Ladies and gentlemen, good day and welcome to ZF Commercial Vehicle Control Systems India Limited Q3 FY25 earnings conference call, hosted by Batlivala & Karani Securities India Pvt. Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star +0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Pvt. Ltd. Thank you, and over to you, sir. Thank you, sir. Good morning, all participants. Thank you for joining us today, and welcome to the ZF Commercial Vehicle Control Systems India Limited's call to brief you on the quarterly earnings. Today, the third quarter earnings for FY24-25 will be presented by the management team of ZF Commercial Vehicle Control Systems India Limited. Our hosts today from ZF Commercial Vehicle Control Systems India Limited are Mr. P. Kaniappan, Managing Director, Ms. Shwetha Agarwal, Chief Financial Officer, and Ms. Muthulakshmi, Company Secretary. I will now hand over the call to Mr. P. Kaniappan, who will provide further insights into the results. Over to you, sir. Thank you, Mr. Jayaraj. Good morning to all of you. I warmly welcome you all to ZF Commercial Vehicle Control Systems India Limited's third quarter results for FY24-25. Certain forward-looking statements that we will make today are based on management's good faith expectations and beliefs concerning future developments. As you know, actual results may differ materially from these expectations as a result of many factors. ZF Commercial Vehicle Control Systems India Limited's results for the quarter ending December 31, 2024, were published on February 6, 2025. They are available on the website www.zf.com under the ZF CV India Investor Relations section. We hope that you have had an opportunity to go through them. A transcript and recorded audio of this call will also be made available on the website www.zf.com under the ZF CV India Investor Relations section. I'm happy to talk to you today as we give you an update about the business of the company. First, economic update. I would like to start with a quick update on our operating environment, which is influenced by economic factors and the development of the commercial vehicle industry. The global economy remains stable, with growth holding up amidst varying inflation, albeit at a slow pace. Geopolitical risks and policy uncertainty, especially with respect to trade policies, have imparted heightened volatility to global financial markets. On the domestic front, real GDP registered a lower-than-expected growth of 5.4% in Q2 FY 2024-25, as private consumption and investment decelerated even while government spending recovered from a contraction in the previous quarter. On the supply side, the growth in gross value added during Q2 was aided by resilient services and improving agriculture sector, but weakness in industrial activity, that is, manufacturing, electricity, and mining, tempered overall growth. Stems from geopolitical uncertainties, volatility in international commodity prices, and geo-economic fragmentation continued to pose risks to the outlook. Taking all these factors into consideration, real GDP growth for FY 2024-25 is projected at 6.6%, with Q3 at 6.8% and Q4 at 7.2%. Real GDP growth for Q1 FY 2025-26 is projected at 6.9%, and Q2 at 7.3%. The risks are evenly balanced. Going forward, economic activity is set to improve along with rising business and consumer sentiment, as reflected in the Reserve Bank of India survey, sourced from RBI Monetary Policy Committee, December 4 to 6, 2024. Now, about the industry, Indian commercial vehicle industry. The commercial vehicle industry demonstrated growth on a sequential basis compared to Q2 FY 2024-25, fueled by the resurgence of construction and mining activities, further supported by festive demand. However, on quarter-on-quarter basis, the industry experienced a 9.5% decline due to a broader economic slowdown and delayed government CapEx spend. Despite this, the shift towards the ICV segment, intermediate commercial vehicle segment, continued in this quarter. The commercial vehicle production, that is, CV more than 6 tons, decreased from 105,025 in Q3 FY 2023-24 to 95,082 vehicles in Q3 FY 2024-25. Looking forward, with the government's focus on infrastructure spending, anticipated improvements in rural demand, and growth in end-use segment, the CV industry is expected to grow. OE sales. The company's OE sales for the quarter stood at INR 409 crores compared to INR 483.1 crores in the corresponding period in FY 2023-24, reflecting a decline of 15.3%. This was primarily driven by a reduction in vehicle production and a shift in the vehicle mix towards buses and ICV segments, resulting in lower contents per vehicle. While we anticipated a lower value per vehicle due to these market dynamics and our strategic exit from low-margin products, we partially absorbed this impact through targeted product launches. I would like to list three such focus areas. So one is electronically controlled air suspension for coaches and electric buses, expanded penetration of upOptiDrive AMT keep drive AMT, AMT automated manual transmission across additional vehicle platforms, and focus on safety solutions, driving a 5% increase in trailer ABS adoption. These initiatives underscore our commitment to innovation and value creation, positioning us well for future growth. The recent budget aims to, that is, the one that was launched on 1st of February 2025, aims to boost economic growth by focusing primarily on stimulating demand in both urban and rural areas. This will be achieved through increasing the income tax threshold and investing in agriculture, with additional emphasis on infrastructure, innovation, and technology. Aftermarket business. Turning to the aftermarket, we are pleased to report a good performance in Q3 FY 2024-25. The aftermarket revenue was at INR 132.4 crores, making a 20.6% quarter-on-quarter growth compared to INR 109.8 crores in the corresponding period in the previous fiscal year. Key highlights of the aftermarket business. Through the aftermarket, we facilitated the retrofitting of hydraulic ABS, anti-lock braking system, and an LCV platform for a leading OEM for export to the Sri Lankan market. This initiative presents a growing business opportunity. Increased penetration of door control systems into northern and western regions. We are actively working towards leveraging multiple growth opportunities in the door control