Minda Corporation Ltd
NSE:MINDACORP
Earnings Call Analysis
Q3-2024 Analysis
Minda Corporation Ltd
The company has demonstrated positive year-on-year growth with revenue increasing by 9.1% to INR 1,166 crores, attributed primarily to a 16% increase in the domestic business. However, the delay in start-of-production (SOPs) and weak export demand due to global economic conditions curbed growth marginally. Profit after tax (PAT) stood at INR 52 crores, maintaining a margin of 4.5%, which was slightly impacted by higher finance costs and depreciation from strategic investments enhancing future growth potential.
EBITDA margin improved to 11.1% with a 13.8% growth year-on-year, reaching INR 130 crores. The company has maintained a healthy double-digit EBITDA margin across quarters, with a slight increase in basis points. To share the profits with shareholders, the Board of Directors recommended an interim dividend of 25%, totaling INR 0.50 per equity share.
The company’s lifetime order book has significantly risen above INR 2,300 crores, with electric vehicle (EV) platforms making up more than 30% of the new orders. Demonstrating a dedication to innovation, 8 new patents were filed, contributing to a total of 265 patents. The company also celebrated the reinstatement of Mr. Ravi Sud as an independent director on the Spark Minda Corporation Board.
Strategic capacity expansions are underway in several areas, such as vehicle access, die casting, instrument clusters, EV products, and sensors, to meet growing demand. These expansions align with the company’s roadmap to premiumization, technology advancements, and enhanced profitability through local production and minimizing reliance on imports.
The Mechatronics and Aftermarket division reported a 5% growth, while the Information and Connected Systems saw a more robust 13% growth. These increases are underpinned by domestic demand, especially from the 2-wheeler segment and a strategic emphasis on component localization. Although exports and the commercial vehicle segment showed subdued performance, the overall domestic revenue growth was strong at 13% to 16%.
In line with evolving technology trends, the company is transitioning from traditional locking systems to advanced vehicle access solutions. This strategy extends to other product lines, increasing the kit value proposition, particularly in the fast-growing 2-wheeler EV segment. The targeted kit value is expected to rise to approximately INR 22,000 to INR 27,000 with the development of new products.
Investment in research and development (R&D) has been substantial, with more than 3% of the company’s top line dedicated to R&D activities. The company has over 550 engineers working on advanced engineering solutions and maintains two specialized technical centers in Pune and Bangalore. Such deep focus on R&D and engineering underpins the firm’s commitment to innovation and technological leadership.
The company continues to focus on its Environmental, Social, and Governance (ESG) sustainability framework, prioritizing carbon neutrality and earning accolades for its efforts in corporate social responsibility during the quarter. This commitment to sustainable business practices and social impact aligns with the broader objectives of the company to deliver value beyond financial performance.
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Ladies and gentlemen, good day, and welcome to Q3 FY '24 Earnings Conference Call of Minda Corporation. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raghunandhan from Nuvama Research. Thank you, and over to you, sir.
Thank you, Nirav. Good morning, ladies and gentlemen. On behalf of Nuvama Research, we welcome you all for Minda Corporation Q3 FY '24 Earnings Call. We thank the management of Minda Corporation for providing us the opportunity we have with us management team represented by Mr. Aakash Minda, Executive Director, Finance and Strategy; Mr. Vinod Raheja, Group CFO; and Ms. Pushpa Mani, Lead Investor Relations. To remind you of the safe harbor, the management may be making some forward-looking statements that have to be understood in conjunction with uncertainties and risks of the company and the risk that the company faces. We'll start the call with brief opening remarks from the management and followed by a Q&A session. Now I hand over the call to Mr. Aakash Minda for his opening remarks. Over to you, Aakash.
