Ladies and gentlemen, good day, and welcome to Varroc Engineering Limited Q2 FY24 earnings conference call, hosted by ICICI Securities. 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 this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Basudeb Banerjee from ICICI Securities. Thank you, and over to you, sir. Thanks, Miraj. Good evening, all participants. Thanks to Varroc Engineering management for giving us the opportunity to host the call. We have with us the senior management, represented by Mr. Tarun Jain, Chairman and Managing Director, Varroc Engineering, Mr. Arjun Jain, Whole-time Director, Mr. Mahendra Kumar Karumanchi, CFO, and Mr. Vikas Dugar, Head, Investor Relationships. So I'd like to hand over the call to Mr. Tarun Jain for the initial comments. Over to you, sir. Yeah, I'm Tarang Jain here. Good evening to everyone, and I thank ICICI Securities for hosting this call. To start with, the geopolitical situation in Europe and the Middle East has created uncertainty in the global business environment. The interest rates may come under pressure if inflation goes up further due to a spike in oil prices. Despite these uncertainties in the global markets, we see a resilient and a growing economy in India. The Indian economy has sustained its growth momentum in FY 2024 so far. Though urban demand has already picked up well, we're expecting the rural demand will also pick up with the current festive season. The automobile production in India during quarter 2, FY 2024, grew on a year-on-year basis for most of the segments. The passenger vehicles grew by 5.6%, three-wheelers registered a strong growth of 19.16%, and commercial vehicles grew by 8.8%. Only the two-wheeler segment has de-grown by 1.5%, as the early festive season helped Q2 during last year. Sequentially, that is quarter-on-quarter, we have seen growth in all the segments. The commercial vehicles have grown 7.9%, passenger vehicles have grown by 12.7%, three-wheelers by 33%, and two-wheelers saw a growth of 13.6% on a quarter-on-quarter basis, as Q1 is generally a sluggish quarter. In terms of our operations in quarter two, FY 2024, we continued our journey of improving operational and financial performance. Our revenues from operation grew by 3% on a year-on-year basis to INR 18,868 million, despite a weak growth in the overseas markets due to the holiday season in Europe. The reported PBT for the quarter was INR 739 million, which includes profit from a joint venture of INR 80.6 million. Our balance sheet has strengthened in H1 of financial year 2024, as we pulled ahead some of the debt reduction initiatives to Q2 and reduced our net debt significantly by over INR 2,714 million, and our net debt-to-equity ratio to below 1x. Our debt servicing ability has also improved, as net debt to EBITDA is now at 1.35x, compared to over 2.13x at the start of the financial year. The annualized return on capital employed for H1 2024 is around 23%. We continue to win the trust of the customers as they are awarding us more business. This is reflected in the new order win. In H1 of FY 2024, our new lifetime order wins is INR 36.02 billion- There are more than 20 parties in the conference. In quarter 2 of FY 2024, we have added 3 new customers for supplying components to the EV models. In the quarter, we also won business from 2 customers for supplying components related to the EV powertrain. These new orders will enable us to strengthen our presence in the EV component space. Our revenue from supplying to EV players in quarter 2 of FY 2024 was approximately 4.4% of our overall revenues. Our effort to increase our technical capability was further enhanced in H1 of FY 2024, as we filed 9 patents in India and 1 overseas. As you might have noted from our submissions to stock exchanges, we've also signed agreements to procure power from renewable energy sources to the tune of over 36 megawatts DC annually for our consumption in the states of Maharashtra, Karnataka, and Tamil Nadu. We will continue to look for more such opportunities in the near future. We continue to enhance our engagement with OEMs and showcase our ability to deliver advanced technology solutions at affordable cost to them. We are also working on various other efforts like capacity utilization, prudent capital allocation, and cost reduction across the board to make our business more robust, w ith this, now I will ask MK, our Group CFO, who will walk you through the presentation, which is already uploaded on our website and submitted to the stock exchanges also. Thank you, Tarun. Good evening, everyone. This is Mahendra. L et me take you to the highlight slide in our presentation, which is slide number 2. As our chairman explained, the year-over-year revenue growth was about 2.9%. Maybe this was partly moderated by the early Diwali, which we had in Q2 of last year. T he revenue closed at about INR 1,887 crores, or $188.68 million. In terms of profitability, we are continuing the profitability journey. We are close to about 10% EBITDA, or about 3.9% in terms of PBT. The absolute PBT was about INR 74 crores. Balance sheet has been significantly strengthened. You may recollect that in our earlier discussions, I mentioned that in H2 we'll be able to reduce debt significantly. This time we actually could pull ahead most of that to Q2 itself, taking advantage of the higher revenue, so we could do more of factoring. And similarly, the higher realization or the realization from the sale of divestment last year, which we realized in the month of July, that also helped us. W ith