Ladies and gentlemen, good day and welcome to the Sandhar Technologies Q4 FY22 earnings conference call hosted by Dolat Capital. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Jain from Dolat Capital. Thank you, and over to you, sir. Thanks, Sajani. Good morning, everyone. On behalf of Dolat Capital, I welcome you all on the Q4 conference call of Sandhar Technologies. From the management side, we have with us Mr. Jayant Davar, Co-Chairman and Managing Director, and Mr. Yashpal Jain, CFO of the company. We thank management for giving us opportunity to host the call. Now, I hand over the call to Mr. Davar for his opening remarks. Post we will have a question and answer session. Over to you, sir. Yeah. Good morning, Abhishek, and thank you for this call to Dolat Capital and to the facilitators. I also want to wish everyone a very good morning to all the participants today. As we sit today, and we've announced the results yesterday, I sit at a time when it seems after a long time the clouds are kind of cleared or clearing, and it looks like a happy runway ahead. With where we are today, with whatever signals we are getting from the automotive industry, from the market, and some of the challenges that seem to be abating now, it seems as if we should be back into a flying mode soon enough. With that positive note and with that positive sentiment, once again, a big welcome, and I'm very happy to answer questions that all of you may have. 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 touch-tone 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. First question is from the line of Anish Moonka from Astrex Capital. Please go ahead. Good morning, Jayant sir. In the past, we have made it clear of our ambitions to keep the ROCE around 20%-25% in any projects that we partake in. However, the projected ROCE of the recently entered machining project is just at 15% as mentioned in our presentation. What are the reasons to dilute the ROCE in this project? Additionally, how big of a challenge do we see continued inflation to put on incremental CapEx? Thank you. Anish, thank you for that question. If you have seen the presentation and you have seen the machining business that one is talking about, this is the numbers that have been given to you for the first year itself. These are annualized numbers that have been given to you. If you look at it and in our history, we don't believe that we have ever started a project with an expected ROCE of 15% in the first annualized operation itself. If you also look at it, we are looking at the EBITDA in this particular case to be much, much higher. We are looking at it at almost 27% of EBITDA, is what we are looking at this particular business. As soon as it matures and graduates, we will be in that figure of 20-25%. You would appreciate that when you start new projects, they do take time. In fact, like I said, this is the first one where we are beginning with an assured ROCE of this to begin with. I don't know if that answers your question? That makes all the sense, sir. My second question is on the long-term gross margin trajectory of the business. We continually mention of the trend of premiumization in our existing portfolio, lucrative exports as a China plus one beneficiary, adding a lot more technologically complex products with relatively less competition. Thereby, as an outside investor, it does look like our gross margin and EBITDA margin trajectory should trend upwards over the next 3-5 years. Am I reading it in a right manner, sir? Anish, you're absolutely correct in your approach, and I would be in your shoes asking the same questions. Congratulations on that question. The quick response that I would have is that obviously COVID has killed many a gear in this particular case. Things have slowed down not only from a perspective of how we anticipated or how the auto industry anticipated. In terms of premiumization, that kind of slowed down. You are aware that the two-wheeler industry, for example, has had the last three years which have been extremely challenging. One of the things that they have not been able to do at the speed that they expected was premiumization, because the overall appetite of the industry dropped significantly. Now, in those case scenarios, for them to add more costs was probably not the best thing to do. However, as we said today, and in my opening remarks I mentioned, there are a lot of clouds have kind of receded and we see pathways ahead. Whether it is in terms of the order books that is building up now on a monthly schedule basis, or the call from the development teams to aggressively move on to platforms that involve premiumization, have become quite aggressive from where we were in the last three years. Last three years, we were following up and asking them, "What is happening? Why are these projects getting delayed? This was supposed to happen, and that was supposed to happen." Thankfully now we are back where we are getting calls from them on a follow-up basis and on the call to quickly develop new components that they want to put on their vehicles. That was very helpful, sir. Finally, I was recently reading a 2020 article by Oracle on how they helped us improve and to automate our processes, improve decision making and cut costs. Sir, could you please talk about our IT investments over the past few years, and how have they improved our way of doing business? Thank you. IT investment? Yes. Okay. For us, IT is in two particular areas. One of course is the internalization of the overall connectivity or connectivity of our businesses with the output of data that we get. That is one. The second, of course, is also the IT facility of the technical side, which not only is the involvement of connectivity in terms of software, but also what we call PLM. PLM is an activity in IT which connects all the technical grounds of all our plants working together in commonization of technical data. Let me explain this to you. We make one component, let's say, in Dharuhera, one in Haridwar, one in Mysore. There are different quality teams, there are different customers, there are different materials, there are different suppliers. Now at one point of time, one customer would ask us to change a certain specification, and that would change at that particular location. Today with our PLM, we have standardized formats that exist in terms of our drawings, upgrades, R&D. Everything happens together, so it is happening across the board. That is one kind of technical connectivity which is connected to our design and operational software. The other portion is connectivity with our ERP, where a lot of decision-making today and analytics today happen on account of the data that is thrown out from the inputs that are done at every place. Whether it is our HRM, which is our human resource management, whether it is our financial management, whether it is our purchase management. On that, Mr. Yashpal Jain, who's also our CFO, is in charge of that particular vertical, which is IT. I would request him to supplement me in giving you this answer. Yeah, sure. Yeah. Morning, Anish. Fact is that we are working in Oracle Fusion and majority all the tools of Oracle we are using, which includes whether the e-invoicing to the integration of all the various functions