Yes. Good morning. Thank you so much, Raghunandhan and Nuvama for organizing this call. Good morning, ladies and gentlemen, and welcome to the quarter 3 FY '24 earnings call -- conference call for Minda Corporation. On behalf of the company, I thank you all for joining us on this conference, and I hope you are all keeping safe and healthy. The quarter was marked by growth across vehicle segments except tractors. This upsurge is attributed to the strong festive buying, improved consumer sentiment and various other factors. Overall, we are optimistic about the industry's trajectory and poised to capitalize on the emerging opportunities. Coming to the financial performance of the quarter. Minda Corporation delivered revenue of INR 1,166 crores, up by 9.1% year-on-year, attributed by the growth in domestic business by 16%. However, growth was partially offset due to the delay in SOPs and subdued demand from export attributed by macroeconomic scenarios. EBITDA margin stood at INR 130 crores at 11.1% with a growth of 13.8% year-on-year, driven by focus on component localization and increasing operational efficiencies among other factors. Moving on to the bottom line. The profit after tax stood at INR 52 crores with a PAT margin of 4.5%, partially impacted by increase in finance cost and depreciation attributed to the strategic investments in capacity expansion and technology upgradation. These initiatives are instrumental in positioning us for the accelerated growth in the future. The Board of Directors have recommended an interim dividend of 25% on the face value, that is INR 0.50 per equity share. Now I would like to take you all through the key developments during the quarter. At first, lifetime order wins of more than INR 2,300 crores with EV platforms constituting more than 30% of the order win. In the first 9 months FY '24, order won stands at INR 8,900 crores, while for the full year previous year, FY '23, our order wins were at INR 8,000 crores, showcasing our growing core product portfolio, product premiumization across segments and growing demand across customers in ICE and EV products. Moreover, we secured order wins with multiple first-time ever orders in new technology products across ICE and EV segments from key domestic and export customers in the area of die casting, wiring harness, vertical access, instrument clusters, representing our expanding capabilities in delivering sustainable mobility solutions. To facilitate the growing demand, the company is proactively enhancing its capacities in smart keys, EV products, clusters and cockpits, sensors, die casting parts. In line with our customer-centric approach, the company inaugurated smart key facility in Vietnam, strategically positioned to serve customers in ASEAN countries. During the quarter, the company demonstrated its commitment to innovation by filing 8 patents, bringing the total patent number to 265. This underlines the company's ongoing efforts to stay at the forefront of technological advancement in the sector. Lastly, it gives me immense happiness and pleasure to state that we have strengthened our leadership by reinstating Mr. Ravi Sud in the Spark Minda Corporation Board, again, as an independent director. His last experience in strategic, financial, including cost control, will help us drive more value for our stakeholders. Moving ahead, we would be focusing on the premiumization of our core products, expanding market share with our existing clientele and acquiring new customers by emphasizing technology advancements through in-house research and development as well as global strategic partnership and alliances in our core products such as vehicle access, wiring harness, instrument clusters, light-weighting die casting wiring harness. Additionally, our ongoing efforts to include localization and connection systems to minimize reliance on important enhanced profitability. Now I will take you through the presentation with key highlights for the quarter. I would request you to take note of the presentation, which is online. We move on Slide 4. Just as a summary and snapshot. We are one of the leading automotive component companies in India, focusing in mechatronics, information and connected systems, light weighting, aftermarket and green mobility solutions. We have more than 27 facilities in India with 2 R&D centers, and 2 plant location overseas, more than 16,000 people, 9 partnerships. If I look at the first 9 months, our revenue has been INR 3,436 crores, EBITDA has been at INR 376 crores, and margin has grown in the first 9 months to about 11%. Our PAT margin stands at 4.5%. And as on 31st December, the shareholding is, promoters standing at 65% and institutions and others and corporate bodies with the remaining. Now move to the next slide, Slide 5. This is the experienced leadership and Board. As I mentioned, we have now onboarded 2 independent directors in the recent 2 quarters. One is Mr. Gajanan Gandhe and Ravi Sud ji. Moving to the next slide, which is Slide 6, on the key performance highlights for the quarter 3 and the 9 months. Quarterly revenue of INR 1,166 crores with a growth of 9.1% year-on-year and a 9-month revenues of INR 3,436 crores with a growth of 7% year-on-year. We delivered double-digit EBITDA margin of 11.1% in quarter 3 with a growth of 46 basis points year-on-year and 10.9% EBITDA margin in the first 9 months with a growth of 26 basis points year-on-year. In quarter 3, lifetime orders won were INR 2,300 crores with EV platforms constituting more than 30% of the order wins and marquee order wins across existing and new technology products. We inaugurated first smart key plant in Vietnam to cater to customers in ASEAN region and other exports. Last, but not the least, undertaking capacity expansions in vehicle access, die casting, instrument clusters, EV products and sensors to cater to the growing demand. Moving to the next slide on the business highlights and key order wins. In this quarter, we have won multiple smart key order in the 2-wheeler and 4-wheeler EV and ICE segments from the marquee OEMs. We have won lifetime orders worth more than INR 400 crores from multiple leading OEMs for their upcoming models. We have won marquee customer order wins for new centers such as tire pressure monitoring systems. We have also won large orders for LCV wiring harnesses for their upcoming models for orders worth INR 450 crores to be SOP from next year onwards. In the area of die casting, we have also -- we have been winning orders in the die casting products for EV battery and motor housings for domestic and exports 4-wheeler OEMs. Moving to the next slide is a snapshot of some pictures of the inauguration of the smart key plant in Vietnam. In slide 9, we think -- we are showing here the expanding capacities to cater to our growth requirements in the upcoming years in the area of instrument clusters at Pune, sensor division in Pune, Smart key facility also in Pune, expanding die casting facility in Greater Noida in North, and also die casting facility in West for exports. Moving to the next slide on the financial performance for the quarter. In Slide 11, we see Indian automotive industry performance in the quarter 3. In terms of year-on-year growth, the industry grew by about 14%, where the 2-wheelers grew by 19%, passenger vehicle by 5%, 3-wheelers by 13%, CV by 5% and tractors [indiscernible]. On quarter-on-quarter basis, the industry de-grew by around 5%, 2-wheelers de-grew by about 2%, PV by about 11%, 3-wheelers by 9%, CV by 9% and tractors by about 30%. Quarter 3 in FY '24 saw uptick in demand across most segments, mainly driven by robust festive season and improved consumer sentiment and pickup in demand for entry-level segments in 2-wheelers as well as premiumize products. In the 2-wheeler segment, it was mainly driven by the festive season as well as the sentiments as well as the wedding season. Growth in PV volume was driven by demand in SUV vehicles. 