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Ladies and gentlemen, good day, and welcome to the Minda Corporation Q1 FY '24 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Jain from Dolat Capital. Thank you, and over to you, sir.
Thanks, Seems. Good evening, everyone. On behalf of Dolat Capital, we are pleased to welcome you to Minda Corporation's Q1 FY '24 earnings conference call. We thank the management for providing us the opportunity. From the management side we have with us Mr. Aakash Minda, Executive Director, Finance and Risk Strategy; Mr. Vinod Raheja, Group CFO; Mr. Anshul Saxena, Group Head-Strategy and Merger and Acquisition; and Ms. Pushpa Mani, Lead Investor Relations.We'll start the call with a brief opening remark from the management and followed by Q&A session. Now I hand over the call to Mr. Aakash Minda for opening remarks. Over to you, sir.
Good evening, and thank you very much, Abhishek, for organizing this call for us. So good evening, everybody, and welcome to the quarter 1 financial year '24 earnings call of Minda Corporation Limited. On behalf of the company, I thank all of you for joining us on this conference call, and I hope you are keeping safe and healthy. The auto industry saw a moderate growth during the quarter across most of the segments, and two-wheeler and passenger vehicle demand mainly driven by pickup in demand driven by new product launches and rise in demand for SUV-style vehicles.While commercial vehicles and tractors demand remains subdued on the back of strong prebuying in quarter 4 FY '23 due to implementation of OBD Phase II [indiscernible]. Exports largely seem to be bottomed out with possibility of recovering in coming quarters. Commodity prices have reversed the rising trend and have started to soften from elevated levels. Semiconductor supplies have also eased out, especially on the back of effective supply management. We expect gradual improvement to continue in the coming quarters.Coming to the financial performance of Minda Corporation. During the quarter, Minda Corporation continued on its growth momentum trajectory with consistent better-than-industry performance. Our revenue from operations stood at INR 1,075 crores, with a growth of 6.4% year-on-year on the strong product portfolio, solid customer base and presence across segments. In terms of quarter-on-quarter revenue growth, our domestic growth has been higher than the domestic industry growth, which is in line with our long-term plan due to the premiumization of products and launch of new products and platforms. However, exports were subdued mainly due to the global economic headwinds.In this quarter, EBITDA margin stood at 10.7%, growth of 12 basis points year-on-year with profit before tax of INR 63 crores and PBT margin of 5.9%, mainly due to higher finance costs and depreciation on the back of investments in capacity addition and technology, which would accelerate our growth going forward. Profit after tax stood at INR 45 crores with PAT margin at 4.2%.Now I would like to take you all to the key developments during the quarter. This quarter was marked by gaining traction in our in-house development product of two-wheeler smart keys, which constituted more than 15% of the total two-wheeler lockset revenues. With our consistent focus and commitment on R&D and technology and innovation, Minda Corporation filed 4 patents during the quarter, taking our total patent count to 255. During the quarter, Minda Corporation won lifetime orders worth more than INR 3,000 crores across segments and products and technologies. Out of this, 50% of orders came from the electric vehicle mobility segment, representing our products growing acceptability and our readiness for electric vehicles. Apart from adding prominent new customers to our EV portfolio, we had significant battery charger order win of INR 750 crores lifetime from a leading OEM. The company won more than 30 awards at various forums like QCFI, ACMA, CII and various customer awards. The road map ahead would be to focus on the core product premiumization, growing our share of business with existing customers and onboarding new customers to focus on technological upgradation via in-house R&D and global strategy [indiscernible].We are also working on further strengthening our operational excellence through cost leadership and digitalization of business processes. We are continuing to work upon localization of connection systems to reduce dependency on imports and improved margins.Now I will take you through to the presentation with the key highlights of quarter 1 performance. I now refer to the earnings presentation which we have uploaded, and I refer to Page 4, which is sharing about the Minda Corporation Limited. Minda Corporation Limited is primarily into these 5 business areas, which is mechatronics, information & connected systems, plastic and interiors, aftermarket and green mobility solutions. Our key customers are almost all customers across various segments in IT, engine, EV, two-wheeler, four-wheeler, three-wheelers, commercial vehicle offers. We are more than 30 manufacturing facilities globally, 16,000 people, 9 partnerships and key focusing on R&D capabilities with having focus in Pune and Bangalore. We have a diversified product portfolio, global customers, strong manufacturing and advanced R&D with 6 decades of automotive experience.I now move on to the Slide 6, which is on the financial performance. I would like to share on how automotive industry has grown. If I look at for the quarter 1 year-on-year growth, auto industry has grown by about 2.3%, wherein two-wheelers have grown by about 1%. Passenger vehicles have grown about 7%, three-wheelers have grown by 24%, commercial vehicles and tractors have degrown.Quarter 1 FY '24 was a mixed bag on demand perspective with signs of volume growth moderation in most segments. In the two-wheeler