system. We are working closely with the petroleum companies to introduce new safety specifications in our upcoming tender, aimed at preventing rollover accidents. The initiative will begin with a pilot program in four states where its effectiveness in reducing accidents will be assessed. Based on the results, we plan to expand the initiative to all other states nationwide. We have launched a Go Green project in partnership with another state operator. By offering retrofit kits with higher capacity compressors, we aim to enhance fuel efficiency and extend the air brake life, contributing to sustainability and higher cost savings. sales to state transport undertakings remained stagnant due to the replacement of aging buses with new vehicles, lower-than-expected reduction of electric buses in that quarter, and state government policies that have affected payment collection. Export of goods. In Q3 of FY 2024-25, the company delivered export sales of INR 290.6 crores. This robust performance was partially attributable to a favorable base effect following reduced uptake in the same quarter of FY 2023-24 due to higher inventory levels. More importantly, our growth was driven by strategic expansion into new business segments, particularly air compressors and actuators, with leading OEMs in Europe. Looking ahead, we anticipate continued growth in volumes for all air compressors and actuators in coming quarters. To support this demand, we are proactively investing in capacity expansion, ensuring we are well-positioned to capitalize on emerging opportunities. Export of services. In Q3 FY 2024-25, the export of services grew to INR 104.5 crores, an increase of 18.5% compared to the same period in the previous fiscal year. This growth was driven by an increase in engineering and related support activities provided to our global team. Digital business. In Q3 FY 2024-25, our digital business income was at 9.5 crores, the subscription income, a quarter-on-quarter growth of 39% compared to Q3 FY 2023-24. This performance was driven by additional business acquisitions in connected advanced driver assistance systems, ADAS, and driver behavior monitoring systems from key fleet operators, along with a steady increase in customer subscriptions for our existing connected services. Subscription revenue grew by 17% on a quarter-on-quarter basis compared to FY 2023-24. The growth was further supported by strengthened field support and targeted customer awareness initiatives. R&D and engineering. The company provided pre-homologation and development support for the implementation of advanced driver assistance systems, ADAS, features for a leading OEM in India. This collaboration enabled the OEM to secure central motor vehicle rules, CMVR certification for their truck range, marking a significant milestone in CV safety and innovation in India. Manufacturing update. The company launched new twin-cylinder compressors from the Mahindra World City plant for European OEM customers in September 2024. This marks a significant milestone demonstrating our capability to produce and export high-end twin-cylinder clutch compressors. At our Oragadam facility, the company established new assembly lines for dual double diaphragm spring brake actuator, DDSBA, and automatic slack adjuster ASA, ramping up production to meet the full demand for our export customers. As part of our strategic manufacturing footprint optimization, we transferred the production of actuators, brake chambers, and exhaust brake assemblies from Ambattur plant to our other plants in Jamshedpur, Lucknow, and Pantnagar. This move enhances operational efficiency by bringing production closer to key customer locations that were improving delivery performance to customers. Additionally, we made significant advancements in productivity and quality by integrating smart automation, robotic technologies, testing automation, and digitalization within our manufacturing cells. These initiatives have strengthened our operational excellence and positioned us to sustain the growth. ZF CVCS India at Bharat Mobility Global Expo 2025. ZF CVCS India participated in the component show at Yashobhoomi from January 17-21, 2025 as part of ZF Group India. The event provided an excellent platform to showcase leading-edge technologies across all product lines, including OnGuardMAX, which is advanced driver assistance systems, ADAS, reversing camera, short-range radar, intelligent AMT, ConAct, electronic stability control, and electronic braking systems, among others. Additionally, we introduced new technologies, including the E-compressor, electric compressor, uncertain It's a twin-cylinder, which is nothing but a twin-cylinder E-compressor, SCALAR, that's a fleet orchestration platform, and CeTrax, which is an EV drive, electric vehicle drive. The ZF booth was formally inaugurated by Sri Piyush Goyal, Honorable Minister for Commerce and Industry, Government of India. We engaged with the CXOs of leading CV OEM and key decision-makers from purchasing, R&D, and marketing teams. Our showcase received a positive response, generating significant interest across all our technologies, which we aim to leverage for future business opportunities. Awards and recognition. ZF CVCS India has been honored with the Best Supplier Award from JBM Group, underscoring our leadership and commitment to innovation, safety, and customer excellence. ZF CVCS India has been honored with the prestigious ZF DNDNA ofAF Quality Excellence Award for the second time in three years, a testament to our unwavering commitment to superior quality standards. This distinguished recognition is one of six key awards presented annually across ZF Group, and the only one dedicated to quality excellence. This recognition highlights the company's quality transformation journey through successfully implementing the ZF DNDNA of AF quality framework among our supplier partners. By fostering a zero-defect mindset and encouraging ownership of quality with the supplier, the initiative has set new benchmarks for excellence within the supply chain. This accomplishment underscores ZF CVCS India's dedication to innovation and continuous improvement, paving the way for our future success. In the third quarter of FY 2024-25, the company's employees received notable recognition in total employee involvement engagements. The product engineering team won the Platinum