3-wheeler segment, the year-on-year growth was led by passenger carriers as well as goods carriers. In CV, growth was supported by increasing demand in infrastructure projects. Going ahead, 2-wheeler demand is expected to pick up in the entry-level segment as well as the premium level segment with a strong order book in PV, longish CV cycle and revival in exports. Moving to the next slide, as the financial statements of Minda Corporation Limited. The revenue has grown from INR 1,068 crores to INR 1,166 crores as on year-on-year with 9% growth. At EBITDA level, we have grown from INR 114 crores to INR 130 crores on a year-on-year basis with a 14% increase in EBITDA. And at PAT level, we are almost flat at INR 52 crores year-on-year basis. At the 9-month level, the revenue has grown by 7% from INR 3,226 crores to INR 3,436 crores, EBITDA has grown in the first 9 months from INR 345 crores to INR 376 crores from 10.7% to 10.9% in the first 9 months, showing a growth of 9%. And PAT margin has been almost flat at about INR 163 crores to INR 156 crores. Moving to the next slide in further details. Our operating margin has grown on -- from year-on-year basis by 9.1%. From quarter 2 to quarter 3, we were almost flat. In the first 9 months, we have grown by 6.5%. At EBITDA level, from quarter 3 to quarter 3 this year, we have grown by 13.8%. And in the quarter 2, sequentially to quarter 3, it is almost flat. But our basis points has increased by 46 basis points from quarter 3 to quarter 3 and by 16 basis points from quarter 2 to quarter 3. In the first 9 months, we have increased 26 basis points from 10.7% to 10.9%. PBT stands almost at the same level from a year-on-year basis to INR 74 crores to INR 76 crores by -- and also from INR 77 crores to INR 76 crores. In the first 9 months, the PAT -- the PBT has gone from INR 230 crores to INR 216 crores basis on our investments and interest. The consolidated revenue on the domestic front grew by about 13% to 16%, led by strong industry growth. However, the growth was partially offset by delay in some SOPs and subdued exports on the back of macroeconomic scenarios. EBITDA margin, we have delivered double-digit margins on the back of increasing efficiencies while low-cost automation and component localization incentives. Board of Directors have declared interim dividend of 25%, that is INR 0.50 per equity share. On the diversified revenue model by geography, India continues to be our largest focus area, which is about 85% to 87%, right -- as this quarter, the exports has subdued. The exports is almost flat, about 8% of the total revenue. And Southeast Asian market with Vietnam, it is 8% to 5%. By end market, 45% is approximately the revenue depending on 2-wheelers. In passenger vehicles is about 15%. In aftermarket is about 11%. And commercial vehicles and off-road is about 25% to 28%. In the areas of products, wiring harness constitutes to about 30% to 33%, lockset is about 25%, die casting is about 15%, instrument cluster is about 15% and other products, which are the new products such as EV, sensors and other electronics areas are about 13%. [Technical Difficulty]
Participants, please stay connected, the line for the management dropped. Ladies and gentlemen, please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected.
Moving to the business vertical performances on Slide #15. In our Mechatronics and Aftermarket division, the revenue has grown from INR 547 crores to INR 575 crores with a 5% growth on quarter-on-quarter -- quarter basis. In the Information and Connected Systems, the revenue has grown from INR 522 crores to INR 590 crores with a 13% growth. On a 9-month basis, the aftermarket -- the Mechatronics division has grown by 9%, and the Information and Connected Systems has grown by 4%. In the Mechatronics and Aftermarket, the revenue grew in quarter 3 FY '24, driven by domestic 2-wheeler segment and premiumization, partially offsetting due to the subdued exports and CV segment. In the Information & Connected Systems, the revenue grew, driven by demand across segments, partially offset by delay in SOPs and subdued demand for exports. Our focus towards component localization resulted more than 15% component secured in-house due to our efforts in the localization of connectors, boosting our sales. Moving to the next slide of Slide 16, shows our transforming current business line as per the technology trends, how we are moving from the locking systems to a vehicle access solution, from a wiring harness system to an electrical distribution system company, from a cluster division to a connected and safe mobility, from light weighting to light weighting and plastics, and EV power electronics as a new division. This is in line with our [ LTS ] strategy going forward and how we are increasing our kit value in ICE and EV products going forward. Moving to the next slide of Slide 17, which depicts our kit value in the 2-wheeler EV segment, per se. So all of our products are engine-agnostic, while more and more EV or other engines are going to come across segments. Our kit value will go through the premiumization. On the right side, we can see that the kit value has further increased with the new products under development to about INR 22,000 to INR 27,000. We have also added a few customers in the EV segment in this quarter. On the next slide are the strategic pillars of growth on Slide 19. We continue to focus on enhancing our core in the core products of safety security systems, wiring harness, instrument clusters, die casting, innovation and technology by focusing on our in-house R&D and partnerships inorganically through joint ventures and global partnerships, enhancing the electrical vehicle growth opportunity by investing further into the EV product lines and strengthening passenger vehicle offerings. Last, not the least is our engineering capabilities. By end of quarter 3, we had more than 550 engineering team working only on advanced engineering. More than 265 patents filed, spending now more than 3% of our top line into R&D and having 2 technical centers in Pune and Bangalore focusing on our enhancing of our product lines. Last, not the least is on the ESG, CSR and Awards. We continue to build focus on our ESG sustainability framework and now enhancing on the carbon neutrality footprint and the carbon credits and [indiscernible]. In corporate social responsibility in quarter 3, we were given various awards and continue to give back to the society across state and organizations we are associated with. And last, not the least is our awards and achievements given by our customers in recognition of our performance on quality, cost, delivery showing significant growth in our ordering wins and services. With this, I would like to conclude my presentation and open the floor for questions. Thank you.
