Ladies and gentlemen, good day, and welcome to the Varroc Engineering Limited Q2 FY23 conference call hosted by Ambit Capital. As a reminder, all parties on the line will be in a listen-only mode, and there'll 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 and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Kokane from Ambit Capital. Thank you, and over to you. Yeah, thanks. Good evening, everyone. I welcome you to the Varroc Engineering Q2 FY23 results conference call. From the management we have today Mr. Tarang Jain, Chairman and Managing Director, Mr. Arjun Jain, Whole-Time Director, Mr. Mahendra Kumar, CFO, and Mr. Vishal Raval, Head Investor Relations. I'll now hand over the call to Mr. Vishal Raval. Vishal, over to you. Thank you. Welcome, everyone, and thank you for joining us for this quarter-end 30th September 2022 earnings call for Varroc Engineering. Please note that the results, presentation, and press release has been uploaded on the website and also in the stock exchange. Before we begin the call, please note that some of the matters we will discuss on this call, including business outlook, are forward-looking. These are subject to known and unknown risks. The risks and uncertainties are included, but is not limited to what we have mentioned in our prospectus, annual summary, and subsequent annual reports, which are available in our website. With that said, I now hand over the call to our chairman, Mr. Tarang Jain, to begin the proceedings. Yes. Thank you, Vishal Raval, and thank you, team Ambit Capital for hosting the call, and good evening to everyone. Before talking about the operational performance of Q2 FY23, I would like to again inform that we are completing the divestment of our four-wheeler lighting business in Europe and the Americas on the sixth of October 2022. As communicated earlier, this has resulted in impairment due to the lower equity value we received. In our consortium books, we have booked a loss of INR 579 million against the net assets of the VLS business which we have divested. With the transaction now behind us, team in Varroc can now totally focus on the continued operations to strengthen its balance sheet and invest in identified focus areas to drive future profitable growth. Talking about the operational performance in India, automobile production for all the segments in Q2 FY23 rose on a year-over-year basis as well as on a quarter-over-quarter basis. The main reasons are due to the lower base of last year and the early festive season. On a year-over-year basis, two-wheeler production grew by 7.7%, three-wheelers by 24.3%, passenger vehicles by 38.1%, and commercial vehicles by 36.2%. In terms of our operations, I'm happy to inform you that we grew the revenue from continued operations by 21.2% to INR 18,399 million on a year-over-year basis. This is the highest ever revenue generated by entities in the continued operations in any quarter. We improved our profitability on a sequential basis with improvement in the EBITDA margin by 100 basis points. This is the second consecutive quarter when the EBITDA margin has expanded and it came in at 9.2%. The operating PBT before JV profit for continued operations has also improved sequentially by more than 294% in the quarter, and it is INR 545 million. The reported PBT of INR 307 million was impacted negatively by net mark-to-market forex impact of INR 242 million, mainly on intercompany notes. We continue to have strong order wins towards new business in H1 FY23 across business units enabling our future growth. During H1 FY23, lifetime revenue from new order wins is INR 25,476 million. Out of this, business wins from five prominent EV customers is INR 8,676 million. Profitable business wins, improving of the contribution margin, focusing on PBT instead of EBITDA margin, sweating of assets, inventory reduction, commercialization of our R&D efforts, control on costs, growing free cash flow, debt reduction, and prudent capital allocation remain the focus of the company. I'm now handing over the call to MK, our group CFO, who will walk you through the presentation, which is already uploaded in our website and in the stock exchange also. Thank you. you. Thank you, Tarang Jain. Good evening, everybody. I think the presentation is already uploaded in the website. Let me start with the highlights. The last quarter, Q2, was an important quarter for us, where we completed this transaction. Of course, we explained the highlights of the transaction in our previous call. I'll still remind you all that we completed this on sixth October 2022. Some of the other highlights have already been explained by our chairman, but just to highlight once again, our growth was pretty strong last quarter at 21.2% on a year-over-year basis. Sequentially also, I think we grew by close to 2%. This quarter had the highest ever revenue for continued operations in Q2. In terms of the new orders won also, it was pretty good. We had new orders, total in which we had wins of about INR 23.5 billion. Including about INR 8.7 billion coming from five EV customers, including two prominent EV customers and three new players also. The EBITDA margin also continues to improve, it reached 9.2% last quarter. Again, it was a good