Ladies and gentlemen, good day, and welcome to the Automotive Axles Q1 FY 2024 earnings conference call, hosted by Batlivala & Karani Securities India Private Limited. 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 then 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 Private Limited. Thank you, and over to you, sir. Yeah, thanks, Lisa. Good afternoon, and thanks to everyone who has logged in to Automotive Axles 1Q FY 2024 earnings conference call. Today we have senior management team. We'll be hearing from Mr. N. Muthukumar, India Leader, Cummins Meritor, Mr. Nagaraja, President and Whole-Time Director, Automotive Axles, and Mr. Ranganathan S., CFO, Automotive Axles. I would now like to turn the call to Mr. Muthukumar for the opening remarks, followed by Q&A session. Sir, you may begin now. Thank you, Sailesh. Good morning, ladies and gentlemen. Thanks for taking your time to join your company's investor call, and we really appreciate your time. We have, like what Sailesh said, we have Mr. Nagaraja and Ranganathan are with us. We are going to take you through the presentation about the company, the products, the ESG initiatives, how financially we have performed, and how the market is. I think this is another question that we used to come, so we are just putting up how the commercial vehicle market is and how we have performed, followed by the focus of the company. With that, introduction, ladies and gentlemen, thank you once again for joining. I will hand it over to Mr. Nagaraja to talk about our location, product, and ESG initiative. Over to you, Nagaraja. Great. Thanks, Muthu. Good afternoon, ladies and gentlemen. My name is Nagaraja Gargeshwari. I'm President and Executive Director on Automotive Axles. So just for those people who are not familiar with Automotive Axles, just a introduction here. The Automotive Axles established in 1981, so we have 40+ years of, you know, existence here. We have been growing. We have four locations, you know, two in Mysore, and then one in Pantnagar and one in Jamshedpur, and 2,600+ employees. We are the largest or the number one axle manufacturer for commercial vehicle in India, and also the number two when it comes to brakes. As you can see, we have products that range from 7-ton GVW of vehicles all the way up to 55-ton tractor-trailers. All major OEMs are our customers. Ashok Leyland is our largest customers. We also supply to Mahindra, UD, Tata, Caterpillar, and also SML Isuzu. Next slide, please. This is our financial information. You know, as you're aware, revenue was INR 5,084 million, EBITDA was INR 611 million, and PBT was INR 505 million. And again, we are catering to the diverse market. We not only cater to the on-highway, but also the mining segment. We also the off-highway and bus and coach segment. I'll ask Ranga to, you know, run through our financial performance slide. Ranga, over to you. Thank you, Muthu. Thank you, Nagaraja. As far as the Q1, 2023-24 is concerned, our revenues are at INR 534 crore and EBITDA at INR 69 crore and PBIT at INR 159 crore. If you really see the compared to the last year, our revenue has grown by 7%, and and our EBITDA has grown by 16%, and PBIT grown by 22%. If you really see our EBITDA last year, the same quarter is 10.5%. EBITDA for the current quarter is about 11.4%. And last year, we had the PBIT at 8.3%, current year is about 9.5%. So though the revenue has grown only about 7%, we have, you know, improved our EBITDA year-on-year as part of the strategic initiatives, and also a large extent, you know, thanks to the commodity reductions in the last two quarters. So, this is a financial, you know, performance for the Q1. And, Muthu, can you take it over the economic outlook and market outlook? Hello? Nagaraja, did you touch on the ESG initiatives and the awards that we got? Those are the two slides. Uh, no. Okay, because there is a slide before the financial. Okay. I will talk about the market, and we'll come back onto that. Ladies and gentlemen, I think, last time there was many discussions about how the commercial vehicle is going to be. So this is a discussion we took up with, SIAM, we took it from the, the various other sources, IMF and all find out how India continues to be the fastest growing economy. You all know that, and it is, we are in a very, very advantageous situation at this point of time. The IIP, even though the stock continues to be good, the projection for the next year is going to be a 6.5 GDP, with the diesel prices, standing flat and the realization for the rental of trucks going good. With the amount of infrastructure boost that is coming up from one side, from the government, the voluntary vehicle scrappage policy available here, we are looking at how we can continue to grow. The commercial vehicle segment is absolutely to be very, very positive. I think you have more information that you would have heard from various OEMs, but we are quite confident that the market is going to be flat or single-digit growth, which is going to happen for next couple of years in our industry. With this outlook, for the first time, we are also showing you how the market has performed over a period of last 5-6 years. If you see in FY 2024, the first quarter has done 97,000, even though the market is less when compared to the Q4. Traditionally, if you look at, we are similar to last year as per to your Q1, and the rest of the four quarters looks very good. So at this point in time, we are very, very confident that the commercial vehicle market, 7.5% and above, will cross about 420K, which we are taking a very, very pessimistic view of 3%, but it can be more than that on the market outlook. Lastly, most of you asked the question on, hey, what's happening with you? How, how is Tata growing? If you look at this slide, the growth strategy, what we have given. In the year 2018-19, our revenue was INR 1,942 crore. The industry volume at that point in time was the highest of 476,000 vehicles. We were the market of 11.9%. If you look at over a period of years, in 2022, 2023, even though we are. The commercial vehicle market is still about 16%-17% less, your company is able to grow from 1,942, a thousand nine hundred and forty-two crore to 2,300 crore, which is about 17%-18%, which clearly shows that our dependency on on-highway business is coming down, and we are growing in other segments. You have been asking for the numbers in the other segments, like export, off-highway, but we thought that this particular slide will give you a confidence on how much we are growing. Even though we are not giving an absolute number to you, I just want to let you all know, between 2020 and now, our exports have grown up by more than 24% of, in the, for the global market. Also, in the bottom, if you see, our earnings per share is given. In the 2018-19, when we were at the peak, our earnings per share was about INR 80, and now for the 2022-23, it is at INR 107.22, which significantly