segment, the slowdown in scooter sales was countered by the pickup in demand for motorcycles, primarily through the changing customer preference in the premium two-wheeler space. PV volumes declined quarter-on-quarter, mainly due to high base while saw growth in moderation on Y-o-Y, driven by rising demand for SUV-style vehicles and new launches. On the quarter-on-quarter basis, the industry grew by 6.5%, largely based on the 12.1% growth from the two-wheeler industry, passenger vehicles degrew by 6.5%, three-wheelers and commercial vehicles also degrew by factors almost flat.Going ahead, demand is expected to remain moderate, mainly due to the seasonality and expected to pick up with the beginning of the festive season. In two-wheelers, exports are expected to recover gradually going forward.Moving to the next slide, which is on the key highlights of Minda Corporation for the quarter. We have consistently grown better than the industry and performed with revenue growth of 6.4% year-on-year. We have won marquee businesses in our new technology products such as smart keys, wiring harness, instrument clusters, sensors, EV die casting and others have started production with our customers. EBIT margin at consolidated level stood at 10.7%, improvement of 12 basis points year-on-year. Total lifetime order wins was about INR 3,000 crores, with EV constituting about 50% of the order book. One such great order was from a leading two-wheeler OEM in the case of battery chargers worth INR 750 crores lifetime order book. We filed 4 patents and won many awards. Smart key for two-wheeler continues to gain momentum with 15% of our two-wheeler offset revenues. We've outperformed the industry with consistently growing revenues and double-digit margins.Moving to the next slide. We would like to share on the truly diversified revenue model. So by geography, India still continues to be our largest revenue share, followed by exports, which is about 8% to 9%, and our overseas operations of Indonesia and Vietnam by over 6%. By end market, two-wheelers and three-wheelers constitute about 40% to 45%, commercial vehicles about 25% to 26%, passenger vehicles about 15% and aftermarket about 10%. By product, lockset constitutes about 25%, wiring harness about 35%, die casting is about 15%, instrument clusters is about 15% and others like sensors and EV products at about 10%.Moving to the next slide. Our revenue has grown on year-on-year basis from INR 1,010 crores to INR 1,075 crores. On a quarter-on-quarter basis, it has been INR 1,075 crores to INR 1,075 crores. At EBITDA, we have grown 8% from INR 107 crores to INR 115 crores. And at from 10.6% to 10.7%. At PAT margin, we have gone from INR 52 crores to INR 45 crores due to higher interest and depreciation costs.Moving to the next slide, which is Slide 10, with the consolidated performance. As I mentioned, our operating revenue has grown by 6.4% year-on-year from INR 1,010 crores to INR 1,075 crores. EBITDA margin has gone from INR 107 crores to INR 105 crores, to INR 115 crores, which has increased by 7.5% and 12 basis points. Our PBT has gone from INR 71 crores to INR 63 crores and PAT has gone from INR 52 crores to INR 45 crores.Overall, on the demand, domestic fund quarter 1 industry grew by 2%, while we grew by about 6.4%. Exports continue to be under pressure due to the macro challenges, macroeconomic challenges. EBITDA margin stood at 10.7%. We delivered double-digit margins on the back of increasing efficiencies, streamlining fixed costs and component localized initiatives in our wiring harness division. Commodity prices have also reversed the rising trend and started softening. And semiconductor supplies continue to ease especially on the back of various effective supplier management and support from our suppliers.Moving to the next slide, which is the business vertical performances. In our mechacronics, aftermarket and other divisions, our revenue year-on-year has gone from INR 490 crores to INR 513 crores with EBITDA from 12.6% to 13.1%. Here, [ Middle East ] exports have been a concern on quarter-on-quarter basis, and they have come down. Margins have increased 80 basis points year-on-year due to better efficiencies in the lockset and die casting division, aided by continuously rising smart key volumes. Exports continue to remain under pressure.Now our information and connected systems, which is the instrument clusters, sensors and wiring harness division, the revenue rose from INR 518 crores to INR 516 crores (sic) [ INR 562 crores ], which is growth by about 8.5% which is on the domestic market. And our margin is also about 8.6%, which is due to the employee cost and also ramp-up of volume in our new plants in the wiring harness in Pune and other locations.Moving to the next slide, which is Slide 13, on our strategic pillars of growth. Minda Corporation focuses on focusing on enhancing our core in the core products of safety security systems, wiring harness, instrument clusters and sensors, die casting EV products, focusing on innovation and technology, which is in our R&D and joint collaboration with global payers, electric vertical opportunities. And as I mentioned, all our products are EV-agnostic, which is with the rising trend of EVs our products are going to an increase in content per vehicle and keep value through the electronification and electrification that is happening. And last not the least is focusing on strengthening our passenger vehicle offerings to control systems, sensors and interior solutions.Our focus is to transform and become a complete system solution provider and a partner of choice to OEMs, focusing on cost leadership in manufacturing and thought leadership in technology and premiumization of all our products across segments, and leading to the delivery of better results than the industry and continue to improve our margin profile.Moving to the next slide on