Ladies and gentlemen, good day, and welcome to the Automotive Axles Q4 FY 2023 Conference Call, hosted by Batlivala & Karani Securities India Pvt. Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sailesh Raja from Batlivala & Karani Securities India Pvt. Ltd. Thank you, and over to you, sir. Yeah, thanks, Seema. Good afternoon, and thanks to everyone who have logged into Automotive Axles Q4 FY 23 earnings conference call. Today, we have the senior management team. We'll be hearing from Mr. Muthukumar N, President and the CEO of Meritor HVS (India) Limited; Mr. Nagaraja, President and Whole Time Director, Automotive Axles; and Mr. Ranganathan, CFO, Automotive Axles. I would now like to turn the call to Mr. Muthukumar for the opening remarks, followed by Q&A. Yeah, Muthukumar, sir, you may begin now. Thank you, Sailesh, for taking time. Ladies and gentlemen, thanks for keeping keen interest in our organization and joining for this call. We really appreciate and value your time and your support for our organization. The presentation consisting about nine slides have already been shared with you. I'm just going to again give you an opening remarks, followed by Ranga and Nagaraj will talk to you in detail. For those of you who are joining for the first time, you all know that this is a joint venture that is established between Mr. Kalyani's flagship company and also Meritor globally. Currently, it is acquired by Cummins globally. This is a very, very long-standing, successful joint venture in India, which is about 42 years old, and we are the leading suppliers of drivetrain, braking, and suspension system, and aftermarket in the commercial vehicle space. Of course, we are also establishing our presence in the industrial market. Just want to update you, as on March 31st, 2023, the AAL has moved up in the ladder and we became the 566 company of the top 1,000 companies with market capitalization of about INR 3.57 lakhs. We have four manufacturing sites with more than 2,000+ employees, and as an independent axle manufacturing, we are number one, and we are holding the number two position, but continue to increasing our, the businesses with various things. We have diverse end markets. We are present in commercial vehicle, when I said we are present in truck, trailer, buses, off-highway, extend military and aftermarket. We most of the OEMs in India on the commercial vehicle space, we are present, with Ashok Leyland, Tata, Mahindra, Daimler, Volvo, Eicher, and of course, Bharat Forge, supplied for their defense. In terms of global, we supply duty trucks, to Thailand, we are supplying to Caterpillar, we supply to VFJ factory for the defense products, a little business with BEML, Godrej, and companies like Cargotec. We continue to expand our business with various customers by introducing innovative products. But, before we talk it, I leave to Ranga, CFO, to talk about the quarterly and the full-year performance to you all, and then I'll come back on the new product. Ranga, over to you. Thank you, Muthu. Thanks for giving an introduction. Just want to give you an update on the financial performance to all of you. As Muthu said, all of you are watching us very closely, so we really see the last quarter performance is about INR 694 crore in terms of sales, as compared to the previous year, about INR 552 crore, a growth about 26% on a quarterly basis. EBITDA, we are at 11.4%, and in terms of absolute values, you know, about INR 79 crore. You know, and of course, there are about four commodities we have accounted, three commodities we accounted this quarter. So, and the PBT is about 9.8% as compared to 9.3% last year, the same quarter. If you look at the yearly for 12 months performance, the total year, the overall revenue, we, we've reached the milestone of INR 2,328 crore. It closed about 56% growth. Last year, we have closed about INR 1,500 crore level. And, EBITDA, we are at 11.3%, which is 9.3% last year, the whole year. So in terms of, in terms of the absolute money, again, we have shown a growth of 89%, and, PBT, we are at 9.4% this year, which is 6.7% last year, and it's about growth of 118%. And so that's the overall summary of it, and, you know, for the full year and the quarter performance. If there are any specific questions, we'll take it up in the question and answer. Thank you. Thank you, Ranga, for giving a summary of quarterly and full year performance. I'm sure that there will be a lot of questions. But, ladies and gentlemen, may request now Nagaraja to talk about the new product launches, which is very, very key in the business, and what we are working on, what type of product penetration we are going to do, and how we are improving the reliability in the market. Nagaraja is going to talk about that and also the initiatives that we have taken on circular economy for creating a sustainable, society. Over to you, Nagaraja. Thank you, Muthu. Good afternoon, everyone. Once again, thank you, thank you for calling into this conference. As Muthu mentioned, you know, one of the key strengths of Meritor and Automotive Axles is new products or the products we cater to the market for any commercial vehicle, 7.5 tons and above. As you can see, last year, we have launched seven products. Out of seven products, if you look at, you know, MS-185 and MS-160, these are all new products to the market. Both of them are developed and customized for India-specific applications, and we also hold the patent in these two products. These products are, you know, the way this has been designed, is to ensure that total cost of ownership for the customer has come down. So, for example, MS-185, it replaces a tandem axle, so but it still does meet the durability requirement and application requirement of the customers for 55-ton tractors or even for the 10x2, you know, tipper, loader tipper. So, the 59 T BGS is one of the kind that has been introduced in India. This has a 16 mm housing, designed for a heavy-duty application, for a tipper application, especially in the mining. Again, this has been launched and then ramped up in a record, you know, period. A 394 brake is not new to India, but the team has been able to develop a very specific application for one of the customer. And as Muthu was mentioning, we are not only, at present, we are a number one independent axle manufacturer, but our goal is to become a number one brake manufacturer also, and supplier also. And the Dia 360 and Dia 394 brakes launch with the our customer is going to take us there. Next slide. So again, how do we get there? One is, you know, bringing in the performance, bringing in the financial performance, operational performance. But at the end of the day, can we do it in a very responsible manner? ESG exactly helps us in going to you know design our way, design our product, design our operation and process, so that you know we also work towards environmental sustenance. So Destination Zero is one critical goal that you know our company and organization is committed to. We did touch upon this you know during our earlier investor calls also. I'm just gonna give you a little bit of update on what we have done. So we are on our way to achieve the 80% of power consumption through renewable energy. We have already initiated some of our furnace. If