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Ladies and gentlemen, good day, and welcome to the Minda Corporation Limited Q1 FY '21 Earnings Conference Call hosted by K.R. Choksey Research. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Ms. Parvati Rai. Thank you, and over to you, ma'am.
Thank you, Sison. Good evening, everyone. On behalf of K.R. Choksey Research, we welcome you all for the Q1 FY '20 conference call of Minda Corporation Limited. I take this opportunity to welcome the management of Minda Corporation Limited, represented by Mr. Ashok Minda, Chairman and Group CEO; Mr. R. Laxman, Executive Director and Group CFO; Mr. Neeraj Mahajan, Group Marketing Officer; and Mr. Bikash Dugar, Lead Investor Relations. So we will begin the call with a brief overview by the management, followed by Q&A.I now hand over the call to Mr. Ashok Minda for his opening remarks. Thank you, and over to you, sir.
Thank you, Parvati. Good afternoon, ladies and gentlemen. I welcome you all to the first quarter of financial year '21 earnings conference call of Minda Corporation. I would like to thank you all for joining us on this call and hope all of you are doing well. The first quarter of fiscal year was an unprecedented period, not only for the auto industry but for the whole economy. The auto sector globally was severely impacted by the pandemic COVID-19 and continues to face headwinds due to general economic slowdowns. The first half of the quarter did not see any activities, and production and sales only started in safe manner from latter part of May. This has led the quarter incomparable with previous periods. Now with the gradual opening of the economy, we are able to see green shoots in certain segments of the industry, especially in 2-wheeler and tractors. In these challenging times, Minda Corporation reported consolidated revenue from operation of INR 1,780 million, a decline of 69.5%. We believe this is better than industry numbers, which -- better than the industry revenue. To minimize the impact on company's financials due to significant fall in industry volume, we have taken numerous cost reduction measures, optimism of capital expenditure and efficient working capital management. There are clear indications of economic activities picking up from June 20 onwards, and we are cautiously optimistic of better times ahead for Minda Corporation. This is further supported by the fact that currently more than 50% of our revenues comes from 2-wheelers and tractors.Additionally, aftermarket and export are also showing speedy sign of recovery. Minda Corporation continues to remain close to its customers to better understand and meet their requirements during these trying times, which will be explained further by our Group Marketing Officer, Mr. Neeraj Mahajan.Now we shall begin detailed discussion on financial and operational performance for the quarter. With this, I hand over the call to Mr. Laxman, our Group CFO. Over to you, Laxman.
Thank you. Thank you, Mr. Minda, and good afternoon, ladies and gentlemen. Happy welcome again to the Q1 results FY '21. I will take the assistance of the presentation that we have uploaded on the website. And I will be referring to the slide numbers for those of you who have the presentation in front of you. For others, I will surely read out and explain some of the slides that are there in the presentation. Thank you.I'd move to Slide #3 of our presentation to give you a quick overview of Minda Corporation, diversified product portfolio, global customers, very strong manufacturing, advanced R&D and now more than 6 decades of automotive experience. The items on the left are you're familiar with. We have a INR 2,800-plus crore revenue. We have 4 business verticals, marquee customers and 30 manufacturing facilities, R&D capabilities, and our current market cap is about INR 1,660 crores. On the right-hand side, we have a revenue breakdown for quarter 1 FY '21. You will notice that the outer ring is the revenue chart for the current quarter, which is Q1 FY '21, and the inner ring is for Q1 FY '20. If we go by geography, you will notice that India contributes now about 80.6% of our entire revenue pie as opposed to 85.3% the same quarter previous year. For -- I'd like to mention here that for comparison purposes, as well as in line with Ind AS 105, we have made the comparison apples-to-apples. It does not include the European operations, which are discontinued. So without them, our India revenue pie was 80.6% now as compared to 85% earlier. Our Europe and North American revenue by geography has increased from 9% of sales to 12.2%, and our Southeast Asia has increased from 5.7% to 7.3%.More importantly, if you look at the right-hand pie chart, which is by end market, you'll notice that the 2- and 3-wheelers have moved up from 51.7% to 53.3% in terms of our entire revenue pie. Commercial vehicle has significantly fallen from 30% to 20%. This includes tractor, and the breakup between commercial vehicles and tractors is 13% is contributed for just Q1 from commercial vehicles and 7% is contributed by tractors. The aftermarket has grown significantly. Last year, during the same period, it only contributed to 10% of our pie. This quarter, it has contributed to more than 20% of our pie.Going by business verticals, which is the pie chart on the bottom, the mechatronics contributes about 43%, and the aftermarket is another 20%. So both included, our mechatronics and aftermarket contributes about 63% of our turnover. And information and connected systems contributes about 36.7%. The India interior plastic division is included in this 36.7%. As of now, it is a small number.I will move to Slide #4, and you are all aware of the industry situation today. But a quick recap on Slide #4, you'll see that overall, the auto industry has fallen by 78.4%, of which the 2-wheeler market has fallen down similarly by 78.5%. The industry fell by 78.5%. It will important to point out here that our 2-wheeler business fell by about 69%. And it's significant for us because roughly, as I mentioned, 53% of our turnover in this quarter has come from 2-wheelers. Passenger vehicles has fallen by 84%. 