 84 crores was that casting. So casting has jumped so much on a quarter-on-quarter basis?

Yes, casting has seen a good improvement.

And this is that entry casting only, right?

That's in entry casting.

And this is only driven by, I think -- as of now 2-wheeler and that we have some seat, like, little bit in the side?

Yes.

Okay. And sir, on the lighting side, you mentioned that INR 250 crores is the 2-wheeler lighting revenue, right?

Yes.

So remaining INR 400-odd crores, roughly out of INR 659 crores, Delvis will be how much?

So 4-wheeler lighting is roughly around INR 200 crores-plus -- maybe around INR 210 crores odd number is for 4-wheel. 2-wheel is roughly around INR 250 crores, so that is, what, INR 460 crores. Balance is for ASEAN and Delvis, because we are lighting in ASEAN as well.

Okay. So you include -- ASEAN and Delvis put together is remaining?

Yes.

Okay. Okay. Okay. And the switches segment, in the quarter-on-quarter improvement, is it that we have seen bigger improvement in Minda Rika or this 2-wheeler also has done very well?

Quarter-on-quarter, 2-wheeler has improved by roughly 20% plus in Q2 -- it's actually Q1 to Q2.

Okay. Okay. So how much is the 4-wheeler revenue in this, out of INR 800 crores, maybe Minda Rika's registry?

Minda Rika is possibly something around INR 210 crores?

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

Thanks, Sajjan. I would like to thank 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 once again for joining with us.

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