within the company, real-time access to the data and analytics part also. So as of now we are completely, I would say, into the IT mode with the ERP facilities and the backup modules also. We are consistently striving towards reducing the paper load within the organization. That's all we are working right now. Sir, cumulatively with these investments, do you see this making an impact on your EBITDA margin profile as the business comes back to normal, pre-COVID levels? Yes, obviously, because. Go ahead. Yeah. Basically IT will be. I mean, if you are asking from the IT perspective that investment we are making into the IT, what happens is that we are using a cloud software, there is annual renewal charges that we are paying to Oracle. As far as matter of hardware is concerned or the investment in IT infrastructure is concerned, certainly the value addition that we are getting from IT, I would say using the ERP module for the interconnected modules is much higher, much larger than what we are spending on the IT right now. With the easy availability of the information to span all our locations as far as the customer databases and the vendor databases, we are much more achieving the economic benefits of going to the setup. That's what I am saying. It will consistently improve our EBITDA margins the moment we are going to more IT digitalization. Jayant sir and Yashpal sir, thank you for patiently answering all my questions. That is all from me. Thank you. Thank you. Participants, to ask a question, you may press star then one. The next question is from the line of Kumar Saurabh from Scientific Investing. Please go ahead. Hello, am I audible? Yes. Yes, we are, sir. Hello, sir. First, congratulations for the amazing work you have been doing, despite of, you know, such a turbulent three years which we have seen. My question is more around the industry growth rate and specifically two-wheelers, and this could be rough estimates, so I would like to know your view. If we look, two-wheeler industry, they do approx 1.5-2 crore of, you know, sales annually. If we add all the 10 years of number, I'm just guessing in India there would be maybe around 20 crore bikes. If we look, we have almost 25 crore households. I'm just taking estimate of one bike per household. Doesn't the industry looks almost penetrated given the prices have really gone up and people who have not yet purchased bikes, maybe they'll be lower, you know, the strata. Historically, I know we have done at peak 8% kind of growth rate in two-wheeler, which is now, you know, in negative. Do you think the previous kind of growth rate will come or we'll peak around maybe 3%-4%? I'm not asking from a one-year perspective because, you know, we had 3-4 bad years. Over a long term, 5-6 years, what do you see as industry growth rate? And from where we will go get our growth rate? Will it come from export or will it come from replacement demand? How do you see that growth playing out and how are we preparing, you know, to, you know, give double-digit growth rate? Kumar, again, a very valid question. I think a lot of this negative sentiment has come about with what has happened in the last three years. However, let me talk about where we sit today. Where we sit today, from the month of April that we completed to the next few months, we have clarity on almost a 25%-30% increase in schedules that is kind of in firm scheduling. Not flexible scheduling, but firm scheduling. Post that, we believe that with the festival season coming on, that schedule is likely to stay on board. Now, I say this, and yet the negative ring of your question still remains as to whether this is the flavor of the month where there is a temporary spike or is that how things are. Now, when you mention the numbers of what you mentioned of 1.5 to 2 crores of population that we have, we actually at one point of time were selling 3 crore motorcycles. Now, calculate what you will, but the ownership of motorcycles or two-wheelers as we have is still very low to some of the other developing countries. That's one. Secondly, the premiumization of personal transport within itself hasn't taken off the way it should have. India still is struggling at 30 cars per 1,000 people, which is at least 15 times less than what it is in the developed world. Now, on one end we say that we are growing as an economy. I don't believe that will happen without the emphasis and growth in the ownership of private vehicles. As soon as we're going for personal vehicle aggregation, the jump to cars will happen when the bottom of the pyramid, which is two-wheelers or motorized transport, can go up. We believe, and if we take the example of China, then the same thing happened at a certain trigger. My belief is that we are still much away from stagnation levels of growth in the two-wheeler industry. We do believe that the numbers that we are talking of for 2030 today are higher than two times of what they are presently or what they were even in 2019. I think the premiumization will continue. The growth in the volumes per se will continue. A value proposition from our perspective is, once the growth of mandatory and premiumization of parts, which means the parts that are being used now, will bring in more technology, will have more value. Locks, for example, that we do, the value of that is likely to be 4-4.5 times of what I supply today. It has already started. Now if that goes in, I get 4 times the revenue from the same, product, but it goes into motorcycles. Even if motorcycles don't grow, the value proposition for an investor in Sandhar always benefits. Higher the premiumization, higher the value addition and EBITDA margins, of course, because of premiumization go up. I think there is a win-win to that particular level and support. I mean, it is to say that if you look at the car market around the world or some other markets around the world, they've stagnated in terms of world growth. In terms of supplier confidence in terms of supplier balance sheet, they've continued to improve because the vehicles that you buy today are much more premiumized than what they used to be. Thanks a lot. Thanks a lot, sir. Two more questions. One, sir, whenever any industry goes through a very long pain period, usually the weaker hands, they get out of market and the market consolidates. In auto ancillary, we have gone through three years of pain. On the ground, have you seen like the weaker players getting out, which is going to benefit those who are there with stronger balance sheets? That is question number one. Second, any visibility we have from the OEM from the chip shortage, if, you know, we are getting out of the chip shortage situation or it is going to continue. Both questions are different. Let me take one at a time. You spoke about, you're absolutely correct. There is a lot of pain in the industry. However, for us as a company, it has been a time of opportunity. In this time of opportunity, in the last year and a half, and 2 years, we have taken on new projects, and I don't know if you have had a look at the presentation. The presentation gives you images, in fact, of the new projects that have been inaugurated in the last few months, and some which are going to be inaugurated or go on board in the next few months. Now, with