Welcome to Tube Investments Q1 FY 2022 earnings conference call hosted by IIFL Securities Limited. I now hand the conference over to Mr. Anupam Gupta. Thank you, and over to you, sir Welcome everyone to the results for Tube Investments. Sorry, Anupam, your voice is breaking. Yeah. Can you hear better now? Hello? Yeah. Yes, sir. This is Anupam. Please go ahead. Yeah. Welcome everyone for the Tube Investments Q1 conference call. We have the entire management team for Tube Investments with us for the call, including Mr. Vellayan Subbiah, Mr. Arun Murugappan, the CFO, Mr. Mahendra Kumar, and all the senior businesses, including Mr. Mukesh Ahuja, Mr. K.K. Paul, and Mr. K.R. Srinivasan. For the opening remarks, I'll hand it over to Mr. Vellayan Subbiah, after which we can take our Q&A. Over to you, sir. Thank you, Anupam, and good morning, everybody. Just to go through, basically, the board met on June 30th, 2021. I'll just quickly take you through the standalone results for the quarter, and then we can talk about individual businesses. The revenue for the Q1 was INR 1,257 crores. There's no point in actually comparing with the same quarter last year because of that COVID quarter. Even this time we got hit by COVID, and it did affect us significantly in April and May, which is why the numbers are obviously a bit lower than what we would've expected them to be. PBT, before exceptional items, was at INR 130 crores. The annualized ROIC was at 41%, and free cash flow actually for the quarter was negative at INR 134 crores. Basically, because inventory levels went up significantly due to unexpected lockdown conditions in May, and the creditors had to be paid per the agreed terms. That we think should improve this quarter. In terms of reportable segments, and now we're following this Ind AS 108 here. Engineering, the segment comprises of cold roll steel strips, and precision steel tubes, CDW and ERW both. The revenue was at INR 815 for the quarter, and PBIT was at INR 83 crores. Metal formed product comprises automotive chains, fine blanking, stamped product, roll formed car door frames, and cold roll formed sections for railways and passenger coaches. Revenue here was INR 245 crores, and PBIT was INR 26 crores. Mobility, which is standard bicycles, special bicycles, including alloy bikes, fitness equipment, and the three-wheeler electric vehicles when we start making them. That division had a revenue of INR 172 crores, and PBIT was at INR 7 crores. The other segment comprises of industrial chains and new businesses. Here the revenue was at INR 88 crores, and PBIT was at INR 10 crores. In terms of consolidated results, which obviously includes both Shanthi Gears and CG Power now. Revenue was INR 2,437 crores, and PBT was at INR 185 crores. CG, where we have a 53% stake, has a consolidated revenue of INR 1,050, and PBT for the quarter was at INR 75 crores. Shanthi Gears, we had revenue of INR 67, and PBT for the quarter was at INR 12 crores. Commenting on the financial results, Mr. Arun Murugappan, Chairman, TII said, "TII has delivered healthy performance for the quarter, despite partial disruption in the operations in some of the businesses of the company due to the impact of second wave of the COVID pandemic. The company witnessed good demand in the engineering and metal formed products business. The signs of exports are encouraging with the opening of overseas markets. With revival of the operations, we expect momentum to pick up in coming months. That's a quick take on numbers for the quarter and results. We'd be happy to turn it over, Anupam, to the audience for questions, and we've got the whole team here like you said. Thank you. Thank you very much. Ladies and gentlemen, 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. Anyone who wish to ask a question may please press star and one at this time. First question is from the line of Abhishek Ghosh from DSP Mutual Fund. Please go ahead. Yeah. Hi, sir. Thank you so much for the opportunity. Sir, just wanted to understand in terms of this quarter, how many days we had the impact of shutdown because of the lockdown because of the southern unit? Actually, this time a lot of the companies were much better prepared for lockdown than last year. If you see what is happening, I would say in some cases, anywhere between 20 to 40 days is what the total loss was. Okay. Sir, despite that, if I look at the engineering division revenues on a 2-year CAGR basis, not on a YOY because it's not comparable, you've still done a very good job. You've still grown at about 10%-11% CAGR. On a 3-year basis also, there's a strong growth. While predominantly your key sector, which is auto, is still not back to those levels. Is it because of inflation? Is it because of market share gains, exports, new products? If you can just help us understand that aspect. Yeah, I'll let Mukesh talk more. Definitely, exports has been the biggest focus area and biggest growth area in the Q1. A lot of the loss in demand from auto has been pushed towards exports, though there was also good demand from auto. That is the quick take, but I'll let Mukesh talk more as well. Okay. Yeah, thank you, sir. Like you rightly explained, sir, this growth in the engineering division is coming with a mixture of exports, which we are participating and working it almost now from last three to five years' time, which has started giving the results. Exports is a key growth driver, which will remain the driver going further for growth. In the domestic market also, we have gained shares in this COVID period. Third is little bit part what you rightly mentioned, is coming out of the inflation. Even the inflation is to yet get factored fully in the revenues. Small portion