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Ladies and gentlemen, good day, and welcome to the Minda Corporation Q2 FY '23 Results 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, Mr. Jain.
Thank you, Tali. Good evening, everyone. On behalf of Dolat Capital, we are pleased to welcome you for Minda Corporation second quarter earnings call. We thank the management for providing us the opportunity.
From the management team, we have with us Mr. Ashok Minda, Chairman and Group CEO; Mr. Aakash Minda, Executive Director, Finance and Strategy; Mr. Neeraj Mahajan, Group President, Marketing; Mr. Vinod Raheja, Group CFO; Mr. Anshul Saxena, Group Head, Strategy and M&A; and Ms. Pushpa Mani Lead, Investor Relations.
Now we hand over the call to Mr. Aakash Minda for opening remarks, host, to [ establish ] each line of business. Over to you, sir.
Good evening, everybody, and thank you very much, Abhishek and Dolat Capital for organizing this call. I welcome all of you to the conference and I request Mr. Ashok Minda to now give the opening remarks. Thank you.
Thank you, Aakash. Good evening, everyone, and welcome to the quarter 2 financial year '23 earnings conference call of Minda Corporation. I would like to thank you all for joining us on this conference call here today and hope you and your families are keeping safe and healthy.
Your second quarter of financial year '23 was marked by improved consumer sentiment across segments, supported by strong urban sales and uptick in rural sales and successful new launches. Despite several challenges, the automotive industry has gradually evolved. And the second quarter of financial year '23 was marked by industry growing across segments except [ sectors ] by more than 12% year-on-year. However, we have our fair set of challenges to be dealt with, leading to subdued growth in exports.
I am pleased to report that Minda Corporation has continued to deliver strong performance during the quarter. Minda Corporation achieved its highest ever quarterly revenue of INR 1,147 crores, registering a growth of 57% year-on-year. EBITDA stood at INR 124 crores, registering a growth of 60% year-on-year with EBITDA margin of 10.8%. PAT for the quarter stood at INR 58 crores, registering a growth of 48% year-on-year with PAT margin of 5%. We continue to derive strength from our robust balance sheet with debt, too, a result of 0.06, strong operating cash flow generation and continued focus on light capital allocation strategies. I would like to take you all through the key developments.
The company entered into a technology license agreement with Daesung Electric from Korea for ADAS system and solutions. This collaboration will level Spark Minda to be ahead of technological by providing localized assisting at solution for the Indian market. In all our core products such as locksets, instrument cluster and sensors are going through higher product price and achieving higher market share. We are strengthening our market leadership position in these products further by giving good quality, latest products and winning new businesses. Around 17% of our total order book in first half of financial year '23 constitutes of order from EV segment, which we have booked the order for Minda Corporation. Electric vehicle products is all set to capture the fast growing EV space with products like smart key, DC-DC converters, battery chargers, IPS and telematics.
Our current order book for first half of financial year '23 constitutes 19% from EV segments has seen successful launch during the quarter with clear count -- EV transformation on the count. The roadmap ahead would be to focus on the core products and growing our share of results with existing customers and onboarding new customers through focus on technological upgradation via in-house R&D and global strategy for years.
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 improve margin. With this, I would now like to hand over the call to Mr. Aakash Minda to discuss the financial and the operational performance of the company during the quarter. Over to you, Aakash.
Good evening, sir. Thank you so much for your opening remarks. I would now like to refer to the presentation, which is uploaded. I would request to take a look at Slide #2. This a snapshot of the Spark Minda Group, Minda Corporation unit. The company has a revenue of about INR 35,000 million, 16,000 workforce, 33 plants and 8 partnerships all across the world for different product lines. I now move to the Slide 3, which highlights the quarter 2 and the first half of FY '23 performance. We continue to get growth momentum with highest ever quarterly revenue, double-digit EBITDA margin on continued and sustainable basis, on sequential basis. PAT increased by 48% to INR 578 million in quarter 2 FY '23 from INR 391 million in quarter 2 FY '22. We secured large orders for TFT clusters in the instrument cluster space from key passenger vehicle OEMs in India. We won businesses across the segments with EV constituting about 19% of the orders once -- in first half of the year.
I now move to the next slide. We show the consistent and sustainable market-leading profitable growth by Minda Corporation. On a year-on-year basis, we increased our revenue by 57% from INR 7,313 million to INR 11,471 million. Consistent and sustainable market-leading growth, highest-ever operating profit -- operating revenue. At the EBITDA level, on year-on-year basis, we grew by 60% from INR 773 million to INR 1,238 million at EBITDA margin of 10.8%. Quarterly absolute EBITDA of INR 1,238 million with a growth of 60% year-on-year basis. At the PAT level, Minda Corporation grew by 48% year-on-year basis at 5% PAT margin.
I now move to the next slide. This is a snapshot of the company where we are spread across different verticals, key customers. EV customers are marked in green. And on the right side, it is just some information on the shareholders as of 30th September.
Moving to the next slide. In terms of the Indian automotive industry performance, as we can see in the H1 of FY '23, the automotive industry has grown by 22% and the highest increase coming from passenger vehicles and commercial vehicles, followed by singular vehicles. In quarter 2 year-on-year basis, industry has grown by 12.5%. Again, the highest growth coming from the passenger vehicles and commercial vehicles, followed by a subdued demand by singular vehicles.