that, we are looking at a growth of over 40%. Those are numbers that we are kind of projecting are because of confirmed orders that we have. For us, it has been a time where not only this, we have also been in the market looking for such pained assets, but they have to be endorsed by the customers. There have been customers who brought us some of these, where we've gone and looked at them. Obviously we will look at it when it is accretive to the value for our shareholders. That is point one. Thankfully, we've had a strong balance sheet, and we continue to have a strong balance sheet, and therefore we are one of those people who are projected to benefit from this low period, not from a perspective of maybe the bottom line directly because of various things, but definitely from a perspective of opportunity for growth for long time and medium time in the future. That's one. In terms of the semiconductor shortage that you spoke about, the information that we have today is that things are abating. You will see, and I know for a fact that there are so many models of both cars and motorcycles and some other products as well, where production has suffered on account of the supply chain. But the information that we have today is that things are changing. The tide is changing. The volumes of semiconductor availability are getting better. We don't have to wait for new plants to come up around the world for that to become better. Some of the lines that had been assembly lines that had been attuned to electronics have come back to servicing the auto industry. Of course, the prices of semiconductors have gone up, no question about it, but the availability is getting better. From what we understand, the timeline that is being given to us is that we need to be prepared for an onset of a much higher demand in the second half of this year itself. These are indications that we are getting this. Thanks a lot, sir. Wish you all the very best. Thank you, sir. Thank you. Thank you. The next question is from the line of Arjun Khanna from Kotak. Please go ahead. Thank you for taking my question. Sir, just wanted to understand how do you see the CapEx outlook for FY 2023-2024? 2023, 2024. FY 2023 and FY 2024. Yeah. I would like to reply to this question. Largely, we'll be finishing our new projects within financial year 2022-23. If you say the CapEx outlook for 2023-24, as of now, we don't have any plan to go for a new expansion unless we get a request in the later part of the year from any of the customers or from any inorganic expansion. That's one thing. Secondly, routine maintenance CapEx, yes, we always incur as a policy. It does not exceed our annual depreciation, which will be roughly around INR 100 crore-INR 120 crore for the year ending March 31st 2023. That could be our CapEx, sir. As of now all projects will be finished and will be on commercial production by the end of March 2023. What would be the CapEx for FY 2023? Yeah. We have set up a target. We'll be incurring a CapEx of roughly close to INR 350-400 crores to finish up our new projects, plus, to maintain our existing assets, sir. A portion of this will be funded from the cash accruals that we'll be generating during the year. In any case, our debt-equity ratio on a consolidated level, including our overseas operation, won't exceed 1:1. It will be below 1:1, in fact. If you see this year, we had a strong negative free cash flow to the firm, almost INR 260-270 crores. Probably with the CapEx schedule for next year, we would again have a strong negative free cash flow to the firm. While you talk of one to one, is there any concern that it may just exceed that? Because earlier we were envisaging a lower absolute net debt for the company. No, it's, I don't see it as a threat to us, even if we have a one-to-one ratio. As far as in the coming 2022-23 financial year, we are projecting a free cash flow. Free cash flow where it means that if I can add back my depreciation to my earnings, we will have something around close to, I would say, it would be around 38. We'll have something around INR 240 crores of cash in hand with us, sir. During the year. Right. Because if I see historically also, we have never generated that kind of, even, net cash flow from operating activities. What brings us the confidence that will happen this year? Because we continue to see reports that possibly, the semiconductor issue may last for maybe, another 12-18 months. No. Basically, thing is that if you see in the past, our operating cash flows has been positive. Largely, we are investing in the business from the operations itself, and the debt we are. No, no. Even this year we had a positive on a consolidated basis, net cash flow from operating activities. I think it was closer to INR 50 crore, even this year. It's just that on our FCF basis, the number seems to be negative. Last year, even though we had INR 124 crore of cash flow from operating activities, our net cash flow, or free cash flow to the firm accounting for capital expenditure and subsidies, was yet around only INR 20 crore. Hence the concern. No, basically, like, as of now in the current financial year, we are expecting the prices of commodities to be stabilized. One of the reasons of the increase in the movement of working capital was to build up the inventory to avoid any critical situation where we run short of the inventories or to take care of the price escalation. That is one of the reasons. Secondly, industry overall was facing troubles, including the vendors. We had to support our vendors. If you see our working capital movement, a large part was used by us in building up the inventories for the new projects as well as the existing projects, as well as to pay off the vendors so that they are also strong and they keep on servicing us. That was the reason which we expect in the current year to utilize that. Just to talk on this point further, given that we are expecting a 40% growth at least as the guidance in revenues, won't working capital move up substantially? Actually, we are renegotiating the payment terms also with the customer, the settlement of the increase also. That's the reason we have considered all the factors and some of the new projects. The payment conditions may be little bit lower as compared to the earlier, in the projects. That's all. We have taken a cumulative average of all those. Arjun, we have been impacted dramatically on account of the commodity increase. If you look at the prices of commodities in the change that has happened in the year, in some of the commodities, for example, if you take nickel, it has gone up from INR 1,200 to INR 2,441. That's more than doubling it. If you look at zinc, that has gone up dramatically. Brass, that has gone up dramatically. Steel, that has gone up dramatically. Aluminum, that has gone up dramatically. In the last 18 months or so, the amount of commodity increases has crippled everyone. Thankfully, the way we understand today from a geopolitical standpoint, from a geographical standpoint, from what we get from the markets and what we understand, the time and the tide has started to abate, in fact, turn positive. Now, for 18 months, the company had to do with continuous price increases, and that impacted us some for a long-term perspective, some for