I have to give an example, our furnace, which is basically we're using, LPG, we have already moved into, LNG, which is slightly better. And also some of the preheating and other things, we have already switched over to electrical. Our goal is that over a period of time, we can eliminate the LPG use, you know, except for, you know, some critical areas. Similarly, reducing packaging, we did talk about, Muthu was talking about, you know, all the exports, what we are doing. We have already with one of the key export customer, we have already switched over to a fully returnable containers or, you know, metal containers, eliminating the wood. We continue to do that. As on date, 90% of our supplies will happen either with the returnable containers, or we don't use wood. And we are on our way by 2028 to eliminate, you know, 100% of wood for packaging. So, and we continue to, you know, engage in social issues, working with the technical institutions, working with the, you know, other institutions where we can help the specially abled and, you know, and some of the class society classes, where they will be requiring support from organizations like us. And diversity and inclusion initiative is another area probably, you know, Muthu did touch the last time. We are not just looking at, you know, improving our gender diversity, but we are also looking at how we can bring in all classes of society and, you know, both at our organization and with our supply chain partners. Employee safety. We have made a big improvement in this area. We continue to invest in the processes which will take care of employee health and safety. So with that, I will hand it back to Muthu. Thank you, Nagaraja. You touched upon all the points. Ladies and gentlemen, as we indicated, we continue to focus on Circular Economy in our aspiration to become Destination Zero. The point at what Nagaraja touched upon, 80% of power consumption through renewable is only start. Many more activities are happening, and the team is doing an excellent job. We have a Mission 25 growth strategy that we have presented to you, and Ranga was talking. I think he's going to talk about this slide from the key initiatives, but I just want to tell you everyone, last year, when the market is still lower when compared to the 2018, 2019, your company is able to penetrate more because of the various initiatives we have taken. Like what Nagaraja said, the rich on new product, creating a modular design, increasing the new product with more reliable... which is also putting, as the customers are demanding a lot more, when compared to what was it was previous. There are companies which are going up to six years and 600,000 kilometers on warranty, and we are also continuously working to upgrade our product, both technologically and at the same time, innovatively, to make sure that we contain our costs, but at the same time providing the value to the customer. I would request Ranga to touch upon the Mission 25 growth strategy, where we are, and what are our focus for the company in ensuring that we have managed the business successfully and taking it forward. Over to you, Ranga. Thank you, Muthu. Once again, you know, good afternoon to all. As part of mission strategy, you know, all of you must be knowing that we are, we are really committed to grow our top line as well as the bottom line through our employee engagement and new product development. So as Nagaraj was telling that, you know, the method and process, what we wanted to do is more holistic, taking into the green initiatives, part of the growth strategy. And, when it comes to the performance, I just wanted to bring you all your attention, you know, the MHCV production for 2023, roughly around 407,000 vehicles, which still, as Muthu mentioned, is lower than the 2018-19 level. But really, you see our revenue for this year is one of the highest in Automotive Axles, you know, history, is about INR 2,300 crores plus, and higher than the peak of 2018, 2019, and though the market is not yet up to the value. So also in terms of EPS, I think history of Automotive Axle, this is the highest EPS we ever declared in this, you know, for the whole financial year. So, that definitely is happening only through our, you know, keen focus on Mission 25 initiatives. As the Mission 25 initiative, there's a lot of gambit. As Muthu said, the market definitely need a new product We are working with the customer's new product, with the new, you know, product requirements and the warranty expectations, as well as, ensuring the value benefit at both sides. Our focus continues to be, you know, grow along with the market and try to work, try to ensure that we grow slightly above the market growth is always our ambition. We have been trying to demonstrate that, and we'll continue to focus on it. So market expected to grow this year about 5%-8%. That's a little bit conservative from our side, but it's got a high potential, but we wanted to peg it at this point of time at 5%-8% at the beginning of the financial year, as far as the MHCV is concerned. I said that the, you know, the operational excellence is a key for the growth, and our focus continues to be on Industry 4.0. Other than paperless office tool, digitization is our key, key focus for 2023, 2024, and for the years, too. You know, our focus continues to be on improving the conversion cost and material cost performance through various methods. That again, we have a specific team is working on it as part of the Mission 25 to improve the performance of material and the conversion cost year on year. One of the key point, which is probably a dynamic which we have to manage around, we have been managing it reasonably well, is with the commodity fluctuations and movements. Sometimes it's often, sometimes it is hard impacted to take it. But we have to see really our initiatives to see that this, you know, commodity fluctuations are managed well. This more 2020, 2023, 2024, the commodity price softened, but we have to wait and watch. But looking up, still prices are going to go up in 2024, 2025. But probably we might work on the performance of the company, that commodity price fluctuations is not really impacting us. So that definitely be a challenge, but definitely will be a focus area from our side, too. That's the point, and last slide, Muthu. You want to take it? Suggest if you complete the, our key actions to manage business successfully, then I'll come back. Please do that. Yeah, I finished as the business growth strategy, you know, we have already signed up- Uh. -the customers. Super. You take it up, Muthu. Thanks, Ranga. Ladies and gentlemen, I just wanted to reassure to most of you that while the company continues to do the growth strategy, continue to expand our margins by doing the cost measures and also value engineering, but also bringing in more focus on safety and diversity inclusivity in the team. Please rest assured that your company will do everything to make sure that we continue to excel in what we are doing and increase the values to our shareholders. Also, I wanted to give an update to you all, ladies and gentlemen, the Cummins integration into our acquisition of Meritor have been approved. And in India also, the CCI approvals have come, and we are now the Meritor acquisition, the Cummins acquisition of Meritor is complete now across all the regions. With that, over to you, Sailesh, for opening up the questions. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you.... We take the first question from the line of Mr. Pradeep Kothari from Unique Portfolio Managers. Please go ahead, sir. Hi. Thank you, and good afternoon. First of all, congratulations, sir, to the team for such a wonderful performance. So my first question is, a couple of years back, we had embarked on this journey to enter new segments, LCV, 4 tonners and above on the MHCV side, e-mobility, sleeper suspensions. So if you just talk about where we are in that journey, how is the feedback? How is the adoption in the market? Thank you, Mr. Pradeep Kothari, for starting this question. As indicated in our past meeting, we have an aspiration to go into off-highway in the defense and also HCV segment. We have already penetrated in ICV segment in about 6 ton vehicles. You all know that we have been supplying to Ashok Leyland in terms of meters and also to Mahindra in few segments. We have a product called 11X, which we are using for those, and 10X and 11X for those. But we are also continuously evaluating our strategies. And, you know, the market, the way in which the electrification or new fuel is going to come, the adoption is going to come much faster in the LCV segments, bus segments, and then followed by the commercial vehicle. So with that reason, keeping in mind, we, while we continue to work on the platform, going sub six tons at this point of time, we are evaluating the credentials of investment at this point of time and holding it back. So that is just, we wanted to let you know. Sir, what could quantitatively, what could be the contribution from these new segments currently? Quantitatively means, sorry? I mean, numbers wise, what, what kind of numbers are you doing there? Don't share the segment, but whatever the segment we are supplying to them, we are 100% to them now. In those vehicle where the product we are segmented for Ashok Leyland and, Mahindra, we're supplying 100% to them. But, I don't... See, because there are a lot of other customers available, the overall market is different, and, we also don't share our, strategy. But whichever the segment we developed the product, it's not only for India market, even it is going out to export for those vehicles where our customer uses, we, we continue to be 100%. Sub 6 t on is where you said you are reevaluating given the changes happening in the industry. No, 6 ton is already running it. Nagaraja, you want to add- Sub-6 ton, that means the LCV. Sub-6 ton we are thinking about it, but Nagaraja can give you an update on our 10X and 11X, how we have penetrated into the market or on what level of quality improvement we have done. Nagaraja, you want to touch upon 10X and 11X? Yeah. Now, the 10X and 11X, you know, initially, we developed these products mainly for the truck application, but based on the customer request, we have already applied it to the minibus application also. And some of our customers are also kind of using it in Asia Pacific or, you know, Middle East application also. So we are seeing, you know, growth coming in there. Like what Muthu mentioned, that, you know, every segment, wherever we apply our product, we just want to make sure that, you know, that meets all the customer requirements, you know, end customer requirements. So we have developed what we call is a quiet ride or a bus, noise sensitive gearing for that, so it is doing pretty well at this point of time. Thank you, Nagaraja. And so my second question on margin. So, given the cyclical peak that we saw in FY 2019, for the next two, three years, we did a lot of work, brought down our breakeven costs and lot of measures that we had taken on our operating side. And our expectation was, if we go back to those numbers there, and we are significantly higher from there, our margins should substantially shoot up, maybe mid-teen, so what we had thought of. So just one, why don't we see that, and if we are missing those, are we reinvesting it somewhere? Thank you for that question. I know this is there lingering in your mind. Please, please, look at this. I know that in terms of percentage you are comparing, but look at the amount of commodity, and we in this business, we get compensated only for the material cost of it and nothing else from the OEMs. And it is very, very tough market when the migrations in BS-VI is happening. The amount of improvement that has been done by the operating team, led by Nagaraja, or in terms of the strategy team with Ranga, has really helped us in at least sustaining the percentages or improving from it. But if you can see the growth in the absolute margin, what it was there in 2018 and now, an amazing growth which has happened. You can see in the 12-month performance of FY 2023, how the team has done it. All the initiatives that we have taken, whether it is to control the material cost, whether it is control to conversion cost, whether it is in terms of the people cost, while we are very, very sensitive in terms of making people to grow, at the same, same time, cost per component or cost per axle continues to come down. These are the initiatives that is taken, and we continue to do those initiatives to make sure that we plan. But in terms of profitability growth, I understand your concern, but there is a huge material commodity increases between 2018, 2019 and now. And, ladies and gentlemen, I just wanted to let you all know that even though the market has not come back to the FY 2018-2019 level, you can see the amount of penetration what we have made, which is purely because of the various initiatives that we have taken. Our top line has grown significantly when compared to the previous peak of the market, but still market is about 15% lower than that level.... Ranga, you want to add anything, Ranga? No, you have exactly said, Muthu. You know, I just wanted to all of you were to understand that, you know, market was, compared to 2018, 2019, was 15% lower, you know? And if you really see our, you know, growth is 20% higher than what, really done in the 2018, 2019. One of the critical factor, influencing factor in the whole aspect is about the commodities. And, and also the real, a lot of other penetrations we had with the customers, what, what Muthu was, explaining. So, if you really look at, the profitability also, no, it's really seen. We have substantially grown as compared to, the profitability, you know, year-on-year, 120% growth and all that. It's purely, it comes through our penetration to the top line and the growth in the top line, as well as the various cost initiatives, you know, we have taken it there. Otherwise, this commodity, it could have been adopted a very normal approach to the entire thing, then probably we wouldn't have managed the commodity very well. You know, we are generally look at ahead of the commodity changes impact to the business, and we drive our, you know, cost, you know, improvement strategies, you know, in such a way that we try to compensate and bring it more than the impact which is coming to the P&L, can generally be there. But as an outset, rather than looking at on a quarterly basis, I