Moving to the next slide, which is Slide 7. I now come to the consolidated performance from Minda Corporation Limited on quarter 2 and first half of FY '22, '23. At the operating revenue, you can see in the quarter 2 FY '23, the company has done INR 11,471 million revenue at a year-on-year basis at 57% growth. At EBITDA level -- INR 1,238 million, which is a 10.8% EBITDA margin, growth of 50% year-on-year basis. And PAT at INR 578 million at 5%. If I look at the first half on year-on-year basis, the operating revenue grew by 67%. The EBITDA margins have grown by more than 100% and PAT has also grown by more than 139%.
Overall revenue of INR 11,471 million for the quarter is up by 57% and 28% as stand-alone without Minda Instruments Limited. This was driven by operations outperforming the industry by production numbers. On domestic front, new businesses across segments and increase in share of businesses from existing customers from various verticals. Exports were impacted due to looming energy crisis and geopolitical tensions particularly in Europe.
The EBITDA margin stood at 10.8% in quarter 2. We delivered double-digit margins despite premium buying on back of continuing semiconductor supply crunch. Margins are expected to be sustained going forward on the back of easing commodity prices and continued efforts to increase efficiencies all across.
I now move to the next slide, which shows the revenue breakup for the group by geography. India contributes to be about 80% to 85%. By end market, 2-wheelers still remains about 45% of Minda Corporation's top line, followed by commercial vehicles and then aftermarket and passenger vehicles. By business verticals, the mechatronics constitutes about 45% and wiring harness revenues constitutes about 35% and instrument clusters about 20%.
Moving to the next slide is the business vertical performances. Here, if you can see on the top left, the mechatronics division has increased its revenue on a quarter-on-quarter basis from INR 4,203 million to INR 5,314 million and the EBITDA going from 13% to 14%. If you look at the half yearly on the right side, INR 7,462 million has increased to INR 9,791 million with 11.1% margin to 13.1% EBITDA margin.
Here, the revenue stability was supported on back of strong demand in domestic markets, increasing share of businesses with key customers and new business wins. Exports across divisions was impacted due to adverse factors impacting the industry in Europe. EBITDA margin is improving on back of higher productivity and sustained improvement across different areas.
In the Information & Connected Systems, if you can see the quarter 2, year-on-year has increased from INR 311 crores to INR 615 crores on a quarter-on-quarter sequential basis, because now we have included Minda Instruments in this. The revenue has gone from INR 532 crores to INR 615 crores and the EBITDA margin has gone from 8.9% to 8%.
On the operating basis, the EBITDA margin stood at 3.6% at INR 1,178 crores of turnover. The sales increased on back of strong demand in domestic market, exports are also impacted adversely here and the EBITDA margin impacted due to the premium buying semiconductors in the management.
Moving to the next slide, which is the Consolidated Leverage Position. As at half year, I would like to share that our ROCE has increased to 21.1%. Our net debt has increased to INR 934 crores, primarily based on short-term working investment capital. And our net debt and the debt-to-equity ratio is 0.06.
I now move on to the next slide on the Journey of New Alliances, which is here, the number of alliances which Minda Corporation has. But I would like to highlight the right side of the table where we would like to show in the last 24 months, how Minda Corporation has focused on strategic alliances that we have already committed to all of you. So we started in April '21 by signing the TLA with Ridevision, for example, 2-wheeler ADAS systems, followed by signing of the joint venture with INFAC of Korea for engineering positions. Moving next towards September, the equity stake in EVQPoint in Bangalore for battery chargers.
In October, we acquired a stake of Minda Stoneridge as well as expanded our technology access agreement with Stoneridge for cluster and sensors. And recently, as Mr. Minda highlighted, we have, last week, signed a TLA with Daesung Electric for ADAS solutions of South Kora. Moving on just to share you about the G&A with Daesung Eltec. So Daesung Eltec is a company from South Korea. We adapt a position that is focused on passenger vehicles, commercial verticals and off-road vehicles. The products with me are the advanced driver assistance safety around the monitoring systems, including cyber monitoring state systems, lane departure warning, turn position warning NeoDAS for off-road vehicles. This will help Minda Corporation become a leader in the ADAS solutions going forward as we've already committed to focus on safety across vehicle and passenger segments in India.
Moving next, focusing on the Expanding of the Manufacturing Footprint, which is to share that as Minda Corporation continuously grows. We are growing our plants and also consolidating our plants for more economies of scale across divisions. Moving to the next -- I will move a little faster on this, on these strategic pillars for the group. The focus has always been on enhancing the core, which is across divisions of safety, security, wiring harness, instrument clusters, die casting and others, innovation and technology by focusing on in-house R&D and joint ventures and partnerships with -- and alliances across the world, electric vehicle growth opportunity.
So I would like to again highlight all the products that Minda Corporation makes are EV agnostic. So while the EV comes in more, it will have a higher kit value and go through higher premiumization, transcending passenger vehicles and other market opportunities such as aftermarket exports and other products.