has got it even in Q1 also. It's a mixture of all three. Predominantly, it is coming from exports and the gain in market share. Okay. What would be exports as a part of the revenues today of engineering division? This quarter it is high. It is close to 18%. Okay. Just one more question from my side. If we see gross margins in last two quarters, obviously has seen some moderation because of the inflation and you would have to negotiate with the customers and pass it on. Where do you see that path of that gross margins coming back, and how should we look at it? If you can just help us understand with that. Yeah. Like how I mentioned in the earlier calls, it may not be appropriate to see gross margins quarter by quarter, because there will be some timing difference between the steel price increases. We should rather see it on a long-term basis, maybe an annual basis. One way to look at it is if commodity prices stick with where they are now, then the current levels will be more indicative. Obviously, we will work on improvements to basically push that number further. That would be the broad distinction. Current levels, plus if steel prices stick, because otherwise the denominator effect on that was huge. The fact that the prices went up so much. I just think it's driven by that. Obviously, we are working more to work on the efficiency side and all that a lot more. That aside, I think that the current levels are indicative, but it might go up a bit. Okay. Very helpful. Thank you so much. Just one last question from the annual report. The flavor of the report was that there's a lot of focus, and which you've been mentioning, a lot of focus on export of Russia, U.S., Europe. You've seemed to add a lot of customers, plus the IRIS certification for railway opportunity. Will you also have to incur a lot of CapEx now to seed those markets and the certification that you have got to be able to grow those markets? If you can just help us with that, and how big are those opportunities? Thanks. Yeah. I don't think that they're significant CapEx. If, for example, if you see what the engineering folks did on their stabilizer bar, that mill, hopefully we will commission in this quarter. That is a CapEx that has been incurred and will allow us to significantly improve our export capability on that side. Even mobility, for example, is beginning to look at exports in a pretty big way. That doesn't require huge CapExes, but there are some smaller CapExes there. I don't think it's CapEx-intensive because a lot of the capacity is there. It's more enhancing the capacity for certain kinds of products. At this stage, it's not requiring totally new greenfield production facilities to drive that. Definitely that focus is there for us, and will continue over the next couple of years. Okay, sir. Thank you so much. Wish you all the best. Thanks. Thank you. Thanks, Mukesh. Thank you. Thank you. Any participants who wish to ask a question, can you please press star one? The next question is from the line of Suraj Nawandar from Sampada Investments. Please go ahead. Hello, good morning, sir. My question was more of related to the CG Power. How are you seeing demand on the ground after the second wave of the COVID? Yeah, again, broadly, like we've indicated before, we don't want too many CG Power questions here. We've already said that after that October timeframe, CG Power will start having its own investor calls. To your question, there has been a tremendous demand in all of the businesses. They have seen good demand growth, whether it's the motors business, switchgear and transformers. I think the switchgear and transformers, the demand for CG is driven both by supply and demand issues, because other supply has gotten reduced, and the railways business as well. All the businesses are seeing good demand. Okay, thank you very much. Thank you. Thank you. Thank you. Our next question is from the line of Niket Shah from Motilal Oswal AMC. Please go ahead. Thanks for the opportunity, and congratulations on the good set of numbers. Sir, first question was, if you can just give us some sense that when do you think your optical lens business will go live? I think in the annual report it's already highlighted the plant is up and ready. When can we see the plant going live, and what kind of revenue should one really think of in the next two years? Basically, the lens facility is live now. There's only one production process that's still kind of being piloted. All the other processes are live. Like we told you, this was more of a pilot project. The revenue from this is very small, because we are at capacity of only 0.5 million lenses a month, which will only get us to six million lenses a year. It's very small. Now what we're doing is readying the plan for expansion, which is what will give us more capacity. That plan is what is getting worked on now. I'd say at the current levels, it will not have a significant impact on revenue or numbers. This is more to prove out that we can in fact make these lenses in India, which we're getting more confidence on at this moment. Understood, sir. Understood. The second question was, again, if I have a look at your annual report, you've highlighted that a lot of niche applications will be the engineering business on the driveline, drive control, suspension applications. Also, within metal form business, you've launched engine oil. If you can just help us understand that, obviously, these might be very, very smaller in terms of revenues, but what is the contribution today coming from these new product launches, and what is the thought process here within each of these segments? Yeah. Like we've said before, what you're seeing and what you have to see at an