appreciate if you look at it on a yearly basis, and, because quarter- on- quarter, there are various fluctuations, being there. Although we are trying to perform it, you know, alongside the growth. But, overall, if you look at the year, we - I think we have performed really well in terms of 120% growth and from the pre-debt level. So it's a very significant. It means our fixed cost in control and variable costs are still contributing as EBITDA percentage, EBITDA absolute value is also going up. In terms of, you know, percentage, sometimes it gives you a misnomer picture, as Muthu was indicating. As a commodity, when you are taking into the system, it may, it may create a kind of a base impact. But in terms of absolute values, we have substantially grown. The absolute value money is impact to the organization. That's the only submission I have it for you. Thanks, Ranga. But still giving a comfort to you or to put this, post-COVID, what happened is, I think our biggest challenge was our supply chain, and to make sure that those people were intact and we continued to deliver. Most of the focus, I think I wanted to appreciate, Ranga and Nagaraj and their team, what they did is when the market again come back last year, I think we could be able to penetrate market because our response time to the customers was much better than our competition, and that is why we could be able to go more. While we could have taken a decision for holding only us, but we have taken the entire supply chain, the value system which is created, is all taken care during this period, and that is. You also know that the Ukraine war that has happened, there are a lot of cost increases in terms of the, the conversion, whether it's the petroleum cost that has happened or in terms of the tools, carbide, which are getting imported. But the team did a tremendous job in terms of, I think there is an average about more than 25%-30% increases in the conversion that has happened, but the team has mitigated it very well in terms of approaching the half cost approach or in terms of converting into a sustainability model. It was an eye-opener for us to understand when Nagaraja and team did wonderfully well in terms of sustainability initiative. It's also supporting you in terms of bringing your profitability. So I understand your concern, but your organization, irrespective of the market, the market continues to be... We are all predicting about flat or 5% more for next year, just because it's an election year before that. But ladies and gentlemen, we are, we are believing that India is going to be the center of stage and center of excellence, and more and more business is going to come to India. The component business in India is going to go very, very high, and we are also working out to see our strategies on how we need to grow in the market, and what is the opportunity that is going to come from other countries to India during that time, how we need to capitalize. Thank you very much. Just for our understanding, sir, we should look at volume numbers of MSP or tonnage numbers, and how are we more linked to, or what are we more linked to? See, there are two things that's happened. When compared to—I can roughly give you, I, I think the OEMs are very, very authoritative, and they are the subject matter expert of this. But I strongly believe that when compared to 2018, 2019 tonnage, we have crossed. But please believe me, our content per vehicles also we have increased it by going in for new products, which is bigger than what it was. So we are selling the same number of axles, but our realizations has gone up substantially. I think that's what Nagaraja was talking to in the products that what we have introduced, like 185, 160. These are. That 185 is the largest axle that is being produced in India. So the same axle what we were supplying earlier for a 49-ton vehicle, now with the 59-ton vehicle, we have increased the size of the axle to. So it will be only one axle from us. So we continue to work, but you are right, in terms of tonnage, we have already. India has crossed the 2018, 2019 number of vehicles into tonnage what is produced. That is happening because of two things. One is the axle load routing changes that has happened. And of course, when the OEMs introduced in 2020, the BS-VI model, most of the upgradation has happened. And you know, the shift that is happening in India towards tractor-trailer and towards more of tipper, the high tonnage vehicles are being produced, and we are upgrading our models like 185, 18 TG axle. 18 TG axle and all are used in the same truck as a tandem axle, but the axle content is much, much higher. Mm-hmm. So the reason I ask this is, because if India has crossed the tonnage, and if we compare our numbers, our revenues are up 20% from the last peak, which we saw in FY 2019, and almost all of it or more of it can be explained by the raw material price increase, which has happened- No, no, no, no. It's not because of-... All is not because of raw material increase. There is a content increase in the axles what we supply to them. The per axle realization has considerably gone up on top of this. While I'm not in a position to give you what is the exact split up of commodity increases, commodity increases is not 20% over a period of time. Over 3-4 years, wouldn't be that much? Sorry, sir? Over four years, wouldn't it be that much? No, no, it is not 20%. Okay, fair enough. Because the market, 2018, it went down in 2020. Just wanted to let you all know, in 2020, the market went down on commodities. Again, picked up from 2021, 2022. So if you see the ne-- You are comparing again 2018, which Ranga spoke. That's why I'm saying that when compared to 2020, the commodity has gone up substantially. But when compared to 2018, 2019, it's not the same level, slightly up when compared to that. Okay, great. Thank you, sir, and all the best. Thank you. We take the next question from the line of Mr. Deepak Jain from Edelweiss AMC. Please go ahead, sir. Hello, sir. Hello? Yes, Mr. Deepak, go ahead. Yeah. So on this new products, which of these products, let's say, 185 you talked about or maybe the brakes, which are addressing the large, you know, addressable market? And any customer approval has come for these new products? Thank you, sir. For example, the 185, we already about more than 3,000 axles. Correct me if I'm wrong, Nagaraja. 