our engineering capabilities. We have now more than 500 engineers. Total patents are about 255-plus. From this year onwards we are spending about 3% into R&D, into new technology. On the right, you can see our Technical Center, Pune focusing on our core product plans and enhancing our software solutions to our products.Moving to the next slide, which is Slide 15, is on the kit value of the electrical mobility. This is a representation of our two-wheeler where all the products of Minda Corporation are EV agnostic and will be offering products in the EV space, irrespective of the Indian segments. On the right is the potential kit value that we offer. So in our vehicle access systems and mechatronics is about INR 4,500, in an ICE vehicle will go to about INR 2,000 to INR 3,000 by increase. In case of wiring harness and connection system will increase by about INR 2000 to INR 2,500. And the new products which are already launched such as battery chargers and DC-DC converters in EV [indiscernible] products is about INR 8,000 to INR 10,000. Total potential kit value for EV is about INR 16,000 to INR 20,000. Here the only product that we have manufactured and started selling as of now. Below are our EV customers that range from domestic and export all across segments.Moving to the last bit, which is on the ESG sustainability framework. Minda Corporation follows the highest standards of ESG sustainability, which is also available on our website and reviewed by our independent directors on a quarterly basis.Moving to the next slide is our corporate social responsibility and how we are focusing to give back to the society across our locations in blood donation camps and other activities that we do. Last not the least is some of the awards and recognitions that we've achieved from our customers all across. With this, I would like to conclude our presentation and open the floor for any questions. Thank you.
[Operator Instructions] We take the first question from the line of Jyoti Singh from Arihant Capital Markets Ltd.
Sir, my question is on the -- like on the first, on the die casting, if you could give the Q1 number for die casting and for the full year. Last year how much it was? And second is what point do you expect a recovery in the export and how is the momentum? And when we are seeing a full recovery going forward?
Yes. So I'll take your first question, in terms of how we are focusing on the exports growth. So exports are looking like subdued. Now in the first quarter, we have had at least 10% to 15% lower sales on exports based on the geopolitical concerns or other financial macroeconomic category. We expect our exports to come back from quarter 3 onwards, and that is when the year-end closing happens and more and more sales are picking up for the export market as well. So our expectation is to come back from the quarter 3 onwards. So on the first question, which is on the die casting front. Last year, in quarter 1, we did about INR 184 crores worth of revenue. And this year we have done about INR 208 crores worth of revenue, which is a growth of about 13%.
We take the next question from the line of Shridhar Kallani from Axis Securities Limited.
So my first question is on the order wins in Q1, which you have stated is INR 3,000 crores, if you could give us a segment-wise breakup like in this division how much orders we have received, if that's possible.
Yes. So thank you for the question. If I again have a look, out of the INR 3,000 crores, about INR 400 crores are replacement businesses and about INR 2,600 crores are for the new businesses. Exports are about INR 138 crores. If I look at the mechatronics division, about 14%, about INR 1,100 crores worth of order has been booked, out of which 14% have been for replacement and 86% have been for new businesses. In the information and connected system is about INR 1,050 crores out of which 70% is for the new businesses and about 23% are for replacement businesses. And other orders, which are about INR 860 crores, again, almost or rather all of them are for the new businesses such as the EV segment [indiscernible].
Okay. And if you could provide us some details on recall any updates that we have from [ PCI ]?
We have already applied in the PCI. As and when we hear anything, we will be making it public the next moment itself. So as of now, the PCI continues to review our application.
Okay. And I would like to draw your attention to Slide #11 where you have mentioned that margins have decreased by 50 bps Y-o-Y. So the impact of margins has been on the ICS division? Or is this the overall margins that has taken a hit because of new plant in Pune?
So if you're speaking about the mechatronics and aftermarket, again the EBITDA has come down again primarily due to the exports, which are again of course higher profitable. But definitely with the increase in terms of the smart key sales will continue to be high. If I look at the information and connection systems, it is primarily due to the new plants that have opened up. So hence, our productivity there and all those things are still taking shaped. So they will come into effect as and when we gradually go on month-on-month.
Okay. I just ended to clarify whether the 50 bps which has been decreased on the margins, like the impact of 50 bps which you stated, is it on the overall margins or on only the information and connected systems margin because in Q1 you are stating 8.6% and again in Q1 FY '24 it is 8.6% margin. So that 50 bps, like you all want to state that you all could have improved by 50 bps, but that improvement has been shortened due to the fact of ramp-up in volumes at new plant?
So your line is not clear, but it is not -- the margin has increased when it comes to quarter-on-quarter basis.
Right. Right. No, I'm talking on a Y-o-Y basis, you all have mentioned in Q1 FY '23 8.6% margin. And Q1 FY '24, 8.6% margin, right?
Correct.
