Ladies and gentlemen, good day, and welcome to the Q2 FY22 results conference call of Motherson Sumi Systems 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. Vivek Chaand Sehgal. Thank you, and over to you, Mr. Sehgal. Thank you very much. Good afternoon, ladies and gentlemen. In a very tough atmosphere, I think, Motherson has tried very hard to come up to the expectations. I think the general headwinds continued very strongly in the second quarter also. Definitely there are a lot of good things that have happened also. You've seen that our standalone results are very good for India. Our order book is again very robust. We do not see any headwinds as far as the demand for cars are concerned and vehicles of choice are concerned. I know you will be very anxious to ask questions, so please go ahead. I stop to wait for your questions. Thank you. Should we open the floor for questions and answers? Yes, please. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services Limited. Please go ahead. Hi, sir. Thanks for taking my question. My question is on SMRPBV particularly. So what are you picking up from your customers with respect to the chip shortage? Are they indicating any improvement in production schedule for third quarter or second quarter and beyond? Thanks, Jinesh. Look, the situation of the chips are improving. I think not so strongly as what one would imagine, but definitely there are improvements. The numbers from the car makers actually show that. One would have expected even larger allocations to the automotive segment, but it appears that every segment is at the moment having a huge demand of semiconductors. Gradually, yes, it's improving, but not to what desired level sooner. Anybody else would like to add on this? Vaaman? No, Papa, I think you've covered it. The worst is behind us, and hopefully it picks up from here. As a follow-up on that, the question to Vaman is, primarily, given that OEMs have been optimizing the supply side issues with respect to improving their own mix. Have you seen similar benefit on SMRPBV with respect to enrichment of mix and in turn, lesser impact at least on the revenue front? Obviously, operating leverage has its own impact on margin, but have you seen enrichment of mix? Look, we are serving all the platforms. Yes, we do have a lot of exposure also to the premium platforms. That's where you know our diversification strategy 3CX10 has really helped us to absorb some of this impact. As you can see in the presentation results, we showed the volume drops on that side-by-side with the wider industry at large. On our results, they were muted in that manner. Definitely being diversified, being able to serve these different industries, we've been able to cushion some of that impact. Okay. The second question is for PKC. We have indicated we're continuously impacted by elevated costs due to new launches. What is the sense you're getting by when we should see normalization from the new launch cost impact perspective? Obviously, supply side is an additional problem here as well. From mitigating new launch programs cost impact when that should go away? I think it's a combination of new launches and as well, chip shortage et cetera. I'd request Pankaj to answer this please. Jinesh, this is Pankaj here. The new launch costs have started, additional exceptional costs have started to recede, and by the end of Q2, they've receded to a great extent. Okay, got it. Lastly, any update on the ongoing restructuring? By when do you expect NCLT approval for the merger of DWH? Jinesh, you know, we've waited patiently 2 x, you know. Once they said they had an outage of Wi-Fi and then the other time, you know, ours was a mixed item, but they still had to go for meetings. They shut close, hoping. Hopefully, 22nd of November, the court will reconvene and take up our case. We hope that that then sets the ball rolling. That's what, as of now, the best information I can give you. Pankaj, do you want to add something or. Assuming we get to around 22nd November, we hope that before the end of this financial year, the listing of MSWIL will be completed. Okay. Okay. Jinesh, we are all waiting very anxiously that we hope that, you know, we can start to roll out Motherson 2.0, and start the new journey that we want to have with our shareholders. Definitely we're also waiting very anxiously. Sure. Great. Thanks and all the best. Okay. Thank you. Participants, to ask a question you may press star then one. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead. Hi, team. Thanks for the opportunity. Just continuing on one of the questions asked earlier on PKC, like when you look at the PKC run rate, it is largely similar to what other company was doing last year in the December quarter, but the EBIT hit is obviously a lot larger. So could you give us some number on, you know, what exactly was the new launch related hit this quarter? And beyond that, were there any commodity hit or mix impact with China slowdown or something that impacted EBIT? Of course, Pankaj will answer this question, but, you know, it's very difficult to compare two different time zones in these very unusual times. One must take what are the current problems that were faced in the last quarter separately from than comparing it with last year last quarter. Sorry, Pankaj, can you answer that? I think it's mostly one time cost, isn't it? It's not every quarter kind of thing. Go ahead, Pankaj. Yes, sir. There are two things in this. One is that, you know, last year was a good story because at this time the market had been growing and new launches had