3,000 vehicles are already in the market, and the volumes is growing. Okay. It's already customers purchased, and the product is in application. We are looking at more customers to expand this market. See, that's the objective, right? For products like 185, 18 TG. When we are going to expand this market, the reliability of product is going to go up, our content per vehicle is going to go up, and at the same time, our realization per axle is going to go up. Okay. On the brakes, which you have introduced, The brakes is basically 394 or 360 is all. 360 is to penetrate into the ICV vehicles. Earlier, we didn't have the product. The 394 products and 325 is again an ICV, the smaller vehicles. The 394 brakes is again a value-engineered product to the customer, and that is what has helped us to gain huge share in the market. We have grown substantially in brakes while we are not in a position to give you the split of axles and brakes, but you can see the growth, what has happened in the market in commercial vehicle and how we have grown. We have grown in every segment, on highway axles, off highway axles, brakes, exports, every area. Okay. So next is on, I'm sorry to interrupt you, Mr. Jain. Your voice is very low, sir. Could you just come a little closer to the phone and speak? From my side, Sir, your side is fine. Mr. Jain? Is it okay? Hello. Yes. Yes. Yes, Deepak. Yeah. Sir, on the broader question, with Cummins coming into the picture, is there any, you know, new products for global sourcing or any strategy change, which you would have—which you would like to share, due to that? With Cummins coming in, we are looking at synergies both within local India because of their presence and very strong relationship with Tata, our relationship with Ashok Leyland. Both of us are trying to complement each other and try to see how we can grow in the local market. At the same time, it's not only because of Cummins coming in. Cummins coming in is going to accelerate. But look at what is happening globally. India is becoming a preferred location for manufacturing in the days to come. We strongly believe by 2032, when India is going to reach toward towards 10 trillion economy, not 2032 or 2033, when it is going to happen, more and more manufacturing sources to come. And I'm sure that Cummins Meritor globally will look at India as a best cost country sourcing. So it is more and more is going to come from to India, and we also need to upgrade our plant. For all of you know, not all the products we produce in India. These are all India-specific application products. There are certain global products also, but we'll continue to work on to see that how we can synergize this Cummins integration and try to make the company from good to great. Okay. So now in terms of revenue growth, I was looking at last few quarters, it has been very strong and more than the underlying industry growth. So one part is due to the inflation and the other is the volume part. So now, when you are guiding for, you know, going forward, FY 2024, you have guided for 5%-8% growth. So you would intend to grow, you know, much higher than the industry, or it will be more reverting to the mean volume growth? Our strategy is multifold, okay? I'm just not taking quarterly. I know that you have touched upon the point every quarter we are growing. Look at between FY 2022 to FY 2023, we have grown 50%, whereas the market has not grown by 50%. The market has grown only by about 24%-25%. Our strategy for the growth, the increase in revenue, even though I'm not able to quantify, I can give a rough number, maybe about, something due to commodity. It's a very yearly double digit, I would say. There is an increase in the penetration of the share of business. There is an increase in content of the vehicle. Also, there is an increase in our share in other segments, like what we are doing in export, what we are doing in off-highway, in those segments which we have introduced. All these things put together, it's growing. Our aspirations is always, I know it is very, very tough, but we wanted to definitely outgrow the market growth. Market growth is one, but our growth will never keep it not with the market growth. We want it to be. Our aspirations are high, but we want to be definite. I cannot state a number, but we want it to be more than the market growth. You can see by yourself last year, our growth is much, much better than the market. Okay. So one last question. The regulatory changes which has, we have witnessed it, in the recent past, let's say BS-VI, what was the content increase due to that? Okay. No, not much. Thanks, Deepak, for asking this question. In terms of the market, what is OBD-2, that online diagnostic that has gone- Okay. The OEMs adopted different strategy. There were some OEMs which have taken that increase in the cost only now. There were many OEMs which I don't wanted to mention. I think you should take it up in their call. Some OEMs have done it even from the BS6 stage one. So in terms of the product, we have tuned our product to those customers who have done it now. But in terms of the content of our axles or something, it's only an, a change in the little, processes and our, change in our, application of the product, and not much change in the content of the vehicle from our side. This cost increase of onboard diagnostics or, emission system management is mainly toward their emission system and only few support from the axle changes. Okay. So basically, whatever major growth, as I understand, is from the market penetration and new products only, which has come in the last- Market penetration comes because of new products and also our growth in the business. Okay. Of course, on top of this, the content per axle, per axle, because like a bigger axle, when you introduce, the content goes up per axle. Okay, understood. Okay. Thank you, sir. Thank you, sir. We take the next question from the line of Mr. Sagar Parekh, from One Up Financial Consultants. Please go ahead, sir. Yeah. Good afternoon, sir, and thanks for taking my question. Two questions from my side. So if I heard you correctly on the Cummins integration, I, I believe you mentioned that the synergies will come from one on the relationship with Tata, that we can possibly explore, and the second could be the export opportunity for Cummins, I mean, for global market from India. Is that the two big synergies that we can tap from the Cummins coming into the picture? See, Cummins is a great company, and, Meritor is definitely fortunate to have this association. I just said as an example of... It's not only with Tata. Cummins has a very, very strong presence with some OEMs in India, and if Meritor is not present there, I said Automotive Axles is not present, I said we can have a synergy for the local customers. It's not only Tata, there are many customers where, when we were not there, how we can synergize, is what I said. Of course, for exports, I said Meritor is continuously working from sourcing more from India in terms of exporting to other. We are not directly competing with any of the regions. We are supplying subsystems to the other countries because the customers are being serviced by Meritor. But what I said is, Cummins will accelerate or catalyze this transition much faster because the global is looking at India for the center of excellence and having more exports to it. Because of the trust and reliability, you can call anything with the current geopolitical situation, what is happening. So that is why I said Cummins. It's not only on the growth that we are looking at from Cummins, there are a lot of good systems and processes, whether in terms of safety, in terms of diversity, in terms of sourcing, supply chain, in terms of the manufacturing practices. The organization is going to get a window of opportunity to go and expand and synergize in all the areas is going to happen. Right. Right. No, my question was actually that, this Meritor would be having a lot of, global manufacturing capacities. Mm-hmm. So Cummins, actually, the Cummins Inc., they have, I think India and China are the two major sourcing hubs for global market because they