a short-term perspective. If you calculate last year, our consolidated EBITDA has been impacted by 23%. That's a huge number. Obviously all that goes into the bottom line as well. Now, a large part of that changes when these commodities are stabilized. We do believe that for this particular year, irrespective of the growth of the industry, with our new businesses that we have kicked off and where start of production has happened and the lag of COVID to a certain extent, the softening of the commodity prices, these will all play into the positive territory for us. Sure. Would it be a fair expectation that margins should head up this year again, towards double digits on a consolidated basis? Absolutely. No question about it. Sure. The last question is in terms of the interest rates, are we seeing a hardening of interest rates and what's our expectation for FY 2023? Well, Arjun, we are at the best lending rate from the lenders. I would like to thank them. Yes, if the RBI goes with the increase in the repo rates or the banks increases the MCLR rate, obviously that may impact us. As of now, I don't see a much hike in the coming period of time, and hopefully we will able to maintain within our current levels. Sure. Thank you. Yeah. Thank you. Thank you. The next question is from the line of Mayur Patwa from Sahasrar Capital. Please go ahead. Yeah. Good morning, and congratulations to the management for the nice set of numbers. No, I have, pardon? Yes, please. You are Mayur. Yeah. You know, I have basically three questions. The first one is I want to understand basically when you say you are, you know, working more or focused on the premiumization of the product, how much is our revenue share at the moment? What is our, you know, what we foresee maybe in a three or five years down the line, what will be the share of premium products to the overall revenue in a year? Okay. Is that a question or is there more question? Yeah. Actually, I have three questions. This is the one. The second, I also want to understand about the improvement on the EV segment. You know, how much again is the revenue from EV segment and how, what are the efforts we are taking to improve the same? Obviously, the third one is basically, you know, when you say that our EBITDA margin has reduced significantly in the last year, mainly because of the raw material prices and other things. How much of that we could really, pass on to the customer? What is the long-term impact we see on the margin side because of this increased cost? Okay. Let me talk about premiumization first, Mayur. Thank you for those questions. In terms of premiumization, you would appreciate and understand that all the products that we do have a premiumization that has already been announced or is being carried off in some of the premium models. To give you an example, or many examples, if you say, pick up any product that we do. If we do products in the line of locks, for example, I already mentioned that some of the locks going into the future not only go up four times in terms of price, in terms of premiumization. Right. Some of them even go up to a level of 10x our current selling price. Right. There is a huge line that's been built up. These premiumizations also are of different categories and levels. There is something which we may call generation 1, which is likely to come in now. There is generation 2, which is likely to come in 2-3 years from now. There is probably stage 3, which will go on board 5-7 years from now. Some of them are on account of passenger safety, some passenger comfort, some passenger entertainment, and some on account of regulatory mandates that the government comes up with. If you put all of these together, there is a huge, huge, huge pipeline. That is not only in terms of locks, for example, it's in terms of mirrors, it's in terms of seat belts, it's in terms of any product lines. If it's looking at antenna, for example, that we do today, or if we look at parking sensors that we do today, the premiumization comes from not only having beeps that come in from rear parking sensors, but from cameras that get attached to it. Every product that you look at, there is premiumization that is happening across the board in every category of product lines that we make and supply today. That is your answer number one. In terms of EV segment too, in terms of percentage growth has been very dramatic. We are of course a little constrained in the number of signals that we get from the industry. Sometimes they are aggressive, sometimes they are not. However, for us as a company, we are quite agnostic to the EV space. We supply to all the EV suppliers. Today, I think we have customers, almost 42 customers that we supply to. We are tried and tested. For us, it's not a proof of concept, but it's a question of out of the 42 that we supply to today, how many of them will survive? If there is consolidation, the good news is that because we supply to almost all, even if there is consolidation and the numbers grow up, we are a part and parcel of that kitty going forward. We don't get negatively impacted even whatever the ratio is between IC engines or between hybrids or between EVs. Now, the thing is that as far as the Indian government is concerned, they have given some numbers in terms of how much EVs will be there by 2026, by 2030, and so on and so forth. The fact is those numbers are still very small, even as percentages if we were to see. It shows that the IC engines will continue, that powertrain will continue to grow, irrespective of the momentum of the EVs. At this point of time, the customer, of course, has been a little confused as to whether what is long-term powertrain to be bought. If I buy an IC engine today, will it be available tomorrow? Will everybody move to the EV platform? And so on and so forth. EVs still have some space and time to be able to prove themselves on a mass market. We still have to wait and see. If you look at two-wheelers, for example, a large part of the two-wheelers are still sold as low-speed lead-acid batteries. We will have to see how the battery componentry, battery prices, have a hold in EVization, as we call it. For us as a company, it is really agnostic as to who we supply to, whether it is an EV supplier, an IC supplier, a hybrid supplier, or a hydrogen fuel cell supplier going forward. Your third question was on the long-term impact of you said something, right? Yes. I'm sorry, Mayur, what was the third question? On the raw material cost, the material prices. On the raw material prices. On the raw material prices, if you look at where we are today, of course, the last 18 months to 24 months has been a very, very terrible period for us because we've had a continuous loss every quarter on account of increasing prices. Now, what that means is that every the last three months' average price is the price that becomes the price for me for this quarter. Now, the problem is if this quarter again there is a rise that's happening, then I'm suffering a loss every quarter. But when it abates, when it slows down, when it stops or starts to come back, that's where the benefits come to us. From an overall perspective, typically we are compensated for over a period of time. Now, the thing is, if you were to look at any price. While