3-wheelers has fallen by 76%. And commercial vehicle has taken the largest fall, which is at 87.6% in Q1. Tractors have fallen by 40%. Just a point to note here is that if I had adjusted -- if I adjusted our revenue to the same mix as previous year, then typically, my sales should have fallen by about 81%. However, because of the new mix as well as the fact that I'm more towards 2-wheelers and my own fall in 2-wheeler has been less than market, our overall fall has only become the 69.5%.Coming to the financials on Slide #5. That's the consolidated financials for Q1 FY '21. As Mr. Minda mentioned, our operating revenue was INR 178 crores, which is a 69.5% fall. We have another income of about INR 9 crores, that's basically the interest income we have on our funds that we have. Our EBITDA, negative, was at INR 20.3 crores, which is substantially contained, which I will come to in the next few slides, contained because of our aggressive push on fixed costs, keeping fixed costs down, specifically things like employee costs, other expenses, et cetera. Our profit before tax was about loss -- was a loss from continued operations, which was INR 45 crores. And then because of deferred tax credit, our profit after tax from continued operations reported on a consolidated basis is INR 36.3 crores. We have an exceptional item, and now we had a profit from discontinued operations of about INR 90 lakhs. And therefore, our final PAT was a loss of INR 35.4 crores. As we mentioned, our previous quarter numbers were very significantly different and so was the same quarter in the previous year, and comparison doesn't immediately make sense. However, they've all been adjusted for comparing it to related items because as we said, as per Ind AS 104, our accounts have been restated, and this table excludes our discontinued operations.On Slide #6, we have the chart illustration of the same numbers. However, the commentary is important for us to share with you. Overall, the 69.5% decline in the industry is mainly was cushioned for Minda Corporation because we got a slightly better-than-industry numbers for aftermarket, which de-grew by only about 42%, and our exports, which de-grew only by 55%. And this de-growth also is largely because of the postponement of demand and logistical challenges in the business. Our EBITDA decreased because of non-absorption of fixed cost, because we have noticed that we didn't do any production or sales for the month of April and for last part of May. And of course, we have an unfavorable product mix because commercial vehicles took a big hit. However, we have come back with very strong countermeasures. We have reduced employee costs significantly, and we have lowered other expenses also significantly in this quarter. If you see our stand-alone and consol numbers, you'll see a big fall in our employee costs as well as in -- lower other expenses. However, maybe half of it can be attributable to lower sales itself. And at least 30% of that, we think we should be able to sustain going forward in the current year, which should benefit our profitability and, number two, which should help lower our breakeven point. Our net profit was negative because of, of course, negative EBITDA. And the other reason, our net profit was negative is that, on a consolidated basis, we also absorbed a INR 5.8 crore loss in -- as our share of our joint venture profits, mainly Minda Furukawa, Minda Stoneridge and Minda Vast.If I move to Slide #7, now we have the same numbers, but split between mechatronics and aftermarket in 1 bucket and information and connected systems in 1 bucket. The revenues in the mechatronics business came out at INR 112 crores, which is a 61% drop, and the EBITDA was about 9.8% negative. Of course, this de-growth has a little bit been cushioned by lower fall in exports and aftermarket, as we mentioned. Our overall fall in EBITDA has also been cushioned largely by various cost-cutting measures. Our information and connected system has fallen by 77.5%. Of course, a huge fall in commercial vehicles by about 80-plus-percent. Revenues came in at INR 65 crores, and EBITDA was negative about 14.2%. It's been fairly impacted by the decline in CVs. And also we have had mixed challenges with respect to product mix in the information and connected systems business vertical.So that's the overall financial numbers we have. So to sum up, our fall has been lesser than industry, number one; we have been fortunate because of the 2-wheeler mix that Mr. Minda mentioned; and we managed to contain our EBITDA losses at about INR 20 crores because of strong cost-cutting measures that we have taken. The other positive, of course, is we have managed to improve our cash flow position during the quarter in spite of COVID. So that's the positive.And with this, I would like to hand over the presentation to Mr. Neeraj Mahajan to give us a quick update on the business performance, order book as well as what we are doing new at Minda Corporation. So over to you, Neeraj.