aggregate level is that there are, again, if we take it back to TI1, TI2, TI3, what you're talking about is the new areas that are getting introduced by TI1 itself. For example, in TI1, if engineering decides to get into stabilizer bar, or the auto chains distribution guys decide to get into engine oil, that's a call that the individual business unit is taking. Why are the business units taking that call? They're basically seeing what can they do to basically improve their revenue growth rate to get to their targets. Actually, if you see, the encouraging sign there is if you take a business like auto chains, because of the shift to aftermarket kits and through some of these new products, that business has seen significant growth. It's been seeing both revenue growth and margin growth. It's gone from, I would say, almost 0% to close to 10%, in terms of both revenue and margin growth. I think that is where it's encouraging. Those numbers don't show up in any kind of aggregated fashion. In a sense, those numbers show up in the individual BU counts. Nowhere do we count separately what happened with that new initiative. Stabilizer bar is not pulled out separately on the release count. That's how we view those. It's absolutely fair that each of them think of their own individual organic growth kind of a thing. Those aren't things that we either monitor at an aggregated level to see how much did they add for the overall growth. Got it. One final question on the EV three-wheeler venture that we have planned. Where are we in terms of the capacity, and when do we see the plan going live? Why don't I let Paul, who's also on the call, answer that? Sure, sir. Good morning to all of you. Paul here. I think we're working around that, and in the Q1 of next year, we should see the launch of the product in terms of this. COVID has put us behind a month or two, but we are working around that, and hopefully, by the Q1 of next year, we should be in a position to launch the product. Sir, would it be possible for you to quantify the capacity or something? Capacity, we are looking at short and long. We are building up that capacity. To answer your question, within the plans that we have made, capacity should not be an issue. That's the way that we have planned the capacity on the first phase. Got it. Sir, just one more clarification on the engineering part of the business. There was this anti-dumping duty in U.S., which you had represented. Is there clarity that now it is completely off and we can do export to U.S. without any CVD or ADD? Yeah, it is almost clarified, and we have got a favorable verdict on that. That's why we are going to see some kind of significant growth in U.S. exports also going forward. Okay. That's very helpful. Thank you so much, and best of luck, sir. Thank you. Thank you. Anyone who wish to ask a question may please press star 1 at this time. The next question is on the line of Vimal Gohil from Union AMC. Please go ahead. Yes. Thank you for the opportunity, sir, and congratulations on a very good set of numbers. Sir, my question was on the optic lens business. Just wanted one clarity. Basically, when you say the lenses, which industry have you sort of say, come to? What does the end-user base look like over there? This is predominantly for the automotive industry. They go into automotive cameras. Automotive cameras. Got it. Sir, what is the market size like, overall market size? Would you be able to sort of highlight that? KRS, do you have an answer for that? Yeah. I think the ADAS space is quite expanding and progressing. It is actually a huge market globally for these lenses, though it has not significantly increased in India. What we are targeting is the exports market, particularly in Korea and Japan. What we have started is only a pilot project. Maybe in the quarters to come, we need to invest in expansion and then look at the bigger numbers. Fair enough, sir. If I may try my luck, if you could just give us some quantification on how much money are we sort of looking to invest in this venture. Would that be possible, sir? Not determined yet. Fair enough. Thank you, sir. Sir, my second question was just, I missed out on your clarification on gross margin. We were a tad above 40%, 41%, 42% in our peak. I guess you gave some clarification there, my question was, post assuming that commodity cycles will sort of normalize or reverse. I'm talking standalone. Do we expect Tube to sort of get back to those 40%, 41% plus levels going forward? Yeah. Correct. Totally slight improvement from where we are right now. That's what Mr. Vellayan Subbiah was explaining. Right. No, sir, what I was asking is, do we get back to our historical levels, assuming that commodity sort of, the festivities? Yes. Okay. Fair enough. You also said that, if I'm not mistaken, you said that the working capital was slightly high this quarter and should normalize going forward, right? Correct. Fair enough. Thank you so much, sir. We have already seen TII's Q2, but yeah, Q2 we should see improvement. Great. That is great to hear. Thank you so much, sir, and all the very best. Thank you. Thank you. A reminder to our participants, if you wish to ask a question, please press star 1. Our next question is from the line of Anupam Gupta. Please go ahead. Yeah, Monica, a few questions on each of the segments. Firstly, on the metal form products, have you seen any improvement on the railway side yet, or it is still very muted? KRS? Yes, sir. See, railway predominantly we supply to the coach factories. Coach factories, because of lockdown, Q1 was affected. They did not increase the production. They were going slow. Q2 looks better, and we hope factories would streamline by Q3. Okay. Just