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Ladies and gentlemen, good day, and welcome to the Minda Corporation Limited Q4 FY '21 Earnings Call, hosted by K.R. Choksey Research. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Parvati Rai. Thank you, and over to you, ma'am.
Thank you, Mallika. On behalf of K.R. Choksey Research, I welcome you all for the Q4 FY '21 Earnings Conference Call of Minda Corporation Limited. From the management side, we have Mr. Ashok Minda, Chairman and Group CEO; Mr. Aakash Minda, Executive Director, Finance and Strategy; Mr. Neeraj Mahajan, Group Marketing Officer; Mr. Sanjay Gupta, Deputy Group CFO; and Mr. Bikash Dugar, Lead, Investor Relations. We will begin the call with a brief overview by the management, followed by the Q&A session.I now hand over the call to Mr. Aakash Minda for his opening remarks. Thank you, and over to you, sir.
Thank you, ma'am. Wish you all a very, very good morning, and thank you very much for joining the conference call of Spark Minda, Minda Corporation's quarter 4 results and annual results. I would request Mr. Ashok Minda to give the Chairman's speech, please. Over to you, Mr. Minda.
Thank you, Aakash. Good morning, ladies and gentlemen. I would like to thank you all for joining us on this call and hope you and your loved ones are staying safe during the pandemic. I would like to reiterate importance of taking necessary precautions to remain safe during these challenging times. At Minda Corporation, we are putting our efforts to effectively manage the situation with utmost focus on the employee health and safety. We have taken various steps, and one of them is to vaccinate all our 15,000 plus permanent and temporary employees all across India.Coming to financial year '21 results. I will say it was a story of 2 halves. The first half was impacted by the COVID pandemic. The economy as well as automotive industry suffered. In the second half, as the economy started picking up pace, we saw good growth in automotive sector due to pent-up demand, preference for personal mobility and growth in agricultural segment.I'm pleased to report that Minda Corporation delivered consolidated revenue of INR 794 crores in quarter 4 financial year '21, which is a growth of 48% year-on-year this year. The company continued to outperform the industry, which grew at 28% in quarter 4 financial year '21. This is the highest ever revenue in any quarter done by the company. In line with our promise to deliver consistent and sustainable profitability, in quarter 4 financial year '21, the company posted again double-digit improved EBITDA margin of 11.2%, which is 390 basis point improvement year-on-year.The company has also reported highest ever profit after tax of INR 54.6 crores from continued operations. We continue to improve operating efficiencies and implement cost control measures. This has helped us to deliver enhanced profitability over successive quarters. In financial year '21, we continue to strengthen our balance sheet by doing right capital allocation and keeping a tight control in working capital. Thus, our net debt position is negative.In light of the above financial performance and in accordance of our dividend policy, the Board has recommended a final dividend of 17.5% on the face value, which is INR 0.35 per share. The total dividend for financial year '21 is 32.5% on the face value, which is INR 0.65 per share. The dividend payout is 17%. Going ahead, Minda Corporation is monitoring the situation, which is evolving post the new wave of COVID-19 pandemic and is putting its efforts to effectively manage the situation with utmost focus on the employee health and safety. We are cautiously optimistic on the outlook for financial year '22 due to various factors like higher spending infrastructure, PLI scheme, scrappage policy and the work done so far within the company to make it more nimble, agile and future ready. Our endeavor remains to serve our customers with best-in-quality products and offer advanced technology at a competitive cost.Now I would like to hand over the call to Mr. Aakash Minda to discuss financial and operational performance of the company for the quarter. Over to you, Aakash.
Thank you, Mr. Minda, for giving us such an inspirational and a brief about the quarter results. I would like to first refer to the presentation that is published on our sparkminda.com website, and I will be referring the page numbers from that presentation, which is already shared.To begin with, I would first like to share about the protocols and measures taken by the company for the COVID-19 pandemic. I'm referring to Page #2, where, as Mr. Minda has mentioned that we have started a vaccination drive for all our 15,000-plus permanent and temporary associates and staff members at no cost to them. We've also started medical tele-consultation for the entire family and permanent -- of permanent employees for the next 1 year for COVID and non-COVID-related activities. We started an emergency response teams at the group level and at regional levels. We've also driven awareness and wellness sessions for COVID and mental awareness across our employees. Most of the plants are still operational to support the customers, and we are engaging with our blue-collar associates and prepared contingency plans so that there is no shortage of skilled manpower. The company is putting its effort to effectively manage the situation with utmost focus on employees' health and safety.I'll move to the Slide #3, which is on the financial numbers, our endeavor and our promise to deliver consistent and sustainable market-beating profitable growth. We have reported highest-ever quarterly operating revenue of INR 794 crores, which is a growth of 48%, year-on-year basis. Minda Corporation has also reported quarterly absolute EBITDA of INR 890 million, which is again the highest ever EBITDA, which has improved by 390 basis points on a year-on-year basis. Minda Corporation has also reported highest ever quarterly PAT from the continued operations, which is INR 54.6 crores, which is 222% up from last year. Hence, we reported the EBITDA margin at 11.2% and PAT margin at 6.8%. This is -- on a sequential basis, we've delivered third successive quarter of improved double-digit EBITDA margin of 11.2%. We'll focus on consistent and sustainable market-leading growth.I'll move to the next slide, which is Slide #4. As a summary, I would like to share on the customer trust on Spark Minda's new technology products. On the left, you will see the various new products, which are on premiumization, electronification and EV related. And on the right, you will see the customers, where we've already won new orders from in these product lines. On the top part, with premiumization, lightweighting and increased electronics content offerings in our existing product portfolios, such as keyless solutions, wiring harnesses, digital clusters, door handles, cybersecurity, keyless entry are the products which we are offering.In the electric vehicle space, in the connected safety electronic space in our existing and future segments, we are offering products from our new partnerships, such as shark fin antenna and also our 2-wheeler ADAS from Israel and our electric vehicle products to customers on the right mentioned such as Maruti Suzuki, Bajaj, Hyundai, TVS. I'm proud to share with you that we have won the DC-DC converter business of the TVS iQube model. This was a quick snapshot of the company.Now I request to move to the Slide 6, which is on the financial performance and highlights for the quarter for FY '21. On the left, I would again like to share the quick highlights. So this is the best ever quarterly