[Operator Instructions] The first question is from the line of [indiscernible] from Anand Rathi.
And congratulations on a healthy set of results. Sir, in the presentation, you have talked about the delayed SOPs. Can you share when these orders will again start? And what would be the size of these orders? And also, can you help us understand what are the orders being delayed?
Yes. Thank you, [indiscernible]. So again, I'll not be able to give the details of which orders they are. But they are to the tune of about 3% to 4% of our revenue. This is coming across segments, primarily from the Information and Connected Systems solutions.
Got it. And it will be resumed back, sir, by which quarter, sir?
Yes. So we are expected to start from, again, quarter 4 and then quarter 1 of next year.
Got it, sir. Sir, Wiring Harness has seen a strong double-digit growth in year-to-date numbers. So what have been the drivers for the outperformance, sir?
So 1 of the areas that we have continuously been sharing is our localization of our connection systems over the past 2 years. We have given various initiatives for localization of the connectors for the wiring harness in terms of moving from imports to domestic. This has, of course, helped us in terms of our being more cost competitiveness as well as further our weaker engagements with the customers while we have been committed to have a deeper engagement on the product portfolio of these customers, how we can increase our share of business -- our -- addition of the new platforms which are coming in as well as our export side is the areas that we have been continuing to drive in Wiring Harness segment.
Of course, as you've also known in the past few quarters, we consolidated our plants in order to get better economies of skill and create capacities for the growing businesses. Hence, these are some of the factors that have led to our increase in the Wiring Harness commutation.
Got it, sir. Just lastly, can you share EV-specific company's revenues for the 9 months, that is for DC-DC converter, telematics and battery charger? And what is the expected ramp up over the next 2 years?
So I will maybe not able to share the details, but what I can share is EV as a percentage of total sales is about 5% to 6% at the group level. If I speak at about the 2-wheeler segment, it is about 11% to 11.5% depending on the 2-wheeler side.
[Operator Instructions] Next question is from the line of [ Ruchita ] from Max Life.
Really happening to see quarter-on-quarter such strong order wins from our side. Just a little help understanding 2 aspects: so one, how should we think of this -- these orders translating into revenue for us? What kind of ramp-up duration should we be expecting? And secondly, export seems to have hurt us this entire year, wherein we've relatively done well on the domestic end but export has ramped us down. So how are we looking -- it seems to have stabilized on a quarter-on-quarter base, if I'm not wrong, this quarter. So just how are we thinking of it going forward? What is the outlook for exports? Is there still pain left? And how should we think about it? Yes, those would be my 2 questions.
Yes. Thank you so much. So I'll answer the first question in terms of the ramp-up of these sales. So the order wins typically in the automotive industry are coming from into SOP -- from order win into SOP in about 12 to 18 months or 12 to 24 months, depending on the vehicle segment, it could be 2-wheeler, it could be 4-wheeler, it is much higher. So the order wins that happen should typically come in about 6 to 8 quarters from the order won that has come. And that is the SOP date, but the peak volume should come in about 36 months from the order win. So that is how it should be looked at. The orders that have been won, in some cases are -- or most of the cases are new developments, which will take a longer lead time. In some cases, they are commonized parts, which we very less products to come into SOPs. On the second front, in terms of the exports, yes, you absolutely right. It is a concern for us as well that the exports for the first 9 months have been subdued due to the various reasons. Firstly, I would like to give assurance that we will continue to win orders in the exports, all across our segments, die casting, vehicle access, instrument clusters, wiring harnesses, et cetera. but the intake of the customers has been slow. In the quarter 3, per se, our exports have de-grown to the tune of about 15% due to the concerns in terms of the exports on the North America and the European region per se. In the first 9 months, as I mentioned, this is also -- and the 9 months has also come down in the similar level, which is impacting our sales growth. So while export continues to be our -- one of the areas of focus for growth in the future, but the actual sales in the first 9 months and quarters are not very encouraging.
Quarter-on-quarter have exports stabilized? Or quarter-on-quarter also you're experiencing decline?
So quarter-on-quarter, they are at a similar level. So if I may say, the uptick versus the order book is to the tune of about 85%. So throughout the year, if you see, the sales have been about 85% of the order book that we have in terms of every quarter.
Got it. And just -- so how you said it usually it takes about 3 years for your order books to translate into peak revenues. So just you would have a fair amount of visibility what this in a couple of years you are going to look like. So on that front, I just wanted a broad idea from you, what kind of performance are we thinking of over the next 2 or 3 years? And also, what could possibly be the driving -- what could possibly be a risk factor that could keep us from achieving our vision?