that, we could actually reduce debt by close to INR 300 crore compared to what it was one year ago. So with this, the net debt to equity comes down to below one, or at 0.94, to be precise, a nd net debt to EBITDA is at 1.35. Business wins, of course, our chairman touched upon already. In H1, if you see the total business won, it was like close to INR 36 billion. We also added three more new OEMs to the EV segment. I n terms of the EV revenue as percentage of total, it's about 4.4%, which should actually grow based on the new orders which we won recently. L ike how we explained earlier, we are focusing more on cost reductions, and one of the areas is energy saving. Previously we mentioned that we are actually tying up with a few firms to source more of renewable energy. T hose things are in place now. There are still few more things to come, but we are still working on them. Going to the next slide about the industry. The two-wheeler industry de-grew by 1.5%, year-over-year, and by about, and it actually grew by 13.6% on quarter-over-quarter. Passenger vehicle grew by 5.6%, year-over-year, and sequentially by about 12.7%. W e still need to see what kind of impact all these geopolitical developments will have on the economy and the industry going forward. W e are hoping that the festival season should help us to some extent in Q3 also. Going to the next slide, which is about the consolidated financials for Q2, s o like how we explained earlier, 3.9% was the PBT in Q2, which is up by 2.2% compared to same time last year. You might have noticed that the interest costs actually went up compared to the previous quarter. That's partly because we prepaid some of the high-cost loans during Q2. That should actually help us in future. Plus the higher factoring discounting also is something which we actually consciously did it to repay the debt. T hose are the main reasons. Going forward, we are hoping that this interest cost should come down in the coming quarters. The next slide, we give the overall H1 picture. Like how we explained earlier, we are always aiming for a faster PBT growth compared to revenue growth. Y ou see that, H1 to H1, if you really see, the revenue grew by 6.4%, but EBITDA grew by 21%, and then PBT was almost like 3.5x. We are hoping to continue this kind of improvement journey going forward, with heavy focus on growth as well as cost reductions. In the next slide, we gave the details of net debt. We are close to INR 1,000 crores now in terms of net debt, as of 30th September. INR 1,006 crores, to be precise. The net debt to equity ended up at 0.94, and net debt to EBITDA at 1.37. It rose 23%. Coming to the revenue breakdown, more or less similar to what we showed earlier. The overall two- and three-wheeler revenue comes to about 71% of the total, and about 15% was the revenue outside India, compared to 85% within India. The outside India revenue was also partly impacted because of the holiday season in Europe and other markets. In terms of the order win, about INR 36 billion was the lifetime business wins in H1. Interestingly, you may see that nearly one-third of that actually is in the EV space now, which is an encouraging trend for us. That's it from our side. We are now happy to take questions. Thank you very much. We'll 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. Participants, you may press star and one to ask a question. First question is from the line of Ashin Modi from Equirus Securities. Please, go ahead. Yeah, hi, thanks for the opportunity. S ir, my first question is regarding margins. M argins on a quarter-over-quarter, this has remained flat at 9.9%. C ould you help us explain how do we plan to go to the 11%-12% margin, going forward? Yeah, and what sort of a margin do we expect the next two to three years? Yeah.T hanks for your question, Mahendra, here. I think first of all, we don't give this kind of guidance going forward, but I'll broadly tell the direction which we are planning to take. Definitely revenue growth plays a role, and the related operating leverage should actually help us to a large extent, because in most of our businesses, our capacity utilization is only around 60-65% levels. W ithout incurring any extra cost or additional investment, we should be able to scale up our revenues in most of the areas. T he operating leverage should help us. On top of that, we are also working on various actions towards improving contribution margin. In the next couple of years, we have certain targets internally we are working on. Energy is one of those areas which I mentioned earlier in my presentation. There are also certain other areas that we are working on. Plus, a continued focus on fixed cost control is another area. We just want to ensure that fixed cost doesn't grow in line with the revenue, or our internal target is to ensure that it grows at a much lower pace than the revenue growth. T hat should also help us in terms of bigger improvement in the overall margins, a nd going forward, we'll be monitoring the businesses for performance based on PBT, not so much on EBITDA. So when it comes to PBT improvement, the interest reduction, interest cost reduction will also help us, because that is already close to INR 1,000 crore. Should come down further in the coming year or so. That should enable us to reduce the interest burden, plus the CapEx control also is going to help us in terms of reducing the overall depreciation burden in the coming quarters. W ith all this, we are expecting that the PBT levels, there should be some, reasonable to good improvement