taken place, so it's on a growth path where more capacities get created to cater to the customer's requirements. Also in this quarter, China saw a very big dip in the volumes because before this quarter we would have seen that China was growing at a very fast pace and the China VI implementation had just fallen. In terms of exceptional costs on the new launches, which we have incurred in this quarter, they would be ballpark about EUR 9 million of exceptional costs. I think there's quite a sizable impact for other segments that has actually hit a bit, it seems like that. Just a second question will be on the raw material side. In the press release you mentioned that there'll be a gradual pass-through. Could you remind us what kind of raw material pass-through contracts do you have, both in India and overseas? Sure. I would encourage G.N. Gauba to take this question. By and large, there's a lag. It's all about, you know, a lag of three months to six months, depending upon the customer. G.N. Gauba, can you elaborate it? Yes, sir. What happens is, in terms of copper, the adjustments are done either four times in a year or two times in a year because it does not necessarily matches to the calendar period what we count depending upon the customer convenience. This lag changes is coming down and it's applied consistently. When the prices are going up or going down. In an increasing market trend which was the case, or sometimes even in September, October we still saw some increasing, this becomes an impact on this. As the raw material prices are set at a high level but the steep increases which we saw earlier is not there so the impact is getting lesser and lesser to lag. This will be applicable in global businesses also, in SMR, PDV and PKC? In case of PKC, less frequent frequency to twice in a year or something like that in some of the businesses. In case of SMRPBV also there could be some contracts where it could be based on a negotiation, some contracts where it will be a time-bound delay. This is very helpful. Lastly, just, Tata Motors in their recent presentation has highlighted Motherson as one of the suppliers on the EV side. Could you share what exactly are you doing with Tata Motors on this? Which part of business in India is working with them? Which segment? Why we don't answer customer-specific modeling thing because we are tied to lot of secrecy and things like that. I'm sorry we will refrain from answering this question. But if we have said it, then it's already known to us to say we supply this, we supply that. There are multiple things. No, I actually just wanted to, yeah, know more that is it wiring harness or is it, non-wiring harness related content in India? I'm sorry, I can't elaborate much over there. Concretely, are we getting down, right? Not to, you know, really explain what future models bring it. Yes, sir. Yes, sir. No, no, that's helpful. Thanks. I'm back in the queue. Thank you. The next question is from the line of Siddhartha Bera from Nomura. Please go ahead. Yeah, hi. Thanks for the opportunity. My first question is on this order book. We have seen some moderation in terms of the new order wins to EUR 2.1 billion in the SMRPBV. I just wanted to check, is there an impact of chip shortages even in the orders also? On a normal basis, it could have been higher. Some of your thoughts on that. Laksh, do you want to take that? Sure. No, there's no these are new orders that have not started yet. They will start at least two years down the line. This has no correlation to order books. This is in fact the virgin order book that we have. We are all assuming that in two years' time, this problem will be long past gone. There could be timing issues. Some new contracts could still be coming up in this quarter, but we don't see any significant downward movement because of the issue. This is all order book that will start in the next two years. Understood. Also if I understand basically focusing on the order wins is about EUR 2.1 billion, because our EV share is going up. It has even gone up compared to the last reported March quarter. Would it be fair to say that a large part of this order wins will be EVs only and the ICE order book will be much lower? I don't think so. I think it's a little bit dangerous to second-guess the customer, but the issuance on electric vehicles is very, very valid. You know, the rate of changeover is much slower than that. We now, you know, this year are seeing similar models having two options of engine. In that sense, we see more, but we can't really second-guess what the market wants and what the people are buying. Okay. Got it. Okay, sir. I will come back in the queue. Thank you. The next question is from the line of Sonal Gupta from HSBC Mutual Fund. Please go ahead. Yeah. Hi. Good afternoon, and thanks a lot for taking my question. Just wanted to understand on the working capital, I mean, like you've mentioned that because of the irregular production thing, it's gone up. I mean, like, I'm just thinking that in terms of given that the production is lower this quarter, won't the working capital requirement be sort of lower this quarter given that the, I mean, whatever credit period you're extending to the customer. Just trying to understand why the step up in working capital in this quarter on a sequential basis. G.N. Gauba, can you take that please? Yes, sir. Sonal, thanks a lot. There are two aspects to be aware of. One, as you know, July-September period is a summer holidays for Europe. You can look at all the quarters except last year because we were coming out of COVID situation