Ladies and gentlemen, good day, and, welcome to Automotive Axles Limited, 2 Q FY 2024 Post- Result, Earnings Call, hosted by B&K Securities. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks and uncertainties and other factors. It must be viewed in conjunction with our business risk that cause the future result, performance or achievements to differ significantly from what it expressed or implied by such forward-looking statements. For better voice clarity, we urge all you to switch off the video while asking questions. To ask questions, please, select the Raise Hand option. We will call out your name, and then, you can, tell company name, and then, I request you to unmute yourself and ask the question. Please note that questions on the chat box will be answered in the end. So to take us through the results and answer your questions today, we have top management of Cummins Meritor and Automotive Axles team, represented by Mr. Muthukumar N, India leader, Cummins Meritor, Mr. Nagaraj, President and Whole Time Director, Automotive Axles, Mr. Ranganathan, CFO, Automotive Axles Limited. So we'll start the call with a presentation, and it'll be addressed by all the three member of the management team. Then we'll conduct a Q&A session. So with that said, I'll now hand over the call to Mr. Muthukumar. Yeah, over to you, sir. Thank you, Sailesh. Happy morning, ladies and gentlemen. It's nice to be back with you for the investor call, and really appreciate you taking time to join us during this call. Your support, the requests that you ask always makes us to perform better, and we strongly believe and we appreciate your support. With that, I have my colleague, Nagaraj, who is President and Whole Time Director of Automotive Axles. He'll be running through the company history, followed by Mr. Ranganathan on the company financial. Once again, over to Nagaraj. Hello. Good morning, everyone. And you know, just a brief introduction to Automotive Axles Limited. You are all aware that Automotive Axles was established in 1981, and over the last 40+ years, the company has grown to this level. Just to remind everyone that we have four manufacturing sites, our mother plant is in Mysore, and then we have two satellite plants in Pantnagar and Jamshedpur, mainly catering to Ashok Leyland and Tata Motors, respectively. We have 2,600 employees. We are number one axles manufacturer in India when it comes to independent axle manufacturer and number two when it comes to brakes. Our major customers are Ashok Leyland, Tata Motors, Mahindra, BharatBenz, VECV. Our main products, as you mentioned, mainly, axles, brakes, and also, the axles for off-highway application. Next slide, please. Over to you. As a part of a growth strategy, we continue to innovate and then develop our products ahead of time. Last quarter, we did discuss about how it is helping us to achieve the growth strategies. These are all the five new products that are in pipeline at various stages and many of them are the design completed and under testing. We are introducing the largest tandem axle for a tipper application called the MT160. This is again focusing mainly on 8x4 tippers and 10x4 tipper applications. We have a product for the TLB. Again, this axle is under testing. We are, we have a couple of new products. We will land a production axle along with MT145. This is for the light and medium duty tipper application. We are also upgrading our current portfolio of products of you know RS120 and 145 to 12.49, keeping in mind regional specific application requirement of both OE customer and the end customer requirements. This will be a fuel efficient, a lighter weight, and having a you know higher durability life. Next slide, please. We continue to focus on Destination Zero. So as you can see on the top corner, 80% of our power consumption will be coming through renewable energy. I'm very happy to share with you, as on date, we have already achieved 40% of our energy requirement is coming from renewable sources. It's not just about the energy, we are looking at reducing the packaging, that we have almost usage of wood has been reduced by more than 80%. We are focusing on water positive. As in fact, we are, Mysore plant is one of few plants in in Karnataka region, which is having a water positive for the last several years. So we continue to focus on, you know, consumer preference and, how the things are changing, and how technology is going to help them, help us in, meeting their expectation. We continue to believe in diversity and inclusion initiatives. So there's a very big push from the management here to achieve this. And the employee safety, health, and fair treatment is always core to our business. These are the core values, and we continue to, you know, support and then make a significant focus in these areas. Thanks, thank you, Nagaraj. With that, I'll request Mr. Ranganathan, our CFO, talk about the financial highlight and how we have been performing year on year on the platform. Over to you, Ranga. Ranga? Sorry. Sorry, I got muted. Go ahead. Thank you, Muthu. Thank you, Nagaraj. Just adding a few points to what Nagaraj explained on ESG initiatives. IT initiatives in line with the Mission 25, also driving automation, all the processes, basically, improving the productivity of the employees as well as, the elimination of, you know, paper are working towards a paperless office. And we have, we have come across significant way, more than 30%-40%, of papers have been, we are working next to eliminate close to about 80% of the paper into the other processes in the organization. With this, closing remark on the ESG, I'll take you all through the financial performance. For the year, we, we have, you know, achieved a revenue of INR 188 crores, with a EBIT of close to INR 70 crores and the PBIT around INR 60 crores. Come next slide. Just have a comparison of the per- this quarter performance versus the last year, and, the compared to the last year, our revenue has grown by 24%, and, our EBITDA has grown absolutely, but grown by 33%. Last year, the same period, our EBITDA was 10.9, we are at 11.9 now. And, PBIT increased by 49%. It's INR 40.5 last year, crores, last year, versus the INR 60.4 crores in the current year. Last year, the fourth quarter, the PBIT was 8.5, now it's about 10.3. As far as the YTD performance is concerned, if you really see, for first six months, we have done about INR 1,122 crores as compared to INR 97 crores last year with a growth of 15%. And EBITDA is concerned, this six months is about 11.6% is the run rate versus 10.7% last year, the same six months. And PBIT is concerned, we have, you know, we've done about 35% growth in INR 821 million to hundred and that is hundred and 111.2 crores in the current year, current quarter, current six months. So close to about 35% growth, but 8.4 last year for the first six months, so 9.9, close to 10% for the six months, is our financial performance. So these are broader highlights of the financial performance for the quarter and for the six months. Over to Muthu. Thank you, Ranga. I see Mr. Pratik, you have raised your hand. We will complete the session, and then we'll come to question and answer session. With that, team, I just want to give you how the market outlook looks like in Indian economy. India continues to be very a strong economy. Prediction from most of the financial institutions and the global indicate that India will continue to grow same fashion and will be the fastest growing economy. You all know our ambitious