in the coming quarters for coming years. Sir, you said that we have added few new customers on the EV side. Could you please highlight what sort of business wins have been done, and which are the key product areas where we are seeing good progress? Within the EV product line that we have, our focus is really on the EV Powertrain, which is the motor and the Motor Controller, and also on our connectivity devices. The businesses we have won are around the powertrain. Okay. Sir, about the customers, which you have added? We can't reveal the exact names of the customers, but, you know, one is a domestic startup who has not yet started production, but we expect to start soon with our powertrain. And the other is an export customer, a much larger capacity powertrain. Then lastly, on the profitability on the EV product side. Given the fact that now FAME-II subsidy has been reduced, do we see any impact of that on our profitability, given the fact that OEM might want to pass on that to the vendor? No, I think our OEMs are very mature buyers of products, especially from us. So, I mean, again, I can't comment on OEM strategy. They also have replacement benefits in place, instead of a FAME II, like a PLI, for example. But in our view, at least, you know, our pricing with respect to EV product line is sustainable, and we expect that that trend will continue. Okay. Thank you, sir. I join back. Thank you. Next question is from the line of Akash Gopani from Investec. Please go ahead. Hello. Thank you for the opportunity. Taking forward that EV question, can you highlight what would be the timeline when we can see this revenue flow into our console operation? And any tentative timeline perspective pertaining to when can we see this revenues reach peak in our EV revenues? Okay, I think the first thing to say is, you know, in terms of reaching peak, I think it's much harder to comment, right? I think because, I think it depends, as you know, there's a lot of variables around OEMs reaching their peak, their peak needs. From the standpoint of, from the standpoint of, by when we could expect to start seeing revenues coming in, I would say within 12 months, right? We've always been fairly consistent in terms of saying that, you know, our products are ready, our platforms are ready, our manufacturing lines are ready, which means we should be able to ramp up very quickly, and I think that's why OEMs like us. T hat's why within 12 months, we could expect to start seeing revenue. Okay. And Arjun, would it be right to assume that the ASP for this product would be somewhere around INR 15,000? Again, I cannot comment on specific segments, but yeah, I mean, it will be significant. Okay. Got it. The larger the powertrain, the higher the price point, of course. Got it. Okay, coming to the non-EV business side, over there also, we have seen sharp increase in order book. So any significant order win or breakthrough in OEM, which the company has been able to do over here, or any increase in share of business with particular OEM we are seeing over here? I mean, today we are present really across the entire two-wheeler segment, and we're present with multiple customers, you know, even in the passenger car and the commercial vehicle segment, right? So, you know, of course, we report, you know, EV separately, in terms of business wins for multiple different reasons. I think the rates, I would say, is really just, you know, par for course, right? We keep driving penetration, we keep driving improvement. You know, certain, within that, if I had to call out certain technology products, even for an IC engine, we would have an Integrated Starter Generator, for example. Right, so I think that would maybe be a highlight, but, but most of it is just, you know, normal sales growth and normal sales wins in, in the capacities that we have available already. Okay, got it. L astly, any comment on the lighting revenues decline QOQ, which we have seen? Any particular reason? Is it pertaining to European operations? Yeah. Y ou know, like we said earlier, you know, Europe has shut down for, you know, in this quarter. So that would definitely be a primary driver. The other thing also is that I would say with India, I think, you know, we've been supplying at peak capacities for a lot of the OEMs. Y ou know, we'll have little bits here and there, et cetera, et cetera, but I would not say that is a major contributor. Okay. Thank you, and all the best. Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Vishal from Swan Investments. Please go ahead. Thank you for taking my question, sir. Vishal, sorry to interrupt you. Can you please speak through the handset? Am I audible now? Yes. Thank you. Sir, I have a question regarding the top line growth, which seems to be muted over last few quarters, if you see. So what are the measures you are taking to push the growth? Any guidance you can, you know, share in terms of the top line growth, which you can give? And you know, you were always, you're focusing on the content per vehicle increase, so any light you can provide, roadmap in that terms going forward? You know, of course, as we said before, we generally don't, you know, provide, you know, we don't, we don't provide guidance for the future. From a top line growth perspective, you know, I think we are, you know, we do expect... it's generally the cycle for most customers is that SOPs generally take place, you know, post Diwali, so that we have, you know, a fair amount of launches that will take place post Diwali. But really, I think from a top line growth