we add value to the, to the shareholder. We will take any questions on this during the question answer session. But going back into the focus areas, we are seeing that the market should grow at about 5%-8%, what I said. We will continue with the plant, we'll continue to focus on Industry 4.0. Last time, Nagaraja presented you on how the company is taking the digitalization initiatives and how we are going towards paperless office. The focus will be there. Ranga was mentioning that the commodity price softened. However, we continue to focus on commodity recovery from the customers on one side, and at the same time, the plant will continue to work on conversion costs and the cost reduction in material. The focus on improving conversion and material cost performance will continue to be there. While on the top line, we continue to penetrate into the market share. Our revenue growth in non-highway, non-on-highway business will continue to be there. Of course, enhancing profitability will be focused. We can achieve this only by enhancing the customer value. Your company is making more and more reliable products, and the product reliability is getting improvement. Also, we work with customers to make sure that we are responsive to the customer is much better, whereby the customer is considered as a preferred supplier and preferred partner. Nagaraja touched upon the new products that we are launching, and all the new products are modular design, which means that when the scale goes up, our profitability can be substantially developed. We, as an organization, believe people make a difference and continuously work on employee recognition, employee engagement, and operational excellence will continue to be our focus area. The next slide talks about the emphasis on people and the environment. We know that we need the intelligent quotient, emotional quotient, and physical quotient for the people. So a lot of training, both in terms of the technical training, management development program, supervisory development program, and feedback and learning reviews are going with the team to make sure that our team is a competitive team and always they, they stay ahead in the market. We are corporate responsible citizens, and we owe to the Mother Earth and also the society we live in. We continue to focus on skill development in the area of new corporate, developing a greener environment, conserving water, and making the people aware of this. Of course, we at the Mysore are starting a program for developing a positive attitude for the drivers and the city bus drivers to make sure that it's a tourist communication and also getting into the safe, driving, behaviors, in the city of, the Mysore, where we are, along with the district administration. Diversity need to be an inclusion for the team and the gender diversity by so is being identified, and the team is working very, very positively on this. Center sustainability and government water positive. 80% energy from renewable source by end of next year are some of the milestones that the team is working on to achieve this. On to the next slide, on the key actions to manage the business successfully. Employee wellbeing, our organization strength depends on how well our employees can. Employee wellbeing is continuing to be a focus area for us. Customer-led products, with the amount of opportunity that is opened up by government, we will continue to increase our exports, continue to increase our defense. Alternative technology, disruptive innovations, and value-leading, we are always competitive to the customer, and the customers highly decide coming to Mahindra and automatically acting as a preferred solution provider. Compliance and ethical code of conduct are very well key, and we continue to make sure that every part of our operation process, the people, we follow this. And moving towards the journey of Destination Zero of towards zero carbon emission continues to be focused. We just missed one slide on the slide number 5 on the awards. Last month, or for the year of 2023, we have been awarded with Exporter Award by the Karnataka government for the largest exporter. So even though we don't see the numbers, it's an understanding the government recognition for our commitments to keep on export from this unit. Your company is also awarded with a Best Performance on ESG by our largest customer, Ashok Leyland, looking at the systems and process in our company towards our journey towards Destination Zero. With Mahindra Truck and Bus Division, normally, a supplier is awarded with improved delivery, improved quality. But with the overall performance of the organization, your organization is awarded with the Best Business Partner of the Year, which clearly gives us an edge over how the customer feels. The customer doesn't treat us just like a supplier, but they feel that we are a business partner working with them and making their business to grow. If you see all the three awards are coming to the front-end company that have been hard work and contribution from the back-end organization of [inaudible]. With that, ladies and gentlemen, I'm just opening it to the question and answer session. Ranga, you, Nagaraja, you want to add anything before we leave to question answer? No, we are, we are good. Okay, thank you. Sailesh, over to you, so to take our questions. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your 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, please wait for a moment while the question queue assembles. The first question is from the line of Aditya Welekar, Axis Securities. Please go ahead. Yeah. So thanks for this opportunity, sir. So just wanted to understand, means now we are saying that, the MHCV market will grow, the growth rate will moderate to 3% from a strong growth of 37% in FY 2023. So what are our key growth triggers going ahead? Means, given that the pace of, CV industry growth is slowing down as compared to last year, are there, are these new products which will drive our growth or exports or any capacity additions? What are your, midterm or long-term plans for, for getting away from the volatility of this cyclical space and, coming up with a sustainable growth outlook? Thank you. I will divide your question into two. One is what we are doing internally, what we are doing externally. Commercial vehicle market, we are saying that it is slowed down, but we strongly believe that the slowdown in first quarter is just an inventory correction, and we are already seeing that the market is picking up in this quarter. So, we strongly believe that our projection of 3%-7% single-digit growth will definitely happen. The trigger for this indicator, if you see, the voluntary vehicle scrappage policy, the government spend towards public transportation. If you see last 3-4 years, the government spend on public transportation was not very less. A lot amount of bus orders are coming, so the company will