Moving next, I would just like to share our core products and legacy products are transforming current business lines as per technology trends. If you see on the left side, starting from the first, vehicle access, locksets and fuel tank gas have started moving to smart vehicle access, door handles, power lift gate systems, cybersecurity et cetera. Wiring harness and connectors have moved to now high ticket value in terms of power solution unit, battery solution unit, EV vehicles harness and junction box and other connecting systems. Clusters and sensors are now moving from analog clusters to digital clusters, telematics, integrated and more optimal solution interface. On the electric vehicle front, the focus has been on -- so battery chargers, DC-DC converters and the development in motor controllers, BMS and other products.
Moving to the next slide is on the electric vehicle growth. This is just to share on the left side how Minda Corporation products are -- all of them are going fit into the EV 2-wheelers. On the bottom part, there are just a few customers that we are showing whom we've already started supplying as well as winning new orders. On the top right, our kit value, the legacy product is about INR 4,500; increase in the vehicle access, product lines and castings will go from, like, INR 2,000; increase in connection systems and clusters by about INR 2,000, INR, 2,500; and EV product lines have increased by about INR 8,000 to INR 10,000; to the kit value, about INR 16,000, INR 20,000 vehicles end of this year.
Moving quick next, the direct value proposition that Minda Corporation offers to our customers and all stakeholders. Moving to last part of the presentation would be various focus on the ESG and CSR and awards. ESG is a prime paramount focus for Minda Corporation and in both, we have developed a very strong framework reviewed by our independent directors of the Minda Corporation Limited for -- looking at the ESG policy. And this is also on the Spark Minda's website.
Moving next to our focus on giving back to the society. There are various initiatives across projects like education, environment as well as supporting people with disabilities have been a focus. And we have put a separate cash all across. Last, not the least is our successful awards and achievements and recognitions by the customers and various other industry bodies, looking at the growth of the organization. In total, we have received 56 awards in this quarter.
With this, I would like to conclude my presentation and open the floor for all questions. Thank you.
[Operator Instructions] First question is from the line of Mohit Khanna from Banyan Capital.
Congratulations on the good set of numbers there. My question is pertaining to the Slide #9 wherein the information and connected sections on the quarterly side on left-hand side. We can see that margin -- the EBITDA margin for the segment has come down from the first quarter to second quarter even though the revenues have increased. So what really has been the reason for this?
Yes. So Mohit, thank you for the question. Again, the majority of this reason is due to the -- first, I would like to share that we have, in the presentation, welcoming Minda Instruments into the Information & Connected Systems. Hence, the revenue jumped from INR 311 crores to INR 615 crores. But if you look at quarter-on-quarter basis, it has moved up from INR 5 INR to INR 32 to INR 615 crores. The EBITDA has gone down and about -- majority of the reason is due to the premium buying of the semiconductors in the Minda instruments, really. And here it is a numerator and denominator effect.
One more thing. If I look at the year-over-year comparison, the gross margins have come down for us by around 4 percentage points. However, the EBITDA margin has held up in fact [indiscernible] so just wanted to understand how sustainable is this. And what really was the reason? Was it the product mix? Because I can also see the aftermarket numbers have gone down and commercial NTV vehicles have gone up. So is it the product mix that is helping us? Is this strength sustainable here?
Yes, absolutely. There are a couple of reasons for this. If you again look at it, the gross margins would be approximately same. If I look at quarter 2 FY '22 without MI. And with MIL, again, they have decreased by about a few basis points. If I look at including the Minda instruments, so there's a drop of about 100 basis points. This is due to the commodity inflation, premium buying of semiconductors as explained. And we also shared within a numerator and denominator perspective. Going forward, definitely, where the raw material prices are expected to come down, it may definitely increase going back forward.
So as the gross margins improves from here on, is it fair to assume that even the EBITDA margins will follow through?
Yes, you can say so. Again, it all depends on the movement of the current prices and that is again a major factor in how this will shape up. And of course, there are premium buyings, looking at the overall global semiconductor shortages. It may be in the fringe.
[Operator Instructions] We have a question from the line of Abhishek Jain from Dolat Capital.
Congrats on a sound set of numbers, sir. First, a few questions from the mechatronics and aftermarket business. So any on -- any new business in the 2-wheeler locking system? And I just wanted to know what is the share of business with a different OEM in 2-wheeler locking?
So Abhishek, thank you for your question. Definitely, we have won orders across -- speak about the 2-wheeler security systems. Our order and focus continues to be in the mechanical offset as well as the keyless installations going forward. I'm happy to share that in the keyless positions, which is a more of a premium product and going forward into the year, our win rate is more than 80%. And then the second part of the question was -- sorry, can you repeat the second part of the question, please?
Sir, what is the share of business with the different OEMs?
Yes. The share of business with different OEMs or the wallet share, what we call is different with each OEM. But as a market share, I can say that we are the leaders with the majority market share in India. So again, I will not be able to share a percentage number but it's in the range of 35% to 40% in the middle.
So what is the current content for these -- in the 2-wheeler locking system? And what sort of growth you are looking because of the premiumization?
So typically, if you look at the current lockset, it goes to about INR 400 to INR 500. But going forward, as I shared with you in the EV slide or even in the non-EV going in the premium segments, it may range from about INR 2,000 to INR 3,000 depending on the configuration of the product. Now it depends on the customers that what type of a keyless solution do we select. If it is a mobile-based or if it is a remote-based or what type depending on that from INR 400 to INR 500 to about INR 2,000 to INR 3,000.