But in the statement below you all are mentioning margins have decreased by 50 bps Y-o-Y mainly due to increase in employee costs and ramp-up in volumes. So this margin that has decreased by 50 bps, is it only for the ICS or on an overall basis the impact?
This is again primarily it has been increased in terms of our Minda instruments, which is the clusters and sensors division. However, in terms of the wiring harness, if I look at from the year-on-year basis, this is lower because of the new plant that has come up and the productivity efficiencies there just because of the new plant. So it is in this particular division not as a company as a whole.
We take the next question from the line of Mr. Abhishek Jain from Dolat Capital.
Congratulations for the great set of number in top line. Sir, my first question is related with this smart key, which contributed around 15% of the overall locking system. So have you won any new business in two-wheeler locking systems?
Yes. I will not be able to disclose the name of new customers, but we are winning orders across engines, which is EV as well as IC engines. So yes, in quarter 1, this year, we have what -- won a business of about INR 360 crores for smart key for one of the leading OEMs in India as well. One of [indiscernible] which is significant.
Now you don't have any presence in the four-wheeler side in the locking system. So are you looking to enter into that business?
No, that is not correct. We have a presence in the four-wheeler locking systems market in India and exports. So we are under development and supplying to local Indian OEMs as well as exporting locking systems overseas.
Okay. And how is the progress of the ASEAN business in fourth quarter?
So for the ASEAN business, I'll give you the numbers. Just one second, please. Yes. So in our ASEAN business, we have a total sale of about INR 50 crores in the first quarter.
Okay, sir. And my last question is what kind of the growth you are targeting in FY '24. You had mentioned earlier that you're looking at 20% to 25% growth for the next 3 years. So are you intact on that statement or you will downgrade the numbers?
No. We are continuing to focus and commit on the numbers that we have already shared before with our outperforming of the industry and growing about 20% to 25%, backed up by the focus on technology and premiumization of the products, addition of new customers, increasing share of businesses, additional new segments such as exports and after-market as well as focusing on the passenger vehicle offerings as well and increasing kit value. These are some of the areas that how we will be increasing our growth as well as addition of new products to technology tie-ups and in-house development as well. So that continues, of course. But yes, quarter-on-quarter, we'll have to evaluate [indiscernible] in terms of the way I mentioned in the beginning that this quarter our domestic sales have been much higher than the industry. But the export sales have been subdued.
We take the next question from the line of Pritesh Chheda from Lucky Investment Managers.
Akash, can you give the color on how much the domestic growth versus 6% volume growth which you're referring in the presentation?
So our domestic growth has been to the tune of about 7% to 8%, which is quarter-on-quarter growth.
On Y-o-Y?
Y-o-Y has been, again, much higher. It is [indiscernible] 12%, 15%.
And how much did exports decline?
The export has declined by, to the tune of about 20%.
And I was just wondering, we had these lifetime order announcements done in FY '22, lifetime order announcements done in FY '23. And now we have another INR 3,000 crores in quarter 1 FY '24. So I was wondering, for those 2 years, your lifetime orders, they haven't come in commercial states?
So typically, in automotive when you win an order, it takes about 1.5 to 2 years for the order to come into start of production. And then the first year is typically a ramp-up phase. So when you win an order, about 2 to 3 years from then comes the peak value into the sales. That is typically how the automotive industry works as per our experience as well. So when we win an order this year, typically 2.5 or 2 to 3 years from now we will see the peak value coming into our sales.
Yes. So you had a INR 1,500 crore to order win in '22 and about INR 2,600 crore order win in '23. So at least of that INR 1,500 crore, some numbers should have flown in this quarter, right?
No, it does not depend on quarter, it depends on the full year. In some cases, for example, in the INR 1,500 crores, typically we divide it by 4 or 5. So if I typically divide that INR 1,500 crore order book, it will be somewhere about INR 350 crores, INR 400-odd crores, that would come in 1 year. Now out of that one [indiscernible] the start of production can happen in first quarter, second quarter, third quarter or fourth quarter. So if the order has come in last year, particularly the start of production should happen from H2 onwards, and the peak year should be next year, which is FY '25.
So if that's the case, then what stock -- what is bothering you on that 20% growth number which was usually highlighting amount based on the order wins you will grow 20%?
What is bothering us or what was the question?
So what is limiting you to call out the higher growth number guidance?
We stand by our commitment, as I just now explained, in terms of our growth based on the 5, 6 factors that I have just now explained, that if we look at the full-year basis, the growth stands committed. Of course, quarter-on-quarter, they can vary due to the factors I have just now explained domestically and exports.
Okay. And lastly, any progress on the equity investment that we have done in one of the listed names?
So as we have also shared in public information, we've already applied for CCI and the CCI is currently evaluating our application. So as and when we hear something, you guys will be the first person to know public information.
[Operator Instructions] We'll take the next question from the line of [ Harish Shah ] from [ HS Capital ].