continue the business. The third is the amount of infrastructure projects and the roadwork that's going on. We believe that the tipper sales will continue to be good, and the country is also looking at a favorable monsoon, even though it is not going to be more than, but it could be average monsoon, which means the agricultural output will be good, and we will have a good amount of good transportation. These are the external indicators which we see on top of the government initiatives and our ability to export more to the other customers. These are all the indicators that we are looking at from the external. Internally, as I said, between 2020 to now, we have almost grown our exports by four times. We have Nagaraja presented during the product strategy, which I will ask him to talk to you later. Most of the new products which we are introducing at a higher content per vehicle and also the reliability is more. We are penetrating more shares in both axles and brakes, so we believe that that will make us to grow in non-industry centric. The growth in aftermarket, the growth in export, and the growth in aftermarket and defense will definitely help us to mitigate a reasonable amount of the cyclicality, what is available in the commercial vehicle market. Nagaraja, you want to add something on the products and how you are improving the reliability to take care of the market and customers? . Yeah, just a couple of comments on the new products, what we have introduced in last 12-18 months. You know, we did talk during the you know, the last face-to-face meeting. We have come out with an axle, which is the largest axle that's been used in India. We call it a MS-185. It's a 500 mm ring gear, which has essentially replaced the certain tractor application. Instead of two tandem axles, the one single axle is able to do that. So we are seeing a good response from the customer, and also this reliability is much higher. So, the two new, two other products are what we call is 59 and, one 165 axles, mainly one used for linehaul, another one for tipper applications. We are the only axle manufacturer, you know, giving a axle housing casing with a 16 mm housing. Again, has a very good, response from the customer. Not only we have not been able to, develop these, products ahead of time, but at the same time, we have been able to also ramp up, when the customer, needed it. So, I believe the new products, what we have introduced, and we also have a couple of other, products which are in the pipeline. You know, we have got, updated our, next, size tandem axle for tipper, heavy tipper applications. They are already been developed and, you know, final field testing is going on. So in next 12months-24 months, we are expecting to introduce at least another three, four products which are very, very unique for India market. Understood. Thanks for that elaborate answer. So my next question is on coming to the financials. So in the non-operating income in this quarter, we have seen a substantial jump both on year-on-year and sequential basis. So is there anything, a one-off in that which we have to consider, or that will be a run rate which we can see in future quarters? No, as far as the other incomes are concerned, yes, you know, it really see, you know, the Q4 of peak volumes given us in a good cash position, as far as the Q1 is concerned. The dividends are expected to distribute in the month of August. That one advantage of earning some better return on the surplus cash is what we've made in the Q1. That is one. Definitely our realization on the scrap has also been better in the first quarter. So those are the two major reasons. Definitely, we are taking a lot of initiatives to see that how we optimize the return on the surplus cash we have. You will see the small momentum in the coming days, but it's more towards, you know, the more than increase, but the share is increasing because the overall volume is down compared to the Q4. Understood. So my last question is, in that, in previous calls, you have touched based upon, new segments like construction equipment and off-highways, where you are planning to enter and gain some market share. So any update on that? So we continue to focus on our off-highway and defense, is what I said. Of course, where the defense has picked up with some of the new programs that we launched. In terms of the construction, you know, the Indian commercial construction market is completely different from the global, and these products, what we need to go for, is a high cycle of product development. So we have currently few products that running on with few customers, but rest of the products we are developing, and it will take about next two quarters for us to get into the customer and launch. Okay. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line from Madhur Maurya from AlfAccurate. Please go ahead. Hello, sir. Congratulations on a great set of numbers. Sir, wanted to understand, so our FY 2023, our gross margins were, you know, slightly under pressure because of raw inflation, and this quarter, there has been a very healthy recovery in the gross margin. So is this because of recovery in our RN inflation, or is this because of some mix change? And, can we, you know, expect our gross margins to sustain or improve from here on? No, I'll take this call. See, as far as the Q1 is concerned, you know, as Muthu was mentioning at the beginning, that, the on-highway business is little softened in the first quarter. And, we are able to get a good share from the export and the aftermarket due to the reduction in raw material. Of course, aftermarket, this quarter, we have done better than the last quarter. Definitely, that is, that is actually, mix is another, one of the contribution. Second, our lot of, you know, cost reduction initiative as part of the Mission 25, that is the second important point. And, these are all the basically the two main... And that's definitely the last year you said that increase, then the commodity price little softened. That's also marginally contributed for improvement. So in terms of sustenance, so again, the off-highway picks up. Definitely both export and the, the, you know, aftermarket, the volumes continue to play the same role, slightly better role. But on-highway picks up that share may come down, that may neutralize the margin. But to just reassure that, you know, our strategic initiatives in terms of our material cost reduction is a continuous focus we are giving from a management perspective, it improve the gross margins. So commodity is not in our control, but other than that, all other commodity, all other strategic initiatives in terms of getting a better pricing from the customer, as well as getting the and also working on the commodity material cost optimization is continuous work is there. There's a dedicated team working on it. We will try to make our best effort in terms of improving the gross margins in the coming