perspective, in the spaces that we want to be in, we have a healthy order book and, you know, revenues will come with it. Okay. Okay. P erhaps this is why if, if you, if we see your, vehicle-wise, growth, which you have, numbers which you have reported, two-wheeler business has grown by 4%, whereas overall volume in two-wheelers have grown by 15% on QoQ basis, s o, the growth in the two and three-wheeler segment have remained muted. This is because maybe, some outgoing platforms and, you know, we are awaiting for the new platforms to come in and that may kick in the growth. Am I understanding right in that regards? I don't think we've had any outgoing platforms per se, but of course, the largest, our largest customer has degrown to a certain extent, right, quarter over quarter, which definitely impacts us. But I think if we think about it again from the perspective of our content per vehicle and where we are seeing, volumes grow in the market, we do have significant content per vehicle, right? Which is something that we keep panning out, you know, something that we'll, you know, keep panning out over time. Further, again, right, we said, like we stated, you know, from an overall growth in revenue standpoint, we do have revenue that comes from Europe, both in two-wheeler as well as, you know, from IMES, for example, right, which is heavy forging. Which, yes, in this quarter will, you know... There is, you know, there is a summer holiday, right, which impacts sales to a certain extent, b ut yeah, there is no, you know, there is no... Yeah, I'm going to put it differently. There is no platforms that have gone out per se, which has impacted us. Sir, any guidance you can give in terms of your CapEx spend? So for the half year, you have spent around INR 160 odd crores. What will be the full year CapEx for this financial year? Yeah, Mahendra here. We may spend maybe another INR 100 crores or below INR 100 crores in the second half. Okay. Okay. Okay. Thank you for taking my question. I'll follow in back. Thank you. Thank you. Next question is from the line of Shubham Jain from NV Alpha Fund. Please go ahead. Yeah. Sir, my question is regarding the comments made by Mr. Kumar on the decreasing interest cost and increasing our PBT margins. Can you please tell me, indicatively, as of now, we are paying INR 200 crore interest cost per annum. What should this interest cost start looking at going on incrementally over the next few quarters? Yeah. W e don't want to give exact number, but like what I explained earlier, we have close to INR 1,000 crore of debt left now, in terms of net debt. Plus, we typically do discounting of receivables to the tune of about INR 500 crore at any point in time. B ased on this, we can broadly work out what should be the future cost. There could be some working capital swings in Q3. We are working on various initiatives, so there may be some temporary disturbance during Q3. G oing forward, once we reach end of the year, I think it should stabilize and it should come down, based on the levels which I indicated just now. Sir, so at what level of net debt to EBITDA, today it's at approximately one time. At what level of net debt to EBITDA will you be comfortable to stop doing this factoring and incurring this excess interest cost? Yeah. So we target to bring it about 0.5x. Okay. That's what we are aiming for. Okay. But it may take some time. It may not happen immediately. Okay. It will take maybe a year or more to actually get to that level. Okay. And what is the factoring, cost interest? So INR 500 crore you said is factoring, so what is the cost on that, approximately? It's cheaper than the debt cost. It's anywhere between 8%-8.3% per annum. 8%-8.3% per annum. So this is off balance sheet. So you pay 10%-12% on INR 1,000 crore, and you pay 8% on INR 500 crore. Is that right? No, the debt interest is around 9% now. So we also took- Sorry? some interest. The interest cost on loans is about 9% now. Okay. We recently renegotiated some of the rates with the lenders based on the inflows which we got recently. So the average cost of- And that cost of visible in the next quarter or so? Yeah, it should be visible going forward. Like what I said, in Q3, there are so many things which are moving around. You may not see a big thing or big reduction in Q3, but going forward in the medium to long term, you should be able to see this kind of reduction. Okay. And second question from my side, sir. We see that your depreciation as a percentage to gross block, you know, is slightly on the higher side as compared to other auto ancillary companies, which again suppresses the PBT margins. Any comment on that? Have you studied this as compared to other auto ancillary companies? Yeah. See, it depends upon the kind of what you call the mix of assets we have also. If you're talking about this particular quarter, we also took some kind of accelerated depreciation on some of the overseas assets, just to keep the books neat and clean. So that impact may be there, maybe until end of this year. And thereafter, I think once we actually control the CapEx spending, in relation to the depreciation that we are incurring, slowly, I think the depreciation burden should come down in the coming quarters and years. Okay. Awesome. Thank you so much, sir, and all the very best. Thank you. Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Tarshil from Crown Capital. Please go ahead. Good evening, sir. Thank you so much for taking my question. S ome of my questions have been answered. So just one, one broad-based question. Sir, in terms of macro environment, what kind of feelings are we getting? Are we seeing that there is now going to be accelerated growth, or how do we see the environment as? And also in terms of our seasonality, so would it be fair to say due to Diwali, our Q- our H2 will be higher in terms than H1? Will that be a fair assumption, sir? See, I think, for us, we definitely feel, that our half two, you know, revenues will be, more than the, half one. Largely, I think, see, what we see that the Indian market, we still see a growth in the Indian market compared to the markets, you know, globally, the other markets globally, where, you know, the sales, growth is quite, subdued even now. And, today, I think, we are also hoping that, you know, that, in a two-wheeler entry level also see some traction, you know, in this season. You know, so, so overall, I think we still remain, we still remain bullish, you know, on the growth, on, on the growth here. I think there's also the elections which is coming up, you know, and we do see that consumption should be there. Consumption should go up also because of the forthcoming elections. Yes, there could be maybe some impact depending on this new war which has started on the oil prices, which could be inflationary in nature for India also, b ut I think overall, I think we remain optimistic and bullish, you know, where the Indian market is concerned, which gives us today more than 80% of our revenues. So we do see a better second half compared to, you know, I mean, the half one, from the point of view of our revenues growth. Okay. Thank you so much, sir. So would it be fair to say it would be around 55-45 split in terms of H1, H2, H1, or it could be even higher in terms like, just in terms of pure seasonality? I can just say it'll be better. You know, we don't know, but it'll definitely be better. Okay. Okay, sir. I'll say just one question in terms of, I, I understand we cannot give guidance, but in terms of qualitatively, do we see that are we, in terms of our revenue, are we stuck in a band of revenue and that will get accelerated as the market improves? Or any statement, maybe not an exact guidance per se, but then do we see that, okay, we'll be able to cross the INR 1,800 crore-INR 2,000 crore revenue that is possible over the next year in the quarters coming by? Again, not a firm guidance, but maybe like, are we stuck in a range which is finally now we'll be able to open up and, you know, come swinging? Will that be a fair way to look at it? I would say, in fact, explicitly not, right? I think- In many ways, right? I mean, if you think about the last few years, our focus has always been two-wheeler, three-wheeler, and that has not been an industry that has been growing. W e have still been able to drive significant growth as a result of very content-focused strategy, right? And I think that is something that continues to play out, right? So, you know, as you know, EV increases in sales and volume, and especially as our customers ramp up, you know, as you know, stories around premiumization, urbanization, et cetera, also continue to pan out, I think we will only see growth. We will only, you know, I think we're one of the first to really benefit from you know, the growth in revenue that takes place, so- Correct. Pretty simply, I don't think we're stuck in a band. In fact, I think we are in a very good place, where- No industry. Right. I mean, we're in a very good place, right? Where, you know, if we compare half to half, H1 of last year and H1 of this year, the industry has degrown. No. The two-wheeler industry. But we've still grown by 6.5%. Oh, correct, correct, correct, sir. I think that... And so, so it's just, like, no, in terms of our growth, we don't see any risk or challenge, right? Except for maybe some war-like situation. Other than that, we don't really see any kind of, risk, right? No. Oh, perfect. Perfect, sir. Thank you so much, sir. All the best, sir. Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Sachin Kasera from Swan Investments. Please go ahead. Yeah, hi. Congratulations on a good set of numbers. Just one question. The strong order wins that we have reported, so when should we start to see the benefit of that, more of H2 of the current financial year, it will be more of a FY 25 phenomenon? This will be FY 2025. More from the second half. It will be the second half. Second half of FY 2025? FY twenty-five. Okay, 12 months from now, that's when we start to see the real benefit of this strong order wins that we had recently? Yeah, which we have just reported. Okay, got it. Thanks. Thank you. Next question is from the line of Pratik Poddar from Nippon India Asset Management. Please go ahead. Yes, sir. A couple of questions. One is, maybe you could just touch upon when you see QOQ growth, as reported in your presentation also, across vehicle classes, it's quite strong, right? While YOY you have outperformed, on a QOQ basis, the revenue growth looks quite muted relative to the automotive production growth of India on the two-wheeler side, be it three-wheeler, PVs, CVs. And in fact, even the largest customer on a QOQ basis has grown. So I'm not able to reconcile as to why have we then grown at 4% this quarter. Yeah. T he largest customer has only grown by 2.7% QOQ, and Correct. grown by percent. So, yeah, the industry, two-wheeler industry has grown by 13.6%, but the largest customer, two-wheeler volume, their production number has only grown by 2.6%. So as earlier stated by Tarun, sir, and MK, that it's better to look at H1, and