continuing on that question, do we have pass-throughs for raw material for railway coach as well, the sections which you supply there for the raw materials? Sorry, your voice is breaking. Can you please repeat the question? Yeah. What I was asking is for the railway supplies also, do we have pass-through for the raw materials where we have seen price increases? No, there is no raw material availability concern, but price increase concerns are there for raw material of railways also, because predominantly we use stainless steel for railway. There is a concern on price increases, but otherwise most of the orders are covered by price variation clauses, there may not be big concern in recovery of raw material prices. Okay. Understood, sir. The second question is related to the engineering product segment. In the annual report and in the call starting, you said that you have seen some market share gains. Which product areas has this market share gains happened in? If you can just give some color there. Okay. Yeah. Like we shared in the earlier call, maybe, let's say we generally don't discuss on the market share segmentation part, this thing. If you see predominantly, we are maybe, let's say, present in the auto sector and particularly in auto sector, it is a combination of your two-wheeler, PV and CV. Across the segments, we are seeing very big gains, yes. Okay. Just continuing there, sir, I think the near-term outlook, at least for auto domestically, specifically two-wheelers is not very great given the inventory levels which are there. How do you see in terms of, let's say, next few quarters for the auto, the engineering product segment going to the two-wheeler side? Let's see. It's anybody's guess, but the festival season is nearing it out and the projections being given is surely it is going to be much better than as compared to Q1. Okay. Just one last question on the cycles business. This quarter, obviously there was some slowdown versus Q4, and I think there was some impact of the lockdowns. As of now, what do you see there? The growth should remain elevated for the next few, let's say, at least for the near term and then normalize? How are you looking at the cycles business side? Paul? Yeah, good morning. I think in the Q1, as rightly pointed out, we had issues of lockdown and therefore, closure of markets, and that is reflected in our revenues that we had in the Q1. Moving forward, the plans that we make for Q2 and Q3 should be at least better than Q1 based on the markets opening up and situation becoming a little stable. As we move forward, there are various kinds of news on stage three of COVID. Therefore, we don't really know about the market opening and different closures. The internal plans that we have drawn up is to look at how we can gain shares where the market remains flat and what are the various steps that we have to do through product interventions, through market interventions, through distribution interventions, through digital interventions, and so on and so forth. We're quite upbeat about the next two quarters in terms of moving forward for us. While the market may not overall show very big pickup based on the demand that we are currently seeing. Okay. To this one question continuing there, in the annual report you mentioned that export share within cycles is close to about 11% in FY 2021. Over the medium term, let's say, how high are you targeting this to go? Apart from the China Plus One factor in terms of sourcing, what else will drive that gain in export share overall? I think there are two, three factors that will drive. One is building an internal capability to compete in different markets of export, which we are doing. That's point number one. Point number two is we will drive these exports further up, based on what we do and how the customer responds. We should be enhancing our exports in the overall pie. This is what I can tell you at the moment. Lots of plans are being made in terms of the standardization of products are happening. Lot more foray into we are ourselves getting into some of these initiatives so that we can manage the supply chain portion of the business. With that, I think we hopefully will give a much better account of ourselves as we move forward on exports. Sure. Sounds good. I'm done for the time being, yeah. Thank you. Thank you. Thank you. Our next question is from the line of Kashyap from Selling Partners. Please go ahead. Hi, good morning to everyone at TI. Just one question, Mr. Anand, slightly high level in terms of thought process. How do you see the trajectory of businesses under TI1 over three-five-year timeframe? We've discussed this, the trajectory earlier. Do you think that incrementally going forward you see the trajectory going upwards or do you think we would be at the same point where we used to originally think about it at? Kashyap, thanks for the question. I think if you ask us right now, see right now, the world seems to be in a very optimistic mood, okay, at least from as far as we can tell, right? If you see what's happening in our engineering, has a new very promising product line and it's seeing very good demand from the exports, which we see can be sustained due to both China Plus One and global steel price levels. Also the fact that there's new product capability. For different markets, there are different kind of approaches that the engineering team is taking. That in itself can lead to good growth numbers in that business. The metal form product business, like we said, the individual areas are looking at new avenues for growth. In mobility, again there appears to be a lot of export-led growth opportunity for that business. That's what Paul was just alluding to earlier to that