Yes. So at a group level, we definitely continue to work on outperforming the market. That is our first importance. And with the order wins that we have secured across customers and platforms and technologies, we would like to achieve that. So there are usually 4 factors which are going to lead us to our growth: one is, of course, the new other wins that we have made. Second is in the premiumization of our products, enhancing the kit value of all the products that we do. The third is the new markets in terms of the exports. And fourth is, of course, the new products that we are adding through organic and inorganic initiatives like we have seen some of the marquee orders that we have won. So these are the areas of the 4 or 5 pillars that are going to help us achieve this growth and outperforming the industry over the next few years.
Next question is from the line of Bhalchandra Shinde from Kotak Mahindra Life.
And congrats for good set of results. So regarding the order win, if you can give more clarity like how one should look at it, like if now INR 8,900 crores order win is for us -- as you said, it takes 2, 3 years to ramp up? But what kind of a visibility in revenue growth prospect-wise it gives us? Means like based on current sales, if you want to draw a picture, how one can draw a line between order line -- order book and sales?
Yes. So maybe, again, I'll share that in the first 9 months, the export orders have been to the tune of about INR 500 crores plus. Again, these are lifetime numbers. In the Mechatronics division, it is to the tune of about INR 4,200 crores, out of which 20% have been on the replacement business and 80% have been on the new businesses. From the 2-wheeler segment, it is about 60%, on the PV segment is about 33%. In the Information and Connected Systems, they are about INR 3,500 crores. Out of this, 31% are about replacement business and 70% are about the new businesses. And again, in terms of these segments, in the 2-wheeler segment, we're about 40%. And in the PV and other segments, we are about 50%. And other product lines, which are upcoming new are in the tune of INR 1,100 crores and 100% of these orders are new orders because they come in terms of the electronic products like the EV product lines or maybe some sensors or other electronic products. Moving on to the overall numbers in out of INR 8,900 crores, about INR 4,000 crores are the replacement businesses. So these are the businesses where the models are running of the customers. So they are needing new facelifts or just the same model coming in. For example, let's say, Bajaj Pulsar is this going to be a refresh in the next year, which is what we consider a replacement order. But if there is a new model or a totally new platform or a model where we were not yet present before, if we consider that, that it is about INR 5,000 crores that we have run in the first year. So to put it into numbers, about INR 4,000 crores in the lifetime order will continue to have the sales in our current sales. But the INR 5,000 crores out of the INR 9,000 crores that we have added, that really spread over a lifetime for about 4 years starting from the 12 to 18 months from now, let's say.
Got it. Got it. And second question regarding our recent collaboration on sunroof. And also, if you can give any update, further update on advancement of the customer addition or not?
And second, is there any other development or any other partnerships we are targeting and in which segments?
Yes. So in terms of the joint venture between the HCMF and Minda for the sunroof and other product lines. We continue to engage with these customers and showcasing new products. We have received multiple interests, formal multiple interests from the various customers, which, again, in the term of NDA, I cannot share. So we will be formalizing the agreement by end of this month. And of course, looking at concluding some of the orders to start production by next year. That is our first interest. Moving on to the other partnerships per se. We continue to engage with various companies globally and in India for technical license agreements and forming joint venture for the growing markets in India in our own product lines. Last, not the least, on the acquisition or the merger and acquisition front, we are very clear that we are -- what we are not going to do. So we are not looking at companies which are overseas in terms of large operations. We are not looking at commoditized product lines such as sheet metal, rubber, et cetera. We are only going to be looking in terms of the products and companies which are in our domains of vehicle access, instrument cluster, electrical distribution systems, EV and light weighting. So these are the areas where we continue to evaluate various companies. And of course, as and when we move forward, we will update you.
Next question is from the line of Basudeb Banerjee from ICICI Securities.
Yes, just to continue with the previous couple of questions. One, you said, out of the 4 pillars of growth, adding newer markets is one of the key. And second thing is post liquidation of the [ free ] cash on balance sheet must be moving up significantly other than the cash flows which we are generating. So if we combine these 2 things, that is accessing new markets and the healthy balance sheet where M&As can be done. So in the long run, how to look at that your strategy will be Make in India and target export markets? Or set up facilities in new export markets to add new markets, so which kind of strategies you be would be looking at?
Yes. Thank you, Mr. Basudeb. Again, thanks for highlighting what I was about to start. So yes, of course, we are now having a healthy cash flow, which we've always been having. So our focus continues to generate free cash flow from our operations. And we continue to do that quarter-on-quarter and year-on-year. We have created watchers for any kind of an inorganic growth. And so we are continuously looking for opportunities with various segments, but only in the automotive space. Thirdly, our area of collaboration are going to be for India, Make in India in terms of exports, localization opportunities. We currently map what is currently imported and what we can localize. Secondly, in the areas of comfort and convenience and our product lines where the technology is changing, more and more premiumization is coming into India basis on the late mega trends. So we continue to invest organically and inorganically. So in the space of organically, we are going to be now expanding our technical center and hence, investment in engineering and also continue to invest in our partnerships and alliances for adding the products in the passenger vehicles as well as other areas for the growth. But we are not looking at any kind of acquisitions overseas. We may, like we have shown earlier in the presentation, grow and follow our customers to start our Smart Key facility in Vietnam, and we will use that facility for local market as well as exporting from there to other countries.