profitability delivered. Lifetime order win of about INR 1,000 crores in this quarter. As you know that we have signed a TLA with an Israel company, Ride Vision, for 2-wheeler ADAS, which is collision system avoidance for the Indian market. We've also started production of our new facility in Gujarat for the Interior Plastic division. We are also focusing on our sustainability, which is on the ESG policy from this quarter.On the right side, the revenue breakdown for FY '21 compared to FY '22. So the outer circles represent the FY '22. Our presence in India has been about 85.8%. Our revenue from 2- and 3-wheeler divisions is about 53%; from the passenger cars is about 11%, which has grown from last year; and our commercial vehicles [ increased ] from 23% to 20%. Aftermarket continues to be a growth driver for Spark Minda, increasing from 13% to 15.7%. Our business verticals is Mechatronics and Aftermarket, contributing to 57% and Information and Connection systems contributing by 42.7%.I'll move to the next slide, which is Slide #7. Here, we just want to show the Indian automotive industry performance. I only focus on the table on the right side, where the auto industry in the full year has de-grown by around 13%. So 2-wheeler has de-grown by about 13%, passenger vehicle by about 10.5%, 3-wheeler by 46%, commercial vehicles by 17%. And on the bottom side, in quarter 4, auto industry has grown year-on-year by about 28%, 2-wheeler by 29%, passenger vehicle by 27%, 3-wheeler by negative 16 and commercial vehicles by 51.2%. Our positive traction in this segment is due to economy picking up pace, preference for personal transportation, agriculture sector growing.I'll move on to the next slide, which is Slide #8, on the consolidated performance of quarter 4 and FY '21. Here, I would like to focus and put interest on the quarter 4 performances on year-on-year. Our operating revenue has grown from INR 536 crores to INR 794 crores, which is a growth of 48% year-on-year basis. Our EBITDA margin has grown from INR 39 crores to INR 89 crores, which is a jump of 128% and 390 basis points from quarter 3 on a quarter-on-quarter basis. Even though the commodity prices have increased, Minda Corporation has increased our EBITDA performance by 10 basis points and 10% from quarter 3 to quarter 4 in terms of absolute numbers. At PAT level, we have posted the highest ever PAT on the continued operations of INR 54.6 crores, which is at a margin of 6.8% compared to quarter 4 last year, which is only 16.9% and 3.1%. As Mr. Minda has also explained, our Board of Directors has announced a final dividend of 17.5% and a total of about 32.5% for this year.I'll move on to the next slide, which is Slide #9. Here is the consolidated performance on the group level. So starting from the left, on a quarterly basis, our quarter 4 to quarter -- quarter 4 last year to quarter 4 this year has again increased by 48%. The major reasons have been due to the BS-IV to BS-VI content, led by wiring harness and also our increased aftermarket and export sales. Our EBITDA has again increased by -- from 7.3% to 11.2%, which is again 128% and 390 basis points. The major reasons and the factors are due to the operating leverage and cost control measures taken all across our organization. But it has been also adversely affected by the lag of raw material indexation, product mix, labor productivity, as we all know the commodity prices have shot up in the quarter 4 and complete of last year. On quarter-on-quarter on our EBITDA, we have again shown growth by 10% and 10 basis points.I'll move on to the business vertical performances for the quarter 4. I'll start -- which is Page #10. I'll start on the left side, which is the Mechatronics and Aftermarket division. This division on year-on-year has grown by 37%. Aftermarket has grown by 37%, and exports have grown by 72%, leading to this contribution. Our EBITDA margin stands at 14.3% due to favorable impact of higher aftermarket and export sales and, of course, cost-cutting measures across, but it is adversely impacted by the RM indexation from the customers. In the Information and Connected Systems, the growth is about 65% on a year-on-year basis. Again, the reason is due to the 2-wheeler wiring harness content from BS-IV to BS-VI. Our EBITDA margin has grown by 10 basis points on quarter-on-quarter, which is due to the improvement in labor productivity, operating leverage, favorable product mix and tighter control on fixed costs. Of course, we understand and acknowledge the opportunity for improvement in the lag of RM -- raw material indexation and again, BS-IV to BS-VI transition costs.I move to the next slide on the consolidated leverage position. Here, I would like to highlight our net debt position. So last year, it was about INR 60 crores. And here, this year, we have about INR 16 crores positive. Hence, we are net debt. I would also like to share about our ROCE. So last year, we were about 17.8%. This year, in the full year, we are about 12%. But if I only look at the performance for H2, on an annualized basis, we are about 24.4% ROCE. Our working capital has also improved from 33 days to 46 days on the annual basis. But if I only look at the H2 numbers, it has gone to 36 days. Primarily, the reason is because of the high inventory of the imported materials and the semiconductors that we are keeping from BS-IV to BS-VI transition. In the credit rating, all the credit rating agencies have reaffirmed ratings with no changes.I will move to the next slide, which is Slide 12, which is on Aftermarket. I would just like to highlight here that our year-on-year growth for quarter 4 has been 37%, and on an annualized basis, the growth has been 23%; and exports have grown by 72% despite the COVID challenges all across India.I'll move on to the next slide, which is Slide 13, on the joint venture performance. So starting from the left, our Stoneridge, which is the partnership from 2004, where Minda Corporation holds about 51%. This division or company continues to perform better. So from 11% margin, it has gone to 11.6%. And this company will remain healthy and keep going positive in the future. There are advanced technology products like digital clusters and sensors, which are offered from this partnership. In the middle box, which is Minda VAST. Here, Minda Corporation owns 50%. Though the revenue has come down from INR 162 crores to INR 143 crores, but the most important part I would like to highlight here is the profitability has increased from minus 3.9% to 1.9% by 200 basis points.As also promised earlier, our focus here is on order winning and order conversion, where we have won new businesses from PSA and other customers like Volkswagen. Furukawa Electric, which is our joint venture for the 4-wheeler wiring harnesses, Minda Corporation owns 25% here. And here, if you see, the turnover has -- or revenue has come down from INR 397 crores to INR 322 crores this year. The first half has been the challenge and hit due to COVID. But quarter 3 -- since quarter 3, the company has performed and bounced back. In quarter 4, the EBITDA is about 6.7%.I'll move on to the next slide, which is on the business performance and the order booking. I would like to first highlight that as a Spark Minda group, we have won many new orders and added new customers such as Toyota, in various product lines in interiors and plastics and mechatronics. And also in electric vehicle space, as I mentioned, DC-DC converters with TVS iQube and other OEMs also shown in the previous slides. I would just start from the left side. In this -- in quarter 4, we have done about INR 1,000 crores of order booking, in which replacement order won for