Thank you, Laxman, for giving a quick number updates. Good afternoon, team. This is Neeraj Mahajan. I'm President and Group Chief Marketing Officer for Minda Corporation. My overview is mainly on 2 accounts: one, for the order book, which I'm going to first talk about. While the entire industry has been struggling for us to come to terms about the volume drops, lockouts, but one interesting thing continued during last time -- last quarter was auto industry purchase teams work from home, and we are very fortunate that we have been able to book some very exciting orders during this time. I would just confirm that -- I would say that this is a very healthy pipeline, which we have generated during this time. And let me confirm that this is divided into 4 sections: our mechatronics, which is business vertical one; information and connected, which is BV 2; plastic division, BV 3; and others and exports.So let me cover the mechatronics one. The overall lifetime order book during quarter 1 is close to about INR 397 crore. This is very exciting for us because we got in this 3 very large orders, 1 which is coming in for die cast from a 2-wheeler business customer. And lifetime business in this case is close to about INR 204 crores. We also received a very prestigious order for our joint venture partner with Vast from Pune. This is also a lifetime order of about INR 56-odd crores. And this is -- these orders are all coming in now for programs, which are either to start in, let's say, 2021, 2022 and so on. The third order for our continued business focus to improve our profitability is coming in on the starter motor and alternator, which is currently -- which we have spoken sometime is not supporting us as much. But we have started to see traction there with -- thanks to the management focus, which is coming in and bringing various activities to not only bring down the cost, but also to improve the quality and engineering aspect of it. So lifetime order there has added about INR 17 crore-odd, and we have very healthy pipelines for RF fuels in BV 1 further.ASEAN business has started to be a very clear focus for us. And during the number breakdowns, you may have noticed while this has been a challenge now, however, we have clear orders coming in from 1 of the largest 2-wheeler global player, which is about INR 15-odd crores of business, which is booked during this time, and team has done a great job here. This is a combination of the next-generation locksets, which also conveys that customer is showing confidence in our future technological product, which we are now developing or demonstrating through tech shows and product exhibitions.On the BV 2 side, which is wiring harness and sensor division, we got award for a very large order from a leading tractor maker for about INR 45-odd crores. We also won sensor 2-wheeler OEM for a very large -- or the largest 2-wheeler customer for about INR 180 crores. This is a very exciting business award again. And also, we got the next-generation cluster activity, which is starting with about INR 20-odd crore business coming in from Northside, the leader in tractor industry. Another instrument cluster for 2-wheeler, which is now the new generation instrument clusters, we have started to see their traction. That order is about INR 15-odd crores coming in from one of India's most popular 2-wheeler company, Indian brand. Now we also saw a very good traction of about INR 134 million revenue orders coming in for light weighting plastic part from largest passenger vehicle maker or engine manufacturer, which is for the combination of passenger and commercial vehicle application. We are excited. This order is something which we were focusing upon to grow our portfolio for Indian plastic parts which, after KTSN, is very important for us to get traction from our customers.Export is one thing that we are continuously focusing, and I'm happy to share that there are 2 important developments, one in terms of wire harness, which is for the European largest 2-wheeler maker. There, just to highlight a point, which is the wire harness is for Euro 5. So that means customer is accepting Minda Corporation's competency of the product in the future model introduction. And also, I think I briefly touched upon this point last time, among the India's largest 4-wheeler maker, we got a very, very prestigious entrance of our new technical agreement joint venture partner -- technical agreement partner. In fact, the Shark Fin Antenna, which is going to be, I think, a new, let's say, beginning in terms of Spark Minda's entry into a new product segment. This is about a INR 50 crore order, and supplies will start from 2022.What we are doing towards the technology, I'm going to the next slide. There, we are very clearly looking at -- in the commercial vehicle, we have seen the traction of the commercial vehicles, especially the buses, becoming more visual in terms of its displays. So our intelligent transportation system architect has started to get good information, intelligence system, which is being developed now. And I'm pleased to share that we have already received the trial orders, and the supplies are starting on the subject with -- among the top 2 bus makers in India for road transport authorities and public transport system. This is something which we would like to expand going forward in terms of our technical competence, which is prevailing on airports, on the railway stations because government is very heavily focusing on it. It is just a matter of money released from government side, and we are going to partner with them in these areas. That's one area we are also looking at.Also, in terms of our -- I'm very excited to share that 2-wheeler, we are going to be the first company in the country to start supplying the first keyless-entry system in 2-wheeler OEM. This is going to be for the first EV -- 2-wheeler EV maker, and our engineering team from SMIT has developed the components through which we have also patented 21 parts for showcasing our technology. So I think this is a very exciting development, and I would like to congratulate my technology team for seeing the research work moving into the productionized area, and we should be able to see the supplies -- the SOP has just started, but the volumes are a little bit on the ramp-up stage because of the COVID, but we will see those numbers growing gradually on this subject. This is going to be one big development as far as Minda is concerned, this is first time -- first keyless entry by any Indian maker, and we are there for this.Design and development on various range of DC-DC converters. We have already got into this subject with 2-wheeler as well as commercial vehicle space, and we are right now in advanced discussion also for taking that matter forward with the horizontal deployment across the industry, offering our already well-developed product, which is well accepted and proven. In terms of our assistance, I just mentioned about Shark Fin Antenna of INFAC South Korea. We are now in active discussion apart from the Shark Fin Antenna for RF and LT antenna, which is fold type also, to offer to other leading passenger manufacturers starting from -- all programs, which are starting from F '22, '23 onwards, so that Spark Minda should be able to supply this high value-added product to these customers. Because fold-type antenna is going out of fashion, and you will see most of the car companies are getting into Shark Fin Antenna from now on. So it is going to be almost a hygiene, if I may say, and we are fully geared up to take care of this part to be offered to all the leading makers in the country, and we have a very strong partner in this case.I would like to summarize this on both aspects. Order book for Q1 is very good at this point of time in spite of COVID, I would say, because Spark Minda team tirelessly worked during this time assisting customers to close their RFQs. And during this time, we could get some breather on the other activities to convince customers on our unique selling points, differentiators, we call it. And on the technology side, SMIT as well as our other engineering members have done exceedingly well during this time, and we are very confident with the strengthening of team, which Mr. Minda will also touch upon or may have touched upon during the call. We are getting future-ready on account of our technological push for 2022 and beyond.I would like to rest my explanation here, and I can take question-and-answer later. So Laxman, back to you, please.
Thank you very much, Mr. Neeraj. And operator, over to you.
[Operator Instructions] The first question is from the line of Ronak Sarda from Systematix.
First question on the capacity utilization. So what would that be in 1Q? And how has that changed, let's say, in July and August? So what would be our utilization levels now? And part 2 of the question is the cost measure. How are costs increasing as ramp-up is happening? Are we seeing substantial benefits once we're around -- let's say, around 80%, 85%?
Sure. So I will answer the first part of the question, and then I'll request Mr. Minda to give his views on July onwards. We tried our best to measure capacity utilization for Q1, Ronak, but then we gave up because it has to be then measured month-on-month because April -- because an average gives a very different picture. So for example, April was 0, May was a very small number and it's basically from June that we started ramping up in terms of our utilization of capacity and then pulling ahead. So it will be fair to assume that in June, it would have been roughly, say, 50-odd percent. And July, the number has again significantly improved. That's the quick take on the measure, Ronak. I'll come to the cost in a minute. But Mr. Minda, if you'd like to add anything on this question.
So you asked, Ronak, about July and August, yes, the OEM, particularly in 2-wheelers as well as the tractor segments, that we exist between these 2 segments. And where we are -- this segment is definitely helping us during this time, and this will continue to happen at least until the time of the festival, then we will see after the festival time. And the aftermarket is, in June, we have increased, 18% growth in comparison to the previous year and same in July. So we expect to catch up significantly in quarter 2 financial year '21. This is what I think.