days. But definitely, the first two elements I mentioned is about the mix. It was quite favorable as on-highway, soft in the first quarter, is one of the main contributors. But definitely, our material cost reduction as part of mission we contributed a bit more in the Q1, which will continue the rest of the quarters. Got it, sir. Sir, given that, you know, the underlying MHE OEM's profitability has also improved dramatically in last 2-3 quarters, and, you know, we are also investing behind operating leverage. We are investing for automation initiatives. So, do you see our EBITDA margins improving to 12% or more levels? Or, do you think there is, because of the lower industry growth, there could be some headwinds to this? So, as far as the last few years, the market, the 5%-8% is our minimum growth, what we are anticipating in the market, okay? We have to wait and watch the next three quarters, MHCV, how it's going to grow. We are also a little optimistic in looking at the market more than the 5%-8%, what we indicated in the presentation. We are quite positive about that, but we have to wait and watch. But minimum 5%-8%, we are anticipating, point number one. Point number two, as the volume is good, as of today, the order book, what we are seeing is, we are seeing a good Q2 and Q3. We have to wait and see that, how it's going to be actually materialized. So as the volume definitely increase, you definitely have the leverage benefit in your system. And definitely, our aspiration to controlling the fixed cost and optimizing the material cost is always on the card. So definitely, the margins have good potential to improve as long as the volume increases the next two quarters. That's great, sir. Great to hear. And sir, lastly, you know, on the new product initiatives, so this year, can we expect any increasing contribution from off-highway, MHE, and also the suspension segment? So, we were evaluating investing for the subsystem segment. So, whether the contribution of revenue from these segments should be increasing from here on? So, do you take the call? Yes, sir. And, so in terms of suspension, we already said that it is a very, very, cost-conscious segment, and we are fighting against the OEMs of internal manufacturing. So, more and more tonnage going in. We don't see from the segment, but looking at from the other, segments like off-highway, as I said, we are getting some new products, which is going to substantially come up, maybe in next two to three quarters, we will be coming out with this product. As I said, exports are growing up between 20, 20 the base. And definitely the next time, we will try to find out the mechanism to see that how we are doing in every segment, keeping some base. I think Ranga is working on this model, because every time when you're asking me, we are not able to answer segment-wise, we feel it's not good. So we will definitely provide you some information. But your company continue to work on, the cyclical issues of, on-highway and try to see how we can go. Though I'm not able to give a very clear, specific and offering business, but one thing that I wanted to caution, the off-highway entering into the segment is extremely challenging, because of the initial barrier that we have. But once we get in, because our priorities will be focusing on off-highway, defense, aftermarket, and export, all the four, to make sure that how we deal with the current cyclical of your on-highway business. Okay. Got it, sir. Great to hear, and I wish you all the best. Thank you. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Dhaval Shah from Girik Capital. Please go ahead. Yeah, good afternoon, team. Firstly, can you share the revenue from axle and brake segment for the quarter and also for the last financial year? Ranga, over to you. See, at this moment of time, we are, the axle is generally takes a major portion of the revenue. So, we will definitely come back to your question, checking feedback about to share or not. So at this moment of time, you can be rest assured, the axles take the major share of the business, and, brakes, will be the half, half the size of it, so. Okay. And, so in the, on the brake side, what sort of market share are we eyeing, over, you know, over some, like, medium to, long-term periods, maybe 3 to 5 year? Yeah, what, what is the market share we are eyeing here? Axles, we already have a very large market share in India. Yes, Ranga, thank you. Sir, while we like what you said, we have a high share in axle. As an independent axle manufacturer, I want to correct, because there are a lot of companies which are meeting right, themselves. In the brakes, we continue to expand. At this point of time, the way in which we are going, I can only tell you by 2026, 2027, we'll be the largest commercial vehicle brakes manufacturing company. I can tell you between 2020 till now, we have expanded 33% our market share in the brakes, in commercial vehicle segment, and moving to become the number one player. And that's the information that I'm able to share at this point in time. Ranga, you want to add anything, or Nagaraja? No, it's good. It's good. So, definitely our aspiration, and I think our marketing team working closely with the customers, with the products, as well as our penetration with the customers. We are not number one today, but as Muthu said, we have progressed a lot. Next, about 2-3 years, we have an ambition to be a number one brakes player as good as the axles as of today. Wonderful. So second question is on the, on from the, what new products or integration benefits we can derive from the Cummins platform? Like 2, 3 quarters back, you were saying we were in the planning stage. Any clarity there? I just wanted to let you all know we have completed one year of acquisition on exactly on third of August, yesterday. Maybe yesterday we had the celebration. Very, very clear long-term strategy for being joined us. While we will not be able to introduce a new product like what you're asking, because Cummins is on Indian solution systems and Axle to a different entity at this point of time, but we are working a lot of area where we can synergy with them on going to the customers together. We have a very, very strategic advantage in India, as we have told you earlier, like, there are some commercial vehicle manufacturers where we are present, where Cummins can leverage it, and there are a lot of customers where Cummins present, where we can leverage, including the after business. So we continue to work with the India leadership team. We continue to work with the global Cummins leadership team to see that how we can leverage. We have a very clear aspiration for our Mission 28. I think Mission 25, we have communicated to you about the focus area. The same way, we have only finalized our Mission 28 on where we need to be in Mission 28, where we'll be completely leveraging the acquisition of the Cummins Meritor. So we will soon