Okay. And sir, in Information & Connected Systems, what is your revenue growth in the first half versus -- first half FY '22 versus first half FY '23 in the wiring harness business, excluding the Minda Instruments system? And margin is still low in this business. So what is your plan to expand margin? And how do you take -- to mitigate the impact of rupee, the depreciation rate?
Yes. So again, as I mentioned, for this quarter 2 FY '23 put together, revenue is about INR 1,615 crores. And if I compare that from quarter-on-quarter basis, it has gone up by 16% from the INR 532 crores. Here, of course, the EBITDA margin at the wiring harness division continues to be in the range of about 7% and the instrument clusters and the Minda Instruments Limited come to be about 10% in double digit.
So going forward, as I've already explained in the wiring harness division, our focus continues to be across various avenues. The first and foremost being the localization of the components, which we are currently importing, majority of it. Second is definitely, as I showed in the presentation is the consolidation of the plants to get better economies of scale. Third is operator efficiency and the fourth is, of course, major impact on raw material prices, which we get a lag of about 1 to 2 quarters from our customers.
And was this the effect of the rupee depreciation on -- because most of the -- around metals are imported now?
So I'll ask Mr. Vinod to answer this question, please.
Yes. While we, let's say, we know that rupee has depreciated. But at the same time, Japanese Yen has also depreciated basically. And a few of the components where the OEM is Japan. So net-net, it has most Europe impacted. But in any case, all these exchange rate variations are largely invested in OEM. So therefore, any variation in debt is compensated work. Of course, we are tying that to 1 quarter only.
[Operator Instructions] The next question is from the line of Bismith Nayak from RW Advisors.
Sir, what would be the order book at the end of this quarter?
Yes. So for the first quarter or the first half of the year, we have done a total order booking of about INR 4,200 crores in the first half. So the first quarter was about INR 2,000 crores and about 10, 30 -- INR 2,300 crores was in the second quarter. This is having a mix of replacement businesses as well as new businesses. About 19% of these new orders come from the electric vehicle platforms and end customers.
Understood. And sir, on the gross margin product I could not understand. So Minda Instruments, that is having an impact of 100 bps. And the premium semiconductor part, can you please help me understand? I'm sorry.
Yes. So I'll help my -- I'll ask Mr. Vinod to give you some more details on this subject. Vinod?
Yes, because of the shortage of ICs and semiconductors basically, by completing the long lead time and supply chain disruptions. We have to secure components at corporate, basically, so from available sources. And of course, when you buy these IPs or semiconductors at poor prices, which are much higher, that -- before we secure, we have the commitment from the customers to pay those poor prices, which are higher than normal prices actually at the moment.
And therefore, we make it pass-through, basically, but we don't have any margin on those pass-throughs basically. Therefore, while in case of Minda Instruments, the top line has grown much higher basically because of premium buying basically. So that, in a nutshell, while optically adds to our revenue, it does not actually help our margin. And to an extent, it had sort of some impact on this margin, which Aakash also mentioned, numerator-denominator impact.
Okay. So the premium that we are paying for procurement of these semiconductors. On the excess, the premium part, we are not getting any margin there?
Yes, because any premium is a pass-through basically, on a cost-to-cost basis.
[Operator Instructions] The next question is from the line of Sachin Kasera from Svan Investment.
Yes. Congrats on a very good set of numbers. Very hard to be consistent delivering good numbers and quarter-on-quarter income. Just 2 or 3 small questions from my side. One was the loss from the SoC seems to have gone up around INR 5 crores. So can you give us some more insights why it was -- the loss, suddenly, it's so high in SoC?
Yes. I'll ask Vinod to take up this question, please.
Yes. I think you are asking to the consolidated numbers where the share of profit from associates is net to about INR 5 crore. And if you would have a look at these, note numbers, just to add. I mean, just to add to the note in the consolidated financial statement, where in case of one of our associate companies, based on a custom classification issue, but that's what note #8 on our consolidated results basically.
So in case of an associate company, based on a custom classification matter, they had to expense out about INR 15 crores basically. Ad completing, we hold about 25% stake in that company. So we have to recognize our share of expense basically. So this is largely on account of CapEx.
And this is -- how about just entry of the -- for the cash expense?
Sorry, we can't hear you clearly.
I'm saying, is this just a provision right now? Or is this something that we have paid?
No, it's already a provision. In the provision only, actually. But yes, this is our share of expense. But so far as our associate is concerned, they have created a provision only as of now actually.
Sure. The next question is regarding the cash flow statement. So despite a strong improvement in profit, if you see because of the higher working capital and also because of almost INR 100 crores of CapEx, the cash flow is not that great and then so net it has gone up. So wondering if you could give us some insight, how do we see the net debt in the second half? What type of CapEx and working requirement we see? And will it further go up? Or will this come down? Because now that you mentioned the price is also stabilizing. So maybe incrementally, we may not need to have such, like, high-level of inventory.
Yes. So let me answer the first part in terms of the working capital. As you will see, that top line has grown significantly here actually. And considering the working capital cycle of about 45, 50 days that we have, our working capital and number days, both on receivables and inventory actually has improved marginally. So far, it's this quarter in this concern basically.