Okay. So, roughly, Ashok, would it be like almost 85% on an average versus last year, the revenue run rate for July and, let's say, mid-August?
We are thinking that, overall, it will be if something does not happen adversely, but definitely, it will be 70% to 80%.
Okay. Yes. Okay. Laxman, on the cost part?
Yes. So, Ronak, on the cost front, the measures we have taken are fairly significant in terms of how much of a reduction we have been able to get in fixed cost as well as in our personnel cost. My estimate is about 30% of this reduction we can carry through for the rest of the year as well because a lot of the personnel and other admin costs, et cetera, in a sense, are also variable. So I would put the number at roughly 30%, Ronak.
And Ronak, most importantly, how to -- each business, this is a time how we reduce the breakeven point. That is what is an important area.
Right. Right. And Laxman, I mean, we used to have significant contribution from commercial vehicles as well. And the last 2 years have been very challenging. So I mean, were those products applied to commercial vehicles more profitable? And -- or is the recovery in commercial vehicles, if it happens in H2, will that be a significant contributor to profitability?
I'll answer the question, Ronak, yes, and I'd like to let Mr. Neeraj Mahajan talk about the commercial vehicle pickup. Only thing, yes, in terms of my shares last year, commercial vehicles were 30% in the same quarter. And this year, it is significantly reduced. So the answer is, yes, it's -- the profitability in terms of EBITDA margin have been similar if you look at last year's presentation on business verticals 1 and 2, largely similar. However, the bulk was being offered by commercial vehicles. So yes, any recovery in commercial vehicles will help us quickly absorb our fixed costs. That's on the costing side. Over to Mr. Neeraj Mahajan on his outlook for the commercial vehicle segment.
Thank you very much. Ronak, to me, well, we have been very closely interacting with all leading commercial vehicle manufacturers because almost 100% of them are our customers. Market outlook as of now, I would say, is gloomy as far as commercial vehicle is concerned. So if recovery -- if at all, for example, the recovery, it is expected, they are not even speaking about it for this year. So I think everybody is expecting about 30% to 40% drop on the annualized basis. So I would not give very optimistic opinion or picture about commercial vehicle at this point of time. While we are, as Mr. Minda also mentioned, there are some green shoots of segments like 2-wheeler, I think the most exciting segment right now is tractor. We are not able to meet their demand due to social distancing right now. We are going 2.5 to 3x their volume requirements compared to 2017, '18. But commercial vehicle, I'm afraid after last year drop of about almost high-double digit, we are still expecting further drop this year as overall market going forward for commercial.
And final question on the KTSN business. Any update there? I mean is the large part of the liquidation done and -- or any update? Have the payments happened from our side, that's now behind us?
Yes, yes, yes. That part is now behind us. And of course, now it's a process, and that process will take time. However, the obligations that we had in terms of what we had to complete by June, yes, we have done what we mentioned.
The next question is from the line of Chetan Gindodia from AlfAccurate Advisors.
Sir, can you explain how the order book works? So you have given the lifetime value of orders of this year is 4,250. And last year fourth quarter was 7,350 crores. So our order book has declined this year and -- or this -- this is the value of new orders that we'll be executing in 1 year -- is this the annual value? Or how should lifetime value orders would look? Is it 2 years, 3 years? What is the time frame for it?
Laxman, can I take this question?
Absolutely.
Thank you very much, gentleman, for your question. Lifetime order is typically considered between 4 to 5 years, depending upon the program life of the project, which is confirmed by the customer. And first year is typically the limited number of months based on the start of production, SOP date, and the balance months left in the financial year. That's how we normally calculate onto this, so this is how the methodology is adapted.
And so the order book has declined from last year, so how should we look at this thing -- how should we read this number?
This is not -- sorry. I think let me reconfirm that. The order book does not mean that what is the -- this is not revenue. This is the new orders which are received during this quarter. So this has nothing to do with our past revenue at this point of time.
Okay. Okay. Okay. And in terms of the 2-wheeler wiring harness business and also the CV wiring harness business, we were supposed to have a big addition in our fleet size and the value of our sales are expected to go up. So can you give the breakup of how much was the increase in 2-wheeler wiring harness in this quarter and also in CV?