Award in the NIQR, National Institute of Quality and Reliability, National Six Sigma Competition, and the Ambattur site earned a Gold Award in the NIQR, National Six Sigma Competition. Our employees actively participated in external total employee involvement and related competitions, winning two national awards, three regional awards, and ten state-level awards across various categories. These accolades were earned through our commitment to excellence and participation in competitions organized by the Confederation of Indian Industry, the Automotive Component Manufacturers Association of India, and the Quality Circle Forum of India, QCFI, National Institute of Quality and Reliability, NIQR, among others. We remain dedicated to our pursuit of excellence. CSR. In Q3 FY 2024-25, we continued to take significant strides and make a meaningful impact in our surrounding communities. At the government middle school, Bhupe Bagbera The product sales in Q3 2024-25 were INR 832 crores against INR 797 crores in Q3 FY 2023-24. This is a growth of 4.4% driven by an increase in aftermarket sales and exports. The company's EBITDA operational profit improved to 23.3% in this quarter compared to 20.5% in the same quarter in the previous year. The profit before tax increased by 2.3% to INR 161 crores, and the profit after tax by 2.4% to INR 126 crores. This was a result of the management's continued efforts in improving the business profitability. We will continue to carefully review the environment and our performance to consider further opportunities. Thank you. We now welcome your questions and feedback. Thank you. 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 your touch-tone telephone. If you wish to withdraw 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. First question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead. Yes. Thank you, sir, for the opportunity, and congratulations on the strong operational performance. Firstly, to Shwetha ma'am, is there any in this quarter, any one-offs in the margin side? Because we have seen a particular good improvement in the gross margin, and the other expense also was low sequentially. Can you help us understand what happened in this moment of both the items? Good morning, Mumuksh. There is a minor one-time impact from the quality cost, which is evaluated on an annual basis. We have talked about us winning the DNA of Quality Awards, and this has resulted in our reduction of the claims and warranties, and that's what's reflected in the books, but the one-time impact is not a major one, and in fact, it is a sustainable one, which will be carried forward. Got it, so can you explain us just on the other expense, the reduction which we saw despite higher revenues, partly to this one-time saving which we have from the reduction of the claims, and anything other than that also? Anything like freight reduction, etc., which have reduced the cost? Just to add to what Shwetha said, so we keep certain provisions for the warranty, so normally, we are keeping it based on the earlier reduction warranty claim trend, and it's a three-year type of basket. So the actual trend has been steadily coming down, which is the actual case in the last two to three years. So the excess provision is released. So that was one-timer, about six crores. But then this is a sustainable thing because actually, it's based on a trend. Again, though we have a practice of releasing it at the end of every year. But it's also sustainable, meaning as you keep improving the quality of products, the field failure comes down, so you reduce your you can also reduce your provision. So that is the topic. Other than that, there is no other one-timer. In fact, we are affected by the forex. That's a negative. It's a tailwind. Sorry, headwind. Got it. Got it. On the gross margin, the improvement would be sequentially largely due to better aftermarket mix and the OEM mix? Actually, there are a few things contributing to the gross margin. One is we continue to review the bleeder products in our portfolio. And in a few cases, of course, we try to improve our cost side in the supply chain side, also in the plant, etc. But there are a few products in which it's more like a commodity today. So we buy the products and sell to the customers like air tank type of products, where it's a bleeder. So we exit at those areas. Wherever we are not making so this is one thing. When you improve your overall margin by doing bleeder management, so in some cases, we go to the customers and seek a revision where we believe we have actually achieved the true cost, the best cost level. Still, if you're bleeding, we go to the customer and seek a revision. So this is one thing that we continuously do in the last two, three years. Now, we'll continue that. Meaning, we have certain targets to achieve in terms of customer profitability, product profitability. That's one aspect. The second aspect is in the supply chain, the purchasing team constantly look at opportunities to really reduce the cost. That, again, is through value engineering, value analysis, and value engineering initiatives. Again, it's an ongoing, more like a three-year type of pipeline. They keep working. That reduces the purchasing price. We call it purchase price variance. So purchase price of the supplier parts. Then also, there's a negotiation process where, based on the volume, we also get certain contribution from the suppliers through the nego route. This is more or less stabilized. These approaches are more or less getting stabilized. So this is on the supply chain. Of course, the factories, again, we work on what we call controllable factory cost, COFACO. We We say COFACO. So again, see what improvement you can do in the cost of essentially addressing the productivity, improving the productivity of the plants continuously. So this is also a lever that continuously it works, meaning if you are sometimes I've been always saying that we come from a TQM type of background in which the continuous improvement is the core of our DNA. So we look at improvement in all aspects of factory cost as well. So that has also contributed. So these things have helped us to improve the gross margins. Got it, sir. So coming to the exports outlook, I think the Daimler order is seeing a good ramp up. Can you just indicate how large this order can be and how I mean, for next CY 25, if