improvement from last year, same quarter and also, quarter-over-quarter. With the completion of the transaction, we now have a cleaner balance sheet where we, removed debt and debt-like items adding up to close to INR 34 billion. Which included about INR 26 billion of debt items and about INR 8 billion of debt-like items. That was a major cleanup, which our balance sheet had undergone. Of course, we also had to pick up the impairment impact because of that. Now with all these changes, with improved profitability, we are now in a better position to service and reduce the debt levels going forward. In terms of the overall, going to the next slide. In terms of the overall industry trends, Q2 again has been pretty good at the entire industry. Both two-wheeler and passenger vehicles registered significant growth. Two-wheeler, of course, grew by close to 8%, but passenger vehicles grew by almost 38% year-over-year. Quarter-over-quarter sequential basis also, the two-wheeler market grew by about 17% and passenger vehicles grew by 14%. Of course, there are some positives and negatives here when it comes to the industry trends. The semiconductor constraint seems to be easing now. That can help the industry in terms of volumes going forward. At the same time, we also need to see how the overall demand scenario pans out. We see some kind of softening of demand at the low end of the spectrum. We need to see how these things pan out in the coming quarters. Now in the next slide, of course, we explained the overall structure of Varroc now after the divestment, as I explained in the previous presentations also. Now this just comprises two geographical segments, India and rest of the world. These businesses of course all of you can actually understand. Coming to the next slide, where we presented the consolidated financials for continued operations. You may notice that the EBITDA margin improved to 9.2% from 8.2% in the previous quarter and also in Q2 of last year. In terms of overall PBT margin are close to about 3% now, during Q2 of FY23. Of course, we also had to book the Forex loss, which is what our chairman was also explaining in his speech. All this reported PBT stood at about INR 31 crores or $3.7 million. One important point to be noted here is the tax. You might have noticed negative tax here, but this is because of a couple of reasons. One is the notional exchange losses which we had to pick up in Q2 and also in Q1 are not actually tax deductible. Because of that, there will be higher tax incidence. Plus whatever deferred tax asset we had earlier on a similar item at global level also had to be reversed because the transaction values changed subsequently. Because of that you will see a negative tax. In terms of PBT, it was at about INR 31 crore. Now in terms of the split between continued and India operations and overseas operations, you might notice in the next slide that it now adds up about 9.8% of adjusted EBITDA margin in Q2 for India operations, compared to 8.9% sequentially last quarter. In terms of overseas also the adjusted EBITDA margin works out about 3%. Of course it was higher in Q1 at about 4.5%. The impact of inflation in the overseas markets, particularly the European markets, had some impact here. We are hoping that going forward, it should look better. With all this the overall continued operations reported 9.2% of adjusted EBITDA margin. Now an important question that we all have is, okay, what is this do to the debt position and the overall leverage? As you might notice in the next slide, the net debt is about INR 1,300 crores or INR 13 billion, which is what we indicated in the last call also. Now the consolidated equity stands at about INR 900 crores or INR 899.36 crores. With an annualized adjusted EBITDA of about INR 672 crores, the ratios are now looking far more comfortable. The net debt to equity works out about 1.45 after the divestment. As on thirtieth September, it was 1.75 because the transaction got closed only on sixth October. It still carried the debt which we subsequently repaid. That's why from 1.75, it came down to 1.45 after the repayment of about INR 30 million from the overseas operations. The net debt to equity now stands at 1.45 on consolidated basis. Net debt to EBITDA is also, it's close to 2 x now, or you can say 1.9 x just below 2. It's about 1.9. This is on the consolidated basis. Even on standalone basis also 1.5. Post divestment, it now stands at 1.7 for VEL standalone. That's also a comfortable ratio. We will try to improve it as we move forward. Now, on the right side, on the extreme right, you might notice the 31st March scenario, which had both continued and discontinued operations. You might notice the kind of debt we had at that time of close to INR 26.5 billion. Now, this is without even considering the debt-like items. If you include that also, you can understand that what happened during this due to divestment was a significant relief in terms of the overall divestment, in terms of overall debt burden. In terms of the serviceability also, I think it significantly improved. In terms of going to the next slide, in terms of the overall revenue breakdown. Of course, these details, I think they more or less remain the same from the earlier