target of becoming the third largest economy by 2030, meaning we will cross $5-trillion economy by that time. And if all these things need to have a lot of infrastructure, push is happening. And you have seen that the push from infrastructure in the current... With that it was underdeveloped country. You have seen that the government is giving a lot of push on green passenger vehicle across most of the Tier 1, Tier 2 cities, and already a good amount of contract has been given to the various vehicle manufacturers. So with push from one side on tipper and other side on tonnage and on the passenger vehicle, the commercial vehicle industry is set to grow. But not that easy with what is coming up, the political situations of going for election year for next year, and we are seeing that conserving cash from every fleet operator is going to be there. The other biggest advantage is that a flat diesel price for the last one year. While there are a lot good amount of advantage for us to grow in this segment, you are seeing on that side the conservative customers, which make sure that our market is slightly flat or slightly is what is happening in this. You all know that our largest customer is Ashok Leyland, who is gaining share, which is really good for us because that keeps us growing. There are few indicators globally, which is like our ocean freight has come to pre-COVID level, which is a good sign and again, making India competitive in the global. Even though the vehicle scrappage policy has come as a voluntary, scrappage as has been started and These are the indicators which are positive. I think, the commodity prices have come up, but it looks like we see the import from China has been controlled by the government. But at the same time, USA has agreed to reduce the import tariff, which means more steel will be exported from India, which may all bear concern on being priced in the future. Commercial vehicle market, if you see, we are predicting about 3% growth over last year in fiscal year 2024. While the first half of the year has been reasonably good, we predict almost a flat in second half of the year, in this year. But in reality, it may go from 3%-10%, depending on how the situation and the equity change in the next come. Your company continue to work on agility. The automobile vehicle team led by Nagaraj, they continue to work on agility to see that whatever the way the market goes up and down, the team will be agile to meet the customer demand, thereby capture the maximum market. If you see, over a period of 2018-2019, the commercial vehicle market has grown. It is actually growing pretty good. We have made about 476,000 vehicles in 2019, whereas currently it is 407. When the vehicle is less, I think we have only grown more than 4% CAGR growth in the market. Every year, we link when compared to the market growth, and that is how we have grown. You can see your company earnings per share is giving the better return. Our focus on the growth strategy for future, especially from every angle of export or penetrating into the market share or annually, value addition in every product we sell, is really helping us to improve our per axle revenue. The company continues to focus on new product modular design. Nagaraj has already presented to you. We are launching 3 or 4 products well ahead of procurement, which will take care of the huge procurement till 2030. Customer values and customer responsiveness, key in the organization, and your organization continue to get the support from all the OEMs being a customer responsive company. People are key for the organization, and operation excellence and employee re-recognition, employee engagement continue focus for the organization to make sure that our organization is best place to work. Couple of focus areas which I want to tell you is FY 2023-2024, market overall may be about 5%-8% growth when compared to the previous financial year. The company continues to focus on Industry 4.0. Last time, Nagaraj presented this, not this time. Maybe he will update next time. And of course, other digitalization activities. The company is moving on to 100% digitalization by the year 2020. As I said, commodity price continues to soften, but however, our focus continues to be on the cost control. The focus on improving conversion is, and material performance always, rewarding, and the company plan to take the organization to the next level. People make the difference between us and our competition. So the employee engagement, the corporate social responsibility, the diversity, equity, and inclusion, sustainability, these are the four on which we continue to work on people and the environment. We have started a program called Saukhya for all our employees, to make sure that how good our people, engagement and health continues to improve, particularly post-pandemic, which make the organization more effective and organization form as a team. So the various activities we have been doing in terms of the diversity, in terms of equity and inclusion, or in terms of making the employee always the best place to work, continues to grow. The commitment to social responsibility in terms of setting up asset development or in terms of health care and training more and more people employable, continue to work for us. The key actions in taking forward the employee will be, and taking, making sure that your people feel that it's the best place to work, continues to stay focused, trying to utilize Atmanirbhar Bharat and their brand to, expand, exports under the new year vertical. Bringing in alternative technology, disruptive innovation, value engineering, to see that your company is always competitive, and we continue to gain our share of continued business. Compliance direction and ethical code of conduct are key, and it is a focus area for the organization. Like Nagaraj said, moving towards Destination Zero by 2045, your company working towards zero carbon emission. These are the key focus areas that we work with. Once again, thank you for your patient listening, and, we stop the presentation here, and over to Sailesh back for questions. Thank you very much for your listening. Yeah. Thank you, sir. We'll now begin our Q&A session. So if you have any questions to ask, please select the hand raise option, and while asking question, please unmute yourself. So the first question is from Pratik Kothari. He's from Unique PMS. Please unmute yourself and go ahead with your question. Thank you. Yeah, thank you. Hi, good morning, and thank you for the opportunity. So first of all, congratulations to the team. I think we have done much better than the industry. So one question, I mean, very broad. We do hear a lot about, and in your comment, you did speak about the government's push on infra spend, the stable diesel prices. We also hear a lot about spend on mining, infrastructure, port development, et cetera. So can you just highlight, and try to correlate this to the M&HCV numbers that we kind of predict for, say, this year, then, which seems not much growth. So, can you just highlight what is happening, and given the macro environment what we read, how does it start reflecting in, say, the M&HCV volume numbers? We just came out of the supplier conferences of all the major OEMs in India, be it Ashok Leyland, Tata Motors, Mahindra, Volvo, Eicher, and all. All of them are upbeat about the numbers. I'm sure that, like us, you would have seen the number. During my presentation, I have shown the peak volumes in 2080 is around 