come back to you then with our overall plan of where we are going to migrate. R est assured that this is a great combination between them and also our acquiring Cummins Meritor is going to really help the organization to take it forward, not only in India market, but also in the global market. Yeah. So while we get a newer customer profile, will we be able to participate in any of the EV programs which Cummins is running at the parent level? Absolutely, where Cummins is coming with hydrogen engine in, you know, they have a lot of vehicles which coming in, which, you want, but we are trying to go into every customer. The customers have a different, vehicle configuration at this point of time, like a remote mounted motor, like an e-Axle and many things. And with e-Axle, there are a lot of modifications that need to be done in the axle to make it, successful even for the remote mounted motor. Currently, we are supplying to, many customers almost I would say that 50% of the EV, vehicle manufacturers on the OEM, we are supplying, axles to them for the remote mounted motor configuration. Remote mounted. Okay, okay. Got it. Got it. You know, it's a very, very small market at this point of time, particularly in commercial vehicle market, but we don't want to leave anything left at this point of time. So we will continue to work with most of the companies and try to see how we can leverage this relationship further. Got it. Got it. Last question will be, we have consistently maintained our EBITDA margin. Now, with, you know, inclusion of newer products, and newer, you know, we're expanding our target market as well. Can this, can our company, march towards, fifth, you know, 14%-15% EBITDA margin, say, over a 5-year period? Is it there in the, you know, in the vision statement, or are you, are you thinking on that line? Is it possible? If you're asking, it's possible, I would definitely say it is not impossible. It is definitely possible. Okay. But we are in a very, very competitive environment where we try to expand our margin, but also to penetrate into the, newer, newer and legacy axle manufacturers or the newer, people that are coming in. You know, our board direction is very, very clear to expand the margin. If you are asking that, that is a part of the mission statement, yes. We need more margin to make sure that we have enough money to plow back into the system from the development and all. So your company is targeting to move to that. Whether you are asking 14%-15%, we normally don't share, but we will try to see that how in our Mission 28, when we communicate to you, we will do that. Okay. At this point in time, it is on the target, and we are moving towards it. Interesting. Interesting. Okay, great. So good luck to the team. Thank you. Thank you. The next question is from the line from Mithila Nandani, from SMIFS Limited. Please go ahead. Thanks, team, for the opportunity, and congratulations for a reasonably decent set of numbers. Sir, first on the bookkeeping side, if you can give some CapEx outlook for FY 24 and FY 25, please. Ranga, you can give the areas where we are investing and continuing to keep focusing. Yeah, see, with the last CapEx, we expanded in the year 2019-20, and our major CapEx expansion to ensure, seeing the market growth we have invested. To that level, the investment as of today, we are, we are not anticipating. However, as you can see that the automation, especially Industry 4.0 driving the industry for Net Zero is a continuous focus. ESG is one of the key, one of the key pillars of the strategic, you know, focus. So we are definitely driving our CapEx to improve margins through our automation in the operations line and improving the kind of capacities within the, you know, our manufacturing line, and so overall enhancing the efficiency and effectiveness of the operations we are going to be investing. So definitely, if you really see the 2022, 2023, what the investments you are looking at, more or less the same level will be there in 2024 and 2025, too, at this moment of time. Definitely, there will be a marginal increase will be coming up, to ensure that, you know, what type of, the export business or the domestic business we are getting it. To meet the new product, definitely there will be definitely an increased CapEx will always be there. So, at this moment of time, the plan-wise, we don't have a substantial investment plan like in 2018, 2019, and 2020, but definitely, this year and next year, we'll have a reasonable investment, mainly on automating the product, improving the quality, as well as in the operating lines, improving the capacity and the output of the respective lines. So that's basically that. So just wanted to give you an update. 2024 and 2025 may not be as good as 2019-2020. Sir, what would be your present capacity utilization, and how much, you know, peak revenue is possible from the current capacity? The current capacity, on an average, if you look at 2022, 2023, we have utilized around 70%-75%. So, sometimes in a month, we would have touched about 80-85 also. But more or less around 70%-75% is what we are seeing today. But we have still capacity of course about 20%, you know, the market growth even up to the 2018, 2019 level, we have enough capacity to meet the expectation of the customer. Okay. Sir, next on the demand side, so the CV industry outlook from your side looks to be on the conservative side for FY24. Just wanted to know your, you know, realistic picture for the coming two years and the on-ground situation at present, please. So we are little conservative because we think when we are aggressive, people say, "Hey, you are aggressive. Election is coming next year. Why are you so aggressive?" And when we are little conservative, we are saying that, to be more honest with you, on the first quarter numbers, what is coming in, we believe that this year will be definitely good unless there is something major changes. As I said, the indicators are the diesel price being flat, the realization of rentals for the diesel, so good agriculture, which means good amount of goods movement between interstate. And on top of this, the amount of construction activity that is going to be done and good amount of progress. These are the things that we see very, very positive indicators of commercial vehicle. You know, there is the 2 million volumes in India. Somebody is talking about 8%, somebody is talking about 16%, not only for the year, at least, but our major customer is predicting about 6% CAGR between now to 2028. You would have heard in their investor call. So we wanted to be aligned with this, but we believe that the market for next two years is going to be very, very positive and the best. Okay. So lastly, on the, you know, margin side, we in the presentation we have given, the target is 80%, you'll get from the renewable sources. So presently, how much power we get from the renewable energy, and by when this 