lifetime is about INR 350 crores and, more importantly, the new orders won have been about INR 700 crores.And if I look at the full year, the Minda Corporation has won businesses of about INR 6,700 crores on a lifetime basis, out of which INR 4,200 crores are on replacement and INR 2,500 crores are on account of new businesses. If I go division-wise, in our Mechatronics division, in quarter 4, we have won INR 655 crores business and on an annualized -- annual orders, we have won about INR 2,500 crores, whereas 51% is replacement and 49% is new business. In the Information and Connected Systems, we had won in quarter 4 about INR 310 crores worth of business, and for the full year, we have won about INR 4,000 crores of business. So in quarter 4, 12% was replacement and 88% was new order wins from various customers. In our Plastics and Interiors, we have won INR 80 crores worth of new orders on a lifetime basis in quarter 4, particularly coming from 4-wheeler manufacturers, OEMs. In our other divisions, we have only INR 28 million, which is, again, from the commercial vehicle business.I move on to the next slide, which is Slide #15. Here, I would like to highlight what Minda Corporation has been -- done in the last year and our way forward for the future, is we are narrowing focus and deepening capabilities. And we are creating values between the various activities that we are taking. So from the left is by enhancing the core. So we have partnered with an operational partnership with PHI Capital. We are achieving the cost leadership position in our operations and plants all across India and overseas. Greater focus is on manufacturing excellence and sourcing capabilities, improving working capital, employee costs, raw material costs.We are strengthening the management; bringing back wiring harness division to closer to double-digit EBITDA numbers; strengthening the ESG framework; setting up the new division and electronics manufacturing excellence; greater share of business from Export and Aftermarket division; and, most important, right capital allocation.On the right side, we are focusing on advanced technology and digitization. We want to achieve and we are achieving thought leadership position in technology. One of the examples is, again, a TLA with Israel-based Ride Vision for 2-wheeler ADAS. We have filed 13 (sic) [ 15 ] patents in FY '22 (sic) [ FY '21 ] and totaling about 166 patents so far.We have incorporated a new electric vehicle company within Spark Minda Group in order to give more focus on the green mobility space. We have upgraded and enhanced our testing and validation capability in electronics to give more quality and best products to our customers. We are focusing on our [ case and make ] strategies, which is lightweighting, safety, connected, electronics and EV. Our important customer centricity. We would like to share here that we have started the production in quarter 3 and quarter 4 for new products like Intelligent Transportation Systems 2.0, electric vehicle components like DC-DC converters and our advanced and premiumized products like connected clusters.We have also started with our objective to grow more with the customer and closer to the customer. We started a facility in Gujarat for Interior Plastic division and expanded our capacities in Mysore and Pune. We are strengthening our key account management structure for customers. We focused on premiumization, increasing kit value and content per vehicle going forward; more products per customer, more customers per product; and, more importantly, our order winning and order booking for increased market share, increasing wallet share of the customers and, hence, increasing order book.My last part of the presentation would be focusing on the technology, where I would request you to refer to Page #18. Where I would like to share on the global trends of connectivity, autonomous, shared mobility and how Minda Corporation is addressing these technologies. So the trends impacting India and how Minda Corporation is working on its connectivity and shared mobility. In those, we are -- in this space, we have started new products like antennas, telematics, digital clusters, Intelligent Transportation System; safety, where our partnership with 2-wheeler ADAS, airbag wiring harnesses, cybersecurity; lightweighting in terms of oil pans in plastics, cylinder cover head, battery trays and die-casting parts.In Electronification, digital clusters, body control modules, immobilizers, keyless entry solutions and, of course, [ beyond ]. In emission systems, we are working on wiring harnesses, compressor housings, powertrain sensors.In Green mobility and EV space, we are working on battery chargers, motor controllers, DC-DC converters, BMS and others. We have already won orders, as I showed to you previously, in all of these product lines, and this is not only for development.My last slide for today would be focusing on Page #21, which is the electric vehicle content and how Minda Corporation offers the electric vehicles going forward. This slide I would like to share with you that all our products and technology that Minda Corporation offers are EV agnostic. With the more and more content of EV coming in, all the product lines will be going through a positive impact and, hence, a lot of premiumization and electronification will happen with all our products. I will not go into the details, but the products on business vertical 1 or mechatronics and wiring harness and clusters will go through positive impact, increasing the content per vehicle and, of course, our content per vehicle and through customers. And our new additions of electric vehicle space have also won orders, making us a very prominent player and a dominant player in the EV space.With this, I would like to say thank you very much. And I would like to conclude my presentation. We would now like to open the forum for any questions, please. Thank you.
[Operator Instructions] The first question is from the line of Ronak Sarda from Systematix.
Congrats on a good set of numbers. The first question is on -- I mean, now if I look, let's say, on a medium-term basis, we had a very strong kicker from the BS-VI transition into revenues. So how -- now if you can explain us how we will continue to outperform the industry growth? So we have a pretty decent order booking. But if you can break that down in terms of products or maybe customers and explain us how we can continue to grow or outperform the industry growth?
Thank you, Ronak. Thank you for the great question. Aakash this side. So I will take up this question. So again, as we have seen, we continued to outperform the industry. Going forward, in the short term to midterm with our promise to consistently deliver sustainable profitability, we are targeting to move towards high double-digit EBITDA numbers, first, moving to about 12% within this year and then higher based on the various opportunity that we get in our organization. With our ROCE, we continue to focus on the higher 20 -- above 20% numbers. And we are looking to outperform the industry.Our growth drivers are going to come from Aftermarket and Exports and, of course, new customer wins that we are heavily focusing on in all across our product lines and segments. We are, of course, looking at continuously adding new products and technologies and some of which have already been shared in quarter 4 and in quarter 3 with our focus on technology and adding new customers and adding new products per each customer and adding more customers per product line. And hence, this is the area where we will be looking at focusing on organic and inorganic growth to continue to outperform the industry.