465,000. When I talk about M&HCV, it's a place where we play 750,000. Last year number was 410,000, 407,000. The market is expected to be... The prediction today is by 2028 or 2030, the industry is expected to reach 500,000 vehicle. Still 500,000 vehicle for India, but the population is very different compared to what we are using in other countries. But I just wanted to let you all know, even though the number of vehicles is about 15% less, the tonnage-wise, we have already crossed the year 2008. That means India is manufacturing more and more bigger vehicles. That is why there is a demand for new product, which what Nagaraj explained about going in a bigger axle, so, and our per axle revenue is going up. So while the India market has not reached the same level of 2018 in terms of the number, last year, we already crossed the tonnage in terms of 2018. Looking forward, if you want the M&HCV segment has to grow, GDP has to grow. Our M&HCV sales is always in relation to GDP. Of course, we have little concern on this year in terms of overall monsoon across India, the agricultural produce come down, but generally, it doesn't look like the second half of the monsoon period, it has picked up. So with the good agricultural harvest, and the GDP growth of 7%, we believe that the M&HCV segment is set to grow. The other added advantage is the mining that's going on, construction. So both surface deeper and deep mining diggers are growing. Haulage is growing. If you have seen that the indicators like diesel prices there, so the truck realization per kilometer has gone up from a very low pit. And a good government push in terms of buying buses for the state transport organization and [that too green]. All these things makes us to believe that the market is set to grow, even though not it's going to be a very, very high growth. It's going to be a, a graded growth, is what we are saying. While these are the positive factors that I can say, we have conservative numbers. We are, India is moving to an election year, year. So a lot of conservative things will be there of spending. So conserving cash will be one of point which we were thinking. So India is a mix, but the long-term forecast for India seems to be very, very optimal. Hope I answered your question. Sure. So the second question on Cummins, it's been a while now that we have been together. Can Can you just highlight how has our journey been all this while, any changes that that has brought us, in terms of customers are operating, our operations, et cetera? The Cummins integration is totally completed in full, and we are now part of Cummins. It is, as I said earlier, I'm very, very optimistic about this change because it's going to bring a lot of new systems into our organization. Cummins, I think already we are working in various areas from operational transformation to going to the customer or cost reduction or consolidation. In every area, we are working with them, and Nagaraja and team is working on how to improve the synergies, operations. The business teams are working together to see that how we can enhance the business. However, a lot of areas working, but for all of your information, Automotive Axles Limited in India is a joint venture between Cummins and Kalyani, and the independent companies operate to the best of the making sure that the best of both, what we got from Cummins, what we got from Cummins, what we have got from Kalyani. So we'd like to make sure that this organization is turning into a whole. Great. Great. Thank you and all the best, sir. Yeah, thanks, Pratik. So before taking next question, if you have any question to ask, please, select hand raise option for asking questions. Next question is from Divyansh Gupta. Please go ahead. So give your company name and proceed with your questions. Yeah. Hey, I'm Divyansh here from Latent Advisors. Just I have four questions. I'll take them one by one. What would be our CapEx guidance for the year and for the next year? Is there any roadmap that has been finalized by the company? I leave it to Ranga to answer this question. If you really look at it, the CapEx for this year is more in line with maintaining the assessments. But definitely, in the coming year, we are working on some automation and removing the bottlenecks. As and when we introduce new products, we also have some alignment and changes into the entire manufacturing processes. In that regard, definitely to improve the productivity, automation, and towards a new product, we'll be, you know, spending more than the CapEx. Next year, this year, probably you may not see more than INR 10-INR 20 crore. And next year, definitely it'll be, we are looking at doubling that just to make sure that, you know, the process automations and productivities and process improvements and other things. But, just if you are looking at something like whether you're going to do it in substantial investment, like what we did in 2018, we are not going to scale up to that level at this point in time. Understood. Understood. And also- Sorry, just what Muthu has explained. Mm. You know, we don't hesitate to invest, not an issue. If you really see our cost, cash position is quite strong. But the point is that, you know, we need to have a business case, and, based on the business case and if we need, additional investment, then we don't hesitate. But what we are... I'm I'm sharing the input based on what information we have today. Got it. Understood. Understood. Regarding this quarter's performance, I was looking, if, if I look at the overall P&L, there were a couple of things which were standing out. So one, if you could explain what drove the increase in the other income? Okay. It's higher than what happened in the Q2 of last year. Mm. Almost doubling. Right. Yeah. So- A couple of things. A couple of things, you know, we have, we are going through a TPM journey as a process. We are also going through every stream of, our key processes, which is, you know, providing the support towards the top-line growth or the, or towards, any other contribution to the bottom line. So in that line, finance team brainstorming, one thing what we have done is about, you know, the management of the cash flow. We have gone through a complete brainstorming. We set aside the base. Basically, the reason would be like, you know, we have brought in a very, very strong monitoring system in terms of deposit and, management system, which where to invest and where to get the, return on that. Broadly, the answer is about, the interest income on the surplus cash is significantly contributing on the income, and number one. And, and we also started new initiatives in terms of weekend parkings, in the mutual funds and express there. So see the cash position and reducing. That's a significant reason for it, is basically bringing the efficiency in the surplus cash and the management process. Understood. Understood. And the second question with respect to the P&L was that the depreciation amount has been reducing, right? So from about INR 110 crore, 103 last September 2022, it has now become INR 89 crore. Yep. And it has been continuously reducing. So, is it just we are not investing further new and therefore there's-? Oh, that's a- -going down? Yeah, yeah, that's a very sensible question. And thanks for asking that. So we are debating internally. There are two things we are, well, we are looking at, you know. One thing is about when we don't hesitate to invest. Point number two is about whatever the investment what we are planning, you