80% sourcing will come, and what would be the cost savings expected by then? Continuing with the margin side, just if you can, you know, give your take on the commodities going forward and any internal target to take the margins in the mid-teen by FY 25, 26. Sir, in terms of renewable power, what you asked for, we are currently at about 30%, but I'm just saying between 25%-35%, because consumption also is varying. Okay. We are getting about 8 megawatts for now. We will be just moving into, like what Nagaraja presented during the presentation, we'll be migrating to about 80% by 2024 end. If you're asking the savings for this, the savings is related. We are talking about the savings in respect to the current electricity bills, and the electricity bills keeps on changing. So we are becoming a good captive, and then we are moving into that, and definitely that will add to the bottom line. More than the bottom line, more than the financials, we are more focused on the carbon neutral that we are the journey that we are going in and achieving the coming target of Destination Zero. And just for information, we just don't work only on migrating to conventional power, the renewable power, but also the plant is taking a lot of initiatives to reduce the consumption of power. The plant is trying to find out the goods movement for both inbound and outbound by using vehicles which are using less carbon-emitting systems. Like moving into CNG or working with the LNG or the battery. So many more initiatives are being taken up to reduce the carbon emission at portal. You asked us for the savings specifically, I think, it's a bit difficult at this point in time to share, specifically on to that. At the cost reduction, I think Ranga and Nagaraja, both of them explained earlier. We continue to stay focused on making sure that every time the commodity changes happen, how would we, we be able to save in terms of improving the yield and working, and somebody asked us earlier whether we are targeting towards 14, 15% and it is on the board direction. Yes, the board direction is to expand the margin, and your team is continuing to work on this. We work in everything, conversion, shipping cost, and of course, in terms of the efficiency of conversion and procurement of raw material, but also in the design cost. All the segments going there, which makes sure that we work on expanding the margins. Okay, sir. Thank you, and wish you all the very best. Thank you. The next question is from the line of Amar Maurya from AlfAccurate. Please, go ahead. Hi, sir. Thank you for the opportunity again. I just wanted to understand on the off-highway segment, even what could be the size of the off-highway segment right now in India, that for the product you are targeting, and who are the major competitors, and is the pricing in the market, you know, leading to more margins, you know, are more competitive than the MHCV segment, or is it more import-driven and hence margin can be better here? Sir, off-highway segment, it's if you ask us whether off-highway is profitable than on-highway segment, it again depends on the organization's ability in doing this. I don't want to do that comparison, but I can tell you that it's going to be very, very tough on competition. Even if you look at the entire market, most of the team is making their in-house manufacturing, and we don't have a ready-made global product which can be brought into the system. Because the type of vehicles we have in India, for example, the JCB backhoes, it's not available anywhere outside the country. It is unique, and they are making by themselves. They hold more than 80% share. So most of these companies are making by themselves, so it becomes extremely challenging for us to penetrate into that and also getting to the cost reduction. At this point, again, our estimates say that we will be equal or less in terms of when we migrate into this, but a huge amount of investment in terms of product development and time is needed at this point in time. Having said this, wherever we are already present, we are trying to see that how we can expand this market and penetrate into this. Oh, by your answer, we are requesting that. Yes, yes, sir. It is available. I know only the total market information of off-highway, but that depends on so many other concerns, and it'll be extremely challenging for us to talk without any proper document at this point in time. Another one. Okay, and we are developing both axles and brakes, so we are working only on the axles part? In, in those axles, we are supplying with brakes and the full wheeling so that it makes better concerns and better quality for them. Okay, got it, sir. Thank you, and all good. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Dhaval Shah from Girik Capital. Please go ahead. Yeah, hi. Thank you for the repeat opportunity. So my question was, regarding, again, the margins. So, in our past conversation, I understand that, you know, in 2016, 2017, 2018, we had adopted automation, IoT, you know, and we were quite early in adopting that. So, have we, you know, what are benefits have we seen of that on the margins? Or, or that, or the benefit has been negated with the increase in cost, other cost items? Sir, I will leave Ranga to tell, but I think, thanks for taking the lead from 2016, 2017, and you are tracking our information. You could have very well seen that how our, the cost of conversion and cost of fixed costs have come up because of these types of automation that we have done in the plant. Okay? While it is not completely negated, but there are a lot of new products there. See, the customers before in 2020- Mm-hmm. The market warranty for those products is, Nagaraja, is it 18 months and 150,000 km, right? Yeah. But today, all the products that we are making has to be a reliability of about 300,000 kilometers and 3,000 hours. So a lot amount of product engineering, product input is also going into this. So it is not negated, but also you should understand between 2016 to now, that you are looking at the percentage. The commodity prices have gone up substantially between 2016 and now, and every time when it goes up, we get recovery back to back only on the material. Yes. The rest of the cost seems to be high. So there is a huge base impact between 2016 and now. I don't want to tell in that number, but it will be around 2%. Ranga can validate my number. And that is the effort that we have done to bring it back. So it is not necessarily negated by this, it's only the percentages you are seeing is, are different. I think, Ranga, I'll hand over to you because you'll be the right person to explain the arithmetic. No, absolutely right. You know, whatever Muthu said, Industry 4.0, yes, but we adopted in couple of lines and- ... Really, the, like Muthu said, is more toward the product reliability and ensure that the increased customer expectations are we meeting it or not? So those, there