in 2020. There is an incremental working capital which gets blocked because of the summer holidays. The second reason which I think we have tried to explain that there have been unplanned disruptions. While when we look at the forecast, the forecast had been that the production would be high. As a consequence, the procurement of the inventories, and this is very much clear from the balance sheet also, that the inventory levels have gone up, which will also be partly because of the higher commodity prices. You are right in terms of the receivables if the sales are down, though in our case, on a consolidated basis, sales are down only by 4% compared to same period last year. The receivables becomes less. Got it. Just in terms of, sir, the other question I had was we've seen, while we've seen a very commendable performance across the European operations despite the decline in revenues and production. We've seen a sharper drop in SMR in terms of EBITDA margins versus SMP. Just trying to understand as to is there some one-off in SMR? Sonal, I would just want to add one thing to what Gaurav explained. Also, you know, the predictability of the order book, which the customers are giving us, the orders that they're giving us for their productions, has a little bit of uncertainty to it because of multiple reasons. The general inventory holding of the Motherson Group is actually on the higher side, and we have allowed that to happen because that allows a little bit of flexibility. This one I think, Rajat, can you please. Rajat Jain is the CEO of SMR. He will be able to answer this question. Chief? Yeah. Rajat? Hi, Sonal. I see on SMR, again, what perhaps has to be understood is that we are present in all the markets, all the OEMs, and also in all the segments. What we see as a sales drop is more reflective of the overall, you know, global vehicle volume drop that has happened. If you see, you know, the vehicle volumes have dropped by about 20% from last year to this year, and we have an 18% drop in SMR. This is, I think, because of the spread that we have and the market share that we have in SMR. I think the bulk of the impact is coming from the sales drop. I mean, obviously, there are other headwinds, as you've been talking about, you know, there are commodities and there are freight issue as well. But, I think, the more significant impact is coming from the sales drop. As I think the situation on the sales side starts to improve, we would start to see the gains coming back very quickly. Got it. Thanks a lot. Just last question, I mean, on an overall basis for the international operations, would you be able to, I mean, like, highlight, I mean, what portion of the commodity cost has sort of been passed on? I mean, like, or, I mean, what sort of an impact are we incurring because of the resetting is still sometime in the future? I mean, like, is there any way to quantify that? It's very difficult to answer that question because of the huge variety that we deal with. By and large, our team is very well entrenched to make sure that they get back every penny that we have. Yeah, there are sometimes time delay and all that. Anybody else would like to add something to that? I think Rajat will be qualified because so many different raw materials, so many different- No, sorry, sir. Just on a, like on a company-wide basis for SMR, SMP, if there is a way to quantify, or PKC, I don't know. You know, the maximum consumption is obviously of the resins. Resins, we are all working together with the customers to get that. Got it, sir. Great. Thank you so much for taking my questions. Thanks a lot. Thanks, Sonal. Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Vibha Batra from FairConnect. Please go ahead. Thank you for taking my questions. My question is again on the raw material price hike, the lag that we have. You know, you've highlighted the increase in copper prices in one of the slides. In a normal situation, the raw material price hike is not very significant. It's okay to have a lag. When the hike is very, very significant, which we have seen in recent times, is there a merit in tightening our risk management policy or the underlying contracts with the customers where we are significant supplier so that this passthrough is quicker and it is maybe milestone linked? Definitely, all efforts have been there, and I must say the customers have been very conscious of the fact that the increase of copper prices have been very, very steep. But I would ask, Pankaj to help me out on this. By and large, we are getting huge support from the customer base. So generally that's the case. But But Pankaj, do you'd like to add on this? Please go ahead. Yes. Customers are very supportive, as Mr. Sehgal said. It's since these contracts are long-term contracts, so even when the prices drop down, then the same contract continues. If in certain geographies we have had more issues because it was also impacted together with currency or any other issues, customers have been supportive and also we negotiate and come to certain conclusions wherever there is a need. Despite this, your margins have actually shrunk, despite customers being very supportive. Yeah, you know, what we have mentioned here is that, as the prices become stable, then the gap between the compensation, which is based on average of past many months, it starts to get refilled. It starts to reduce, and that is what we are seeing now. The gap is still there, but the gap is reducing. Okay. On a steady state basis, what kind of EBITDA margins can one expect? We will guide on the EBITDA margins. Okay, sir. Okay. Thank