question. If you look at those three things combined, actually what you would hope for is that the TI1 revenue growth number would actually be higher than what we thought what it was historically going to be. Right. That's our current take on the business. Right. That's our current thesis, right? That's where we are. I know. I thought about it similarly, hence I thought to ask that question. That's all from my side. Wish you guys all the best and look forward to meeting you soon. Thanks, Kashyap. Thank you. The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund. Please go ahead. Yeah. Hi, good morning. This is Shyam from Sundaram Mutual. I have just a couple of questions here for Hitesh. What will be the average utilization in engineering and metal forming in this quarter Q1 as compared to Q4? Just trying to understand how are we placed from an utilization perspective in Q1. We had lockdown affected, but again, Mukesh and KRS can give the answers. KRS here. Let me answer that. Shyam, I think there was an effect because of lockdown. Notwithstanding that, the OEMs have really shown some promise, both two-wheeler and four-wheeler in terms of pushing up their numbers. How much are we sort of utilized to about 75%-80% of our capacity? It will be latter part of the quarter. Okay. Understood. That is helpful. We still have a 20% gap, room in terms of to include the inflation before any need for CapEx, I mean. Yeah our assumption here? Yeah, you're right. We have capacity to take care of the increase in demand in the coming quarters. Okay. Sir, here, what will be the peak utilization we can reach in the engineering segment and metal forming, sir? Any ballpark numbers you can share? Can we go to 90%? Is 90% sort of the peak utilization number we can garner? Shyam, regarding engineering business, we have a good advantage because over a period of time, we have created plants in all the regions, like north, west and south, as well as eastern India. Let's say our part of strategy three years back, what we shared in the investor call, we are trying to build the common capabilities across the plant. This gives us a good headroom. Let's say that sometimes north will not be doing well, west will not be doing well. Interchangeability of the plants is really becoming handy for us to cater to the different market needs. Barring, let's say, whatever the 10, 20 days we lost in the month of May, apart from that, we are operating at a ballpark number around 85%, and we also have a fairly robust process. We look forward for next two years. We take the actions, particularly in advance how the market projections are there. We have a fair, robust process on that. We take the appropriate call on capacity expansion, wherever is required, pretty much in advance. At any point of time, to cater to even fluctuation in the demand by 20% plus or minus, we are geared up to handle that. Understood, sir. Thanks for that. Just to follow up on that, we had indicated a CapEx of close to INR 250 crores for this fiscal year, out of which you have said the bulk of this around INR 200 crores may be towards the 3-wheeler, the electric vehicles. Any change in terms of the CapEx numbers for this year? Any perspective that you can share on other than the EV 3-wheeler division, anywhere else you would want to spend more CapEx? Yeah. The total it will be around that only, INR 250 crores only. In addition to the EV project, we will also be spending some amount to expand capacities in tubes and also in auto chains. Okay, understood. Arun Murugappan, just one last question. Metal forming from a margin perspective has held up, EBIT margins has held up pretty well despite the drop in volume per se. Is that due to the mix within the division railways going down? Is there any initiatives that we have taken that has contributed to this margins being slightly resilient than what one would have expected, per se, in metal forming? Yeah. One is, of course, the action which we are taking for margin improvements have started yielding results. The second thing is, there were also certain price recoveries for inflation during Q1. Okay. Understood. Arun Murugappan, the other segment will include industrial chains, because that segment seems to have improved sequentially. The chains has contributed to this or that lens pilot project has started playing out into sequential improvement in the other segment revenue? No, it's mainly because the industrial chains is now grouped under other. We have taken it out of metal form products and grouped it under others, along with the new business. It's mainly about industrial chains. Okay. Thank you. Thank you very much. Thank you. Next question is from the line of Sundar from Spark Capital. Please go ahead. Hello, sir. Thanks for the opportunity. My first question is with regards to a couple of resolutions that were passed yesterday in the week, Friday, on the AGM. One was to do with the investment of about INR 2 crore into working capital. The other was that INR 25 crore into innovative research. First we'll start with the INR 25 crore of innovative research. What does this pertain to? Is it out of the normal business course? What are we looking for, sir? Sundar, thanks. Broadly, like we've articulated, this will be for TI2 investment. TI2, the approach we've taken, we'd said that this would be more like VC style investment. What we've been looking at is kind of several different platforms that we think can be growth platforms for TI in the future. Amongst those, kind of, we are studying and we are working to study, I would say four platforms that we see as interesting. One of those is this whole area of environment and sustainability. The idea with the INR 25 crore is that