Sure. So maybe the other way to look at it is, if I look at your new order wins in this year, which is new business wins of almost INR 2,500 crores, could you split that up in, let's say, how much is exports or how much is it about new customers there which we were not catering to previously?
Yes. So here, we can give more and more details, and I'll maybe request our group CMO, Mr. Neeraj Mahajan, to give further details on the question, please.
Thank you very much, Ronak. I clearly understand your interest to focus more on how we are planning to grow in the future. Our focus is very clear. We want to grow on our exports for sure because that's where we are looking at, definite double-digit growth. We have so far been compounding -- CAGR-wise, we are going close to about 25-odd percent in the last 4.5 years. And we intend to -- because now the base is becoming large, we intend to still continue to grow upwards of 17% to 20%. So exports would remain our growth driver in this particular case.And second most important thing what we are doing today is to look at our 4 key areas. This may give you some glimpse of how we are trying to look at our product positioning in terms of our existing customers. So our main focus right now is, we don't want to go very thin on our customer base. We want to consolidate or retain our current customer and penetrate in them with share of business improvement for profitable products; we want to grow for cross-selling with a very, very clear focus at this point of time.And third, most importantly, we want to be with them in early engagement where their future programs either related to EV or high-volume programs are being discussed. So this is a very clear strategy which has resulted in F '21 Q4 results for order booking. And same trend is being planned to achieve for our next F '22 order book plan as well.
Sure. The other question I had on the wiring harness business profitability on the EBITDA margin side. So Aakash, could you split that up, I mean, how has the raw material inflation eaten into margins? And what kind of improvement are we seeing? Because, I mean, for us, it looks like quarter-on-quarter margins are still high despite a sharp improvement in CV volumes. So could you split that up into how much is the raw material impact and which would be a pass-through and would come in next couple of quarters? And what kind of efficiency improvement have we seen now?
So just to share with you, our wiring harness division is performing better on a quarter-on-quarter basis, like, we moved by 10 basis points from last quarter. So of course, the productivity improvement and other cost control measures are coming into place. Our biggest driving factor here is on the raw material perspective. Most of it and the biggest factor comes from the commodity price inflation, which has come from the copper. In the last year, 78% copper has grown over the last year, along with other commodities, which is, of course, impacting us and the entire industry. Of course, 200 basis points is the impact on the commodity price into the wiring harness division. Of course, our labor productivity improvement is around 100% on quarter-on-quarter -- sorry, 100 basis points on quarter-on-quarter.And of course, other -- VAV and other cost reduction has helped us improve this again. But yes, our -- going forward, our focus is to improve our raw material localization content, which will, of course, takes -- the process of customer validation takes some time. So we will have -- we are working on that. We are also working with our customers as well as suppliers for back-to-back indexation. So in most of the customers, we have about 3 to 6 months of indexation. So when an impact happens within this quarter, we get paid by our customers in the next 3 to 6 months' time. And this is the lag that basically comes in due to about, let's say, 100 basis points on the EBITDA -- wiring harness EBITDA margin. So this is our endeavor and focus going forward.
Sure. Sure. And final question, if I can squeeze in. Maybe Bikash can help it. If you can share what were the JV margins for quarter 4? Because I think the full year margins are impacted by the first half performance. So what would be the Q4 run rate of profitability across the 3 JVs?
So Ronak, maybe I can also answer this question here that our -- Minda Stoneridge quarter 4 '21, our EBITDA margins have been at INR 14.4 crores, our Minda VAST has been about INR 1 crore and Minda Furukawa has been about INR 4 crores. On a year-on-year basis, we have increased by 11% from Minda Stoneridge. We have decreased in -- either we have improved in Minda VAST, as I mentioned, by 200 basis points. And Minda Furukawa has decreased again due to the quarter -- first -- half year -- first half challenges in the import contents and other issues.
Yes. So I was actually looking for EBITDA percentage, if you can share because...
Sure. EBITDA percentage in Minda Stoneridge is about 11.6%, Minda VAST is 1.6% and Minda Furukawa is about 3.4%.
This is for Q4?
Correct.
The next question is from the line of Jinesh Gandhi from Motilal Oswal.
My first question pertains to the new initiatives which you are taking. So primarily, given the technological changes in the auto industry, almost all of your peers are trying to get foothold in this new generation components. And also, there are new competitors, which are not necessarily part of automotive supply chain but are becoming relevant. So where is our competitive advantage in this new generation component? What is your approach to be ahead of the curve in this respect?
So thank you very much for your question. I maybe answer the question that, a, we are looking at -- in the new technology product lines in our businesses, which we are already there, which we call our area of expertise and legacy businesses. And we are going through a positive impact and change with our premiumization, with our electronification. And for those reasons, just to give you an example, in our keyless entry systems, we are the only company in the world to find 21 patents in the keyless entry space for 2-wheelers, which is clearly showing our early as well as market leadership position in the 2-wheeler keyless system space.Similarly, there are other examples that are there in terms of the die-casting or in terms of our electronics that we are moving forward. So for example, digital clusters, from the analog clusters, now we are moving to digital clusters within TFT space. So hence, this offering really gives us premiumization as well as electronification into our core businesses that we are already there.What we are, of course, focusing on is the time to market. So our time to market of the new developments in products is going to be the key factor. Also, our affordability of new technology is an approach that we are taking for all our new initiatives and product lines, which will offer affordability to the customers but, of course, keeping the margins intact and, of course, early entry. So in all these cases that I mentioned in terms of lightweighting, safety, connected or EV space, we're already present. And if I compare ourselves to other peers, we are, I think, won order customers -- customer ordering winning has been done, which shows the customer confidence that they have in us.
Okay. Okay. Got it. Secondly...
And maybe last to add is that we are offering a system solution. We are not only looking at components or subsystem. We're looking at complete system offering to the customers for all the product lines that we have to offer, whether in our legacy businesses that I mentioned or our non-legacy or inorganic businesses, whether in safety or EV space or electronification or antennas or Intelligent Transportation Systems.
Got it. Got it. Secondly, with respect to SMIT, so clearly, it has been a step in the right direction. What would be your current investment in product development and R&D? And do you plan to step this up, considering the future opportunities?