you. We guide in those. Thank you, sir. The next question is from the line of Chirag Shah from Edelweiss. Please go ahead. Yeah, thanks for the opportunity. Sir, again, coming to raw material contract, given the unprecedented increase that we have seen, so generally in this kind of environment, is it right to assume that the lag or pass-through could be even as high as six-nine months also? Because this probably we have not seen this over last decade, you know. With GST, this kind of price hikes have not been seen. The lag pass-through effect could drag on for longer than the normal three, normal discussions that we have seen as in normal circumstances. This question is both for India as well as for our international business. Chirag, you have to have patience when you're supplying to car makers. They have a lot of challenges, and we can't behave like a, you know, crying child or something over there. We have put in our case into the customers. Pankaj also reiterated that the customers have been very, very supportive. I don't know why we are assuming that, you know, six to nine months wait on and all that. Normally, if you know our company very well for a long time. Always the March quarter, we will have the maximum adjustments coming in. Also, just remember, many of the customers today take it that they will have forward contracts, so they're buying copper and all these things at forward contracts. We get a steady supply of that. A lot of things are in play there and new ways and means are happening which are actually reducing this. Pankaj, do you want to add something here? No, sir. I think you have covered most of it now. Okay. Second question I had with respect to PKC and China. Pankaj, you referred that there is a slowdown in China post Euro 6. So is the downward adjustment done or there is still scope of some negative surprises on the demand in China? And also given the general demand environment in China, the way that it is set, is there a risk in general to the optimism around the volume recovery in China? Chirag, can you please repeat your question? The voice is not very clear. Yeah, I'm sorry for that, sir. I'm saying that on the China, first for PKC on the CV side, you mentioned that there was a drop in volumes in China post Euro 6 implementation. Is that adjustment done or and can we expect the momentum to resume, or is it still there could be some lingering effect of that downward adjustment that you are referring to? What I hear from you are saying that the volume drop has ended or we expect it to linger on for more time. Is that your question? Yeah. Yeah. See, it's not very clear, so it is month-on-month. Even when the volumes went up, they were not predictable that the volumes will reach that high in China. We watch the situation very carefully. What we do is have short-term, medium-term working and also working together for growing the market and growing with new customers as well. That's how we are playing it out. I think in next few months you would come to know how the market grows. Yeah. This is helpful. If I can just squeeze in one last question for India business, China. Multiple things which are playing in China. It's an enigma. It's very difficult to figure out what's happening, really happening in China. Think about it, you know, they are going to have the Beijing Summer Olympics, Winter Olympics over there. There's a lot of issues on coal and power and all that particular things over there. A lot of these things are there which are affecting what China do. We have learned over our experience that we don't really question too much. Just wait and see things fall into place at the right time. Most of our dealerships are with the truck makers itself, so we're not overly worried about getting taken care of, you know, if you understand what I'm trying to say. Thank you very much, sir. One question for G.N. Gauba, sir. In standalone, there is a huge jump in other income. But which is not necessarily getting reflected in consolidated in that way. Is there any intercompany adjustments or something like that? Because it was INR 222 crore and generally the other income has been around 40-50 crores. I'm referring to standalone numbers. Yes, sir. Chirag sir, this is a dividend income, so you- Okay. Also given in the cash flow. Also, it is shown as separate line item. Okay. Thank you, sir. I'll sir. I'll use that. Thank you. Thank you. Thank you very much. Thank you. Chirag, we actually make a special mention that there is dividend income which are coming from MSWIL. Hope you see that. Go ahead, please. Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Jay Kale from Elara. Please go ahead. Yeah. Thanks for taking my question. I joined a bit late, so sorry if this question has been asked. Just if you can throw some clarity on the INR 1,000 crore fundraise, I mean, the equity that you have raised a few days back. What would be that for? If you can just throw some light on that. Thanks. If we, Gauba, do you want to take that one? Hi, Jay. The INR 1,000 crore approval that we have sought is an in principle approval from the board. As and when we launch the transaction, I guess you will have more color on it through the procedure sector. Understood. Also if you can just qualitatively talk about how are you seeing, you know, the inorganic opportunities coming through. You know, we did mention during the COVID time, things have become difficult because of the funding from various governments. How is that situation panning out currently, and where are we in that cycle? If you can just throw some qualitative, you know, color on how things are right now versus one year back. Well, I think all, almost all the help that was being given by the governments is almost dried out. True to what we had guided you earlier, the quantity of companies which are getting out of business is upping. It's really a lot. Huge opportunities for us. That's all I can tell you at the moment. Gauba, you want to add something here? No, no, sir, absolutely right. The pipeline is extremely strong. It hasn't looked this strong for a long time. As you rightly said, you know, the COVID special situations are being withdrawn. You know, many of the assets, the difference between the men and the boys are becoming more and more visible. Understood. Yes, yes. Thanks and all the best. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Nishant Vass from ICICI Securities. Please go ahead. Yeah. Hi. Thanks for the opportunity. First, my first question is on financials. Interest costs seems to be a little higher than on a quarter-on-quarter basis, which we expected to kind of trend down. Is there any one-off sitting in the interest cost line? And can you guide us on how we should be expecting it? Sorry, your voice is a bit muffled. Which company are you talking about? Sir, I was talking about the interest cost line. On a quarter-on-quarter basis, there has been an increase in that. Is there any one-off sitting in that cost? Because we were kind of expecting this cost to trend down with the refinancing that we did. Can you throw some light on how we should think about this going ahead? Kunal and Gauba, could you just take that, please? Kunal then Gaurav. Sorry, Kunal, you are taking or anything? No, go ahead. ahead. Go ahead, Gauba. See, Nishant Vass, I think it is in the similar range because the finance cost also includes the exchange fluctuation, so it is INR 131.32 crore. In the quarter gone, we have also distributed the dividend of about INR 500 crore, which means to that extent there will be a one-month funding additional for the group which would have been there, which would get settled as we move forward from the cash flows. Gauba sir, in second half we should expect this to trend downward, I presume. The market grows, we will grow the sales. We will have more market. Depending upon what at a particular point of time the borrowings are based on the market, operations. Understood. My second question. Average rate of borrowing has come down. That I can say. Okay. Yeah, that's what I was kind of thinking around. Yeah, thanks for that. Second question is on the order book. Obviously we can see that your even your incremental order share of electric is going up and globally electric as a share of sales is also going up. So can you give us some construct as to where your, let's say, our EV revenues contribution coming from electric? Has it touched early single digit, high single digit? Is there anything that you could throw some data point at us? Sorry. On the order book, we can't give any details about this. We just calculate the percentages and put it in for particular LTI. The customer appreciates our ability not to disclose much because their own strategy and everything depends upon all this. I would appreciate if you understand the sensitivity on us not answering this question. Sir, I don't know if I was referring to the revenues of, say, the first half of the year. That's not possible for you to quantify? Sir, your voice is cracking up. I couldn't hear you. Can you repeat it, please? Sir, I was not asking from an order book standpoint. I was asking from the revenues that we reported in the first half. Would it be possible to look at electric contributions because you are already highlighting the same for order book? If you can, if that is available. If it's not available, then it's fine. I don't think we do that calculation. Anyway, Val, can you answer this one? I don't think we do that calculation. Nishant, we can come back to you. No problem. We don't have a lot of time. No problem. Thanks a lot. Thank you. Participants, to ask a question, you may press star then one. Just a moment. Nishant, if it helps you, of the top 10 electric vehicles sold in the world, I think we are suppliers to seven of them. If that helps you. Thank you. Participants, to ask a question, you may press star and one. As there are no further questions from the participants, I now hand the conference over to Mr. Vivek Chaand Sehgal for closing comments. Thank you, and over to you, sir. Thank you very much. Thank you very much for your question, and I hope we answered them to your satisfaction. We are limited in our liberty to disclose the facts, especially in the new orders and all that because it exposes the OEMs' strategy, what they're thinking, what they're doing. Please bear with us on that. We are anxiously waiting for this NCLT to hear our case and give the final orders. This is the third time that they have given us a date. Hopefully, the courts will see, if we get this particular thing, then I can promise you we will start what is called Motherson 2.0. Hopefully within a year, within a month or two months of that NCLT approval, we should be in a very interesting position. Watch out. I think we have said the third quarter we still see a lot of headwinds and all that. Our team is gonna work very hard to do better and better. I hope and pray that all of you and your families stay safe and healthy during these troubled times. Wish you all the best. Thank you very much. Thank you. Ladies and gentlemen, on behalf of Motherson Sumi Systems Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.