you want to share any outlook, how do you see the exports growth? And secondly, on the BMW EV order, are you seeing any pickup there? And thirdly, just on the exports, how is the different value of a twin-cylinder compressor versus normally a regular compressor? How different is the content per vehicle for this product? Yes. I do not have the mandate to give exact numbers, but what I can tell you, our growth in export is largely driven by the new product launches. One is, of course, the global markets are not that much growing, particularly both Europe and the US. But we expect improvements maybe after two quarters. But currently, our focus is to really grow through new products. In the last year, we have launched three new products. One is we are already supplying to one of the global players, DAF. DAF, we are expanding the volume. Again, compressor, high-end compressor. Earlier, we used to supply compressors at 318 cc to, of course, 636 to that type of compressors to one of the global OEMs. Then we, based on the success of that, then we extended to DAF. DAF started with the 440 compressors. Now they are steadily increasing. And we have got now we are supplying the high-end twin-cylinder clutch compressor. This probably is the highest in terms of value content in the compressor segment. Again, based on the success, and of course, we have also launched Daimler Global. So that's again a similar high-end compressor. That volumes are slowly picking up, increasing. Exact number, I'm not in a position to value. But typically, the content is around about EUR 200 per compressor. So content is probably a good thing. So we also expect volume also to pick up. This is on the compressor side. We are a global center of excellence for compressor manufacturing in this space. So it's a question of how we continue to strengthen our position there in terms of future, which I think we have all ingredients to really strengthen our position there. The second area is you asked a question about BMW. We are not seeing any big immediate recovery in the product that we are selling. In fact, in that quarter, about INR 12 crores, it has reduced versus the previous year. But again, this is a global topic. So we are awaiting the evolution in this space. But one other area where we are growing is in the actuators and brake chambers. We have launched a new brake chamber to one of our important customers, Volvo. In the actuators and brake chambers, we see more opportunities as we are securing a stronger position with some of the global OEMs in terms of share of market, etc. Yeah. We see growth, but one challenge is while we grow through the new products, the demand of some of the existing is moderating because of the global situation, economic situation. That's why we are still in the range of INR 100 crores per month type of range. I expect at least going forward, things would slowly improve. Got it. Just on the Daimler side, anything there that is improving? That's right. That is recently only we launched. Now, maybe during September or October time frame, they launched their product. It's taking up well. Customers seem to be quite happy. Volumes are increasing more than what they've indicated. We see a growth in the space. So that's another customer, Volvo, DAF, and Daimler. So these are the three customers now. We see improvement in the situation as we move forward. We are also trying to build additional capacity, expanding, putting some investment, etc. So that work is going on. Just lastly, recently, there was a transport committee meeting, and Dr. Nitin Gadkari had talked about the upcoming regulation on the ESC and ADAS, etc. Just I would just want to get your feedback. How do you see that announcement, I mean, that mention about the regulations? Yeah. So in terms of our readiness to support the industry, we are already ready. In the case of ESC You might know that in the bus platforms, the ESC adoption has been adopted, but I would say about 40% of the overall size of the industry because of certain loopholes or whatever in the regulation, but then September 2025, the government actually is bringing some more key points in the regulation that will allow ESC to be fitted that requires the ESC to be fitted in maybe 60%-70% of the overall bus production. That will increase. Now, the ESC is a technology that is more needed for double-decker buses, needed for buses which are going very in the coaches. Whenever they take a turn, there could be a rollover possibility. ESC helps to prevent that rollover. That is the technology. So this is much more relevant in India in the truck segment because people overload, and the vehicle became unstable because physically, the vehicle by physics, it becomes very unstable because the center of gravity is moving up. So you need to have technology. You have to solve it through technology. Very recently, we see there are some few places in India where there's a tanker accident which are carrying hazardous goods. It led to some collateral damage to people around. Some people died, etc. So this is an urgent requirement for the market because when you deal with liquid transported through a tanker, the vehicle per se becomes unstable. By physics, the driver cannot control because so this is an excellent technology to stop this. What we have done is we have been working with all the Indian, most of the Indian OEMs, and many of their platforms are already homologated with ESC technology. Recently, we also came out public that we have invested in an ESC test track in our test track in Chennai. Now, two things to learn. The market itself, we are seeing some pull from the market even without a regulation for these technologies for the trailer EBS, which has got a rollover elimination possibility. In the truck, mostly, it will come through a regulatory route. We are very much ready to support the government with all our capabilities. Already, we are partnering. Exactly when this will come, we are not because the notification has not yet come, but it will soon come. It is expected to come. Also, the ADAS or Advanced Driver Assistance System is the next technology that the government will bring in regulation. A lot of talk about it. Generally, the ADAS needs ESC also to effectively apply the safety in the vehicles. You need to have ESC also before the ADAS. These things are the very immediate in the near-term expectation