the prices may drop today, but if the average over a period of time in terms of inflation does have an impact, that impact stays in our balance sheet and profit and loss account for the entire lifetime. Those are only recovered in terms of margins that we get from a reevaluation of our costs whenever there are new developments, new models or new parts that are designed and taken care of. That can happen only when model changes. Otherwise, there is an impact, the entire industry works on the same criteria of how costs are calculated in terms of commodities. That's why I said some models that if they last 10 years or 12 years, we do have an impact that continues in our books. If they are short-term kind of models, obviously the impact is taken off. In case there are temporary spikes in commodities that happen and they come back, then we don't lose anything, because at one time we lose, and then subsequent times we recover. We do believe there will be some recovery due in this current year because prices have gone up to crazy amounts. We don't believe those are sustainable. If they are not sustainable and they come down, whatever amount they come down to, that will be a benefit that will be passed back to us. Excellent. Basically, we are saying in the long term, it should not have any margin impact because of this. No, no, no. This is something that happened. If you go back, you know, 30 years ago, steel used to be at 20, 15 INR a kilo or 18 INR a kilo. It grew from there on to, let's say, stabilize at 40-45 INR a kilo, about three years ago. Now we have gone up to levels of INR 90. They've started to fall. Aluminum similarly. Zinc used to be 100 INR. Yeah, you know, we are saying basically whatever the price. 350. Basically what we are saying is obviously then whatever the rise is there that you can pass down to the customer, then that should not have any impact on us. Because of the gradual change that happens three months. Again, I think the entire industry has woken up today and has gone back to the OEMs, where we are in negotiations saying this three-month period doesn't work for us, so we would like it to change. This, at one point of time, this used to be six months. It was brought to three months. Now we are saying it should be done on a monthly basis. If that happens, then the commodities will truly become an absolute pass-through for the entire industry. Okay. Sure. Thanks. Thanks for answering my question. Thank you. The next question is from the line of Abhishek Jain from Dolat Capital. Please go ahead. First of all, congrats for strong set of numbers in the challenging quarter. Sir, what is your revenue target for FY 2023? What would be the revenue growth in the different segments? I mean, be that sheet metal, aluminum fabrication and your core business, like locking system. Well, Abhishek, obviously I will not be able to give you absolute numbers, but what I can say is with the investments that have been done that are matured and have taken off already, we are considering the overall revenue even to be on a conservative side to grow over 35%, for sure. In terms of if you want segmental stuff, then, there is the proprietary business where I think the revenue will grow close to 30-odd%. In terms of the die casting and molding business, we believe the numbers of revenue growth will be about over 20%. In terms of sheet metal and allied businesses, we look at that number to grow up by, again, in some cases, because they are absolutely new, there the numbers are going to be in triple-digit growth. On an overall perspective, we are looking at numbers to grow, like I said, over 35% seems to be a conservative enough number for me to give you. Around that, but obviously the margins growth is where we will concentrate, and those should be much, much higher than the overall growth numbers that we are talking about in terms of top line. What will be the incremental revenue from the sheet metal business and because of this capacity addition? You want to take that question? You'll have the numbers in front of you, Ashwani. Yes, sir, I'll take up that question. Yeah. Basically, Abhishek, your question was that how much business we'll be getting from the new projects that we are executing, right? Are you talking specifically of sheet metal? Yeah, specifically of sheet metal. Yeah. Basically, we are expecting a revenue—you want a number from us? I'll just give you the number. We are expecting a revenue of something odd, INR 230 crores from the new sheet metal businesses that we, the projects will be executed during the year. Two sheet metal businesses. Thing is that for some of the, I mean, like Mysore, et cetera, they will not be operating for full year. For the part of the year they will be operating. Going forward in 2023, 2024, this figure could be much, much higher compared to what I have told. Okay. Thanks. That's all from my side. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Basudeb Banerjee from ICICI Securities. Please go ahead. I am trying to get couple of questions. One, what's the kit value per unit for Royal Enfield as of now? Specifically, can you Can you please ask Mr. Banerjee? Sorry, I didn't hear you too well. Can you speak a little louder? Yes, sir. With regards to the premiumization aspect, as you had actually mentioned in the beginning of the call that you are looking at premiumization coming back post-COVID. With Royal Enfield being one of the key premiumization drivers in the two-wheeler space, what's your kit value per unit of Royal Enfield as of now? Come again, what was the question? What about Royal Enfield? The last portion of your question. Content per vehicle of Royal Enfield as of now, how it has been progressing and what's the wallet share of the key products you are supplying to them because they are also having various new launch plans in the coming quarter, that is. Mr. Banerjee, first of all, I am happy to announce that all their premium models are with us for all the product lines that we do. In terms of premiumization of their model is one thing, but premiumization of components in the same models is also there. Okay. From that perspective, we are a part and parcel of every new activity that is happening in our existing range of components that we already supply them to, as also addition of many parts that we were not supplying to Royal Enfield that have fallen into our kitty now. On an average, what will be a value addition per the model as of now? In terms of contribution per vehicle, I don't know. Yashpal, do you have those numbers or idea? Contribution for Royal Enfield, sir? Yes, sir. Revenue per vehicle. Vehicle for all of them. On an average. Only for Royal Enfield, sir, on an average. On an average, sir, if I was to calculate, including the wheels, including the handlebars, including the locks, I would say that our contribution to them would be close to about INR 3,000-INR 3,500. In some models even higher. How much will be that compared to, say, HMSI or other normal two-wheeler suppliers you have? TVS is probably the maximum where I think it even goes up to over INR 10,000 a vehicle in many a case. In the case of Hero, depending from model to model, it could range between INR 2,500-INR 5,000 something odd. That's where those numbers are. Of