I just need a couple of updates from your side. First is with regards to the smart key business, as mentioned that it constitutes nearly 15% of two-wheeler lockset revenue, would be interested to know the names of the clients that who we are associated with. That is my first question. And the second question is if you can also provide an update on the component internalization plan which we are having for the wire harnessing division.
Yes. So I will not be able to give you the exact names against the orders as we are bound by confidentiality of our customers. But I can tell you some of the general names we have won the orders as well as already in mass production, and you can see from the market as well. There are customers like Bajaj Chetak, Hero and other export customers as well. And as and when the new customers start coming in, we will see those products in new market. And we have a 100% win ratio of the RFQs that come across our door when it comes to the two-wheeler smart key solutions. So our focus is how we can be, still be leader and 100% market share in this particular segment and continue to focus on value engineering in order to offer these products all across segments whether in ICE EV as well. On your second question, when it comes to the components localization. So we, again, continuously focus on investing in our development capabilities for in-house connection systems. As I mentioned earlier into BS IV and BS VI times we were having about 50% to 60% components made by in-house, by Minda Corporation. But then when the BS-IV and BS-VI came in, we had to start importing. So currently, rather in that point of time we were importing about 90% of our connectors. But now we are importing about 70% of our connectors in line with our commitment that we've already given before. And our domestic local sourcing is about 12% to 13%. And internal from Minda Corporation Component Division is about 10% to 15% in our wiring harness component localization. And as and when now we are getting more and more approvals quarter-on-quarter based on our two-wheeler and other OEMs, we'll continue to add these products both in ICE and EV segments.
Okay. So we expect this localization to improve like from going in the coming quarters.
Yes, of course. Every quarter-on-quarter you may see a small number, but in the long-term horizon, as about 2 years' time, we have maintained our goal and target to go on a single-digit EBITDA number from the wiring harness [indiscernible] double-digit EBITDA number, which we are in line in order to achieve the same.
The next question is from the line of Mihir Desai from Desai Investments.
So my first question would be on the premiumization as your company is known for product premiumization. Can you throw some light on what is happening in our cluster business?
Yes. So typically, if you see in instrument cluster, it depends on segment to segment. If I speak about the two-wheeler segment analog cluster or a needle-based cluster or [indiscernible] motor clusters what we call, it's typically about INR 600 to INR 700. But when you move on to the next generation of clusters, we have smart clusters in the form of personalized, individualized connected clusters and more of TFT, they are of course to the range of about INR 3,000 to INR 5,000 per cluster. Of course they are cost higher in penetration into the EV segment as well as in the higher-end bikes. And as and when we get more and more volume and more and more acceptability, we are now moving into the lower segment of bikes as well. So that is on the two-wheeler segment. When I speak about the four-wheeler per se, in four-wheeler [indiscernible] segment we will have needle-based clusters which are again typically INR 1,500 or INR 4,000. And if I speak about a TFT cluster in a high C and D segment vehicle, you will have more than about INR 8,000 to INR 10,000 worth of clusters. And going forward, these clusters are now coming into a profit or an end-to-end pillar-to-pillar cockpit solutions which are having infotainment and other heads-up display and other driver information system what we, what Minda Corporation calls. And we are fully geared up and ready and also displaying our products to customers all across in India and overseas through our partner and in-house technology for [indiscernible] solutions in the pass segments as well. When it comes to the commercial vehicle segment, of course they are open to [indiscernible]. So there are different technologies available there. Yes, of course, they are also now moving from analog to digital clusters. And tractors they are open to [indiscernible]. And again, with the target application there, there is less penetration when it comes to the TFT clusters just because of the application of the tractor industry. But yes, in time to come, they will also move into the similar asset. But the cabin tractors, the tractors which are covered fully, there they are moving into the TFT per se where we are also -- Minda Corporation has partnered up with the Indian tier 1s and Indian OEMs and already developed clusters and started supplying TFT clusters for their domestic and export models, which are open to [indiscernible] as well as in the cable side, for EV as well as nonEV sector as well.
Okay. Sir, secondly, on the book keeping I wanted to ask that the depreciation figure [indiscernible] gone up. So if you can throw some light on this. So yes, I'll ask Mr. Vinod Raheja to take up this question, please.
As you can see from our annual report that in fiscal '22-'23, we impaired a CapEx of about INR 280 crores, which were capitalized. And so the full year impact of that depreciation. And of course, in the upcoming quarters, the capacity utilization of those should also happen in [indiscernible].
Okay. And sir, can you please also guide on net debt levels of what you are planning to? And what are the current levels?
Net debt to equity is [ 0.3 ]. And as at 31st June, we have net debt of --
Sorry to interrupt you, sir, we are unable to hear you clearly.
Yes, net debt is 462 as of 1st of June. Can you hear us?
Yes, Yes, yes. And sir, lastly, as in India, specifically currently the aerospace industry is getting under limelight on Make in India front. So do we see, as our company would have any opportunity in that sector also or that segment?