know, between now and next year is about INR 60-INR 70 crores. In that range we are having in mind, in our mind, in terms of doing that. We are freeing up the opportunities to do that and also our bandwidth to invest. Just because, you know, depreciation is going up, we also do have a demand in the market to invest. And again, that is comes out with additional capacity and definitely we are ready to invest, point number one. Point number two, if you are going with any product lines or any new support to the growth initiatives, definitely we will be doing that. These are all pipelines, which the strategic team is working on it, but it takes time to finalize it. Point number one, at this moment of time, that's in the pipeline. Point number three, definitely, you know, as we are going for Industry 4.0 and other automations, and the product as a part of the regular process, the investment, definitely going to happen. Probably, yes, it is a 40-year-old organization and, you know, we have to optimize in segment because the two things only support our bandwidth to implement our CapEx proposals is, probably will be carefully designed, with the value proposition to the investment that we are working on it. Definitely, as I said, between this year to next year, we will be definitely doubling our investments around the low. We are doubling it more towards automation and towards, you know, new product. But to be honest, to be between now and next year, whether the depreciation will continue to be at this level, yeah, it will continue to be less than. There will be a slight improvement will be there in terms of the percentage. It might go up slightly, but it may not be substantially go up. Then large, a large industry, and a long 42 years, the most of our assets are depreciated. And wherever needed, we also gone with the automations. In 2018, we also invested a lot of autom we brought in, and new lines were introduced. So we're continuously working on it. We don't have to stock up into the investment, just the depreciation is low. Based on the businesses, new products and automations, we selectively doing it, which gives a maximum, you know, benefit to the overall to the business, and we are doing it. So that's the story. Got it. Similarly, for the other expenses, that has also seen about a 40 basis points reduction. Was it rate related or something else which drove this? See, we are actually, Muthu was saying that cost control is one of the major driver and, you know, and, regardless of your, you know, volume benefit and keeping the cost base cost as same level with a minor variation. So that's the big impact. Got it. Understood. Understood. Just one last question. You had shown that graph of MHCV production, and that is automotive, has kept on growing. I understand also that some portion of our products actually ends up getting exported, right? Can you give us some sense, like, of how much of our product ends up going to the export market? Thank you. I think, this is one of the questions that used to come in every, investor call, and every time they're not able to provide you with the detail. But based on majority of the feedback that you've given to me, they will not be able to provide you the absolute job or absolute percentage. I can reference from you. Between 2018 and 2019, our CAGR growth was 20%. Okay? Mm-hmm. What we have done in 2018, 2019 to now. So that's an indication that you'll be able to, I'm sure that you as an analyst will be able to deep, deep dive into it. Understood. We will continue to grow. With Cummins coming, taking over- Mm-hmm. -and with lot of focus. See, our focus is predominantly on the domestic customers, and we have to meet their requirements. But at the same time, we want to do more of the export. Doing exports is going to phenomenally improve the systems and products of the company and of the quality in this company. So we'll continue to focus on expanding exports and see how we can do. At this point of time, most of our exports are going our, our different factories that come in America, globally, and they export to the customers that we have launched across every week. Understood. The reason I was asking was that, Yeah, go ahead. Is looking at the domestic MHCV, hence comparing it against automotive performance, is it a fair metric or not? Because it might... As you have mentioned itself, right, that exports have grown significantly. Yeah. Whereas the industry of Indian MHCV hasn't grown. So that's why I was trying to get a sense for that. Thank you. Thank you for finding this out, but I just want to tell you, the last 10 years, if you see, or the last five years, if you see, we have doubled the market growth on if you clearly take only from the segment. Even on the commercial vehicle market, if you see, the market is only about 20% less than the previous, but we have grown 20%. Maybe two other points, I think Andrea explained to you very well on the capacity. Again, just want to give comfort to every one of you. Our objective is not to reduce the depreciation, not this. In 2018-2019, we made significant investment to increase the capacity, and today the team has come back to a good level of capacity utilization. So we will be definitely working on the year to come about, looking at how the Indian MHCV market is going to grow over the overseas opportunities, our software commitment. So we are being very, very careful on where to do the investment, because electrification is set to come in. What newer technologies or newer CapEx that we need to do. Nagaraj and team are working extensively to see that what new technologies is going to come in electrical, can we do those investments in those things? So they're working with the global team. So that is what is going to happen now, and any more investment that we do will be futuristic. We are already spending money on digitalization, but any further investment that we do will be futuristic, which will take care of the mitigation actions that is going to come. Got it. Understood. And so just one, because you touched on the electrification. There is also a trend or lot of the articles are pointing that EV might not be correct, let's say, mode of power for CVs, whereas hydrogen might be a good alternative. Are we working anything on those ends? At this time, Or calling anything on that? Okay, I think it's more coming from an OE or I think Cummins India leadership team would be the right person to tell. You know, Cummins is already working on hydrogen, hydrogen fuel cells or something. But if I restrict my questions only to the axle and brakes manufacturing, we are making axles which can meet any of the fuels that come, whether it's a battery operated electric vehicle, or hydrogen fuel cell, or hydrogen, or LPG, LNG. There, if you see, there are more than 14-16 players who are aspiring to get into the MHD segment in India today, a new player, your management or your team is working with every customer to see that when the axle is fitted, it's our commitment there. Got it. Got it. Thank you. Thank you, and all the best. Yeah. Thanks, Divyansh. Before taking next question, just announcement. If you have any questions to ask, please, select raise option for asking questions. Next question is from Mr. Dhaval Shah. Dhaval, please, give your company name and proceed with your questions. Yeah. Hello, Muthu sir. Hello, team. Good morning. Am I audible? Yes, we hear you very good, Dhaval. Yes, sir. Great set of numbers. This is Dhaval Shah from Girik Capital. My