course, you will have to realize that they depend from models to models. By that logic, should it be right to assume that there is a long way to go for that 3,500 in Royal Enfield to move at least to 5,000-6,000 in the near term? No. If you look at the overall parts, maybe those parts. Like I said, there are some in which there is an averaging. For example, for Royal Enfield now we also give them hubs and clutches. We also give them wheels, we also give them handlebars. There are some new portions of castings that have just started, some sheet metal that has just started. The potential there is of course growing as much as what we do for some of the others. I would imagine that the potential for us is to go up to 10,000 in case we were to take the entire kitty. Some we don't take because their volumes are much smaller. Sure. You know, we also have to play the volume game. For us. Understood. Volumes are extremely important for us to enter a certain area because it requires a certain amount of effort, resources, in terms of teams that you build up. In some cases, it also means expansion in terms of capital equipment or putting up plants nearby to service them on a regular basis. Keeping all of that combination, yes, it is growing on a gradual basis, but I would imagine those are the numbers today. Unfortunately, I don't have the exact numbers in front of me right now, but I'm giving you a ballpark. Sure, sir. That's helpful. Second thing, sir, as in the initial part of call, you said you are seeing some scheduled orders growth of almost 30% in the coming quarter, though it is aided by COVID delivery slightly. From a sequential perspective, say from a Q4 execution perspective, how are you looking at, say Royal Enfield outlook for your previous outlook from a sequential perspective? Well, because we are strategic to Royal Enfield, I don't have the exact numbers of Royal Enfield, but suffice to say that if you look at it from a sequential standpoint, you have to realize and understand, or appreciate that in the quarter that happened, you know, the last year quarter of April, May, June was a washout. You know, May was completely shut. June was shut to almost half a month. April was okay, but it wasn't the greatest. As a quarter, we had lost out on the entire, not us per se, but also the customers and the OEMs lost a lot of sales. We believe that this would. I don't know if there will be comparison because this will be hugely higher than what it was in that particular quarter of April, May, June. Sure. I'm saying from January to March of fiscal 2022 compared to the quarter just which went by. How are you looking at supplies to them from June quarter or say September quarter outlook aspect? Good news has started from the month of April onwards. January, February, March is not something that we can look at. Those you've seen the results of everyone and you've seen where they're going and what they've done. They've largely been in the same place to a large degree. April, May, June is where we see things changing. The positiveness in the entire industry stoking up. We believe that this is the quarter which will make a substantial difference. Sure. Because that is also getting corroborated from the retail figures of April and May till date. As you are also saying that, so that trend only gives the conviction further for improving outlook for the two-wheeler segment. Thank you. Yes. That's how it seems, sir. Well, the footfalls I understand in showrooms has gone up dramatically. The export pulls have started to happen, to a better degree. You know, during the last few year or so, the export numbers had gone up, and they continue. In the last few months, in fact, they had gone down. I see again attraction coming in for the export models. The domestic market seems to improve with footfalls in the showrooms. The overall impact. You know, the biggest thing is inventory has come down. The inventory that was lying with dealers has come down dramatically. The entire system has become more lean. There was a time when most of these companies were making their two-wheelers on a basis, which meant that they were just producing, not really concerned too much about the inventories. The inventories in the market in some cases had gone up to over three months. Now that those have come down to realistic levels and even below, the pipelines now are pulling for our components to be built. I think it's becoming more and more a just-in-time play. Okay. Thanks. Thank you. The next question is from the line of Navneet Bhaiya, Individual Investor. Please go ahead. Hi, sir. Thanks for the opportunity. I have a couple of questions, sir. You currently have about 54% of your revenue from two-wheelers, 24% from four-wheelers. How do you see this trending over the medium term? Are there any margin or ROI differences between the various segments? Navneet Bhaiya, thank you. Is that the only question? Is there any other question so I can just- No, I have a couple more. One of your projects which you are undertaking is the SMT project, which is into printed circuit boards, USB chargers and a few more. This is, as far as I understood, a little different from, you know, what you've been doing till now. Again, you know, which customers are you catering to here? Are the margin profiles and the intricacies in these projects better/tougher? That's my second question. My last question is, sir, how difficult or easy is it to add a customer or a new model? For example, I believe you supply to Tata Motors in their CV segment. How, again, you know, easy or difficult would it be to extend your relationship to, let's say, a Tata Nexon or for that matter, a JLR? Okay. Let me take them one by one. You mentioned about the ROI in the businesses of four-wheelers and two-wheelers. Again, Navneet Bhaiya. Yes As a company, we look for opportunities. Those opportunities, of course, are governed by the ROIs, the ROCs, and the affiliation and our attraction with those customers. If you ask me as to whether I want to do a four-wheeler business more than a two-wheeler business, the answer is no. We are agnostic because at the end of the day, I want return on capital employed. I want a good business. While some people could be doing four-wheeler businesses, four-wheeler businesses have their own challenges. One, for example, the fragility of the volume of sales. Secondly, the scales to which you operate in. The changeovers that happen. For us, it's a question of which order can we get and whether that order will be able to give us the return on investment is question number one. Is the one better than the other? On an overall perspective, yes and no. Sometimes this is better, sometimes the other one is better. Our current ratio, like you said, is 54% for two-wheelers and 24% for four-wheelers. Is that likely to change? Perhaps. Are we pushing towards that to change? The answer is no. If I get more orders and better business in four-wheelers, I will take it. If I get something better in two-wheelers, I will take it. In case I get something better in electronics, I will take it. If I get something in construction equipment, which is a growing sector, I will take it. This is a coincidence that this is where we sit today. One reason could obviously be that in some of the