we would make smaller bets in companies, and take a percentage of an existing company with the intent of then being involved with that company's growth, where we can bring some value to the table, but also help the entrepreneurs basically drive their business. These are, of course, riskier bets. With more VC-like style payoffs versus having a very fixed kind of payoff schedule. The intent is that we use this from TI's perspective to get into some of these areas in which we don't have capability sets right now. Clearly, developing capability sets in an organic fashion would be more difficult. Will you be able to further elaborate on what are those four areas, the four platforms that looking beyond environment and sustainability, the other three, if you can? It's basically medical devices, and it's optics and electronics. Those are the areas that we've looked at initially. That doesn't mean those are the only four we will explore. Vimal, you will be spearheading this project? Sorry? You will be heading this project? I'm not heading anything. I don't do any work over here. What we do is different people get involved. Like I said, in one situation, we are using a consulting firm to help us. Different people get involved, and then usually the division head will take ownership of the project fairly early. I understand. Vimal, the second question I have here was that I know, getting into CG Power, you don't want to answer much out of it, but from the time you took over in last December till now, if there were three parameters to be drawn, one in terms of revenue, the two in terms of supplier relationships, three in terms of the net liabilities, how have you progressed then, and where do you think we should look at it going forward? Like I said, Sundar, let's not get too much into this thing here. You can see where it's tracking in terms of the overall numbers. Obviously, there are a lot of disclosures. If you actually just read all of the disclosures, both that was there in the annual report at the TI Conso level, but also now even in our quarterly statements, there are a lot of disclosures that if you just read, you'll get a sense of how each of the situations is resolving along those three lines. The revenue side, you can definitely see the traction basically in terms of the quarterly numbers itself. I think most of that data is out there. Rather than get into it on this call, it's better when we start doing the quarterly calls there post the October quarter, that will be a better time to do it. Fair enough. Thank you. Thanks for that. Thank you. Thank you. Our next question is a follow-up question from the line of Vimal Gohil from Union AMC. Please go ahead. Great. Thank you so much, sir, for the follow-up. Just wanted to get your sense on how much out of a total product basket specifically for automotives, how much of it would be engine agnostic, and how much of it will be directly dependent on ICE which will get impacted, especially in electric 2-wheelers post the proliferation of electric 2-wheelers going forward? At the total level, it's not going to be a significant shift for us. There are certain businesses which will be impacted more. For instance, if you see the auto chain segment, we have drive chains and cam chains. Cam chains will have some kind of impact because of EVs. Drive chains are expected to continue. Similarly, in engineering business also, there may be some minor impact, but at the total level, it's not going to be significant. Right. The chains that you mentioned, the cam chains, those are not a very big portion of your total overall automotive chain portfolio. Would that understanding be right? Yeah, not very significant. Yeah. Got it. Fair enough, sir. Thank you so much. In any case, after market, we continue for much longer. Got it, sir. Thank you, sir. Thank you so much. Thank you. Next question is a follow-up question from the line of Abhishek Ghosh from DSP Mutual Fund. Please go ahead. Thanks for the opportunity again. Thank you. Abhishek, your voice is breaking. We are not able to hear you clearly. Hello. Is it better now? Slightly better, but still there's a break. Request you to please come in a network area. Okay. Just allow me a minute. Hello, am I audible now? Yes. Okay, thanks. Sir, if we just go through the annual report again, we see lot of newer segments like metro rail as a new opportunity, seating solutions, new products like the safety critical products, the cranes and the hoist, all these things which are part of TI1 itself. You think all these newer products, newer opportunities which has got added in TI from the last cycle of FY 19, is it fair to assume that you've added a new opportunity size of another INR 1 billion dollar over these newer products? How should one look at the overall opportunity size that has got added into TI1 because of these new products? That's a slightly difficult number to estimate. They're already there. Yeah. See, basically, take things like stabilizer bar, for example. It's a significant opportunity if you look at it globally. As we go segment by segment, there are definitely things that are significant if you look at the opportunity globally, including the kinds of cycles now that K.K. Paul is making and beginning to export. I don't think we've ever gone through the exercise. I guess the quick answer is, I don't know, man. All I'm saying is it does push the growth rate of those businesses from that organic level that we thought would be five to seven. It can push it up from there. The quick answer to your question is, I don't know. Okay, fair enough. The other question is also now in the two-wheeler space, at least the expected shift to EV is much faster there. How are you engaging