do not have capacities across the world, but Meritor would be having capacities globally. So in spite of that, we can still tap, like, they can look at India as a global export hub, is what you are saying? I don't think from the manufacturing perspective, Cummins manufacturing plants cannot produce axles, and axle producers cannot do this. Correct. I don't think nobody will stop the manufacturing at the U.S. and buy it from India. It's not going to be economical because there is a huge pressure in every country, particularly U.S., on the local content also. You all know about it, and I don't want to get into that. So exporting of subsystems is going to happen. Cummins presence will only catalyze, but it will be more depending on the lead time of supply to the customers. You know, the U.S. market is continued to be strong at this point of time, and we have a good order book that's available. There was also a lot of talks about the global recession that's going to happen, but at this point in time, we see a very strong, U.S. market, whereas, in Europe, we see a flat. So it all depends on the situation, but there's definitely Cummins acquiring and bringing in more and more to India, is also one because of Cummins, it is going to catalyze, at the same time, the geopolitical situation of coming more to India. And of course, what Nagaraja and team are doing in terms of improving the reliability of the product, delivery accuracy, the quality, and the precision supply is what we do. Right. And Cummins, actually, I believe in the last call, you had mentioned that Cummins is very strong in the off-highway segment, where they supply the engines to the mining sector. That could be one potential area that we can look at in terms of synergies, right? Where- We are working, we are working very, very close with them to go to those customers and see. See, off-highway is a different cup of tea, where there are certain suppliers who merge engine, transmission, drivelines, everything together is a kick to the system. So we are evaluating that, and we are using Cummins expertise to see that how we can accelerate and how we can penetrate into those segments. It's definitely going to happen. Of course, military, too. Sure, sure, sure. My last question would be on the margin. So I, well, I understand that, you know, last 2, 3 years, there have been massive commodity inflation, due to which percentage margins is not looking as per our expectations. But going forward, as the commodities deflate, kind of deflate, then the cost reduction initiatives that we have taken over the last 2, 3 years that we have been talking about, will that be reflective in the margins, percentage margins? And can we expect, like, kind of 13%-15% kind of range going forward as the commodity—assuming that commodities will deflate? Okay. Assume commodity is going to deflate, let me tell you, from April, there is already a commodity increase that's going to happen. I don't want to speculate on whether the commodity is going to go up or come down. The impact of base impact, what Ranga said, it has to be evaluated for the, for the level of what you are saying about going up by 3-4 points in a couple of years. I don't think base impact of commodity is going to inflate us to 13.5% or 15%, what you said, and I don't want to comment on that. But one thing that I can just assure you is, it is just because of commodity movement going up and come down, Cummins Meritor performance will not be reflected on that. It will be one of the factors. We continue to put on our product innovation, we continue to launch new products, we continue to work on cost reduction activities, and we also go to the customers, we find out that what is the total cost of ownership, and thereby expanding. All these initiatives will continue to be there, and we'll be marching towards those targets, what we have indicated. Our aspiration is there to reach, but within one or two years, we are going to reach. If it is an arithmetic number in one or two years, it's different, but it is all has to come back with a substantial actions and substantial delivery point within the entire value chain system. Got it. And basically, we have this arrangement with Meritor HVS. Is that going to remain as it is with the Cummins coming into the picture or is there no? Cummins, Cummins, and both, I think, last time we introduced the slide, the Cummins CEO, Jennifer Rumsey, or, Mr. Kalyani, the Chairman of Automotive Axles, both have been very, very upbeat about the positive relationship what we are going to have. The relationship is going strong and it, it will continue to be there, the current system what we have. Okay. Just on slide number 8, there is the first point, the successful implementation of LTA agreement. What does that exactly mean? See, at this point of time, we have a very, very successful long-term agreement with various customers, like our largest OEM customer. Right. I can tell you that more than 70% of the business by numbers or value we have in our LTA agreement running up for at most next two years, which is going to really help us to focus on what more we can do. And we have started; our team is already working on how beyond 2025, how do we need to expand, how do we need to grow, and what type of initiatives need to be done. Mm. That is what I said. At this point in time, we have a very clear long-term agreement signed with the customers. It's largely renewal of contract for next two years as well. It's not only renewal of contract, but also the new contract that we got in. Okay, okay, sure. Yeah. Okay, that's it from my side, sir. Yeah, thanks. Thank you very much, Mr. Sagar. Thank you, sir. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to three per participant. Should you have a follow-up question, we would request you to rejoin the question please. We take the next question from the line of Mr. Nishit Jalan from Axis Capital. Please go ahead, sir. Yeah, hi, sir. Thank you for the opportunity. So my first question is also, again, a follow-up on the new product introduction. One of the reasons we were looking to launch these more improved products is to offer better value proposition to some of the OEMs who are not our customers currently. Right? So any breakthrough there, anything, any major development there? They have liked our product, they have taken for sampling. Can we gain more business out of them? Because while you are doing your work in terms of data penetration, moving towards higher tonnage vehicles and all, a major part of the growth can come if the largest MHCV OEM can start sourcing more and more from us. So any progress on that front? See, while we continue to work on this, it's a little... I'm not saying that it's impossible, but it's a little challenging is because most of them have invested on the axle manufacturing inside their facilities, and most of the largest OEMs are doing the axle by themselves. So our innovation, what it is going to happen, if it is going to substantially improve that, those OEMs will come to us. We continue to work on them. It is not that our products are not sold to the companies which are making axles. There are certain companies which are making axles by their own design. Still, they are buying the premium products and