So I'll come back to you with specific numbers. However, there are 2 points here. One is, it is, yes, the 2-wheeler wiring harness kit value, we have said, will more than double. That thesis continues, and it was expected to actually show quantum results as we go forward in the future quarters. In the Q1, while we are not able to significantly see the difference is because the BS VI to BS IV mix, if you put it roughly, they're still being only roughly about 50% because majority of the BS IV still came in due to exports of the OEMs. So that is one clear point. And the second point is, of course, there has been ramp-up challenges with respect to BS VI at all the manufacturers and recovering. And therefore, a more clear comparison or at least the visibility of that bulk up of kit value be more clearly available in Q2 and Q3 going forward. That's the quick response.
Okay. And in terms of decline in gross margin that we have seen in this quarter compared to last quarter, so what has led to this?
The absolute fall in the revenue, it's significantly dented, so it doesn't make it comparable at all.
Okay. So going ahead, we should be back to our 38%, 40%, is what we should expect?
Yes. As we ramp up, yes, we should. And our hope is that we will catch up faster than probably what was usually expected because like many other players, we have also very aggressively worked on our fixed costs. So if we are to reach the goal in x months earlier or x number of quarters earlier, we hope to reach that goal faster now.
I was -- we were not expecting that the recovery will be faster than we are seeing in 2-wheeler and tractors. So during the COVID time, we were thinking that the second quarter will also be very much a concern, but things are not like that.
Okay. Okay. And last question, in terms of the employee cost, we have seen a very sharp reduction. So should we expect the employee cost in absolute number to remain at this level? Or will it be more of linked to the revenue and should be back to the INR 90 crores, INR 120 crores run rate from next quarter?
Sorry, I missed that.
Our employee cost has declined to INR 54 crores from INR 96 crores last quarter. So what -- so is this employee cost reduction likely to again go back up with the rise in revenue? Or is this a more sustainable reduction? How should we read into this?
So roughly 30% of it, we expect it to be a little sustainable, a very rough number, because our employee cost has a mix of variable and factory workers as well as staff costs, et cetera. So all the cost-cutting measures we have taken on the personnel side, we are expecting about 30% -- 25%, 30% of this to remain sustainable.
The next question is from the line of Abhishek Jain from Dolat Capital.
I just wanted to understand what is the current status of insolvency process of Minda KTSN? Has it completed?
No, it has only started now. An insolvency administrator, we believe, has been appointed. And it's a process that will take its own course, and it's very, very, what shall we say, established process that they will go through. So it's a work in progress. It may take some time.
So how much debt will reduce post completion of this process?
So the debt that is already -- the debt numbers have already been reduced because now our consolidated numbers are without the numbers of KTSN. So today, roughly, our consolidated debt looks at about INR 394 crores.
INR 394 crores. Sir, my second question on the date part that -- your interest payment is around INR 50 crores annually, which is around 38% of your EBIT despite a sufficient cap in hand. On the other hand, you are earning only the INR 26 crores to [ INR 28 crores ] at interest income. So you are losing significant amount of interest every year. Sir, just wanted to understand your thought process behind to keep the money for future acquisition and how this will be fruitful for the company's profitability?
Yes. So 2 points that you've highlighted: one is the negative carry that we call with respect to keeping the money at a lower interest rate; and second is you are talking about the strategic intent in terms of what to do with the money. So the strategic intent, I will request Mr. Minda to answer. But before that, on the finance side, I'd like to say that, of course, we have kept the powder dry, and there is a small cost to keep that and then incremental cost will be about 1% of the amount of total deposits I had. Strategically, it's worked out very well for me now because we have dry powder available in case the management and the leadership decides to take a call on synergistic acquisition opportunities. And I would like Mr. Minda to comment.
Yes. We have decided strategically to park this because we create QIP, and the reason of the QIP was to invest for our future growth plan and for the inorganic growth. And we have not -- we have decided not to use this on putting in the system, and we are continuously working for using this QIP funds in areas where we really are not doing any further investment. So that is why we have decided although we also know that we are losing somewhere some minor percentage of the interest. But we have decided that so that the more working capital which we are using, there will be a pressure with the businesses to be more efficient to take out the funds from the working capital. That was a strategic call to keep the [ fund ].
So are you looking to make any repayment during FY '21 or '22? As the current situation, capacity utilization is quite low and you are losing a significant interest also, and your EBIT is also quite low. So just wanted to know on this.