areas that we operate in, the volumes are much higher in the two-wheeler space. If we make locks, for example, the price of the locks is probably the same in many cars and many two-wheelers, but the volumes are extraordinary. We are the largest lock producer typically in the world, if you ask me. The same way we do with mirrors. But the volumes come from there, and if the percentage margin is higher, then it is very agnostic for us to pick that up. That's answer one. Answer two on SMT. SMT is towards premiumization of several of our own componentry, first of all, which means we are now going to be doing smart handles, which we've already started. We started USB chargers. We do electric steering locks. We do parking sensors. We do shark fin antennas. We do audio-visual monitors. For all of these, currently, many of these SMT or these PCBs are being imported. Now, when you import them, obviously the cost is much higher. Working with our customers, we had them agree that if we localize this, there would be a margin play which will go up, some of which will be shared by the customer and some of them would be shared by us. Going forward, in our quest for electronication and premiumization, we believe that these numbers and the PCB assemblies required in India would go up substantially, and therefore we've opened for ourselves a new line of business. This will be profitable from day one, and we don't have to go out seeking for customers to begin with, because we ourselves internally are going to be customers with a much bigger value add than we get today. That is question two. In terms of Tata Motors. Tata Motors. See, our industry is quite small. There are huge amount of entry barriers. There are only so many people in play. For any component run, there are only two or three players. In some cases, in our case, for example, with some models or with some of the OEMs, we are the only player. In a case like this, these are long-term relationships. For us to jump into a Nexon or for this or for that is natural. The only thing is sometimes there is competitiveness on the pricing. Now that we are very strict as a company, in terms of making sure that whatever we supply has to be supplied with a minimum amount of ROI and minimum amount of margin, sometimes we let some of these things go to the others if that makes sense to them, because in the overall run, if it is not going to give me that in terms of scale, size, or profit, then we have to be very choosy in what we do. You have to understand there are, you know, as many number of OEM players in this country as there are around the world, and for you to be able to service everyone, every model, if you want to get into that race, then obviously it affects your bottom line. We are the ones that are a little choosy on who to pick, which model to pick, where to go. It's not as if Tata Motors doesn't know us. It's not as if these RFQs don't come to us. All the RFQs in the business come to us for the complementaries that we provide them. Thank you. Ladies and gentlemen, we will take the last question from the line of Shashank Kanodia from ICICI Securities. Please go ahead. Yeah. Good morning, sir. Sir, firstly, I just wanted to know, last year we had grown 25% in terms of revenue. What should be the volume growth now that- A little louder, Mr. Kanodia. Yeah. Just wanted to check. Last year we grew 25% in terms of value. What is the volume growth and what is the revenue share growth for fiscal 22 from the consolidation? Oh, from the consolidated. You want to answer that question, Yashpalji? Yeah, sure. Shashank, you are interested to know the value-wise growth? The volume growth. What he's saying is, what is on account of inflation? Is that what you're saying? Compared to what is volume rate growth? Actually, we are very bullish that we will not have exactly the volume growth in terms of number of parts supplied because of the diversity. Okay. You know, the number of parts, I mean, the number of component or part numbers that we supply run into thousands. Some may be supplied in millions, some may be a few hundred thousand, so on and so forth. That is a difficult question for me to answer. All we can tell you is that on a generic basis, this 25% growth has come in from new product lines that have opened, and these are new entries into these OEMs for that kind of parts. You are aware of the industry, right? If you look at the industry, you have seen that while the industry has grown much lower compared to how we've grown, or in fact, the industry has kind of gone down, we have still been able to manage a 25% growth. That 25% growth has come in from newer kind of parts, newer kind of businesses which have started now and which is going to help us in scaling up this growth and the growth numbers that I spoke about. Now, we haven't taken too much of growth in the industry in our projections for the future. What we are looking at is our growth, which is coming in from new components, new premiumization, and so on and so forth. In this particular year that we are now looking ahead for, we have not even looked at any growth or numbers that appear from any commodity increase, because sometimes the pass-through that also has an impact. Exact numbers to which components, we'll be very happy to send you numbers in terms of comparisons if you were to choose the parts that you're likely to have information from. Secondly, for, you know, every quarter we try for double-digit margins, but your operating performance is hard to reflect that. Could you give us a realistic sense as to what could be a sustainable margins for us? See, we have done margins in the past. You know, when I answered this question in the last quarter or last year, we had. At that point of time, we had stopped expansions. I think we were at numbers of between 12%-13% towards the EBITDA margin. Right. We believe that with a combination of the diverse product lines that we have, that is a margin which should be a standard margin for our industry, for our kind of components that we do. Of course, over a period of time in the last year, there have been various changes, and there have been ups and downs in terms of sentiments, in terms of commodities. That is probably, if you look at that particular quarter, I don't have the numbers in front of me, but that was a sustainable quarter from a perspective of the output, from a perspective of capacity utilization. It was ideal in some form. I would imagine that as a company, that is what our take is and that is where we should be. So y ou ask me what is an ideal margin. I would say not just ideal, but something that has been achieved in the past and something that we wish to always hold, is between 12%-13%. Right. You know, in the opening remarks you mentioned about supporting your vendors, right, in the times of difficulty. Do we also get support from the OEM clients? Because even you are now down towards single-digit margin trajectory and single-digit return ratios. Does that flow from the OEMs to the ancillary players like you as well? Well, you know, we, the OEMs do have lines of credit and discounting and so on and so forth. One of the reasons for our working capital probably limits have gone up because we've stopped using that discounting. They charge us too