is a residual cost reduction is that mainly we wanted to have a product quality and reliability was the main objective of the automation project. Okay. Point number 2 is basically, you know, and we really say there's a benefit. Yes, definitely, there's a benefit. That's part of the Mission 25, which is coming in. But the, compared to the 2 base periods, you know, commodity increase is very substantial. Only the last year we have seen little of softening on the commodity prices. Quite a bit of, if you really see 18, 19, and now, my, when a very, very high level estimate, more than 2 percentage points of improvements we have brought in, in the P&L. We have not taken any strategic initiative towards the cost, towards all the lines. I think we may not be able to sustain this commodity and still be standing, you know, at the grip of the market. So we have proactively taken a lot of initiatives irrespective of the market conditions, that we have a target. We have mitigated the commodity, plus we have ensured that we have improved our margins for the last 3, 4 years. This is a little bit unseen in the financial statement. You know, we are just with the percentage, I completely respect that, and that's how that is a target for us to work on. The point I'm saying that, you know, the unseen picture is about the commodity impact of the P&L and how we are taking steps internally in all respects to mitigate and show the improvement in the market. So- Sir, definitely, and we have, I mean, you guys have mitigated the RM impact quite nicely. The margin is very stable, that, that's for sure. No, no, that's why you see that if you, if you have your benchmark in your mind, you compare them with 17, 18, or something like that, or 18, 19, and compare them, how they've grown, where they are from, where they are now, and compare the automotive. You can definitely see a story by yourself. Got it. And, sir, this comment, one is that on the product side, which will, we will get, but anything on the cost side in terms of our supply chain, in terms of, better production techniques, anything of that sort, you know, will come in, you know, get us, which will also help us reduce the cost? So there is a global integration team operating at the, you know, the highest level between both the companies, which is working, looking at various costs, like in terms of what is the cost of pipe, what is the cost of raw material and benchmarking. And this integration is going to bring benefits for both. There are a lot of good practices in Meritor and Automotive Axles, which will definitely get into Cummins. And the same way, the best practices from Cummins will flow in, which is innovative. I think the objective of this integration is going to help. It is the same thing that was happening earlier between Bharat Forge and Automotive Axles, or Meritor, and Meritor Global and Meritor India. So these synergies at point of time, definitely is going to bring down the cost in terms of the. If the organization structure, when it is going to be rationalized with them, it is going to bring down the cost. You know, various expenses, like whether it's the test cost, whether it's the conversion cost, it is going to bring down, and you will definitely see that the management is under fast track for implementing all these changes to bring down the cost. Okay, great, sir. Great, sir. Okay, thank you very much. Thank you. The next question is on the line of Dhruv Agarwal from Niveshaay Investment Advisors. Please go ahead. Thank you for giving the opportunity. Sir, if you can throw some light on the order between the upcoming quarter, it would be of great help, sir. Sir, can you repeat? I think I could not hear you properly. Yes, sir, can you get my voice? Sorry to interrupt. Mr. Agarwal, can you use the handset mode while speaking and not the speaker phone? Yeah, yeah. Sir, if you can throw some light on the order book in the upcoming quarter, it would be of great help, sir. Sorry, sir, Mr. Agarwal, we are not able to hear you. Hello? Sir, may we request that you use the handset mode and not- Sir, okay, sir, your voice is not audible. If my understanding is right, you are looking at the order book for the next two quarters. Is that right? Yeah. Yes, sir. Yes. Thank you very much. See, that's the beauty of the Automotive Axle that Cummins Meritor. We have a defined business, and we focus on the share of business with the customers, and the organization is highly agile. We never lose business just because of our ramp-up time or order book. Whatever the customer is asking, I'm gonna need share and whatever the business, then we continue to focus on this. As I said, when the market is set to grow by 3%-4% in this year, we will definitely see that the revenue at an equivalent level or in the last five years, if you see, we have always been doubling the market. That is what is the uniqueness of it. We'll continue to grow. While we have an order book for reference for the people in the supply chain team to gear up for this, as an organization, the driving team always works on to meet the customer demand, because in many cases, we are single source, and we can never say no to them. So we will continue to execute all orders which is coming to us, but at this point in time, we can just take the market growth as our numbers. Okay, thank you so much, sir. And sir, one more question regarding the CapEx. Sir, if you can just quantify the amount, sir, it would be a help, sir. Um, Ranjan? ... Mr. Ranganathan, your line is in the talk mode. Please go ahead. Mr. Ranganathan? Oh, I don't know where Ranga, Nagaraja? Sir, we have lost the audio from the line of Mr. Ranganathan. Give me a minute, I'll just connect him back. Okay. By the time Ranga comes, see, Nagraj, you are on the line? Okay, it looks like both of them got disconnected, both Ranganathan and Nagraj. Ranganathan is connected. Yeah, Ranga- The line got dropped. No worry. There is a question on CapEx, how much we are spending and all. So that's what you can... You'll be the right person to answer. Sir, like, if you can repeat, it would be a great help, sir. Hello. No, I just same point is some one more gentleman has asked for it, so I answer the same thing. We will definitely we will be investing on the sustenance. The investments are largely based on improving the productivity and automation and quality-related stuff. So, definitely, we will be case-to-case basis, we will be investing on the NPD related based on the new product launches and the customer requirements. This largely we all just put together, we see that we call it as a sustenance budget, which my opinion may not go beyond 1-1.5% of your turnover. Okay. Thank you so much, sir, for this. Sir, Ranga, having said that, I just wanted to add up a few points. The product development is very, very key focus, and, like Nagaraja presented in the meeting, there are many of the programs that we are working, where, we