in the market. ADAS also they are quite ready. In fact, one of the big OEMs, they even presented in the Bharat Mobility that they are ready with level two automation, which is essentially we are working with them, our technologies are adapted. Advanced driver assistance systems, there are multiple features of that. But then the government will expect us will bring notification for some basic minimum that is required to ensure that vehicles are safe because that particular advanced driver assistance. There is called advanced emergency braking system, which is a part of the ADAS. There, essentially, the vehicle will have an ability to see, think, and act. In the sense, it will see what is in front through radar and cameras. It will have software which will actually be able to process the data and think, and then it will apply brakes or otherwise. So that is the way the technology works. And in our view, these are in the next two, three years timeline, most of these will come to market. Understood, sir. Very helpful, sir. I'll come back to you. Thank you so much. Thank you. Thank you. Next question is from the line of Himanshu Singh from Baroda BNP Paribas Mutual Fund. Please go ahead. Hi, sir. Just on the impact on Forex, you mentioned that there is a negative impact of Forex. Is it accounted in other expenses or other items Yeah. I will request Vauncertain Hi, Himanshu. This is accounted in other expenses. And would you be able to give the quantum this quarter, previous quarter, and last year? Last year, same quarter, we had a 15 crore positive impact. And last quarter was 9.3 crores of loss as well. Okay. You You want me to repeat? No, no. It's fine. Thank you. Coming to the margins, so we have seen a substantial increase in margins this quarter from, let's say, 14.9% last year to even if we account for the one-off of INR 60 million, that comes to around 17.9%-18.4% this quarter. So do you think this is sustainable, and we should see a substantial increase in margins while we're going ahead as well? Yeah. The mix is one aspect that has been playing. It has played well for us in the last quarter. You see, the aftermarket, we have grown at 20% while the OE businesses, we have in a way degrown. Export, we have done well. So mix can play a certain impact. Otherwise, all substantial. But aftermarket, we are seeing the current situation, even in the last one month or so, also we are seeing a good improvement. We have to see how it will evolve. But for the mix, everything else is sustainable. Mix, if it is playing some challenge, it can have an impact. But at least in the near term, we see most areas to grow. Both aftermarket, OE, exports, we believe will grow because we're seeing some signal that OE demand also increasing now. Aftermarket also increasing. And export, we have some different orders in the pipeline. So things are looking up. Okay. And sir, what is the current mix? And how do you see it going ahead, let's say, in the next two years? Do you see the aftermarket increasing in the overall scheme of things substantially? What is your assessment on that? Okay. Typically, if you see, our OE businesses are about 50%. Typically, right now. But then you can always apply your math. Aftermarket is about 16%. This is in the last quarter. That is the quarter which we are discussing. And exports is about 35%. So 50 OE, 15 aftermarket, and exports about 35. So in terms of profitability, aftermarket is very profitable. And any big change in the aftermarket export, if you see, currently, we are in the range of one-third of our production, overall sales we do export. I don't see a very big change in that unless otherwise we have some serious issue on the top line, on the OE. But now that the market recovers, you can always expect this is the type of mix that can be. Okay. Aftermarket is 16%. Export is 35%, and OE is 49%. That's the actual percentage in that quarter. And with that, you see some improvement in the bottom line because if there's a change, if there's a change to this, suppose OE, it is increasing, and aftermarket, it is coming down, the impact will be there. Unfavorable situation in terms of margin, but not too much, but still you can, for your calculation, you can use that as well. Okay. Okay. Sure. And sir, just on the revenue side, so we are in the range, as you also mentioned, in the INR 90 crore-INR 100 crore range from last eight quarters. So when do you think you would be able to sustainably go above that INR 100 crore range, INR 1,000 crore range substantially? No. The target export, no? Overall, I am seeing the growth starts now. Probably all areas, at least we see improvement this quarter. But April, May, we have to see. Because now, if you see the government statement or RBI statement indicates that the growth is expected to be in the range of 6.3%-7.3% going forward next few quarters. And because the government has started investing and a lot of tender programs for the buses, particularly EV buses, is already happening, and many customers have started producing the electric buses, we are seeing a positive momentum to start now. While how pronounced it is, we have to see because all of us have to really see how it is evolving. But we are preparing to seize this opportunity. So INR 1,000 crore is, in my view, it's not too far per quarter. Sure, sir. Thank you so much. I'll get back in touch with you. Yeah. Thank you. Next question is from the line of Rakesh Jain from Axis Asset Management Company. Please go ahead. Yeah. Hi, sir. Sir, just wanted to understand. You talked about domestic OEM growing next year. You expect that. Is it for you or you're talking for the industry? No, I'll tell you. I'll give some data points and you can make the actual number of 6 ton and above vehicles is something that is what is our space. It could be buses and trucks, etc. So in the quarter that we are discussing, roughly you can see we have done about 95,000 vehicles. So it's about 30,000, 32,000 vehicles a month we are talking. In January, the number was 39,000. So you can see there is a growth. There's a growth. We are seeing a growth indication. Our view is that the growth is not okay. One is this last quarter of the year for the OEMs. Second, also the mix was very unfavorable because the main heavy-duty vehicles or MSC segment, that mix came down from about 60-62% to 57% in that quarter, the quarter of