much money for this discounting facility. Yashpal Jain, you want to say something on that? Yeah, yes. Yeah, sure, sir. Basically, Shashank, the question is that we get the line of credit, as sir told, the discounting facilities from the bankers nominated by the OEMs. Normally the discounting rates have considerably gone up. In some cases, they are even beyond 7.5%. At the same time, we are getting the working capital limits at something around 4.5%. What we do is that we don't go for discounting from the customer side. We are using clean working capital facilities. That is probably one of the reasons that you see the debt levels are shown high, because their discounting is normally clubbed with their current liabilities. That's how it goes. Shashank, to answer your question, a lot of small scale, a lot of other people in the industry that were in pain, and where they had no available line, they went to the OEMs, and OEMs supported them. For us, we feel otherwise because we believe that we, our strengths are strong. We have not utilized that. In fact, we have given support to our supply chain. Right, sir. Okay. Sir, combined FY 2022, 2023, we are doing something like INR 500 crores of gross tickets, right? What kind of asset turns can we generate from that particular series? Again, it will be a hybrid, right? Depending from component to component, from the vertical to vertical. Sheet metal will be different than logs, which will be different than mirrors, which will be different than this. Each unit will be different. We do have a working. Yashpalji, would you have the presentation that we had the other day? Yes, sir. Which may have the asset terms that, if you have it in front of you, just open it and give some idea of the asset terms. Like, we are expecting a strong growth of around 35% in terms of our revenue on the current levels, right? Okay. One of the things. If you ask me the asset turn, if I take the total asset turn of my company, that would roughly be, if I say, it will be about 2.5% in the coming year or so. Time. 2.5 times. With this, I will add, because couple of my projects will be starting later part of the year, post Q3. If I have to take the complete capacity utilization, for example, I take a scenario 23-24, it can exceed even, go beyond 3-3.5% with the volumes. 3-3.5x. Yeah. Yeah. Yeah. Yeah. Okay. Sir, lastly, you see, do you see debt peaking as for this at the end of this year, or you see a consistent growth in the debt levels also for the company? No. Debt level, like our largely new projects will be finished into current year financial itself. We have set a target to keep our debt levels below 1:1, I mean, that is good ratio. For the coming years, we don't see much CapEx investment unless we get some new projects or we go for some inorganic expansion. At the same time, with the capacities being used from the new business as well as the existing business, we'll be on a fast track to repay the debt also, to reduce the debt. Because a few quarters back, your commentary was that debt should have peaked in FY21 itself, and now we have almost doubled that this year and probably we'll have even more debt coming on our books for this fiscal year. Even at that point of time, we have said that under the current circumstances, we had no reason to expand debt. These businesses that you have seen have been thrown as opportunities onto our table. These are all new, and these required very quick working. In fact, some of the projects are coming up within 3-4 months on fully matured startup basis. Obviously, when something like that happens, you could consider them inorganic in some form. Yes, yes. Sure. There's one last thing, sir. On the EV front, if you can name some of your clients in this, in the power sector supplying to them, it would be great. I think we have given that in the past. It's a long list of the manufacturers, and it's a long list of components. If I was to read them out, it would take a while. I would say that in the Indian context of the EV industry, we are participating everywhere. In fact, even to a point of not only the people who've set up establishment, some people who are planning to set up establishment. Some of them which are in the trial and error mode are also buying most of the componentry from us. Akrit, tell me, it remains broadly the same business what we do in the IC part, or is there some addition to it? Yes, there are some additions to it. In fact, there are several components that we have developed only for EVs, specifically for EVs, that work with those kind of currents, and those are completely different. It's not interchangeable directly. These have more software, these are more electronic in nature, is how it is. We are also now developing some componentry which specifically only going to EVs in their power trains. Sure, sir. Thank you so much. That's all from me, sir. Thank you. Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Well, once again, a big thank you to Dolat Capital for putting this together. A big thank you to all the participants today. Thank you for all your questions. I'm not sure if I've been able to do justice to your questions in terms of my response, but sometimes that happens when you're talking on the phone. I'm hopeful that the next time around, with things improving the way they are, maybe we can spend more time in a physical meeting, Abhishek, and address some of these things to even better satisfaction and maybe detailed presentations rather than the one-hour slot that we had today. Like I said in the beginning, let me close with that, saying that while the year has been extremely challenging, in terms of whether it was the second wave of COVID, which had disrupted the business in the last year of April, May, June, which was the crazy aggressive nature of commodity price increases. Whether it was the shortage of semiconductors, whether it was the negative sentiment in the market, whether it was the continuous increase in other input costs. You know, power went up, fuel went up, wages went up. In fact, in our European operations, gas and power was costing us 8 times of our regular power cost. Of course, there were the upcoming BS6 phase regulations and transitions that were confusing the market on EVs and so on and so forth. Going forward now, I think I believe that all of that is in the past. The impact of COVID has melted down, restrictions have been eased, and I believe that this will give the much needed momentum to the industry. The economy and the global health situation is also improving. For us, 2022 looks to be very, very positive. The commodity prices are expected to be stabilized. The new plants that we have put up or in the process of just completing will add to revenue, it'll add to margins, it'll add majorly to the content per vehicle. The schedules from OEMs, I mentioned, have improved dramatically, and the Q1 is looking to be completely undisrupted in a sense. The vehicle inventories are at record low, and the chip availability is improving. So from my perspective, this year should be a good year. On that positive note, I want to thank you all once again for joining this conference call. Thank you. Thank you. Ladies and gentlemen, on behalf of Dolat Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.