Sure. Understood. So basically, post KTSN, no such plans of having major investments in the Western world?
No, not at all. We are very open to look at engineering centers, which will give enhancement to our technology in India, but we are not looking at any kind of large operations or large manufacturing footprint companies, which are overseas in the West. So this is -- we continue to keep focus with Mission Minda itself on the capital allocation across the group.
Sure. And second question, sir, in terms of imported components for your business or exports, are we seeing, I mean, [indiscernible] challenge currently and what kind of cost inflation for your logistics costs you are currently seeing which can have an impact on next couple of quarter results?
So while there are mixed, of course, the semiconductors have definitely eased off from our electronics perspective. But various displays like PSP and all continue to be imported. So that is one aspect. With going forward, the customers as well as our risk mitigation, we are looking at inventory increases from the aspect of securing any kind of uncertainties coming forward, whether in terms of design side or in terms of minimum side. Also, when it comes to the connectors, we're continuously reducing our imports and now investing further and further in our internal component division, for which the results can be shown as suggested earlier.
[Operator Instructions] Next question is from the line of Abhishek from Dolat Capital.
Congrats for the winning of many new business. Sir, in instrument cluster business, you have market share in passenger vehicle is hardly 1% -- 2%. But you have won many new business. So what is your revenue target from this business for the next 2 years? And what would be the market share in the passenger vehicle instruments cluster?
So in the passenger vehicle instrument clusters, we have already won a few orders in the last year in the space of advanced TFT clusters with large margin OEMs. As I mentioned, this is one of the reasons for SOPs. So these SOPs will be coming into the quarter 4 or quarter 1 of next year. And there is where once present, we'll be having our further increased share in our cluster space in the passenger vehicle segment. On the new technologies front, we are working in terms of the driver information system, which is going to be connected in terms of the complete cockpit, in terms of the rear view, in terms of the other electronics that goes with it. So we will be further increasing our kit value and offering to our customers. We already started engaging with various customers on account of demonstration and RFP that we have received organically as well as through our partners. So we continue to look for more orders. But currently, if I may say, in our passenger vehicle segment, once the SOP is come into effect next year or in the next 12 months, we will be having a share of business about 4% to 5% in that range.
So what would be the quantum of that business, incremental revenue from FY '25?
So in FY '25, our instrument cluster business per se, would be the tune of about INR 800 crores to INR 900 crores. So it's something that we look at moving forward in the next few quarters.
Okay. And the company is also looking in organic growth, as you mentioned, with the deployment of cash of around INR 600 crores. So what would be the key product additions from that?
Sorry, in the investment of where, please?
So you have around INR 600 crores cash in your books, and you are looking for the inorganic growth opportunities. So what would be the key product additions in your portfolio?
Yes. So as I mentioned earlier, we are very clear on what we will not do as a company, and that is what is most important. So we are not entering or we will not enter into the commodity items such as sheet metal or rubber or any such things. Number two, we will not do anything which is purely ICE engine related. Thirdly, we are not looking at investments into the West market as explained to the previous question in terms of the acquisition. So what we are going to be focusing on is in our area of core products, which is into the vehicle access space, number one; number two is into the wiring harness or the electrical distribution space; number three is into the instrument clusters and sensor space; number four is into the die casting or light weighting space; and number five is into the electric vehicle mobility. So we are looking at both in terms of the component expansion as well as the system expansion, and this could come from talent acquisition or this could come from asset acquisition.
Okay. And my last question is that what is your CapEx plan for the next 2 years? And what is the current gross and net debt?
Okay. So here I'll ask my -- our group CFO to maybe share some words on this.
Yes. So historically, in the course of last 2 years, we have been spending about INR 200 crores INR 300 crores. And since we are looking at expanding capacity, so over the next 2 years, we should be spending in the range of INR 300 crores to INR 450 crores type per year.
Okay. So you are talking about the FY '25-'26 or FY '24-'25?
'24-'25 and '25-'26, every year there are, yes.
And what is the current gross and net debt of the company?
Well, the net debt of the company as at 31st of December was about INR 450 crores. But now we have net cash in our books having the [indiscernible] investments.
So are you not looking for the debt repayment because that interest cost is very much high now?
Well, like I mentioned, this is sort of more a financing need, and we will always look at judicious mix in terms of, say, our own internal approvals, debt, et cetera.
The next question is from the line of [ Amin ] from JPMorgan.
And apologies if this question has been addressed in the past. Sir, you right now have low share coming from ASEAN market, but you've recently started a plant in Vietnam. So my first question on that was, is the customer OEM Vietnamese or ASEAN or Asian OEM or is it an Indian OEM? And secondly, given the size of the Vietnamese market and it can be an entry into the larger ASEAN piece as well, do you think ASEAN over the next 3 to 4, 5 years could be a much larger chunk of your consolidated revenue?