unique product for us. If it goes to export, everybody buys it from us, whether it could be Daimler, whether it could be Volvo or Tata. But how do we penetrate into all the segments is what we continue to work. I think, thanks for the question, and we look at all your wishes onto us to penetrate and get more business into this segment. So just to probe a little bit more on this, when you say that your axle MS-185 or 18G offers a better performance, what exactly are we talking about in terms of parameters? Where these axles will be better compared to the previous axles or maybe some of the axles which are being manufactured in-house by the OEMs? This is some of the new launches which was not available earlier, 58 and tractor trailer and all. But I would leave this question to Mr. Nagaraja to explain, because he's an architect of these designs was created. Nagaraja, over to you. ... This is with respect to 59? No, 185. Yeah. So, again, 185 is a product, you know, which can be applied in multiple areas. So the first one, like I mentioned, you know, for tractors and, you know, like, 10-by-2 tippers. This essentially, you know, reduces the overall cost of ownership for the customer without compromising on durability or performance. And in fact, probably just for information for all of you, that this is one of the most, I would say, popular kind of an axle in China. So essentially, we are bringing in this technology, and then also manufacturing capability and capacity. We believe that as the infrastructure is improving and more and more, you know, tractor-trailer application is going to happen, I think we'll be in a very good position to, you know, realize on those increased market shares. Okay. Thank you for the explanation, sir. So my second question is, defense could also be another growth opportunity for us. I think we already have products in place, but there is the order from the government in terms of armored vehicles and all, is taking more time. Any progress there or anything you have heard from your OEM customers regarding progress on the defense side? For sure, the government has started, I think, thanks. I think if you go back to the initiatives of Make in India or buying more from the defense, a good amount of progress is happening as a country. I think more and more of the product is being sourced in India, and we are also beneficiary because of this. I think, while we are not giving the split between the defense and all, we are growing in that segment, and we supply to the major, our OEMs for the defense, even though we don't supply directly. Other than the VFJ factory, which they were making vehicles, we were supplying axles, but rest of the things we are supplying to the OEMs. So while you can't share the numbers, will defense be less than 5%-10% of the total revenues? Is this, would this be a fair understanding? Wow! I think, that's a nice way of asking, when we know that we are a sale of about 2,300, and we don't share the numbers, you're asking 5%-10%. I leave it to the guessing at this point of time, and, sorry about it, that we are not in a position to disclose those numbers. So basically, why we are getting to it is, or why I am getting to it is, basically just to understand what could be the quantum jump or what could be the delta which could come from defense. Will it be a small delta leading to few percentage point growth? Let's say, if industry grows at X%, you will grow at X plus two, X plus five, or if industry grows at X%, you can grow at X plus 10%, X plus 15%, if some of these things, exports, defense, and all starts materializing over the next two, three years. I know the intentions, and I sincerely apologize for not able to give it to you. But one thing, one assurance I can give you, whatever the way industry grows, I think we'll be better than the industry growth. That's what I can tell you at this point of time. I'm sure that we will try to see at what time we'll be able to share this information and in the future. Sorry about it. Okay, sir. Okay, sir, thank you so much, and all the best for the future. Thank you very much. I think, we have another 4 minutes, so let's- Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two per participant. We take the first question from the line of Mr. Aditya Welekar from Axis Securities. Please go ahead, sir. Yeah, so just to understand, if we remove the cyclicality of the both the top line and cost side. So from the top line, we are cyclic, cyclically dependent on the MHCV cycle, and on the cost front, we have our commodity, steel prices and all. So if you remove these, then what will be your internal EBITDA margin target, long term, which you have in your mind? So we are a customer-focused company, and our focus is more on how to penetrate into more and more customers, and but if we internally target every two-five years when we are working on the strategy, we try to grow in terms of EBITDA. See, EBITDA margin is not only for making for us, but we wanted to work very closely with the customers and making sure that the customers who work for us find our products, the total cost of operations is much, much better than competition. That is why you see that we are continuously growing what we are bringing in. One or two, for example, like what Nagaraja said, the product 185 can bring wonders in the market, what we brought in. We could have made another couple of points of profit in that, but the trust we created with the OEM, that we are providing a solution to them, which will make them to penetrate into this. And that's why more and more OEMs are continuing to stay with us, who have been working with us. While we have an aspiration to expand the margin and we will continue to grow on this, internal aspirations is much, much higher, and I don't think... I think, you know, both the companies, Mr. Kalyani and Cummins, both of them are a technology product, and both of them has a huge aspiration to grow. Ladies and gentlemen, trust me, that they put the same pressure on us also to expand the margins and at the same time, growth. We will never compromise on growth for the profitability or profitability for the growth. We'll continue to work and expand, but the internal target, at this point in time, I'm not in a position to share with you. Okay, fair enough. So one specific question on this Q4 numbers. So if you see, our revenue has grown by 6% sequentially, but EBITDA grew stood almost flat to Q2. So one reason is the raw material, but the other expense component is also increasing. So, which I think is in our control. So why, why it's why the increase in the other expense is happening? Any measures you will take to contain it? Ranga, would you like to answer on the other expense? Yeah, I see, we said at the initial of the meeting, there are two aspects: one is the commodity for sure, and also, we have agreed some extended warranty with the customers. So, we have provided one time this quarter to make sure that align with the customer expectations. So these are only two reasons at the overall basis. So, other than that, the financials don't have any dilution as far as the numbers are concerned. Okay. So one last question: so any CapEx guidance for FY 2022? See, by and large, you know, largely the capacity is in place. So