trends, except that in terms of the product segments, two-wheeler and three-wheeler now add up to about 68%. Four-wheeler expanded to close to 28% and others at about 4%. Geographical spread, if you see, close to 20% of the revenue comes from outside. This is including the overseas continued operations plus exports from India. In terms of customer concentration, you can see that Bajaj accounts for about 39% of the overall revenue and others about 61% or 62%. Going to the next slide, which is about the new lifetime orders which we won in H1. This is how the split is. The lifetime revenue from customers. If you really see the customer concentration part, the orders won from Bajaj add up to only 18%. The remaining orders from other customers add up to about 82%. Another interesting point here is the new orders from EV segment comes to about 34% of the total. That is a strong positive thing, which we are looking at. In terms of the two-wheeler and four-wheeler, it is now split like 44 and 56% in two-wheeler and three-wheeler and 44%, from others. Of course, in the next slide we have given these, EV opportunities, the portfolio products which we have, which I think we shared in the previous presentations also. Same is the case with the next slide, where we talk about what does this mean to FY25 revenue, in terms of two-wheeler and three-wheeler products. Finally, coming to the future focus areas for Varroc, this one gives a good picture of what we are planning to attempt in future. These are the five parameters which we will be continuously monitoring. We will definitely focus a lot on revenue growth, which will be supported by volume growth as well as by any kind of pricing. That will be followed by strong CM2 improvements. That's what we are focusing on. This will enable us to strengthen the business, makes the business more robust. This will all translate into a good PBT growth. Here again, we need to have a tighter control on fixed costs so that the improvement in contribution margin translates into PBT growth. Now obviously, this PBT growth should convert into FCF conversion also, which is going to be a focus area for us. Now, once we complete all this, we generate cash which can be used to reduce the debt levels going forward. Once we actually bring down debt to reasonable levels, we can then think of where to invest. Going forward, our capital deployment will be based on conservative principles so that this deployment again generates revenue growth and the cycle continues. That's going to be a focus area for us going forward. With that, I'll bring this presentation to an end. Of course, we have some slides that are about the CSR initiatives and all which we have taken up recently. With this, I hand it over to you. We can take up any questions which the virtual may have. Thank you. Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have the first question on the line of Arvind Sharma from Citigroup. Please go ahead. Yeah. Hello, good evening, sir, and thanks for taking my question. Sir, my question is on these tax issues that you spoke about. Will they continue over the H2 as well? If not, then what's the expected tax rate? If yes, then how much more of these additional taxes could the company be paying? No, these are not like additional taxes or something. Like what I explained, these were the deferred tax asset kind of thing which we accumulated earlier as an asset. Thinking that there will be a good consideration and good profit on sale of investment, which did not happen, so we had to reverse it. That's one. Second thing was, there was these exchange losses which we had booked. So that reduced the profits. That reduced the reported profits earlier. The taxman doesn't recognize this, so we still have to pay tax on it. There's no additional tax or anything here. Going forward, we won't be having any significant intercompany loans to these overseas entities. We don't expect this kind of impact going forward. Going forward, the taxation should be at the corporate tax rate, right? Correct. Going forward, it should normalize. Sure. Thanks so much, sir. My second question would be on the margins. I mean, both of them. First, on the overseas operations, we see the margins have gone down from 4.5% to 3%. Could you please explain the reasons behind that? For the India operations, since you stated there are some issues in terms of demand going ahead, if you could elaborate upon that and the possible impact on margins we could see in India operations, which have been fairly strong at 9.8%. Going forward, what kind of an impact could directionally we see on these margins if the demand is soft? Sorry, your question is about the overseas operations? Both. First, overseas operations, the reason behind the 150 basis point decline. For the India operations, the impact of softer demand. As far as the overseas operations are concerned, I think I explained in my presentation also, there was this high inflationary scenario in the overseas markets, particularly in Europe. That had some impact on the profitability. We should see how it behaves going forward. As far as India operations are concerned, of course, we don't want to give any guidance here, but our effort is always to improve margins from where