discussion. But now we expect this also in this quarter. Now, unless it is likely to increase, the mix is likely to increase because of, again, the construction, mining, those activities are actually increasing. And also, the electric buses where we have a good content, even though it's a low volume, but still it's a high content type of segment. That was not happening in that quarter at all because of the tenders were not there. Whatever orders customers were having, they completed, they were waiting. But now most of the electric bus manufacturers have started the production. We see a growth there. In our view, how this will pan out, we have to still wait and watch. At least this quarter, we see at least some indications of we are in the second month of this quarter. Indications are quite positive. A lot of pull from all customers. In some areas, we are even looking at going for a third shift type of operations to support the market volume. Again, we are more or less connected to the industry. Industry grows, we are also going to grow. Whether it will continue beyond April, we have to watch. At least this quarter, I'm seeing a very good demand pull from OEMs. Also, there's a very good increase in the bus production. Also, we expect that to continue because of the school season and the rest of the school. So is it possible to quantify how much does buses contribute to our overall revenue today? Actually, in terms of model mix, I can tell about 24% of the vehicles are produced overall in that quarter, about 32,000 per month. 24% is bus production. But to our revenue, we don't know separately, we are not having that number. We treat that as along with truck and bus. And we consider the value per vehicle as a key thing. So bus production, if it increases, again, if it is EV bus, it's a positive value per vehicle, increased value per vehicle. But then if it is a normal bus, it is not. It is actually an unfavorable type of mix. Okay. And sir, just one thing on the export side on the new products which you are adding. Those products are just currently being tendered to one single customer or they are more than one customer? New products, the export is for many customers. But in terms of product lines, we have four important product lines. Compressor is one of the major product lines. Maybe we will be doing one-fourth of roughly. You can take one-fourth of our overall export comes from compressor. Compressor area, as I said, we started with one customer and we are expanding to two more customers now. So we are starting to supply to two more customers. Earlier, we were supplying the basic level compressor. Now we are getting into advanced high-end compressors. And our view is India may become a center of excellence for this type of compressors. That's the way we are moving because we have a good supply chain. We have a good engineering capability in India. We have a good manufacturing strength. Then the second important product is actuators and brake chambers. In a brake system, you have a compressor, you have actuators, brake chambers. Then you have some valves. So in the actuators and brake chambers, again, we are emerging stronger and the pipeline is building. We are supplying to many customers, not only in the truck segment but also in the trailer segment. But in all these cases, the model is we don't directly supply to the customers. We supply to our parent or a region from there. They supply to the customers. So we have more like an intercompany operation through a transfer price type of logic. But the key point is we are emerging in these spaces more and more a center of excellence. The actuators and brake chambers. The third area is we used to make that electronic control system for the ECAS. So air suspension for BMW type of similar platforms. There is a reduction in the demand. Maybe globally, there are the EV transition, there are some challenges. So we have to understand the plan of our customer. But as such, our demand has come down there. We have to study how this is going to evolve. Then, of course, we have many valves and component supply, etc. But there, I would say it's not a very strategic type of topic. So we currently deliver based on the need. But in certain areas of the valves, we see the volume to slowly pick up. I mean, yeah, this is the broad line. So customer-wise, it is very widely spread. Because every customer needs these products because the products are released at a global level. It's a global product. Again, there's a possibility to keep expanding in this space as well because cost-wise, we are quite competitive, at least in the actuators, brake chambers. We are the top leader in my view. Okay. Okay. That's all from my side, sir. Thank you so much and all the best. Thank you. Thank you. Next question is from the line of Mukesh Saraf from Avendus Spark. Please go ahead. Yes, sir. Good afternoon and thank you for the opportunity. First question is just back to the margins part of it. In this quarter, have we got any benefit of pricing negotiations with customers say for prior periods, which has kind of cumulatively come in this quarter? Any such benefit we've got, sir? Yeah, Mukesh, no specific topic. It's a normal every quarter we are working with customers and pipeline of bleeders like that. So that's nothing specific, yeah. Sure. Sure. Understood. And secondly is on the September 25 timeline that you mentioned for ESP, what is the change there, sir? Is it now that at the RTO level before registration, there will be some kind of a check? Or basically, what is the issue now in terms of what change the government is going to make? You see, the bus production, many customers, they do the bodybuilding elsewhere. So they don't understand that this ESP has to be only for the body factory-fitted, factory assembled thing. So that is one exclusion the market has taken like that. Okay. That has been corrected. Yeah. So from the bodybuilders, now the non-OEM bodybuilders, even they will have to now kind of mandatorily fit the ESP? From September onwards. Right now, they are not fitting. Again, it depends on their tender to their customers also. But then, by and large, it is not excluded. Also, certain intra-city operations also, they are excluded. That will also some of that will also come in. But mainly, the factory fitting versus external bodybuilding. Got it. And similar adoption on trailer