So we keep continue to evaluate various markets and options and opportunities, definitely. But yes, we believe that for us, automotive, there's a lot of opportunity and scope available. So we continue to focus on the automotive segment.
The next question is from the line of [ Devang Shah ] from [indiscernible].
So I just want to know that, the PAT margin that is coming in these particular quarterly numbers around 4.2%, there is a significant -- we have seen a decline. So any specific reason? And moving forward, what's your outlook on that?
Yes. So as we just now explained, primarily reason is due to the increase in the finance cost and the depreciation. So the finance cost on year-on-year has gone from INR 8 crores to INR 14 crores. And depreciation has gone from INR 32 crores INR 39 crores. And our forecast and our interest rate and also increased. So these are the reasons why the PAT margins have gone down. But overall, again, for the year, they should come back to the same levels as we have always done.
And last year there was onetime [indiscernible] actually, as you would know. That also had sort of [indiscernible] impact on the base line.
Okay, sir. So you are optimistic moving forward that it is going to improve from here on?
Yes, correct.
The next question is from the line of Richa Agarwal from Equitymaster.
So my question is on the EV kit value that you have suggested that the potential kit value can go up to INR 16,000, INR 15,000. The question is, I mean, do we see these gains visible in the [indiscernible] realizations and at the top line level? Or does it also take in at a margin level because, let's say, from FY '18 to now, the margin is kind of stable at 11%. So let's say, 2 to 3 years from now, as these last time win orders start contributing, do you expect an improvement in the margin? And if yes, to what extent.
Yes. So firstly, again, this INR 15,000 to INR 20,000 is not the potential. It is based on the products that we are currently supplying and are in mass production. Of course, in a particular bike, the 100% of the kit value may not go, but this is our complete kit value offering in the two-wheeler segment that we offer in the mass production range. When it comes to the future of the products of electric vehicle mobility with the improvement in terms of [indiscernible] electrification of power products definitely the margin is expected to improve with more and more software content in these electronics content going up. So right now we expect to grow this. But we do not expect to grow to the tune of 15% EBITDA margin.
Okay. Sir, could you also give us any send of capital -- CapEx for FY '24?
So typically, we spend about 5% to 6% of our top line into depreciation, which 2% to 3% goes into R&D. About 1% to 2% goes into the greenfield projects of plant operations and 1% to 2% goes in our regular and CapEx -- maintenance CapEx.
The next question is from the line of [ Tanuj Kiani ] from [ Ventura ].
Sir, I just had one question regarding the effective tax rate. What will the effective tax rate going forward? And do we have any back credit?
So is your question on effective tax rate?
Yes, and the remaining back credit. So can I get some information on that?
Yes. For the fiscal '23-'24, we are expecting effective tax rate of about 20%, 21% range.
[Operator Instructions] We take the next question from the line of [ Rajesh Kumar ] from [ Share Giant ].
My first question is on, sir, can you help us by throwing some light on how the EV sales is panning out? And which are the major products in that segment? And how do you see the traction going forward?
Yes. So again, if you particularly look at the two-wheeler EV penetration in the Indian market, which is close to about 3% to 4%, Minda Corporation revenue from the EV perspective or the EV segment is typically higher, to the tune of about 6%. So it shows that clearly we are going ahead of the industry growth when it comes to EV sales. And our penetration is much higher, which showed our customer confidence in our products, technologies and capabilities. So if I put into numbers in our quarter 1 last year, about 2% of our sales were EV. And in this quarter, about 5.5% to 6% is our revenue from the EV sales from our top line percentage.
So are you seeing any kind of disruption due to the recent move [indiscernible] policy or the subsidy in the EV front? So how do you see it panning out?
So in the long run, EV is inevitable from my opinion. EV is definitely going to penetrate more and more. Of course there will be some short waves that will be there. Last year, there were some fires during the summer this year. This year there are some regulatory concerns. Next year there could be something else. But again, these are all short-term [indiscernible]. But in the long run, yes, definitely EV is the future when it comes to the two-wheeler segment and going beyond other segments, which is bound to grow.
So what are the kind of the margins you are making on the EV segment?
So it depends on product to product. And it depends on segment of the two-wheeler also. So if there are customers like -- which are mass manufacturers of EV, of course, they are not so premiumized in nature. But if there are segments and customers which are higher end of the EV segments there of course they are using premiumized products where our profit margins are higher.
We take the next question from the line of Saral Seth from Indsec Securities & Finance Ltd.
My question was with regards to the product mix. So we see that the two-wheeler mix has gone up while the commercial vehicles and passenger vehicles have gone down. In fact, even aftermarkets has gone down. So this also has impacted our margins. Would it be fair to say?