we are. All right, sir. This 9.8% margin, of course you won't give a guidance, but you don't see too many headwinds to this number. Yeah, I mean, we still need to see how Q3 pans out. We are in the middle of Q3. We should see how the demand scenario behaves in the coming one and a half months or two months. Based on the same, we can see how that's going to have an impact. As it stands now, we don't see any kind of thing to worry about. Sure, sir. Sir, just one final, not a question, but just an observation. There has been a fair bit of restructuring in the way you report numbers. Is this the way that you'll be reporting here on? No. See, when it comes to restructuring, I don't think there is any difference in terms of segmentation. Yeah, we split between India operations and overseas operations. That's how we are going to report in future also. Sure, sir. Because, as per your Q1 FY23 numbers, India operations were at INR 0.7 billion, but now we see INR 14.1 billion. I mean, there has been some regrouping, but this is how you'll report here on, right? Yeah, yeah. See, the major difference is the VLS lighting business in India was not reported as part of India business earlier because the geographic segmentation is something which we're bringing in only now. Yeah, going forward, this is how it will be. Got it. Thank you so much, sir. Thanks for this. Thank you. Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. Participants who wish to ask a question may press star and one on your touchtone telephone. We have the next question from the line of Abhishek Jain from Dolat Capital. Please go ahead. Thanks for the opportunity and congrats for the same set of numbers in tough times. We can't hear you. We can't hear you. Can you speak loudly? Thanks for the opportunity and congrats for the same set of the numbers in tough time. Sir, my question is relating to the overseas operations. What is your roadmap to improve your revenue and the margin for the overseas operations for the next two years? What sort of the targets do you have in your mind? Abhishek. Okay. Yeah. I understand. Yeah. You know, see, basically what has happened is that the business which is in Europe today, other than our forging business in it, which we continue to improve operationally, you know, we have a two-wheeler lighting business. You know, two-wheeler lighting business we've had for the last 10 years and this business has got plants in Italy, Romania and in Vietnam. Overall, I think this business is quite a steady business. You know, it does a revenue annually at about probably between EUR 45 million-EUR 50 million a year. It's a steady business and this is something, you know, we have to see because we have the confidence of all the customers in the tubular business, whether it's in Southeast Asia or in Europe. Going forward, I see in the next couple of years, we see a good traction in our Vietnam business in Southeast Asia, because that's where we see with the Asian markets, I see more of a better growth potential as compared to Europe. Europe, you know, we have to see how it pans out. Currently there is, you know, there are these headwinds because of the war, the Ukraine war. We have to really see what really happens in the coming months, you know. Because the war is on, we cannot really predict how the volumes will pan out for us, you know, in at least the coming year. I think that also let's say the war is on, you know, in Europe, we still expect to grow in a smaller way, probably anywhere between 2%-5% is what we are looking at. When it comes to our Vietnam facility, that's where our focus is gonna be a little bit more on our two-wheeler lighting business. That's where we are now active at the moment working on growth opportunities over there, you know, also with the Japanese OEMs. That's where we are looking at probably, you know, a good 5%-10% growth in the Southeast Asian market as we go along. Overall, the two-wheeler, I think this is something where, you know, we feel more confident in Southeast Asia rather than Europe. When it comes to our new business of electronics, you know, which is in Romania, this business of course at the moment we have a revenue of about close to EUR 25 million a year. Here we are supplying the electronic assemblies to, you know, to Plastic Omnium, you know, for the lighting business. Here is where we are now looking at future growth. I cannot say. At the moment, you know, we're looking at a strategy for growth. Yes, this is also a business we want to grow this thing going forward. At the moment, I think we'll probably be clearer in the next quarter, you know, about how we're pushing on a strategy now, you know, how we want to grow our European business, both on the two-wheeler lighting and the electronics side. Yes, there will be a growth. How much growth? I'm not very clear at the moment. This will be more clear within the next one quarter. For FY23, it will be tough to make a margin of the 5% in numbers from our business because there will be a continued pressure because of this RM and the wage inflation. I think that we will we'll definitely make a margin. We'll definitely make an EBITDA margin. See, it's very difficult to really predict, you know, how this inflation pans