So what is the first part? Are you looking at -- what you said, repayment did you say?
Repayment of debt.
No. So the repayment of debt is naturally occurring because of the tight cash management. And thanks to inputs from new gentlemen, we, in fact, had a very tight focus on working capital. And because of that, we have managed to generate funds to repay debt. In fact, during the COVID period of first quarter, also, we generated cash surplus. So we are expecting debt to naturally go down by this. We don't expect such low EBIT to continue. Q1 is not probably a right extrapolation for the rest of the year. And so that's where we stand. And in fact, today, also as we speak, our cash position should be roughly equivalent to the debt we have. So if you look at it theoretically, on a net debt basis, we should be 0.
Okay. My last question is related with the 2-wheeler locking system. So just wanted to know your share of business with the different OEMs. Have you won any new business? Or have you had an increase in content per vehicle post BS VI implementation? Or do you need it?
Can you please repeat the question? I didn't understand.
Sir, just wanted to understand the share of business with the different OEMs. And I just also wanted to understand, have you won any new business or any increase in content per vehicle because of the change in launch, BS IV to BS VI.
Yes. So for sure, in case of wiring harness, there is a content increase. In case of share of business, I think we have segment-to-segment and even in that, program-to-program differentiation. So I think it's an exhaustive thing, if -- we talk about, we will have line items of about 100-plus. Maybe I can understand your question later, and I can ask, Bikash, to especially provide you that information for a specific segment that you are looking for. But in general, for share of business, if we talk about for the 2-wheeler, we are in a strong, commanding position when it comes to the top 3 in case of wire harness. I would say in most of the places, depending upon program, we are either holding about 70% to 80% of share of business in, let's say, leading maker 1 and 2 and 3 or at least 50% in most of the cases. So it depends, the product, which we are referring to here.
And as I explained to you last year that we introduced the key account management to give the focus on the specific end customers so where we can increase our per vehicle content and not only the per vehicle as a whole, but per vehicle customer-wise, model-wise content, how we can increase this as a group. So that is how we are giving focus. So as we have mentioned, there are a list of products, list of models, how much we have -- in that model, how much content we have, how much we can increase, all that is how we said the list of items where we wanted to increase per vehicle content.
To give you comfort, I can just share one input with you. If you see most of the 2-wheelers today are becoming from mechanical or mechatronic products are moving into connected and also in terms of keyless, the value addition in such cases from Minda Corporation is going to increase. And that is going to increase the value per -- or kit value for each vehicle, what we supply. And our main focus right now is to make sure, which I have explained in one of the slides for, let's say, DC-DC converter, keyless-entry system for this, and we are right now very deeply connected with some of the new start-ups with whom we are discussing for their requirements. We have one of the start-up, which is going to start its state of -- start-up production in October month for their 2-wheeler EV in Netherlands. So there, we have got various products which we have started to also discuss with various start-ups here. And also the 2-wheeler, which is in advanced stage of EV entry into the country. So I would say that kit value will surely increase going forward as electronic components and content is going to increase because that's where SMIT focus of development and also the return is going to happen.
Okay, sir. Sir, my last question is related with the share of business with the Bajaj Auto in 2-wheeler locking system.
I think specific clients, it will be a little unfair to probably discuss. But Neeraj, over to you in case you would like to add any comments.
I think I can see some of the members of competition in the call, so I would avoid that question.
Otherwise, we are not using any -- at least on the positive side, but not an issue -- which was not an issue with Bajaj.
The next question is from the line of Sachin Kasera from Svan Investments.
Sir, just one question on the cost cutting. So if you can just quantify that -- of the total cost cutting. You mentioned some 30% is sustainable. So if you could just quantify that on the employee front? And secondly, have you also taken on significant cost reduction in the other expenses? And if you would quantify that also which is sustainable.
Yes. Sure, Sachin. Thank you. Sachin, on the staff cost, I'm talking about within the overall employee cost, the staff cost also. And within staff costs, we've reduced about -- saving about INR 12 crores in this quarter. That's the specific number that comes to mind. And if you see the other variable expenses, that has gone down by about INR 33 crores. So out of which, again, about 30% of that is something which we think is sustainable.
So broadly, we have been able to reduce the cost around INR 80 crores to INR 100 crores a year, which is a sustainable number. Is that a better way to look at it on an overall basis?
It may not be fair to estimate it for the whole year.