Yes. Absolutely. So Spark Minda Technical Center has been the -- one of the -- or rather it is the flagship investment in the advanced engineering space for Minda Corporation. We have been, I think, one of the first companies in the Tier 1 space in India to make such an investment on the advanced engineering center, focusing on embedded electronics and hardware/software, cannibalizing our own product lines.Of course, we have also recently invested in our electronics manufacturing excellence division, focusing on -- only on electronics products and the next-generation products that are upcoming, which has also been done in the last year. So maybe we can share you off the line in terms of the investment done in the SMIT over the last few years, but I can share with you, more importantly, the results that have come out from the Spark Minda Technical Center, where we have now increased more than 3% -- 350 engineers in this space only focusing on new technology, we are investing or spending more than 2% of our annual revenue on R&D. We have engineers focusing on electronification, EV space and the new products in the electronification that are upcoming for our customers. So this is what I would like to share with you here.And more importantly, this facility is a world-class, state-of-the-art facility, which we have been showcasing to our customers as well as our partners. And we've been able to get some partnerships as well as customer has own confidence. Constructive realization of new product developments is what we're offering here. So that is what I would like to share on the Spark Minda Technical side.
Right. So this 2% investment as a percentage of sales, do we expect that to step up? Or this is what we would be continuing to invest in R&D?
So we do continue to -- or our plan is to continue to invest in the similar range. Of course, as in -- when we feel going forward the requirement is there, we'll, of course, step it up. But currently, we will be focusing in a similar range.
Right. Right. And lastly, my question is on PLI. So clearly, that scheme -- I mean while it's yet to see the final to be shared, but what is your sense in terms of what are the areas in PLI draft scheme which would be of interest to you? And if I...
So just to share with you, your company, Minda Corporation, qualifies for all the parameters of the PLI scheme. So we, as a company, are going to be applying for the PLI scheme once it is rolled out completely. Of course, it is going to help us in export turnover generation and with the focus of Atmanirbhar Bharat generate new jobs and innovation within the country. We're also speaking to our various potential -- not various potential, but various partners that we have overseas, our joint venture partners also, on how we can localize this product line from here. But yes, we are engaged with the right partners to help us sail through the -- and apply for the PLI scheme, and we will be hopeful that we get [ regarded ].
The next question is from the line of Abhishek Jain from Dolat Capital.
Congrats for strong set of numbers. Sir, what is the revenue outlook for first half FY '22, given the weak 2-wheeler retail volume and high inventory in the system? And I just wanted to understand what is the supply...
Yes. There's a lot of background noise. Sorry, can you repeat your question, please?
So sir, I just wanted to know that what is the outlook for the first half FY '22, given the weak 2-wheeler retail volume and pile up the inventory in the 2-wheelers? And what are the supply and production side challenges?
Yes. So again, that's a great question on the outlook. So definitely, the outlook for the quarter 1 is challenging. With particularly in the month of May, more than 70% to 80% dealerships have been closed, we have the reports from FADA, which is a public document. And with more and more increased lockdowns all across, this looks to be a challenging quarter for everybody. Definitely, that's an area of concern. But our -- most of the plants are open due to the export orders. But overall outlook is definitely challenging for the quarter 1. However, having said that, Minda Corporation has -- working a lot on the cost control measures and, more importantly, the COVID-related safety measures for all our employees. But yes, this outlook is challenging, but fingers crossed, when the COVID cases are reducing all over India, the dealerships might open, eventually customers' demand increasing to their Tier 1s like us.
Sir, as the inventory is high in the 2-wheelers, so most probably, the second quarter would also be hit because of the high inventory in the system?
It is very difficult to predict in this situation how the outlook is going to be for the quarter 1 and quarter 2 period.
Okay, sir. Sir, my next question is related with the revenue performance in 2-wheeler locking system, excluding ASEAN business in FY '21. And just wanted to understand how is the share of business with the different clients. And have you added any new clients?
Yes. So if I talk about the security systems division, okay, we command more than 35% share of business in our product lines and particularly in this space is what we are also commanding all across in India with our customers. Our -- this division is going to go through more of premiumization and electronification. And as I mentioned, we have filed 21 patents in this division -- in the security systems division, which will help us increase our content per vehicle as well as our share of business with each customers in this space, giving us an early entrance as well as a system solution provider going forward. So in the future, the security systems division is going to be growing further with the electronification and premiumization that is going to happen.
So how much growth was there in the 2-wheeler locking systems, excluding ASEAN business in FY '21?
So in our safety and security division, if I just compare, quarter 4 was about INR 182 crores. And in quarter 4 this year, we have done about INR 241 crores, which is a jump of about 33%.
And FY '20 versus FY '21, how much it was?
So FY '21 to -- FY '20 to FY '21 is the nominal growth of about 2% to 3%. But here, you will have to factor in the COVID of the first half of the FY '21. So those numbers, of course -- we say these numbers are not really comparable due to the low intake of the customers and in the first half of this year.
Okay. And sir, my last question is related with the aluminum die-casting business. Who are the existing and the new clients? And how is the margin performance? And what was the export versus domestic mix in this aluminum die-casting business?
So our die-casting division has grown, basically, in the last years and quarters. This is an area of our focus and one of the fastest growth areas that the Spark Minda division has. In terms of the exports, what I can say is our quarter 4 in last year was about INR 23 crores worth of exports compared to -- this year, we are doing about INR 42 crore exports only in the die-casting division. So it has basically doubled or a 90% year-on-year growth, you can say, in the die-casting division space.Of course, in this division, our focus is more on exports side. As we are focusing on value-added products and technologies like turbocharger housing and other housings compared to the domestic market, which is more of the shoot and ship product lines. Of course, in our -- we are increasing our capacity here to support our -- or fulfill our customer demand from global OEMs as well as global Tier 1s overseas.
So how much capacity addition is there in the die-casting business in FY '22?
So if I talk about -- just to share with you the investments on this business, it's upward of about INR 50 crores to INR 60 crores on the investment in this division only to increase the capacity. I will be maybe have to check back on the numbers of the capacity utilization on the die-casting division, but we are about 92% utilized of our capacity in the die-casting space. So that is what we are currently looking at. We calculate on a tonnage basis. So maybe I can request Bikash to get back to you on these numbers, please.