So as I mentioned, again exports have been subdued in this quarter. And the domestic sales also has grown by 6%, and most of this has come from the growth of two-wheelers, which is at the rate of 12% shown in Slide #6. So of course which replicates our 45% of our revenues coming from two to three-wheelers as well. So in the same line, our growth from two-wheelers have also grown in this quarter to the tune of 48% revenue as compared to 44% last year.
Right, sir. That was very helpful. Sir, just a follow-up on the previous participant's question on the EV two-wheeler outlook. So with the recent revision in the same 2 subsidies, there has been a volume, subdued volume over the last 2 months, but there has been gradual recovery. So any comment on that? Would you take it as a temporary and you feel the volumes could come back to historic levels?
Yes, yes. So I think it's all temporary, I believe, in the long run, as I mentioned, little -- this is bound to grow. So again there will be temporary concerns faced by the industry, whether regulatory, whether technology, whether pricing, whether raw material, whether semiconductors or I mean lot of things. As I mentioned, last year there were some fire concerns. So there was a small blip in the sales. But again, when we compare from year-on-year, they have grown much more. And again, if I see in the longer run perspective, two-wheeler particularly, the penetration is going to definitely grow up to about 10% and 15% and 20% in the years to come from the current level of about 4% to 5%.
Sir, the addressable market share in EV segment in two-wheeler EV segment, what would be our market share in the addressable product market?
So every segment and every product is a different mix for us.
So blended will help, sir.
Yes. If I speak about the lockset market, overall, in India, we are more than about 40% market share. And again, this can be also translated into the EV segment as well. Similarly, when it comes to the wiring harness per se, we are more [indiscernible]. And again, this EV two-wheeler space. Again, while the EVs are going up, we have some customers -- we have businesses from the large two-wheeler OEMs. And when it comes to clusters as well. So here, again, in the two-wheeler space, there are 2 types of clusters that I mentioned in the segment, one in the higher TFT cluster space and second is in the analog cluster segment. So different segment of customers have different market share when it comes to the products. When it comes to EV product lines such as DC-DC converters, battery chargers, there again we have different market share when it comes to the existing large customers or the start-up OEMs as well.
Sure, sir. That was helpful. Sir, several two-wheeler OEMs and passenger car OEMs have launched several new models. Do we have significant presence there in order to gain market share?
Yes. We have our traded products going into the four-wheeler EV customers as well, which again are being launched or are going to be launched by four-wheeler OEMs in India.
Understood. Sir, despite very decent stable growth, the margins have kind of stabilized at these levels, though you have indicated that the raw material costs are softening. But what would be the key growth lever to increase from 10.5%, 11% to maybe 12.5%, 13% on a sustainable basis, what could be the growth driver, sir?
Yes. So we, as an organization always have the long-term perspective and long-term view in mind. Of course, quarter-on-quarter variations could be here, which are again [indiscernible] in nature. In the long run, we expect to grow by about 20% plus. And again, when it comes to the EBITDA numbers, we don't give future guidance, but our goal is to always be ahead of the industry. And we would like to go to about 12%, 30% EBITDA numbers. And the major growth levers are basically improvement in our wiring harness division, which is in single-digit EBITDA numbers going to double-digit [indiscernible]. And the other segments such as the exports, the aftermarket premiumization of the products across segments in commercial vehicles, two-wheelers, four-wheelers [indiscernible] of EBITDA number results. Focus on all of that, the technology, along with the cost leadership in our operations. So we are focusing heavily on our operational excellence, how we can continuously engage and involve to increase our productivity levels, reduce our raw materials as well as our working capital inventory to help us perform and deliver better.
That was helpful, sir. Sir, my final 2 questions. So when you say the potential EV kit value at INR 16,000 to INR 20,000. So where are we in real terms right now in terms of kit value for EV, two-wheeler EV?
We are offering INR 20,000 kit value. So it's not potential. It is actually kit value that we can offer in a segment including all our products.
That's quite exciting to hear. Sir, on the new product side, apart from what we are offering, industry is moving towards ADAS and those kind of technologies. So do we have patents files and do we have some kind of products available in that kind of segment? For example, Kia recently launched ADAS version, Toyota has launched. So just wanted to understand, are we moving towards futuristic technologies and products?
Yes. So if you see maybe not in this presentation, but earlier presentation, which are also uploaded online, we have signed up 2 partnerships when it comes to the ADAS space. One is from a company called Ride Vision from Israel for two-wheeler ADAS solutions or what we call ARASS advanced rider assistance safety solutions. And the second is from a company called Daesung in Korea, but around the monitoring solutions as in an L1 for the mid-variants and the other low variants of vehicles. So we are also investing internally as well in order to come up with these products. And currently, these products are under development and under local adaptation and in the field trials and tests. So that is what we are currently working on, particularly to ADAS. As an organization, we continuously invest in new technologies and products which are going to be premiumized in our own areas. Secondly, we continuously evaluate what are the synergy products in our own product domains such as vehicle access, driver information systems, electric vehicle mobility, connected mobility and ii light-weighting. So we continuously evolve and get more and more products which we call synergy products. And then we also keep continuing to evaluate diversification of the products, which we can add, whether in four-wheelers or in other product lines which will give us 2 partnerships or organically or investments into startups, which will give us additional growth going forward.