So the improvement working investment capital is largely a result of scalable growth in top line, actually. That is part 1. Part 2 on the CapEx side, as you can see the cash flow statement that we incurred CapEx of about INR 110 crores in the first 6 months, basically. And -- yes. Sorry, you said something?
No, and you think -- so what will be the number for the full year on the CapEx front?
I think about kind of about -- so I concluded, kind of about 3% to 4% of our top line at CapEx. And by that perspective, about INR 160 crores, INR 170-odd crores is the number that you look at, actually.
Which means as to the CapEx will be lower than usual?
Yes. So again, yes, we can say so in terms of numbers. But of course, as we -- as the year goes forward, we're also going to look at growth-related CapEx as more also. So yes, you can say broadly, there would be similar lines, that will be lower.
Sure. And my last question is Slide 17, where you have mentioned that as we progress going ahead, our kit value will move from INR 4,000 to INR 4,500 to INR 16,000 to INR 20,000. So can you give us how are we -- where are we in this journey in the sense in the last 1 or 2 years, have you seen this improvement? I know this INR 20,000 will take some time, but what is the type of increase we have seen from this INR 4,000 to INR 4,500 to where are we today? And what is your sense? Will it take us, like, 2, 3 years or 5 years to be INR 16,000 to INR 20,000 potential kit value?
So as I mentioned, again, from the current product offering of about INR 4,000 to INR 4,500, which is going to go to INR 16,000. And this is going to happen all across our product lines.
If I speak about the kit essentially and the other Mechatronics-related products, the increase will be from about INR 1,000 to INR 2,000 to INR 3,000. When it comes to the wiring harness, instrument clusters and other such connected devices such as sensors and all, which has further increased by about INR 2,500.
Speaking about the EV product lines, which is a battery charger, DC-DC converter, motor controllers, et cetera, will be about INR 8,000, INR 10,000. Now out of all of these products that I've mentioned to you, about -- only except motor controller and battery management systems, which are under development, rest all are under mass production, whether it is a cluster, keyless entry, wiring harness, sensors, battery chargers, DC-DC converters.
Also to share with you in the last about 18 months or so, we have 1 order book in the -- to the tune of about INR 2,000 crores from the EV customers and platforms in which you can start seeing from 2 years from now, showing that into our top line.
So directionally, we should start seeing improvement in kit per vehicle as we go ahead. Some improvement in '24 and the good improvement in deeper FY '25, FY '25.
Yes. Absolutely. But again, I would like to always caution here on the update of the EV industry. So of course, while the EV is growing month-on-month and quarter-on-quarter, but there are various challenges in terms of cost of ownership, fire issues and other such issues which relate to the motivation of customers. But hence, our focus is to, of course, win most and most amount of orders from our customers.
And when the EV penetration increases, so will Minda Corporation's revenue also.
Sure. And just one last follow-up on this itself. So if you can give us some sense on, because a lot of the route -- R&D and the new product developments, so what type of R&D budget we are running in the current year or at least last year? And what are our overall cost and how do we want to spend and how do you want to increase the strength of the R&D team?
So of course, engineering and R&D is core of our business. On an average, we've been spending about 2%, 2.5% of our revenue into the R&D. Going forward, you can expect it to be in similar lines.
Sure. And just lastly on this R&D bit itself, we are seeing that the world is gradually moving more and more towards the software side of -- on the vehicle. And most of the parts are getting some sort of embedded software involving them, and we also mentioned that we want to move -- if we go to Slide #16, we also have mentioned that how we are trying to indicate more and more electronics and intelligent, smart systems in all our products.
So are we sort of looking at significant investments and building capabilities in terms of how do we have some more software-based products in what our future products that we are launching?
Yes, absolutely. We are focused on developing our capability in software. All the products that we are going to be manufacturing and designing, we need a strong software base and pillars. So again, our technical center in Pune and further growing and expanding is definitely enhancing the capabilities across various competencies that are needed, including software.
The next question is from the line of Pankaj from Affluent Assets.
Congrats on a very good set of results. I just wanted to understand what is the thought process behind -- I would like to understand, where do you see the company going forward maybe 2 years down the line? So currently, on an annualized basis, our top line is around INR 4,000-odd crores with EBITDA margins of around 11%.
The margins have been consistent for last 3 years. But if I remember that is you had mentioned that the wiring harness connectors in -- are majorly imported. So what's the progress on indigenization? And where would we see the margin going forward as the share of indigenization increases?
Yes. So again, Pankaj, our focus is delivering consistent and sustainable numbers. And again, thank you for highlighting in the last -- over 10 to 11 quarters. We've been consistently delivering double-digit EBITDA numbers, and our focus is on capital allocation as well as delivering consistent and sustainable numbers going forward and gradually increasing.
Our interest going forward is to, of course, beat the market. So if the market is growing at 10%, we would like to grow at about 10% so that we are always ahead of the market, and we have, again, planned in order to do so. The major areas of growth will be, of course, premiumization of our products, addition of new geographies and new customer segments. Of course, the market itself growth and definitely more customers for products and more products for customers.
Going forward, in terms of the wiring harness connection systems. So currently, about 70% to 80% -- sorry, about 55% connectors are imported. And currently, our own indigenous are about 25%. By end of this year and about middle of next year, we plan to move to about 20% to 22% of indigenized components coming from our own division, which will take our EBITDA to single -- high single digit numbers.