The next question is from the line of Sachin Kasera from Svan Investments.
Congrats to the entire management. I think we are now getting the right momentum. I had 2, 3 queries. One was -- first question was regarding the capacity utilization. So we have done close to INR 800 crores this quarter. So what is the utilization in Q4? And with the existing capacity, what is the peak revenue we can assume on a quarterly or a yearly basis?
Sure. Thank you, Sachin. Thank you for your question. So in quarter 4 across different products and segments, we have different capacity utilization. For example, for our die-casting, as I mentioned, we're running at about 90% capacity utilization. For our 2-wheeler locking systems, we are at a capacity utilization ranging between 70% to 75%. In wiring harness across all our segments, we are doing at about 80% capacity utilization. And for Starter Motors and Alternators, a small division, but we're doing at about 100% capacity utilization.The challenge that we are facing is on the shortages of supplies of the semiconductors and other shortages, which are very uncertain in nature if we have seen in the last year, leading to fluctuation in our customer requirements, but the capacities that we are having are seeing impact in what we're offering. But of course, we are lesser utilized due to these shortages by about 15% to 20% on the shortages from various sources that are there.But going forward, our shutdowns that are there or the single-shift working that we are doing, it helps us kind of generate extra capacity from this. What we're also working all across our organization and all across our plants is to generate higher revenue from the given space and equipment. So we are starting or we are doing a drive to improve our utilization of our equipment and fixed assets that will generate higher turnovers. So this is the drive what we are focusing on. Going forward, in terms of the capacity expansion and utilization, about 50% of our CapEx goes in our general or sustaining CapEx, which is sort of including these parameters as well.
Just a follow-up on that is, once in 2, 3 quarters all these constraints go away, can we achieve like INR 950 crores, INR 1,000 crores quarterly revenue from the existing capacities? Or we'll have to invest some more CapEx to achieve that type of turnover?
So of course, we will increase gradually. Our endeavor is to really move towards those numbers, Sachin. The focus is to sweat the assets more and more. Again, we have the highest -- one of the highest FATRs in the industry, which is about 4.2. So hence, we -- our endeavor is to take them to a much higher number. But of course, it is challenging. But to answer your question, we are going to strive and put our best efforts to achieve those numbers on a quarterly basis.
Sure. And what is the CapEx plan for the current financial year?
So for the current financial year, we are doing about INR 130 crores CapEx. Some of this CapEx is brownfield expansion. Some of this is, again, die-casting, as I already explained to you, and about half of this is in the -- going in the sustainable -- sustenance CapEx. We are, of course, doing CapEx in terms of our electronics manufacturing division in Pune that I mentioned, with our focus on the electric and green mobility space and, of course, in our Pune and Mysore facilities, as I mentioned to you, based on the customer requirements going forward and the order wins. But of course, the half of this comes from the sustenance CapEx.
Sure. My second question was regarding the return on capital employed. We have seen a significant improvement. We are currently at 24% on an annualized basis. But if I look in a little bit more detail, almost INR 180 crores that is invested currently in the JVs, there, the returns are low single digits. So one is that.And secondly, in terms of the cash that we are carrying, that is also depressing our return on capital. So on both these, what is your thought process? Are we setting certain benchmarks even for a JV that they should at least, say, contribute 14%, 15% return on capital that we have put in? And similarly, in the case of cash, I think it's been lying for a while. So what are the thoughts there?
Thank you, Sachin. I think 2 questions. The first one, I think, I would like to share on the JV performances. Of course, I think the concern is primarily on the Minda VAST. As I mentioned, I mean, Minda VAST, the focus is on order booking and reduction in our costs, which is leading to our profitability. In this -- just to share with you in Minda VAST, we've invested huge amount, like you rightly said, on the paint shop facility, which is again the state-of-the-art facility and the products that are offered by Minda VAST like outdoor handles and indoor handles need this paint shop facility.So our focus here is to do more order wins. And again, we've won orders from Toyota or Maruti from these businesses or the PSA going forward in this division. Of course, this will help us in economies of scale, and operating margins will improve on a quarter-on-quarter basis from this division.As I mentioned, on the Stoneridge this thing on Slide #13, we've increased, again, the top line from INR 381 crores to INR 390 crores. And again, this is despite of COVID. So this partnership, I think, is going to be very healthy. And going forward, it is going to give us good fruit. So -- and of course, in the Furukawa, you all know that now we've own about 25%. So that is not a concern that we see going forward. Of course, the quarter 1 and quarter 2 this year were challenging due to the imported contents in COVID. But I'd like to share again that in quarter 4, they have achieved 6.7% EBITDA, as I already mentioned to you. So from quarter 3 onwards, this company is also coming back. To answer your...
No, sorry, continue.
Yes. So can you repeat your second question that was there, please?
Just before that -- so is there an internal [ road map ], say, over the next 2 to 3 years? I think you invested close to INR 180 crores in these 3 JVs. We are looking -- because our internal ROCE itself for now, if I renew these JVs, is close to around 27%, 28% now. So we should expect 20% -- 18%, 20% return on capital from these investments in the next 2 to 3 years?
So Sachin, as -- just to share with you again, in March 31st, our ROCE was 17.8%, and this year only [ if I look at ] 12%, but annualized number only in half -- second half is coming to 25%. So this is on a stand-alone basis that we are looking at now.
My question is specific to the investment that we are making in 3 entities. You have put almost...
Correct. Correct. I am coming to that. So just again to share with you, these are the numbers for the -- stand-alone numbers. Of course, for the consolidated, our target is to achieve towards the same numbers. That will, of course, take time. Again, the first focus is to improve the EBITDA into these -- profitability into these companies and, again, more so on the Minda VAST. And this -- and of course, do not really invest too much into these companies or partnerships anymore, which will eventually help us get to higher ROCE numbers. And one of the important drivers is the revenue growth in these companies with the similar FATR ratios of the stand-alone numbers, which will, of course, improve our ROCE. So less cash to be deployed, higher revenue to be generated and, of course, more improvement or rather drastic improvement in our performance and operating margins for these partnerships.
Sure. And the second part was regarding deployment of cash because we are sitting on almost INR 400 crores, INR 500 crores of cash now for almost more than 1 year, 1.5 years. If you could comment.