out going forward. You know, it's really uncertain. We are confident that we'll make a positive EBITDA for sure in this business. That's clear. Our workforce will continue, but it's difficult to predict the macroeconomics scenario for the future. Sir, we are seeing the impact of the RM inflation in the bottom line, but not in the top line. Even the top line has gone down in this quarter despite the capacity additions in the electronics business in Romania and plus that some ramp-up in the other two-wheelers business. What is the reason that we are not able to do top line growth? Top line also to an extent does get impacted because what we are servicing in the two-wheeler is also on the premium side. I mean, the premium side and the, you know, and also the entry level. There is some impact, you know, which does come in. We have to remember that the month of August normally is a holiday, you know, in Italy, and normally you don't have more than one week of sales. Both our forging plant as well as our lighting plant in Italy both have been impacted by, you know, lower sales in August. Therefore overall, the sales has been impacted, you know, for the quarter. Okay, sir. Then in India business, we have seen an impressive growth in your electronics business because you have started supplying the motor and controller, DC-DC converter for the Bajaj RE. Just wanted to know how much increase is that, how much content per vehicle, and are we also looking to supply to other e-two-wheelers brands? Yes, we do. I mean, in fact, we're increasing our volumes, you know, with Bajaj Auto on the motor control and other, you know, products for the EV. Those volumes are going up, you know, on a consistent basis. We mentioned that even for the EV powertrain, we are in discussion with other customers, and we are hoping that we are gonna be winning some businesses also when it comes to the EV powertrain and of course also the other products around the EVs, whether it's lighting, switches or plastics or other products. What kind of the growth we are looking from the electronics business for FY23? I think that we are growing with the market, you know. We are one of the early starters, and I think that we have efforts, we have a focused approach to EV now. You know, we have kind of several years of EV time. Therefore I think we will see a good momentum and good percentage of EVs as we're growing every quarter-over-quarter. My other question is from the lighting business. How is the current contribution in the lighting business from two-wheelers versus four-wheeler side? We don't comment on those individual sub-segment level data. Okay, sir. Sir, you won many new businesses on the four-wheeler lighting side. Can you throw some light over there? What is the content per vehicle there, and who are the key customers, and what is the opportunity size? See, I'm not mentioning about the content for vehicles for lighting. You know, today our major customers today are Mahindra & Mahindra, Volkswagen and Renault-Nissan. We also supply something to Tata, you know, Tata Motors. We are now looking at driving, you know, sales with another couple of customers as we move forward. We are quite confident that, you know, we will grow our overall lighting business in a very positive manner going forward. What is the current revenue from the four-wheeler lighting business? Again, we don't disclose that segment information. Okay. My last question is related with this, your outlook on the polymer and the metallic business. What sort of the roadmap you have to improve this business? Polymer business, you know, we are both on the two-wheeler side and the four-wheeler side. I think on two-wheeler side, you know, we have got substantial, good market share, you know, across all customers in India on the two-wheeler side. Most customers, I would say. That's something, probably, we have a range of products. We are looking at probably cross-selling of the products, other than Bajaj to cross-sell with other customers. That's something, you know, which is already in process, and we continue to, you know, grow on that side. I think, more our major focus, you know, is gonna be on the four-wheeler plastics, and that's where we will see, you know, that being focused a little bit better on the four-wheeler side of plastics, and we grow that business, you know, on a pan-India basis as we move forward. That's the focus area. When it comes to metallic side, you know, we see anyway a growth year on year for the next few years, you know, for particularly investments we have already made. We are seeing a good growth going forward in metallic. Here, like I've said in the earlier calls, we are being very cautious because most of our metallic business is all IC engine related. So like we do transmission parts and we do engine valves. Here, you know, we are very particular, you know, that we have to look at ROCEs being, you know, over 22. Unless ROCEs are there, you know, in this, in any new business win, you know, we are not really willing to invest further on the metallic side. Here also the metallic side, our focus would be a little bit more on the exports where we see better contribution, you know, towards the margins. In a manner, as you mentioned that