H1, we have grown by 6.5%, whereas the industry has only, two-wheeler industry has degrown by 0.2%. And there are new, there are new businesses for SOP are going to start in second half of this financial year. A s we stated earlier, we remain confident that we'll do better than the industry growth. Okay, okay. The other is when I look at your employee cost, very sharp accretion. In fact, it is something which has detracted your operating leverage on a year-over-year basis as well as on a quarter-over-quarter basis. Just curious, why has that happened? Yeah, Pratik. So, a couple of things happened. One, we had some one-time good news in Q1. That's one of the reasons. The second reason is we also, we are trying to change the composition of the workforce. We recruited some GETs and also, some workforce at the entry level, which should actually give us benefit going forward in the long run. So that's another reason. Yeah, but we remain conscious going forward, you know, on, on all fixed costs. No, so just to double-click on this, changing or parameterization which you are doing, is it in anticipation of the additional orders which are yet to be executed, and then we'll see the operating leverage? Is that the way I should think about it? So you're building capacity for future growth, but the capacity is built at a lower cost because you have hired entry-level graduates, et cetera. Yeah, that is one reason. Secondly, we are also reskilling, considering the growth prospects we have. Okay, got it. I think one of the participants did ask, and you did say that by H2 FY25, you'll start seeing the new order being, order book being executed. Over what timeframe is this? In the sense, when you have won these new orders, in what timeframe would you execute, like, either three years or 18 months, two years? Again, Pratik, every customer and every program will generally- Okay. have different development timeline, right? You know, passenger car development timeline is generally longer than a two-wheeler development timeline. Within passenger car, within two-wheeler, within commercial vehicle, different customers have different philosophies, right? So I think it's hard to put a... I mean, it's hard to put an exact number on it without actually explicitly delivering a revenue guidance. I think like we said, right, I think FY 25 is when we expect, a lot of this will go into, will go into manufacturing. Sure. And the new orders which you have won, these are not replacement orders. These are over and above your base business, which you really do, right? So these are essentially filling up of capacities which will drive operating leverage. Is that a fair understanding? Yeah, absolutely. We don't report any replacement numbers at all. These are, these are only new order wins. ... Okay, fantastic. Last question, when you look at your largest customer, they've been quite vocal, at least in this conference call, about new product launches on the EV side, be it two-wheelers as well as scaling up their three-wheeler EVs. Is it fair to say that their scale up, the content per vehicle in the EV, for them would be far higher than their base business, and that could drive operating leverage or that could drive revenue growth for us once their three-wheeler and two-wheeler EV business starts becoming more popular or starts gaining traction? Yep, I think that is definitely fair to say. Would you have 100% share of business over there with them? No, I think platform by platform, model by model, it will vary. But, I mean, as you can- You are the preferred customer, supplier over there. That's fair. We would always be significant. Fantastic. Some products we could be single source, but in some products there would be a sharing of business. Got it, sir. Got it. Sir, just correct me on the interest cost, a bit puzzling, right? You called out debt interest cost, you called out factoring cost. When I do the math and when I annualize your interest cost, it doesn't add up. How is that? Because look, you have INR 200 crore of interest cost. You said INR 1,000 crore of net debt at 9% interest, that's INR 90 crore. INR 500 crore of factoring cost at, again, 8.3%, that's INR 40 crore. 90 plus 40 should be, whatever, INR 130 crore versus INR 200 crore. Can you help me understand where is this INR 70 crore additional coming from? Yeah. T here are also things like the lease interest, which is part of that. Plus there are bank charges, plus there are things like prepayment cost, which we paid this time to get rid of some of the high-cost debt. And more so for- If you annualize all this, it may actually work out to be that number, but going forward, some of these may not repeat. What's the lease cost last? Maybe you can just call out that? This is the lease and the interest component of the leases that we have. Yeah, yeah, I understand that. What's the lease cost, like, per quarter? I don't want to give the exact number, but you can broadly work out the difference. And second thing you need to keep in mind is this is like net debt versus gross debt, right? We also have about INR 200 crore-INR 250 crore of cash- Mm-hmm. which will scale down going forward. Y ou need to apply this on the gross debt also. Understood. What is this foreign exchange gain pertaining to? Yeah, so it has both operating and non-operating parts of it. Operating is simply the restatement of these export sales. Okay. Non-operating is relating to these loans and advances which we gave to our overseas subsidiaries and the businesses which we have there. Can you call out the non-operating one, please, if it's possible, sir? Broadly, you can say 50/50. Okay, fantastic. Thanks, and best wishes for the future. Thank you. Thank you. Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Piyush Gandhi from Kovill Capital. Please go ahead. Hi, thanks for taking my question. Would it be possible to quantify the impact of European shutdown in this quarter, and in terms of revenue, how much would we have missed? Right. Yeah, it's difficult to... I mean, we don't want to reveal that kind of breakup between overseas and India, but you can broadly say that for nearly more than a month, most of those businesses were closed for holidays. Okay. So that's what we- Would we, would it be fair to assume, given the shutdown, the margins or probably EBITDA would be far lower, I mean, for this quarter, again, versus the previous quarter? Yeah, obviously, because that revenue was not there, but costs would continue. Okay. They'll continue. Okay. Yeah. Next quarter, maybe once the business comes back to normalization, there is some tailwind from that part of the business that can come through? Correct, correct. And would it be possible to quantify the impact of, you know, falling raw material prices on our top line? I mean, we've seen on the whole of one year, the both metal part of the business and the plastics part of the business would have seen some deflation in the products, so that would have been passed on, right? So, I'm just trying to understand, you know, what is the underlying growth versus the inflation/deflation that hits our top line. We can broadly say maybe it's close to 1% and up to 2%. Okay. It's very- Not very large. It's not that large, as such. Right. Fair enough, sir. in this quarter, particularly because of this shift in festive season, that would also have had some impact on our top line growth, right? Correct. Any number that you would like to put in? How do we estimate this? Difficult to- Okay. give a number to it. No, the whole idea of asking these questions is to understand the underlying, you know, top-line growth, because we've been in this 1,800, 1,850, 1,900 range for last three, four quarters, and we are actually, we're hoping that given this is the biggest quarter for us, this quarter would have been a little better on the top-line front., s o that's why I'm trying to understand where is the miss coming from. That was the underlying thought process, nothing else. No, I understand. Yeah, but I understand your question, respect that also. Mm-hmm. But difficult to quantify, it is what we're saying. Fair enough. To look at the annualized number, you should look at how much we have done in last four quarters and compare that to the previous four quarters number. If you annualize the numbers, then you will see that we have significantly grown. I would also say, I think if you compare H1 of this year to H1 of last year, we have grown. But to be honest, I think as a result of semiconductor challenges that took place through, you know, 2022 or basically FY 2023, some of the revenue last year was a little bit maybe lopsided. I f you look at the half overall, the only real difference is the impact of the festive season. W e've still been able to drive a level of growth. Fair enough. Fair enough. Sir, I may be completely wrong on this, and pardon me if I'm wrong, but if I recollect properly, our domestic lighting business, we were supposed to start on a plant, and we were supposed to, you know, in-house in-source the entire LED light production. Is that already happened, or I'm reading something wrong? Yeah, no. W e had already in-sourced... So, okay, so we had not got any outsourced lighting production even last year. Yes, we are starting a new plant. In fact, it is partially started already, and I think that ramp-up into, you know, from the old plant into the new plant will continue. I t is not an in-sourcing activity that is taking place. It is a location move that is taking place because, unfortunately, in the old plant, we ran out of space. How much more capacity would the new plant have? Because you also mentioned in one of the answers that we are running out of capacity on the lighting side of the business. I would say space more than capacity, but yeah, we have the ability to, I mean, we have the ability to add 40% more volume. Just one last question. Any update you would like to share on what is happening in the China business? We were in an arbitration procedure with them. Yeah. B oth the approaches are continuing. The arbitration proceedings are continuing. On the other hand, the discussions with the partner on split are also progressing well. It may take maybe a little more time to actually conclude. So in any case, we are assuming that this should actually come to an end before end of this year. Okay. Okay. Thanks. Thanks. That's it from my side. Thanks. Thanks, Julia. Thank you. A request to all the participants, please restrict to two questions per participant. Next question is from the line of Vignesh Iyer from Sequent Investments. Please go ahead. Congratulations, sir, and thank you for the opportunity. I just wanted to know, after the prepayment of this debt, what would be our now cost of debt, as of after this prepayment is done? Yeah, that's what I was answering in the, in the earlier part of this discussion. You can roughly say 9% the average cost of debt right now across maturities. Plus factoring, is anywhere like 8%-8.3%, which is what we are including. Okay. Okay. C an we, I mean, as a part of the India statement, I understand that you have