Yes. Sure. Definitely, certainly, this has been a concern for some time now, and it is our concern as well. However, what we are doing is multiple avenues exploration what we are doing. So of course, investment into the technology products and partnerships that we're looking at. Also, going forward, see, we have created clear norms that we will not invest in a manufacturing company outside India, especially in Europe. So we've taken our learnings from the past, and it is a clear mandate that we will not invest in any operating-related company in Europe or overseas. We can look at technology-related engineering centers, but we will not look at high investment related.So there's a huge turnaround cost, et cetera, which we will not look at. So of course, in India -- and our plan is to look at various opportunities. We are already looking at and exploring multiple opportunities, but COVID has against struck back. But yes, once there is something sizable in this front, I will come back to you.Our second area of focus is on our partnerships, that we are in discussion with various potential partners, which will help us give a growth, not in the short term, but in the medium to long term basis, where, of course, we are very, very careful on our right capital allocation with very careful thoughts and norms which is there. So we understand that this is a concern or a challenge. But I think it is -- we've taken a cautious call to invest in the right place at the right time, and we have the opportunities in that. So once there is something sizeable, I will come back to you.
[Operator Instructions] The next question is from the line of Chirag Shah from Edelweiss.
Congrats for a good set of numbers. Am I audible?
Yes, Chirag. Thank you so much, Chirag.
Yes. So quickly, 2 questions. So continuing this capital allocation, since -- and JV, see, our track record even on JVs is not necessarily that great. We have not been able to scale up or leverage the capabilities of Minda Corp and our JV partners. So what incrementally you would be looking even when you enter into JVs? Because opportunity space, even in the existing product line exists for you. Are you looking to acquire customers? Are you looking to do more outsourcing? Is there any change in way you are looking at JVs altogether or tie-ups or strategic arrangements. That will be the first question?
Yes. Thank you, Chirag. I think that's a very, very important question. So I can only say that, of course, the way partnerships have been done in the past need to be really changed going forward, I think, not for only Minda Corporation, but as the overall the world and the industry is going forward. So we need to find out different and smarter ways to do alliances and partnerships.Having said that, our focus and most important way to look at partnerships is technology. Of course, to give you an example, like the -- in fact, that the TA that we signed up last year is getting new product of the antenna systems and solutions in the country and, of course, getting new customers, such as Hyundai Korea in our kitty.Also going forward, we are -- it is going to be more of a step-wise approach, where initially this is going to be -- the partners overseas are looking at TAs and then converting into joint ventures. So this is not what we are talking, but generally as the industry trend and the global trends that are happening. So hence, we are working on both side, TA and joint ventures, in order to first look at technology and then, of course, customer additions in that front. Again, the primary customers are, of course, the Indian OEMs that are there. So hence, the focus will be on those customers which are here, whether in 2-wheelers or 4-wheeler on commercial vehicle space.Another example just to share with you is the technology part with the Israel-based 2-wheeler ADAS company, so which is again a TA. Of course, the objective is to bring the technology into India and offer to our customers and use the strengths of Spark Minda Group in terms of localization, manufacturing excellence and customer connect, and use the capabilities of technology and engineering of our partners. So that is how we plan to move forward in terms of the partnership model.
Yes. Second question was on die-casting. First, can you let us know what was F '21 total revenue for the die-casting business? Broadly is also okay.
Yes. So the full year F '21, the turnover for the die-casting division was INR 425 crores and for quarter 4 of FY '21, which was about INR 150 crores. So if I compare year-on-year growth for FY '21 versus FY '22 on a quarter basis, the growth was 66% and, on an annual basis, it was about 11%.
And between INR 425 crores, the domestic export breakup would be?
Out of the INR 425 crores, domestic is somewhere about 60%, if I'm correct. Yes, it's about 60% on the domestic side, and about 35% to 40% on export side.
So over the next 2, 3 years, this INR 425 crores, how can it grow? Basically, export, how big is the opportunity? Because there was some shift happening from China, and we emerged as an alternate source. Now what is the potential size of that revenue? And how much of that pie we can actually garner?
So Sachin, as you know that, firstly, die-casting business is a capital-intensive business. So I want to again share with you that though the EBITDAs are higher, of course, our focus is to go step-by-step because of this reason and maintaining all our parameters in line. Export die-casting will probably double in the next 3 years' time from about INR 110 crores to more than INR 200 crores or INR 220 crores in the year FY '24.Of course, there's a huge amount of opportunities in exports in the die-casting space. Our customers are, thankfully, seeing more and more confidence in us. So our objective with the PLI scheme and other initiatives and operational excellence and best-in-class technology will get us probably more customers. But of course, we have to marry both the top line, the profitability and, most importantly, the CapEx in this capital intensive business.
Okay. This is helpful. And last question, if I can just ask is, on this premium key -- or the keyless entry that -- option that we are looking in 2-wheeler space, the discussions got postponed because of BS-VI and COVID. Are the discussions started? And when do you think adoption would start happening in the 2-wheeler? Because that was supposed to be a very big opportunity for us where our realization could have jumped 3, 4x at least?
Sorry, Sachin, I didn't understand what product are you talking about or what did you mention, please?
Keys for 2-wheeler.
Keys? Okay. Yes, Sachin, there are 2 different or 3 different aspects to it: a, definitely, there is, as you rightly mentioned, the opportunity for us is about 3x, 4x, 2x, depending on the different configuration a customer selects. But more importantly, what I wanted to share is that this -- because it is a cost increase to the customer, though it is a comfort and convenience feature, of course, it is going to be taken up as on a year-on-year basis. We are already engaged with the largest 2-wheeler OEMs. You name it, and we are already engaged, develop products, already won orders in the keyless and the smart key space with these customers.Definitely, they will take time to come to market, but they will start coming soon. On a year-on-year basis, the increase will happen from conventional lock keys -- locking keys to the keyless entry systems. Of course, they will start from the higher segment vehicles and come down to the mass customers.
Yes. So as of now, that traction has not yet started. Is [indiscernible] because of this COVID assumptions and cost increases in general, so those discussions -- adoptions have got pushed again?