See, so firstly, to answer your question, we follow our customers. So It is not only -- I mean, it is a mix of all customers. And it is not only for the ASEAN countries, but even exports to the West from there -- whether there are European OEMs, Japanese OEMS or Indian OEMs, there are various different business models we continue to see. [Technical Difficulty]
Participants, please stay connected, the line for the management dropped. Ladies and gentlemen, please stay connected, the line for the management dropped. Thank you for your patience. We have the line for the management reconnected.
Extremely sorry for that. So ASEAN market continues to be an area where having multiple free trade agreements so that is something that what we are leveraging as well as growing from that part of the world to the other West regions is something that we are looking at. So yes, it may not be a very large portion of our revenues going forward. But yes, once the market picks up again, as well as in the other areas that we're exploring, it could be an area of importance for us because we have a presence in the ASEAN countries with 2 locations, which is Indonesia and Vietnam for the last 10 years and plus.
Next question is from the line of Shreyansh from Vasuki India Fund.
Sir, I see that you've been expanding our capacity in various verticals. So just wanted to understand what does our current capacities these verticals look like? And what would be the expanded capacity, say, in terms of die casting, smart key facilities or sensors or instrument clusters? And even when sir said, our CapEx for next 2 years would look like, say, some INR 300 crores to INR 450 crores. Could we have any breakup of what the CapEx would be for these each verticals?
Yes. Maybe I may not give you the detailed breakup of each vertical per se because we have a very clear financial prudence for each division, each plant and each vertical, where each division has to be profitable and giving free cash flow as well as the ROCE. So hence, basis on that, we plan our financial prudence and capital allocation. That's point number one. Point number two, on the capacity utilization. Different verticals and different divisions have different capacities. Our first and foremost importance is how we can sweat our assets more and increase the FATR from the current and existing plants. With now -- with the current growing technologies that we have and are coming in the future, we are setting up these new facilities to increase our capacities merely from the areas of electronics. So in the vehicle access space now with the new facilities that we're coming in, we're currently having a capacity utilization of about 80%. So with the new facilities, this will increase. In the wiring harness space, we have recently consolidated and opened larger facilities in the 3 regions. So there, we have more than about 55% to 60% of our capacity. In the instrument clusters and sensor space, we are running high on capacities and hence, build 2 new plants. So yes, these are our areas on where we are currently focusing. And die casting with the new export orders primarily and in the domestic orders, we are coming up with 2 new facilities, one in the North and one in the West on this aspect. So this is what we are currently looking at from each of these capacity utilizations on the FATR as well as on the financial prudence and capital allocation against each division and each location.
Next question is from the line of Raghunandhan.
Trying to understand the product mix over the medium term. In terms of smart keys, last quarter, you had indicated that within 2-wheeler, the penetration has come to 15% given that the industry is seeing premiumization and also you are focusing on more products and winning more customers. How do you see this share of smart key increase in the future? Similarly, within instrument clusters, how do you see the share of digital clusters increasing. Currently, if I'm right, it's around 25%, 30%, how do you see that increasing? And lastly, in EV share, which has now reached 5%, 6% of revenue, given that the share in your order book is higher, do you think that by FY '26-'27, the EV share in overall revenues will also increase similar to the share in the order book?
Yes. So when it comes to the keyless solutions, definitely, it is on the increasing trend because it's -- the #1 reason is on the comfort and convenience that the end consumer would like to face because the trend in technology moves from the 4-wheeler to the 2-wheeler. So from the current about 15% in the next '26 to '27 as you asked, should be in the range of about 20% to 25% of this because our target or our expectation by 2030 in the keyless penetration should be in the range of about 35% to 40% is what we are expecting. When it comes to the instrument cluster in the 2-wheeler space primarily. Again, on the TFT -- I mean there are multiple segments -- so one is the analog cluster and second is the LCD third is the TFT. So hence, they are categorized in 3 different aspets. So in the analog clusters, which are primarily the needle-based clusters, they are taking the highest amount of share, but the more of premiumization that is happening. The LCD cluster and -- its penetration is much faster right now or much greater right now. And the TFT is, of course, much more expensive. So that is taking shapes in the EV customers per se as well as then penetrating into the high-end ICE bikes. So I may not be able to give you an exact number against each of them, but we can get back to you on how the 2 segments in terms of the digital are moving forward. Third, on the electric vehicle mobility or the electric platforms, we have about 5% share of our overall revenue coming from this. In the 2-wheeler space, we have about 11% revenue. Moving forward, in about '26 to '27, this 5% is expected to be about 10% to 15% of our revenue because the order books are being done, but we would like to be cautious on the uptake of the EV vehicles and the EV platforms as some are success and some are not so success. And hence, the overall group level, we expect this to be about 10% to 15% in the FY '25 to FY '26.
To Mr. Vinod Raheja, a couple of questions. Sir, on the tax rate, it was higher this quarter, and there was some impact of tax related to earlier quarters. So would this be a onetime impact. And for FY '25, should we work with about 25% tax rate? Would that be a fair assumption?
Yes. First of all, effective tax rate, both current and [indiscernible] 25% would be a fair assumption. As regarding your other query in terms of tax in relation to earlier, it is more a classification from defer to reclassification. So we should be seeing -- both should be seen together.