question is, with regard to the mining point, which you were mentioning in the call. So, if you could help us to understand, so how many trucks sold in India would be going towards, pure mining application? And given, you know, the comments from various mining companies, including the largest coal India, you know, the kind of output they want to increase, over the next, say, three to five-year period, it is a large opportunity, for MHCV, industry. So, any number, you know, like how many trucks are sold, for the mining application? Any other big emerging opportunity, do you see, which can, which will support the growth of the MHCV industry, which we have not seen in the past? There are two things on this, the M&HCV is one, and off-highway is one, for your question. Yes. For India, they are talking about making 60-ton vehicle, 110-ton vehicle for mine. Okay? So I will not touch on this. If you look at commercial vehicle alone, immediate M&HCV, about 30% of the overall truck that is produced is in the tipper segment. And on that, about 45%-50% goes to, or 55%-60% goes to surface mining activity, road construction activity, the rest go for the mine. The deep mining will be only hardly 10%-20%. Yeah. So OEM would be the right people to give this number or how it is going to go. But I wanted to tell you one thing. During presentation of Nagaraj, I will request him again to come and talk about it. Mm. India is the largest Tandem Axle can take care of the mining region. Yes. Meritor, Cummins Meritor, has a design for both surface mining with a higher tonnage and also going for deep mining, because we make our tractor. Enough amount of development is done, testing has been completed with various OEM, and we are ready to launch the product, whichever the market, whether it is going for a deep mining or taking a higher load. And that is why Nagaraj, during presentation, said we are ahead of market, and we are launching this product. It's almost five years that, more than 10 years, we launched, but it's actually picking up now. We have launched with a tandem 160, which is the biggest size, about two years before, and we are now getting customers to pick it up. So, Nagaraj, you want to add anything on that, Nagaraj, how we are getting our ready for that? Yeah, nothing much. As Muthu mentioned, you know, we have all the required products in our locally developed and available right now. And apart from that, you know, there are the additional products are also available in our global regions, our portfolio, so that you know, it takes a very short period of time for us to localize it, test it, and then apply it for the specific requirement. Okay. And then, you know, we did talk about last time. One is developing the product, second thing is also validating it. Cummins Meritor has invested heavily into the testing facility here in Mysore. So generally, 80% of the products, you know, we should be able to do the validation locally and then, you know, launch it in the market much faster than our competitors. Correct, sir. And then also if you can touch upon the off-highway. So JCB has also given a very strong guidance for the India market, and also right now they are exporting, I think, roughly 40% of what they make in India. So how can you capitalize on JCB's growth in India? While, it may not be good for us, I think, you know, JCB make their own axles, you know. But with the Cummins coming, we are working with them. We have various volumes in the off-highway segment. Nagaraj touched upon one of the points called TLB, which is more India specific, and it is utilized by 50% or 60%, right? Is the TLB application. So we developed the product. It is very competitive and technically superior. Working with the customer to go, we will have challenges with the... While the opportunity, these challenges also continue to be good because we are going to increase internal cadence of them. We are very, very upbeat about, yes, we'll be able to that product and go to the customer. We continue to work in the off-highway segment. Okay, so this product. Offered as a product in here with the superior product. We are not choosing to work with everybody to see that, we work with. Yeah. Interesting. Okay, and last question. Since, so in discussions in the past you discussed about, you know, expanding our margins over the longer term. So by when, you know, can we see that thing and any comments on the margin expansion plan? You have seen our conversion efficiency at any point in time is double of what market growth in top line. Yes. And for both that we are growing in this, your EBITDA or PBT is growing almost, again, double of it. While, like I think, Sailesh spoke in the past, we are not giving a forward statement on where we are going to end up with. I can continue with the team, led by Nagaraj. Continue to work on improving our efficiency, internal capability, to see that we outgrow the market. I think that's the statement I can give. Ranga, if you want to add specifically, you can tell Ranga. So, I know it's a right question. The point is that, always all of you have a little more, how much we do. You know, that's always be a point, which is the expectation that puts us and, sometimes sleepless nights, but nevertheless, we are working towards it. As Muthu was saying, we have a strategic, viewpoint, looking at the market, that we are very upbeat, you know, we are looking at in terms of, improving the bottom line, you know? And, where opportunities are, the Muthu team is working about how to get the best realization of the axles, from the customers. And, as I mentioned, in one of the, he asked the question about, even in the cash cycle, we are trying to improve the front. So we are looking at every opportunity. Both, as, I'm constrained not to share a number that what we are looking at it, but, you know, the volume is to our favor. We definitely see much improvement in terms of the margins on the axles standalone. And also in future, if there's more opportunities coming in, in terms of the export or the, all the markets, with new products moving. Definitely, you know, we also seek an opportunity to improve our margin in those areas, too. So, as you rightly said, yeah, the volume grows, you'll definitely see the growth. And even the volume stable condition during the COVID and other times, you see that, you know, we, our margin, we have put our best effort to grow margins. Yes. So I think we are conscious about our fixed cost spending, and keep all the fixed cost, and control, and also the commission efficiency. And earlier, Nagaraj also mentioned that our power and our solar power to overall power consumption is 40% now. We are looking at taking it to 80% and keeping the fixed cost control. Definitely, you know, you know, it's the, there's a precaution looking at the M&HCV cycle, as our organization has learned over four years. So, in terms of managing the upside and downside, we are very careful about it. And we go down, we also be ensure that we don't go down to that level of generally general market. And also, when we go up, we try to maximize the profit. Definitely we are forward-looking. The market grows. We are there to grow the margins. Okay. So the raw material basket is softened, so while, around two years back, even it was high, but our gross profit has remained consistent. So what is the reason for that? Like, we're not... in this quarter, we're not seeing an increase in the GP or not, we saw a sharp drop in the GP. No, compared to last year, definitely