metallic business is more highly- Abhishek Jain, request you to kindly sum up your views again for follow-up questions. Okay, thank you. Thank you. We have the next question from the line of Rishi Vora from Kotak Securities. Please go ahead. Yeah. Mr. Vora, please go ahead. It appears that this participant has left the queue. I now invite Mr. Vinay Jain from Karma Capital. Please go ahead. Yeah. Hi. Thank you for the opportunity. Starting with the India business. Mr. Jain, request you to kindly come closer to the mic or off the speakerphone. Your audio is a bit low. Okay. Can you hear me now? Yes. Is it any better? Hello? Yes. Yeah. Wanted to ask question on the India business. If I look at, barring electrical and electronics business, all the other business segments is actually, if I look at on a sequential basis, the growth is lower than the industry growth which we have seen, be it two-wheeler, four-wheeler or three-wheeler. Any specific reason for that? Because again, for us, there would be a component of maybe partial price increase as well coming through in the current quarter. See, what I see is that we have grown both in our electrical and electronics business and the polymer business. Both, I think sequentially the revenues have gone up, you know, if you really go to the details. Yes, metallic. On the metallic side, yes. You know, we have not really grown on the metallic side. Because the metallic side also does a significant amount of exports, which has been impacted, you know, because of the situation in Europe. Right. Lighting business, if you could comment too, because on a consolidated basis, the lighting business is also down around 5% sequentially. Is it largely attributable to the overseas business? Yeah, I think yes. I think we are doing very well, I think, on the growth in India on our four-wheeler lighting business. I think that's a business, I think, our customers continue to grow over there. I don't think it's anything to do with the local domestic market. You know, there, I think we are continuing to grow, you know, in this lighting business, even in the last quarter. Understood. Again, on the overseas part also on the way we are recording it now, sequentially the revenues have come off by around INR 550 odd crore and the margins also off. What are we guiding for on the overseas business or ex-India business from a medium-term perspective? Are we still on track on achieving that 8%-10% margin over the next three to four quarters? Yeah. See, we are definitely going to be guiding. See the issue in Europe is, you know, the Ukraine war and inflation. Mm-hmm. That's the biggest issue here. You know, that's why it's very difficult. You know, it is very difficult to kind of, you know, predict what's gonna happen on the margins. It's not. Right. That easy, you know. Right. That's what, you know, earlier partner also asked the same question. Yeah. Definitely very difficult to give a guidance in Europe, you know, on the margins, and also the volumes, I would say, considering the situation, you know, in Europe at the moment. How is the ramp-up for the Romanian facility coming up? Is that also getting delayed because of the situation which is in Europe? No. I think the situation at the moment, what's happening, we already have a set business, you know, where we are supplying, you know, from our assembly lines to Plastic Omnium only enough, you know, for the lighting PCB. That business is going on. Presently, the volumes are okay there, you know. Yes, one is impacted by inflation in that business also. Like I said earlier, you know, we are now strategizing, you know, with some other customers, you know, and trying to for some more business wins going forward. We are looking at a growth. We are looking at a growth also in electronic business going forward. Presently we are in a stable situation at the moment. The revenues we are doing at present. It takes some more time for growth to take place, you know, on the Romanian electronics side. We are definitely, you know, working towards winning some new businesses over there. Is it now in the. Overseas business is just about 10% of the total. Right. No, but, in terms of profitability, is it still loss-making or is it in the black now? I think we already explained it earlier in the presentation. It is not loss-making, it is making profits. Okay. We showed 3% EBITDA year. Understood. Last thing also, over the years, we have accumulated losses with respect to the VLS business, and also, we have taken an impairment charge on the asset side. Do we expect any benefits to accrue on the actual tax to be paid in future years or you're expecting a normalized tax rate going ahead? No, as of now, we are not expecting anything to come from there. That's the reason we reversed the accumulated deferred tax assets. Mm-hmm. Going forward, it should be the normal tax rate. Understood. Got it, sir. Thank you so much. Thank you. Thank you. We have the next question from the line of Rishi Vora from Kotak Securities. Please go ahead. Sorry about disconnect here. First question on, you know, you said earlier the fact that you want to improve the contribution margins of the business. Now, if you just specifically talk about the polymer business. You know