Congratulations once again.
[Operator Instructions] We will move on to the next question from the line of Rajesh Kumar from Share Giant.
Just one last question from my side. Sir, you recently filed for a fundraising exercise. So if you can throw some light on the status of the same.
Can you repeat your question? Your line was unclear, please.
Yes. So you had recently filed for fundraising. So if you can help me with the status of the same?
So we have taken a Board approval last quarter as a resolution or enabling resolution to Scout on the fundraising. So we continue to explore. And as and when there is a need, we will definitely come back to the market for that.
Okay. And sir, on the business question, what is your plan to grow the passenger vehicle offering at Minda Corporation, which is currently at around 14% to 15% of your total win. How do you see it going forward in the next 2 to 3 years?
Yes. If you see maybe 2 to 3 years ago, this was even lower. We have added many products in terms of instrument clusters, sensors, ADAS solutions, interior plastics, sharpen antennas, other products of vehicle access. Now we're continuously working to add more products in these domains of light-weighting such as die casting and others that we export as well as [indiscernible] customers in India. So we continuously increased our focus on four-wheelers. And in the next 2 to 3 years' time, our target is to take this about from 15% to the tune of about 25%. That's our target, by adding new products organically. Of course, inorganically, we can do this much faster. But definitely, in a four-wheeler per se from the time of getting order to a conversion and in SOPs, this takes about 2 to 3 years' time. So our target is good about 25% in about 4 years time from now, organically.
Yes. Sir, my last question is on the commercial vehicle side, I understand that this is a cyclical industry. And roughly 30% of the -- your revenue comes from commercial vehicle. Do you not consider this a risk? And if you consider it, how are you trying to mitigate this?
So the industry is, again, cyclical, definitely. But I think this has been the way for last many, many decades. It's growing. Of course not yet back to the levels of pre-COVID. But with the way India Inc is going in the next 5 to 10 years, this demand or opportunity when it comes to exports as well as end-consumer moving into premium vehicles, whether in two-wheelers, four-wheelers and more and more features of and regulations in terms of safety and other such regulations coming, this industry is definitely bound to go and give us opportunities such as players like us to increase our kit value, get new technology and then give us the desired growth.
We take the next question from the line of Navin Matta from Mahindra Manulife.
Just a question with regards to your cumulative order book, new order wins, which may have -- which still have to go into production. Would you have a number that you could share?
Hi, Navin. No, I'm sorry, I don't have that number, which has to go into production hands up. But yes, we can get back to you with that number on how much order book is yet to go into production, which is under development right now.
Okay, sure. And just I missed your comments on what kind of growth are we targeting for FY '24. I think we were planning for double digit. So just what are your thoughts on that?
It continues to be in the line that we have shared earlier and also committed to deliver those numbers which are much higher than the industry, north of 20%. Of course, as I mentioned, that's on the annual basis, and we are committed to deliver that based on the various factors. Quarter-on-quarter, there could be definitely blips based on various factors like exports or other seasons. But in the long run as well as on a full year basis, we are fully committed to delivering our numbers which are much higher than the industry and giving [indiscernible].
Okay. And sir, in your presentation you mentioned about in the ICS segment, there was some challenges with regard to ramp-up in the Pune plants. Just trying to understand if that had any material impact in terms of your top line growth in this quarter?
No, there is no material growth. Rather, we continue to win more and more business in this product and segment and plant. That is where we have set up this plant. So as and when we mature month-on-month, of course, more and more better productivity goes in.
Okay. So there is no challenge as such in terms of plant ramp-up? That is not the way to read it?
No, no, no. We are fully functional, fully capable in terms of state-of-the-art facility, fully digitalized with Industry 4.0, et cetera. Of course, there are new products, there are new development challenges, as I mentioned, the ramp up from the customer, as well as there's a ramp-up internally as well. So that is where this takes place. But of course we have our standard operating procedures, our training and other such things which are definitely there in order to service our automotive standard in customers.
Got it. And just one last one. I think you mentioned your net debt is about INR 450-odd crores. Can you give me the gross number?
So gross, in the end of this quarter is INR 570 crores.
Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to Mr. Aakash Minda for closing comments.
Yes. So thank you very much. Going ahead, Minda Corporation remains focused on strengthening its competitive edge by investing sustainably in R&D with the aim to produce high-quality products that cater to the diverse needs of customers worldwide. Our strategic approach will remain on fortifying our core products and expanding our product and customer base, both by attracting new clients and deepening our relationship with [indiscernible]. Further, stabilizing commodity prices and semiconductor supplies are expected to [indiscernible] improvement in underlying margins. We are fully poised and confident of margin-accretive growth in the coming quarters. Thank you very much.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.