So Sachin, no discussion has got postponed. Rather they have got preponed because during this COVID time, customers are focusing more and more on technology and engineering engagement. As Mr. Neeraj Mahajan mentioned on the early supplier engagement is what we are also doing with our customers. To -- of course, to win orders and showcase our production technologies. So in this particular space, we have already engaged with Bajaj, TVS, Hero, et cetera, other customers you can name, for our keyless entry systems.Developments are also ongoing. Customers have already awarded us the projects, but they are only going to come to market in the next 12 months to further timeline. And of course, when the volume picks up, this will be showcased in the market. But yes, no engagements have been postponed. Rather our team, particularly from technical center and other engineering teams are working very much hand-in-hand with our customers. There are our engineers placed within the customers for early supplier engagement in these particular product lines and all across the other product lines that are there -- which are going through the electronification, premiumization as well as increase in content per vehicle.
The next question is from the line of Apurva Mehta from AM Investments.
Sir, congratulations on a great set of numbers. I only wanted to ask about this same question, which a participant has asked earlier about the keyless drive. So are we looking at a big potential for export also on this technology?
Sorry, what drive, please?
Keyless. Yes. So on the export front, we were getting some orders on the export side also from Honda and everywhere. So are we looking at this as a big opportunity on this side?
Yes. Absolutely. We are looking at a big opportunity. We have already started supplying and exporting keyless entry products to our export customers, such as Piaggio. So we are already doing this and that SOP has already started. So again, we are seeing more and more penetration in our domestic as well as export customers. Even in our ASEAN presence and our ASEAN countries, we are looking at export orders, but more so from the west. Companies and manufacturers from U.K., U.S. are also looking at this product, and we are speaking to them, developing products for them and somewhere gotten orders already, and we're looking to convert these orders also.Just to also give you an example. For example, the EV bike, Etergo from Netherlands, we had already won the keyless entry business about 2 years ago. But of course, Ola has now taken that over. So we are going to be looking at that in India with Ola. So whether it is an EV start-up, whether it's an EV big company or whether it's a legacy mass manufacturers or bigger OEMs, we are catering to all the customers for the keyless entry solutions as well as our -- all the other product lines, whether our core area of expertise in keyless entry, our wiring harnesses, instrument clusters, sensors, die-casting, 2-wheeler ADAS and other product lines that we are looking at to enter in our EV space also.
Sir, one thing I want to get some insight from you is, we are heavily dependent on 2-wheeler side, almost 60%, 65%. If we take the aftermarket and add it up, we are close to 60%, 65% of our sales from 2-wheelers. So what is our plan to shift that focus? And what will be -- in the next 3, 4 years, how can we -- our dependence on 2-wheeler goes down and our dependence on other segments like cars and CV goes up. So are there any plans that we -- in the next 3, 4 years, this pie will change?
Yes. Absolutely. So again, just, firstly, to share, the dependence is definitely a majority dependence, but it is in the range of 50% to 55%. Of course, having said that, we are very clear going forward that our dependence on the other segments has to increase. For that, there are very extensive steps that have been taken, and I would like to share a couple of them with you. Number one is the Interior Plastic division, which is our division in the plastics and the interior space. So this vertical will -- or division will grow, again, 2 to 3x in the next few years. There are products like air vents, center consoles, are the lightweighting products that we're offering. And of course, we have won orders from companies like Toyota for these products, which are giving us more and more entry into the 4-wheeler space.Another such example is our joint venture or partnership with INFAC for the antenna systems, which is, again, not the conventional product. A, it is electronics; B, increased contents in vehicle; and C, more importantly, to answer your question, in terms of 4-wheeler space. And of course, here also, we have won orders already from giants such as Maruti Suzuki, Hyundai and Kia and in advanced discussions with other Indian OEMs in order to win businesses. So this is our second such example that we are looking at.Third, of course, we are looking at our Minda VAST joint venture, which is primarily into the 4-wheeler space. We have won orders, as I shared with you, from Force Motors, from Toyota, from PSA, from Volkswagen, which is also going to help us win the 4-wheeler space. Having said that, our new -- or not new, but our focus in the next few years in the mid-term to long-term plan is definitely to explore more and more products and technologies into the 4-wheeler space and other commercial vehicles. Again, the example of intelligent transportation system that we have started, that is, again, giving us more and more fruits into the non-2-wheeler space per se.And of course, our die-casting division is increasing in the 4-wheeler as well as Tier 1 space in exports side. So I think these are the few examples, which we have already initiated to give you some sense of our direction towards the 4-wheeler aspects and less dependency on the 2-wheelers.
And on the electronic side, what is our focus and -- because there's a huge opportunity on this side because a lot of people are now trying to derisk and source this from Atmanirbhar Bharat kind of theme. So where we lie and what is our focus area and what kind of opportunities we see in this business?
Yes. Definitely. Thank you for that question. So if I understand correctly, your question is on the electronics capability in this space. So if I maybe request you to refer to our innovation and technical slides from 17 page onwards. Here, you will again see that we are in fact -- we are working on technologies which are impacting globally and India on the positive front. Our more and more focus is on the electronification space, which is like antennas, telematics, ITS, digital clusters, keyless entry systems, 2- wheeler ADAS, EV products going forward. So they are all based on electronics that are there. So legacy and non-legacy business will grow in electronics.We are partnering up, and we already have large suppliers like Renaissance, NXP, et cetera, as our partners for the electronics. So of course, we are also speaking to them in how we can engage further where Spark Minda requirement is going to be increasing on a year-on-year basis. So we are looking at this opportunity as on a holistic basis and even a product-wise basis on how we can improve our electronic content, also our electronic ecosystem as a whole as Spark Minda Group.
Ladies and gentlemen, this was the last question for today. On behalf of K.R. Choksey Research and Minda Corporation Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
We just have closing remarks from our group Chairman, Mr. Minda. So maybe I request Mr. Minda to just give the closing remarks, please.
Thank you, Aakash. So thank you for participating in the call. And before I conclude, I would like to assure you that we will continue to support and stand by our stakeholders through these trying times and will emerge stronger from this crisis as we continue to strengthen our core and look for opportunities, which mega trend is bringing. With this, I wish that all of you stay safe and request you to use every health and safety precautions. Thank you. Thank you very much for joining. Thank you, everyone.
Thank you. Ladies and gentlemen, you may now disconnect your lines.