with probably the newer OEMs and the products for the same? Any thoughts around that, if you can share? Yeah. It's still early days. We're exploring it. There are two schools out there, right? Bhavish and Ola has said that it's going to accelerate, then everybody's reading the newspapers and saying that all the IC two-wheelers will be gone. Interesting. I don't know if it's even like with this level of subsidies over time. See, the bigger question is this, right? Which is both Ola and Ather seem to be losing a lot of money on their two-wheelers, and will be losing. It's estimated that Ola will be losing some very significant numbers per two-wheeler sold. Broadly, we don't know, right? This is what we're kind of hearing in terms of what we hear from other guys who are suppliers and competitors and so on. Now, if that is the case, we need to see, right? We don't want to get into an industry that has a big revenue pool and no profit pool. We need to figure out, and that's what we're exploring. Paul and his team are exploring it actively. We're basically exploring. Because for us, the revenue pool only makes sense if it comes with a good profit pool. Otherwise, we're not going to get VC funded and raise INR 1 billion to fund something like this. We need to explore that. If we get to a solution where we think that there's a profit pool, then we will jump into it. Okay. Just one last question from my side. In the earlier articulation, you obviously had a PBT margin target of that 10%, and which you are kind of comfortably, consistently doing much above that even with the negative operating leverage. How are you thinking about it now? Is there a change? Obviously with this new product addition, the growth will be much better. How should one look at it? Any thoughts there? Correct. We should increase it. I'm saying we should increase it to 14% in three years. Okay. That is very helpful, and wish you all the best for that. Thank you so much. Thank you. Thank you. The next question is from the line of Janakiraman from Franklin Templeton. Please go ahead. Yes, thanks. Morning, Vellayan Subbiah and team. Morning. One question on the cycle. One question on the cycle exports. You've been saying that the cost handicap versus the Chinese and the Taiwanese exporters is what is holding you back. What is the reason for this cost position? Is it the labor cost, productivity or something else? How do you propose to work on this? Paul, can you take it? The only way we can explain this is that we have done a significant amount of input substitution. We did not depend on low pandemic, et cetera, but we said that we have to make our supply chain much more robust, and we cannot take a risk. We started a lot of indigenization imports a few years. I'm happy to say that we have substantially improved that score in terms of this. Today, if you are looking at from a normal trend, what you look for are the failures. The bulk of that is improved, indigenized. That's point one. Point two, it also talks about premiumization of your products in terms of aluminum, et cetera, which we are on that journey in terms of moving forward. We put our own capacity, as I said to you earlier, we will be dealing with that internally in the phase I as we proceed doing our venture for exports. Third is we also have a plant in Sri Lanka, actually, which we are moving much more towards exports in terms of getting to different countries. This is part of the business, actually, different domestic demand and export demand. That's third. Fourth is a very important long-term opportunity to build which we are now doing through the practice of doing that, number one. Number two is also, taking on some basic products with export line quality, such that we used to manufacture this kind of bikes in a very large factory. As far as capacity is concerned, we believe with our two plants, we have capacity. We have to make our labor capability and capacity, which we are at the current moment on that journey. All this put together on a phase-wise way as we have planned. This is our way to be able to give the necessary thrust in a continuous manner in exports. I hope I've answered your question. Sure. When do you hope to reach cost parity with the Chinese and Taiwanese et al? Cost parity is different manner. It depends on which markets are you looking at and which products are you looking at. What we are looking at is cheaper products that allow us a certain amount of margin where we are not getting boxed between Taiwan and China, Madura and China. Also bear in mind that there are a lot of anti-dumping duties on China in different markets. Would that allow us an opportunity as a new entrant in terms of making inroads in those markets? There are also additional opportunities that are cropping up in the China Plus One strategy that Vellayan Subbiah talked about earlier. There's a new enterprise that's now looking at this strategy in terms of viewing India as a strategic market, after China. That also gives the opportunity to small and medium manufacturers based in India in terms of the way that they plan it, the way that they show their intent in getting after the export markets. There is also a lot of talk going on between the government and the industry now in terms of looking at how to build this component capability in India, which still, because there are a lot of researchers that are going on into who are not currently in bicycle business, but in automotive business, et cetera, to manufacture some of these components. Some of the global leaders in some of the components being invited to manufacture, set up a manufacturing base in India with government help and all. There's a lot of rethink from the government's end