there's an improvement in GP. Compared to last September- Almost 3%. If you really see the GP, we are seeing middle class level, definitely there's an improvement of 0.5% compared to last year. But, can also add to this meeting. Sir, we just wanted you to know, in the commodity industry, we have a very good system of a back-to-back with customers. And so when the commodity goes up or comes down, our organization is not very greatly impacted, except for timing. I think we explained this, in one of the presentations earlier. Yes. Whereas the market goes up or down, we will go back to the OEMs and, you know, the Indian automotive practice. We'll go back and make sure that the corrections is done. Except for the feedback, except for the feedback. Okay. Ranga, you are there, maybe look from there. No, no, you are absolutely right. So the commodity does not add any margins at the bottom line. It only, you know, cost to cost, whether the reinvestment is happens, whether reduction or increase. So, we don't tend to gain anything on the. Only it probably, either it, impact your bottom, the percentage, in terms of percentage, there's more a base impact. Other than that, I don't think, there's not any. Okay. Okay. Okay, thank you, team. Thank you very much. Yeah. Thanks, Dhaval. If anybody has any question to ask, please, select hand option for asking questions. Next question from, Mr. Sunil Kothari. Please give your company name and ask your question. Hi, thanks for the opportunity. I'm Sunil Kothari from Unique Asset Management. We are running a PMS. Sir, just little bit more clarity on the relationship with our this parent company, Kalyani. So how we transfer, what is the transfer procedure? Because what I understand from previous speakers, so commodity, raw material prices has fallen, but we are not that benefited. We are doing innovation, we are doing automation, we are improving productivity, reducing costs, creating new products, but that reflection is not here. So how it works and we transfer the all the products we manufacture everything, and we transfer to that [JV]. They sell to our customer. So how the pricing works? Um, Ranga? No, Mr. Sunil, sorry, you know, as far as the pricing between both companies, we have established transfer pricing mechanism. And, basically, the transfer pricing mechanism is set, we have been following it for some time. And, this has also been validated by PwC as a matter of governance, to see how are we doing it and is it on arm's length. And this application is also placed before the board for approval. So as far as the pricing mechanism is concerned, we have a stable and established pricing. Definitely, you know, that is no concern from investor standpoint, that I will second you. Point number two is about you looking at, you know, so many initiatives, and we are moving, and if you really look at that detail, though, we are putting costs and other variable costs in control, but also cost increases naturally happening around us. If you don't, you know, bring the initiatives, every initiative you're looking at that we need to bring down the bottom line improvement is a quite, quite natural expectation, you know. But it's also inflationary impact is there in every cost element year-on-year. Today's scenario, in every element of whether transportation costs, whether it is, you know, all our suppliers, the conversion costs, and also the power costs and so many things. So we bring up so many initiatives to mitigate it and also try to bring over and above this inflation impact, what is the best we can do it in the, in the bottom line. As far as the new products are concerned, you know, definitely, you know, there are two things. Well, you can't expect the new product developments or, you know, initiatives to show the profitability overnight. You know, it does go through a cycle before it comes into, you know, volume, required volumes to start contributing to the bottom line. So these are all futuristic. One by one, definitely will show up. The point I'm trying to bring a perspective is about, definitely our desire is, to, do, better, you know, material performances and bring, mitigate the inflationary issues through the internal initiatives and all the stuff. So definitely, the great efforts have gone in, in terms of mitigating this cost inflation and also showing a better profitability in the bottom line. So it's very difficult, outside of looking at it, you guys are talking so much, great, but the bottom line, if you really look at the bits and pieces into the picture, there's so much cost escalation is also naturally coming into the system. That also we have to go over and above that, what is it we can do with it? So it's a very quite challenging environment. Some issues will happen next quarter, quarter on quarter, we can see it. Some issues, it makes six months to one year to show the performances. But really see the real comment, I'll suggest you, sir, if you really look at it in terms of the EPS, the end of the day, you know, the earnings per share is one of the highest we have shown in the last March 2023. Our desire is always to protect the shareholders' interest, and in that, we give the best value, not only in terms of profitability, but also in terms of the governance, you know. You know, we work very independently in terms of ensuring the governance and give the maximum confidence to the shareholders. That's basically our prime objective and prime value system in this organization. Mm-hmm. Right. Sir, if Mr. Nagaraj or Mr. Muthu can explain a little bit on what that JV do the value addition, we transfer them the product, are doing everything. What value addition they are doing, so that, that will be helpful. Nagaraj, you want to add? Would you want to... on this point? You know best, how you're working with them and such things. You want me to go ahead, Nagaraj? Go ahead. Okay. I want to touch about some things I didn't mention- Yeah, you touched at the beginning. Yeah. So I, so a couple of things, during the presentation, we didn't kind of repeat it. So the, the biggest value what, you know, our partners bringing in or MHVSIL is bringing in is, you know, bringing in the product and technology well ahead of time, and then, you know, having the necessary infrastructure, to validate them. So, once upon a time, our time to market, for a new application or a new product used to be anywhere between two to three years. And then in the last, three to four years, it has been dropped down to less than a year. In many times, it is less than six months. I think that is the biggest, I would say, value add that is coming, which is really helping us to be, very, very competitive, in this, market. We have been able to keep that, you know, number one position when it comes to independent axle manufacturer, you know, just because of that. And if you go back to the history in the last 10 years, we are the Automotive Axles is the, you know, the, first company to introduce, any of the, products, whether it's a hub reduction, whether it is a, axle with a diff lock, or, or, you know, the, tandem axles, we are the first, you know, company to introduce into the market. This is going to be a big challenge without the support of, you know, Cummins Meritor. The things are done by this JV. Product additions, new product launch, new product technology. That you mean to say, sir? Yeah, business development. Okay. All those activities is being added, the testing, validation, investing on the testing that by them. So just to