that business even if you're looking before 2019-2020 have been doing at high single-digit EBITDA margins with a gross of less than post-tax gross of less than, like mid- to high-single-digit. Now how do you going forward, what are the key initiatives that you will be taking in order to, you know, improve the profitability of the gross profit business? Firstly, see, look what I think today we have already, like you said, we have made a lot of investments in the past. Today we are still not at our full capacity utilization, you know. Therefore, I feel there is still scope, you know, with whatever the capacities we have today to improve. You know, to load more business over here. We are growing. We are growing there, you know, as much. Also whatever further investments we are making, you know, we are very, very looking at a very conservative approach. You know, I mean, we are not going to go. We will be very careful when it comes to capital intensity. That's something, you know, we're gonna be extremely careful going forward. Other than that, you know, already, you know, we are very, very okay with working a lot, and we are very focused on basically, you know, operational efficiencies. How to drive more OE, you know, control our variable costs. You know, also, you know, better sourcing with the growth taking place. You know, how to do better sourcing, you know, from the market. So definitely we want to drive our contribution margins up as our CFO has mentioned in his presentation. So the focus is on improving contribution margins to better control on our manufacturing plants, mainly a lot on the variable costs and including also material costs. I think that's somewhere where we are actually, you know, getting, I mean, a good traction there. Also, we are also working on, you know, trying to recover wherever the material increases have taken place. You know, we're trying to recover it from the customer, you know, on a regular basis. Whereas, we are actually pushing the customers, you know, to compensate us for whatever the material cost increases, you know, including the electronic price increases which take place. We're trying to get a better recovery from customers also, which was, you know, not that strong probably pre-COVID. That's something now we're taking it in a much stronger way. Moreover, you can see this is in last four-five years, the business mixture for India operation is drastically changing. Now we have growth coming from electrical business, then your four-wheeler polymer business and aftermarket. That mixture has a better profitability in the industry as compared to the other businesses. This is what will drive the business margins going ahead. Internally also, lot of work is being done to control costs and increase the efficiencies. Understood. What is the capacity utilization in your polymer business unit currently? I think depending, we have got a total of about 13 plants. You know, it could be anywhere depending on the plant. It would be probably anywhere between 55%-75%. It depends on which plant. Okay. Wonderful. Going forward, you know, as you have also won several EV orders for EV components, obviously the margin profile of those components will be very different, the ROCEs, the returns will be different. So, you know, how will your margin profile and ROCE change? Will EV components be higher margins, equivalent or lower margins than, you know, your current business? And my sense is asset turns are much higher than, you know, other current business lines. So will it be margin dilutive but ROCE accretive or even more margin accretive to the company? No. The electronics EV components are definitely helping us drive better ROCE and better margins going forward. That's what you know and this is the future you know. Electronics and EV parts is the future along with the four-wheeler all the four-wheeler businesses what we do. This is something where I mean there is a very good focus. You are right. I mean, yes, maybe pre-COVID we did not see you know that kind of ROC, but I think going forward, we are moving towards a target of at least 22 ROC, you know, and also better better EBITDA margins. You know, that's something we are focusing. We gotta focus on. Sir, just last question. What is the CapEx for this year? Yeah. It's the remaining six months, it could be somewhere between INR 100-INR 150 crores. Okay. Thank you very much. Thank you. Participants who wish to ask a question may press star and one on your touchtone telephone. We have the next question from the line of Miyush Gandhi from Propulsion Capital. Please go ahead. Hi. Thanks for taking my question. Sir, would it be possible for you to share how was the growth in the four-wheeler business? The participant has placed the call on hold. We will move on to the next question. We have the next question on the line of Basudeb Banerjee from ICICI Securities. Please go ahead. Thanks, I have just a few questions. One, just on the last question, you said, at the end of CapEx plan is INR 155 crore. How much was the CapEx in Q1? H1 was INR 150 crores. In India operation it was around INR 70 crores for only. Consol? Consolidated, I think it will be close to INR 100 crores. Yeah. Consolidated anyway, it's not the right way