to look at this sector in terms of giving it a push for exports, premium bikes for exports. The other opportunity that will come through is with e-bikes. That is bicycles that are electrified in some sense. We just launched our first product in the domestic market just a day back, working much of that and so on. We are working around different markets that could make a big push to e-bikes. Sure. Thanks. Mr. Vellayan Subbiah, one question to you. I heard your description of the electric two-wheeler market in terms of our profits. Do you think the electric three-wheeler market will be a bit different with a reasonably attractive? Yes, that is definitely our belief. Even in the 2-wheeler market, all I said is we're studying it. Definitely we do think that 3-wheeler is going to be better. Even 2-wheeler, we're still studying it at this stage. Where exactly is your 3-wheeler product development now? Is it the specs design prototype of the program? That obviously we won't share too much now. We will just have to wait till the market and till the product kind of gets out, which like Paul gave you the timeline earlier. We just have to wait for that. Good. Thank you. All the best. Thank you. Thank you. Our next question is from the line of Rohit Ojha from Progressive Shares. Please go ahead. Hi, sir. A few questions related to Shanthi Gears. The pending order book of Shanthi Gears has been swelling up, which is around 42% on the upside at around INR 235 odd crores or so. Can you help us understand that what percentage of the order book is for manufacturing and what percentage is for the services business? Oh, that will predominantly be manufacturing. Manufacturing. It will be predominantly manufacturing. We will try and get you that split, but a large chunk of it will be manufacturing. Okay. If I were to break the order book into short, medium, and long cycles, short being less than six, medium being 6-12, and long being more than 12, what would be the break if you can help us with that, if you can share the ratios for that? Yeah, we generally don't give that kind of breakup to the external world. Yeah, but in terms of filling the lines, it's not been an issue at all. We are reasonably covered in terms of sales for the near term. Okay. By end of FY 2022, will you be able to kind of clear this pending order book that you have? Yeah. There'll be ins and outs, but gradually, yes. We'll come pretty close to that. Okay. On the margin front, I know you don't like to give guidance, but will you try to reach the pre-pandemic levels, if I can be lucky over there? Yeah. Ideally, yes. Why not? Okay. Sir, this order book, and if we try to understand that the synergies that might come and if the management thinks that you will be able to blend in the synergies between Tube Shanthi and CG Power, do you think that the pending order book can swell by another 30, 40 odd%? That's difficult to put a number to it, but they are under discussion. They are being explored. Once we have some good clarity on that, we'll give you those details. Okay, sir. Sir, any new product or product launches in pipeline which you would like to share for Shanthi Gears? I think they're doing the segmenting review that they've talked about. They continue to look at everything, but some of the areas similar to what we've talked about in the past, kind of in terms of the areas of growth. We'll continue to look at new industry segments, but may not be so different in terms of new products. Okay. Sir, if I were to ask one more, in terms of the raw material prices and their fluctuations, how does it happen with Shanti? The revision of prices, does it take it on a quarterly basis or half yearly or one yearly contract basis? Yeah. See, normally the way it happens is when the quote is submitted, a reasonable factor towards inflation is already baked in. Okay. On top of that, wherever possible, the price variation clause will also help. Okay. Maybe a certain percentage where it may not be possible to do so. That's what we'll absorb through our efficiencies. In recent times, were you able to take any price hikes? This is a custom built gear business, right? It varies from order to order. There's no general form which is applicable here. Okay. Depends upon case to case. Okay, sir. Thank you for the answers. Thank you. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Anupam Gupta for closing comments. Thanks, Alan. Vellayan Subbiah, if allowed, I just wanted to ask one small question. On your TI2, you have invested in quite a few already and you are willing to put up more in a few startups. In the medium to long term, how big do you see this compared to TI1 and TI3? Or would it be, let's say, small, at least for the foreseeable future in the overall contribution sort of way? We've always said that it's not going to have any significant effect on the short-term results. It's more building platforms for the medium and long term. I'd say that you have to start thinking at least 5 years plus when you start thinking about TI2. Only at that point will the numbers start getting material in any way. You just think about this as seeding the next set of businesses that can be significant businesses for TII in the future. It's not a near-term or short-term thing. Right. That sounds reasonable. Thanks a lot, and I'll hand it back to you for any closing comments that you might have. Hey, I think that's very good. Thank you. We continue to be encouraged overall by the environment. Thanks everybody for joining, and look forward to catching up with you again next quarter. Thank you. Thank you all. Thank you, Anupam. Thanks, Vellayan Subbiah. Thank you. Thank you very much. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.