will be spending money on such programs depending on the customer needs. While developing the product ahead of the market is a responsibility, when it comes to the industrialization, we have to spend. So what Mr. Ranganathan said is on, basically on the rest of the CapEx for the capacity, for the automations and all, the product CapEx is separate. Okay. Thank you for the- Right, Ranga? Yes, yes, absolutely, so that's what I said. The sustaining CapEx is largely to 1 to 1.5%, and o nly sustenance CapEx, sir. I just wanted, you all to, like, note it down. We definitely, you know, this is a 42-year-old organization, and we are definitely upgrading our manufacturing process and systematically in such a way that it's not adding burden, both in terms of the cash as well as in terms of the other quality and other fronts. So we are definitely doing it gradually. We are taking each step carefully so that we manage the margins as well as manage the customer expectations. I think, ladies and gentlemen, I'm sure that what Ranga said is very, very possible, because we as an organization, and as we are 42-year-old organization, we try to balance between the CapEx and also the returns that comes out from it, which is very well clearly seen from the depreciation level. You, you all asked the question in 2019 to me, "You are putting so much of money, what's going to happen?" I said, "Yes, we will get the business." And some of you even expressed the concern about, "Hey, so much of money you are spending, and the market industry would fall, what will happen?" And you can, you can review our depreciation levels at this point in time to see that how good we are able to utilize the assets and get through judiciously and competitively. Right, sir. Thank you so much, sir. Thank you, Sailesh. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Radha. Please go ahead. Hi, sir. Thank you for the opportunity, and congratulations to the team for good results. So two questions from my side. First, you spoke about the MS-185 product. So, on this, are new trucks having MS-185 over the tandem axles? And what are the features it is offering, and what is the cost difference of MS-185 versus the actual trailer it is replacing? How much can we replace the old tandem axles in the next two to three years? And does Tata have such a product, and can we try replacing their tandem axles with our new MS-185 product? Wow! That's a great question. Nagaraja, over to you. Yeah, thanks for the question. As we mentioned, this is a unique product with a 400 mm ring gear, you know, applicable for a 55-ton tractor, which earlier was, you know, using either 6x4 tractor, now it has become 6x2. I'm sure that our competitors are also probably looking at, you know, developing a similar thing, but we are the first one to get into the market. And also, this particular product has been time-tested. You know, this product has been in use in the U.S. in a slightly different avatar for the last couple of decades. So, we understand how this product works and how we need to optimize it for Indian application. Coming to the, you know, how many of the in the market, how it is going to change, we are, we are seeing at least one customer is completely using it. We are also looking at another customer and asking for that. We have already supplied the, you know, free testing samples. With respect to timings, you know, what happens in next 2-3 years, probably Muthu can, you know, give you that kind of a forecast. Thank you, Nagaraja. I think that is a very, very nice question to ask. You asked in the next two, two, three years, how many of the tandem we can replace? I can answer for this. While we offer the solution for the OEM, there are also few, few operators who have requested for the change in their vehicle to utilize this product, which is being sold as an aftermarket product. I'll stop with this. Getting back into the OE, like Nagaraja said, we started launching to one of the customers, where the vehicle sales is really good, and with the Ashok Leyland, we are launching. We are the two-- There are two things that's happening in India. One is the tractor-trailer as a segment is growing in India in comparison. We believe in the next 5-10 years, the tractor-trailer will go high, and we get high from hardcore engines, and these axles will come. This product, what we are launching, is like forward-thinking, because we are just launching the product ahead, when the market is coming up and trying to change the market to launch this product. These are the reason why your company is considered as a business partner, for the OEMs and not just like a axle supplier. Coming back into the volume, whatever the growth that is going to happen in, the tractor-trailer segment, I strongly believe that this product, will be there. Whether we'll be able to present in 100% of the cases or whether we'll be able to get into Tata, we are working, we'll be able to make it. But it is extremely challenging when somebody has the ability to make these axles, and these are the ideas, and people will decide to take them. We will continue to focus on this, and this is going to be a substantial volume in terms of the tractor-trailer segment. I can't say the exact number, but the industry is looking at growing in around 20% of the tractor-trailer segment year-on-year. Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Sailesh Raja for his closing comments. Yeah, thank you all, for attending this session. We especially thank the Meritor Automotive Axles team for their time. Muthu, would you like to make any closing comments? Yeah. Thank you, Sailesh. Thank you, ladies and gentlemen, for the confidence that you have in our organization and your support. Your support and the feedback that you give in the investor calls and doing face-to-face meeting, gives us a lot of encouragement, and also it adds our responsibility to meet it here and live up to expectation. Your company will continue to do everything to make sure that we meet up your expectation. Just want to let you know that we are graduating, we are migrating, it's coming, taking over us. We are migrating. You can see that from just a supplier for supplying axle to us, we are migrating ourselves like a business partner. We migrate ourselves into an [EEG], where each customer feels it. So your organization continue to put its best of effort by bringing the best practices from Kalyani Group, from Cummins, Cummins Meritor, and making sure that we make this organization from good to great. Thank you very much. Thanks for your patient listening. Thanks, Nagaraja and Ranga, for joining and explaining to the team very well. Thanks, Sailesh and team, and the team for organizing this and supporting it. Thank you very much. Yeah. Thank you, sir. Thank you. Thanks, everyone. Thank you. Thanks, everyone. Bye. Thank you, ladies and gentlemen, and on behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.