Are you at single digit -- I mean, right now, we are think low double digit, right?
We are currently at around 7%.
Okay. For that specific connectors. Okay.
For the wiring harness division.
Wiring harness, okay. I understand. Okay. Okay. Okay. So you mean to say we were from 7% moving towards 9%-odd, right?
Yes, that's our target.
So what is the tentative time line for the sale, if you could help me with that?
As I've already mentioned, it's about 18 months around, plus, minus.
From now?
Obviously, yes.
Okay. Okay. And just secondly, if I understand -- if I did not miss the number, are the EV share in our top line is around 19%. So is this -- and are we focusing only on Indian OEMs? Or we are trying to explore opportunities outside India as far as EV is concerned?
It's, of course, India and overseas. So we've also started winning orders from overseas customers in these segments, particularly coming from Europe.
Europe?
Yes. [indiscernible].
The next question is from the line of Abhijit Kumar from Sharegiants.
Sir, I noticed in the results the other expenses have gone up. So if you can help me in, like, what are the legal hedge from the other expenses, and what are the reasons its increase, sir?
Yes. I'll ask Vinod to share the details.
Yes. See, the other expenses have increased marginally on account of 2 key reasons basically. One, of course is energy prices, as we know, have been going up basically. Like, the P&G prices or the grid power rates have gone up. That is part one. Second, we have to know that almost all the previous quarters' volumes impacted by COVID, and therefore, in terms of our, say, drivers', like, expense also has sort of gone up. So these are the 2 assignable reasons, actually. Rest, otherwise, it is largely in line with our sort of growth in top line.
Okay, sir. Sir, just on that follow-up. So, like, how do you foresee in future the other expenses, these hedge to pan out? Will it normalize? Or it will continue to remain integrated for some time?
See, it is a function of, like Aakash mentioned that our target is to grow at about 7%, 8% more than the industry actually. So until the time, we can sort of have a growth of more than 15%, actually. I think as a percentage, other expenses and percentage will shape, should sort of remain under check and actually should come down slightly.
Okay. Sir, also on the recent sharp increase in the commodity prices earlier, and now recently, we have seen a trend of cooling off on the commodity prices, so how does it impact your margin? Like, do you have any kind of inventory gain or losses which translates into volatility margins? How do we look at our model, our earnings from that state?
So again, we have back-to-back agreements with our customers for all doing -- most of the raw material, again, largely aluminum, copper, zinc, et cetera. If you see in the last 24 months, the prices have been increasing. And coming from this quarter, we can see some relaxation in that front. So we are taking -- typically have about 3 to 6 months lag and agreements with our customers. So if the prices are going up, we start getting an impact. And if the prices start coming down, there's a positive impact, of course, the following quarters and so on.
Sir, like, recently also, we have seen a lot of geopolitical tension. You have also highlighted in the presentation and press release about there. So how do you see the scenario going forward in the next 1 year? There -- will the things get normalized? And how our growth plans will foresee longer with it?
See, I cannot comment on geopolitical issues. And we are running an automotive company, so I would like to refrain from that. But of course...
I was looking at more of an impact on you, like, how much impact we will have on that.
I'm coming to that. Of course, when we come to the order book, all across our divisional products for the export markets are very healthy and strong. If you really look at our exports going forward, our exports have grown by about 10% quarter on -- year-on-year basis, and again, across all divisions and segments. There is, of course, some products like impact on motor, which is having a concern due to the exports on the Ukraine-Russia aftermarkets, yes.
Okay. Sir, we also see we have a significant amount of cash in books of more than INR 300 crores. So if you can throw some color, like, what are your plans on utilizing this amount?
So if you answer the question, it is more towards the inorganic and M&As and all. So here, I mean we raised this QIC a couple of years ago. And so far, again, we have been having such a strong cash balance, and of course, increasing and growing due to the focus on the free cash flow.
But important here to mention is that we are always evaluating opportunities when it comes to the M&A, but it has to be a very right fit to our organization. We have created norms internally on what we will do and what we will not attempt or do. So based on those norms, we are very clear how we will take it forward. So I mean the cash is there, of course, but we don't want to spend them and do an M&A just because it is lying there.
Okay. And just a connection question on that, what is your capacity expansion plans? And what is your current capacity utilization?
So our capacity utilization is different across different products and divisions and plants. So again, typically, about in our start and was -- security division is about 60%. Wiring harness division is about 80%, 85%. Die casting division is about 80%. And similarly, electronics, because still it's going up, it's about 15%, 16%.
Okay, sir. And...
Sorry to interrupt, Abhijit. I will request you to please come back in the queue. The next question is from the line of Neha Sharma from Sul Globe Investments.
Am I audible?
Yes, you are.
Sir, I have a couple of questions. So can you please help me, like, how do you feel would be the electric vehicle do in the future? What are your thought processes on the same?
Yes. So Neha, again, electric vehicle mobility is the buzz around and it's something that we, being in automotive, are really looking forward for it to happen sooner than later. I mean, I would appreciate the government's push on account of paid policies and the PLI scheme and other such government-related specific incentives for everybody to push the EV manufacturing as it is, production and sales. Of course, trickling down to the Tier 1 components of manufacturing system solutions like us.