Got it. And sir, you earlier mentioned CapEx around INR 300 crores to INR 450 crores, would it be fair to assume that given that this CapEx is to meet the future requirements or the large order book which the company has. Would it be fair to arm that within this CapEx more than 20% would be going towards EV?
Yes. So there are, again, the CapEx, you can largely say like that because EV particularly, there are 2 separate things: so one is, of course, on the product side, per se. So that's one. So while we come up with the new products in the EV space, that 20% of our R&D could go there. But the others could move in terms of our premiumization of our own products which are -- regardless of the EV or ICE segment. So as I've said earlier, whether it's a vehicle access or instrument cluster or a wiring harness or a sensor, it is engine-agnostic. So hence, the investments continue to be there. But EV, particularly the new product lines could have that amount of share. We are currently under the planning our strategy for the investments for the electric vertical new mobility product lines going forward. And there, we are investing further much higher than 20% of our R&D into the new products in the 4-wheeler segment, into the charging space as well as in the commercial vehicle segment in the alternate fuel.
Got it, sir. sir, with reference to the Smart Key facility at Vietnam, what was the investment? And what is the revenue potential? And what kind of -- and when do you see the revenue commencement here?
Yes. So basically, it is an assembling facility right now. So exact numbers, I would not be able to share online due to confidentiality. But it is not high, if I would say. It is less than a couple of crores. So that's where it is because this is for the domestic market for our -- domestic market of ASEAN for our various customers as well as exporting from there to the European market as well.
And on localization, you have achieved 15%, which is an improvement versus earlier quarters. How do you see the further increase in localization over the next 2 years? And how that can flow into benefits on margins?
Yes. So we continue to invest organically as well as invest inorganically for component localization. We have taken various initiatives and steps on the component localization front, both on ICE and EV and across segments for 2-wheeler, 3-wheeler, commercial vehicle, et cetera. Moving forward, again, as I mentioned, our target is to become -- or rather get the larger share in these segments where we are having larger market share. So we would like to grow. I will not be able to share exact number on the -- because we don't give that guidance. But what we're looking at is how we can grow in the EV space in the 2-wheeler with the localized connection systems and also in the pickup or the commercial vehicle space in the LCV segments, and of course, in the tractor space where the new regulations are coming in. This will again further enhance our kit value, maintaining our share of business in the 2-wheeler of about 35% and in commercial vehicles is to the tune of about 40% plus and tractors is, of course, much higher.
Next question is from the line of Radha from B&K Securities.
Sir, I can see your presentation, you mentioned that...
Radha, your voice is not coming clear. Can you speak through the handset?
Is this better?
Yes.
Yes. Sir, my query was that you mentioned in your presentation that this quarter, you won orders of INR 400 crores in smart locks both for the 2-wheeler and 4-wheeler. So just wanted to understand that what is the total order book in smart locks for the 2-wheelers and 4-wheelers as of now, if you can the bifurcation?
So ma'am, in the first 9 months, as I've shared earlier, in the Mechatronics division, we have won orders to the tune of INR 4,300 crores, out of which 20% are replacement and 80% are new. So -- and again, 60% of this constitutes from the 2-wheeler segment and about 30% constitutes from the passenger vehicle segments. So that is what we're looking at on this front. On the particular quarter in this year, we have -- this quarter 3, we have won INR 1,100 crores from the vehicle access space, out of 40% are replacement and about 60% are from the new business per se. And these are, again, from the marquee customers and not from start-ups.
Sir, actually, I just wanted to understand the order book in smart locks for 2-wheelers and 4-wheelers, only the smart locks?
So ma'am, we'll come back in terms of the details in terms of smart locks because there are multiple components that go in a system is a smart access where the smart lock is only one part of it, which is a locking system. Then there are other electronics part of it. So yes, we will come back to you in detail when we look at it. When we speak about what we presented in our presentation, there is multiple orders and not just 1 order for this particular technology.
Okay. Sir, secondly, I wanted to understand the 2-wheeler EVs, like Ola. So they are also using smart locks. So could you be -- would you tell us, who is supplying smart locks to them? Are we present there?
Ma'am, we are under NDA, but yes, we do -- various customers in EV.
Yes. sir, you have customers in EV, but are we also supplying to Ola?
Ma'am, we are under an NDA, but as we mentioned earlier in our call, we have won businesses from Ola in this space.
Sir, last question. In this quarter, what should be -- what percentage of your revenues is coming for smart locks?
Ma'am, this is also given in our presentation, about 25% of our group revenue comes from the vehicle access space or vehicle lock space.
As there are no further questions, I will now hand the conference over to the management for closing comments.
Sure. Thank you very much. I would like to conclude by saying that with an unwavering commitment to quality, customer-centric approach and a steadfast dedication to innovation, Minda Corporation aspires to position itself as a leading player in the automotive components sector. Our focus extends beyond business success. We are delighted and we are dedicated to fostering growth opportunities for our employees, delivering profitable returns to our investors and making a meaningful contribution to the communities where we operate by focusing on growing ahead of the industry by focusing on our internal operations and increasing our profitability, increasing higher ROCE margins as well as most importantly, the right capital allocation. So thank you so much for your patient hearing and your questions.
Thank you very much. On behalf of Nuvama Research, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.