ABS also is happening, sir? Is that timeline also September 25? Because there also, there seems to be a gap between mandatory regulations versus actual adoption. Yeah. Here, I think it's a very good topic because actually, government has mandated in 2019. It's 2017 itself, that all the trailer produced in our country has to have a trailer ABS. But actual adoption is only about 22% as far as I know, until two or three months ago. So you mentioned this quarter some 5% increase in trailer ABS adoption? Yeah, yeah, yeah. So what we did was we spoke to some of the trailer manufacturers. And trailer manufacturers telling us, "If you supply two options, that is without ABS and with ABS, then the customers, the trailer manufacturers will only go for without ABS. So we will supply without ABS." That was a point of some of the trailer manufacturers. So then we have jointly decided we will work together and then at one stage, we have to stop supplying without ABS. We don't want to support the unsafe type of practice. But then so there was some push-pull. But finally, they all agreed. Many of them have agreed that steadily they will improve. As such, we got only 5% improvement in that quarter. But then more and more fleets are now adopting because they have to communicate to their customers and make sure the new orders are booked only with the ABS. Because ABS, again, as I said, is a very safety-critical topic. Government mandated. So we also want to support that compliance. So by April, I see at least a very significant improvement because that's the way they are working with the manufacturers of trailers. But what is positive happening in the market is many of them chose to go for a Trailer EBS, even though it is not mandated, trailer electronic braking system. Instead of ABS, they go for EBS because EBS has got ABS feature plus also rollover elimination possibility. Also, it has got many functionalities because EBS per se is a very intelligent system. It will also ensure that the tire life also improves. It will apply whatever the amount of air to be applied to whichever wheel, etc., as per the need. Because ABS will apply blindly, but there it applies brake based on the driver's demand. A lot of people are seeing significant improvement in the tire life. On their own, they are adopting. They are deciding to go for Trailer EBS where, of course, it's a high content and good. It looks like that's a win-win type of model. Again, we are working with the industry and trying to support. Trying to collect more information. Yeah. Yeah. Got Got it. Got it. Just lastly, the Oragadam plant, the subsidiary, we are seeing revenues are more or less around that INR 60 crore mark, even this quarter. It hasn't really gone up much. What are we seeing there? Is it entirely driven by exports right now, especially the new line that you mentioned for actuators? Or is there some other domestic products as well that they're going to be starting to manufacture there at Oragadam? Yeah. In Oragadam, in the subsidiary, we are producing three or four products right now. One is the electric compressor. That's the main product. Electric compressor with localization, more and more localization. We are now ready to support the industry in much larger volume. But then in that quarter, electric buses were not produced because earlier orders, whatever was there with OEMs, they have completed. New tenders were not released because of the election and subsequent delays and certain tasks. Also, I think some OEMs, because there, the model is transport as a service type of model. The OEMs have to invest on the CapEx. The STUs pay the per kilometer rate. There were some issues in resolving that part between some OEMs and the STUs, etc. So that was another reason why some OEMs did not participate and all that in some tenders. But I understand the government has resolved that. But we are seeing already a takeoff in the EV electric compressor production. In January onwards, it has been increasing now, and we are trying to create the required capacity to support. So this will increase our Oragadam plant production of one aspect. The second is another important thing is we manufacture the cartridge. Cartridge Cartridge there. That is getting more and more streamlined. It was earlier we started as aftermarket supplies to India, about 5,000 number a month. Now we have launched for the OE to one of the big OEMs. 10,000 number a month is a typical demand. So they are ready now. The production has started. Of course, organizationally also, now we are trying to prepare for a larger production and sales. We expect the improvement there. Sure, sir. Sure. Great. Great. Thanks for the segue back. Thank you. Thank you. Thank you. Next question is from the line of Viraj from SiMPL. Please go ahead. Yeah. Hi. Can I add a bit? Yes. Yes. Go ahead. So just three questions. First is just a little bit more clarity on the gross margin. And the reason is if you look at last four years or even longer, this kind of gross margin we have really not earned in last. I mean, last we're talking about 2014 is when we earned a 43% kind of a contribution margin. Now, I understand what you're saying in terms of export share and aftermarket share. But broadly, even if I look at some annualized basis, export either way has been around 13%-14%. That's more of the 16%. While in OE, in domestic, we talked about a negative impact in terms of the segment of trailers and vehicles share reducing towards ICV. Generally, there were no new orders. It can come through EV buses, which we supplied in Q3. So just still trying to understand. If I could just understand the major factors, we talked about pruning of the portfolio. So can you just give a more detailed perspective in terms of the major contributors to this kind of a margin profile and how we should understand it going on next two, three years? Yeah. Okay. So our focus is more and more margin. It's seen last few quarters, seven, eight quarters. You see, we are now continuously driving margin expansion. It's a matter of focus. So we are taking many actions, whether it's OE, whether it's aftermarket, whether it's export. In all areas, we are trying to see how we can drive margin expansion. So our performance in this quarter is not a one-off maybe it's not a one-time. If you see a trend in the last eight quarters, we have been steadily improving. Number