So there are definitely concerns when it comes to total cost of ownership, battery prices, infrastructure, et cetera. But I think all government, as well as customers, OEM manufacturers, Tier 1s are doing a lot of work in order to see a boost in EV coming forward. I may not be able to give some numbers, but first is definitely going to be 2-wheeler penetration followed by commercial buses and then passenger car and commercial vehicles.
Okay. Okay. Sir, 1 more. So how the EBITDA margins, sir, evolve with more EV and sales?
Yes. So definitely, top line is going to increase, because, again, our products are going to go through a premiumization rate, depending again on the kit value and the configurations our customers select, because all of our products will be personalized as well as premiumized. On the bottom line front, of course, our focus is to keep the margin at sustainable numbers and grow steadily.
Okay. And one last, sir, could you please help us explain a bit in detail about the PLA with the [ Daesung ] electric? And what are the synergies it will bring into Minda?
Yes. So the company is called Daesung Electric from -- and they are into in-vehicle infotainment systems as well as gas solutions, primarily focusing on 4-wheelers, commercial vehicles and off-road vehicles. We have signed a TLA with them where they will give us technology and we will be offering the same manufacturing the same through our OEMs in India. This is in line with our commitment in order to offer safety-related solutions across India. So while we already offer a 2-wheeler ADAS solutions, this is another feather in the cap in order to offer the complete solutions to ADAS customers.
The next question is from the line of Anil from The [ Inversa ] Investment.
Sir, I would like to understand how is the [ die casting ] division is doing? And do you have any CapEx plan for the same?
Sorry, did you mention about the die casting division?
Yes. Die casting division, sir.
Again, if I look at the die casting division, we have increased or grown the die casting division by about 50% year-on-year basis. And quarterly -- quarter-on-quarter basis to the tune of about 5%, and this is primarily due to the exports going down in Europe, as I mentioned.
The focus here is definitely to look at lightweighting solutions and products going forward. We are currently one of the leaders in the [ double-charge ] housing. And going forward, we are looking at EV penetration for domestic market and exports.
Do you have any number for CapEx that you have in mind for this division?
So again, die casting definitely is a higher CapEx business. So I don't have a particular number in mind. We can get back to you.
Yes. And one -- I mean, one more question, sir. What is the EBITDA margin for MIL and ICS? Do you have it separately?
Yes. So as Minda Instruments, again, the EBITDA numbers are again increasing quarter-on-quarter -- year-on-year and quarter-on-quarter. So if I look at about EBITDA percentage, it's about to the tune of 10 to 10.5 percentage. On year-on-year, they have grown by about, about 10 -- sorry, 100 basis points. And on quarter-on-quarter, they have also grown about 12%.
And then I also think that the wages have gone up to a certain extent. I mean do you have any figures around how much the wages are increasing?
So of course, wages, being in -- more on the wiring and harness front have gone up, again, due to various aspects when it comes to our plants and business orders and other such things. So again, there are various factors for this -- but this is not a sustained growth in terms of numbers. That happens, variation from month and quarter-to-quarter.
The next question is from the line of [ Sridhar Kalani ] from Axis Securities.
Congratulations on the number and also on the new alliances. So I would like to understand that you just mentioned that PLA-based its -- for Indian OEMs. Is there any restrictions to you with regards to manufacturing and filing it and exporting these items?
No. See, there is no restriction at all, but of course the focus is on the Indian markets. We don't want to export them. I want to bring in technology from Korea and focus on the Indian OEMs as well as international OEMs present in India with the focus in Indian market.
Okay. And in this -- are these PLAs exclusive to you? Or are -- or can they also intend to with any other manufacturers?
No. This PLA is 100% exclusive to Minda Corporation.
Okay. So sir, and you also had a tiered drive division last year, so how is the order book for that segment currently?
We are in the process of localization and indigenization of the product. Of course, the market is evolving right now because the regulations and other such things for the 2-wheeler adapt are yet to see light, And of course, the government board are focusing on that. We are already in discussion with a couple of customers for testing and validation of new products and then, of course, seeing them soon in the market.
Okay. And these are mainly for electric vehicles or for the IC engines also?
Both.
And, sir, what…
Yes, the application can be both for IC and EV.
Okay. And sir, like going ahead what can be the market size of this segment?
Great question because it differs going forward. I mean 2-wheeler as a different market, I mean once you include the aftermarket size, the volume may increase. And similarly, when it comes to the 4-wheeler side, we expect that our serviceable side to be about INR 1,500 crores to INR 2,000 crores in about -- by 2030.
The next question is from the line of Sachin Kasera from Svan Investments.
This dealing with the 2-wheeler effect, what is the type of investments we'll need to do?
So again, I will not be able to give you some number right now. But again, at the first phase, I mean, there are multiple phases of this. So the first phase is, of course, understanding the technology and developing it here in business. And then, of course, once we start marketing it and validating with the customers, then there'll be investments for major leagues. When it comes to the manufacturing, we already have the electronics division, which would be capable enough to manufacture this. But as the electronics division is growing, so as a -- generally, as an electronic division, it may need CapEx for growth.
And when do we intend to start probably a serious level of commercial production?