to show interest cost, but as part of the notes, can we have that bifurcation shown for better clarity as to what is your regular part of the interest and what is prepayment or back time charges, if any, that is already debited under interest? I mean, this is a one-time thing. It's not that every quarter we are going to have, and there is no requirement of Ind AS that we have to give this separately as a disclosure. Mm-hmm. This is a one-time thing which should not happen going forward. O kay. Okay. I mean, because there is some discounting charges as well, right? That is a recurring nature, Correct. That will continue because that is the cheapest source of financing for us. Right. That'll be the last one to be taken out. Absolutely. Absolutely. Yeah, that, that's all from my side. So thank you and all the best. Thank you. Thank you. Next question is from the line of Abhishek from Dolat Capital. Please go ahead. Thanks for the opportunity. Sir, we have seen a strong growth in the polymer business in this quarter. H ave you won any new business in this segment? And how is the outlook ahead? Yeah, so you know, polymer in general, right, across, whether it is molded plastics, painting, seats, air filters, I think we, you know, when we have one new business which goes into production, we have, we continue to win business as well also. A gain, you know, that growth is driven by a combination of, let's say, businesses that have been executed from past year. In some places we also have, let's say, you know, higher content, especially on topics like painting, a nd also in some places, maybe a level of natural growth from the OEMs. Okay. And sir, how much difference in the cost of discounting of debtors versus loan cost, and how much benefit we get? And, what is the normal payment terms you give to the customer usually? Yeah, I think I answered this earlier in the call. The debt, debt is at around 9%, and factoring is somewhere between 8%-8.3%. How much is the- Sorry? Normal payment terms to the customers? Sorry? How much normal payment terms you give to the customers? Payment terms, of course, vary from customer to customer. Most large part of the customers is in the range of about 30-45 days. And then there are also certain customers in the range of 60 days and all. We're trying to rationalize that, but yeah, you can say average, maybe around 45 days. Okay, sir. Thanks. Thank you. A reminder to all the participants, you may press star and one to ask a question. Next question is from the line of Rohan Prasad from Renaissance Investment Managers. Please go ahead. ... Hi, sir. T his is again on your growth. I f I, if I look at your largest customer- Rohan, sorry, but your voice is not coming clear. Hello, am I audible now? Uh, slightly. Is it better? Yes. Yeah. M y, again, my question is on growth. So if I look at your largest customer, H1 to H1, revenue growth is something like 17%. So isn't it better to look at revenue to revenue growth versus volume growth? And considering that, our growth is just about 6%. So could you explain this? Sorry, I'm not clear what exactly is the question. Are we saying that we've grown more with our- I'm saying your largest customer, Bajaj, has grown, H1 revenue has grown at 17%. I'm not talking about volumes, I'm talking about revenue. And we've grown at about 6%, and even Hero has grown at 4.5%. So in that context, our revenue growth appears to be on the lower side, H1 to H1, I'm comparing. Or maybe that's not the right way to look at it. It's honestly, it is hard for us to comment on customer- Pricing and their revenues. Yeah, and it's hard for us to comment on customer like value or revenue growth. I think, of course, you know, the pricing strategy is how... You know, I think that is best to speak with them. I think from a supplier perspective, I think looking at the volume and comparing their volume growth with what is our, you know, revenue growth, I think makes a lot more sense. Okay. Can you actually repeat what is the CapEx you're planning for this year and next year? CapEx? Yeah. CapEx, we may spend about another INR 100 crore or so in H2. How much have you done in H1? It's close to about INR 110 crores or INR 113 crores. Should we expect a similar number for next 1-2 years? Yeah, it should be around INR 200 crore, or thereabouts. Just trying to work out your cash flow. So there should be any meaningful change in the working capital cycle that we have as of now? Should not be. It should only get better, is what we are trying to say. In between, there could be some ups and downs, but going forward as a trend, it should not get worse than what it is right now. Okay, great. W e're seeing net-net next 2-3 years should be good on free cash flow generation for us? Yes, yes. Cool. Great, great. Again, not exactly, but yeah, that's what we're aiming for. Yeah. So basically, what I'm trying to understand is that, I mean, with about INR 1,000 crore debt, we should be max two years, we should be net cash. Yes. Ideally, yeah. I mean, yeah, it should be maybe even early, perhaps, but anyways. Thank you, sir. All the best. Thank you. Thank you. As there are no further questions, I will now hand the conference over to the management for closing comments. Thank you all for joining the call, and I would again like to reiterate that we'll continue to drive profitable growth, be prudent on our capital allocation, and focus more on free cash flow growth and also on the cost reductions. Thank you once again. Thank you very much. Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.