one. Number two, what do we do to improve, if you see, in the OE? There were certain bleeder products because we have taken a conscious decision that individual customer's profitability will have to look at, individual product profitability will have to look at. And wherever we are not making, we are seriously looking at anything that we can do in terms of production or the supply chain cost. And then we also work on a should-cost type of analysis. If we are able to at least if we are able to reach a should-cost, then why should we keep bleeding and supplying? So we go to the customer and then request them to do the reset. Some cases, customers say, "No, this is a commodity I can buy from elsewhere." Then we take a call. Some cases, customers are agreeing because in our views, the quality of the products is extremely important because it's a safety-critical product. We are able to demonstrate that these products have been working very well in many areas. Of course, jointly developed with the customer for many years. So we cannot bleed and suspend. So we jointly, quite a few areas, we are trying to reset, improve. This is one side. You constantly look at how do we get a better realization for our sales to OEMs. What percentage of portfolio you would have seen churn either in terms of pruning or resetting the price? Just to give a perspective, if I look at 50% of the business is domestic OE, and what I understood is a major part would have in the pruning or resetting would have been in that part of the business. J ust to get a perspective, what share of that business would have seen a reset or pruning in terms of portfolio? Maybe we don't have the exact number, but this is the direction we are moving. We are still protecting our overall business because, as I said, there are many new advanced products also simultaneously we are launching. But this is the direction. I'm saying directionally, this is how we move. On the aftermarket, again, as such, the market is a profitable business. Our scope is to expand with new revenue streams. Some of the products which we are launching now, what we are selling now, is completely different from what we used to do. Typically, as I said, we have a digital business in which there's a subscription revenue we are getting, which is for many advanced technology products in the digital realm, and doors and door control systems are something that in new products we have been looking at. We are at. We are selling, so like that, we are seeing many new opportunities. As such, margin is a good margin, but the focus is how do we increase our things, so like that, overall, even as I said earlier, the factory productivity year on year, we are trying to improve. We have been so overall, our focus is continuous improvement on the margin front. Of course, there are a lot of adversities as well. There's a lot of challenges, not that every customer is going to give what we ask. But we are working on that. I don't know because what you asked, the question also was not exactly clear. I don't know if I answered your question. I'm not sure. I'll probably take this offline. In fact, I just have two, three more questions. One is, if I look at the manufacturing subsidiary, which we set up for advanced products, if I look at the nine months, the sales contribution seems to be much lesser than the year before. And just in the previous participants' commentary, you were talking about new products, RAMPUP, and localization. So I'm just trying to understand if I look at next two, three years, how should one see scale-up of those advanced products through the shared subsidiary? Yeah. Yeah. So that's the plan. More products also will follow. Right now, the three products we are producing, and that a lot of we have created more space, and one of the products also has the potential to be exported, so our idea is to really stabilize the production to India, to Indian customers, and then because we are able to localize or produce at a much more cost-effective manner, but we have to see. Maybe every quarter we can review this, but as such, the Oragadam side focuses to really ramp up production and then market is supporting right now in the electric compressor area, but then in the other area, we are able to stabilize the production. Now I expect things to improve in terms of volume. Okay. Just last query, then I'll come back to you. Do you agree related to the portfolio which? I need to close this call, but maybe I'll take your question quickly. Sure. I'm not sure of the newbies on the call as well. But the question is, largely in terms of the portfolio which the WABCO India used to have, and now ZF CV, as you see, steadily expanded in the portfolio over the last two, three years, largely in the CV and selectively in the passenger vehicles for export. So going forward, if I look at next three to four years, do you see any such more opportunities in terms of portfolio additions through the listed entity within CV and both in PV? I hope not, but I remember this part we have more or less clarified earlier also. So we will have only WABCO portfolio. Plus, the ADAS technologies are now into the listed company, which was earlier ZF also having its own ADAS. WABCO also was having its own ADAS. So this is one. Number two, ZF has permitted at a global level, they have given a special permission to use CVCS listed company to support the LCV segment. LCV segment is basically more like those platforms like Tata Ace type of product lines, particularly to the EV transition. So we have got quite a few portfolio. There is a separate initiative there. That next two, three years' time frame, that will also start getting we will start seeing revenue flowing from that as well. These are the two major additional areas other than the original WAPCO portfolio, ADAS and LCV segment. Okay. Thank you. Thank you. Thank you. Thank you. Ladies and gentlemen, we will take this as a last question for the day. I would now like to hand the conference over to the management for the closing comments. Yeah. Thank you. Thank you for all your interest and for the participation in this earnings call. Any more details, you can always reach out to our CFO and company secretaries. We will try to clarify as much as possible. Thank you. Thank you very much. Thank you. On behalf of Batlivala and Karani Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.