we may not be doing a substantial investment on the capacity side. Definitely, you know, the sustainable CapEx will definitely be there to meet operational excellence in the Industry 4.0 and digitization. As Muthu and team is working on various new businesses, as the businesses mature, and it comes to operations, definitely if there are any need for investment, that will be decided then and there based on the business case. But at this moment of time, the guidance will be, it may not be, you know, substantially, capital investment will happen in 2023, 2024. So it will be a sustainable to just to ensure the operating efficiency and operating performance, perspective, mostly on Industry 4.0. Any new CapEx required based on the business requirement and new businesses, that will be evaluated then and there. Okay, understood. Thank you. Thank you. Thank you, sir. We'll take the next question from the line of Mr. Amit Hiranandani from SMIFS Limited. Please go ahead, sir. Hi, sir. Thank you for the opportunity, and many congratulations to the team for the wonderful performance for the financial year. Sir, my first question is basically, the guidance which you provided for the 5%-8% for the CV industry, in FY 2024. Is this on the conservative side you are giving? And secondly, on the margin side, sir, how much benefit on margin is expected, due to shifting the power cost to renewable energy? And continuing with the margin, what are the steps the company is taking, to improve margins further in the next two years, assuming stable commodity prices? Thank you very much for the appreciation for your the... We are migrating to renewable energies for sustainability, and to be more frank with you, in India, yes, you are right. It is adding to the sustainability of society, and at the same time, the cost to the organization. Our team of Ranga, the company secretary, they have done an extensive, and Nagaraja's team has done an extensive negotiation, and I believe that we got one of the best price from them. And it's definitely adding up to our containing our conversion cost, because there's a huge increase in the petroleum prices, huge increase in the corporates and all. So we will continue to work to control the cost, but obviously we are doing. Definitely, we are better than the market in terms of the CV. In terms of the volume for the next year, yes, we are doing only conservative number of 5%-10%, but I believe, the way in which we started with April, the market is definitely going to be good. But there are a lot of uncertainties that is coming in, within real-time emission system that's coming in, and OEMs wanted to be very, very conservative. You know, our business is purely depend on that EBIDTA, so we want to be conservative, but we have a very ambitious growth plan, and we will definitely outgrow the market. If the market is going to go up, Nagaraja and team are ready to deliver, and then we'll utilize the opportunity, but we are presenting only a conservative number. Very, very conservative, I would say. Okay, sir, but this time, do you think the CV cycle is going to be a very longish one this time? Sir, look at what happened this. Right from FY 2018, the CVs have dropped. It is not like a normal time where it is dropped and going up, right? From FY 2018, we had an IL&FS issue, the issues for the people for getting the loans. Then we had an axle load rating change, followed by the BS-VI implementation, and after that, when the COVID came and the market dropped. After COVID and all, when the market is trying to come back, the second wave came. It took a little longest time for getting back into the market, if you see, when compared to what it was earlier and this time. And, with the amount of freight growth that's happening and the amount of infrastructure development that has happened in the road, the existing truck utilization also has substantially gone up with the amount of good road. So all these things are putting together on the truck requirement, not the truck requirement are going up. This is a dynamic industry, and depending on the price, the industry will grow. But I believe that this is because of various improvement that happened in the infrastructure, the various improvement that's happening in axle load rating. The actual tonnage movement is going very good and the market is strong. The amount of infrastructure spent in the government and the aspirations is very, very high, which means that the commercial vehicle segment is going to go up. You all know that commercial vehicle segment growth is purely depends on the GDP growth, and we are the first to react to that. So I strongly believe that the various initiatives there, and it is going to stay for a little time because the market has been very, very slowly absorbing various shocks and it is sustainable. Still, we are not seeing the rentals are very strong still. That is one of the lead indicators for us on the commercial vehicle segment. With the rentals being strong, with the diesel price reasonably stable for last one almost 11 months, and I strongly believe that, yes, there is a good demand and we are keeping going. And the infrastructure spending has happened, which is mainly predominantly that tipper segment. Strongly believe that the market is going to be stronger. Of course, we don't want to get into the next year elections and what is going to happen after that and all, because those are some things. But, and also a lot of global, supplies is coming to India. So I believe that market is going to be stronger for some more time. Sir, one last question, if I can squeeze in. Sir, can you please help me with the, you know, the market share in the axle segment and the average realization? Hmm. Well, I know that your last question, but the last question is the one which we will not be able to share. Thank you very much. I think, Mr. Sailesh, we are already 1:10. I know with the participants, I, I'm very sorry that we are not able to provide that information. Yeah, yeah, it's close enough. Okay, sir. Thank you. Thank you, sir. Thank you. Yeah. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments. Thank you, B&K team, for organizing this. Thank you all the investors for the confidence that you have reposed on this company. Your confidence is making us to feel supportive. I think the amount of trust that you are keeping on our company is making us to be very, very confident in terms of committing an aggressive target and at the same time keep moving forward. We really appreciate and value your commitment, interest in this organization. As a management team, we'll always stand together to meet up all your expectations of the stakeholders, be it the customers, shareholders, society, and whatnot. The company will, with the strong leadership team from both, Cummins, globally and also with from Kalyani, and you can rest assured that the company will continue to perform and, try to exceed the expectations what you're giving. Once again, thanks, Nagaraj, Ranga, and Sailesh for, supporting in this event. And thank you all investors for taking time to join with us. Really appreciate. Thank you very much. Thank you, sir. Thank you. Thanks, everyone. Thanks. Thank you. Thank you. Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.