So first, that is definitely engagement with the customers, which will begin immediately. And once we -- this is a very critical safety product, so the getting validation may take time, somewhere about 2 years as well. So hopefully, once we start winning orders, we should start in somewhere about FY '25, '26.
Okay. Great. One question on if we see for the current quarter, as well as for the first half, our growth rate is very, very strong and much higher than the industry growth rate. So would you be able to give us some sense on if each other, so it means that we definitely gain market share. Now if you could at least give us some data, is it like, which products are gaining market share or any specific customers that are gaining market share, that would be very helpful.
Yes. So Sachin, again, our interest and focus is to grow ahead of the industry. Again, all of the products and Minda Corporation, most of the products that we work in, we have the largest market share and somewhere between 35% to 40% are that bracket. Most of -- when we speak about the vehicle access, information connection systems, clusters or other products, so most of the products enjoy, and we really don't need that market share, then we are already at the receiving end. So our focus is always to be ahead in the market respect. Of course, we do a lot of -- spending time with the customers to grow along with them. So all the customers are very important to us.
Sure. And in the last 2 years, because of the strong growth in not only product, our market share has gone up quite a bit. So from here on out, we see here to outgrow the industry, we still have headroom for market share in the same product? Or it has to either primarily come from new customers, new geographies or new products? What is your take on that?
It's a mixed bag. There is no one clear, it's a mixed bag. It's from more products, more, like, brand new -- more customers, more wallet share of each customer across the geographies in terms of domestic that was exposed. So it's a mixed bag, and this is where our focus with being close to the customer and focusing on the domestic and export markets will come into play.
Sure. And lastly, if I see the revenue breakup between aftermarket exports and OEM, OEM pricing share has gone up, so what is the outlook on aftermarket and exports for the next 2 years?
So aftermarket and exports will continue to also help in the growth story of that operation. Exports, as I mentioned, is somewhere about 10% to 11%. As a long-term vision, we would like to grow this, strengthening our actions and areas with respect to such opportunities. When it comes to aftermarket, our focus is, again, on our core product lines and continuously adding new and new product lines. We've recently added new helmets and other such product lines.
We are doing a lot of analysis state-wise, how we can move from do-it-your-own method to do it do it more lean and vice versa, expanding into multiple geographies. We recently entered into Bangladesh in Africa. So some of the areas where we will see growth in exports and aftermarket.
Sure. And just lastly on the margin, I mean, at one point of time, you still have aspirations of higher double-digit recognizing type of EBITDA, do you think next 2, 3 years, we can expect to reach that type of number? Or you think maybe more like 11%, 11.5% margin or a sustainable margin there?
Sorry, repeat question. Your voice is not very clear.
I'm saying at one point of time, we used to have some aspirations of the higher double-digit or closer to mid-teens type of EBITDA margin in the medium term. We're currently closer to around 11%. So do you think that over the next 2, 3 years, we can aspire to have this type of improvement in margins? Or do you think over the next 2, 3 years, a more sustainable number would be more like 11%, 11.5% type of EBITDA.
So I would say more sustainable numbers. That's our focus, like I was explaining the last few quarters. Our prime focus is sustainable and consistent delivery of all across our platforms and areas. So the focus is growing on sustainable numbers and growing gradually and increasing that quarter-on-quarter.
The next question is from the line of [ Abhijit Kumar ] from Sharegiants.
My question is on other financial assets. Was there a significant increase in other financial assets over the last year, so what could be the reason for this? And, like, what are the financial assets, if you can give some color on this?
Yes. I'll ask Mr. Vinod to answer the question, please.
Yes. So the other financial assets increase in the cash flow statement of about -- from INR 45-odd crores. You see it, actually, you know. Because I mean, in the rising commodity prices and the pass-through of commodity prices happens within lakhs, it is sort of unbilled revenue against which we have sort of received the purchase orders, but we are in the process of raising invoices. That is part 1. Part 2 is the security deposits in respect of, say, ultimate in risk effect. So these are largely 2 things, basically, which sort of grown in today.
So this part of the business?
Yes, it part of the business. And I think in the next quarter, it should get normalized.
And sir, as your significant amount of investment also, so is there a possibility of monetizing some amount so that we can become debt-free at the end of around that level, the borrowing and all?
Which kind of assets you mentioned for volume…
You have, sir, investments also on the second-hand [ investments ].
No, no, we don't have anything to explain with regards to that.
Okay. And another question more on [indiscernible 01:03:52], compared to last year, there was a significant distribution [ resilience ]. If you call help me in like what could be the reasons and how that could be a trend going forward?
See, like majority of our supplies are to OEMs, basically. And we -- while the number or the amount of receivables appears to be higher, but if you calculate it in terms of number of days, that largely remains the same actually. It is mainly because of a very high growth in supply, I think, it's -- I go through the same number in terms of Y-o-Y basis, the number is pretty high actually. So it is only all about that.
Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments.
Thank you very much, everybody, for joining the call today. Again, I would like to summarize that for the quarter -- in quarter 2, we have given a 57% growth on a year-on-year basis on top line. And at the EBITDA level, we have given a 60% growth year-on-year basis at 10.8%. Our focus is to deliver consistent and sustainable performance year-on-year and quarter-on-quarter. We look forward for your support, and thank you very much. And if you have any questions, you may reach out to our teams. Thank you.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.