draw your attention, which why are we as a investor or shareholders, being minority, ask this question is just for... You have the data, but just I'm for the sake of other investor, I would like to convey is the profitability of that JV has tremendously gone up during last two, three years. Profit before exceptional item was INR 61 crore in 2020, it was INR 51 crore in 2021, and now INR 106 crore. So my point is, the efforts, the, which you people are taking, are we able to gain or keep our, the share of whatever you are doing? Or it's just because it's a 50/50 JV, and we being minority, always we will think that way. And frankly, I raise this question two, three year also back, yet I'm not able to satisfy myself, just trying to draw your attention. That's all. I'm not seeking for any answer, but this is not comforting for minority, that I would like to directly convey. Sunil Ji, again, thanks for your frank and questions you asked. We really appreciate it. If you see the profitability of the effort, who is putting the effort, it all being worked at one company, and then done and then taking the... Your question, I think, as you said, you have discussed this question, I would request you to please visit to Mysore. I think that's what one of the requests that you have been giving, maybe next AGM, we can have it. Please understand for yourself the amount of investment that is going on product development, the investment that is being done on testing. As in, like what Nagaraj said, as an independent axle manufacturer, please understand, 75% of the axles are manufactured by the OEM in India. With the current 72%, I would say precisely. The companies which are making vehicle, they are making axle with it. In spite of that, for the critical application, important application, they come to us because we are competitive even with that; it's only because of the technology that we brought in. But thanks for bringing these questions and, giving us the honest feedback. We will certainly work on giving the comfort to... It's not a minority, [audio distortion]; you are our customer, and we continue to work with, you to gain the confidence and make this automatic. Thank you. The point was just to make you feel that what minority investors are feeling, because that profitability from 2021 to 2022, it also double. Profit from INR 51 crore to INR 200+ crore. So, it gives little discomfort to minority. That is my viewpoint. I don't know whether you'll be able to satisfy me or other investor, but this JV is not giving comfort. I mean, you have to, I understand this is a quarterly con call. I can't say any more on this, but this, the parent's supposed to think about, consolidating, these things at some time. That is my suggestion and request. Thanks a lot for your explanation, sir. Thank you, sir. Thank you very much for giving honest feedback. Yeah, thanks, Sunil Ji. Our next question is from Mr. Sagar Parekh. Please give your company name and ask your questions. Yeah. Hi, sir. Am I audible? Yes, Sagar, we can hear. Yeah, hi. Thank you for taking my question, and congratulations on excellent set of numbers. So first question will be on the capacity utilization. Currently, what could be the capacity utilization for brakes and axles, if you can give it, give us separately? Uh, Ranga? No, brakes will be around, you know, at this moment of time, close to about 70%, 70%-72% average. And axles, we are more or less the same level. So, yeah, around 70%-100% is our utilization. Okay. So basically, at INR 600 crore quarterly running about 70% capacity, so you can still improve about- See, one point I just want to draw, I think Nagaraj can add value. See, as a new product introduced, the capacity, what we talk is about overall, you know, full-fledged axles. But, the various combination, is always a 10-14% variation will be there when the new products introduced, new ratios introduced, because each comes with their own gear set, their own, you know, other assembly processes and et cetera. So, what I'm trying to say, 70-75, could be even 78 or 80 also. So, but, depends on the ratios, depends on type of axles we manufacture, based on the order board of the customer. Roughly, you can take 75%-78% level, kind of things, at which the utilization is there. And, Nagaraj, you want to add something? Yeah, no, I think you are right. I think, Mr. Parekh, you know, our capacity is kind of based on the product mix, like, what Ranga just now mentioned. It depends on how many axles we make for, let's say, a tipper application, what's the regular liner application, you know, what's the hub reduction. So it's a kind of, you know, because we have put up our manufacturing line so lean, and so modular, so that, you know, our capacity kind of vary on the product mix. Like, I agree with Ranga, it ranges anywhere between, you know, 70%-80%, depending upon that particular, on the product mix. Just to bring everybody's attention to that, the demand or expectation from the customer has significantly upwards. I remember Muthu talking about this last quarter. The warranty expectation from the customer has gone almost doubled, and they want to, you know, take it all the way up to 500,000-600,000 kilometers, 5,000 hours for tipper applications. So this requires a you know different kind of you know manufacturing process, and that will have some kind of say on our capacity. Similarly, for bus application lines, [NVH] requirement has gone up significantly. So, that's where Ranga was mentioning, next, 1-2 years' time, we are looking at, you know, making significant improvements to enhance the current capacity to, you know, accommodate all these different product mix- so that, you know, our capacity will be, you know, it will be good to especially meet those peak demands, like this quarter, current quarter, and next quarter. Thanks for the elaborate answer. So basically, if next year we grow by about 10%-15% in top line, then you probably be at about 90% kind of utilization. So next year you have to take some kind of decision in terms of capacity addition or- Yeah. You think it's still some time away? Because de-bottlenecking and all those things can also improve the util- capacity. No, no, sir. Parallelly, we'll be doing it like what Nagaraj did it while Ranga and Nagaraj gave the overall utilization. Like, there are station-wise capacity utilization, and the team is working on the CapEx. For example, that's what Ranga was telling. This year, we have planned to de-bottleneck some areas for the new technology, new products that is coming in, and we will continue to invest. And never in our system, we will wait for the market to invest. Even in 2008, 2019, what we invested is really helping us today. So we will continue to be ahead of market, because by knowing the market systems, and we'll continue to be the front. As I said, whatever investment we want to do, we will be doing it for the next technology, so that we, even when the market goes either to battery operated or fuel cell or new generation, our, our capacities or our equipment is capable of delivering those precision and accurate product. Understood. Secondly, on this MHCV expectation for Q3 and Q4 that you have given in the slide. Thanks for that. Just wanted to check, just on Q4, our MHCV volume expectations could be lower on a YoY basis versus Q4 last year, 126 and- That is the current indication from the OEMs at this point of time. Okay. You see that actually, registration has slowly started coming down this quarter. Okay? So we