But there are some area of cost, which will definitely continue, that is what I said. It help us to drop down our breakeven point and that -- there are various heads where we have reduced the cost that will help us to continue.
Ladies and gentlemen, we'll take the last question from the line of Chirag Shah from Edelweiss Securities Limited.
My first question is on Shark Fin and Shark Fin Antenna. So if you can just shed some more light how big is the opportunity and are you the sole supplier or there are other suppliers of this? And is it for a single model as of now or it's for multiple models?
Your voice is not very clear. Let me just comprehend the question which you have stated. So if you confirm me, then I'll proceed. One, you stated if the Shark Fin Antenna is going to be exclusive product, which is going to be introduced in the customer. Second question, you said in terms of the timing of this introduction. Is that correct understanding?
No, sir. I'll just repeat. I hope my line is clearer now. Your first question is right. Are you the sole supplier or you are making an entry into that product, in that trend as a Tier 2 supplier? Second, is it for a single model or -- on project basis or it is for multiple models? And third, is it the import substitution product or it is completely a new product that you have created? Was this product already been in the system and you are now replacing it?
So let me take the third question first. At least for the customer, we have got introduction. This is replacement of early -- previous generation product. That means the fold-type antenna, so that's going to be a, let's say, a replacement of a new generation product in production. Second, we are not in large -- or the large customers do not introduce a single supplier, so there is going -- there are going to be at least 2 vendors supplying the same. And third, the product is going to be today the business order is for 1 particular model, but which is for our -- let's say, preferred situation, it is going to the -- almost the largest volume program. But considering the historical situation, we have noticed that these parts are commonized to take advantage of the pricing in long term, including tooling cost, reinvestment being avoided. So we are hopeful that we may have opportunity to introduce this part in other programs. But as of now, to answer your question, this is for a specific program. I hope I answer all the questions.
This is an important -- yes, it is an import substitute. Most of the vehicle -- most of the customers import this at the moment, and this is going to introduce in all the segment over a period, in all the category of the vehicle.
It's clear that it could be a reasonably big business for us. And second was in the wiring harness domestic side, today -- who would be a key competitor today? Are you expecting the BS VI -- in the BS VI, today, who is your -- the competitor you would benchmark yourself with on the wiring harness side?
In the WH segment, this is by sector, so we have multiple competitors. This is becoming a commodity space, to be frank. So 2-wheeler, it's going to be another 3 dominant players, including us. We have commercial vehicles, there are another 2 important competitors. We have tractors, which is a lot of complication, but very crude wire harness relatively, so you have more competition there, including next to the plant kind of wire harness, those were supplying to them for over the last 30, 40 years. BV is the most, let's say, organized one, including its technology, but I'm pleased to say that in the BS IV, BS VI transition, recognition of Minda Corporation as one of the most reliable wire harness supplier is there among 2-wheelers, among commercial vehicles equally and substantially. But I can -- I don't want to go specific to my competitor's name in this case. I'm sure -- unless that is very specific question which you would like me to address, too.
No. It is very helpful. And sir, just to clarify the Shark Fin Antenna, just if I can. So this is for a particular OEM, right, this technology, it cannot be used for some other OEM, right? I presume that [ is your invention. ]
No. So let's make it more -- so the product per se, the patented design of external shape is going to be unique, but if you -- there are about 4 or 5 different varieties of feature application, which are going to be possibly offered in future, if they would like us to expand more with the higher-end technological product in their product range. However, the basic design of the product can be utilized with the specific model-related design requirement of particular customers. So to answer the question, generic interior design, unique for particular model, which requires to be developed. We have competency for both. So this can be expanded to other customers easily. This is what we -- as far as the product range is concerned, without very significant investment other than volume expansion requirement of CapEx, I think the technology can be horizontally deployed with other customers also.
Ladies and gentlemen, due to time constraint, we'll take that as the last question. I would now like to hand the conference over to the management for closing comments.
So this financial year '21 will be a challenging year, but we are confident that the worst time was behind us. I can assure you that Minda Corporation, with its unique value proposition, research and development-driven products, support from customer base and a strong balance sheet, is well placed to navigate through these difficult times. With this, I thank everyone for joining on the call, and please keep safe. Thank you. Thank you very much.
Thank you. On behalf of Minda Corporation Limited and K.R. Choksey Research, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.
Thank you.