to compare now because it had discontinued operations also. The semi-annual reported consolidated numbers included this INR 14 crores. Correct. Correct. Yes. Overall for the full year, roughly you are expecting around INR 250 crores? Yeah. I think the right way to see it is just look forward. I think that's the right way to actually think about it. Going forward it will be INR 100-150 crores next year. Just trying to see that now, in today's presentation with INR 1,300 crore of net debt, which was expected to be net cash a few months back. The trajectory of your current and free cash flow, just trying to understand how much time will it take to take that to manageable cash levels at this level of margin where you are already at record levels. What kind of sustainability to reduce debt you will be looking forward to? Like what I mentioned, so we have, you know our current EBITDA margins from the current run rate in terms of revenue, so you can compute it. As far as CapEx is concerned, yeah, I mentioned INR 100-150 crores next six months. After that also it could be in the range of maybe INR 200-250 crores, the following year. We will have very tight control on CapEx going forward. So based on that you can work out. I mean, we don't want to give any guidance here, but we are really focused on maintaining our CapEx, improving profitability and also, yeah, improving the free cash flow situation overall. Then the debt also. Yeah, all that will flow into debt reduction. Like this quarter, interest outflow, which was INR 49 odd crore, now after the debt reduction, with on this level of debt, what will be the sustainable interest output? Yeah, I mean, like what I mentioned, no, you know the net debt levels and you know the average rates right now. I think this you can compute. As we continue to generate, debt will come down. But based on the current levels, you can compute the interest burden for the remaining six months. With Astral business where overall working capital to sales used to be almost zero or negative. Now under this new business, do you see any chances of working capital sales structurally changing? Because why I'm asking is already generating free cash flow and reducing CapEx are of paramount importance in case working capital reverses structurally, how one should look at it. Yeah, you're right, Pradeep. I think we will continue to have good control on working capital going forward. We don't want to give any kind of indications or estimates now. That's certainly one of the focus areas. In order to generate good free cash flows, we need to have working capital also under tight control. We are focusing on that. Sir, earlier part when you said three weeks of manufacturing holiday has been observed for European operations. What kind of such holidays one should expect in the Christmas month? Christmas month. Yes. Christmas month again, another 50 days of holidays generally happen in Europe. Normally, December in India is also one of the weaker months. When it comes to Europe, obviously, there are, you know, 10-15 days, you know, there is no working there, practically. Obviously, the month of December, you do see an impact. You know. Listen, so broadly, holidays from a QOQ perspective will broadly remain similar, so no incremental benefit or damage because of holidays on that issue? Yeah, yeah. There's no incremental damage. It is the way, you know, it has been in the past years. I'm not talking of COVID years, but. Sure. Last question, sir. Like, when we were discussing earlier, post the fire accident, the new facility of four-wheeler lighting will come up somewhere end of FY22. What's the progress with respect to that? How are you improving the utilization of Chennai facility? Some key OEMs are planned to be added. What's the status there? Basically, when it comes to our new facility in Pune, I don't think we mentioned that we're gonna be ready, you know, in 2022. I mean, we are going to be, we're looking at SOP somewhere around April 2023. That's what we're looking at. We, I mean, we are, the plant is, I mean, moving at a very fast pace. You know, I think we should do SOP. I think it will bring in some more benefit of single-piece flow and all that. Yes, we are looking at, of course, more business, you know, in Pune. When it comes to Chennai, Renault-Nissan is a main customer we have there today, other than Daimler, where we are exporting for bus lighting. Renault-Nissan, recently also we won another very big business of about INR 70 crores of business annually a year, you know, in this last quarter. I think it's Chennai plant is playing along well. I would say we are growing our revenues also in Chennai. Going forward, we are in touch with also another large customer, and we're hoping that we see some good traction with this other customer also moving forward in Chennai. Sure, sir. Thanks. Thank you. I would now like to hand it over to the manager for closing comments. Thank you, and, thanks again for joining, listening, and asking your questions. We continue to pursue excellence in our day-to-day lives of creating value for all you stakeholders. Thank you. Thank you. Thank you. Thank you. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and we may now disconnect your lines.