have just gone ahead with what is the indication that's coming from the market. So that indication will be driven due to largely because of election-driven slowdown, or is there anything- That is what people are, people want to conserve the cash. Then, like a normal investment that has happened in the last quarter, people are thinking that, "Hey, people wanted to wait and watch." Maybe, maybe after December, depending on this, mid-election result, maybe the sentiment will change, and we may be ready. That's why, as I said, the company is prepared. I think Nagaraj and team, they are prepared to deliver even if the market is going to up north, so that we'll be agile and try to ensure that every opportunity is converted to sale. Understood. And last question on the defense side: so, would you like to throw any color on how the defense business is shaping up? So in H1, for example, our sales have grown by 15%. Any kind of contribution mix or anything that can give us quantitatively or even qualitatively, you can share some details on how the defense business is shaping up, that would be really helpful. That's my last- We have five products that has been approved, and, maybe if you look at the CAGR there, I think while the overall defense sales from our customers has come down, I think we have grown by about 3%-4% from the base year, like what I have indicated earlier. But defense is a long term, but we are taking every effort to make sure that 100% of our strategic partners or OEM, we are present there. That's what I would be able to tell at this point in time. You're saying that we have grown by 5.45% over from? Yeah, in exports, we are growing, continue to grow. On exports or I was talking about defense. Sorry, defense. You're right. Defense, you have grown by 4%-5% year over last- 3.3%. In the past, if you take as a base of 2019 or 2020, yes, we have grown. 3%, okay. Okay, but, so but we have been approved by for five products, so... Yes, yes, yes. We continue to work with the customers and product getting it approved. When it is going to convert to the vehicle, when it is going to go, is a million-dollar question. Okay, so this will be largely Ashok Leyland or any other OEMs also? The majority of Ashok Leyland, sir. Other customers we are working, but everybody has their own manufacturing, and we are working with them. So Ashok Leyland themselves would also be having their own, captive, for defense, captive axle arm for defense, or they largely procure from us, or is there anyone else? Can you, can you repeat, sir? For Ashok Leyland, would we be the only sole supplier for axles for their defense applications, or would there be anyone else also? I don't know about that, but whichever the products is approved, we are 100%. See, the Ashok Leyland has different verticals of vehicle, like mining vehicle, anti-mining, anti, various application. In those applications where we are supplying, we are 100%. But there are a lot of other defense programs that they have, where we may not have a product, which we are not present. So I'm not able to answer you clearly about what is it, but whichever the product we are supplying, we are 100%. What would be the contribution of defense as a percentage of [audio distortion]? It's, we normally, maybe less, but, you know, it, it comes with a huge, development cost and validation and testing cost. I would say that. So it's a long term... This is an investment for the long term, for the organization, which will definitely make this organization a better, contribution in the days to come. The government is also, whatever the commitment that they're given, they are working towards that. Still, whatever the commitment is given by 2025, how much is going to be procured is not happening. Only 50% of that is happening. Okay, and just, sorry, just last question on this. Bharat Forge is talking about their defense, you know, business, you know, significantly going up, especially on, even on the vehicle side. So there, would we be, like, supplying the axles to Bharat Forge? Or any, any color on that? No, Bharat Forge is using majority of their vehicles for, with the independent suspension, and we don't, we are making a rigid axle now. We are not affected. We are not there. Okay. Okay, that's it from my side. Nagaraj, we, do we supply one or two axles, or we are not there, right? Pardon, Muthu. We are not there for selling, to Bharat Forge from our plant, right? Uh, no. Okay. Thank you. Okay. Yeah, thanks. So we have one question in chat box from Sridhar from Axis Securities Limited. I just read out. So what are the factors that led to EBITDA margin expansion by 100 basis points YoY to 11.9%, and what is the management further doing to improve the margins? Also, any EBITDA margin target in the medium to long term? Shall be thankful if contribution to sales from top two, three customers in percentage could be shared. Yeah. Ranga? No, no, I think I answered it before. You know, our desire is definitely improve the margins. As I said, as the volume grows, you definitely see the growth in the margin percentages, too. We are concerned to share a a number, but definitely we have it as part of strategic initiatives. You know, we have a specific program called Mission 25, driving the cost lines and material performance. Systematically, we are doing it for the last five years. That's the reason a large amount of this initiative is one way is mitigating the inflationary pressures which is coming into the business, but further contributing to the profitability. But our desire is to earn as much as is possible. We seek every opportunities when the new product has been launched, and as well as, you know, other conversion initiatives we are taking it. We'll surely we will improve the performance. As long with the volume increase, we, you definitely see a better performances in the overall bottom line. Sailesh, I think that, Yeah, yeah. Yeah, Yeah, yeah, yes, sir. Due to... Yes, sir, due to time constraint, that was the last question for the day. So I'll-- Sir, any closing comments you'd like to make? Yeah. Once again, thank you very much for all your confidence and continue to inspire us to grow. We will continue to put our efforts on product development. We'll continue to put our efforts on making our plant the best plant to work with, with the new digitalized and new technologies to come. We'll continue to invest on people to make sure that the differentiator between us and our competition is the people who work with the organization. Technology and innovation continues to happen, and you have seen that we are number one in launching. I think Nagaraj talked about how many type of new technologies that we have launched. We'll continue to work on this. We're looking for your support. All the feedback that you have given, we take it, and we will continue to work on this and to see that how we continue to make this organization more trusted organization for you to invest most important. With that, ladies and gentlemen, thanks for your time. Thank you very much. Thanks, Ranga and Nagaraj, and Panda for joining and then answering all the questions. Thanks, Kailash and team, for organizing this wonderful session. Thank you very much. Thank you, sir. Have a- Yeah, thank you, sir. Happy Diwali to every one of you. Thank you very much. Thank you, everyone, and wish you a very happy Diwali. Yes, all of you, very happy Diwali. Yeah. Thank you, sir. We conclude this call. Yeah. Thank you, Ranga. Thank you, everyone. Thank you very much.